Thursday, September 10, 2009

Sunny Money for Some

As interest in SRI grows, product offerings need to keep pace. A welcome addition for socially responsible investors is the newly launched Solar Income Fund LP. Note, however, that the Fund is structured as a Limited Partnership with a $25,000 minimum investment for accredited investors only. It is offered in BC, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland, Nova Scotia and PEI.

The Solar Income Fund LP will construct, own and operate solar photovoltaic system installations in Germany. Why Germany? The simple answer – Feed-In Tariffs (FITs). The Renewable Energy Sources Act (EEG) in Germany guarantees each plant operator a fixed price for electricity generated from renewable resources. According to the WorldWatch Institute ‘The FIT is credited for the rapid deployment of wind and solar power among world renewable energy leaders Denmark, Germany, and Spain this past decade. Similar policies have since been adopted by many other countries, leading the FIT to become the most prevalent tool for promoting renewables.’

The EEG has been in force since 2000, and has driven renewable energy capacity and use in Germany. Paul Ghezzi, the Managing Director of the Solar Income Fund LP says ”The reason we selected Germany is that it is the most prudent, the most mature and the most stable market in terms of solar PV. Our hope is that in a year or two, Ontario will be there.” Ontario was one of the first jurisdictions in North America to adopt a FIT, in the Green Energy Act. It is anticipated that the FIT will encourage a similar green renaissance here.

However, the twist in the Solar Income Fund LP is that because the income is generated in Germany, investors will have to file German income taxes, and this makes the investment more complicated.

The three most important variables for the solar PV installations are how much will they cost, who is financing them and who will buy the energy generated. The Solar Income Fund LP has nailed down all three. Their contracts are fixed cost, the banks and the German government have come through with financing on excellent terms and the feed-in tariffs provide certainty at the end of the process. “When it comes to alternative energy, the real money is being made in private infrastructure,” continues Mr. Ghezzi. “This allows individual investors to participate.”

Well, the accredited ones anyway. The Solar Income Fund LP is targeting an 8% return, and hopefully some capital gain for investors at the end of the day. The exit strategy will be to sell the installations, or perhaps take them public a few years down the road when the LP winds up.

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