Installing solar panels. Photo: OregonDOT, licensed under CC BY 2.0.

Analysing UK renewable energy yieldcos

Choosing one renewable energy closed-end fund over another isn’t straightforward. The different yieldcos available differ in size, the type of clean energy they use, the management fee they take and the financial gearing they employ. I explored the universe of different renewable energy yieldcos in a previous post, identifying a number of different listed structures. This time around I want to look at some of the different attributes and metrics of six UK-based yieldcos. The difficulty in assessing these yieldcos comes in evaluating the importance of different measures. Is the effective dividend yield most important to you? Or perhaps you’re trying to assess the financial structure in place or determine how efficient the renewable portfolio is?

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The universe of renewable energy YieldCos

Wind turbine in Glyndebourne by Mark Bridge, CC license:
Wind turbine in Glyndebourne by Mark Bridge, CC license:

I have long-believed in the necessity and potential for renewable energy, putting my money where my mouth was in 2012 via the Abundance Investment crowdfunding platform. My first investments were Padero South Downs and Resilient Energy Great Dunkilns. Padero South Downs aimed to provide free solar panels for residents in the UK’s South Downs region, however the project stumbled with the contractor being put into liquidation. Abundance decided this would create further delays and increase the risk to expected returns, so the debentures were paid back at par value. Resilient Energy Great Dunkilns (REGD) was more successful and its wind turbine continues to produce clean energy to this day, according to the project’s website. Abundance’s stake was eventually sold on to a local community benefit society and debenture holders received their capital back plus an 18 per cent premium calculated on the basis of outstanding capital. Over a six and a half year period REGD generated returns of 26 per cent or 4.01 per cent per year, although Abundance states an Internal Rate of Return (IRR) of 6.75 to 8 per cent variable. The difference here is probably due to my slightly more conservative calculation denoting a time period where my capital was in and then out, rather than when the investment officially closed and concluded. Nevertheless, for a single crowdfunded wind turbine, I thought this wasn’t a bad result.

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