Gresham House Renewable Energy VCTs 1 & 2
Update (26 September 2018): Offers closed
These offers have reached capacity. Any applications already submitted will be processed on a first come, first served basis.
This is a rare opportunity to invest in VCTs with a mature portfolio of asset-backed, operational renewable energy projects which enjoy long-term inflation-linked, government-backed income. The portfolios were established before VCT restrictions took effect. This is a small raise, so the overall profile of the portfolio should not change too much as a result of any new investments.
This 2018/19 top-up offer seeks to raise £6.46 million split equally between the two VCTs.
The previous small raise of £4.4 million in March 2018 reached capacity in less than a week. We expect the current offer to fill up quickly.
- Both VCTs rank in the top 10 of all VCTs over 5 years, based on NAV total return (past performance is not a guide to the future)
- Mature portfolio of renewable energy assets acquired before VCT rules became restrictive
- Both VCTs have paid out total combined dividends of 39.5p since launch in 2010 – note past performance is not a guide to the future
- Target dividend of 5p per share, not guaranteed
- Limited exposure to power prices, as 85-90% of the portfolio income is underpinned by some form of long-term government subsidy
- Limited raise of £6.46 million across both VCTs, expected to fill up fast
- Minimum investment £10,000
- Available exclusively online through Wealth Club for non-advised investors
The VCTs are managed by Gresham House Asset Management. Hazel Capital was acquired by Gresham House plc in 2017. Gresham House then took over as investment adviser to the VCTs, under the name Gresham House New Energy. The team is experienced. Together, it boasts more than 100 years’ in fund management. The team that manages the VCTs has been the same since inception.
The VCTs previously invested in renewable energy projects with an emphasis on solar. Renewable energy has historically been an extremely popular investment in VCTs. The benefits were clear: it’s asset-backed, the revenues are government backed and inflation-linked. That’s partly why the government prohibited new investment into renewable energy in a VCT from April 2015.
As new investments in renewable energy are no longer permitted, the money raised under this offer is expected to be invested in the cleantech and environmental sustainability sectors, as well as, potentially, some companies quoted on the AIM market. Hazel believes the cleantech sector will continue to grow rapidly as a result of both the commitment of the UK Government to decarbonise the economy and the falling costs of equipment and engineering.
The new investments should account for no more than 10% of the total NAV.
Investors will receive one A Share for every Ordinary Share subscribed for under the offer.
From 2021 (and every five years thereafter) shareholders will be asked to vote on whether the companies should be wound up or continue as VCTs.
Current portfolio overview
The VCTs hold an existing portfolio of 16 investments in UK renewable energy projects, all of which qualify for some form of government-backed subsidy (typically FiT or ROC). Most of the assets were acquired between 2011 and 2013, when those subsidies were more generous. Currently 85-90% of the income generated by the portfolio is underpinned by those subsidies and is therefore unaffected by energy price fluctuations.
The existing portfolio breakdown is shown below. These figures are based on valuations as at 30 September 2017.
Examples of existing portfolio companies
Lunar 2 Limited
The biggest holding in both VCT portfolios is Lunar 2 Limited. It wholly owns South Marston Solar Limited, Beechgrove Solar Limited and 10% of Vicarage Solar Limited. These companies own ground-mounted solar farm projects of 5MW (near Swindon), 4MW (near Hawkchurch) and 0.64MW (Ilminster, Somerset). Furthermore, Lunar 2 Limited owns 90% of Lunar 1 Limited and therefore its subsidiaries (AEE Renewables UK 3 Ltd. 90%, AEE Renewables UK 26 Ltd. 90% and New Energy Era 10%).
The VCTs first invested in Lunar 2 in December 2013 at a cost of £2,979,000. At the end of March 2018, it was valued at £15,360,000 and now makes up around half of the value of each of the VCTs.
ChargePoint Services Limited
An example of a newer-style investment is ChargePoint Services Limited. Hazel invested £500,000 in November 2015. The business provides software and services for electrical vehicle charging stations. In 2017 the company partnered with Motor Fuel Group (MFG) which is the UK’s second largest forecourt operator. Together they install rapid electric vehicle chargers across UK forecourts.
Dividends and performance
The VCTs aim to pay a dividend of 5p per share per year, equivalent to approximately 4.3% of current NAV. From 2018 any dividends will be paid once a year in December. Dividends are variable and not guaranteed.
Both VCTs have paid out total combined dividends of 39.5p since launch in 2010 for a combined holding of one Ordinary and one A Share.
Source: Hazel VCTs. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Until 2017 dividends have been paid once a year in September. From 2018 any dividends willbe paid once a year in December.
Source: Hazel VCTs. Total return includes Net Asset Value and cumulative dividends per share. Past performance is not a guide to the future. Dividends are variable and not guaranteed.
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
VCTs are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
VCTs can now only invest new money in growth capital deals. Management buyouts, replacement capital deals and investments in mature companies and certain sectors are no longer permitted. This results in considerably higher risks.
Although the renewable energy projects are operational there are still specific risks associated with this kind of investment. Some cannot be controlled. For instance, there might be lower than expected wind speeds, lower irradiation levels and hence lower than expected energy output. There might also be downtime of the energy generation equipment, changes in government legislation, volatility in annual revenues and increasing operational costs. Consequently, annual revenues may fluctuate. This, along with any delays in receiving revenue due from government, could impact the availability of dividends.
Significant proportions of both VCTs are invested in renewable energy. Whilst this means the VCT could benefit from significant largely predictable income, it also means there is concentration risk.
It should be noted the management team is unproven in making and exiting investments under the new VCT rules. In the event of future fundraises, these newer investments would constitute a larger proportion of the portfolio.
Fees and charges
A summary of the fees and charges is shown below.
|Full initial charge||4%|
|Wealth Club initial saving||n/a|
|Net initial charge through Wealth Club||4%||Annual charge||1.4% (1.15% from Nov 2018)|
|Performance fee||up to 30%|
More detail on the charges
The VCTs have a policy of purchasing a limited number of their own shares from time to time, subject to board approval. Shares will be purchased at a discount to the most recently published NAV. You can find more details of the share buyback policy in the offer document.
Dividend reinvestment scheme
There is no facility to reinvest dividends.
These VCTs consist largely of operational, asset-backed renewable energy projects with government guaranteed, index-linked income streams, which should help support regular dividend payments, although this is not guaranteed. These investments were made when conditions were favourable for renewable energy projects. Very little should change because of this latest and modest fundraise. The portfolio still holds the investments that have served Hazel so well to date. There’s no guarantee this run will continue; past performance isn’t a guide to the future. Investors are still investing in smaller companies and a concentrated portfolio: these are high risk. However, if you like the look of the current portfolio and the team’s experience, this offer is well worth considering, in our view.
The previous offer earlier in the year reached full capacity in less than a week. We expect the current offer to be equally popular.
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. 19.09.18
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.
- Target dividend
- Initial charge
- Initial saving via Wealth Club
- Net initial charge
- Annual rebate
- Funds raised / sought
- £6.5 million / £6.5 million
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