Greencoat Solar II LP Set to Purchase 156MW solar portfolio in the UK

An agreement is underway for the UK asset management company Greencoat Capital to buy a solar portfolio with an output capacity of 156MW from BlackRock Real Assets and Lightsource bp on behalf of a number of the UK’s largest pension funds.

Financial details for the deal have not been made known though the companies have said that Greencoat will acquire 100% ownership of the assets. This purchase increases the solar generating capacity of funds that are managed by Greencoat to approximately 880MW.

Greencoat Capital official Karin Kaiser is very happy with the deal and said:

“This is a brilliant portfolio of proven operational assets that will provide our clients predictable cashflows with inflation protection over the long term, whilst contributing to the decarbonisation of the UK’s electricity sector. The acquisition takes installed solar capacity to over 880MW, across the funds we manage, generating enough power across the year to power all the homes in a city the size of Manchester. We continue to see a strong opportunity for solar aggregation in the UK, and an active near-term pipeline. This transaction delivers to investors in Greencoat Solar II long term secure income cash flows that over the long lifetime of these assets will be uncorrelated to general stock market factors.”

At the same time Lightsource BP’s chief investment officer Paul McCartie said the transaction was “testament to the strong growth of the UK market”.

“The portfolio was originally developed and constructed by Lightsource BP and is today a strong operational portfolio,” he added. “We look forward to working with Greencoat and continuing to provide operational services in the future.”

The solar PV portfolio is broadly made up of projects backed by Renewable Obligation Certificates (ROCs) with an average of 16 years of support remaining but one of the assets, the 14.4MW Charity solar project in Shropshire, is backed through a Contract for Difference.

Under the Renewables Obligation (RO) scheme, introduced by the UK government as a support mechanism for large-scale renewable projects, suppliers must generate an increasing proportion of their electricity from green sources. Operators are issued RO certificates (ROCs) based on the amount of electricity they generate for a period of 20 years. This scheme was closed to new generating capacity in 2017.

A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades.

BlackRock’s Global Renewable Power team acquired a 90% stake in the portfolio in 2017 via its partnership with Lightsource bp. Lightsource bp maintained a 10% stake in the portfolio at this time. The partnership has delivered financial and operational improvements throughout its holding period and realised the de-risked portfolio at a premium for investors.

Lightsource bp will continue to provide asset management and operational services for the projects which generate enough electricity to supply around 45,000 homes while offsetting 65,000 tonnes of carbon emissions annually.

BlackRock Renewable Power global chief investment officer and Europe head Rory O’Connor commended the purchase maintaining it demonstrated the resilience of the renewable sector despite the Covid-19 pandemic.

“The structural transition to a lower-carbon future is providing attractive investment opportunities in renewable power globally. There is a significant re-allocation of capital underway that underscores the resilience of the sector, even while public markets face uncertainty as the world addresses the COVID-19 pandemic.”

He added that the recent close of Blackrock’s Global Renewable Power II Fund at $1.5bn provided further evidence of “strong ongoing demand from our clients looking for renewable power and climate infrastructure investment opportunities that can deliver attractive and sustainable returns”.

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