FIM Solar Distribution LLP – “D” Partnership Shares

For professional or very experienced investors only.

This is an opportunity to invest in an established – and growing – portfolio of UK solar parks managed by leading sustainable real asset investment manager, FIM, now part of Gresham House. Together they manage more than £1.5 billion across five specialist alternative investment strategies.

Investors could benefit from attractive long-term income with a substantial degree of inflation protection and the added benefit of IHT relief.

Investment highlights

  • Target distributions of 7% p.a. for the first 10 years, 9% p.a. for the next 10 years and 5% p.a. thereafter – not guaranteed
  • Illustrative total return of 1.44x (first termination) and 2.08x (final termination) – not guaranteed
  • Uncorrelated to equity markets
  • Circa 55% of the revenue derives from government support schemes which are index-linked for 20 years, thereby providing a significant degree of stability and inflation proofing
  • 100% IHT relief after two years on the remaining investment
  • Income should be tax free for the first three to four years
  • Long term, with a defined exit strategy (First Termination Date on 5 April 2026) with potential to realise investment prior to that
  • Tried and tested technology, with low performance risks and operating costs
  • Minimum investment £95,040 
  • Online no-obligation reservation
  • Closing Date 28 September 2018

The opportunity 

This is an opportunity to invest in new “D” partnership shares of the FIM Solar Distribution Fund LLP. The fund started in 2016 and currently owns six large-scale ground-mounted solar parks in England and Wales with an enterprise value of £45 million. 

The current offer aims to raise £20 million. The funds raised, combined with the fund’s cash resources, will be used to acquire three to four additional solar assets.

The sites are operated with the objective of delivering income from the generation and sale of renewable electricity. Circa 55% of the revenue derives from government support schemes which are index-linked for 20 years, thereby providing a significant degree of stability and inflation proofing.

Target returns

This table shows illustrative returns for a £100,000 investment at each of the termination dates. These are forecast and not guaranteed. The level of any distribution will depend on the total electricity produced each year from the solar parks and the revenues received from the sale of ROCs and electricity. It will also depend on the amount raised from this “D” Partnership Share Issue, the timing of the deployment of funds raised, the specifics of future acquisitions and market conditions. 

Illustrative returns for a £100,000 investment - not guaranteed 

  From investment to final termination (April 2042)
  Year 2026
(First termination date)
Year 2031
(Second termination date)
Year 2036
(Third termination date)
Year 2042
(Final termination date)
Cumulative Dividend (£) £47,541 £88,474 £143,398 £176,429
Cumulative Dividend (%) 48% 88% 143% 176%
Residual value £96,789 £83,098 £49,287 £31,402
Total return (£) £144,330 £171,573 £192,686 £207,833
Total return (x) 1.44x 1.72x 1.93x 2.08x
Source: FIM. The figures in the table are for illustrative purposes only and are not guaranteed. They do not take any tax liability into account.

See detailed illustration to first termination date (2026)

See detailed illustration to second termination date (2031)

See detailed illustration to third termination date (2036)

See detailed illustration to final termination date (2042)

Highly tax efficient

Partnership shares benefit from Business Property Relief (BPR), so the investment should become 100% IHT free after two years. As the business is already trading, the two-year clock should start as soon as shares are issued. Of course, any distributions you receive could form part of your estate on death and could therefore be liable for inheritance tax. 

The partnership structure means that any taxable profits will be allocated to members in accordance with their holding and each member will be taxed based on their circumstances. 

The manager will claim capital allowances on behalf of members. Capital allowances are expected to offset taxable profits for three to four years, so any cash distributions should be tax free in those years. 

Please remember, tax rules can change and benefits depend on circumstances. 

How does the fund work?

The fund owns and operates six solar parks, which currently produce over 29,000MWh of output per year. The annual output is relatively stable. 

All of the sites receive government subsidies in the form of Renewables Obligation Certificates (ROCs) for 20 years from accreditation. Three of the sites received accreditation in 2015 and three in 2016, so they should continue receiving subsidies until 2035 and 2036 respectively. Government subsidies represent circa 55% of the total gross income, and are index-linked.

The remaining income (45%) derives from the wholesale of the electricity generated. 

Operating costs are low (circa 25% of revenue) and largely fixed. 

Investors become members of the fund, which is structured as a limited liability partnership. Broadly speaking, after paying for the operating costs, the remaining revenue is distributed amongst the members, who should receive two cash distributions each year. 

These cash distributions represent the vast majority of the returns. In addition, depending on how long they stay invested, members might receive a share of the residual net asset value. 

The fund is a long-term investment. It has four set termination dates, with the first in April 2026 and the final one in April 2042. At each termination date, members can vote whether the fund should continue. However, members may be able to realise their investment before then, although this is not guaranteed. 

Risks

This is a long-term and illiquid investment, only available to investors classified as Elective Professional Clients. Capital is at risk. Returns are not guaranteed.

Many factors could affect the performance of the fund. Please read carefully section six of the information memorandum for more details on the risks. 

The minimum aggregate subscription required for “D” Partnership Shares to be issued will be £3 million.

In the event that the minimum subscription is not achieved by the closing date of 28 September 2018, or if extended, 31 December 2018, funds will be returned to applicants without interest. 

Fees

FIM will receive an initial fee of 2% of the funds subscribed and will pay Wealth Club an introducer fee of 2%. Rebates are available for investments of £1 million or more. 

FIM will also receive a transaction fee of 2% of the acquisition price of each solar park and an Annual Management Fee of up to 4% of the gross revenues (circa £20,000 p.a.). 

Please see section four of the information memorandum for more details on fees. 

Our view

For the right investors, we believe this could be a compelling opportunity. The level of income on offer is attractive, especially considering the comparatively low risk profile and the downside protection granted by long-term government subsidies. 

A degree of inflation proofing and inheritance tax relief could be a boon to some investors.

We believe the structure of this fund could be advantageous to investors and FIM is a credible, highly experienced and well-resourced manager.

Register your interest and make a no-obligation reservation

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 04.09.2018.

The details

Type
Solar fund
Sector
Renewable energy
Average income distributions (first 10 years)
7%
Illustrative total return (first termination)
144%
Target raise
£20,000,000
Minimum investment
£95,040
Closing date
28 September 2018