Gravis in UK solar debt deal

The subordinated debt fund is channelling up to £15m in loans to a portfolio of 1,500 domestic solar panel installations in England. The £65m PFI fund – fully invested – is considering raising new equity and putting in place debt facilities to capitalise on an ‘accelerated pipeline of opportunities’.

GCP Infrastructure Fund, a debt vehicle that invests in UK Private Finance Initiative (PFI) projects, is providing a maximum of £15 million (€17 million; $23 million) of loans against a portfolio of up to 1,500 domestic solar panel installations in England, London-based Gravis Capital Partners, the fund’s manager, announced yesterday.

The loans are expected to last for 23.5 years and will be “secured on a senior basis against the cash flows arising under the UK government’s feed-in tariff (FIT) scheme”. Drawdown of the loans will commence in mid-October at the rate of £5 million a month against a schedule of completed installations. 

“In our view the FIT scheme – particularly as it applies to domestic solar panel installations – offers all of the most attractive elements of PFI/PPP in that cash flows are long term, predictable, public sector-backed and inflation-linked, while generating a very wide spread of risks at the underlying asset level,” Stephen Ellis, managing partner of Gravis Capital Partners, commented in a release.

The recipient – A Shade Greener – is a private group which developed the free solar panel business model in England, which sees the company install residential solar panels at no charge to the users, recouping its investment via the UK government’s 25-year feed-in tariff scheme.

Gravis’ debut £65 million PFI subordinated debt fund was fully invested in May, but the investor said the new loans were funded “primarily from significant recent and ongoing inflows into the Master Fund from entities investing directly in [it]”. 

Gravis raised £40 million earlier this year through a feeder fund listed on the London Stock Exchange, known as GCP Infrastructure Investments, to help fund its £65 million Master Fund – the GCP Infrastructure Fund. Gravis is now considering raising new money for the Master Fund “through the issue of C shares” and by putting “in place debt facilities to provide further funding at the Master Fund level,” Gravis said in a statement.

GCP Infrastructure Fund, an open-ended vehicle, is targeting returns of 8 percent.