Blackfinch Renewable European Income targets £300m IPO

Blackfinch Renewable European Income targets £300m IPO – Blackfinch Renewable European Income (BRET) has announced its intention to float with a fundraising of up to £300m by way of placing, offer for subscription and intermediaries offer of ordinary shares. A placing programme will also allow the company to issue further ordinary shares in the 12 months from the date of publication of the prospectus and following admission to the premium segment of the official list of the FCA and to trading on the main market for listed securities of the London Stock Exchange.

Blackfinch Group, the investment specialist with significant experience of investment in the renewable energy sector and a heritage dating back over 25 years, will be appointed as BRET’s investment manager.

The new trust’s aims are to provide shareholders with an attractive level of distributions by investing in a diversified portfolio of mixed renewable energy infrastructure assets in Europe that have the opportunity for capital appreciation over the medium-to-long term through active asset management.

Once fully invested, the company is targeting a dividend yield, based on the initial issue price, of 1% to 3% for the first financial year to 30 June 2022, 5% to 5.5% for the second financial year to 30 June 2023 and thereafter 6% per annum, and increasing progressively. Dividends are expected to be paid quarterly and generally in equal instalments. BRET will target a net total shareholder return in excess of 8% per annum over the medium-to-long term.

The company has engaged Howard Kennedy Corporate Services LLP as sponsor and Barclays Bank, acting through its investment bank, as sole global coordinator and joint bookrunner with finnCap.

The launch comes as the world transitions to a climate-neutral society, which the company says is both an urgent challenge and an opportunity to build a better future for all. There is an imperative for countries across Europe to significantly increase their renewable energy sources in order to meet ambitious reductions in carbon emissions – the EU aims to be an economy with net-zero greenhouse gas emissions (climate-neutral) by 2050.

BRET says the renewable energy sector is at a critical inflexion point where substantial investment is required and that the trust is in prime position to take advantage of this green revolution, and has a robust flow of investment opportunities available.

The total requirements of renewable energy in Europe are currently 609GW, but it is anticipated that $967 billion will be spent on renewables in Europe between the present day and 2030. The GW capacity of renewables is therefore expected to rise exponentially, for example solar photovoltaic (PV) and wind energy will see an estimated increase of 8,519 GW of solar and 6,044GW of wind by 2050.

Anthony Marsh, chair of Blackfinch Renewable European Income, said: “We are delighted to announce that we are considering an IPO and a fundraising of up to £300 million, which we intend to make available to retail investors via an intermediaries offer. Demand for renewable energy in Europe is enormous, and there is a critical undersupply. This new investment trust will create a portfolio of European renewable energy infrastructure assets capable of generating stable long-term cash flows that will support a dividend yield over the medium-to-long term of 6% per annum and more, and total shareholder returns of over 8% per annum.

“The portfolio will be diversified across technology, geography, and stage of construction, and investments will be focused on the higher yielding markets of Italy, Portugal and Central Eastern Europe, including Poland, Czech Republic, Austria and Hungary. Blackfinch Group, BRET’s Investment Manager, has a highly experienced energy investment team and successful track record in renewable energy investments, and their network of strategic partners will help accelerate the deployment of monies raised.

“We are also delighted that BRET is expected to qualify for the London Stock Exchange’s Green Economy Mark at Admission, its badge of ‘green excellence’, and look forward to the Company’s flotation on the Main Market of the London Stock Exchange in October.”

Richard Cook, CEO of Blackfinch Group, added: “Reaching net zero emissions by 2050 is the goal of major economies globally.  The conversion to cleaner forms of energy is being accelerated in Europe, which has ambitious carbon reduction targets.  However, there is an overwhelming deficit of supply of the cleaner forms of energy that are needed to meet these targets.

“Blackfinch has a well-established track record of investment in the renewable energy sector.  We look forward to using our experience and expertise in our role as Investment Manager and Asset Manager to generate the attractive dividend returns and capital growth that BRET is targeting – a yield of 1.0% – 3.0% in the first year, rising to 5.0% – 5.5% in the second year from admission, and 6% thereafter, together with a net total return in excess of 8.0% a year over the medium-to-long term.”

Trust highlights

Compelling market opportunity arising from structural undersupply of cleaner forms of energy and the EU’s accelerated renewable energy transition targets

• Significant demand in Europe for renewable energy driven by the European Union (“EU”) and individual EU member targets:
• The EU’s Renewable Energy Directive in 2018 established new binding renewable energy targets for 2030; at least 32% of gross final energy consumption is to come from renewable sources, a significant increase on the previous target of 17%.
• Bloomberg New Energy Finance expects $7.7 trillion to be invested in new generating capacity by 2030 globally, with 66% ($5.1 trillion) of that going on renewable technologies.  Of that $5.1 trillion, Europe is expected to account for $967 billion.

Prospect of long-term income of in excess of 6% per annum from investments with stable cash flows

• BRET believes its proposed portfolio of diversified European renewable assets will generate stable long-term cash flows, in support of its dividend targets yielding:
• 1.0 to 3.0% for the first financial year to 30 June 2022¹ and 5.0% to 5.5% for the second financial year to 30 June 2023, and then 6% per annum and increasing progressively thereafter.
• BRET is targeting a net total shareholder return in excess of 8.0% per annum over the medium-to-long term.

Seed assets worth approximately £232 million are under option for acquisition

• 21 construction-ready solar assets with a total enterprise value of c.£232 million are under option for acquisition.
• These seed assets are located predominantly in Italy, with two assets in the UK.  They are expected to become operational within 30 months of Admission and have a total installed capacity of over 300 MWp.

Pipeline of assets in excess of £500 million has been identified

• A pipeline in excess of £500 million of renewable energy infrastructure assets (operational and construction-ready) has also been identified across BRET’s preferred European geographies and are under negotiation. They include wind, solar, hydro, hydrogen and other assets.
• It is anticipated that the net proceeds of the Issue will be deployed within 12 months of admission.

Prudent investment policy designed to optimise returns while mitigating risk

• European focus in less crowded markets; Italy, Portugal, Poland, Czech Republic, Austria and Hungary, with some exposure to the UK, which allows for a greater return on investment.
• Technology diversification; a minimum of 50% of committed capital will be invested in wind, solar and hydro assets, with the balance in other forms of renewable assets, including hydrogen, storage and central district heating, which diversifies exposure.
• Capital allocation split between operational and non-operational assets; up to 50% of committed capital will be deployed into operational assets and up to 50% into construction-ready and in-construction assets in the medium term, which provides for better risk adjusted yields.
• Acquisition of early-stage assets provides potential for capital appreciation; as construction-ready and in-construction assets are completed, there is scope for significant value creation.
• Partner network; BRET will benefit from the Investment Manager’s network of strategic partners, which will promote a streamlined acquisition process.  Key partners include Enviromena Power Systems, the integrated clean energy group, Sunnerg, the solar ‘turnkey projects’ specialist, and Solar Balance, the Portuguese solar energy plant developer.

Strong ESG focus

• Investments will be assessed against BRET’s ESG policy to ensure appropriate fit.
• The Investment Manager is committed to ESG. It is a signatory of PRI (Principles of Responsible Investment) and is working toward meeting UN Sustainable Development Goals.

Experienced Board and Investment Manager with a successful track record

• The Board comprises four non-executive Directors, headed by Anthony Marsh, who established the world’s first Green Investment Bank.  All are independent of the Investment Manager and AIFM.
• Blackfinch is an award-winning investment specialist, with over £500 million total assets under management and administration, which has significant experience in the renewable energy sector and asset management.
• Blackfinch’s energy team can demonstrate yield and return consistently in excess of mandated targets and yields trending towards 6% in 2020.

BRET : Blackfinch Renewable European Income targets £300m IPO