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UK power stations up for grabs as infrastructure in spotlight

Damhead Creek Power Station (right of image).

Knight Frank has been appointed to sell two UK power stations for a combined price of about £95 million.

Rye House and Damhead Creek, located in Hertfordshire and Kent respectively. The firm said that both properties represent a rare opportunity to acquire freehold infrastructure assets.

Damhead Creek is a 17.58 acre site located in Hoo, within the Kent and Medway growth corridor, 35 miles south east of London. Rye House is a 19.21 acre site situated in Hoddesdon, 18 miles north of London.

The power stations are of the Combined Cycle Gas Turbine type and provide a secure, inflation-linked income stream. Both sites are leased to VPI Power Limited on a 15-year lease and 12-year lease respectively, with tenant options to extend. The assets both provide opportunities for annual rent reviews linked to CPI as well as potential for alternative energy and distribution uses with on-site access to the National Electricity Grid and the National Gas Transmission Network, subject to planning.

CCGTs are a highly efficient means of generating energy that combine a gas-fired turbine with a steam turbine. They are essential large-scale power generation assets providing grid services via the capacity market. KF said that they support the UK’s transition to a greater reliance on renewable energy.

Growing interest in UK infrastructure sector

The firm added in a statement that the UK infrastructure market is gaining interest from investors who are increasingly looking to diversify their asset portfolios and are keen to gain exposure to property which will help the UK reach its net zero target by 2050. “The prospect of long-term fixed income, strong risk-adjusted returns, combined with regulated and government support and resilient and anticyclical properties is only ensuring the area continues to gain momentum.”

European infrastructure investment volumes reached £125 billion in 2019 whilst UK transaction volumes are estimated to be around £44 billion, driven by renewable energy and social infrastructure sectors.

Charles Fletcher, Specialist Property Investment at Knight Frank, said: “We are seeing increasing investor interest in the infrastructure sector which we expect to increase further given the growth of urban populations and the world transitioning to a low carbon economy.”

Knight Frank expects to see further interest in the UK’s infrastructure sector given the UK’s net-zero target, which will require a quadrupling of renewable generation and doubling of the annual investment in the power sector, in addition to large investments in heat networks, waste management and electric vehicle charging points.