Asset managers and funds look to Ireland as new tax efficient home.

Ireland is changing the rules in a bid to entice renewables investors.  Ray O’Neill, CEO at Fincovi, sets out the 5 changes you should be most aware of. 

Competition in the market is driving top quartile renewable energy funds to look at domiciling their assets in Ireland. The revision of the Irish Investment Limited Partnership (“ILP”) laws, as outlined in the draft bill published in June 2019, has already caught the attention of fund managers who are serious about growing their funds, attracting new investors and increasing yield.

The Irish Government has an ambition to attract 5% of the $3.3 tn global private equity (“PE”) market, with a focus on green finance. Indeed, it has been suggested that jurisdictions such as Luxembourg anticipate nervously a steady flow of up to 25% of their PE funds to relocate to the Emerald Isle in the next 24 months. Money talks.

The bill will introduce several changes to the current legislation of particular significance to wind investors:

1. Segregated liability

The bill allows ILPs to establish an umbrella fund, with segregated liability between the sub-funds. This gives lots of flexibility for investors to get access to different asset classes at different stages of their development while putting a comforting ring-fence on the liability of each sub-fund.

2. A safer harbour for Limited Partnerships (“LPs”)

The same bill gives more certainty and clarity around the activities a limited partner can     and cannot undertake, without increasing liabilities. 

3. Simpler to change

LPs can participate in advisory committees and vote on changes to the partnership agreement, now with only a simple majority, and without losing their limited liability status.

4. Dual naming

ILPs operating in a non-English speaking jurisdiction can register a “dual foreign name” to facilitate translation requirements.

5. Limited Partner Obligations

It is likely that partners will not be required to contribute to the capital of the partnership going forward, save for the prescribed terms of the partnership agreement.

From wings and engines to blades and turbines

Ireland is already an attractive place to establish an investment platform. It’s legal, regulatory and tax environment could be beneficial to any renewable energy fund. Irish corporation tax allows for neutral treatment, provided certain conditions are met. It also has a wide and expanding tax treaty network, second to none, with an established world-beating aviation section already taking full advantage of the tax regime and local expertise.

With over 60% of global leased aircraft being leased out of Ireland, the government and financial services industry is now ramping up its green finance offer to mirror its longstanding success in aviation.

Once you’ve moved in

Renewable energy fund managers are subject to increasing regulatory requirements, rising costs and pressures to reduce fees. Jurisdictional tax efficiencies i.e. moving your fund to Ireland, is certainly one way to compete. But success will also hinge on the effectiveness of the manager’s infrastructure, in-house operations and outsourcing strategies. Trending in the industry – and Ireland is no different – is to outsource financial management, reporting and portfolio reviews.  As well as securing good savings, fund managers that embrace administrative and governance outsourcing reduce the risks associated with old “organically” developed in-house processes. No more Excel files everywhere!

Fund managers need to show investors how they can systematically cut costs, enhance governance and speed up the data cycle, so that they can achieve sustainable returns. Anything that can help add depth to this element of the investor pitch is worth more than consideration. It’s an imperative.  As your new home from home, Ireland stands ready to assist.

Renewable Energy Fact Sheet

Ireland

  • Today 5 GWs of renewable energy installed
  • 350+ wind farms
  • Further 2.2GW of consented solar farms ready to build
  • National renewable energy target (RES-E) is 70% by 2030 up from 40% in 2020
  • €11.2 billion of investment required to hit Irish 2030 target

Europe

  • Today 189 GWs of wind energy and 120 GW of solar energy installed
  • Further 310 GW of solar energy to be installed by 2030
  • Average EU renewable energy target (RES-E) is 49% by 2030
  • €500 billion + of investment required to hit EU 2030 target