NextEnergy Solar piles into Italy – Next Energy Solar Fund has made its first investments in Italy; eight operating solar plants with an installed capacity of 34.5MWp at a total cost of €131.9m. Five of the acquired plants are in the region of Puglia (total 21.5MWp) and three are in the region of Campania (total 13.0MWp).
The equity value of the acquisition amounts to EUR55.0m. The portfolio’s total outstanding long-term non-recourse debt facilities amount to EUR76.9m. The Italian portfolio value will account for £116.2m of a total portfolio value of £929.1m, or 12% of the total. They have a limit of 15% of gross asset value for OECD investments outside the UK. The acquisition will be financed from available financial resources.
All eight plants were grid-connected between 2010 and 2011 and benefit from the Italian feed-in-tariff (“FIT”) regime, with FITs ranging from EUR195/MWh to EUR318/MWh. The FIT revenues account for approximately 84% of total expected revenues in 2018, with the remaining 16% deriving from the sale of electricity into the Italian energy market. The FIT expires in 2031, after which the portfolio will continue to receive revenues from the sale of electricity generated at market prices.
NextEnergy says that the portfolio’s extensive operating history and significant on-going cash flow generation represents an attractive aspect of the acquisition and further mitigates operating and financial risks associated with the usual acquisition of solar power portfolios. In addition, the return profile of the acquisition is superior to returns on the existing asset portfolio and is therefore expected to be accretive to overall returns.
The portfolio assets have been financed with non-recourse fully amortising project financing debt transactions provided by a major Italian bank and a major European bank. The Italian bank provided one project financing covering four projects and the European bank provided a separate project financing covering the other four projects. The Italian bank’s project financing matures in June 2029. The European bank’s project financing matures in June 2030. Interest rate hedges in place cover between 75% and 95% of the outstanding principal of both project financings until maturity. NextEnergy will release the names of the banks upon receiving their consent to do so as per the financing contracts in place.
The investment manager, adviser and their affiliated entities (“NEC Group”) have long-standing experience in the development, construction, financing and asset management of solar plants in Italy. NEC Group has had a presence in Italy since 2007, with currently some 50 team members in its Milan and other regional offices and has over the course of its activities managed and/or monitored approximately 1,300 individual utility-scale solar power plants in Italy on behalf of equity owners and debt financiers. NEC Group’s expertise in Italy was key in identifying the portfolio, assessing its quality and in the acquisition process, and is further expected to facilitate the asset management of the Portfolio going forward.
Kevin Lyon, chairman of NESF, commented: “Following the expansion of the investment policy to include OECD investments outside the UK, we are pleased to announce our first international acquisition in a market in which our investment adviser has demonstrable long-standing expertise. Their experience and local presence in Italy will be invaluable in managing the portfolio going forward. This acquisition diversifies our market risk, while reducing the overall exposure to brown power prices across our asset base. In addition, implementing the foreign exchange hedge limits the effect of any currency fluctuations on the returns this portfolio will generate for us. All in all, this portfolio is a very attractive addition to our company. In parallel, the team continues its work on acquiring further solar assets in the UK at attractive values and I expect further announcements in the near future.”
NESF : NextEnergy Solar piles into Italy