The REIFs’ Fundraising Record

09 Sep 2021 / Insight

By Nigel Hawkins

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Investors’ appetite endures

Executive summary

  • Undoubtedly, renewable energy is a growth sector, albeit one where public subsidies are pivotal. Approximately 40% of UK electricity demand is now met by renewable energy, a figure that is set to rise further as coal-fired stations are decommissioned and nuclear power capacity, despite the Hinkley Point C project, falls.
  • Of the privatised electricity companies, SSE, by some way, is the key renewables player: it owns more than 3.8GW of renewables generation capacity. However, there are now 19 quoted Renewable Energy Investment Funds (REIFs), many of which generate electricity from wind or solar.
  • Despite the challenges, as well as the uncertainties, caused by the COVID-19 pandemic, these 19 REIFs have raised more than £3.5bn since January 2020. Most of these funds have been deployed in either building new plant or buying existing capacity.
  • While most REIFs have experienced few problems in raising funds once they are quoted and have established a track record, some of the more recent IPO fundraising targets – in some cases, being decidedly ambitious – were not met; consequently, fundraising expectations had to be cut back.
  • With relatively secure revenues, these 19 REIFs have proven to be resilient investments of late, despite lower long-term energy price forecasts. Currently, the sector is trading at an average premium to NAV, although these premia vary quite markedly between individual funds – TRIG’s premium is currently ca.13%, while NextEnergy Solar’s is minimal. The sector’s prospective dividend yield is ca.5%.
  • The two most valuable REIFS are TRIG and Greencoat UK Wind, valued at £2.7bn and £2.5bn, respectively. While their strategies vary noticeably – the former is expanding into mainland Europe, while the latter is very focused on the UK – their revenues and dividend payment capacity are highly dependent on wind-power generation.
  • Interest of late has focused specifically on the energy storage REIFs, Gore Street and Gresham House. This duo has undertaken seven separate fundraisings – of varying size – in the past 18 months in order to finance the buildout of their planned capacity. Other REIFs are eyeing up the energy storage sector, and especially the battery element of it.
  • Outside the REIF sector, the quoted investment infrastructure funds have also been resilient performers. In July 2021, sector leader, HICL, despite some COVID-19-related setbacks, raised gross proceeds of £120m, at a discount to its market price of ca.2%. BBGI* did likewise and, although its £75m raise was lower, the achieved discount was similarly low.