Downing’s proposed IPO offers alternative to high premiums

The Downing Renewables & Infrastructure Trust will invest in a diversified portfolio of renewable energy assets apart from other infrastructure assets in the UK, Ireland and Northern Europe

The proposed initial public offering of a Downing investment trust investing in renewable energy has been heralded as a good opportunity to access the asset class at a time when most competitor trusts are trading on large premiums.

Downing is seeking to raise £200m through an IPO on the London Stock Exchange which it aims to get away before Christmas.

The Downing Renewables & Infrastructure Trust (DORE) will invest in a diversified portfolio of renewable energy assets including wind, solar, hydro and geothermal. It will also invest in other infrastructure assets in the UK, Ireland and Northern Europe.

It has secured £30m of cornerstone investment, with Downing and Downing managed funds committing about £20m and existing Downing clients fronting up £10m.

Nevertheless, in mid-October the Triple Point Energy Efficiency Infrastructure Company (TEEC) announced it had raised £100m.

Downing head of energy and infrastructure Tom Williams said the opportunity has “never been larger”, noting the firm has identified a £1.5bn pipeline of renewable assets.

We’re seeing enormous amounts of deals in the market, he said. We picked a strategy that really allows us to access a wide pipeline of opportunities.

He added: We’re obviously very confident otherwise we won’t be doing this and I think there is still the market out there and we need to we need to respect that it’s not just us that can deliver this, we need investors to agree with us. But the early indications are that is the case; people like the proposition, they like our track record, they like our strategy and so I think we’re really well placed.

Fairview Investing director Ben Yearsley thinks the Downing trust has a decent chance of getting off the ground but it will be an “interesting test” in the current environment.

According to the Association of Investment Companies, Bluefield Solar Income is trading at 17.1%, Greencoat Wind UK is at 14% and Foresight Solar is at 9.7%.

In the press release announcing the IPO, Downing said the trust aims to deliver a sustainable income and capital growth by investing in assets that are diversified by technology, geography, project stage and revenue.

The trust is targeting an annual NAV total return of 6.5% to 7.5% over the medium to long term. The target dividend yield by reference to the issue price for the calendar year to 31 December 2021 is 3%, rising to a target of 5% for 2022.