Gresham House Wind Energy 1 PLC

This is an opportunity to invest in an established – and growing – portfolio of UK commercial wind farms 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

  • Aims to provide semi-annual distributions of all surplus cash (c.8% p.a. cash yield) – not guaranteed
  • Targets an IRR of 7.25% post Corporation Tax, net of all fees and costs – not guaranteed
  • Largely uncorrelated to equity markets
  • Around 50% of the revenue is derived from Renewables Obligation Certificates and index-linked to RPI for 20 years, potentially providing some protection from inflation
  • 100% IHT relief after two years on the remaining investment – tax rules can change and benefits depend on circumstances
  • Income should be tax free for the first three to four years
  • Long term, with first liquidity review date on 31 May 2029, with potential to realise investment prior to that
  • Tried and tested technology, with low operating costs
  • Very illiquid and long-term investment – for professional investors only
  • Minimum investment £105,000

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest. Whilst Wealth Club and the investment manager are authorised and regulated by the Financial Conduct Authority, the investment itself is unregulated, so you do not have the usual investor protections, including recourse to the UK Financial Services Compensation Scheme.


Register your interest

Wind energy investmentsThe offer 

Gresham House Wind Energy 1 PLC ("the Company") was set up to own and operate UK-based onshore wind farms, with the objective of delivering income from the generation and sale of renewable electricity. 

The Company’s income is currently generated from three operational wind farms, (Mynydd Portref, Torrance and Wathegar), with a good geographic spread throughout the UK. They generate enough electricity to supply around 17,600 homes and save 32,000 tonnes of CO2 per year. All three wind farms benefit from ROCs for 20 years from accreditation and have between 13 and 14 years of fixed index-linked subsidies remaining.

Now Gresham House is seeking to raise £15+ million to expand the portfolio. It has already identified an initial opportunity that meets the investment objectives, in the form of the Wathegar 2 wind farm. If the current fundraising offer is successful, the Company intends to purchase up to 75% of Wathegar 2. A purchase price has been agreed and the Company has secured exclusivity until 18 November 2019.

The Company’s target parameters for future acquisitions can be summarised as follows:

  • Wind farms with generating capacity typically in excess of 5MW;
  • Operational assets with proven track record;
  • Accredited for ROCs (or other forms of subsidised support), providing legislated index-linked revenue;
  • Land leases for a minimum of 25 years from the commencement of operation.

In addition, the Company may acquire wind farm holding vehicles with existing project finance arrangements in place. The Manager’s intention is that gearing should be kept at a suitable level such that bank covenant tests are comfortably met. 

The minimum investment is £105,000 (100,000 "A" Ordinary shares at a price of £1.05 per share)

Target returns – not guaranteed

The Company targets average annual dividends in the next 10 years of circa 8% and an IRR of 7.25% post Corporation Tax, net of all fees and costs, but there are no guarantees. 

Circa 50% of the gross revenue from each currently owned and accredited wind farm will be generated from a legislated source, index-linked to RPI for 20 years from accreditation. The remaining 50% of revenue is expected to be generated from the sale of wholesale electricity to a licensed electricity supplier. The current industry forecast is that electricity prices will rise by circa 1% on average annually in real terms over the next 20 years, as the demand for electricity rises combined with a drive to decarbonise electricity generation and reduce carbon emissions. However, please note, this is in no way guaranteed. Any fall in energy prices could impact revenues. 

The Company was incorporated on 9 May 2019 and commenced trading on 26 June 2019, so it has limited trading history itself. However, the underlying wind farm assets have been operational since 2012 and 2013. 

Tax efficient

Shares in the Company should 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. 

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

Liquidity

Wind energy investments are very illiquid and should be held for the long term. There is no recognised market for Ordinary Shares, so it may be difficult for shareholders to sell their shares.

That said, the Manager aims to provide some liquidity by seeking to arrange deals in Ordinary Shares between willing vendors and willing purchasers. This service is available to shareholders wishing to realise part or all of their shareholdings in the Company, subject to any retained holding being a minimum holding of 100,000 Ordinary Shares. A fee is payable to this service.

In addition, the Manager will consult with the Advisory Committee and then Shareholders to review the Company’s options for creating liquidity events on each of the following target dates:

  • 31 May 2029
  • 31 May 2034
  • 31 May 2039
  • 31 May 2044

Risks – Important

Wind energy investments are very illiquid and should be held for the long term. They are for experienced investors only, who should not invest money they cannot afford to lose.

The vast majority of any investment returns is in the form of income, namely regular cash distributions. There is no capital repayment at the end, similar to what happens with an amortising loan. This is because an investor would typically own a share of the assets, i.e. the wind turbines that form the wind installation. These assets have a long but limited economic life, around 25 years, so their value tends to decrease over time. That said, there are projects in the EU that have been operating for longer. Extending the life of wind farms is an active area of research. Repowering existing projects with newer, scaled-up technologies is also an important strategy in the long term. 

When an investor sells their shares they should be entitled to their share of any residual value of the assets. If the investor dies, their share of the assets should qualify for BPR.

Investments of this kind are not typically covered by the Financial Compensation Scheme. The value of your investment could fall as well as rise: your capital is at risk. For instance, energy prices might collapse, or the wind energy market might change.

Many factors could affect the performance of the Company. Please read carefully the relevant section of the Information Memorandum for more details on the risks. 

Fees

Gresham House will receive an initial fee of 3% of the funds subscribed and will pay Wealth Club an introducer fee of 1.3%. Rebates are available for investments of £1 million or more. 

Gresham House will also receive a fee of £150,000 for each wind farm project in which the Company takes an interest and an annual management charge equal to 2% of the gross revenue from each underlying wind farm asset. Please see section four of the information memorandum for more details on fees. 

Our view

For some experienced investors, this could be a compelling opportunity. The level of income on offer is attractive in our view. A degree of inflation proofing and inheritance tax relief could be advantageous.

Gresham House is a credible, highly experienced and well-resourced manager.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision 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.

The details

Type
Wind energy
Sector
Renewable energy
Target semi-annual income distributions
c. 8%
Target IRR
7.25% net of all fees and costs
Target raise
£15,000,000+
Minimum investment
£105,000
Closing date
31 Oct 2019
Last updated: 8 October 2019