Mariana Water Turbine EIS (MWT EIS)

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Closed April 2016!

 

Investment Objective

Although renewable energy projects are no longer eligible for government subsidy under EIS, Mariana’s investment team will look to secure a long term power purchase agreement (PPA) which involves selling the electricity generated from water turbines back to the host utility company. This operating model removes the need for this renewable technology to be subsidy dependent.

The EIS companies will purchase, install and operate hydro-electric water turbines, installed within the UK’s water pipe network. Mariana will have the co-operation of some of the UK’s largest water companies. The technology is non-weather dependent. Turbines can be installed in many sites, including but not limited to, high pressure entrance points to water deposits, dam and reservoir outflows and where pressure reducing valves are installed. The natural flow rate of water through the pipe turns the turbine to generate electricity. The water utility companies agrees a secure lease and enters into a long term Power Purchase Agreement (PPA) to purchase the generated electricity. Any surplus electricity can be sold to the electricity grid.

The PPAs are 20-30 years, are inflation linked and stipulate a fixed price at which the energy will be sold. This gives the EIS companies a long-term, predictable revenue stream. In selling the electricity output directly to the host utility companies, the EIS companies will only be dealing with investment grade counterparties.

The host water utility companies, as major consumers of power, receives a direct financial benefit through significant energy savings (the proposed price at which energy will be sold is circa 20-30% cheaper than buying direct from the grid), as well as helping them to reduce carbon emissions and comply with corporate social and environmental legislation. A 100 kW turbine can save 300-400 tonnes of CO2 per annum and produce 600,000-800,000 kWh of electricity each year.

This patented and proven in-pipe system provides a clean, efficient and cost effective means of generating electricity. Water turbines harness the energy flow from existing water installations and can be retro fitted to existing facilities or specified for new works. The technology has been installed at over 20 European water facilities in the past three years and is generating proven returns.

After the minimum 3 year holding period the EIS companies can look to sell the turbines to create liquidity for investors that wish to exit. It is important to note that investors have the option to retain their shares. Mariana feel that the long-term, inflation linked yield that the assets are generating will make them attractive to potential third party buyers. There is also an option to sell the turbines to the host utility companies.

Total estimated water utility company market size for turbines is in excess of 120 MW which equates to a capital value of approximately £600m. Mariana’s experienced development partners provide a full turnkey service and Engineering Procurement and Construction (EPC) contract from initial feasibility studies through to delivery and installation, testing, commissioning and ongoing Operational and Maintenance (O&M) support of projects.

 

Target Return

£1.20 per £1 invested after 3 year period

Target Diversification

MWT EIS will only invest in a small number of Investee Companies and furthermore there is a significant sector bias. Diversification of the Portfolio will therefore be limited. That said, we aim to reduce this risk by ensuring each EIS company owns a range of turbines, installed in different geographical locations with PPA agreements with multiple water utility companies.

Exit Strategy

At the end of three years the EIS companies will look to sell the turbines to create liquidity for exiting investors. There are a number of exit routes:

The most likely is that the EIS companies will sell the turbines to the host water companies. There is a large appetite for water companies to acquire renewable energy assets, given the increasing environmental regulation that surrounds the industry. For example, Severn Trent Water recently announced it is planning to invest £190 million in renewable energy assets over the next five years in a bid to increase energy supply from clean-energy sources. Currently Severn Trent Water’s green energy portfolio includes four wind turbines across three sewage treatment sites, solar panels on the roof of its headquarters in Coventry, six hydroelectric turbines, and 56 AD plants on 34 sites producing energy from sewage. Following the latest investment, Severn Trent expects to produce 50 per cent of its gross energy consumption from renewable energy by 2020. Renewable energy generation by water companies is therefore well advanced. The Turbines are another renewable energy asset for the water companies to use as they seek to meet their carbon reduction targets costs and contain their operational costs.

The EIS companies could also look to sell the turbines to investment banks/pension funds. We believe these counterparties will be attracted to the long term, inflation linked yields the assets are generating. Mariana maintain strong institutional links from our Interbank Broking, Market Strategy and Asset Management functions.

Fees

Initial fee: 2.5% (levied on the investee companies).

Annual Management Charge: 2%

Performance Fee: 25% of realised returns, after the 3 year period, on returns above 115%

Nominee & Custody Arrangements

The Administrator and Custodian: James Brearley & Sons

James Brearley & Sons has a proud history of providing custody services, share dealing and investment management services to both private and intermediary clients for over 90 years. As one of the north of England’s leading administrator and custodians, investment managers & stockbrokers, it employs over 70 people.

The firm’s skilled and experienced staff combined with its financial strength enables James Brearley & Sons to provide high quality, bespoke and flexible services to all investors. Following the introduction of the Personal Equity Plan (PEP) in 1986, the forerunner of what is now today’s New Individual Savings Account (NISA), James Brearley & Sons has acted as a custodian of investor assets.

This responsibility today extends beyond NISAs to include general investment accounts, pension vehicles (SIPP & SSAS), trust arrangements and offshore insurance bonds.

The introduction of the firm’s online dealing and valuation services in 2000 proved a pivotal move, enabling it to become one of the first stockbroking companies in the UK to provide investors with access to online dealing as well as online access to their portfolio valuation, cash statement and transaction history. This early entry into the online world has held the company in good stead.

James Brearley & Sons now provides a wide range of online solutions to other financial services businesses, which has led to the company having responsibility over investor assets totalling in excess of £1 billion spread across more than 10,000 accounts. Copies of James Brearley & Sons most recent audited accounts (to April 2015) are available on request.

James Brearley & Sons Ltd is authorised and regulated by the Financial Conduct Authority (FRN 189219). The company is incorporated in England and Wales, Company Number03705135.

James Brearley & Sons Ltd is a member of the Wealth Management Association (WMA) and is a member of the London Stock Exchange.

It is a HM Revenue and Customs authorised NISA Manager. Registered Office: Walpole House, Unit 2, Burton Road, Blackpool FY4 4NW.