Downing Renewables & Infrastructure Trust, an investment trust set up with a view to investing in solar, hydro and geothermal power production capacity in the UK, Ireland and northern Europe, is planning a £200 million IPO. The trust is targeting a London-listing to help it raise the funds it needs to capitalise on what it expects to be a strong trend towards investment in renewables over the next 3 decades. ‘
The UK is pursuing a transition towards the ‘net zero carbon’ status and has targeted its achievement by 2050. London-listed oil and gas majors have also committed to achieving net zero emissions status by the same year. The drive is expected to see significant investment funds flood into the renewables sector.
Downing, a partnership with experience and a track record in renewables, having managed 116 investment projects since 2010, will manage the trust. Potential investors are likely to be encouraged by the fact that the partnership’s investments in renewables over the past decade have generated average internal rates of return at 9%.
Tom Williams, Downing’s head of energy and infrastructure, described the new trust’s portfolio strategy as investments in renewables assets “diversified not only by technology but by geography, project stage and revenue”.
Williams went on to explain:
“By constructing a truly differentiated portfolio in this way, we reduce our dependency on any one renewable energy resource, any single jurisdiction and any one set of policies and regulations.”
It is hoped that the diversification strategy to be adopted by the trust will offer it a natural hedge by “reducing the impact of seasonal variability”, which will lead to greater stability in revenues across medium to long-term time frames.
Downing says it has already identified a “significant pipeline” of potential acquisitions valued at over £1.5 billion. Advanced negotiations, aimed at securing exclusive access to Norway and Sweden-based wind and hydro assets, are underway.
The Downing Renewables and Infrastructure Trust is targeting a net asset value total return of between 6.5% and 7.5% per annum over the medium to long term. The listing is expected to take place in December and is being handled by N+1 Singer. Downing says that a cornerstone £30 million investment has already been committed to. The cash will come from a combination of £20 million that will be invested by Downing and funds it manages and £10 million from existing clients.
It has already secured £30 million of cornerstone investment, with Downing and funds it manages chipping in £20 million and a further £10 million from some of its existing clients.