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Renewable Energy Investment Club

By Carlos Anderson,2014-03-30 22:02
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Renewable Energy Investment Club

     Project Outline

Everyone can take a part in increasing the amount of renewable energy the UK uses. Educating

    people is the key to helping people develop their own renewable energy ideas. I am determined to no

    longer waste the will and determination of local groups to produce green electricity

    Brian Wilson, Minister for Energy

1.0 Evidence of Need

    Worldwide energy demand continues to increase (currently at a rate of 2% per annum), while the availability of fossil fuels is expected to decline in the longer term and concerns over the potential impact of global warming continue to grow. Dulas Ltd and Groundwork Bridgend and Neath Port Talbot has realised the need to diversify the energy mix within Wales and promote renewable energy as a sustainable alternative to our current supply. There are a variety of factors that have led to this:-

    ? To contribute towards reaching Central Government's targets of supplying 10% of energy

     from renewables by 2010.

? To reduce CO2 emissions and combat global climate change.

? To conserve natural resources and the environment.

    ? To promote a sustainable economy through the provision of employment opportunities.

    ? To secure the future supply of energy in the UK whilst relieving the reliance on external energy resources.

    In order to address the issues outlined above, the Renewable Energy Investment Club (REIC) will act as a facilitator, encouraging and promoting the demand for and supply of renewable energy. The REIC will fulfil this role through the provision of renewable energy investment opportunities, enabling community groups, SMEs and individuals to secure a sustainable future by developing their asset base.

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2.0 Project Background

    Prior to establishing a partnership, research and development was carried out independently by both Dulas Ltd and Groundwork Bridgend and Neath Port Talbot;-

    Groundwork Bridgend and Neath Port Talbot commissioned, as part of the development of the project, a feasibility study from Malcolm Lynch Solicitors, the leading expert in the field. The study indicates that there has been little in the way of 'community investment' in renewable energy projects to date. The only example of an operating scheme is The Bay Wind Co-operative in Cumbria. The report goes on to highlight that 'Investment Clubs' of the type being proposed have tended to be of two different types. Private investors making pooled investments on the Stock Exchange and the network of 'business angels' who look to invest in commercial businesses. A third model that has been developed in France called 'CIGALE' has been specifically set up to invest in community based businesses as a predominately social investment. It is this third model which is the basis of the design of the project.

    The study outlines in depth, the necessary legal structure of the club and gives an example of how the process of investment would work based on an investment of equity shares in a windfarm development.

    Meanwhile, Dulas Ltd had been developing the concept of a ‘Community Renewable Energy Investment Club’ (CREIC). The proposed project aims to contribute to increasing the share

    of renewable energy in the EU to 12% in 2010, in line with the Council resolution of June 1998, and in particular with the Campaign for Take-Off. Dulas developed the CREIC in association with the Agence Régionale de l’Energie Provence-Alpes-Côtes d’Azur (ARENE

    PACA) in the Provence-Alpes-Côte d’Azur region of France, to develop and pilot a

    methodology for the development of Community RE ‘Investment Clubs’ for citizens in both regions.

    In Wales, some work has already been carried out to stimulate community participation in RE projects. This includes the Dyfi Eco Valley Partnership, of which Dulas are a founder member. Work has also been carried out on developing ownership options and structures for community hydro and biomass schemes in Wales. This work has highlighted a number of barriers to the involvement of community groups in ownership of RE schemes. One of these barriers is the framework surrounding the ways in which ‘shares’ in community RE schemes

    can be offered for sale on a local basis. This often involves costly legal requirements, such as issuing of a Prospectus, which is a costly and complex process.

    Renewable Energy developers have indicated future developments that members of the investment club could investment in. The benefits that the investment club can offer to the developers will not only be financial, but will also greatly assist in lessening the social impact within the locality of the development. The investment club will therefore provide an opportunity for the developers to demonstrate their commitment to the local community. Expressions of interest have been received from a wide range of community groups and SMEs.

    In September 2001 a partnership was secured between Groundwork Bridgend and Dulas Ltd and the REIC was established as a registered not-for-profit company.

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    3.0 Project Description

    REIC strapline:- ‘ Energise your investment’

    3.1 Project Aims

    ? To support the growth and development of Community Based Regeneration

    Organisations (CBRO’s) and Small and Medium sized Enterprises (SME’s),

    through the provision of renewable energy investment opportunities.

    ? To raise awareness of and promote renewable energy initiatives within the

    commercial and voluntary sectors.

    ? To raise awareness of and promote social and ethical investment opportunities in

    South Wales.

    ? Help to diversify the economy by encouraging renewable energy industries to

    locate within the UK.

    3.2 Objectives

    ? To increase membership to 2,000 members by October 2002 and 3,000 members

    within 2 years and maintain these membership levels to a minimum of 2000

    members.

    ? To facilitate and do share offer for at least 3 small RE schemes, 3 medium

    schemes and 2 large scheme over next 2 years ? To promote and publicise the benefits of community RE ownership. ? To maintain a high-quality web-site which contains detailed information and sign-

    posting for prospective investors and new community groups wishing to develop

    their own community-owned RE project. ? To establish an efficient operation, administration and Board of directors and

    advisors to run REIC

    ? To ensure that functions are carried out in the most efficient manner either by

    REIC staff or sub-contractors.

    ? To maintain our own standards and reputation for facilitating investment in

    sensitive RE development.

    ? To verify that investment opportunities provided to members have a minimum

    Return on Investment (ROI) of 8% gross over 15 year project lifetime or 4% per

    annum minimum to shareholders.

    ? Safe-guarding 2 part-time jobs in Wales

    ? Bringing substantial economic benefits into Wales through keeping inward and

    local investment in RE projects within Wales ? Contributing to Wales sustainability targets

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3.2.1 Outputs

    ? Enhanced long term asset base for CBROs and SMEs.

    ? Opportunity for community ownership of RE developments, ensuring that

    economic benefits are retained within the developments region.

    ? The REIC has the potential to encourage RE developers, in order to utilise the

    community investment opportunities.

    ? The community and investors will develop a greater understanding of the

    environmental, social and economic issues surrounding energy supply and the

    need to diversify the UK energy mix.

    ? RE developments will encourage economic activity within the region, providing

    long-term skilled employment.

    ? Reduction of the voluntary sector reliance on grants and unpredictable funding by

    securing a long-term asset base.

     3.3 Criteria for Investment

A variety of renewable energy developments will be considered for investment, including

    wind, solar, biomass, hydro and tidal. Criteria for selection will be established when

    choosing which development is appropriate for the REIC to support. This will include

    questions such as:-

- Does the development produce renewable energy?

- How will the development benefit the region?

- Is the development sustainable?

- Is the development ethical?

- Are there any adverse ecological impacts from the development?

- Do the financial returns meet with the baseline return rate?

Each development will be considered independently by the REIC, prior to information being

    disseminated to members of the investment club for consideration.

3.3.1 Benefits for RE developers

Developers will have the opportunity to promote their investment opportunities through the

    REIC. The benefits to the RE developers are:-

    ? access to an alternative source of equity for the RE development

    ? involvement with the local and wider community

    ? access to an established network of investors wishing to support RE

    ? promotion on the REIC website

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    ? article published in the REIC bulletin

    ? opportunity to present information to potential investors at the REIC Seminar

    ? promotion of the sustainable technology being developed

3.3.2 Fees for developers

? up to 1MW project- ?250.00

? 1-5MW project - ?3000 (?1000 following share offer and ?2000 payable on

    commissioning)

? greater than 5MW project - ?15000 (?5000 following share offer and ?10000 payable on

    commissioning)

3.3.3 Developers Procedure

    Stage One Supply REIC with a detailed Business Plan

    Stage Two Complete Share Offer document

    Stage Three Present offer to REIC members

    Stage Four Circulate share offer document to REIC members

3.4 Who can invest?

The investment club will offer membership to individuals, SME’s, Community Based

    Regeneration Organisations (CBRO) and Credit Union members. Due to the restrictions of

    the financial services it is necessary to become a member of the REIC before investing.

3.5 How to invest?

In consultation with the developers, the REIC will produce information for the members of the

    investment club on each investment opportunity available. Information will be provided at the

    appropriate time giving details on the investment procedure necessary for a particular

    development.

There may be two options for investment, either as an individual, or as an intermediary

    investment group made up of REIC members. The nature of the development and the needs

    of the developer will determine these options. The investment intermediary group option

    may be necessary to ease communication with the developer who may also wish to avoid

    having too many small shareholders.

3.6 Example of investment club mechanism

Figure 3.1 below shows how the investment club mechanism would work using the example

     6 of a windfarm development. In this example investors would invest individually

     Stage 1

    Seeks

    Figure 3.1: Example of investment club investment

    Investment ClubWind Farm

    Stage 2Company

    Information on

    investment

    Stage 3

    Invest

    individually

    Community/SME

    (Members of REIC)

    Figure 3.2 below illustrates the REIC mechanism when the members invest using the

    intermediary option.

     Stage 1Figure 3.2: Example of investment club with intermediary Seeks

    investment

    Investment ClubWind Farm

    CompanyStage 2

    Information on

    Stage 3investment

    Invest

    90% shareholding10% shareholdingCommunity/SME100% community OwnedDeveloper

    Investment Intermediary(Members of REIC)

     3.7 Members Benefits

Members will have the advantage of being kept up to date with renewable energy investment

    opportunities whilst being provided with the facility to invest. A quarterly newsletter will be

    circulated to all members providing information on developments, investments and the

    renewable energy industry. The REIC will maintain a website (www.reic.co.uk), giving details

    of current investment opportunities and general advice.

Members can be reassured that their money will be invested only in developments that are

    considered to be social and ethical investments. This is particularly beneficial to SMEs who

    are answerable to client/supplier demands for ethical investment.

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3.8 Income Generation

    The REIC is a ‘not for profit’ company, however, income will be generated to cover the overheads and administration costs of running the club. Finance to cover these costs may be obtained in a number of ways, both from membership fees and from a commission fee charged to the RE developers offering shares. In order to make the REIC as accessible as possible to people, funding will be sought initially to cover the costs of membership fees and promotion and marketing costs. It is anticipated that the REIC will be self-sustainable within two years and will not need additional external funding once the membership base has increased.

3.9 Legal advice

    The report conducted by Malcolm Lynch of Wrigley solicitiors outlines the basic legal framework for the establishment of the REIC. Further advice was being sought from ‘Bar in the Community’ and ‘Business in the Community’.

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4.0 Project Development and Management

    The framework of the REIC has been outlined below and the investment club will initially be seeking a number of developments to attract new members to the club.

    4.1 Structure of the Renewable Energy Investment Club

     Sponsors Board of Directors Advisory Group Dulas x 2 Representatives from:- Groundwork x1 The Community Loan Fund Co-op Bank WDA Powys Energy Agency Baywind Investment Club Members Individuals

    SMEs

    CBROs

    Credit Union Members

     RE Development Investments Eg: Wind, Solar, Tidal, Hydro, Biomass

    4.2 Investment Club Staff Structure

    Groundwork’s ‘Renewable Energy Project Manager’ will work together with Dulas Ltd to develop the investment club. However further staff are needed to promote and market the REIC and assist with the daily running of the investment club.

Skills

    The following skills are available within the REIC board and advisors: ? Co-operative administration

    ? Co-operative financing

    ? Project financing

    ? Marketing and business development

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Skills cont…

? Project development:

    ? Planning and Environmental Impact Assessment

    ? Project management

    ? Site identification and design ? Engineering

    ? Monitoring

    ? Contract negotiation

    ? Landowner lease negotation

    ? Accounting

    ? Business planning

    ? Marketing

    ? Understanding of legal issues

    ? Press and media presentations

    ? Public speaking

    ? Training, education (particularly to schools) and dissemination ? Advice on RE and community development

    ? Promotion, facilitation and information on community RE

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