Octopus Investments (Octopus) is reducing its annual management charge (from 1.75% to 1.25%) and capping the running costs on its flagship solar Venture Capital Trust (VCT) product, Octopus VCT 3&4. Adviser fees remain unchanged.
This action has been taken to ensure that, despite the reduction in Feed‐in Tariffs (FiT) for solar installations connected after 12 December, Octopus can continue to offer Octopus VCT 3&4 with the same target returns as originally envisaged, with tax‐free dividends of at least 5p per year beginning in 2013.
Octopus Managing Director Paul Latham says: “When the FiT reduction was announced, we wanted to make sure that we could still make solar investment work, and we didn’t want our clients to be at a disadvantage because of the changes. Lowering our AMC means we’ll be absorbing the costs ourselves. We think this is the fairest solution for our investors, as it means looking past short‐term profits and putting them first.
“When the Government announced the results of its Feed‐in Tariff (FiT) review at the end of October, it was widely expected that the reduction in FiT for sub‐50kWp solar installations would mean investment into solar via VCTs and Enterprise Investment Schemes (EIS) would no longer be economically viable. As a result, a number of investment companies took the decision to close their funds and return money to investors.
“However, thanks to negotiations undertaken by Octopus and its development partner Lightsource Renewable Energy, we’ve managed to renegotiate more competitive installation costs for sites expected to be built after the 12 December deadline. At the same time we’ve been successful in securing a strong deal pipeline, with sites being built to our order and to our specification. These are all remarkable achievements made possible only because Octopus has the credibility and economies of scale that comes from being the largest installer of commercial scale solar in the UK.
“So, despite what you might have heard elsewhere, solar investment (for Octopus at least) remains well and truly on. Government action has been taken to make solar investment less profitable, but we can assure investors and advisers that Octopus will be bearing these additional costs on their behalf.
“But we are still reminding investors that the opportunity is limited. Solar generation involving the collection of FiTs will become an ‘excluded activity’ for VCTs and EIS solutions from April next year.”
Octopus has also announced the opening of the next tranche of its popular Octopus EIS solution, having raised nearly £30 million in the previous tranche in just a few weeks. This tranche of Octopus EIS will also invest in solar energy schemes, but with a wider remit that includes solar sites outside of the UK.
