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Foresight Solar VCT gets FIT

The Foresight solar VCT is a venture capital trust that invests mainly in unquoted companies that generate electricity from solar power systems and qualify for Government feed-in tariffs.

FITs are Government incentives for individuals and companies to generate their own electricity using renewable energy such solar power. They provide a fixed payment for each unit of electricity generated for 20 to 25 years, which provides a predictable, long-term inflation-protected revenue stream for investors. There is a further tariff for energy that is not consumed and which is sold in to the national grid.

The prices guaranteed under FITs are set high enough to provide an attractive return in investment after taking into account the cost of the system, sunlight available and other variables.

Foresight established this VCT because it believes that FITs will lead to rapid growth in the sector and attractive returns for investors. The firm is looking to raise up to £40m for this VCT and will build on its experience in solar power investments in Europe. It has invested in solar power projects in Spain and Italy of more than £150m since 2007.

Foresight says the technology to use solar energy to produce electricity is tried and tested, with solar panels now familiar to many people. It sees solar power as an attractive investment because it is supported by legislation in the form of FITs and the government has committed to generate 15 per cent of all the UK’s energy from renewable sources by 2020.

The firm says demand for solar electricity is not dependent on economic recovery and that government spending cuts will have little impact because it is the electricity supply companies, not the Government, that pay the FITs.

The VCT will have a five-year life but there is an individual rollover option for investors who want to stay invested after five years. It will also have a zero discount buyback policy, where any discount to net asset value will be managed through buying shares back at their net asset value.

This product could be useful for investors who share Foresight’s expectations of growth in this sector and who prefer a VCT to an enterprise investment scheme such as the Downing low carbon EIS fund.

Foresight’s experience and relationships with contacts built up over the last few years could be useful in finding UK investment opportunities but a range of factors could represent risks. Differences between the forecast and actual levels of solar power produce could impact on returns, as would any changes in legislation and in the costs of solar panels and other equipment.

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