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US solar fund raises £153m as IPO market stirs to life

11 April 2019

US Solar Fund (USF) has become only the second investment trust launch of the year, raising $200 million (£153 million) in its initial public offer.

US Solar Fund (USF) has become only the second investment trust launch of the year, raising $200 million (£153 million) in its initial public offer.

The amount raised falls short of the $250 million (£191 million) its Australian fund manager, New Energy Solar Manager, sought. It follows a brief hiatus with the flotation delayed by a month as investors completed due diligence.

However, the launch, brokered by Fidante Capital, is well above the £100 million mark viewed as the minimum to get on the buy-lists of wealth managers, the biggest and most active investors in London-listed closed-end funds.

The company will invest in the rapidly growing US solar power market where it has identified 14 potential investments worth $4.8 billion from which it is seeking a 7.5% annual shareholder return, 5.5% in dividend income.

Its shares will be listed on the premium segment of the London Stock Exchange at $1 and will begin trading next Tuesday.

The launch is another sign that the quiet stretch for investment company flotations which set in the second half of last year may be ending. Last month Baillie Gifford raised $477 million (£364 million) from North American pension funds and UK institutions for Schiehallion Fund, which will invest in late-stage private companies and is listed on the LSE’s specialist fund segment.

Gill Nott, chair of US Solar Fund, said: ‘We are delighted by the success of our fund raise, the first premium-listed investment company IPO of 2019, which has been achieved at a time of considerable political and economic uncertainty.’

John Martin, chief executive of New Energy Solar Manager, said he was pleased with the response from institutional investors. ‘We look forward to deploying the proceeds into our high quality pipeline of opportunities and delivering long-term, stable, risk-adjusted returns.’

USF joins a growing band of renewable infrastructure funds launched to supply capital to the burgeoning clean energy market and provide an alternative source of investment income while interest rates remain low. It will be the eleventh investment company in a sector with a total market value of £6.7 billion following the recent over-subscribed £302 million share placing by the Renewables Infrastructure Group (TRIG).

Although flotations are in short supply, a number are waiting in the wings, such as Aquila European Renewables Income which is being marked by Numis Securities and looking to raise €300 million.

Alternative, non-equity income remains the main draw for secondary share issuance. Greencoat Renewables recently raised €148 million and the Warehouse and Supermarket Income real estate investment trusts raised £76 million and £45 million in their respective share placings. Tufton Oceanic Assets (SHIP) has also been active, raising $350 million, followed by smaller issues from TwentyFour Income (TFIF), which raised £23 million and RM Secured Lending (RMDL) £14 million.

According to Winterflood Securities, a total of £563 million has been raised through trusts’ regular share issuance this year with Smithson (SSON), Finsbury Growth & Income (FGT), City of London (CTY), BB Healthcare Trust (BBH), Capital Gearing (CGT) and Personal Assets (PNL) all active last month.

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