Corporate Finance
Green is popular colour for today's savvy investors and opportunities in sustainable investment cover a wide range of sectors, each with their own strengths, development drivers and growth potential. The core sectors with the best short to medium term investment potential are generally recognised to be biofuels and biomass, renewables (especially wind and more recently solar), waste recycling, energy from waste schemes and clean technologies such as fuel cells.
Far from being the niche it once was, sustainable investments are attracting seasoned investors, with city stalwarts Jupiter, Merrill Lynch and New Star launching investment funds focussing primarily on quoted opportunities in the sustainable investment sector. The banks are also taking up project finance opportunities in the sector as well as more corporate finance supported lending.
The demand for renewable energy in the UK is likely to exceed supply for the next 10 years and probably for much longer. Renewable energy is now regarded as key to a reduction in greenhouse gas emissions and in order to achieve this reduction, the EU has set legally binding targets on each member state.
The UK’s target of obtaining 15% of all energy from renewable sources by 2020 requires almost a ten-fold increase in renewable energy supply over 2008 levels. Installing this new capacity presents major challenges in terms of capital and other resource availability. These constraints will almost certainly ensure that supply remains below the target and therefore below demand through to 2020 and beyond. This long-term prediction of excess demand presents an unusually positive environment for investment.
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The UK is an attractive market for renewable energy and waste sector investors. The main renewable energy incentive programme, the Renewables Obligation, is estimated to be worth £1 billion annually for the next 18 years, supporting a total revenue opportunity of over £2 billion annually. Returns per megawatt of renewable power generated have been as much as double those available in other major European markets.
We are more reliant on landfill than all but one of our European neighbours with over 60 million tonnes of potentially valuable material buried in landfill each year. Capturing this value by recycling or energy generation could create annual revenues of more than £4 billion and the economics are improving every year as the rate of tax charged on landfill escalates.
Sustainable investment looks set to experience considerable and continued growth. With progressive government policies, favourable tax regimes and a wide scope of investment opportunities, sustainable investments offer an attractive option for all investors, not just those with a green agenda.
We advise a variety of investment funds, banks and entrepreneurs and companies in relation to the legal structuring of their finance arrangements in this area – the sooner you get started, the better for everyone, so call us today and let’s get things moving.
Kavita Patel, Partner
Corporate Finance
T: 44(0)800 763 1645
E: kavita.patel@martineau-uk.com
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