Guinness Sustainable Infrastructure EIS

Guinness Asset Management

Closed April 2016!

 

Investment Objective

Guinness Asset Management’s latest Sustainable Infrastructure EIS offering is building on its expertise in the Sustainable Infrastructure sector and is targeting returns of £1.15 per £1.00 invested.

Guinness EIS Tranche 7 has been established to make investments in sustainable energy and infrastructure companies that are eligible for EIS tax reliefs.

The Sustainable Infrastructure sector provides an opportunity to deliver investors a stable and predictable return with managed project risks. The sector has a low correlation with other asset classes such as equities or property.

Guinness Asset Management’s team has been investing in energy since 1998, and in sustainable energy since 2008. This track record and network leaves it well positioned to identify investment opportunities with suitable characteristics which are summarised below.

Stable and Predictable Cashflows – We look for Companies with stable revenue streams underpinned by long term contracts
Low Technology Risk – We invest in companies that install and operate proven technology, to minimise operational risk
Strong Counterparties – We favour creditworthy counterparties for long term supply or sale contracts
Asset-backed investment – We invest in companies that own capital equipment that underpins our investment

The following areas have been identified as suitable for investment:

CHP Generation

Combined Heat and Power (CHP) plants integrate the production of heat and electricity in a highly efficient process, typically using natural gas as a fuel. Energy intensive businesses benefit from this technology to provide stable, cost effective energy to support their operations, and we will invest in companies looking to meet this demand. There are opportunities to provide energy to industrial, commercial and residential buildings.

Waste Heat Recovery

Many factories produce waste heat as part of their industrial process. This heat can be used to generate electricity using established technology which can then be used on site or exported. Industrial companies are exploring opportunities to reduce energy costs by installing this technology.

Waste Management

Local Authorities are under pressure to reduce the amount of waste being sent to landfill and to increase the efficiency of waste water treatment. Companies can generate consistent long term income streams from credit worthy suppliers for managing waste through composting, waste water treatment or other waste management processes. Companies are now able to offer services that treat this waste more effectively and can convert it into useful output that can range from electricity and natural gas to solid fuels and building materials.

Unsubsidised Renewables

Most solar, wind, hydro and biomass projects have required government subsidies to make a viable return, which now makes them excluded activities for EIS investors. However, falling costs and site specific needs mean that certain projects both in the UK and internationally are expected to produce acceptable returns without subsidies. We are working with developers to assess such projects for investment.

Target Return

£1.15 per £1.00 invested after all fees (and before any EIS tax reliefs)

Targeting investing in approximately four companies

Exit Strategy

The focus of the Service is on generating capital growth. It is not The Investee Companies hold Sustainable Infrastructure assets for which there is a strong and growing secondary market. Guinness envisages exit to one of:

Sale to developer. A key CHP developer has expressed an interest in buying the projects we back. We have indicated then when we are ready to sell we will appoint an independent advisory firm to run a sales process, of which they will be an integral part of.
Sale to site owner. Energy offtakers are often commercial businesses. Once a project has been operating and derisked, it may become attractive for them to buy it.
Sale to infrastructure funds. The Investment Manager has discussed sale options for existing investments with infrastructure funds who aggregate these assets.
Sale to energy aggregators. Energy companies looking to expand their portfolios of energy generators.
Sale to financial buyer e.g. infrastructure fund, BPR/IHT fund, YieldCo. All are acquiring cash-yielding energy generating assets that provide long-term, inflation-linked income streams.
Leveraged exit. After three years investee companies should be able to raise debt at favourable terms, enabling a leveraged exit for investors.

Fees

Guinness Asset Management will not make any charge directly to Investors, but instead fees are charged to the investee companies to maximise an Investor’s EIS reliefs. The investment manager will charge investee companies an initial transaction fee of 2% of the investor’s subscription and a further annual monitoring fee of 2% for up to 5 years. Both the initial and the annual fee will be charged on a pro rata basis to investee companies.

A performance fee of 20% of the distributions above £1.00 per £1.00 invested, excluding EIS income tax relief, will be paid to the Investment Manager. The performance fee will only become payable once £1.15 per £1 subscribed has been distributed to investors.

Nominee & Custody Arrangements

The Share Centre
PO Box 2000
Aylesbury
Buckinghamshire
HP21 8ZB