Specialist finance house Aurium Capital Markets (Aurium), which provides investors with access to innovative investment opportunities, has warned that the government’s recent announcement to phase out all coal fired stations within ten years, has dramatically increased the chances of the UK having blackouts and energy security issues.
It says the coal announcement will actually place an increased reliance on renewable energy projects. Combined with falling long term infrastructure costs in this sector, rising power prices and the fact that the UK is behind on its emission reduction charges, as well as being a responsible way to fill the energy gap, the sector is an increasingly attractive long-term investment notwithstanding the phasing out of investment subsidies. Aurium is therefore aiming to raise up to £500 million for investment into the renewable energy sector, including adding to £200m already raised to help build and acquire a portfolio of major biomass and Energy from Waste (EfW) plants in the UK.
Steven Blase, Partner Aurium Capital Markets said: “The decision to remove coal fired stations increases the risk of the lights going out in the UK because it will have a negative impact on our energy capacity. Coal’s share of UK electricity generation was 30% in 2014, and renewables accounted for approximately 19%. This winter, for example, our overall excess energy capacity is just 1.5%.
“The announcement over coal makes the UK’s reliance on renewables even stronger, and we believe that the growing focus from investors for assets that provide long term steady returns with low or no correlation to other more mainstream asset classes makes this an increasingly attractive investment proposition for institutional investors.”
Aurium, which was rated by InfraNews as the No 1 UK solar debt provider and No 2 provider of debt in the UK renewables sector overall for 2014/2015, has delivered mid teen returns to its investors from the sector.
The company is targeting institutional investors, who it says are placing a growing focus on investment opportunities that have low correlation with equities and bonds, and which can provide a steady and attractive long-term return.
Aurium addresses a fundamental barrier facing developers of UK renewable projects: a lack of specialist finance. It assesses risk based on the unique nature of renewable projects rather than more traditional metrics, delivering liquidity regardless of the stage of the project (e.g. construction finance), the speed of turnaround (i.e. weeks not months) or the size of the project (i.e. too small for larger institutions).
In October this year, Aurium sponsored the launch of Bioenergy Infrastructure Group (BIG), a platform established to invest in the construction of biomass and EfW plants in the UK.
BIG has recently agreed to build a 21.5 MW EfW plant at Ince Park, Cheshire with a construction value of £87 million and also a £200 million 25 MW plant in Hull, East Yorkshire. The latter is expected to operational by January 2018 and will be the first Refuse Derived Fuel (RDF) based advanced combustion technology plant supported by the Government’s new Contracts for Difference (CfD) arrangements. CfDs aim to help stimulate investment in green energy developments to achieve carbon reduction targets by guaranteeing a fixed price for generators supplying energy.