A. The first thing to say is we were founded in 1998 and since then have raised £7 billion in media
investments. At the time we [were] largely focused on media asset management – so we’ve got lots of experience of raising money where the financial community and practitioners didn’t understand each other as well as they might.
Ingenious also has knowledge of fundraising and how to effectively raise money in the EIS (Enterprise Investment Scheme) environment.
Last year, we looked at other sectors that looked quite similar [to media]: sport, leisure and clean energy.
With
energy efficiency there is a very strong economic underpinning, driven by the rise in energy prices, but we particularly like the fact there is strong Government and regulatory support behind it.
So, effectively, we are investing in a series of EIS companies that are retrofitting energy efficiency in
buildings. These projects are happening every day, but what is not happening is they are not being funded.
Q. Why?
A. One, because property owners and ESCOS (energy service companies) only have a certain amount of money and banks are not lending…and property owners are a little cautious – and, even, don’t know what to do.
Q. What market are you targeting?
The commercial and public sectors. It could be hotels; it could be logistics centres, shopping malls. We’re looking at properties with reasonably high energy consumption (in the public sector that would include schools and hospitals).
We focus on buildings that are owner occupied. It would be nice to think that we could do an office block where the services are consumed across different tenants, but that becomes much more technically complicated. That is what the Green Deal is aspiring to resolve.
Q. Are you considering getting involved int the Green Deal?
A. This is not a market we are focusing on – we are looking at the next notch up in terms of size of organisations.
Q. As you say in your prospectus, energy efficiency is a growing sector and an attractive one to invest in. But, given the difficult economic times, has it been hard to attract investors?
A. It’s been the converse. Property owners are facing tough times, which is making them more focused on cost.
From investors' perspective, they are getting nothing on their cash in the bank; the equity market is pretty volatile…what we are able to provide is 19.6 per cent tax free a year. So if you are a 50 per cent taxpayer, it is appealing – and for people who have filled up their maximum pension pot and are looking for other places to invest. So we’ve been having some great conversations with investors.
Q. With your knowledge of the market, what technologies do you think are most promising to invest in?
A. We don’t take technology risks. When we look at projects, we look at ones that have multiple technologies.
A great example is the Empire State Building in New York. It went through an energy refit in 2010. Out of 60 different interventions, they selected eight, which gave the best bang for their buck. They are already saving 38 per cent of the energy consumption of the building.
So we like [our projects] to have range of impacts. I’m not looking at sexy new technology; I’m looking at de-risking.
Q. Where does the investment go?
A. Investors will invest in the fund (we are looking to raise £10 million and the minimum investment is £10,000). Once the fund has closed, we will invest in EIS companies which trade in energy efficiency projects, project management, retrofitting.
They will [first] negotiate with property owners, there is then a procurement exercise and once equipment is in and up and running, then the fund makes a return by taking a share of the energy that is saved.
Q. Can you provide me with some examples of the companies you are working with?
A. It’s a fairly new area, so we are working with Sustainable Development Capital, which has been active since 2007 so is very well connected in this sector – with ESCOS, the companies doing the work and property owners.
Q. What does the property owner get out of it?
A. After [the contract] period elapses – usually it’s a seven-year contract – the property owner will benefit fully from savings. They also get a reduced CRC (Carbon Reduction Commitment) bill and they get to free up some of their Capex budget (capital expenditure budget). So, for example, a school, which has to spend money to upgrade, doesn’t need to because the EIS fund can do it. Instead the school can spend the money on new classrooms.
Q. Energy prices have gone up hugely in recent years and they are set to continue to rise. What would be your advice to businesses that may want to mitigate these costs through energy efficiency but are concerned about the costs?
A. To get someone else to pay for it. That is why it is rather timely; a lot of companies are in a difficult position and they will struggle to convince their FDs (financial directors) [to spend money on upgrading]. But, if you’ve got a building like a hotel, which is valued on a multiple of profits – 10 to 15 times their operating profit – and we go in and do a project and save £100,000 to £150,000 in energy costs, the building will be worth between £1 million and £1.5 million more.
Q. What about the companies that are undertaking the work. How do you make sure the standard of the work they carry out will deliver the returns you are looking for?
A. It is essential that they are well-established companies. A feature of this market is they will underwrite the equipment – they warranty to a high degree the performance of the equipment. If the equipment fails [to deliver the savings], they have to make a payment to us.
Q. Your offer, which closes on March 23 2012, is looking for minimum investments of £10,000. What is the typical profile of your investor?
A. It’s a pretty broad church – anyone from doctors and dentists to executives in business and retired people because of the inheritance tax attractions. But it’s got to be a UK taxpayer.
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