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Wind turbines are seen at Mynydd Portref Wind Farm near Hendreforgan in South Wales, Britain, March 26, 2021. REUTERS/Matthew Childs
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LONDON, Dec 21 (Reuters Breakingviews) – Blue-blooded UK asset manager Schroders (SDR.L) is making a bold bet on renewable energy, buying a 75% stake in wind farm developer Greencoat Capital for 358 million pounds. Greencoat has been raising assets by over 15% annually in recent years as investors, especially wealthy UK ones, pile into renewable ventures in search of yield. It can charge stable fees, with near-certain growth as countries wean themselves off fossil fuels.
Such predictable returns come at a price. Assuming Greencoat continues to grow profits at around 18% a year, it should generate 24 million pounds in pre-tax profit by March 2022. Schroders will keep three-quarters of that, implying a multiple of around 20 times pre-tax profit. Listed rival Foresight (FSGF.L) is valued at 17 times. And that’s before the additional 120 million pounds that Chief Executive Peter Harrison will have to pay if Greencoat’s team hits its undisclosed targets. To make the deal work, Harrison will need to sell more wind farms to its institutional clients and grow Greencoat’s assets in faster-growing markets like the United States. (By Neil Unmack)
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Editing by Ed Cropley and Oliver Taslic
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Wind turbines are seen at Mynydd Portref Wind Farm near Hendreforgan in South Wales, Britain, March 26, 2021. REUTERS/Matthew ChildsRegister now for FREE unlimited access to Reuters.comLONDON, Dec 21 (Reuters Breakingviews) – Blue-blooded UK asset manager Schroders (SDR.L) is making a bold bet on renewable energy, buying a 75% stake in wind farm developer Greencoat Capital for 358 million pounds. Greencoat has been raising assets by over 15% annually in recent years as investors, especially wealthy UK ones, pile into renewable ventures in search of yield. It can charge stable fees, with near-certain growth as countries wean themselves off fossil fuels.Such predictable returns come at a price. Assuming Greencoat continues to grow profits at around 18% a year, it should generate 24 million pounds in pre-tax profit by March 2022. Schroders will keep three-quarters of that, implying a multiple of around 20 times pre-tax profit. Listed rival Foresight (FSGF.L) is valued at 17 times. And that’s before the additional 120 million pounds that Chief Executive Peter Harrison will have to pay if Greencoat’s team hits its undisclosed targets. To make the deal work, Harrison will need to sell more wind farms to its institutional clients and grow Greencoat’s assets in faster-growing markets like the United States. (By Neil Unmack)Follow @Breakingviews on TwitterRegister now for FREE unlimited access to Reuters.comCapital Calls – More concise insights on global finance:Biogen scales back Alzheimer’s drug hopes read more Europe’s new monetary bad cop has right bark read more Novo lead in obesity race starts to sag read more Standard Chartered fine is warning for bank bosses read more Aussie fund manager sails way off course read more Register now for FREE unlimited access to Reuters.comEditing by Ed Cropley and Oliver TaslicReuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.