United Utilities sells £100m renewable energy unit

Warrington-based water giant United Utilities said on Tuesday it agreed to sell its renewable energy business to SDCL Energy Efficiency Income Trust plc (SEEIT) for £100 million enterprise value.

United Utilities Renewable Energy Limited (UURE) has a portfolio of solar, wind and hydro renewable assets and UURE comprises 69 MW of renewable generation assets across 70 sites.

“Following divestment, these assets will continue to provide long-term green energy to our regulated Water and Wastewater business, United Utilities Water Limited (UUW),” said United Utilities.

“This sale allows UU to recycle its capital employed in the UURE business back into the next phase of our ambitious journey to net zero, whilst continuing to source green energy from the existing UURE portfolio.

“Completion of the transaction is expected in the coming months. Royal Bank of Canada Capital Markets (RBC) acted as financial advisor to UU and Norton Rose Fulbright (NRF) acted as legal advisor.”

United Utilities CEO Steve Mogford said: “We are committed to our ambitious carbon pledges and target of achieving net zero carbon emissions by 2030.

“A key part of setting the foundations for that goal has been our renewable energy portfolio that, in recent years, we have built across our UU sites.

“With the portfolio now fully built-out and operating well, we are excited about the opportunity to recycle our investment in these assets to support the next steps in our plans to achieve net zero.

“We are confident that SEEIT will be an excellent long-term partner for the UU group, as the UURE asset portfolio moves into the next phase of its life cycle”.

SEEIT said in a statement the renewable portfolio comprises 90% solar PV, 9% wind and 1% hydro in terms of total generation.

“The portfolio benefits from long term contracted cashflows and, as the assets are operational, will be immediately cash yielding,” said SEEIT.

“The solar PV and wind assets are all connected to UUW on-site water utility infrastructure via private wire, and provide green electricity under long-term, fixed-price power purchase agreements with UUW, which covers approximately 74% of total revenues.

“Additionally, a number of assets benefit from 20-year Feed-in-Tariffs, with fixed RPI-linked payments backed by the UK Government, which account for approximately 17% of the total revenues with a remaining weighted average life of 14.5 years.

“The transaction fits SEEIT’s investment policy as it increases the supply of renewable energy generated on-site and helps to reduce greenhouse gas emissions arising from the supply, distribution and consumption of energy. In particular, these assets supply clean energy to critical water infrastructure sites.

“The investment is funded from the company’s existing resources and completion is expected in the coming months subject to customary consents and approvals.”