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March 23, 2010, 2:36 p.m. EDT

U.K. Solar Utility Start-Up Plans $1.35 Billion IPO

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By Selina Williams And Juan Montes

A group of senior executives from the European utilities and solar-power sectors are seeking to raise as much as €1 billion ($1.35 billion) through the listing of a start-up company on the London Stock Exchange that would then buy solar-power assets.

The executives said U.K.-based solar-energy developer Engyco PLC would invest in existing power-producing photovoltaic operations, initially in Spain.

The planned initial public offering is a bold move, as solar companies have suffered more from the global economic downturn and credit crunch than have other providers of renewable energy. The once-hot sector is out of favor with investors, and some owners of Spanish solar projects, often in the construction sector, have financial problems and are in need of cash.

Engyco, which has no revenue or earnings, said it has agreements to buy existing solar-producing projects in Spain with a capacity of 86 megawatts for €640 million as it aims to become the U.K.'s first listed independent solar-power utility.

But it is likely to face competition for deals from Spanish companies that also are trying to buy troubled smaller solar developers. Among potential rivals for deals are Spain's biggest photovoltaic solar operator, T-Solar SA, and Fotowatio Renewable Ventures Inc., in which General Electric /zigman2/quotes/208495069/composite GE -1.18% Co. holds a 31.85% stake.

T-Solar, which has 143 megawatts of photovoltaic-electricity-generating capacity in operation, plans its own IPO to finance its international expansion.

Engyco aims to list in London at the end of April or in early May, its chairman, John Roberts , said. Mr. Roberts was chief executive of United Utilities /zigman2/quotes/203908003/delayed UK:UU +0.61% PLC, a FTSE 100-index component, and is a non-executive director at independent electricity generator International Power PLC.

Meetings with potential investors are expected to begin shortly.

"The opportunity that Engyco has identified is compelling, and the team which has been assembled to pursue it could not be stronger," Mr. Roberts said. "The assets which we intend to manage enjoy both favorable operating conditions and a highly attractive pricing regime."

Engyco is looking to buy assets in Spain that were agreed to in 2008 and qualify for the generous feed-in-tariffs available at the time. The income streams from those projects are index-linked to inflation at a fixed rate for 25 years. After a small step down in the rate, the income streams will remain index-linked for the lifetime of the project.

Many of the targeted assets are owned by companies engaged in other businesses that want to sell their non-core assets in solar.

"The response that we've had from the owners of the assets has been extremely positive, bearing in mind that most of these are owners of assets that are not core to their main business, which is frequently construction, and some are in a degree of financial distress, Mr. Roberts said. "We are offering to buy them for cash and that's very attractive to them."

He declined to elaborate on the possible sellers.

With its sought-for €1 billion, the company plans to buy a total of 150 megawatts, including the 86 megawatts in asset-sale agreements already lined up, from among Spain's total solar installed capacity of three gigawatts. This implies a cost of €7 million a megawatt, Mr. Roberts said.

It costs about €4 million per megawatt to install solar in Spain, so the higher price Engyco is paying reflects the older and more generous feed-in-tariff regime.

Engyco also announced that Thomas Krupke , formerly chief executive of Germany's solar module and photovoltaic manufacturer Solon SE, would serve as its CEO. Pedro Mielgo , formerly chairman of Spain's national grid company Red Eléctrica de España, will be a non-executive director.

Engyco has appointed Numis Securities Ltd. and Ambrian Partners as advisers. Ambrian Capital PLC CEO Tom Gaffney told Dow Jones Newswires that initial interest from potential investors has been encouraging.

Jason Douglas in London and Bernd Radowitz in Madrid contributed to this article.

Write to Selina Williams at selina.williams@dowjones.com

/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 13.39
-0.16 -1.18%
Volume: 50.02M
April 16, 2021 4:00p
P/E Ratio
23.05
Dividend Yield
0.30%
Market Cap
$119.03 billion
Rev. per Employee
$459,155
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/zigman2/quotes/203908003/delayed
UK : U.K.: London
963.00 p
+5.80 +0.61%
Volume: 300,646
April 19, 2021 1:30p
P/E Ratio
59.78
Dividend Yield
4.45%
Market Cap
£6.59 billion
Rev. per Employee
£337,748
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