Brexit has brightened the outlook for U.K. solar funds, with higher power prices lifting earnings for the industry and burnishing its attraction for investors seeking to insulate themselves from political upheaval.
Trading volumes at three London-listed U.K. solar funds more than doubled in the six months after June’s referendum calling on Britain to exit the European Union, compared with the first half of the year, according to data compiled by Bloomberg. The top-performing NextEnergy Solar Fund Ltd. returned 18 percent since the vote. All the funds beat the 11 percent gain of London’s FTSE 100 Index.
“Brexit is of course not so good in general, but it’s good for solar,” said Michael Bonte-Friedheim, founding partner and chief executive officer of NextEnergy Solar Fund Ltd. “With the low interest rates, investors searching for returns come to us.”
The Bank of England’s decision last year to cut rates in an effort to boost the U.K. economy in anticipation of Brexit-related issues has also benefited solar funds.
The listed funds, which funnel cash from solar electricity sales back to their shareholders, appeal to investors hunting for dividends. They typically pay 5.75 pence to 7.25 pence a share quarterly. The Bluefield Solar Income Fund Ltd. provided the top dividend yield, returning 6.7 percent over the last 12 months, according to data compiled by Bloomberg.
NextEnergy has attracted new investors in recent months, according to NextEnergy CEO Bonte-Friedheim. He’s planning to expand the U.K. portfolio by adding 180 megawatts this year, raising assets under management to about 600 megawatts.