To help manage the transition to a more renewable energy future, we not only lend to the renewable energy sector in Australia and New Zealand but we also support the sector in Europe and North America.
When Greencoat UK Wind debuted on the London Stock Exchange in March 2013 it became the first listed so-called renewable energy ‘yield co’.
Providing yield to equity investors
Greencoat successfully demonstrated that renewable energy projects could access an untapped source of financing beyond the small pool of funding provided by balance sheet-constrained utilities and private equity. As a result, billions of dollars have flowed into Greencoat and the many other listed renewable energy vehicles that were launched in the trail that Greencoat blazed.
Greencoat’s renewable energy investment solution is simple enough in concept but had a considerable impact on the industry. Greencoat’s innovative platform attracts broader institutional equity interest found in the equity capital markets, so matching long-term equity with long-term assets. This enables efficient large-scale renewable energy deployment by recycling developer capital.
Improve net present value
We leveraged our expertise in the UK renewable sector to help Greencoat establish an innovative and flexible debt financing platform that responds to its unique needs and requirements.
Central to Greencoat’s business model is delivering investors with a running yield. That makes interest-only debt particularly suitable as it improves net present value (NPV).
As a key relationship bank to Greencoat, we provided a single bank term financing solution of £100 million. It comprises a seven-year interest-only loan and associated interest rate swaps. It is structured to allow all commercial lending to sit on a pari passu basis at holding company level with underlying investments left unlevered. This financing strategy helped optimise Greencoat’s cost of capital and enhance shareholder returns.
However Greencoat is also always on the lookout for new assets so the financing platform we provided enables flexible capital deployment for future growth in what is a highly competitive mergers and acquisitions (M&A) environment. In the last financial year Greencoat acquired three wind farms for around £310 million while delivering a 6.34 pence dividend to its investors.
Greencoat’s investment portfolio currently comprises 19 operational UK wind farms, predominantly onshore, with an aggregate net installed capacity of 420 megawatts (MW).
The estimated installed capacity of onshore wind in the UK stood at 9 gigawatt (GW) in 2015 with offshore at 5GW. By 2020, offshore wind installed capacity is expected to equal that of onshore wind at 12GW. Hence, investment focus will increasingly shift to offshore wind development, and we are well positioned to support this as demonstrated by our involvement in the 588 MW Beatrice Offshore Wind Farm that reached financial close in May 2016.