Greencoat U.K. Wind has gone public in the UK in the country’s biggest renewable energy IPO to date.
The company raised $395 million, surpassing its goal for $321 million. Both the UK government and utility SSE said they would buy shares.
The infrastructure fund, which is managed by investment group Greencoat UK, will use the funds to buy its first six wind
farms that combined have a capacity of 126.5 megawatts.
Greencoat plans to buy only operating wind plants and give shareholders a 6% dividend on the initial share price, triple that of bonds.
With Greencoat standing ready to buy them, utilities would continue to build wind farms and once operational, sell them to Greencoat. Utilities would use the cash to build more wind farms, onshore and offshore.
It would boost investor confidence in the UK wind energy sector which has been waning because of uncertainty over government support.
"The IPO being progressed by Greencoat Capital is an elegant solution, and something that is likely to be replicated," Richard Simon-Lewis of Lloyds Banking told Bloomberg.
Once operational, wind farms have predictable, low operating costs, which are well suited to long term ownership through a fund. Returns don’t depend on the changing cost of fuel, as is the case for natural gas and coal plants.
The UK’s target is to source 30% of electricity from renewables by 2020 (up from 12% now), but the government is struggling to finance them.
In related news, biofuels company Mascoma withdrew its proposed $100 million IPO in the US because of "market conditions."
Mascoma follows Enerkem, Fulcrum BioEnergy and Coskata, all biofuel companies that have shelved IPO plans over the past year.