Resilient Energy Alvington Court Renewables

Financial Performance

REACR aims to raise £600,000 to finanlise their previous £1.35million target that has contributed to the construction and commission of a 500kW wind turbine. REACR have completed a successful pioneer raise of £300,000 for the turbine deposit and other costs as well as a community share offer which took their total raise to £750,000.

Refer to the risk page of the profile for more details.

How the finance will be distributed

 The gross revenues of the Society averaged on an annual basis over the operational life, including operational and maintenance costs of managing the wind turbine asset andbusiness of the Society are show in the pie chart below as a % of gross turnover. These are estimated from financial modelling, along with an indication of the Society surplus. The aggregate estimated costs of these items per annum is approximately £132,000 per year.

The distribution below assumes no repayment of Share capital until Year 20. Earlier repayment (withdrawal of Share capital) would reduce Shareholder payments and therefore increase the Society surplus for additional community benefit. The lease and land maintenance payments will be paid to the landowner of the Site.

Income

The principal source of income for the Society is from the FiT Generation Tariff; it is to be paid at the accredited generation rate of 12.49p/kWh. We also sell the electricity under a PPA, initially at a rate of 5p/kWhr. The FiT rate will be adjusted on 1st April each year by the rate of inflation in the previous calendar year. REACR have fully accredited the project with OfGem and are obtaining the FiT generation rate of 12.49p/kWh (index linked) until 22nd April 2036 provided we maintain connection to the grid.
 
The society’s income was significantly reduced in the first year of operating by prolonged and unexpected delays by OfGem in administering the Feed in Tariff (FiT) scheme. REACR are informed that this is due to the large number of applications received by OfGem immediately prior to the Government’s amendments to the FiT scheme in 2016. Prior experience had been that the turnaround time for processing of projects, such as REACR, was a matter of only a few weeks. In this instance the processing took 11 months, during which time the society was unable to claim any FiT income associated with energy generated by the turbine– a considerable sum. During the time REACR's application was being processed, OfGem also changed the rules regarding the effective start date for FiT payments. The UK Government announced that the effective start date, for the 20 year period over which FiT payments could be claimed, would change from the date at which a project was certified as exporting to the grid (the policy in place at the time of the REACR application for preliminary accreditation), to the date at which the FiT accreditation was finally verified.
 
Because of this change, the society’s initial income from the FiT was be backdated only to 22nd April 2016 and not the 25th November 2015 commissioning date. These changes do not affect the long term viability or income overall, since the society will still receive FiT payments for the electricity which the turbine generates for the guaranteed 20 year period. However, the delay to the FiT commencement date affected the society’s income and cashflow in this first year of operation. Consequently, the Society has yet to pay out any members return although expects to in 2018/19 financial year.

Fixes and Variable costs

The operational and maintenance costs of managing the Wind Turbine Asset and business as a percentage of gross turnover are estimated as follows:

  • Wind Turbine Maintenance and Manufacturer’s Warranty: 8% of turnover
  • Lease Payment to landholder: 7% of turnover
  • Business Rate to Forest of Dean District Council: 2%
  • Land Maintenance charges to landholder for access road, fences, maintaining land and hosting community events: 1.5%
  • Community Fund: 4%
  • Business and Asset Insurance: 2%

The estimated cost per annum is £124,000 for a £1,350,000 asset.

The Board will not be paid a fixed remuneration but will be entitled to travel allowances to
and from board meetings and connected workloads.

Summary Cash Flow Projections

 A summary of the Society’s cash flow projections over the 17.5 year life of the project is shown in the table below.

Jan 2023 Jan 2028 Jan 2033 Jan 2035 Total
Income £1,681,990 £1,818,060 £2,278,032 £1,588,051 £7,366,133
Operating Costs incl. 4% Resilience Grant Fund £643,562 £674,576 £810,968 £549,814 £2,678,651
Cash for Finance & Social Impact £1,038,428 £1,143,484 £1,467,333 £1,038,237 £4,687,482
Members Interest Payments £581,555 £561,150 £561,150 £336,690 £2,040,545
Members Capital Repayments £257,194 £467,625 £467,625 £678,056 £1,870,500
Surplus for Social Impact incl. 4% Resilience Grant £266,959 £187,431 £529,680 £87,013 £1,071,082

Expenses

The project will be managed by The Resilience Centre Ltd and will be retained on a ten year rolling contract to administer the Society.  The project manager will take full technical and commercial running of the project including but not limited to:

  • Monitor the day-to-day performance of the Wind Turbine as well as the O&M contractor and the turbine manufacturer and recommend changes to optimise performance as necessary.
  • Ensure maintenance work is undertaken expediently and any repairs are organised efficiently to minimise down-time and energy generation.
  • Administer the Community Fund and chair meetings of the Community Panel (chair has no voting rights) to ensure everyone has a fair and equitable hearing.
  • Administer the strategic fund and work to maximise the long-term legacy of the project by working with Dean Community Energy Group and others to ensure greatest social impact locally on energy use, costs and benefits.

Projected cash return

Based on the business plan REACR intends to pay members a return of up to 6% on their capital invested each year and return capital at the end of the 20 years.

The table below outlines the cash flows forecast on £1,000 invested. All figures are in £'s.

Year 2017 2018 2019 2020 2021 2022 - 26 2027 - 31 2032 - 36 Total
Share Interest Paid £0 £20 £60 £60 £60 £303 £260 £215 £978
Capital Repaid £0 £0 £0 £0 £50 £250 £250 £450 £1,000
Total £0 £20 £60 £60 £110 £553 £510 £655 £1,978
% return* 0% 2.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% IRR 6.2%
The above illustration assumes no capital repayment in years 1 - 4 of the project.

*Predicted % Interest payments will be reduced in early years based on current conservative estimate of cashflow within Society

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