TIDMGV1O
RNS Number : 2566C
Gresham House Renewable EnergyVCT1
17 June 2021
17 June 2021
GRESHAM HOUSE RENEWABLE ENERGY VCT 1 PLC
Publication of Circular and notice of General Meeting in
connection with the proposed managed wind-down
The Board of Gresham House Renewable Energy VCT 1 PLC (the
"Company"), has today published a circular to shareholders (the
"Circular") in relation to the recommended proposal for a managed
wind-down of the Company and the associated amendment of the
Company's Investment Policy (the "Proposal").
The Circular includes notice of a general meeting which will be
held at the offices of Gresham House Asset Management Limited,
Octagon Point, 5 Cheapside, London EC2V 6AA at 12.30 p.m. on 13
July 2021 (the "General Meeting"). A resolution will be put to
Shareholders to seek their approval of the New Investment Policy at
the General Meeting.
Introduction
The Board noted in the circular accompanying its notice of
annual general meeting published on 18 February 2021 (the "AGM
Circular") that it believed that the annual general meeting of the
Company to be held on 22 March 2021 (the "AGM") presented the right
opportunity for Shareholders to consider whether Shareholder value
was best served by continuing to hold the assets of the Company, or
to consider other options. The Board recommended in the AGM
Circular, that Shareholders vote in favour of the Company's
continuation vote (the "Continuation Vote"). However the Board also
undertook, notwithstanding the passing of the Continuation Vote, to
bring forward proposals for the voluntary liquidation,
reconstruction or other re-organisation of the Company for
consideration by Shareholders in a general meeting to be held
within six months of the AGM. At the AGM, the Continuation Vote was
passed, in line with the Directors' recommendation.
Following the AGM, the Board carried out a thorough review of
the strategic options available to the Company, the monetisation
opportunities in the market for the Company's assets and the
appropriate proposals to deliver value to Shareholders. The Board
acknowledges that the timing of any disposal and/or voluntary
liquidation of assets must maximise Shareholder value as well as
preserve the VCT tax relief for Shareholders, particularly those
who participated in the more recent fundraisings.
The purpose of the Circular is therefore to set out details of
the Board's Proposal in relation to the future of the Company and
to convene the General Meeting. In particular, the Circular sets
out details of, and seeks Shareholders' approval of, the proposal
relating to the Managed Wind-Down of the Company and associated
amendments to the Company's Investment Policy. Under the
Managed-Wind Down process, the Company will be managed with the
intention of realising all assets in its Portfolio in a prudent
manner consistent with the principles of good investment management
and with a view to returning cash to Shareholders in an orderly
manner.
Background to and reasons for the Proposal
The Board has been considering, and consulting with Shareholders
on, the future of the Company and in particular the available
viable options for addressing the challenges the Company faces and
maximising Shareholder value, which include the following:
-- the existing assets have finite lives and the NAV of the
assets will decrease as earnings are distributed as dividends;
-- as the NAV of the Company falls, the Total Expense Ratio will
increase over time due to the Company's fixed costs;
-- the changes made to the VCT rules in 2014 mean the Company is
unable to raise further capital to make new investments into
renewable assets in order to help spread the Company's fixed costs
over a larger asset base. Any new capital may only be deployed in
opportunities with a much higher degree of risk profile than
renewable generation, which would dilute one of the key attractions
of the current Portfolio;
-- based on current cashflows, the Company is unable to fund
share buybacks whilst maintaining dividends at current levels;
and
-- the Board's opinion along with that of its financial advisors
is that the secondary market for buying and selling renewables
assets which benefit from government subsidies continues to be very
strong at the present time and that a well-managed sale through a
competitive process could produce a more attractive return for
Shareholders than continuing to hold the assets.
In the AGM Circular, the Board indicated that as a result of
these considerations, the Board believed the Company should
consider in the near term whether Shareholder value is best served
by continuing to hold and operate the assets, or by another route.
The Board therefore recommended that Shareholders vote in favour of
the Continuation Vote on the basis that the Board would thereafter
undertake a strategic review of the future of the Company and in
particular intended to examine the likely returns to Shareholders
and timing of any managed wind-down of the Portfolio.
Having considered the various strategic options open to the
Company with a view to maximising Shareholder value, the Board has
determined that the Company should be put into Managed Wind-Down,
with cash returned to Shareholders in a timely and efficient
manner, and in a way that protects the upfront VCT tax relief. In
order to do this, the Company is seeking Shareholder approval, by
means of a special resolution, to replace the current Investment
Policy with the New Investment Policy set out in Part 2 of the
Circular. If approved, the Board will endeavour to realise all of
the Company's investments in a manner that achieves a balance
between maximising the net value received from those investments
and making timely returns to Shareholders.
It is anticipated that the divestment process for the main solar
assets of the Company and GHRE VCT 2 will take up to nine months to
reach completion from the time of the formal commencement of the
sales process. An initial return of capital for Shareholders
through a tax-free dividend will be made shortly after the sale of
these assets. If the Company succeeds in selling these assets at or
close to their net asset value, it is expected that this initial
dividend will be the most substantial return of value during the
Managed Wind-Down Process.
Once this initial distribution is made and subject to
shareholder approval, both the Company and GHRE VCT 2 will be put
into voluntary liquidation, which will allow a reduction of fund
level costs over the remaining life of the companies until more
than five years have passed since the last issue of Shares in 2018.
The remaining assets in the Portfolio will be sold in that period
but once the Company enters liquidation, there will be no further
distributions until October 2023 at the earliest in order to
protect the tax position of Shareholders who were allotted Shares
in 2018.
The amount of the net proceeds that can be paid as dividends and
the timing of any distributions will be determined by the
distributable reserves of the Company and the need to comply with
the VCT rules as they stand currently, and in the future.
As all of the Company's main solar assets are owned 50:50
between the Company and GHRE VCT 2 and there are no rights attached
to such ownership that would allow one company to force the other
to sell its share in each asset, if the Company's Shareholders pass
the Resolution but the GHRE VCT 2 shareholders do not, the ability
of the Company to sell its assets as part of the Managed Wind-Down
process, at an attractive price or at all, will be materially
adversely affected.
Dividends
Should the Resolution be passed and the Managed Wind-Down
process be initiated, the payment, quantum and timing of any
dividends paid during the Managed Wind-Down process will be at the
sole discretion of the Board, and will be dependent on the sale of
the assets, ongoing income streams generated by the assets held and
the Company's ongoing cash requirements. There can be no guarantee
as to the payment, quantum or timing of dividends during the
Managed Wind-Down process.
Should the Resolution not be passed and the Managed Wind-Down
proposal therefore rejected, the Board will keep the payment of
annual dividends under review and, subject to ongoing income
streams generated by the assets held, the Company's distributable
reserves position and the Company's ongoing cash requirements, will
seek to pay these for as long as possible.
Shareholders from 2018 share allotments
The Directors are aware that there are still a number of
Shareholders in their initial five-year holding period following
the share allotments that took place in 2018. The Board will work
closely with its VCT compliance consultant and financial advisors
to arrange matters with the aim of ensuring that the liquidation
and return of funds to Shareholders is carried out in such a way
that will ensure, as far as possible, that their income tax relief
is not withdrawn. In effect, this means that once the Company
enters liquidation, there will be no distributions until Q4 2023 at
the earliest when the five year holding period for those
Shareholders who participated in the 2018 top up offers will have
expired.
Indicative returns for Shareholders
The independent valuation exercise carried out by Ernst &
Young LLP ("EY") in summer and autumn 2020 resulted in EY
concluding that the reported NAV of the Company was a true and fair
reflection of the market value of the assets. However, Shareholders
should note that these valuations are based on long term
assumptions and whether the assets can be sold in accordance with
these valuations, or indeed at all, depends on market conditions at
the time of sale. Whilst the Board believes the majority of
assumptions relating to the EY valuations hold true as at the date
of the Circular, there are some material changes that will affect
these valuations, including the Government's reversal of the
planned cuts in the rate of corporation tax over the longer term
which will negatively impact on future distributable profits and
cash flows from the Company's underlying investments. Whilst the
Board believes market conditions are favourable currently as
regards a sale of the Company's main solar assets, there is no
guarantee such conditions will continue in the short, medium or
longer terms and the market value of, and returns from, the assets
cannot be guaranteed.
In seeking to realise the Company's investments in an orderly
manner, the Directors will take into account the continued costs of
operating the Company and the impact of the reducing NAV on ad
valorem adviser fees. The capacity to trade in the Shares will be
maintained for as long as the Directors believe it to be
practicable and cost-effective during the Managed Wind-Down period
and the Board will seek to minimise costs wherever it is reasonable
to do so.
Amendments to the Investment Policy
The Proposal involves amending the Company's Investment Policy
to reflect a realisation strategy and the Company ceasing to make
any new investments. The proposed amendments to the Company's
Investment Policy are considered a material change and therefore
the consent of Shareholders to the proposed amendments is being
sought.
The Directors believe that being prescriptive as regards the
timeframe for realising the Company's investments could prove
detrimental to the value achieved on realisation. Therefore, it is
the Board's view that the strategy for the realisation of the
Company's investments will need to be flexible and may need to be
altered to reflect changes in the circumstances of a particular
investment or in the prevailing market conditions.
Part 2 of the Circular sets out the New Investment Policy in
full.
Benefits of the Proposal
The Directors believe that the Proposal is in the best interests
of Shareholders as a whole and should yield the following principal
benefits:
-- implementing a managed and orderly disposal of investments
should maximise the value to be realised on the sale of the
Company's assets and, therefore, returns to Shareholders;
-- the Proposal will allow cash to be returned to Shareholders
in a cost-effective and timely manner; and
-- the Proposal will preserve the upfront tax relief for Shareholders.
General Meeting
The general meeting has been convened for 12.30 p.m. on 13 July
2021 to be held at the offices of Gresham House Asset Management
Limited, Octagon Point, 5 Cheapside, London EC2V 6AA. The
Resolution to be considered at the General Meeting, which will be
proposed as a special resolution, seeks authority to adopt the New
Investment Policy.
In the light of the COVID-19 pandemic and associated Government
guidance, including the rules on physical distancing and
limitations on public gatherings, Shareholders are strongly
discouraged from attending the General Meeting and indeed entry
will be refused if the law and/or Government guidance so requires.
Arrangements will be made by the Company to ensure that the minimum
number of Shareholders required to form a quorum will attend the
General Meeting in order that the meeting may proceed. The Board
considers these revised arrangements to be in the best interests of
Shareholders in the current circumstances. Shareholders are
strongly encouraged to appoint the Chairman of the General Meeting
as their proxy to vote on their behalf as it is unlikely that third
party proxies will be able to attend the General Meeting.
The Board encourages the submission of questions on the content
of the Circular to the Board via email to
renewablevcts@greshamhouse.com by 5.00 p.m. on 7 July 2021. Answers
will be published on the Company's website by close of business on
12 July 2021.
A copy of the Circular has been submitted to the Financial
Conduct Authority and will be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at
https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/gresham-house-renewable-energy-vct-1-plc/
.
Terms used in this announcement shall have the same meaning as
those used in the Circular, unless the context requires
otherwise.
- END -
Gresham House Renewable Energy VCT 1 PLC - LEI:
213800IVQHJXUQBAAC06
For further information please contact:
Gresham House Asset Management
Tania Hayes t.hayes@greshamhouse.com
Tel: 020 3875 9860
JTC (UK) Limited - Company Secretary
Christopher Gibbons GreshamVCTs@jtcgroup.com
Tel: 44 203 846 9774
Important Information
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website or pages which may be accessed through hyperlinks on the
Company's web-pages, other than the content of the document
referred to above, is neither incorporated into nor forms part of
the above announcement.
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