Over the past few months, we have seen a significant increase in the number of enquiries from investors looking to purchase operational renewable assets.
This trend is being driven by a lack of new development sites due to a tightening of planning rules and reductions in subsidy rates making new developments less attractive.
With interest rates at an all-time low and with new North American and Asian investors entering the UK market, we are witnessing prices paid for operational sites reaching an all-time high.
Landowners may be surprised by the uplift in value that has been achieved in their site as a result of successfully commissioning the development and obtaining a couple of years of operational data, which both significantly de-risk the investment for a potential purchaser.
Site values are primarily a function of the prevailing and projected income from the development vs the number of operational years left in the planning consent and subsidy accreditation, meaning sites values reach a peak after 1-3 years of operation with values decreasing from then onwards.
Valuations account for the varying risk of an investment by applying a yield factor to the projected income stream with higher yields being applied to higher risk opportunities. Whilst yields can vary significantly between technology types and projects, investors increased knowledge and understanding of renewable technologies has led to the perceived risk of such investments falling and so yields are now at an all-time low.
Those landowners wishing to sell an interest in an operational site will often look to maintain their underlying freehold of the land by transferring the development into a Special Purpose Vehicle (SPV) and then establishing a lease from the landowner to this SPV to coincide with the remaining length of a planning consent or operational life of the installed technology. This SPV can then be sold to preserve the landowner’s freehold title of the site. It may also be possible to establish a ground rent from the SPV and so will maintain a longer term income for the landowner, however this will obviously decrease any sale value.
Any direct power supply arrangements from the development to onsite energy users can also be preserved and maintained as part of the sale process.
Sale processes can often move quickly depending on the scale and underlying nature of the site, with competitive bidding between interested parties the best way to achieve best value.
Carter Jonas has a significant amount of experience in marketing and brokering sites, administering this process on behalf of landowners and in achieving best value for clients.
Please contact the team for a free market appraisal or to discuss your options.