Half Yearly Report -7-
October 29 2010 - 5:40AM
UK Regulatory
Subject to satisfactory performance in line with the business plan, the first
payment of mezzanine loan interest is expected to occur in December 2010 and the
first dividend distribution is expected in the first half of 2011.
Twinwoods Heat & Power Limited
Twinwoods Heat & Power Limited is a company developing a waste wood biomass
generating scheme in Bedfordshire. The plant design is identical to the
Sandsfield Heat & Power Limited development and is again being developed in
partnership with Bioflame Limited which owns 30% of Twinwoods Heat & Power
Limited.
Following the acquisition of the assets of Ventus 3 VCT plc, the Company owns
50% of the share capital in Twinwoods Heat & Power Limited acquired for total
consideration of GBP2.0 million and also provides a mezzanine loan facility of
GBP400,000.
Construction on the site commenced in 2009 and the plant is expected to be
operational in the first half of 2011. Construction works are proceeding on
schedule.
Kettering East Energy Limited
Following the acquisition of the assets of Ventus 3 VCT plc, the Company held a
loan facility of GBP250,000 provided to Kettering East Energy Limited, a company
developing a seven turbine wind farm project in Northamptonshire with full
planning consent.
As a result of unforeseen difficulties in the site development process the
Company elected not to proceed with this scheme and the loan facility was repaid
by Kettering East Energy Limited in October 2010.
EcoGen Limited
Following the acquisition of the assets of Ventus 3 VCT plc, the Company owns
12% of the ordinary share capital in EcoGen Limited acquired for total
consideration of GBP400,000 and holds GBP200,000 of convertible loan notes.
EcoGen Limited is an experienced wind farm owner, operator and developer.
EcoGen Limited is actively managing the development of a series of new wind farm
sites in the UK. Its most advanced planning application for a five turbine wind
farm project in Cambridgeshire was recently refused. EcoGen Limited is
considering an appeal of the planning decision.Detailed work has begun on the
pre-planning process for a number of additional sites.
Wind Power Renewables Limited
Wind Power Renewables Limited is a developer of wind farm sites in East Anglia.
The Company made an equity investment of GBP90,000 which was matched by Ventus 3
VCT plc. Following the acquisition of the assets of Ventus 3 VCT plc, the
Company held 30% of the share capital in Wind Power Renewables Limited and
provided shareholder loans amounting to GBP120,000. In September 2010, the
Company invested a further GBP72,000 for equity and increased its shareholding
to 48% of the ordinary shares. The funding was raised to meet the increased
costs of preparing planning applications.
Wind Power Renewables Limited has submitted three sites for planning to date.
One of the sites was refused planning permission in October 2009 and has now
been resubmitted on a revised basis. Two other sites are awaiting determination
although one of these is expected to require a revision to its layout to meet
certain constraints that have been identified. There are three other sites that
have been secured under land options that will be considered for planning
applications in due course.
Greenfield Wind Farm Limited / Muirhall Windfarm Limited
During the year ended 28 February 2010, the Company advanced an interim loan
facility totalling GBP325,000 to Muirhall Windfarm Limited, a company owning a
fully consented six turbine wind farm site in West Lothian, Scotland. The loan
facility was provided as part of an exclusivity arrangement in respect of the
long term financing of the project. The loan was extended by GBP50,000 in March
2010 and was repaid in full when the Company acquired a holding in Muirhall
Windfarm Limited's parent company, Greenfield Wind Farm Limited, as part of the
long term financial structure for the wind farm scheme.
In March 2010, the Company's ordinary share fund acquired a shareholding of
8.35% in Greenfield Wind Farm Limited for consideration of GBP334,000. The
Company's "C" share fund acquired a shareholding of 12.5% for consideration of
GBP500,000. The ordinary share fund and "C" share fund also advanced mezzanine
loans of GBP668,000 and GBP1,000,000 respectively.
Ventus 3 VCT plc made an equity investment of GBP332,000 in Greenfield Wind Farm
Limited for a shareholding of 8.3% and advanced a loan of GBP664,000. Therefore,
following the Company's acquisition of the assets of Ventus 3 VCT plc, the
ordinary share fund of the Company owns 16.65% of the share capital in
Greenfield Wind Farm Limited and provides a mezzanine facility of GBP1,332,000.
Works on site commenced in early April 2010 and the six wind turbines are
scheduled to be fully installed in November 2010 and operational by the end of
December 2010. Construction works are currently progressing on schedule.
The investments by the Company's ordinary share fund and "C" share fund in the
ordinary shares of Greenfield Wind Farm Limited have been structured so as to
meet the qualifying holding tests under HM Revenue & Customs VCT regulations.
The mezzanine loans are not structured as qualifying holdings.
Renewable Power Systems Limited
During the six months ended 31 August 2010, the Company's "C" share fund
provided a loan facility of GBP350,000 to Renewable Power Systems Limited, a
company which specialises in the development and operation of landfill gas sites
and other forms of energy from waste generation. As part of the agreement to
provide the loan facility the Company has secured an exclusivity agreement
relating to any project that Renewable Power Systems Limited requires external
finance to progress. This facility is structured as a short term investment to
provide Renewable Power Systems with development capital and is scheduled to be
repaid in June 2011. As the Company does not hold equity in Renewable Power
Systems Limited, it is not a qualifying investment under HM Revenue & Customs
VCT regulations.
BEGL 2 Limited & BEGL 3 Limited
In September 2010 the Company's "C" share fund provided medium term loan
facilities of GBP500,000 to each of BEGL 2 Limited and BEGL 3 Limited. These
companies are subsidiaries of Broadview Energy Limited.
BEGL 2 Limited is the development company for a fully consented five turbine
wind farm in Leicestershire and BEGL 3 Limited is the development company for a
fully consented four turbine wind farm in Teesside.
In each case the loans have been secured against the relevant development
company and will be used to meet construction and post consent development costs
alongside long term bank loan facilities. The facilities are to be repaid in
full no later than June 2012. As the loan facilities are short term in nature
they are not qualifying investments under HM Revenue & Customs VCT regulations.
Investment Policy
The Company is focused on investing in companies developing renewable energy
projects with installed capacities of two to twelve megawatts, although larger
projects may also be considered. Given the target investment size, investments
will generally be in companies developing projects initiated by specialist
small-scale developers and smaller projects which are not attractive to large
development companies and utilities.
Asset Allocation
The Investment Manager seeks, primarily, to allocate the Company's investments
in equity securities and loan stock of companies owning renewable energy
projects with full planning consent, ready for construction of the project to
commence or whose assets are already operational. Up to 10% of net proceeds
raised from the initial share offer and the "C" share offer, respectively, may
be allocated to development funding for early stage renewable energy projects
prior to planning permissions being obtained.
The Company's policy is to maintain cash reserves of at least 5% of net proceeds
raised from the initial share offer and the "C" share offer for the purpose of
meeting operating expenses and purchasing its shares in the market.
Circumstances may arise which would require the Company to hold less than 5% of
net proceeds in cash for a limited period of time.
In order to comply with VCT requirements, at least 70% by value of the Company's
investments are required to be comprised of qualifying investments.
Since the acquisition of Ventus 3 VCT plc's assets, the Company typically owns
25% to 50% of the equity share capital of each investee company and a portion of
its investment in each investee company may be in the form of loan stock.
The Company's uninvested funds are placed on deposit or invested in short-term
fixed income securities until suitable investment opportunities are found.
Risk Diversification
The Company invests in companies developing projects that are situated
throughout the UK. Funds are also invested with a range of small-scale
independent developers so project risk is not concentrated with only a few
developers. The portfolio contains investments in companies with projects at
different stages of the asset lifecycle, ranging from pre-planning to
construction and then into operation. Investments are made via subscriptions for
new share capital or via loan stock instruments in order to secure a negotiated
level of return from each investment . The majority of investments are made in
special purpose companies set up specifically to develop a single project. The
bank debt financing is non-recourse to the Company.
The returns from projects are largely dependent on the UK Government's continued
support for renewable energy, primarily under the Renewables Obligation and
Feed-in Tariff mechanisms. The risk of any negative change to government policy
is mitigated by the UK Government's historic practice of grandfathering
financial support mechanisms for existing assets. This risk is further mitigated
by the Company typically negotiating fixed and/or floor price mechanisms into
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