The US solar power market is going to double in total capacity within the next four years. Many of the projects to be built have already been signed to one document or another – for instance, Texas has a pipeline greater than 40 GW (approximately 2/3 of total US capacity currently), with greater than 7 GWac already with interconnection approval. And it is going to take an enormous volume of capital to make it happen – as evidenced by a wall of money in place, and hundreds of millions at a time rearing up for the attack.
US Solar Fund PLC (USF) has raised approximately $200 million with the goal of deploying the investment in the US solar market over the next six months. The fund is being run by New Energy Solar (NEW), a Sydney, Australia based firm managing $800 million globally, with at least 14 projects already in the US. NEW invested $15 million of its own money into the new fund.
USF’s investment goals are consistent with NEW’s investment strategy of targeting investments with an objective of an annual dividend yield of 5.5% once the portfolio is fully operational and a net total return of at least 7.5% p.a. (net of all fees and expenses but before tax) over the life of its solar investments. The company aims to sign power purchase agreements with investment grade companies over at least 15 years.
The group noted they’ve found $4.8 billion worth of 14 investment opportunities comprising 60 projects across 13 US states.
The fund’s chief executive John Martin noted that the US has a large and rapidly growing solar market which they forecast to require at least $38 billion for utility scale solar.
The fund was listed in London for multiple reasons, the first of which is that there has been considerable success in funds of this nature in recent times. NEW suggested that strong European institutional investor interest in gaining exposure to utility-scale solar infrastructure in the United States through a listed US$ denominated investment vehicle is the main driver for the rationale.
Citywire noted that three pure solar funds – Bluefield, Foresight and NextEnergy – are currently offering yields of around 6% for which there has been strong investor demand, pushing their shares to premiums of 8%-16% above their net asset value (NAV).