South African investors’ appetite for listed offshore assets has been well fed by property counters like Capital & Counties, Intu Properties and most recently Hammerson, which listed last September. These funds have a primary listing on the London Stock Exchange, a secondary listing on the JSE and an asset base that is largely UK and Europe domiciled.
Now a solar energy fund run by UK investment firm Foresight will be listed on the JSE in early April, via the JSE’s fast-track process.
The placement of a maximum of 250m shares will be a private placement to institutions, with the minimum investment being R1m.
The Foresight Solar Fund is the second largest of its kind in the UK, with a gross asset value of about £614,2m (R9,8bn), a net asset value of £360,2m (R5,7bn) and a market capitalisation on the LSE of about £370m (R5,9bn), as of 1 March 2017.
It is aiming to raise £50m via both this listing and a rights offer and private placement of shares in the UK and a further £200m during the course of the year.
Holding company Foresight Group started out life as a private equity player in 1998, investing in growth companies in the tech sector, among others. It established its solar investment team in 2007 and its first fund, the Foresight European Solar Fund, in early 2008. The investment manager now manages about 900MW of solar assets worth £1,3bn across Australia, the UK, Italy and the US. Of this, over 400MW is held in the Foresight Solar Fund, which will be listed on the JSE.
While there are no immediate plans to invest in South African solar projects, the fund is highly acquisitive and this is not off the table. “We have an attractive pipeline in the UK and will initially pursue these opportunities,” says Ricardo Piñeiro, head of UK Solar at Foresight Group.
What is attractive about a JSE listing is the depth of South Africa’s capital markets coupled with the market’s understanding of renewable energy and solar in particular, thanks to the Renewable Energy Independent Power Producer Procurement Programme.
“The South African market is very aware of how renewables work, but for investors there are no utility-like investment options, which have stable cash flows and yields,” says Piñeiro.
Foresight’s asset portfolio is cash generative with a high proportion of contracted, inflation-linked cash flows and an attractive 6% pound-denominated annual dividend yield. The fund’s main objective is to provide investors with a sustainable, inflation-linked and growing dividend, together with the potential for capital growth over the long term.
As part of its strategy to unlock value through acquisitions in the consolidating UK energy sector, the fund recently concluded its second major acquisition for 2017 with the completion of the Sandridge solar deal in the UK. This added 122MW to the existing 350MW.
“Since listing in 2013, we have come back to the market several times and will continue to do so as we are in a growth phase,” says Piñeiro. “We finance acquisitions using debt, and then capital-raise to repay that debt. In this way we avoid a cash drag for investors, and they always know what they are investing in.”
The proposed listing price (net asset value per share of 105p plus listing costs) will be released on 14 March, with share subscriptions closing on 29 March and the formal listing on 3 April.
- This article was originally published on Moneyweb and is used here with permission