One of the biggest players in the burgeoning Build to Rent market has announced that it has taken a 36% stake in a ground source heat company to improve its resilience against climate change post-Covid 19.
Legal & General Capital (LGC) has announced its investment in The Kensa Group, one of the UK’s largest players in the ground source heat pump technology sector, as it scales up its investments in addressing decarbonisation.
Legal & General already has an existing clean energy investment portfolio, including low carbon heat, transport and power generation, and this latest deal follows the financial services company’s increased stake in Pod Point, one of the UK’s largest electric vehicle charging companies, alongside EDF.
Legal & General says it is investing in sub-scale industries ‘that it can use its platform to grow rapidly in the post-crisis period’, with the investment in Kensa supporting the firm’s ambition to form part of the UK solution to reaching the government target of net zero carbon emissions by 2050.
At present, heating and hot water for UK homes accounts for 25% of total energy use and 15% of our greenhouse gas emissions. It’s expected that, by 2025, the current consultation on new building regulations will likely outlaw fossil fuel heating systems for new-build homes, providing a considerable and immediate opportunity for an alternative low carbon heating solution.
Legal & General says retrofitting homes to make them more energy efficient and low carbon represents a significant market opportunity, with around 23 million homes in Great Britain using mains gas (carbon intensive) as their heating fuel. Meanwhile, two million homes are electrically heated (high running costs) and the remaining two million use heating oil or other fossil fuel systems (both carbon intensive and with high running costs).
Kensa, which describes itself as the UK’s largest manufacturer and installer of ground source heat pump technology, is the only integrated supplier and claims to be ‘one of the most developed and effective for delivering homes with the lowest operational carbon emissions’.
As well as offering an alternative heat solution to existing and new-build houses across the UK, the partnership is set to provide Legal & General’s extensive ecosystem with a low carbon heating solution, as it works with local authorities, government and key industry players to create scaled solutions.
Legal & General has its own fast-growing housing platform, which spans Build to Rent, build-to-sell, later living and affordable housing, as well as modular construction. Plans are already in place to make all its new housing stock operationally net carbon neutral between now and 2030.
As part of this, the firm says its later living business, Inspired Villages Group, is in advanced discussions with Kensa to implement ground source heat, while it has also rolled out Pod Point electric car chargers, amongst other initiatives.
“We invest our capital in clean energy assets, businesses and technologies which will help accelerate the UK’s progress to a low-cost, low-carbon economy,” Kerrigan Procter, chief executive of Legal & General Capital, said.
“Our investment in Kensa will enable the business to scale up at pace, bringing vital capacity to the sector. Our partnership marks a major milestone for Legal & General as we look to invest in the transformation of the energy system, and also add critical capabilities to deliver our own ambitious target to achieve net zero homes.”
He added that Legal & General were delighted to invest in a business that will play a major role in the transition to low carbon heating in the UK and ‘support significant job creation in the low carbon sector’.
“Our investments in clean energy are backing businesses that already employ more than 400 skilled workers in the UK green economy and we expect further accelerated growth in employment in the sector as the UK invests for the future post Covid-19, where tackling climate change should dominate the agenda,” he concluded.
Simon Lomax, chief executive of the Kensa Group, said: “We are excited that Legal & General Capital has recognised that Kensa's ground source heat pump systems will play a major role in the transition towards low carbon heating in the UK. This significant investment will allow the Kensa Group to strengthen its market-leading position by accelerating Kensa Heat Pumps' research and development programme, expanding Kensa Contracting's district heating shared ground loop array activities, and providing zero-cost ground arrays via innovative funding programmes through Kensa Utilities.”
He added: “The investment also provides the opportunity to install our systems at scale at sites being developed by Legal & General’s property business portfolio, contributing towards the UK’s ambitious 2050 net zero carbon target.”
Legal & General’s partnership with Kensa coincides with the completion of a new 900m2 manufacturing premises in Cornwall, which is set to enable the production of up to 30,000 ground source heat pumps every year.
The company has a large interest in the fast-growing Build to Rent market, which creates purpose-built privately rented residential homes across the UK. It has a ‘large and growing’ portfolio of more than 4,600 homes across 13 schemes, with over £1.7 billion in capital committed across the UK since 2016.
This includes operational schemes in Bristol, Birmingham, Walthamstow, Leeds and Manchester, with planned schemes in Brighton, Woolwich, Glasgow and Croydon