Solar21 has succeeded in building a fund of more than €100m from Irish investors. The fund, which invests in solar photovoltaic (PV) farms across Europe, expects to morph to €500m in the next 18 months, as investors are increasingly looking to solar energy as a viable investment route in the midst of volatile equity markets.
Currently, the majority of Solar 21’s funds are invested in photovoltaic solar farms to provide renewable energy to the German and Italian national grids, which are backed by 20-year feed-in-tariff agreements, guaranteed by the EU and the respective governments.
Michael Bradley, CEO of Solar 21 Renewable Energy Ireland, explained that the returns from the sales to the national grid are re-distributed to the investor by way of a fixed 8.5pc annual coupon.
“The high-level coupon level and the current volatile equity markets are the key reasons why so many people are choosing to invest in solar energy,” he said.
He said it was not difficult to see why so many people are drawn to the “radically different” solar energy investment concept, as the “stable investment environment” for solar PV projects contrasts so much with the current equity market volatility.
He said Solar21 focuses specifically on those economies with the most attractive long-term guaranteed feed-in-tariff agreements.
Bradley also drew upon how pension investors are increasingly looking towards solar PV funds for their long-term investments.
Said Bradley: “Pension investors choosing Solar21 are typically investing €100,000 to €250,000 and diversifying lump sums from conventional assets classes, such as equity and property. The concept appears to be receiving widespread approval from brokers and other investment advisers.”
Solar21 expects to grow its fund to €500m
As for Solar21, Bradley is anticipating that the fund will grow to €500m over the next 18 months.
“People are so open to this new form of investment because it offers the type of investment security that is difficult to achieve elsewhere on the marketplace. It differs greatly from other more traditional investments, such as equities, bonds or commodities, in that it is not dependent upon some unknown future event in order to achieve a return.”
He added that solar energy investment is not dependent on the healthy performance of economies or the financial markets to achieve a decent return.
“In essence, the volatility of the financial markets is completely removed,” said Bradley.
German Federal Bank
The investors in Solar 21 are working in alliance with the German Federal Bank (GFB), which has agreed to contribute up to 80pc of the funding. While the fund enjoys 20 years FiT sovereign agreement, the loan is structured over 17 years, ensuring the fund has sufficient time to rebuild the original capital base to repay investors should they choose to exit at that point, said Bradley this morning.
KfW banking group is a German government-owned development bank, based in Frankfurt. Its name originally comes from Kreditanstalt für Wiederaufbau, meaning Reconstruction Credit Institute. It was formed in 1948 after World War II as part of the Marshall Plan. It is owned by the Federal Republic of Germany (80pc) and the States of Germany (20pc)