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Finding the right home for your cleantech investment funds

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Fiona Le Poidevin (pictured), Deputy Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry – explores how a range of factors, including listings capabilities, make Guernsey an attractive domicile for cleantech investment funds…

Distinguishing features of Guernsey’s 50-year old finance industry include its breadth and the ability to take the lead and build up expertise in providing niche products or services, such as captive insurance, private equity and infrastructure funds.

Guernsey Finance has now established a group which is specifically looking at how the banking, insurance and in particular the investment funds sector can capitalise on the rapidly growing interest in clean technology (cleantech), including renewable energy. This comprises tidal, wave, solar and wind power amongst others, together with nascent research to find new sustainable technologies.

Therefore the development underpinning the use of these energy sources on a commercial level varies quite dramatically. These differences mean that the type of investment required varies, as do the investors. Advancing brand new technologies needs funding for research and development, essentially innovation, whereas the construction of wind farms requires investment into infrastructure.

Guernsey’s advantage is that it has developed an investment industry with the critical mass and expertise of a range of providers who service all types of funds, from the vanilla right through to the esoteric. An example is the Guernsey closed-ended IPM Renewable Energy Fund ICC Limited and its related Solar Park Fund (GBP) IC Limited which is listed on the Channel Islands Stock Exchange (CISX) and aims to achieve a stable income over a five year period.

This diversity has helped the value of funds business in Guernsey reach more than £261 billion at the end of December 2011 – up 1.6% year on year. In particular, Guernsey remains extremely popular with promoters in alternative and niche asset classes and especially where there is a demand to access capital markets.

Indeed, one of our greatest strengths is the ability for Guernsey structures to list not only on the CISX but also the London Stock Exchange (LSE), Euronext Amsterdam, the exchanges in Frankfurt, Toronto, and Australia, amongst others.

Data from the LSE to the end of December 2011 shows that Guernsey is home to more non-UK entities than any other jurisdiction globally. This includes the Guernsey closed-ended Phaunos Timber Fund, which is listed on the Main Market as well as the CISX.

Data from the CISX to the end of December 2011 shows that there are now 4,333 securities listed on the exchange. The figures also show that more of these are incorporated in Guernsey than any other single jurisdiction. This includes the closed-ended Forest Company Limited and the open-ended Virgen Forestry Extracts Fund Limited, which are both focused on socially and environmentally responsible timber-related investments.

For cleantech funds in particular, listing provides access to a wider pool of capital than may otherwise be available. However, investor demand for returns tends to dictate that most cleantech listings relate to the more mature technologies where the investment is in infrastructure projects. For example, the Guernsey-incorporated, AIM-traded Mytrah Energy Limited (formerly Caparo Energy Limited) is an independent power producer focused on building large scale wind farms in India and where the intention is that it will own (and operate) a portfolio of wind farms with a target total installed capacity of 5,000 MW by the year 2017.

Indeed, what we are now seeing is that the rapid development of the emerging markets is pushing up demand for energy. Therefore, these centres are increasingly being seen as markets for the location of cleantech infrastructure and the consumption of renewable energy. Another example is Crescent Capital, the Turkish-based fund manager focused on clean energy and infrastructure, which has launched a Guernsey closed-ended fund. The Clean Energy Transition Fund, L.P. (CETF), which aims to raise a target amount of EUR200m by the end of 2012, has already attracted a total of EUR100m commitments from investors.

This convergence is of extreme interest to us in Guernsey where we are focusing on both renewable energy and emerging markets. Indeed, Guernsey has received approval for its domiciled companies to list on the Hong Kong Stock Exchange (HKEx), which means that our entities can be used as vehicles for accessing capital markets in both the West and East. This is a particularly significant step in helping us to diversify our business base by attracting new flows from the ‘emerging’ markets such as China, India and Russia.

In conclusion, what we can see is that Guernsey is already home to a significant number of cleantech structures focused on a wide range of technologies across a variety of geographical regions. The Island has experience and expertise in servicing vehicles investing in the widest range of asset classes but Guernsey entities can also access capital markets by listing on stock exchanges right across the globe, and of course closer to home, on the CISX.

This is a message we are now taking to the wider world.

The original version of this article was first published in the CISX Bulletin Board, Issue 21/Spring 2012 (April 2012)

 

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