Shares in Bluefield Solar Income (BSIF) jumped up to 16% this morning after the high-yielding renewables fund accepted a £548m cash bid from biomass generator Drax (DRX), six months after putting itself up for sale.
Drax beat a shortlist of bidders after agreeing to pay 92.574p per share. Including a 2.25p interim dividend due this month, BSIF shareholders will receive a total of 94.824p per share or £561m. That’s 31% more than the 72.2p share price when BSIF went into an offer period on 4 November and is just 9% less than its net asset value (NAV) of 104.52p per share at 31 March.
Having closed last week at 78.8p on a 25% discount, BSIF shares shot up 12.9p, or 16.4% to 91.73p when the market reopened this morning.
Drax, the £2.7bn owner of the biomass-fuelled Drax Power Station in North Yorkshire and Cruachan Power Station near Oban in Scotland and also pellet production plants in North America, saw its shares firm 0.7%, or 5.5p, to 797p.
While Drax’s sustainability claims have been questioned, particularly over its alleged use of virgin timber from Canada, its shares have rallied from 419p in October 2023 propelled by a £450m share buyback programme and the government’s decision last year to extend subsidies to biomass from 2027 to 2031.
The takeover, which if approved by a minimum of three quarters of BSIF shareholder votes at a general meeting, will see the disappearance of the UK’s first dedicated listed solar fund when it launched in July 2013.
Chair Michael Gibbons said BSIF had been a “pioneer” that had grown a fully-owned UK portfolio of 121 photovoltaic plants, six wind farms and 109 small onshore wind turbines with a total energy capacity of 748.7MW.
It also had a 25% stake in a 412.1MW UK joint venture with GLIL Infrastructure giving it total operating capacity of 851.8MW, of which 793.5MW was solar.
In addition, as at 31 December, it had a pipeline of 946MW of solar projects and 1,915MW of battery energy storage projects, of which just 25MW were under construction with the rest fully agreed, in planning or under development.
For the year to 30 June 2026, BSIF was expected to generate 880 GWh of clean energy, enough to power around 326,000 homes, and avoid over 155,000 tonnes of carbon dioxide emissions.
For Drax, this “significant transaction”, one of its biggest ever, was part of the generator’s plan to allocate up to £2bn into flexible and renewable energy this decade to deliver a “step change” in earnings and contracted cashflows, said chief executive Will Gardiner.
Gibbons said the sale had been made necessary by the higher interest rate environment which since autumn 2022 had caused BSIF shares to trade at a double-digit discount below asset value.
“Without fresh capital to invest in new projects, the portfolio’s quarterly NAVs have naturally declined with the payment of dividends. Against this changed backdrop, following an earlier evaluation of strategic options and shareholder feedback which indicated a clear preference for value maximising options, the BSIF Board acted decisively to initiate a formal sale process,” he said.
Our view
Matthew Read, senior analyst at QuotedData, said: “In light of the headwinds facing renewable energy infrastructure funds, this looks like a pragmatic outcome for Bluefield Solar Income shareholders. The offer provides a clean cash exit at a healthy premium to the undisturbed share price, even if it remains below the last reported NAV.
“BSIF is one of the sector’s longest-established funds and we have long regarded it as a high-quality operation. It has built a substantial UK renewables portfolio, with around 0.9GW of operating assets and a sizeable development pipeline. However, persistent sector discounts, higher financing costs and limited access to fresh equity have made it difficult for listed funds to grow and for the market to recognise that value.
“Our view is that Drax is getting a bargain. It is acquiring a scaled, cash-generative renewable platform with contracted revenues, development optionality and clear operational synergies at an attractive price, even after the headline premium. For BSIF shareholders, however, the certainty of cash may be preferable to waiting indefinitely for the discount to NAV to close.”
Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.
