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Ecotricity - the Poster Child of Mainstream Renewable
Need further proof renewable energy development is going mainstream? Then look no further than Dale Vince’s renewable energy business, Ecotricity.
Here, the former New Age traveller has amassed a personal fortune worth more than £100m by dedicating the past 15 years to building his own renewable energy electricity supplier.
In doing so, he has built a business that has a loyal customer base of more than 150,000 individuals and campaigns tirelessly for UK domestic energy independence. He has continued to plough profits back into the business, reinvesting in energy generating technology and new developments, and growing organically year on year.
But here’s the thing. In the last few weeks there has been a subtle but important shift in this growth approach, with the news that Ecotricity has secured a £70m refinancing deal for its 60MW wind and solar portfolio from UK fund manager Aviva Investors.
The deal provides the energy supplier with an important opportunity to capitalise on its existing portfolio and generate greater value by freeing up capital to increase the existing rate of development.
And that’s all the more interesting because it is the first time that Ecotricity has really started to shift its future financing strategy off the balance sheet.
Admittedly, in the past, when additional capital has been required Ecotricity has tested the private finance approach, issuing so-called ‘eco bonds’ on two previous occasions. But not this time.
So why the change?
Our take is that this simply boils down to lending ratios and the ability to quickly raise and manage larger pools of capital. In the past, ‘eco bonds’ and development on balance sheet have provided sufficient capital to keep pace with development – but not anymore.
In order to remain competitive with the market and keep pace with increasing commercial growth, it simply has to look further afield for fresh ways to raise new capital. Re-financing the existing portfolio is the natural next step.
Sure, set in the context of the wider refinancing market and the ways in which existing developers have recapitalise the balance sheet, the Ecotricity deal really doesn’t look like anything special.
But this more aggressive financial strategy shows that developers and financiers can no longer afford to operate in virtual silos. There is no conflict with pursuing green goals and securing finance from mainstream lenders. If ardent environmentalist Vince now recognises this, then others should too.