Nottinghamshire Community Energy

Financial Performance

NCE aims to raise £850,000 through this Share Offer which will be used to develop a 5MW Solar Array at Langar Lane Farm in Nottinghamshire. The total investment required for the project to be built is £5.7m. The balance will be funded by debt finance of £2.9 million and a bond offer of £1.95 million. 

Project Development

The proposed solar project at Langar Lane Farm is developed by NCE and Mongoose energy. The project has planning permission, grid connection secured.

Loan Finance

The total investment required for the solar installation including project acquisition and fund raising costs is £5.7 million. This share issue is aiming to raise £850,000. The balance will be funded by debt finance of £2.9 million and a bond offer of £1.95 million. It is intended that the bond will be for two years and will have limited security over the projects. NCE have an indicative offer for a £2.9 million loan from Triodos Bank. Approval of this loan is subject to clearance by the bank’s Credit Committee and due diligence by the bank.

Should, for any reason, the share offer not reach its target NCE will increase the size of the bond offer to raise any outstanding amount required. If more than £850,000 is raised in the share offer, then NCE will accept those funds and reduce the size of the bond offer.

Key Assumptions

 The project benefits from the government backed Feed in Tariff for renewable electricity production.

  • The solar farm is forecast to generate 4,725MWh in its first full year of operation.
  • Total investment costs to build the project are £5.7 million, including construction, acquisition and fund raising costs.
  • The project is commissioned by June 2016 and secures a Feed in Tariff of 6.16p/kWh.
  • Feed in Tariff income and all costs increase in line with inflation which is assumed to be 2.5% each year.
  • Electricity export prices are in line with industry expert projections.
  • Degradation in solar panel performance is at 0.5% per year, in line with performance warranties.
  • The bond is refinanced after 2 years with additional debt and a new share offer.

Annual return

NCE aims to pay members an annual return of 7%. Interest payments are calculated from the date of issue of the shares.

Tax relief

Shares bought under this re-opened share offer will not be eligible for tax relief under the Seed Enterprise Investment Scheme (SEIS) or the Enterprise Investment Scheme (EIS).

Forecast income and costs

The table below shows the income and expenditure over the lifetime of the project, all figures are in thousand of pounds (£,000).

Year 0 1-5 6-10 11-15 16-20 21-25 Total
FIT Revenue 1,518 1,703 1,879 2,073 37 7,211
Export Revenue 1,205 1,580 1,918 2,199 2,523 9,425
Total revenue 2,723 3,283 3,797 4,272 2,560 16,636
Operating costs (860) (938) (988) (912) (1.176) (4,874)
Net Revenues 1,862 2,345 2,809 3,360 1,384 11,760
Member Interest Payments 218 297 267 250 23 1,055
Member Capital Payments 0 0 64 658 127 850
Bank Interest Payments 575 487 269 37 0 1,369
Bank Capital Payments 459 829 1,036 610 0 2,935
Bond Interest Payments 498 571 484 284 25 1,862
Bond Capital Payments 0 0 705 1,102 150 1,957
Community Fund Payments 153 108 74 195 1,252 1,847
Closing balance 115 74 127 37 261 68

Notes

  • Please note that these are financial projections and actual results may differ.
  • Community benefit societies pay out member interest before tax as it is treated as an expense. Interest can still be paid even if the business makes an accounting loss (largely due to depreciation), as it may still have a healthy cash balance. Investors should be aware that this is different to a normal company where dividends can only be paid out only if the company is carrying a profit.  
  • The income comprises income from the Feed in Tariff and from sale of exported electricity.
  • The costs comprise operations and maintenance (land rent, business rates, servicing), insurance, management charges, interest on the bank loan and repayment of the bank loan.
  • Each year NCE will pay into a reserve account to put away funds for parts replacement. The Feed in Tariff income is for a period of 20 years. In years 21 to 25 the income stream is from exported electricity.

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