Three local authorities have jointly invested £12m in a bond secured against two solar farms.
Warrington Borough Council, and two councils which are part of the OneSource joint services initiative —London Borough of Newham and London Borough of Bexley — have shared due diligence costs on the deal, which will see them buying bonds issued by Rockfire Capital.
The investment management company this week announced that it has bought two sites which generate 10MW of solar power a year.
Danny Mather, head of corporate finance at Warrington, told Room151: “The idea of collaboration in a deal like this is a relatively new one. We were able to share expertise and costs.”
Some of the bonds have a duration of one year, but the majority are for five years, with a combined return of 4% per year.
Mather said: “The investment is secured against the solar farms, which we would take ownership of if things ever went wrong.”
One of the farms is sited in Wales, with the other in Shropshire.
Both sites benefit from generous government subsidies through the feed-in tariff system which has now been severely cut for new solar projects.
The deal will allow the authorities to increase the proportion of ethical investments in their portfolio, Mather added.
Liam Kavanagh, Rockfire founder and chief executive, said,: “This is a key area of green energy and continues to offer attractive returns to investors.
“We will continue to develop our holding in this important sector and anticipate that solar will continue to grow as a key source of power in the UK.”
Mather also said that Warrington is looking to collaborate on further similar deals.
He said: “We are working with Rockfire to bring a basket of other deals to market, worth about £60m.
“We are looking at sites that benefit from the government’s feed-in tariff — a lot of opportunities exist at the moment.”
He added that “numerous councils” were interested in this particular asset class.
Last year, Warrington collaborated with Newham and Thurrock councils on a £60m bond investment in Swindon Solar Park, one of the UK’s largest solar farms.
Returns on these bonds are expected to be 6% a year over a five-year period.
