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Schroders goes big on renewables with Greencoat buy

The initial focus will be on expanding Greencoat’s existing business but as new technologies mature, such as hydrogen and large-scale energy storage, the strategy will go beyond wind, solar and biomass.

Schroders has agreed to acquire a 75 percent stake in Greencoat Capital, a UK-based renewables specialist asset manager, for £358 million ($475 million; €421 million).

“Combining the strength of Greencoat Capital as one of the pioneers in the space and one of the leading asset managers, with our global distribution footprint, we believe, gives us the opportunity to build a global renewables asset manager,” Schroders’ global head of private assets, Georg Wunderlin, told affiliate title Infrastructure Investor.

According to a joint press release, Greencoat is one of Europe’s largest renewable infrastructure managers with £6.7 billion of AUM as of 30 November, 2021. In the four years ending 31 March, 2021, it has achieved compound AUM growth of more than 48 percent annually.

Schroders Greencoat, the new entity that will be created once the deal is completed, will sit within Schroders’ private assets division. Greencoat will maintain investment independence, Wunderlin said.

“What makes it exciting for us and the reason we’re doing it is because this firm sits in one of the most relevant and attractive investment areas of the future, supplying the world with renewable energy assets, which are critical in achieving global climate goals,” he said.

The initial focus will be on expanding Greencoat’s existing business, which is active in wind, solar, biomass and renewable heat, as well as supporting its expansion into Continental Europe and the US.

However, “over time, as new technologies become mature and investable – think hydrogen, or even large-scale energy storage/batteries and even potentially, relevant grid infrastructure for the renewables space – as those opportunities arise and become investable, we are absolutely planning to tackle those together”, Wunderlin said.

Under the terms of the agreement, an earn out, payable three years after completion of the deal and capped at £120 million, is also an option. However, it is subject to stretch revenue targets and the continued employment of the senior management team.

“We feel very strongly aligned with the team and the team is committed to be with us for a long-term future,” Wunderlin said.

According to the statement, a series of other options, available to Schroders or the Greencoat management shareholders, would allow Schroders to acquire the remaining 25 percent of Greencoat “over time at a price based on a fair market valuation at the time of the option exercise. The structure of the option arrangements [is] designed to ensure maximum stability and alignment between the four founders and Schroders”.

The deal is expected to close in the first half of 2022.