Octopus Investments, a UK retail fund management companies specialising in smaller company investing, has opened a new tranche of the Octopus Enterprise Investments Scheme (EIS).
The latest tranche builds on Octopus’ expertise in investment into the energy industry and will, for the first time, seek to focus primarily on investment into the anaerobic digestion sector.
Investment in EIS has grown significantly in recent years, as more investors and advisers become aware of the tax planning benefits that an EIS offers. The amount invested in EIS in the year to 31 March 2012 almost doubled the previous year with EIS fundraising reaching over GBP1 billion, up from GBP545 million in 2010-11.
Octopus’ latest EIS tranche has been launched in order to meet the growing demand from investors and advisers for opportunities to benefit from the different tax reliefs and potential returns offered through an EIS.
John Thorpe, business line manager for EIS at Octopus, says: “It is great to see continued demand for EIS as more and more people recognise the meaningful role that EIS can play as part of an investor’s portfolio in helping them target their financial goals. As the largest provider of EIS in the UK, and with a proven track record in energy investment, Octopus is well placed to provide access to further EIS investments in the energy market. We work hard to find attractive opportunities for our investors, and the investment team at Octopus has demonstrated how its expertise in the industry enables it to identify those sectors and companies which should scale measurably, realise their potential and deliver returns to our EIS investors. As more people become aware of the benefits of investing in smaller companies, and the significant tax benefits of EIS, the demand for EIS is stronger than ever.”
Octopus has been investing in the energy market since 2010. Over the last four years, it has created a broad platform to raise and deploy funds into the renewables and broader energy sector. Since 2011, Octopus has deployed over GBP900 million into solar investments through its partnership with the UK’s largest fully integrated solar developer, Lightsource Renewable Energy. In 2013, Octopus entered into a partnership with Qila Energy, one of the UK’s leading UK based developers of anaerobic digestion (AD) plants. To date, Octopus has invested over GBP20 million into AD plants, with five currently under construction.
Matt Setchell, head of the renewable energy team at Octopus, says: “As we have seen with solar, the energy market opportunity in the UK is significant. It is a growing industry, and, as evidenced by the Finance Bill 2014, the government is actively encouraging investment into the more nascent sectors to help them develop and become more established in order to meet renewable energy targets. We have identified AD as a sector that is ripe for growth, with attractive characteristics for our funds, as demonstrated by significant deployment outside of the UK. However it still remains undeveloped and there is currently insufficient bank finance available to support these businesses, especially during the plant construction phase. Octopus EIS can provide an alternative source of funding which can help fill this gap. We build partnerships with the companies we invest in, with management teams that have extensive experience in the sector. This enables us to get closer to the technologies and help manage risks while supporting management to realise a business’ full potential.”
In addition to investment into anaerobic digestion, Octopus EIS will also seek to invest in reserve power businesses. Reserve power provides electricity to the National Grid during periods of increased demand, which can be dictated by seasonality or by events and weather variation occurring each day. The government requires that a certain amount of reserve power be available to the National Grid, and Ofgem has forecast that this market is likely to grow significantly as demand for greater capacity to provide reserve power increases. Octopus EIS aims to invest in the development of reserve power plants in order to benefit from the predictable returns that are targeted by investors.
Enterprise Investment Schemes were introduced by the government in 1994 to encourage investment into smaller companies in the UK. Investments into an EIS can provide investors with a range of valuable tax reliefs providing the investment in the underlying companies are held for at least three years. These include 30 per cent upfront income tax relief, capital gains tax deferral, up to 45 per cent loss relief and tax-free growth. Investments are also free from inheritance tax after two years.