Investors in Irish renewable energy fund Arclight are in line for a €20 million-plus payout after the business borrowed €43 million through a bond issue.
Arclight, which develops solar farms in Spain and the UK, recently raised €43 million through a bond issue, which was taken up entirely by private equity giant Blackrock.
According to Declan O'Halloran, managing director of Arclight's investment manager Quintas Energy, the fund will use around half the cash to refinance existing debt and return the other half to its investors.
Meanwhile, backers will continue to receive income from solar farms that Arclight has funded and which are now generating electricity.
A group of private investors put €40 million into Arclight in 2008 either directly or through their pension funds.
Mr O’Halloran said at the weekend that returning cash from the bond issue, combined with the value of the income they are receiving from solar farms, would “make the investors whole”.
At the same time Arclight is pursuing the Spanish government for around €25 million to €30 million through an arbitration, which the company will also return to investors if it is successful.
Mr O’Halloran explained that the Spanish government unilaterally cut tariffs that it had pledged solar farms would receive for generating electricity in 2010 and 2012.
As a consequence, Arclight is pursuing the government for breach of contract through an arbitration process overseen by the World Bank.
The company calculates the cost of the action at around €2 million to €4 million. “Those costs have already been put aside,” said Mr O’Halloran.
Arclight intends to list the bond it has just issued on the Frankfurt Stock Exchange.
“Blackrock is the sole investor in the bond,” Mr O’Halloran confirmed, adding that the US fund asked that the debt be listed. Bank of New York Mellon will manage the listing.
The bond is due for repayment in 2036 at interest of 2.4 per cent a year. According to Mr O’Halloran, Standard & Poors has rated it E1. “That is not an investment rating, it’s a green rating,” he said.
Green ratings assess an investment’s environmental and climate impact. They range from E1, the highest ranking, implying the least environmental and climate risk, to E4, the lowest rating.
Quintas Energy, which has offices in Spain and the UK, is Arclight’s project and investment manager.