Solar firms to be banned from VCT investment

Albion Ventures has welcomed the government’s decision to crack down on some VCT and EIS providers by placing “feed-in tariff businesses” such as solar companies into the excluded activities list from April 2012.

Patrick Reeve, the managing partner at Albion, says a number of VCTs have been using their special status under public legislation to target investments that do not meet a public need.

He says: “Essentially, that is a business that could be covered by bank finance, and the proof is that the targeted returns they are looking for from their investments is 5-6%, which is far too low.”

Ben Yearsley, an investment manager at Hargreaves Lansdown, says: “The easiest way to calm it down was to say you cannot do any of it. Banks will lend if the companies are attractive enough.”

Mike Currie, a partner at Foresight Group, says there will be a rush to invest in solar before April 2012.

He says: “From a cash-generative perspective, it is a good thing. It will allow us to get to the targets we need to and retain the existing projects, the Solar VCT and EIS. It will get the same quantum of cash over a limited period of time.”

Yearsley says the government has aimed its re-focus of EISs and VCTs at the majority of VCTs that have a limited life.

“It is clearly an area of the market they do not like,” he says.