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NextEnergy raises £85.6m

The revised ambition of the UK firm’s solar fund, whose original target was £150m, comes as investors’ appetite for listed renewables vehicles hits a bump.

NextEnergy Capital has announced the result of its latest fundraising effort with the £85.6 million (€104.2 million; $144.0 million) float of its Solar Fund.

In its initial prospectus issued on 18 March, the London-based merchant bank detailed plans to launch a listed fund on the London Stock Exchange with a target of £150 million. It then confirmed expressions of investor demand at the end of the month for a cumulative amount of more than £100 million.

The later loss of a “strategic investor”, however, led the firm to lower its fundraising target to £85 million earlier this month, it said in a statement then. The note further explained that NextEnergy had been “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, a “significantly greater” proportion of net proceeds was earmarked for investments in assets that are already operational. The firm also expected to declare a dividend of 5.25 pence per share for the financial year ending 31 March 2015, higher than the 4.0 pence per share indicated in the original prospectus.

The NextEnergy Solar Fund, which is targeting an RPI-linked yearly dividend of 6.25 pence per share, is aiming for long-term aggregate returns equal to an unlevered IRR of between seven and nine percent.

“The company has secured strong support from a number of top-tier institutional investors and private wealth managers. These investors have been attracted by the Company’s focus on lower risk operating solar power plants in the UK, the experience and track record of the Investment Adviser and the company’s attractive RPI-linked target dividend,” commented Kevin Lyon, non-executive chairman of NextEnergy, in a statement.

The news comes amid an apparent tapering of investor interest for listed renewable vehicles, a number of which recently fell short of their initial fundraising targets.

In late March, The Renewables Infrastructure Group (TRIG) garnered £66.2 million from a secondary offering that was previously aimed at raising between £85 million and £120 million. Also last month John Laing Environmental Assets Group (JLEN) reached its £160 million IPO target – but only after John Laing, the fund’s parent group, bumped its share in the offering from 24.9 percent to 40 percent.

Hoping to capitalise on investor interest in long-term, cash-yielding assets, a record number of renewable funds had previously launched on the London Stock Exchange, with more than £1 billion raised by five funds last year.