The renewable energy focused fund is “designed to enable UK taxpayers to make lower risk, tax efficient investments in trading companies that own and operate wind and solar installations which qualify for feed-in tariffs (FITs) in the UK,” Downing says.
The fund will be managed by Downing Corporate Finance, and the manager will be advised by Low Carbon Investors (LCI).
LCI is a fund management company focused on the low carbon sector, and manages the AIM listed fund, Low Carbon Accelerator Ltd (LCA).
Downing specialises in the structuring, promotion, and management of tax efficient funds, including venture capital trusts (VCT), EIS, and inheritance tax mitigation funds.
To minimise investment risk, the fund will:
- Only invest in wind and solar assets. Both of these technologies have millions of operating hours and performance data, and neither technology requires raw materials as fuel once installed, and so have no exposure to fluctuations in feedstock prices;
- Only make investments when all planning and regulatory permits have been obtained; and
- Not use significant debt to finance the underlying assets.
The EIS fund is seeking to sell the portfolio of investments after four years, and to return capital to investors at that time.
The renewable energy fund is targeting a tax-free compounded return (IRR) in excess of 8% for investors. This is the equivalent to a 13% IRR to a 40% taxpayer.