The company is aiming this offer at investors who are looking for VCT tax relief through a product that is focused on capital preservation and liquidity. The VCTs will invest mainly in unquoted UK companies in the solar energy sector, focusing on projects below 50kW that benefit from Government feed-in tariffs. These offer 25-year inflation-linked subsidies for electricity generated by qualifying solar power installations, enabling Octopus to provides investors with stable and attractive revenue streams.
This dual VCT offer targets annual dividends of 5p for each share from 2013 and Octopus intends to provide liquidity for investors through a zero discount buyback policy for the life of the VCT. Octopus says some VCTs have a buyback facility with a significant discount to net asset value, but a facility with no discount was felt to be more attractive and useful to investors who may want to exit the investment after five-years. Five years is the holding period that is required to retain the upfront income tax relief and Octopus is targeting a return of 110p a share at that point.
Octopus has found that some investors want a very long-term, tax-free income stream; some want a five -year investment and others want the ability to choose. The company believes it has catered for all these by tapping in to the long-term income generated by FITs and providing liquidity through the zero discount buyback facility.
Octopus is an experienced VCT manager that also has knowledge of the solar energy sector through its solar enterprise investment scheme and solar investments in its existing VCT portfolios. The firm has its own solar team and is also able to identify suitable projects through its relationship with solar energy firm Lightsource Renewable Energy.
This is one of several products offering a final opportunity to invest in solar energy with tax breaks before April 2012, after which FITs will no longer qualify for inclusion in VCTs or enterprise investment schemes.
Competition from within the VCT market may come from the top-up to the Foresight solar VCT, while solar-based EIS funds from Goldfield Partners, Downing and Triple Point could provide alternatives.