Investment group Downing has announced it has raised over £50m for its renewables trust from its funding round earlier this month.
The equity raise will be used to repay outstanding fees drawn down from the company’s revolving credit facility – which amounts to £17.3m – and to boost its investment portfolio with the acquisition of near-term hydropower, wind and solar assets in the UK, Sweden and Finland.
Downing Renewables and Infrastructure Trust (DORE) raised gross proceeds of £52.9m for 47.6m shares – priced at 111p each.
Hugh Little, chair of DORE, said: “We are delighted to have exceeded our target and raised c.£52.9 million, particularly given the challenging capital markets backdrop. These proceeds will be used to repay the revolving credit facility and to invest in an attractive pipeline of near term opportunities, which are intended to further diversify our portfolio.”
DORE is a closed-end investment trust that trades on the FTSE AIM All-Share.
The fund aims to provide investors with sustainable income and capital growth, through a diversified portfolio of renewable energy and infrastructure assets in the UK and Northern Europe.
Its core objective is accelerating the transition to net zero carbon emissions through its investments, compiling and operating a portfolio of renewable energy and infrastructure assets to help facilitate the transition to a more sustainable future.
Transition difficulties ahead for renewable trusts
Russ Mould, investment director at AJ Bell told City A.M. the equity raise reflects investor enthusiasm in renewable projects, despite challenging economic headwinds.
He said: “DORE’s ability to upgrade the size of its offering and raise around a third of its pre-deal market capitalisation suggests there is still plenty of appetite among investors for the renewables story, especially as energy security remains a hot button topic in the wake of a surge in oil and gas prices and ongoing concerns about relationships with Russia. Investors’ search for sources of reliable income, and possible hedges against inflation, could also be factors behind the high levels of interest.”
However, Mould also suggested there remained challenges for the trust during the transition period to renewable with the continued importance of oil and gas to meeting the UK’s energy needs.
The investment director explained:“Managing the energy transition from hydrocarbons to renewables remains a key challenge and investment is needed to make it happen. However, this change, and those investments, will not come without risk. Whether we like it or not, renewables are currently less efficient than hydrocarbons as a source of energy and that is something that investors need to factor into their risk/reward calculations. They may also have to consider the relative importance of oil and gas against wind, solar and other options when it comes to managing this transition over the short- to medium term, even if the direction of travel looks pretty clear much further out.”
Downing is a London-based investment management firm with over 25,000 investors.
It currently manages £1.7bn of equity invested into businesses across a range of sectors, from renewable energy, care homes, health clubs, and children’s nurseries, to technology and sports nutrition.
It has made more than 176 investments into solar parks, wind farms and hydroelectric plants since 2010.