NextEnergy European Solar Utility PLC, a newly-incorporated specialist investment company focused on utility-scale solar energy assets in the EU (excluding the UK), today announces its intention to launch an initial public offering ("IPO") by way of a placing and an offer for subscription (together, the "Issue") of Ordinary Shares.
The Company will seek to provide investors with a sustainable and attractive dividend over the long term by investing in and operating solar PV plants located in countries within the European Union (excluding the UK) with an initial focus on Italy and Spain. In addition, the Company will seek to provide investors with an element of capital growth through the re-investment of excess cash and technical and financial optimisation of its portfolio.
The Company's investment strategy offers the potential to improve upon base-case target returns through: (i) optimisation of technical performances, (ii) cost reductions through economies of scale and current contracts coming up for renegotiation, restructuring of cumbersome and inefficient corporate and financing structures, (iii) extension of asset life, repowering and/or integration of ancillary technologies (e.g. energy storage) to fully utilize grid connections and balance the electricity grid.
The Company's intention is to apply to the Financial Conduct Authority for admission of its Ordinary Shares to the premium segment of the Official List, and to the London Stock Exchange for such Ordinary Shares to be admitted to trading on its Main Market for listed securities.
The Company has appointed Mirabella Malta Limited (the "Manager") to perform investment management services and the Manager has delegated discretionary portfolio management activities to Mirabella Financial Services LLP (the "Portfolio Manager"). The Portfolio Manager will receive investment advice from NextEnergy Capital Limited ("NECL" or the "Investment Adviser"), which will also second certain of its principals (Michael Bonte-Friedheim and Aldo Beolchini, together, the "Secondees") to the Portfolio Manager. The Secondees will have a determinative role in the Portfolio Manager's investment decision making process. It is also intended (and the Management Agreement contemplates) that the Investment Adviser (or an NECL Affiliate) will fulfil the role of the Manager in future. The Investment Adviser, NECL, is a member of the NEC Group.1
The Company will constitute a close-ended investment company and an alternative investment fund. The Company is also intended to constitute an investment trust company.
The EU solar PV market has the largest installed base of operating solar PV power plants
· The solar sector in the EU is the largest solar PV market globally with an installed capacity of 86.7GWp (at year-end 2014)2, and was the single largest contributor to the overall net new installed energy capacity from 2010 to 2014 in the EU.3
· Italy has an installed solar PV capacity of 18.5GWp2, mainly comprising assets constructed between 2010 and 2012. The country has the fourth largest installed base of solar PV plants globally, behind Germany, China and Japan.4
· Spain has an installed solar PV capacity of 4.7GWp5, mainly comprising assets constructed in 2008. Spain is the EU's 5th largest solar PV market.2
· The Company's key target markets, Italy and Spain, together represent c.27% of the EU's installed solar PV capacity.2
· The majority of installed solar PV capacity in Italy and Spain has an operating history in excess of two years.
· Further growth in the EU's solar PV installed capacity is expected and is forecast to increase at a CAGR of 7.0% from 2014 to 2020.6
Attractive opportunity to consolidate fragmented Italian and Spanish solar PV markets
· The Italian and Spanish solar sectors present an attractive opportunity for consolidation:
o Highly fragmented markets, with the top 10 players accounting for only 5% and 13% market share in Italy and Spain, respectively.7
o The average size of the individual plants is relatively small (e.g. in Italy c.40% of the solar PV assets are between 200 kWp and 1 MWp in size) and are most commonly financed with individual leasing financing transactions.8
Attractive and sustainable dividend, with capital growth potential
· NEESU is targeting a dividend of between three and five € cents in 2015, eight € cents per share in 2016 (its first full year subsequent to its IPO) and increasing to a target of nine €c in 2017 once potential upsides of the investment opportunity have been realised.
· The Company is targeting aggregate returns to investors that equate to a levered IRR of between 10% and 12%.
· The Company also targets an element of capital growth from re-investing excess cash flows generated beyond the dividend.
Access to the NEC Group's solar expertise and track record
· The Directors believe access to the NEC Group (a leading investment manager in the solar PV sector in Europe) positions the Company well to exploit the opportunity to consolidate the Southern European solar PV market and generate sustainable and attractive dividends.
· With a 40-strong dedicated team focused on the solar sector, and extensive experience and an operating presence in Europe since 2007, the NEC Group has a proven track record in the following key areas:
o Asset development and investment: more than €130m of NEC's own and third party equity and debt invested in developing, constructing and financing 13 solar power plants in Italy.
o Acquisitions and fund management: the NEC Group is the investment manager of the LSE-listed NextEnergy Solar Fund Limited, which has raised £246.6m that was invested into c.217MWp over sixteen acquisitions in UK solar power plants since it floated in April 2014 and continues to pursue further growth opportunities.
o Managing and monitoring solar PV plants: WiseEnergy, the NEC Group's operating asset management division, is a leader in the solar PV sector, managing and monitoring over 1,200 utility-scale solar plants with a capacity of more than 1.5GWp and c.€3.9 billion in asset value.9
· Senior management and employees of the NEC Group have extensive renewable energy and public market expertise, including over €100 billion in energy and infrastructure transactions.
· The Directors believe the NEC Group's experience will put NEESU (through the delegated portfolio management structure) in a strong position to achieve its investment objective and target returns, emanating from its solar market focus and extensive network of operating relationships with participants in the solar sector, and experience and expertise in optimising the technical and financial performance of the operating solar asset portfolios.
Strong pipeline and swift deployment of IPO proceeds after Admission
· The Company has the right of first offer on the Investment Adviser's strong pipeline under the terms of the Management Agreement:
o More than 1.3GWp of assets already identified for potential acquisition.
o Discussion initiated, or bids made, in excess of 427MWp of projects - representing nearly €500m of equity investment.
· It is intended that the Net Issue Proceeds will be deployed in accordance with the investment policy within six to nine months of Admission.
A scalable model
· The Company anticipates significant scope to grow the Company's portfolio over time, driven by:
o The NEC Group's expertise in sourcing attractive investment opportunities.
o The right of first offer under the Management Agreement with the Investment Adviser.
High quality, independent board
· The Company has identified a high-quality independent board comprising individuals with extensive experience in corporate governance of listed companies, the energy and renewables sector and investment management.
· The proposed Chairman of the board is Stefano Preda (formerly Chairman of the Italian Stock Exchange), with the other board members comprising Javier Herrero (formerly CEO of Iberdrola), Paolo Braghieri (currently CEO of GE Capital's subsidiary Interbanca) and Anne Tutt (currently Chair of the audit committee and a Non-Executive Director of Oxford University Hospitals NHS Trust).
Credit Suisse is acting as Global Co-ordinator and Bookrunner, Macquarie Capital (Europe) Limited and Peel Hunt are acting as Joint Lead Managers, Cantor Fitzgerald Europe is acting as Co-Lead Manager and BDO LLP is acting as Sponsor, in relation to the IPO.
Commenting on the announcement, Michael Bonte-Friedheim, CEO of the NEC Group, said:
"The Southern European solar PV market has seen a rapid growth in installed generating capacity, undertaken in a very short time frame and financed principally by non-industrial investors. As a result, these markets are highly fragmented and do not operate at an optimum level. Consolidation by an industrial player with a long-term investment horizon can drive operating and technical improvements as well as cost and financing synergies.
Our track record and operating presence in this market enables us to identify and pursue attractive acquisition opportunities, execute multiple transactions in parallel and manage the acquired solar plants efficiently. We have already identified a significant number of portfolios available for acquisition and are pursuing multiple negotiations.
The skills of the NEC Group, in conjunction with a very experienced board, give the Company access to the network to deploy capital quickly to convert its pipeline into a large portfolio of operating solar assets. Longer term, there is an exciting opportunity to rapidly and incrementally grow NEESU's asset base and maximise the value of each acquired plant.
NEESU is therefore well placed to convert this market opportunity into consistent and long-term shareholder returns and in short order become the leading owner of operating solar plants in the region."
Stefano Preda, prospective Non-Executive Chairman of the Company, said:
"I believe NextEnergy European Solar Utility PLC is well placed to consolidate the sector in Italy and Spain and is structured to implement an industrial approach and take a strategic role in the respective energy markets we operate in. Ultimately, our objective is to provide attractive and sustainable returns, via dividends and capital reinvestment, to investors over the long-term.
Access to the NEC Group gives the Company a significant advantage, bringing its leading expertise, track record and relationships to source, operate and grow the solar asset base rapidly."