NextEnergy Renewables

NREN will offer investors access to the high return potential in private renewables funds…

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by NextEnergy Renewables. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

NextEnergy Renewables

NextEnergy Renewables (NREN) is a proposed investment company to be listed on the London Stock Exchange which will invest globally across the renewables energy space, investing in private funds and co-investments in order to offer a higher return potential than the existing listed renewables funds, as we discuss in the performance section.

NREN will target a 9-11% NAV total return, from a portfolio split roughly equally between private funds run by the manager NextEnergy Capital, private funds run by third parties and co-investments with those third parties in attractive assets or portfolios. The manager already has a seed portfolio of ten funds lined up, while co-investments are expected to follow as opportunities arise.

The targeted return includes a quarterly dividend worth 5.5p which is expected to grow each year. The dividend for the period from launch to December 2021 will be 3p.

NEC has a team of 200 professionals whose experience in the sector will be brought to bear on investment selection. While NEC specializes in solar power, NREN will invest in wind power, battery storage and emerging technologies such as hydrogen via third party managers who specialise in these assets.

As well as the potentially superior returns, NREN will be investing in early-stage assets, meaning it will be contributing to increase the renewables energy capacity in the global economy, as we discuss in the ESG section.

NREN is seeking to raise up to £300m, with a further placing programme enabling the manager to expand the size of the trust further. The intention is to use a revolving credit facility to manage liquidity when making new investments before equity can be raised. The closing date for the offer is Early March and the shares are expected to begin trading shortly after.

Kepler View

We think NREN is a potentially exciting addition to the renewables space, offering the ability to invest in private funds which would usually be out of reach of the ordinary investor. The high return target is attractive if it can be achieved, as the expected returns on the operational funds in the seed portfolio indicate it may (see portfolio section). Meanwhile the diversification in the portfolio is attractive in itself, and addresses some issues of concern to investors in renewable trusts. First, the UK market is becoming increasingly crowded, with returns potentially eroding as a result. Theoretically, NREN’s global remit should give it a better chance of sustaining high returns and grow the size of its portfolio. Secondly, the relatively short time horizon for the private funds and the strategy of turning over investments every 7 to 10 years should limit concerns about how long life assets are valued without any testing of the market.

Furthermore we think the ESG story is strong. NREN will invest in early stage projects and assets, meaning it will be helping to grow the pipeline of renewables energy supply rather than investing in mature assets for which there are no shortage of institutional or public market investors. Shares will be issued at a premium of 2% to the initial NAV, which compares to the renewables infrastructure average premium of 12%. As far as risks go, deployment risk is one to highlight. The strategy will require significant activity to identify suitable new third-party investments and co-investments, although as we discuss in the Management section, NEC has extensive resources to do this and the guaranteed seed portfolio will allow it to invest immediately a significant part of the IPO proceeds.

BULL BEAR
Strong secular growth trend to renewable energy should lead to broad pipeline of potential investments
Illiquidity of the underlying investments
Higher potential returns from investing in private funds
Manager’s area of expertise is solar, although external specialists will be hired for other asset classes
Global, flexible remit means returns potentially sustainable in the long run
Investment portfolio has not yet been assembled yet, with some uncertainty over third party investments to be made
Thomas McMahon
Thomas is a senior investment trust analyst and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.