Guinness Asset Management has launched the Guinness Renewable Energy EIS Fund 2 to make follow-on investments in EIS qualifying companies that have already received investment from the Guinness Renewable Energy EIS Fund (Fund 1).
The Investee Companies will primarily develop, install, own and operate roof-mounted solar PV projects in the UK.
Returns from these opportunities have improved over 2011: EIS income tax relief has risen from 20% to 30%, solar panel prices have fallen by an estimated 35% and the Feed-in Tariffs have increased by 4.8%.
The ability to take advantage of this opportunity only exists until April 2012, when wind and solar Feed-in Tariff projects will become excluded for EIS investors and the Feed-in Tariff for new projects is expected to fall.
The investment case for investing in solar PV projects that qualify for EIS relief has strengthened over the year. Most importantly, the largest input cost – the cost of solar panels – has fallen by an estimated 35% during 2011.
The imposition of the April 2012 deadline has increased the importance of being able to construct projects in a short timeframe. Solar projects can be installed faster than wind, hydro or anaerobic digestion projects. As a result, there is an abundance of attractive opportunities to invest in roof mounted solar projects on residential and small commercial sites.
The Guinness Renewable Energy EIS Fund 2 will make follow-on investments in Fund 1 Investee Companies and other opportunities from Fund 1’s investment pipeline.
Fund 1 has agreed terms on three investments into companies that will develop, install, own and operate residential and commercial roof-mounted solar PV projects in the UK. Based on conservative assumptions these would deliver 12% to 14% per annum returns to investors after fees and tax benefits. Each of the companies has a pipeline of additional projects which would be supported by investment from the Guinness Renewable Energy EIS Fund 2.
By investing in the same companies as Fund 1, the Guinness Renewable Energy EIS Fund 2 will benefit from shared transaction costs and fast deployment of capital. Once Fund 1 is fully invested, the Investment Manager will be able to deploy the Guinness Renewable Energy EIS Fund 2 into the Investee Companies that are delivering projects with the most attractive returns and that are hitting deployment milestones.
Feed-in Tariffs guarantee a minimum inflation-linked price for electricity generated by qualifying solar, wind, hydro and anaerobic digestion projects for 20-25 years. Solar and wind will be excluded from further EIS investment after 5 April 2012. Feed-in Tariffs are under review and new lower tariffs are expected from April 2012.
There is, therefore, a finite window to make EIS investments at current Feed-in Tariff rates that will expire in April 2012.
The Fund will be managed by Shane Gallwey, Tom Hill-Norton and Edward Guinness who bring extensive EIS, private equity and renewable energy experience. They are supported by Matthew Page, and an Investment Committee that includes Tim Guinness, Andrew Martin Smith and Lord Flight.
The Guinness Renewable Energy EIS Fund 2 is targeting a limited fundraise of £2.5 million to take advantage of our identified investment opportunities. There is a short deadline to invest in the Fund – the closing date is 30 November 2011.
There is no minimum amount that this fund needs to reach to close. The investment team reserve the right to increase this maximum but will only do so if they are highly confident that any additional capital can be invested effectively by the April 2012 deadline.
Shane Gallwey, Fund Manager, says: “Renewable energy companies that generate electricity under the Feed-in Tariff regime have great visibility of revenues. Combining this with the enhanced tax benefits available to EIS qualifying companies has created an excellent investment opportunity, but only for a very short period of time. We have a first rate team and are ready to make investments soon after the Fund closes.”
