Metlen solar SPV financing raises questions over UK project ringfencing

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Metlen solar SPV ringfence

Highlights

Whirlbush Farm SPV borrowed £77.6 million from Alpha Bank in December 2023 despite its £32 million project cost and operational status.
Metlen redistributed over £59 million from Whirlbush to non-operational group affiliates before selling solar assets, including Whirlbush SPV, to Schroders Greencoat on May 26, 2024.
Metlen’s presentation of adjusted net debt, which excludes project finance in SPVs, complicates assessment of true leverage as its annual report provides limited disclosure on key calculations.

Whirlbush borrowing structure draws scrutiny

As reported by Financial Times, Whirlbush Farm, a Buckinghamshire solar project acquired by Metlen after planning approval in 2022, is placed in a UK special-purpose vehicle intended to tie project costs to future cash flows while insulating the parent group from project-specific risk.

Metlen subcontracted construction of the roughly £32 million project, which is handed over and switched on in June 2024. By last year, the site is operating close to its 50MW nameplate capacity.

On December 19 last year, Whirlbush is among several UK-registered SPVs to record a shared Alpha Bank loan facility under the umbrella name Project Vision, according to Companies House filings cited in the report. In its accounts for the year to December 31, Whirlbush says it borrowed £77.6 million from Alpha Bank, up from zero a year earlier, and reports that more than £59 million is owed to it by other companies in the same corporate group, compared with less than £100,000 a year earlier.

Metlen says by email that Whirlbush acts as the representative borrower and that part of the proceeds is then advanced to other project companies. The company describes this as a relatively standard project-finance structure designed to finance multiple projects under a single facility while reducing complexity and costs.

The arrangement proves short-lived. Metlen announces on February 4 that it agrees to sell a package of UK solar assets to Schroders Greencoat, including the Whirlbush SPV; the sale completes on May 26, and the Alpha Bank loan is marked as satisfied on June 3, with a person familiar with the matter confirming the debt is repaid as part of the transaction.

Debt presentation and leverage remain in focus

Composite debenture structures are common in the UK, but the Whirlbush case stands out because an operational SPV with no new financing requirement draws a facility worth more than double its book value, redistributes funds to non-operational affiliates and is then sold within months. That sequence raises questions over whether the principle of ringfencing is fully preserved, even if Metlen rejects any suggestion of year-end window-dressing.

Metlen says the financing process starts months earlier and concludes in December after normal due diligence, approvals and documentation. It also says the facility has a clear commercial purpose and is not driven by year-end reporting considerations.

The immediate accounting effect appears limited because Metlen fully consolidates Whirlbush and the other Project Vision SPVs, meaning the cash and debt sit on opposite sides of the parent company balance sheet. Even so, the episode matters because investors trying to assess group indebtedness rely on Metlen's adjusted net debt metric, which excludes project finance in SPVs from its twice-yearly covenant calculation.

That calculation is central to Metlen's financial profile because adjusted net debt cannot exceed four times adjusted EBITDA. Yet the company's 444-page annual report gives little detail on EBITDA excluding SPV income or on net debt excluding non-recourse loans, and instead presents a graphic comparing adjusted leverage with unadjusted net debt without explaining the methodology, an approach that leaves the group's underlying leverage harder to judge.

In our earlier article on Equites Property Fund’s accelerated UK exit, we explained how the REIT boosted its interim distribution after selling the £200.5 million Aviva logistics portfolio and redirecting capital to South Africa. We also highlighted that the UK disposals reduced leverage (with loan-to-value falling to 28.1%) and strengthened liquidity, positioning the group to fund domestic growth while keeping guidance intact.

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