UK Bioenergy and Heat
Investing in high-quality, sustainable bioenergy and renewable heat assets that aims to deliver predictable income and inflation protection over the long term.An experienced team focused on mature technologies
Responding to favourable market conditions and institutional investor appetite, Schroders Greencoat launched its bioenergy and renewable heat business in 2019, to provide opportunities to invest in bioenergy and renewable heat assets in the UK and Europe.
Focusing on mature technologies, including biomass power and energy from waste, our bioenergy team addresses a market standing at circa GBP 30bn in the UK alone.
Our bioenergy team is among the most experienced in the industry, with over 50 years of combined involvement in the development, funding, construction, and operation of a wide spectrum of bioenergy assets.
A performant portfolio invested in biomass and heat
Schroders Greencoat currently manages four biomass plants on behalf of private markets institutional investors: the 39MWe Sleaford Renewable Energy Plant, a straw-fired biomass plant in Lincolnshire, the 40MW Templeborough Biomass Power Plant, a waste wood-fired biomass plant in Rotherham, the 15MWe Speyside biomass combined heat and power plant in Moray and the 40MW Margam Green Energy Plant, a waste wood-fired biomass plant in Port Talbot.
In addition to these assets, the bioenergy team manages two newly built renewable heat projects: the 105MWh/year Low Carbon Farming industrial scale greenhouses near Bury St Edmunds and Norwich, and the low-carbon greenhouse currently under construction in Ely, Cambridgeshire.
Portfolio strategy
Within bioenergy, Greencoat focuses on sustainably-fuelled assets with strong operational performance and well-contracted cashflows. The team also participates in selected greenfield opportunities and currently manages three of the UK’s largest low carbon greenhouses.
The mostly predictable cash flows of bioenergy assets are a good fit for institutional investors searching for secure returns in a low yield environment. They offer attractive risk-adjusted returns and portfolio diversification as part of a wider real assets portfolio, providing revenues largely uncorrelated with traditional credit and equity markets.
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Key Investment Risks
Volatility risk: The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
Liquidity risk: There may be very limited liquidity available via the secondary market of the proposed Fund given the underlying private credit assets and investors should consider an investment only if they intend to hold it for the life of the proposed Fund. Liquidity of the underlying investments might not be sufficient to meet investor subscription and redemption requirements.
Interest rate risk: A rise in interest rates generally causes bond prices to fall.
Credit risk of underlying issuers/lenders: A decline in the financial health of an issuer/lender can cause the value of its bonds/ loans to fall or become worthless.
Currency risk: The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses.
Counterparty risk: The counterparty to a derivative or other contractual agreement or synthetic financial product could become unable to honour its commitments to the proposed fund, potentially creating a partial or total loss for the proposed fund.
Derivatives risk: A derivative may not perform as expected, and may create losses greater than the cost of the derivative.
Concentration risk: The proposed Fund may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.
Gearing risk: The proposed fund may borrow money to invest in further investments. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.
Valuation risk: The underlying private credit assets may be subject to inadequate pricing reliability. In addition, property-based vehicles invest in real property, the value of which is generally a matter of a valuer’s opinion.
Industry/country risk: Legislative changes, changes in general economic conditions and increased competitive forces may affect the value of investments. Additional risks may include greater social and political uncertainty and instability and natural disasters.
Infrastructure asset risk: Infrastructure assets expose investors to additional risks, in particular construction risk (e.g. construction delays, cost overruns, etc.) and deployment risk (e.g. capital being deployed in several instalments during construction period rather than upfront for brownfield investments).