Low Carbon, one of the UK's fastest growing renewable businesses and Palmer Capital, the pan-European real estate fund and asset manager, have launched the first fund formed specifically to invest in UK solar parks.
The UK Solar Income Partnership aims to raise £52 million (approx. 60 million) from institutional investors, which will be used to acquire three existing solar parks from Low Carbon, the first 5MW sites to receive OfGem accreditation in the UK.
The Solar Fund will be a 10-year, closed-ended, tax efficient investment vehicle, which aims to provide investors with the opportunity to receive an attractive long term rate of return supported by Government backed income in the form of the Feed in Tariff ('FIT').
The FITs have been introduced by the Government to help increase the level of renewable energy in the UK towards meeting the legally binding EU Renewable Energy Directive target of 15% of total energy from renewables by 2020. The FITs are RPI indexed and applicable for 25 years.
The Fund will target an 8% net return to investors per annum, with a high yielding 8% annual distribution and there is an option to extend the Fund to 25 years. The management team will co-invest £2 million of equity into the Fund. Palmer Capital is acting as sponsor to the Fund while Low Carbon, developer of the solar parks, will be responsible for fund and asset management.
The Solar Fund will acquire three completed and operational 5MW solar parks, all of which have been developed by Low Carbon which has developed the largest number of solar parks in the UK to date. The sites are located at Kilkhampton, Hayle and St Austell in Cornwall, and are situated in prime solar positions of between 21 and 25 acres.
The three parks comprise over 65,000 photovoltaic ('PV') solar panels producing over 15 million kWh (Kilowatt hours) per year, offsetting over 7,000 tonnes of carbon which equates to enough energy to power 3,000 homes.
The Solar Fund also has an option to acquire a fourth solar park, also in Cornwall, which, if exercised, would mean that the Fund own four of the 12 solar parks in the UK.
FIT is a UK Government program designed to reduce the threat of climate change by promoting the uptake of a range of renewable and low-carbon electricity generation technologies. It requires Licensed Electricity Suppliers (FIT Licensees) to pay a generation tariff to small-scale low-carbon generators for the electricity they generate.
In June 2011, the Department of Energy and Climate Change ('DECC') reaffirmed the rates payable when it stated that it "will not act retrospectively and any changes to generation tariffs implemented."
Roy Bedlow, CEO Low Carbon, said: "Solar photovoltaic power is a commercially available and proven technology with significant potential for long-term growth. It is estimated that by 2050, PV will provide around 11% of global electricity production which is the equivalent of reducing carbon-based emissions from the average annual electricity use of 253 million homes.
"However, in the UK solar PV only accounts for around 0.1% of total generating capacity, whereas Germany, which has a similar solar resource to the UK, has installed 6GW to date and regularly produces 20% of its daytime energy requirement from solar power. These three British solar parks that will be acquired by the Fund represent an important first step to enabling the development of yet more renewable energy and help us shape a profitable low carbon economy."
Commenting on the Solar Fund, Alex Price, CEO of Palmer Capital said: "The Solar Fund demonstrates Palmer Capital's willingness to use both its real estate and financial expertise to identify opportunities to structure and bring forward innovative, leading-edge funds which maximize returns for clients.
"We are one of the first property companies to invest into renewables, and one of the first to see a new alternative institutional asset class emerging from the cross over between real estate and renewable energy schemes. Low Carbon is a market