MIDAS SHARE TIPS UPDATE: US Solar Fund should benefit from governments’ increased support for all things environmental
US Solar Fund should also benefit from governments’ increased support for all things environmental. Solar power was the fastest-growing form of electricity generation in the US last year and the country already boasts enough solar plants to power more than 17 million homes. Over time, that number is expected to increase substantially.
President Biden is determined to cut carbon emissions dramatically in America. He has already extended tax credits for new solar power projects and other incentives are expected to follow.
This creates a favourable backdrop for US Solar Fund, the London-listed group specialising in American solar power projects. US Solar floated two years ago, raising $200million (£144million), at $1 a share, to acquire a portfolio of solar projects.
Hotting up: US Solar Fund aims to raise $100million by offering new shares
The group now runs 42 plants, generating enough energy for more than 90,000 homes. But chief executive John Martin is keen to expand the business and is seeking to raise more than $100million by offering investors new shares, again priced at $1 each. The old shares have risen to $1.03 since US Solar floated so the fundraising is on offer at a discount to the market price. There is also the promise of a juicy dividend – 5.5 cents this year and expected to rise steadily thereafter.
Reassuringly too, Martin knows exactly what he wants to do with the money. Some $80million will be used to pay down bank debt. The rest will be deployed to increase US Solar’s share of a massive solar plant in California.
Even as Martin and his team seek to raise new funds, they are eagerly eyeing up fresh opportunities, hoping to take this business from its current market value of $207million to at least $500million in the next few years. Every new acquisition has to satisfy certain criteria though, including long-term contracts with reliable utility firms so US Solar can carry on paying generous dividends. These can be paid out in dollars or sterling, depending on shareholder preferences.
The shares are also traded in both currencies and the new stock will be available through intermediaries including Hargreaves Lansdown, AJ Bell and Interactive Investor.
Midas verdict: Midas recommended US Solar when it floated, since when Martin has done everything he promised to do. Now the group is keen to increase the pace of growth, taking advantage of attractive openings in the American solar market. The fundraising presents a good opportunity for investors to participate in that growth – and earn some decent dividends along the way.
To be traded on: Main market Ticker: USF Contact: ussolarfund.co.uk or 001 646 860 9900