Review - Downing Indian Solar EIS

Archived article

Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.

This offer is now closed

Investors looking to access the renewable energy sector through EIS have only a narrow window of opportunity remaining. The Chancellor's announcement, made in July last year, means that renewable energy will be excluded for new EIS investment as of April 6 2016. 

Renewable energy companies that benefit from government subsidies are already excluded for new EIS investors. However, costs have fallen substantially in many areas and solar, for example, can now compete with traditional forms of electricity generation without the need for stimulus, especially overseas. EIS rules currently allow overseas investment.


  • Last window of opportunity to invest in renewables through EIS
  • Indian solar is expected to generate almost twice as much energy as UK solar 
  • Uses local, specialist partners to identify prime opportunities  
  • Renewables energy team led by the experienced Colin Corbally

The offer

UK solar energy has been a staple EIS and VCT investment for the last five years. In addition, solar energy has been gaining ground globally, helping force the price of solar panels down. Costs have fallen so much that in many countries subsidies are no longer needed to help solar compete with traditional forms of electricity generation. Whilst the UK isn’t that attractive without subsidies, due to the strength of the sun, other countries are better positioned, such as India.

Downing LLP has invested over £300 million since 2010 in renewable energy projects, mainly in the UK, but also latterly in India. The renewables energy team is led by Colin Corbally, a highly experienced investor. In India, Downing is teaming up with local specialist developers to identify suitable opportunities. They launched their first Indian Solar EIS last year. In a nutshell, the EIS purchases agricultural land, has it re-zoned as industrial, then installs solar panels and finally sells it to local companies.

Bureaucracy in India is notorious and therefore the local developers need to buy the land first, as foreign companies are not allowed to own agricultural land. However, once it has been re-zoned as industrial, foreign companies can purchase. UK solar farms generally lease the land, in India, as land costs are so low, the EIS owns the land and solar panels.

The actual output per solar panel is expected to be almost twice as high as compared to the UK – the irradiance of the sun is far stronger in India. Combine the stronger sun with lower installation costs and you can see why Downing thinks it is an attractive market. This electricity, once generated from an individual site is sold to a blue chip company locally, with a medium to long term purchasing power agreement.

Target Return

The target return is £1.20 per £1 invested after a three to four-year investment period. Downing’s performance fee is linked to this level.

Exit strategy

Downing has identified a number of options for exit. The developers Downing is partnered with are likely candidates for repurchase. Alternatively, the projects could be refinanced as these projects have long term stable income streams. A further option, similar to the UK, could be selling them to pension or insurance companies.


There are clearly several specific risks with this investment. Firstly, currency risk; India is a developing nation and as such tends to have a higher degree of volatility in its currency. This has been evident over the last six months. If the currency devalues versus sterling, then investors lose out.  Conversely if the Indian rupee appreciates, then investors gain. It is possible a hedging strategy could be put in place. After having spoken to the managers, their comments were that although the rupee might be volatile, the US dollar value of the assets should remain fairly constant. A second risk is the lower regulatory oversight that comes with dealings in a developing nation. Another key risk could be political upheaval; however, India has a mature democracy in our view.


The initial charge is 4%, in addition Downing may charge investee companies 2%. The annual management fee is 2%. The performance fee is 20% of the excess over £1 per share, however investors have to receive £1.20 before any performance fee is due.


Whilst seemingly a very speculative offer, solar is a tried and tested formula with a high degree of predictability and a low degree of technological risk. Clearly investing in India brings specific risks, however one thing is virtually guaranteed, the same solar panel in India will generate far more energy than compared to the UK. In addition, there is a huge need for reliable sources of energy as India is developing so quickly. This is an exciting offer and the last chance to get solar exposure in an EIS structure. The team is very experienced and this is their second Indian solar offering.