Wind energy fund plans $320 million IPO with government backing

LONDON Wed Feb 6, 2013 11:53am GMT

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LONDON (Reuters) - A new fund focused on buying wind farms in Britain plans to raise at least 205 million pounds through a government-backed flotation on the London stock exchange.

Greencoat UK Wind, an infrastructure fund managed by Greencoat Capital, said on Wednesday that it had signed agreements to acquire six operational wind farms from utilities SSE (SSE.L) and RWE (RWEG.DE).

The British government is backing Greencoat's flotation, investing to the tune of 50 million pounds on a 100 pence issue price, in a move which it said will help catalyse additional private investment in the renewable energy sector.

Britain needs to invest huge sums to meet its target of generating 15 percent of its energy demand from renewable sources such as wind by 2020.

Greencoat believes its acquisition of already operational wind farms will be part of a trend of changing ownership of Britain's wind energy assets, currently operated mainly by utility firms.

By divesting wind farms to funds like Greencoat, utilities will be able to raise money to recycle back into building new wind farm developments, while retaining deals to buy the electricity the farms produce.

"Our view is that there's a lot of opportunity to grow. We expect the other utilities to come and talk to us," Greencoat Capital partner Stephen Lilley said in an interview with Reuters.

SSE said it will sell four wind farms to Greencoat for 140 million pounds, and invest up to 43 million pounds in Greencoat shares. The four farms have a generation capacity equivalent to around 5 percent of SSE's total wind farm capacity.

"The proceeds from these disposals will support our investment in new renewable assets in the coming financial year," SSE's finance director Gregor Alexander said.

Europe's IPO market, which has been struggling because of the region's long debt crisis and sluggish economic growth, started to show signs of life in the final months of 2012 as confidence picked up.

While the recovery remains fragile, ebullient stock markets have already this year encouraged several firms in Europe, including British housebuilder Crest Nicholson, to launch plans to float.

Greencoat, which has an option to increase the size of the issue by 55 million pounds, said its proposition will be attractive to investors, with plans to provide a steady income via an annual 6 pence dividend which will rise in line with inflation.

Both SSE and RWE - which is selling stakes in two farms to Greencoat - said their divestments were conditional upon Greencoat listing successfully, a process which is expected to be completed by the end of March.

RBC Capital Markets is acting as coordinator, sponsor and joint bookrunner on the deal.

(Additional reporting by James Davey and Kylie MacLellan, Editing by Rosalba O'Brien)

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