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Acuity links environmental VCTs

Smaller companies specialist Acuity Capital is aiming to raise up to £20m through a linked share offer for the Acuity environmental VCT and environmental VCT 2.

Acuity Capital was formerly part of the Electra Partners Group and became independently owned by its management team in 2008. Under this offer, it will divide investors’ capital equally between the two VCTs.
Acuity Capital says the European Union and the UK Government have put in place legislation to change the way in which we dispose of organic waste, which has created investment opportunities in waste recycling infrastructure projects.
 
The VCTs will invest mainly in UK unquoted companies specialising in organic waste disposal plants. These plants also produce a biogas by-product which can be used to generate electricity as another source of revenue.
 
The focus will be on firms involved in projects backed mainly by long-term minimum fixed price contracts with local authorities or established companies as a way of managing risk. Each VCT will invest in at least six projects, to reduce the impact of poor performance of any one company. Projects will use low-risk, proven technology and the companies involved will have good business plans, a demonstrable demand for its products and services, adequate capital resources and quality management. Acuity Capital will also consider the prospects for an exit, either through a trade sale or flotation.
 
Investment will be through a combination of secured debt and equity, targeting a tax free running yield of 10 per cent once the VCTs are fully invested. Revenue for each site is expected to come from fees paid by the disposer of the waste for each tonne of waste to be processed, the sale of compost and, for some sites, the sale of electricity.
 
The legislation that underpins the need for an alternative to landfill sites, and the need for renewable energy sources, support the investment case for organic waste processing plants.

However, there are potential risks, which could impact on the VCTs, such as delays in planning permission for the plants and construction risks such as incomplete designs. The performance of individual plants will also depend on the volume and quality of waste.

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