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Renewable energy investment funds are braced for earnings cuts of around 3 per cent following plans announced in the Treasury’s Summer Budget that a levy exemption scheme will be scrapped with near-immediate effect.
Infinis, which invests in onshore wind and landfill gas, suffered the greatest share price slump following the news, losing around 16 per cent in less than 48 hours following the budget speech. At midday Wednesday its share price was at 195.25 pence per share, but was trading at 164 p/share by Friday morning.
Greencoat UK Wind was highlighted by investment analysts as one of the funds likely to take a hit following the Treasury’s decision to abandon the Levy Exemption Certificates, which exempt consumers from the Climate Change Levy.
RBC Capital analysts estimate that the Treasury’s move could knock 2-3 per cent from the fund’s net asset valuation. But Greencoat said in a statement to the stock exchange on Thursday morning that the impact was already factored into its forecasting from 2022.
Although the scrapping of LECs has come some seven years ahead of its initial expectations, the fund says that the impact will be “largely offset” by a future reduction in the corporation tax rate due to its low level of corporate gearing.
The share price shed just 3 per cent in value to change hands at just below 109 p/share on Friday morning.
Also set to take a hit in the region of 3 per cent is Bluefield Solar Fund and Foresight Solar Fund. Foresight said the impact will effect 3 per cent of its revenues while Bluefield confirmed that the LECs “make up 3-4 per cent of total revenues” for the fund, but that this will be partially offset by the corporation tax change.
Both funds lost around 4 per cent following the budget speech; Foresight’s share price fell from 104.74 pence per share to lows of 100.60 p/share while Bluefield shares slipped from 109.50 p/share to 105.10p/share. The funds both pared losses by Friday morning to around 102 p/share and 105.75 p/share respectively.
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