Gower Regeneration - OFFER CLOSED

Financial performance

Gower Regeneration is looking to raise £1.085m through this share offer to repay a loan from the Welsh government used to build the solar array. Gower Regeneration expects to pay annual interest of 5% from 2018.

Project costs

Gower Regeneration has already built a solar array with main costs associated with development, construction and professional fees.  The ongoing costs of the solar array include for operation and maintenence management charges, insurance, rent, repair provisions and administration.

The cost for both implementation and operation has been estimated at £1.085m . Gower Regeneration has already secured a £992,000 loan from the Welsh government towards construction costs, so this investment will be helping to replace this loan.

Project income

Gower Regeneration Ltd will generate income from two main sources:

Renewables Obligation Certificate (ROC) payments: for each unit of electricity generated for 20 years, which is projected to make up over 50% of the project’s income during that period. As a condition of the loan finance, a price has been secured for the Renewables Obligations Certificates received for the first years of operation at 95% of the ROC ‘buy-out’ price (5.20 p/kWh).

Power Purchase Agreement (PPA) payments and associated embedded benefits: for each unit of surplus electricity sold to an energy retailer. As a condition of the loan finance a 1 year PPA has been secured with Good Energy (estimated at 4.97p/kWh including REGO and embedded benefits)

Annual return

Gower Regeneration projects that Members will start earning a 5% gross annual interest rate from 2018. 

Financial projections

Summary Cash Flow Projections Based on P90*

A summary of the Society’s post commissioning cash flow projections over the 20 year life of the project is shown in the table below:

31 Dec 2022 31 Dec 2027 31 Dec 2032 31 Dec 2037 31 Dec 2047 Total
Income £619,450 £601,041 £657,214 £667,636 £752,791 £3,291,132
Operating Cost (£113,528) (£114,191) (£159,310) (£190,770) (£462,655) (£1,003,455)
Cash for financing and social impact £505,922 £486,849 £497,904 £476,866 £320,137 £2,287,677
Members Interest payments (£247,242) (£194,515) (£127,221) (£41,459) (610,437)
Member Capital Repayments (£190,846) (£243,573) (£310,867) (£337,939) (£1,083,224)
Surpluses for Social Impact Fund £27,188 £62,658 £59,816 £97,468 £320,137 £567,266

 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.
  • *This above summary uses the warranted performance at p90 (i.e. the yield predicted to be exceeded 90% of the time) as the basis of the income generation figures. The logic is that there will be many more years that generation figures exceed expectations than there will be ones where they fall short, giving us confidence that we can honour our commitment to shareholders.

Social Impact Funds

The Board will consult members and other key stakeholders about what to do with the society’s profits each year and design, deliver and report against a social impact plan, more detail of which can be downloaded from www.regengower.co.uk

The funds available are projected to increase considerably over time as members’ capital is repaid.

Key Notes

Projections are based on a number of assumptions and there is no guarantee these projections will be achieved.

Income is from selling exported electricity as well as from payments through the Renewables Obligation (RO) scheme and a number of Embedded Benefits.

Costs comprise of operation and maintenance management charges, insurance, rent, repair provisions (e.g. for inverters), Gower Regeneration Ltd administration (e.g. accounts and shareholder management) and decommissioning costs.

The project was successfully accredited for RO with Ofgem by 31st March 2017 and has secured a RO of 5.20p/kWh for the first year of operation which accounts for 51% of projected income during the first year of operation; the PPA of circa 4.97p/kWh has been secured through a 1 year contract with Good Energy (the price is based on an estimated all in one price for power and embedded benefits provided by Good Energy).

Alternative refinance packages are being explored in case the Offer is not fully subscribed. Based on current discussion with lenders, it is not expected that the terms of a refinancing package would be detrimental to the interest rate payable to members, but there would most probably be a reduced amount of funds available for delivering wider social impacts.

Key assumptions

 The key assumptions underlying these projections are as follows:

  • Total project costs are £1,085,000 including: development (not paid for by grants), legal, construction, loan set up costs, fundraising and contingency costs;
  • The society successfully raises the maximum equity funding;
  • The construction of the solar scheme was completed by end of March 2017 and any snagging issues resolved by July 1st 2017;
  • The solar scheme generates 1,026,983 kWh in its first full year of operation as per its P90 prediction;
  • Degradation in solar panel performance is at 0.68% per year in line with product warranties;
  • The power purchase agreement will rise in line with inflation expectations;
  • Rate received for ROCs will rise with inflation expectations from the initial rate secured for the first year of operation
  • Annual electricity and retail price inflation of 2.5%

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