Review: Guinness Sustainable Infrastructure IHT Service
The Guinness Sustainable Infrastructure IHT service focuses on renewable energy, specifically rooftop-mounted solar projects. The investment is in a unquoted trading company which benefits from Business Property Relief (BPR): after two years of being held the investment should be free of inheritance tax.
- Focused on roof-mounted solar energy projects
- 5% target return (not guaranteed)
- Capital preservation a priority
- Minimum £25,000 investment
- Manager experienced in the renewable energy sector
- Low annual fees
Guinness Asset Management (GAM) was set up by Tim Guinness in 2003. Mr Guinness was co-founder of Guinness Flight Asset Management which he sold in the late 1990s. GAM manages £900 million the bulk of which is in funds investing in quoted markets and about £90 million in EIS and IHT services. There are 33 staff in London; Shane Gallwey, Hugo Vaux, Chris Villiers, Malcolm King and Ed Guinness are the key people in unquoted investments (including this IHT service). This IHT service launched in 2015. Guinness has a wealth of experience in the renewable energy sector. Its first energy EIS launched in 2011 (now closed due to EIS rule changes) and invested in a similar array of projects.
Target return and strategy
The target return is 5% per annum, net of all fees, variable and not guaranteed. The return is rolled up, but for investors who require an income can take regular withdrawals from capital.
Investors buy into a trading company called Guinness Sustainable Infrastructure Limited (GSIL). GSIL will invest in sustainable infrastructure projects. Although the remit is wide, in reality Shane Gallwey, lead manager of this service, suggests that rooftop-mounted solar projects will form the bulk of investments.
Rooftop-mounted solar installations
Guinness plans to install solar panels on factory roofs with the aim to subsequently sell the electricity generated to that factory at a higher price than the National Grid would pay. The factory also gets a better price than buying from the grid.
There is no typical size of project, it could be anything from £50,000 to £4 million.
It is time consuming to negotiate deals, however, Mr Gallwey believes the returns are better than ground-mounted solar. For example, a 5 MW solar farm (ground-mounted) might need 30 acres of land and cost £5 million to install. With rooftop-mounted solar there is typically no rent to be paid or additional grid connection required. More importantly, no planning permission is required.
Clearly, when planning to sell energy to a factory rather than the grid, there is credit risk. For this reason, Guinness carries out due diligence on the underlying factory/business before investing. In addition, if that business were to go bust Guinness could still sell the electricity to the grid.
There is a preference for investing in solar projects that are already agreed and with the grid connection already in place with only the contractual installing and construction needed. The installation is normally covered by guarantees about overruns etc. By investing at this stage Mr Gallwey believes higher returns can be generated than buy buying already generating assets.
There will be quarterly valuations and dealing points so investors will be fully invested within 3 months of making their subscription.
Share prices since inception in 2015 are shown below. As expected by Guinness, the share price remained static whilst installations were made, with steady growth in excess of the target rate after this initial period. Please note the share price is based on Guinness's own valuation.
Source: Guinness, May 2017. The chart above shows share price since inception. Past performance is not a guide to the future. Five year data is not available as the service launched in 2015.
Although the service intends investing in sustainable energy infrastructure, the plan for the foreseeable future is to invest only in rooftop-mounted solar projects. Therefore, this is quite a specific service. Additional risks include the fact that Guinness prefers to invest in pre-construction projects; for example, there may be delays in construction that could impact electricity generating capability and thus returns.
Capital is at risk and you should not invest money you cannot afford to lose.
Eligibility for BPR is assessed at the date of death and will depend on the companies remaining qualifying. Remember, tax rules can change and the value of tax benefits depends on circumstances.
Guinness levies no initial charges directly. The annual management fee is 1%, paid for by the underlying investee company. In addition, there is a 0.275% dealing fee and annual custodian fee of £37.50 per client – both paid by the underlying company. There is a performance fee of 20% of any profits payable on redemption assuming a simple hurdle of 3.5% per annum has been achieved. The total annual charges are annual capped at 1.5%, excluding performance fees.
Guinness Asset Management has over £20 million invested in rooftop-mounted solar projects through its existing EIS and has shown its expertise at delivering excellent returns, although past performance is not a guide to the future. The Sustainable Infrastructure IHT Service benefits from the team's considerable experience and resources. We believe returns, although not guaranteed, should be predictable over the long term.
This review is not intended
to be advice or a personal recommendation to buy the investment mentioned, nor
is it a research recommendation. Wealth Club aims to highlight investments we
believe have merit, but investors should form their own view on any proposed
investment and read the providers documents carefully.