NextEnergy Renewables (NREN) announced its intention to launch an IPO and to seek admission to the premium segment of the LSE main market. NREN is seeking to raise up to £300m at an issue price of £1.00. NREN expects to publish its prospectus in early February.
The announcement notes that “NREN is a differentiated renewables investment company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. NREN’s ambition is to increase the global renewable energy supply through established clean energies available today, whilst taking exposure to new key transformative energy transition infrastructure (such as hydrogen and battery storage) to help tackle climate change whilst reducing the global use and reliance on fossil fuels.
NREN intends to provide investors with attractive long-term regular income and capital appreciation. An investment in NREN will enable investors to gain exposure to a diversified portfolio of renewable energy projects and exciting energy transition infrastructure through investing in and alongside (by way of co-investment) private investment platforms managed by some of the world’s leading renewable energy investment managers. It is expected that over time the portfolio will be equally weighted between funds managed by NextEnergy Group, third party managed funds and direct investments (by way of co-investment).”
The fund’s investments will be sourced through NextEnergy Capital Group and other high performing managers’ platforms, co-investments and direct acquisitions. NREN will be managed by NextEnergy Capital IM, a global specialist investment manager in the renewable energy sector and part of NextEnergy Group which has an established track record of managing both public and private investment platforms, and over $2.3bn in renewable energy-focused AUM.
Investment Highlights
- “NREN is targeting total returns of 9-11 per cent. per annum
- The company’s target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence per ordinary share and then growing progressively thereafter, with a target dividend of 3 pence per share in relation to the period from initial admission to 31 December 2021
- Unique preferential access to existing and future NextEnergy funds as well as exposure to other global investment third party vehicles and direct investments which benefit from higher returns, specialist renewable knowledge and greater diversification
- The advantage of liquidity through publicly-traded shares
- Attractive unlevered returns via stable and growing dividend distribution and NAV uplift, above what is offered by other listed renewable energy sector funds
- Exclusive access to renewables and energy transition opportunities with long-term contracted revenue streams and upside potential (from portfolio optimisation, yield compression, and technological innovations amongst other factors)
- Greater portfolio and risk diversification (including by geography, technology, managers, revenue mix) than what is offered by other listed renewable energy funds through the global renewable infrastructure spectrum and exciting energy transition technologies
- Immediate attractive capital deployment targets identified, including instant access to NextPower III LP, and co-investment opportunities with NPIII via the seed portfolio
- A broad, specialist and established team with an extensive track record and wealth of relevant experience in listed funds, private funds, direct investments, ESG and a broad set of renewables technologies
- Full access to different geographies, technologies, counterparties, power markets and managers through NEC’s globally-diversified portfolios and investment remit
- A low base management fee, of c.40bps, in addition to a performance fee. A fee structure with strong performance and incentive alignment with shareholders, that results in lower overall fees relative to existing listed renewable energy funds. For example, a total return performance of 8 per cent. would result in overall fees of c.40bps and a total return performance of 11 per cent. would result in overall fees of 85bps
- Access to low-cost co-investment and direct opportunities provides the option to gain exposure to the most attractive assets, optimise portfolio construction and increase returns
The opportunity
- “Renewable energy is forecast to account for the majority of electricity generated globally by 2030
- A total of $13.3 trillion is expected to be invested in new power generation capacity from 2019-2050 – equivalent to $416 billion per year. Almost 80 per cent. of this or $10.3 trillion will go to renewables
- This transformation is driven both by the underlying economic rationale for renewables and a seismic shift in stakeholder expectations, underpinned also by projected growth in hydrogen production, energy storage and electrification of transportation
- Private investment is expected to account for the majority of new investment capital in the global renewable energy sector
- During the COVID-19 crisis, renewable energy infrastructure strategies demonstrated their resilience to shocks and uncorrelated nature to other sectors
- Private funds are able to offer higher returns and additional flexibility than existing listed renewable funds
- Private platforms have more flexible and patient acquisition strategies than listed vehicles
- Increased geographical and sector diversification compared to existing listed funds which are mainly investing in highly competitive markets
- Flexible exit strategies allow for realisation (and distribution) of private funds’ value creation and yield compression
- Access to the leading managers in the industry with larger teams and greater alignment to achieve higher returns in addition to stable income
- IRR Target: The fund on launch targeted 13-15 per cent. gross IRR and is on track to achieve or exceed this target
- NPIII was awarded the 2020 Renewables Fund of the Year by Environmental Finance
- NextEnergy Group uses the UN Sustainable Development Goals as a global framework to define the ESG elements of its investment strategy. This framework will be fully integrated into NREN’s investment process and ESG strategy
- NREN is expected to qualify for the London Stock Exchange’s Green Economy Mark at Admission, which recognises companies that derive 50 per cent. or more of their total annual revenues from products and services that contribute to the global green economy. NREN also expects to be designated as a Guernsey Green Fund by the Guernsey Financial Services Commission”
Readers interested in the full briefing can access the intention to float RNS release by clicking here.
NextEnergy Renewables – Intention to float