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Energy Garden

Financial performance

Energy Garden has identified a potential pipeline of 12.5MW of solar assets, and is anticipating an acquisition price of around £16.5m, based on its estimates.

Revenues & Operating costs

Revenues generated from the solar assets will be derived from a mix of the following revenue streams:

(a) Government support mechanism: Feed-in Tariffs (FiTs) and Renewable Obligation Certificates (ROCs) are 20-year inflation-protected Government support mechanisms for the generation of solar PV. FiT rates and ROC levels are determined based on the technology, size, and date commissioned. The pipeline of projects that Energy Garden is considering for acquisition contains a mix of FiT and ROC solar PV assets, with varying levels of support.

(b) An export tariff (applicable to FiT solar PV assets only) is a guaranteed minimum price paid for electricity exported to the grid. On smaller projects, where part of the electricity is used on site, export is deemed to be 50% of total generation at a set rate under the FiT, to avoid additional metering charges.

(c) A power purchase agreement (PPA) with either a private offtaker or with a large utility or corporate entity is a contract that governs the terms and sale of electricity.

Revenues will be allocated first to ongoing operational costs. These costs will cover a number of contracts to ensure the solar PV assets are running as efficiently as possible. These include, among others:

  • Operation and maintenance (O&M)
  • Asset management
  • Lease costs
  • Insurance costs

Projection based upon raising £9m

The Directors have reviewed financial projections and considerations based on raising £2 million, £9 million and £16.5 million. This section presents summary financial projections for a £2m and £9m raise, with assumptions on capital raised to purchase solar PV assets fulfilling the criteria defined in the Offer document. Detailed projections on a £16.5m raise can be found further down the page. All three sets of projections have assumed that the assets are acquired within one year of the issue of Bonds.

There are detailed finacial projections in the section based on the offer raising £16.5m. Except where otherwise noted, all other financial information provided in this profile and the Offer Document is based on raising the Maximum Total Subscription of £16.5 million.

£9m raise Year 1 Year 2 Year 3 Year 4 Year 5 Years 6 - 20
Total income (£000s) 813 1,166 1,189 1,212 1,236 17,337
Energy Garden expenditure (£000s) (99) (122) (125) (128) (131) (2,007)
Other expenditure (£000s) (259) (316) (324) (333) (341) (4,978)
Total expenditure (£000s) (358) (438) (449) (461) (472) (6,985)
Surplus/Loss (£000s) 455 728 739 752 764 9,759

Projection based upon raising £2m

£2m raise Year 1 Year 2 Year 3 Year 4 Year 5 Years 6 - 20
Total income (£000s) 160 230 234 239 243 3,377
Energy Garden expenditure (£000s) (31) (38) (39) (40) (41) (674)
Other expenditure (£000s) (27) (33) (34) (35) (36) (565)
Total expenditure (£000s) (58) (72) (73) (75) (77) (1,239)
Surplus/Loss (£000s) 102 158 161 163 166 2,012

Returns

In accordance with the Rules, the Members will determine at each AGM how to apportion any surplus remaining following satisfaction of any costs and liabilities (including those relating to funding the energy garden program), interest payments and capital repayments to Bondholders.

Energy Garden estimate that the Bond will return up to 4% interest per annum to Bondholders.

The table below shows the modelled capital repayment and investment payable to a Bondholder investing £1,000. Assuming that returns are in line with projections, the Bondholder would receive £1427.59 over 20 years with an effective interest rate of approximately 4%.

Note that interest will accrue during Year 1 but will not paid until Year 2. In order to align with Energy Garden’s financial year and to allow for sufficient cashflow, the first interest payment will be payable on interest accrued from the Issue Date through the end of calendar year 2019. Interest payments thereafter will be payable on interest accrued through the relevant calendar year.

A £1,000 Bondholder gets (£s) Year 1 Year 2 Year 3 Year 4 Year 5 Years 6 - 20
Interest 0 61.19 39.30 37.64 36.17 254.31
Capital Repayment 0 20.10 38.66 36.74 37.75 866.56
Total 0 80.26 78.16 74.38 73.92 1,120.87
Cumulative 0 80.26 158.42 232.80 306.72 1,427.59

Social Return on Investment

Social Return on Investment (SROI) provides a currency-equivalent figure based on the social and environmental benefits delivered by any programme or project, plus the financial return to give an overall SROI figure *.  SROI is a framework to measure and account for a much broader concept of value, and return on investment, than in financial terms alone.

The SROI of Energy Garden was calculated on the assumption of £16.5m of investment, with a 20-year duration of the programme. Energy Garden has forecast an SROI of £2.04 per £1 of investment, comprised of £1.04 financial return and £1 social return.

* See Cabinet Office 2014 report A Guide to Social Return on Investment

 The SROI of Energy Garden is based on an analysis of:

  • Perceived mental health;
  • Perceived physical health;
  • Perceived competence, engagement and purpose;
  • Sense of trust and belonging;
  • Safety;
  • Learning new things; and
  • Self-confidence.

These variables were analysed through questionnaires pre- and post-installation of existing energy gardens. Each variable saw a positive change as a result of Energy Gardens.

Note to Financial Model

The information provided here is given as an illustration only of the projected financial returns that may be generated from a portfolio of potential solar PV projects. A number of variables may affect the income generated and therefore it is not possible to provide a definitive statement of the exact financial return that will result from such a portfolio. Energy Garden has taken a conservative view on a number of the assumptions factoring into the projected returns, as well as drawing from the experience of its Board of Directors.

Profit and Loss

The following are the forecasts of Profit and Loss for the next 20 years based upon the offer raising £16.5m

Profit and Loss (£000's) Year 1 Year 2 Year 3 Year 4 Year 5 Years 6 - 20
Total Income 1,229 1,762 1,796 1,831 1,866 26,482
Total Operating Costs (359) (437) (447) (459) (467) (6,465)
EBITDA 870 1,326 1,349 1,372 1,399 19,085
Depreciation (565) (678) (678) (678) (678) (9,780)
EBIT 301 645 668 691 718 9,251
Bond Interest (661) (659) (640) (614) (590) (4,017)
Profit before Tax (359) (14) 28 77 128 5,234
Corporate Tax 0 0 0 0 0 (378)
Net profit (359) (14) 28 77 128 4,856
Dividends 0 0 0 0 0 (853)
Net retained profits (359) (14) 28 71 128 4,003

Cash Flow

Energy Garden have forecast the cash flow on a conservative basis

Cash Flow (£000's) Year 1 Year 2 Year 3 Year 4 Year 5 Years 6 - 20
EBITDA 870 1,326 1,349 1,372 1,399 19,085
Working Capital (132) (3) (3) (3) (3) 127
Capital Expenditure (16,302) 0 0 0 0 0
Project Cashflow (15,565) 1,323 1,347 1,370 1,396 19,212
Taxation 0 0 0 0 0 (378)
Cash Flow before finance (15,565) 1,323 1,347 1,370 1,396 18,834
Bid Cost (95) 0 0 0 0 0
Subscription for Bonds 16,427 0 0 0 0 0
Capital Repayment 0 (332) (643) (608) (624) (14,330)
Interest 0 (995) (650) (622) (598) (4,205)
Total 16,427 (1,327) (1,293) (1,230) (1,222) (18,535)
Reserve Accounts (7) (37) (85) (138) (186) 453
Equity Share Capital 1 0 0 0 0 0
BenCom Payments 0 0 0 0 0 (853)
Net Cash Flow 762 (41) (31) 2 (12) (101)
Cash Balance 762 721 690 692 680 10,592

 Note

  • Forward-looking statements are merely unaudited projections based on a number of assumptions and should not be relied upon as indicators of future performance. There is no guarantee these projections will be achieved.

Key assumptions

Financial Projections

The financial projections for Energy Garden have been prepared by the Board of Directors, following advice from BDO. The financial projections use example solar PV installations drawn from a pipeline of potential acquisitions. The pipeline is comprised of a variety of solar PV assets, including solar PV mounted on residential homes, commercial rooftops and ground-mounted. There is also a variety of income sources including FiTs, ROCs and PPAs with large utilities and private organisations. There can be no guarantee that the portfolio actually acquired by Energy Garden will have the same characteristics as the portfolio modelled in the financial projections or that revenues and costs will be in line with the assumptions below.

Acquisition Cost

Energy Garden have assumed that the solar PV assets can be acquired at or below the indicative cost provided by the sellers to date. In the absence of a cost indication, we have calculated costs which would deliver a yield in line with other indications, between 6 % and 8 % per year depending on size, location and potential risk. The actual acquisition price will fluctuate, subject to due diligence and negotiations with the sellers.

Energy Garden’s modelled assumptions for the price of each site are in line with indications from legal and technical advisors and range in cost, subject to output and performance per kWp, the complexity of the asset and other considerations.

The projections listed in the tables are illustrative; however, they assume that Energy Garden will acquire the assets which make up its current pipeline as soon as funds are available. You should note that the acquisition of different assets or a different timing of any acquisition could alter the projections, either positively or negatively.

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