NextEnergy Capital acquires its first solar project in India

The UK-based firm is funding the investment through its latest fund, NextPower III, which has raised around $280m and a target of $750m.

NextEnergy Capital, a UK-headquartered firm focusing exclusively on solar energy, has closed its first deal in India, acquiring a 27.4MWp solar project from German developer IBC SOLAR Energy.

The solar park, located in Odisha in eastern India, was built and has been operated by IBC SOLAR since May 2018. It has a 25-year PPA with an investment grade off-taker and 100 percent of the revenues contracted, NEC said.

The acquisition is funded through NextPower III, NEC’s latest vehicle, which has a $750 million target and around $280 million in commitments so far. Known investors in the fund include Finland’s Elo Mutual Pension Insurance Company and CCLA, one of the UK’s largest charity fund managers, NEC said in January when it announced a second close for the vehicle.

“The focus of the strategy is OECD investment-grade countries where NEC has deep expertise from its 13-year track record,” NEC’s managing director and head of investor relations, Shane Swords, told Infrastructure Investor. “India is the only APAC country that NP III has in its pipeline given its status as a key OECD partner country which offers both attractive risk-adjusted returns and long-term power purchase agreements.

“India will only be a very small percent of the fund (maybe 5 percent), and NEC does not have a dedicated strategy/fund for India; this is only part of what is a much greater OECD international strategy.”

The fund has acquired six solar assets with a total installed capacity of 384MWp and eight further projects under exclusivity with a total capacity of around 800MWp, according to NEC.

The total 1.2GW of the acquired and in exclusivity assets is nearly half the 2.5GW target NEC has set for the fund’s portfolio. According to Swords, NPIII is already ahead of its deployment target with 60 percent of its investment period remaining.

“The fund is performing ahead of the target IRR. Based on the current assets (acquired and in exclusivity) the net projected IRR is 16.2 percent, versus a target gross IRR of 13-15 percent,” he said.

Founded in 2007, NEC has solar assets under management of $2.3 billion across three investment vehicles: two private funds (NextPower III and NextPower II) and listed investment company NextEnergy Solar Fund. NP II has aggregate commitments of €232 million and owns 98 solar plants in Italy comprising 140MWp, while NESF owns 755MWp in the UK and Italy, comprising a gross asset value of £991 million ($1.3 billion; €1.1 billion).

Last May, NEC also launched NextPower UK ESG, an unlisted fund for which it seeks to raise £500 million that will initially house two subsidy-free UK solar farms with a combined capacity of 115MW currently under construction. NEC will target further UK subsidy-free sites and has about 600MW of a development pipeline it is bringing through and will transfer to the fund at a later date.

“NEC’s investment team is currently focusing its efforts to increase the portfolios in its carefully selected geographies, including the US, Latin America, southern Europe and India, where NP III has ongoing transactions, and expects to announce further acquisitions during the third quarter of 2020,” Swords said.