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Bluefield Solar to diversify to battle ‘volatile’ energy future

The London-listed fund will set aside 25% of its gross asset value for non-solar investments as it prepares for increased renewables in the system.

London-listed Bluefield Solar Income Fund has set out plans to diversify beyond solar power, as it prepares for medium-term changes to the UK energy system.

The fund, which has been listed since 2013, is one of the largest owners of UK solar assets with a total portfolio capacity of 478MW. It has now set out plans to shareholders to allow it to invest up to 25 percent of its gross asset value – currently £656.7 million ($812.1 million; €719.6 million) – in other renewable technologies such as wind, hydropower and battery storage.

“The UK energy market is very different today from where it was in 2013, largely because we’ve got much higher levels of renewables,” James Armstrong, managing partner at Bluefield Partners, told Infrastructure Investor. “What will the future hold and how will we grow the business? We’ve taken what the shareholders are looking for and looking at where the market is going.”

Armstrong added that shareholders have appreciated BSIF’s approach of “not jumping in” for assets. The fund bought three plants for £13.9 million in January, which remains its only acquisition this year and its first since April 2018.

Armstrong also said the changes to the investment strategy were not a result of the coronavirus pandemic, rather they were in the energy system that Bluefield had been studying for several months, the effects of which had been accelerated by covid-19.

“The consequence of higher levels of renewables and intermittency is there will be growth and you need to be able to protect and enhance earnings in that slightly more volatile environment,” he explained. “If we were going to construct a portfolio today with that in mind, we looked at what for the next three, five and 10 years will be a really attractive mix for our shareholders. Wind is very complementary and has a similar risk profile.”

In March, Bluefield hired Baiju Devani from The Ingenious Group as an investment director to lead its efforts in the search for wind power assets. However, while BSIF outlined storage as one possible investment outcome, this remains a more medium-term possibility.

“Batteries are going to be fundamental to the success of decarbonisation. It’s of the upmost importance that it happens,” said Armstrong.

“Our view is that today we don’t see the revenue stack as being as predictable as it sometimes portrayed. We think it is sometimes difficult to see how that works. Nevertheless, it’s going to work. Whether the economic conditions change – be that incentives or otherwise. Our job is to educate ourselves and be ready to invest when [it’s] economically sound. Whether that is six months, 12 months or three years I can’t tell you. We are spending a lot of time making sure we understand how the storage market works and how it can maximise our existing and future portfolio.”

The changes also allow BSIF to invest up to 10 percent of its GAV in assets outside the UK, although Armstrong clarified this was to accommodate potential portfolio opportunities that contain attractive UK-based assets.