Wednesday 23 August 2017

Books open on €250m listing for Greencoat

Knockacummer Wind Farm in Cork
Knockacummer Wind Farm in Cork

Gretchen Friemann

The Ireland Strategic Investment Fund (ISIF) and AIB have committed to a one-year lock-up on their combined €100m stake in Greencoat Renewables, which is due to debut on the stock exchange on July 25.

State-backed ISIF and AIB are seed investors in the renewable infrastructure fund's IPO.

Books on the €250m float close on July 19. Davy and RBC Capital Markets, a Canadian broker, are running the deal.

Research compiled by RBC and distributed to prospective investors underscores the rapid expansion of the renewables funds industry. Since the flotation of first player Greencoat UK Wind in 2013, the listed sector in the UK has widened to six players worth a combined £3.6bn (€4.1bn).

The comparatively high yields on the funds - a key draw for investors - has helped ensure the sector trades at a premium to net asset values.

RBC predicts Greencoat Renewables here will benefit from the same dynamic and estimated that as the firm "delivers on strategy, it will also start to enjoy a valuation that includes a premium to NAV". The analysts calculate that the increase could range as high as 10pc.

While investors are likely to commit to Greencoat for its dividend - the fund is expected to generate a yield of close to 6pc - RBC's analysts argue that Ireland's wind market offers "strong" potential and estimate that capacity in this energy segment will increase from 2.8 gigawatts at the end of 2016 to 3.9-4.3 GW by 2020 , which "should create a market worth €5bn to €8bn".

Greencoat bought windfarms in Cork and Tipperary earlier this from Brookfield Renewable Ireland, an offshoot of Canada's Brookfield Asset Management.

The properties had originally been sold by the State in the Bord Gáis Energy privatisation.

Despite outage risks from an ongoing grid upgrade to Greencoat's biggest asset, the 100-megawatt wind farm at Knockacummer in Cork, which will transition the wind farm from the distribution to the transmission network, RBC insisted the works will leave little impact on the dividend.

Instead, the broker argued that even if Knockacummer was down for more that 20 weeks, the NAV would remain unaffected. Greencoats could also switch the wind farm back on to the distribution network with relatively short notice.

RBC said that even in a low-wind year, Greencoat's dividends would be fully covered by "net operating cashflows".

Greencoat will float on London's Alternative Investment Market (AIM) and Dublin's Enterprise Securities Market (ESM) at €1 a share.

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