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UK Renewable Funds Drop On Osborne’s Climate Levy Cuts

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Alexander Longley, Bloomberg

U.K.-based energy funds have taken a hit following the government’s decision to extend a climate change levy to renewable producers. The government, looking to reduce the impact of renewable investment on consumers, may cut support further.

The Renewables Infrastructure Group Ltd., or TRIG, was the hardest hit by Chancellor of the Exchequer George Osborne’s measures. Its share price dropped 3.1 percent on Thursday. Earlier in the day, it issued a statement saying the measures would reduce its net asset value by 4 pence per share.

The chancellor said on Wednesday that renewable energy companies would no longer be exempt from the Climate Change Levy, meaning that firms like TRIG would no longer receive a government subsidy to offset their fuel costs. These subsidies had previously come in the form of Levy Exemption Certificates, or LECs, which will be abolished on Aug. 1.

 “It means that the economics change for U.K. wind and solar farms and it’s in the order of about a 4 percent to 5 percent reduction in your revenues,” said Gurpreet Gujral, an analyst at Nplus1 Singer Ltd.

The lowering of its net asset value meant that TRIG has been forced to postpone the issuing of new shares until next week, it in a statement Thursday.

Other firms in the sector also fell. Bluefield Solar Income Fund Ltd. dropped 2.3 percent and Renewable Energy Generation Ltd. fell 2.2 percent.

Lower corporation tax is likely to partially offset the effects of LEC withdrawal.

James Armstrong, managing partner at Bluefield said that the company would have “relatively low exposure” to the removal of the subsidy. He expected the firm’s revenue to fall by 3 percent to 4 percent once other tax changes were taken into account.

The government, looking to reduce the impact of renewable investment on consumers, may cut support further.

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