UK – The UK solar infrastructure market is becoming attractive to institutional investors such as pensions funds, according to specialist private equity manager Oxford Capital.

Oliver Hughes, senior investment manager at Oxford Capital, told IPE: “The solar infrastructure market used to be a rocky road – now it is stabilising.”

Investments in solar infrastructure benefit from long-term, government-backed, index-linked yields under the Feed-In Tariff (FiT) and Renewable Obligation Certificate (ROC) schemes.

David Mott, managing partner at Oxford Capital, said: “Solar generation is a low-risk asset class, which, once operational, delivers a reliable government-backed income stream over the long term.

“Until now, the issue for institutional investors has been the fragmented market and a lack of large-scale solar assets.

“But in 2013, demand from pension funds and insurance companies has increased.”

Mott puts the increased interest down to the first “proper” institutional deal in the solar space taking place in the summer of 2012, when Aviva Investors acquired a 23MW portfolio of residential photovoltaic (PV) systems built on 7,000 UK domestic houses from HomeSun Holdings.

Greater certainty with regard to FiTs has also helped.

In 2012, the UK became the most important EU market for renewables, with 27% of transaction values within the EU, compared with only 7% a year earlier.

Significant growth is forecast, with 7-20GW of anticipated solar PV to be installed by 2020, compared with 2GW today.

Oxford Capital has launched a renewable energy infrastructure investment programme for pension funds and institutional investors, investing in portfolios of large-scale ground mounted and rooftop solar generation, primarily in the South East of the UK, which aims to deliver asset-backed, index-linked yields in excess of 7-9% over 20-25 years.

The manager already has around £50m (€58.1m) of solar-generation assets under management in its first two infrastructure programmes.

It has a number of exclusive relationships with long-term development partners that will provide access to a further 150MW of solar generation capacity before March 2014.

IPE and Stirling Capital Partners are co-hosting a conference, Infrastructure for Pension Funds and other Capital Owners, to take place on 2 October in London. For more information please visit www.ipe.com/infrastructure.

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