Private equity investment firm Rockpool Investments has launched a new GBP5m EIS-compliant investment opportunity in on-site utility provider Basalt Global.
This is the latest in a wave of EIS qualifying deals that Rockpool has offered to investors since changes to the EIS rules were made in April 2012, making the scheme more attractive to investors.
Basalt Global operates a network of energy-efficient power plants in hotels, hospitals and other buildings. Its power plants are fuelled by natural gas, and generate electricity and hot water at high energy efficiency. Basalt Global’s customers typically commit to buy power for 10 years, providing highly predictable revenues. The GBP5m investment will fund the installation of around 26 power plants across the UK.
Rockpool says there are two innovative aspects of the investment opportunity. Firstly, there is a fixed dividend, taking advantage of the EIS rule changes which for the first time allow for preferential dividends. Secondly, investors can opt to exit in 2016, with a compound annual growth target of 18 per cent; alternatively, they can choose to stay in the scheme for a seven per cent long-term yield and exemption from inheritance tax.
The investment should qualify for both EIS and Business Property Relief, enabling investors to claim 30 per cent of their subscription back against income tax, defer capital gains up to the amount of their subscription, and see the value of the shares excluded from their estate for inheritance tax purposes.
Matt Taylor, managing partner at Rockpool Investments, says: “By reducing the opportunities for higher earners to invest in their pensions, the government has given a boost to EIS. The predictability of Basalt’s earnings makes it attractive for wealthier investors, particularly in combination with up to 98 per cent tax savings. It’s also ideal for investors wishing to take advantage of the new exemption for remitting offshore money to the UK into trading companies.”
Basalt Global will be able to provide energy at a more affordable rate compared to traditional suppliers by generating heat and electricity in one process and on-site, which means the energy will be produced in a far more efficient manner. CHP typically produces primary energy savings of around 28 per cent, leading to 20-30 per cent cheaper energy bills.
Sam Almozaffar, chief executive of Basalt Global, says: “Most hotels currently use conventional energy suppliers. Combined heat and power plants are a very attractive alternative because of the long-term cost savings they can generate. The high purchase price and installation costs of these units make signing long-term energy supply contracts more attractive than buying the equipment.”
