Rule change forces rethink for renewables EIS

Managers of clean energy-focused Enterprise Investment Schemes (EIS) will be forced to revamp their portfolios amid new rules to restrict companies benefiting from government support under Renewable Obligations Certificates (ROCs).

Rule change forces rethink for renewables EIS


Royal Assent of the Finance Bill is due this month, with the draft legislation singling out just two technologies – hydropower and anaerobic digestion – still eligible for tax relieved investment. 
EIS promise sophisticated investors 30% tax relief in return for a minimum three years investment. 
Renewable energy firms generate their income from selling the power to wholesalers and through sale of ROCs which are given as a way of subsidy by the Government.
Some estimates have claimed that nearly two-thirds of money into EIS last year were in renewables projects which benefited from the ROC energy subsidy and EIS tax benefits, making the returns arguably more generous and less risky than the Government intended.
Fund groups operating in the renewables sector include Stellar Asset Management, Ingenious and Guinness Asset Management. 
Sebastian Speight, managing director at Ingenious’ clean energy division, acknowledged there is likely to be a significant change to the opportunities to invest in renewables.
“From EIS investors perspective, it looks likely that the chance has gone to invest in renewable energy-generating companies that receive government subsidies, save for a few specified technologies,” he said. 
“It remains to be seen whether the Government will allow less mature renewable technologies to receive tax-incentivised investments. EIS investments into the sector are still expected to be provided by the main specialist houses as the UK renewables market with a focus on new investment strategies in this growing UK industry.”
Stellar AM fields its Wind Energy EIS, and CEO Jonathan Gain said investors must act fast to benefit from ROC support. 
“We had been planning this fund long before the Government decided to pull the plug on the ROC-subsidised EIS model,” he added. 
“Fortunately it has indicated that the rules will not be applied retrospectively. Some will argue that this was a double whammy of benefits that was never intended, I take the view that it was a good way of supporting the development of green energy in Britain.”


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