OAM2681 OVCT 2 Prospectus aw12 - Clubfinance

■ The following risk factors may adversely affect the value of, and the
returns from, the investments made by the VCT in investee
companies and, as a result, the value of, and the returns from the
Ordinary Shares being reduced or lost:
– The nature of energy-generating assets is that their useful
economic life is fixed and the assets tend to produce
predictable revenue streams over a protracted period during
which, without refurbishment expenditure, the value of such
assets is likely to decline;
– The operational profitability of potential investee companies
may be adversely affected by factors outside their control
including, inter alia, lower than projected wind speeds,
divergence between forecasted and actual levels of levels of
solar radiation, weather patterns, change in government policies
regarding renewable energy subsidies, changes in the rates of
Feed-in Tariffs, interest, inflation, foreign exchange or tax, or by
changes in prices of solar panels and other capital equipment,
lower than projected energy output, downtime of plant and
machinery, unavailability of grid connection higher than
projected operating costs, availability and cost of insurance and
other unanticipated events that adversely affect operations;
– Investee companies may require planning permission from local
councils or governmental bodies to undertake their proposed
operation which may result in delays in obtaining, failing to
obtain or the withdrawal of such planning permission.
Delays as a result of statutory and regulatory requirements,
including those imposed by environmental, safety, labour and
other regulatory and political authorities, and delays in
construction or additional unforeseen costs in completing
construction may also have a negative impact on the financial
returns of the investee companies’ businesses. Where these
funding shortfalls are not covered by performance guarantees
from the construction contractors or insurance, the VCT may
have to contribute additional working capital in order to support
investee companies and avoid dilution. Risk relating to
construction costs include incomplete design, inadequate site
preparation, uncertainty over source of materials, weather and
seasonal fluctuations, industrial relations problems and financing
risks;
– With the recent extension of VCT legislation to permit activities
being undertaken in Europe, as opposed to simply within the
UK, together with the fact that certain sectors rely on base
currency other than sterling, for example, biofuels, it is possible
that investee companies may be exposed to exchange rate
fluctuations. Where possible, the investee companies will ensure
that receipts and costs are settled in sterling or appropriate
hedging arrangements are implemented; and
– Although the VCT may receive certain conventional venture
capital rights in connection with the VCT’s investments, as a
minority investor it may not be in a position to fully protect the
interests of Shareholders.
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