Information Memorandum - Foresight Group

LETTER OF INTRODUCTION
MAY 2013
DEAR INVESTOR
The solar sector in the UK has been transformed by
financial incentives initiated by the Government which have
accelerated the pace of development. Over the past three
years installed capacity has increased from 27MW in 2009
to over 2 GW today. The introduction of revenue support
schemes in other countries has led to a huge expansion in
the number of solar generation plants there and Foresight
believes there is still substantial capacity for growth in the size
of the UK market.
In addition solar benefits from the highest degree of public
support for an energy technology with 82% in favour,
compared to 66% for onshore wind farms and 74% for wave
and tidal (DECC Public Attitudes Survey).
The Department of Energy and Climate Change (DECC)
has recently included Solar PV as a “key technology” in its
Renewable Energy Roadmap, highlighting the recognition by
government that solar has a significant role to play in enabling
the UK to meet its renewable energy targets. Their analysis
suggests a capacity of between 7GW and 20GW in 2020. This
change is due to the progress that Solar PV has made in the
UK in the last 18 months, in particular the cost of Solar Power
Plants, which reduced by over 50% during the period.
Solar Power Plants are particularly attractive for investors
because the government supported revenue streams from
projects under the Renewable Obligation (RO) scheme offer
enhanced returns for 20 years and the technology involved is
well-proven and reliable.
Demand for Foresight Solar EIS Fund 2 which opened in
February 2013 exceeded the target size of £20m and was
therefore extended and closed at a total of £30m. We are now
launching Foresight Solar EIS Fund 3 to give investors access
to our strong flow of solar power investment opportunities
with the tax benefits of an EIS investment. We expect 2013/14
to be the busiest yet in the UK solar market, following a
strong Q1 which saw capacity increase by 350MW, with a large
number of attractive projects in development and due to
come on line over the next year (NPD Solar Buzz).
This year’s offer follows the first wave of fundraising for
Foresight’s Solar VCT and Foresight Solar EIS in 2010 and
2011 respectively, which surpassed expectations. These funds
bought four UK Solar Power Plants at a combined cost of circa
£50m. After more than a year’s operation of above base case
performance, these assets have recently been refinanced with
an innovative bond issuance which has crystallised a 20%
uplift in valuation and consequent increase in the funds’ NAV
(NAV announcement by Foresight Solar VCT on 3 May 2013,
which has a near identical holding as Foresight Solar EIS in the
same four Solar Power Plants). As a result of this uplift both
Foresight Solar VCT and Foresight Solar EIS investments are
tracking well ahead of their target returns (correct at time of
writing).
Since establishing our solar power team in 2007, we have
invested in Solar Power Plants with a total transaction value
of more than £310 million and forecast generating capacity
of 86 MW. This extensive in-house experience of sourcing
opportunities, arranging bank finance and completing solar
power investments means Foresight is well placed to capitalise
on opportunities in the sector and provide access to attractive
returns for investors.
Recently the Feed-in Tariffs (FIT) that have supported utility
scale Solar Power Plants have been reduced, making the
Renewable Obligation scheme more attractive. Solar PV
installations were historically small scale and expensive
compared to other technologies and as such were supported
by the Government’s FIT regime which was designed to
support small scale low carbon electricity technologies.
However, as the cost of solar reduced and the size of
installations increased the government felt that the level of
FIT support was overly generous for utility scale sites. As the
solar sector has matured the Government has ended support
for new utility scale Solar Power Plants under the FIT regime,
which continues to support small scale solar installations.
Utility scale Solar Power Plants are now better supported
under the RO Scheme, which is the Government’s main
financial mechanism to incentivise the deployment of large
scale renewable energy generation.
Foresight Solar EIS Fund 3 aims to enable individuals to invest
in this maturing sector and to benefit from the enhanced
revenue streams possible under the RO Scheme. In addition
to income derived from selling the generated electricity,
generation plants accredited under the RO Scheme receive
20 years of income from the sale of Renewable Obligation
Certificates, which substantially increases the Solar Power
Plants’ returns. The Enterprise Investment Scheme is one
of a very small number of tax-efficient investment schemes
officially sanctioned by HM Revenue and Customs. Subject to
your personal circumstances, you should be able to reclaim
30% of sums invested from your Portfolio against your
tax bill and your investment should be outside the scope
of Inheritance Tax after two years. The EIS benefits are
principally available on sums invested of up to £1,000,000
per individual in any one tax year. Further details of the tax
benefits are described on page 25. It is our intention that all
of the monies invested by the Fund will be in UK EIS Qualifying
Companies.
I hope that you find this Information Memorandum clear
and easy to understand. You can call us on 01732 471812 for
more detail at any time. You must seek financial advice before
you invest in the Fund. When you are ready to invest, you will
find the Application Forms from page 39 onwards.
Jamie Richards
Head of Infrastructure
FORESIGHT SOLAR EIS FUND 3
03