GPs with UK portfolio companies could face even more regulatory red tape after the UK government announced its Energy Savings Opportunity Scheme (ESOS).
ESOS, mandated under the EU's Energy Efficiency Directive of 2012, will require some GPs and their portfolio companies to calculate their total annual energy consumption, carry out an energy audit and identify energy savings opportunities. The audit will also need to be reviewed by a qualified “lead assessor” and the firm will need to keep evidence that it has carried out energy analysis. Failure to comply could result in a fine of up to £90,000 ($143,000; €110,000).
However, not all GPs will be hit by ESOS. To qualify for the scheme a GP must own a portfolio company deemed a “large undertaking”. A large undertaking is defined as one that employs at least 250 people or has an annual turnover exceeding €50 million and an annual balance sheet total of €43 million. But, if the GP does own a large undertaking then any “small or medium undertakings” owned by the firm will also have to comply with ESOS.
There are ways in which firms can “disaggregate” these undertakings for compliance purposes – meaning that portfolio companies caught by ESOS will have to comply on their own. Although legal sources say consideration will need to be given to whether some smaller portfolio companies can comply with the ESOS requirements without support from the fund manager.
“They may not have the in house expertise to deal with the monitoring and reporting,” said one UK-based lawyer. Another factor for firms to bear in mind when disaggregating is that the consent of both parties is required. In other words, portfolio companies must agree to be disaggregated. The lawyer warns that management may push back in some instances.
GPs that are caught by ESOS must carry out their assessment and notify the Environment Agency by December 5, 2015.