Downing is launching a new Renewables and Infrastructure Trust, with a closing date of December 4.
As the name suggests, this trust will invest in renewable energy projects, wind, solar, hydro and geothermal.
Over the past decade Downing has invested in 116 renewable energy projects, delivering an annualised return of 9 per cent on realised investments.
At launch, UK solar projects will make up a £50m portfolio of seed assets, but longer term this trust will be more diversified, especially from a geographical perspective.
Up to 60 per cent could be invested outside the UK, with the Nordics being the key investment region.
To add some oomph to long-term returns, up to 35 per cent will be invested in construction projects.
These will not be revenue generating but provide capital growth potential.
The underlying revenue stream will come from a mix of generation, subsidies and power price agreements, maximising long-term agreements with creditworthy counterparts.
Trust gearing will be up to 10 per cent; however, the underlying projects could have gearing of up to 50 per cent.
The annual fee will be 0.95 per cent up to £500m. A dividend of 3 per cent is projected for 2021 and rising thereafter.
Most existing renewable energy trusts trade at a substantial premium to the assets, often 10 per cent or more – with this new launch you buy at par value. The trade-off is not having 100 per cent invested on day one.
In an investment landscape shorn of dividends, renewable energy has delivered through the turmoil.
Sustainable and income paying makes for a compelling investment.
Downing has over a decade of experience in renewable energy investing and this new trust is a logical move, giving the opportunity to invest at par value when most renewable energy trusts are trading at substantial premiums.
Ben Yearsley is a director at Shore Financial Planning
