Gravis Capital Partners (GCP), the London-listed infrastructure debt fund, has closed on loans worth £26 million (€30 million; $40 million) to a portfolio of commercial biomass boilers, it announced last week.
The senior debt facilities will have an average life of 13 years and will yield circa 10.5 percent per year, payable in arrears, GCP said. The biomass boilers portfolio receives payments from energy regulator Ofgem, under the Renewable Heat Incentive (RHI) scheme, a UK government 20-year subsidy for non-domestic renewable heat generators and producers of biomethane in the country.
GCP says the RHI subsidies will be enough to service its loans.
The debt specialist added that, with this recent deal, it has managed to invest around three quarters of the £132 million in new capital it raised last autumn through C shares. Considering the fund is now over 90 percent-invested, the C shares issued last year will now be converted into ordinary stock.
GCP originally started life as a subordinated debt provider, but has recently found a niche providing senior debt to parts of the renewables sector.
“Our early investments consisted of subordinated debt secured against UK PFI [Private Finance Initiative] projects. However, we have recently been providing senior loans in the renewable energy sector that still hit our return requirement, particularly to developers of smaller projects that are really struggling to get hold of long-dated debt,” Rollo Wright, a partner at GCP, told Infrastructure Investor in a recent interview.
“The very few other long-dated debt providers are not usually willing to back smaller developers, preferring much larger projects. Given the interest we’ve seen from potential borrowers, it sometimes seems we are almost alone in this space,” he added.