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NextEnergy lowers IPO fundraising sights

The NextEnergy Solar Fund has lost a £30m strategic investor, and has brought its minimum target down from £100m to £85m.

In a second supplementary prospectus issued today, the NextEnergy Solar Fund has announced that it is now targeting a minimum issue size of £85 million (€103 million; $143 million) from its forthcoming initial public offering (IPO) on the London Stock Exchange.

In its initial prospectus, issued on 18 March, it was announced that the fund would be targeting £150 million. In a first supplementary prospectus, issued on 31 March, it said it had received preliminary expressions of demand in excess of its minimum gross proceeds of £100 million.

In its latest announcement, NextEnergy reveals that a “strategic investor” which was considering an investment of £30 million, will no longer be participating. The firm said it was “unable to agree terms with the strategic investor that it believes would have been in the best interests of shareholders as a whole”.

As a result of the reduction, NextEnergy said it would invest a “significantly greater” proportion of net proceeds in assets that are already operational and that it now expected to declare a dividend of 5.25 pence per share for the financial year ending 31 March 2015 rather than the 4.0 pence per share indicated in the original prospectus.

In addition, it said it would now meet all the expenses of the issue in full and that, consequently, its expected the opening net asset value (NAV) will be 100 pence per share rather than the 98 pence previously indicated. Neither the investment adviser nor any member of the NextEnergy Group will subscribe for ordinary shares in the issue.

Furthermore, the fund announced that if NAV has not reached £300 million on or before the fifth anniversary of admission, the board would propose a special resolution at the company’s annual general meeting that the company “ceases to continue in its present form”.

The NextEnergy Solar Fund is targeting an RPI-linked yearly dividend of 6.25 pence per share. The vehicle is aiming for aggregate returns to investors over the long term equal to an unlevered IRR of between seven and nine percent. Fees will be worth one percent of net assets under management – declining as the net asset value grows – with no performance or transaction fees.

NextEnergy Capital, the UK merchant bank that will manage the fund, was founded in 2007 by Michael Bonte-Friedheim, a former managing director within Goldman Sachs’ energy and power unit, with the ambition to become “the leading specialist merchant bank for the renewable energy sector”. Wise Energy, its asset management subsidiary, manages more than 1,100 solar plants worth an estimated £3.1 billion.