NextEnergy’s new £300m listed fund targets ‘private energy transition market’

The new London-listed vehicle will offer broad access to private markets renewable energy funds and co-investments.

UK-based renewables manager NextEnergy Capital is looking to raise £300 million (407.8 million; €338.8 million) for a new London-listed fund to invest across a broad range of private renewable energy funds.

The NextEnergy Renewables vehicle is raising the capital on London’s stock exchange until the beginning of next month, aiming to deliver net returns of 9-11 percent. The strategy is set to deploy capital equally across international private renewable energy funds, co-investments and commitments to NextEnergy’s own private market vehicles, for which it is currently raising international solar fund NextPower III and UK-focused fund NextPower UK ESG.

The strategy has been launched to give investors in the listed market an opportunity to invest in private renewables funds, where the opportunity for higher returns is much greater, according to Michael Bonte-Friedheim, founder and chief executive of NextEnergy Capital.

“Our own experience indicates that private vehicles are able to achieve higher returns than listed vehicles,” he told Infrastructure Investor, pointing to an average return of 5-6 percent among listed renewable energy funds. “We’ve taken these learnings and come up with a product that enables investors that can only invest in listed equities to access that private energy transition market.”

NextEnergy has managed its own listed vehicle, the NextEnergy Solar Fund, which launched in London in 2014 and now owns 763MW of UK solar capacity across 91 sites. However, the buy-to-hold structure of NESF and similar listed vehicles is one of the reasons why Bonte-Friedheim believes NextEnergy Renewables can generate higher returns.

“On the listed side there is shareholder pressure to deploy. In the private markets you can wait to find the more attractive assets that are higher returning,” he explained. “The private vehicles are also focused on the exit and so the management teams are focused on building portfolios that can realise high sale values, compared to the listed sector.”

Bonte-Friedhem added that the fund’s pipeline, in addition to its investments in NextEnergy’s own products, includes a list of about 10 active renewables vehicles, diversified across geographies and technologies.

NextPower III today made its latest acquisition, adding 39MW of Portuguese solar assets to the portfolio, which now amounts to 430MW. The fund, which was launched in 2018, has raised about $300 million to date ahead of its target of $750 million.