The UK’s National Wealth Fund has committed £250m as a cornerstone investor to NextPower UK ESG, which focuses on new-build solar projects.
Renewable energy investor NextEnergy Capital has announced that NextPower UK ESG (NPUK), its biggest private fund focused on new-build solar projects in the UK, reached a final close at £733m (€869m). As previously reported by Impact Investor, NextEnergy Capital had set an initial fundraising target of £500m when it launched its fourth solar energy focused fund in 2021.
The National Wealth Fund (NWF) allocated to NPUK as a cornerstone investor, committing £250m on a match-funding basis to draw private capital into new-build renewable projects in the UK.
“NextPower UK has been another success story for NextEnergy Capital and the wider NextEnergy Group in the backdrop of a difficult global fundraising environment,” said Michael Bonte-Friedheim, group CEO and founding partner of NextEnergy Group, which has $4.5bn (€4.1bn) in assets under management.
“NextPower UK clearly demonstrates the demand from investors for this type of strategy, run by a specialist investment manager with a significant track record of capital deployment into high-quality assets,” Bonte-Friedheim said.
The solar fund attracted several new investors, which included mainly local government pension pools from the UK, and international investors from the United Arab Emirates and Japan, a NextEnergy Capital spokesman told Impact Investor. Landing the NWF as a cornerstone investor had been “a really strong catalyst, and a seal of approval for other investors,” the spokesman added.
UK’s biggest solar farm
To date, NPUK has invested more than 70% of its committed capital on 15 assets. These include Llanwern solar farm in Wales, which is the UK’s largest operating solar power plant. Once fully deployed, NPUK’s assets are expected to produce more than one gigawatt (one billion watts) of capacity, and help the British government towards its goals of trebling solar capacity by 2030, according to NextEnergy Capital.
“Today’s announcement perfectly demonstrates the impact our investments can have. Catalytic capital deployed by the National Wealth Fund going forward can help mobilise institutional investment into clean energy projects across the UK, driving growth and providing greater capacity to power homes and businesses,” said Stuart Nivison, NWF’s head of portfolio management.
The NWF was established in October last year by the British government to help finance the energy transition and drive economic growth. It replaced the UK Infrastructure Bank and is wholly owned by the UK Treasury, and will provide £27.8bn of funding to partner with the private sector and local government to mobilise private investment.
Institutional investors
“As long-term institutional investors with a global outlook, we see the UK as an attractive market that punches above its weight for development-stage renewables, given the strong market fundamentals and increasing policy support we are seeing here,” said Imraan Mohammed, portfolio manager at Leeds, England-based Border to Coast Pensions Partnership, one of the biggest pension pools in the UK.
“We are committed to investing in high-quality infrastructure opportunities that align with both financial objectives and sustainability principles on behalf of our partner funds,” said Nadeem Hussain, head of private markets and co-chief investment officer at LGPS Central, which manages the pooled assets of eight local government pension schemes in the Midlands, central England.
Hussain added that NPUK offers “long-term, stable returns from utility-scale solar farms while driving meaningful environmental impact”.
NextEnergy Capital plans to launch a follow-on strategy, NextEnergy UK II, early this summer, which will likely have a fund size of around £750m, according to the NextEnergy Capital spokesman.
“There is between 16 to 17 gigawatts of operational solar currently deployed in the UK, which the British government wants to lift to 50 gigawatt by 2030. A huge amount of investment will be needed, mainly from private sources, but also from capital markets. So there is a huge opportunity here in the UK,” the spokesman said.
