RNS Number : 2566C

Gresham House Renewable EnergyVCT1

17 June 2021

17 June 2021


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.


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.


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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June 17, 2021 06:00 ET (10:00 GMT)

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