Guinness Sustainable Energy EIS 6 has been established to make investments in UK Sustainable Energy companies that are eligible for EIS tax reliefs. Investment opportunities offer characteristics of stable and predictable cashflows. Investee Companies often have low technology risk, blue chip counterparties, limited competition and low correlation with other asset classes.
Returns: The investment objective of Guinness Sustainable Energy EIS 6 is to deliver tax-free investment returns of over £1.20 per £1.00 invested, net of all fees, in addition to £0.30 of EIS Income Tax Relief. The Investment Manager does not charge any initial fees or monitoring fees directly to Investors, but instead charges fees to Investee Companies, see below. This ensures investors maximise their EIS relief. The Investment Manager’s interests are aligned with those of investors, and the Performance Fee will only be payable once £1.20 has been distributed to Investors per £1.00 invested. The Investment Manager will charge Investee Companies a transaction fee of 2% of funds invested, and an ongoing monitoring fee of 2% per annum of funds invested for up to five years.
Closing Dates: Guinness EIS 6, has a first closing on 31 December 2014, a second close on 3 April 2015 and will remain open until final closing on 30 June 2015.
Investment Strategy: The Investment Manager has developed an investment strategy, outlined below to address the opportunity identified in Sustainable Energy.
Investment size: The Investment Manager will typically make Investments of between £500,000 and £5,000,000 in each Investee Company. Investee Companies may own several renewable energy generating installations across several technologies, providing diversification.
Debt: The Investment Manager will only invest equity in companies, often at the construction stage of a project. Investee Companies may look to raise debt finance once they have stable operating histories. The Investment Manager prefers early stage companies to be 100% equity financed, ensuring Investors have senior claim over cash flows and assets.
Technology risk: The Investment Manager will aim to minimise technology risk by only investing in companies that use proven technologies with an established operating history. Where possible it will secure equipment performance guarantees from manufacturers. Banks typically identify certain equipment that they will lend against, and the Investment Manager aims to make Investments that facilitate future bank financing.
Investment stage: The Investment Manager believes the optimal trade-off between development risk and financial return can be achieved by investing in a company which has already achieved the required permissions and consents, but before it has started construction. The Service may also invest in companies developing earlier stage opportunities or companies with later stage operating projects where the risk return profile is attractive.
Counterparties: The Investment Manager will seek to work with companies whose project developers and engineering, procurement and construction (EPC) contractors have a successful track record of delivering operating projects on time and on budget. It will also seek to work with high quality counterparties on long term contracts.
EIS: The Investment Manager will confirm that Investee Companies have received EIS advance assurance from HMRC prior to investment.
Exit: The Investment Manager will exit Investments individually or as a portfolio as soon as practicable after the EIS Three Year Period. Investee Companies are expected to be attractive to third parties looking to secure stable, and in some cases inflation-linked cash flows. The main routes to exit are likely to be a trade sale, a sale to an aggregator, or a sale to a financial buyer. The Investment Manager is incentivised to ensure an exit within five years as no Monitoring Fee will be payable after that period.
Investments already identified: Guinness has lined up two hydroelectric investments already for the latest offering, and are confident the investment objectives can be met.
The Investment Manager has been granted exclusivity on two hydro projects of 2MW and 1MW respectively. The projects have received planning permission, grid connection offers and environmental approvals and are ready for construction subject to final due diligence and investment committee approval.
The projects are both in Scotland, where there is a large hydro resource with a long history of developing hydroelectric projects to meet local energy needs Pre accreditation for Feed-In Tariffs has already been sought which will lock in the subsidy rate that the projects will receive provided they are commissioned within two years.
Hydroelectric projects have the lowest environmental impact of any power generation technology and, once built, can operate for many years. They are a relatively low cost technology to implement and, therefore, require a low Feed-in Tariff to achieve the desired return.
The Guinness EIS team has invested over £30m in nine companies that were set up by leading renewable energy entrepreneurs to develop, build, own and operate renewable energy generation projects. A brief summary of each company is shown below.
Spire Energy has funded the construction of a portfolio of solar installations on six National Express bus depots and two manufacturing facilities owned by Ecotherm, a subsidiary of Kingspan plc. The landlords pay a commercial rate for electricity produced and commit to use a significant portion of the projects’ output. Spire Energy receives the Feed-in Tariff and any power not used on site is sold to a green power utility for a fixed price.
Free Green Energy Corporation builds, owns and operates roof-mounted solar projects in the UK. Free Green has recently completed a major installation on the roof of BMW’s car-manufacturing plant at Cowley, near Oxford. Free Green is currently working with EvoEnergy, a leading UK solar installer based in Nottingham and with installation teams nationwide.
Myroe Energy Limited sources, installs, owns and operates renewable energy generating projects with a range of developers in the UK. In particular, Myroe Energy has signed heads of terms to build and operate 250kW wind turbines in Northern Ireland.
Larimin Limited sources, installs, owns and operates roof-mounted solar projects including in Northern Ireland. Installations are currently being rolled out and earn a mixture of ROCs and energy purchase payments from customers.
Redan Power has installed solar panels on 14 purpose built barns located in East Anglia and a further 28 residential sites in Southern England. The landlords are able to use the barns and electricity generated at a discount. Any electricity not consumed on site is sold by Redan Power to a green power utility for a fixed price that is higher than the Government-set export tariff. Redan Power receives the Feed-in Tariff payments for the electricity generated.
Electric Avenue has installed solar panels on 141 houses in southern England. The householders are able to use up to 100% of the electricity generated for free. Electric Avenue receives the Feed-in Tariff payments for the electricity generated which includes an export tariff for half of the electricity generated.
Renewable Asset Limited is building solar installations on commercial and industrial buildings in Northern Ireland. Northern Ireland has an attractive subsidy to encourage solar installation, whereby installations benefit from 4 ROCs. Renewable Asset Limited has also entered into heads of terms to build and operate a Combined Heat and Power (CHP) plant in Southern England.
Green Energy Trading Limited was set up in 2014 and has now entered into heads of terms to build and operate a hydro project in Scotland. The proposed site has received planning permission, a grid connection offer and environmental approval and is ready for construction.
Addison Energy Limited sources, installs, owns and operates roof-mounted solar projects predominantly in Southern England. Installations are currently being rolled out and earn a mixture of ROCs and energy purchase payments from customers.