Schroders’ green pivot has golden price

LONDON, Dec 21 (Reuters Breakingviews) - Blue-blooded UK asset manager Schroders (SDR.L) is making a bold bet on renewable energy, buying a 75% stake in wind farm developer Greencoat Capital for 358 million pounds. Greencoat has been raising assets by over 15% annually in recent years as investors, especially wealthy UK ones, pile into renewable ventures in search of yield. It can charge stable fees, with near-certain growth as countries wean themselves off fossil fuels.

Such predictable returns come at a price. Assuming Greencoat continues to grow profits at around 18% a year, it should generate 24 million pounds in pre-tax profit by March 2022. Schroders will keep three-quarters of that, implying a multiple of around 20 times pre-tax profit. Listed rival Foresight (FSGF.L) is valued at 17 times. And that’s before the additional 120 million pounds that Chief Executive Peter Harrison will have to pay if Greencoat’s team hits its undisclosed targets. To make the deal work, Harrison will need to sell more wind farms to its institutional clients and grow Greencoat’s assets in faster-growing markets like the United States. (By Neil Unmack)

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