NextPower UK ESG Fund Exceeds Target, Raises £733M

NextEnergy Capital’s NextPower UK ESG (NPUK) fund has surpassed expectations, successfully closing its fundraising at £733 million—almost 50% above the original target of £500 million. This makes NPUK the largest dedicated private fund for new-build solar in the UK. The fund is focused on significantly enhancing the country’s energy security and reducing carbon emissions through the development of new-build, utility-scale solar projects.

The fundraising success happens at a period when global conditions for fundraising have been extremely challenging. Not withstanding these circumstances, NextPower UK has succeeded in raising major capital, of which more than 70% of the amounts committed have been deployed. Among these is the acquisition of 15 solar assets, bringing total portfolio capacity to 731 megawatts (MW). NPUK is progressing steadily toward its ambitious objective of reaching total capacity of 1 gigawatt (GW) of solar power.

The National Wealth Fund, one of the major investors in the NPUK, was instrumental in the success of the fund. The National Wealth Fund invested £250 million, which served to mobilize private capital for the development of renewable energy infrastructure in the UK. This investment is the fund's first big independent investment in the renewables space, which could potentially catalyze additional institutional investment in UK clean energy projects. In the words of Stuart Nivison, National Wealth Fund's Head of Portfolio Management, this substantial investment in NPUK is a demonstration of how catalytic capital can be used to raise private sector finance for necessary clean energy projects.

To date, NextPower UK is well on its way to meeting its target of over 400MW of operational capacity by the close of the year. Already, 249MW are in operation, including Llanwern, the UK's largest operating solar farm. The fund is set to reach more than 1GW of total capacity once fully invested, which will also support the UK's Clean Power 2030 objectives, aimed at speeding up the shift towards renewable energy sources.

Environmental impact-wise, NPUK is an Article 9 Fund within the EU Sustainable Finance Disclosure Regulation (SFDR). This categorization implies that the fund provides quantifiable environmental, social, and governance (ESG) impacts. The projects of NPUK involve biodiversity improvements and clear reporting, ensuring its operations comply with sustainability guidelines. When running at its full capacity, the solar portfolio of the fund will provide clean energy sufficient to power about 371,756 homes every year. This will result in offsetting around 887,003 barrels of oil annually, making a substantial reduction in the UK's carbon footprint.

The success of NPUK mirrors the increasing demand for high-quality, long-term infrastructure investments that provide stable financial returns as well as a positive environmental contribution. Nadeem Hussain, LGPS Central's Co-CIO, highlighted the need to invest in infrastructure opportunities that meet both financial goals and sustainability principles. He pointed out that NPUK provides investors with stable returns from utility-scale solar farms while at the same time catalyzing environmental change, reflecting the increasing popularity of sustainable investments.

Looking to the future, NextEnergy Capital will be launching a follow-on fund, NextEnergy UK II, in the summer of 2025. The new fund will continue to take advantage of the growth prospects of the UK solar market and leverage the performance of NPUK, further accelerating the transition to clean energy in the country.

By making its strategic investments, NPUK is facilitating the growth of renewable energy capacity in the UK and is supporting the government in its aims to decarbonize the energy market and meet its Clean Power 2030 ambitions. The performance of the fund illustrates the keen demand for ESG-led investments within the renewable energy marketplace and indicates the growing role of private capital in the transition to a low-carbon economy.

In short, the NextPower UK ESG Fund has reached a milestone, raising £733 million to finance the growth of solar power in the UK. With its robust investment strategy, focus on sustainability, and clear intent to deliver quantifiable environmental benefits, NPUK is poised to continue its positive impact on the UK's clean energy industry.