London IPO raises $200 million to invest in solar in the Americas

The installed capacity of U.S. solar is going to double within the next four years. Many of the projects to be built already have some form of documentation or approval; for instance, Texas has a pipeline greater than 40 GW (approximately 2/3 of the total U.S. capacity at present), with more than 7 GWac already with interconnection approval. And while it is going to take an enormous volume of capital to make this happen, there is a wall of money already in place, and hundreds of millions at a time rearing up for the attack.

US Solar Fund PLC (USF) has raised approximately $200 million with the goal of deploying the investment in the U.S. solar market and other OECD nations in North and South America over the next six months. The fund is being run by New Energy Solar (NEW), a Sydney, Australia based firm managing $800 million globally, with at least 14 projects already in the United States. NEW invested $15 million of its own money into the new fund.

USF’s investment goals are consistent with NEW’s investment strategy of targeting investments with an objective of an annual dividend yield of 5.5% once the portfolio is fully operational and a net total return of at least 7.5% p.a. (net of all fees and expenses but before tax) over the life of its solar investments. The company aims to sign power purchase agreements with investment grade offtakers with terms of at least 15 years.

The group notes that it has found $4.8 billion worth of investment opportunities comprising 60 projects across 13 U.S. states.

The fund’s chief executive John Martin observed that the United States has a large and rapidly growing solar market which he forecast to require at least $38 billion for utility-scale solar.

The fund was listed in London for multiple reasons, the first of which is that there has been considerable success in funds of this nature in recent times. NEW suggested that strong European institutional investor interest in gaining exposure to utility-scale solar infrastructure in the United States through listed U.S. dollar-denominated investment vehicles is a main driver.

Citywire noted that three pure solar funds – Bluefield, Foresight and NextEnergy – are currently offering yields of around 6% for which there has been strong investor demand, pushing their shares to premiums of 8%-16% above their net asset value (NAV).