Solar investor NextEnergy Capital (NEC) has secured a “first-of-its-kind” debt financing from Santander as it continues its UK subsidy-free build-out.
A non-recourse debt financing structure of £100 million (US$123 million) is to be provided by Santander to cover investment in two subsidy-free projects, which are to have a constructed value of over £60 million, NEC said.
The 75MW Llanwern site in South Wales - which NEC is lauding as the UK's largest solar farm to date - and the 40MW Strensham site in Worcestershire are to benefit from the financing.
It is expected that the two farms will be connected to the grid in Q4 2020, with both to be contracted with Power Purchase Agreements. NEC then plans to move the farms to a new subsidy-free private fund dubbed NextPower UK ESG, which is to target a “significant number” of new-build subsidy-free solar projects in the UK.
The investor currently manages three investment vehicles: two private funds, NextPower III and NextPower II, and its listed investment company, NextEnergy Solar Fund (NESF), the latter of which owns c.754MW across 90 assets in the UK and Italy, comprising a gross asset value of c.£1,060 million (US$1,305 million).
NESF already has operational subsidy-free solar sites in the UK, including the 50MWp Staughton solar farm, which it celebrated as the UK's largest subsidy-free site when it was connected to the grid in 2019.
In April, NESF stated it was planning to start construction back up again "shortly", with an 8.5MWp extension first on the list. Its UK portfolio performed above expectations in the year ended 31 March 2020, with a generation outperformance of 4.6%. NESF is targeting an operational subsidy-free solar pipeline as large as 150MW by the end of this year.
Michael Bonte-Friedheim, CEO and founding partner of NEC, said it was a "pleasure" to announce the new financing structure and the beginning of construction, particularly in light of the "challenging backdrop" of the COVID-19 pandemic. This, he said, "shows the strength and depth of the teams involved, coupled with the resilience of solar as an asset class in these times".
Santander has partnered the NextEnergy Capital Group previously, having agreed a £40 million (US$49 million) revolving credit facility with NESF in 2018. Santander has also funded battery storage as well as solar, announcing it was providing a £25 million (US$31 million) non-recourse debt facility to UK battery storage firm Zenobe in 2019, allowing it to target behind-the-meter services and construction of new utility-scale projects.
Santander Corporate & Investment Banking's Alejandro Ciruelos said: “This is a groundbreaking transaction and an important step forward in making subsidy-free renewables viable in the UK.“
May 26 - May 27, 2021
Looking at the drivers and dynamics of utility scale solar in the UK & Ireland over the next five years. This event will consider the immediate challenges as we enter the build phase in both these markets where we could see as much as 4GW deployed in 2021 alone! What developments will continue the growth of 100MW+ sites and what impact will government policy have on the rate of deployment in both markets?Join leading developers and manufacturers shaping the direction of one of Europe’s most active markets and hear from speakers with a history of influencing innovation and change.
Feb 03 - Feb 04, 2021
The business of solar is changing, as the industry scales up, technology, IT and new players to the market will add complexity. This sparks a host of opportunities such as co-location of solar and storage and the rise of unsubsidised solar projects as well as challenges which will question the very business model of European solar asset owners. Solar Finance & Investment Europe is the meeting place for institutional investors, sovereign wealth funds, solar, wind and storage funds and large energy buyers to do business.