Gower Regeneration - OFFER CLOSED

Share Offer

£300 minimum (£100 for residents of the City & County of Swansea)

Risk factors

All investment and commercial activities carry risk, and investors should consider whether Gower Regeneration is a suitable investment for them in light of their own personal circumstances.

 This offer is not covered by the Financial Services Compensation Scheme.


General investment risks

Investing in Gower Regeneration shares is not the same as investing money in a bank account as your capital is at risk and you could lose up to, but no more than, your entire investment.

The Board consider the key risk factors to be as follows:

As a newly formed company, Gower Regeneration Ltd has no track record prior to this project. The directors involved have extensive commercial and legal experience of running successful social enterprises, including raising finance, and have contracted demonstrably competent contractors to build the solar farm and are taking technical advice procuring the operations and maintenance contract.

Construction

Gower Regeneration Ltd entered into a ‘turn-key’ construction contract to mitigate risks of unforeseen construction costs. The Society has selected its construction partner Lark Energy carefully, taking into account their experience and track record delivering similar scale projects to tight deadlines. Although the site energized on 31st March, remedial works / snagging can be expected to continue during the Offer. In addition, the contractor has asked to be paid for additional earthing works which has been disputed. An appropriate contingency has been built in for unforeseen circumstances including allowing for any delays or downtime in the first three months of operation. Technical advisors will also ensure that equipment has been installed correctly to ensure the warranted performance.


Operations

Generation of electricity involves mechanical and electronic processes which may fail under certain conditions leading to lost income and repair or replacement costs. In order to lessen this risk, the Society has used Tier 1 panels with a 20 year performance guarantee on a warrantied degradation ratio (0.68%) and inverters on an extended 10 year warranty. The Society will undertake regular preventative maintenance through an O&M contract which at the time of share offer launch was still being finalised, though budgeted for conservatively within our projections. We have taken out insurance to cover business interruption caused by major equipment failure.


Liquidity

It is not intended that any capital will be withdrawable by members for at least two years. Withdrawal of shares will only be possible if the company is generating sufficient surpluses or if other members wish to buy more shares. Any withdrawal will be at the Board’s discretion. Investment in Gower Regeneration Ltd is intended to be a long term investment and although capital will be repaid incrementally, members should be prepared to hold their investment for the first 20 years of the project. Should the members withdraw their shares and the Society go into liquidation, creditors could reclaim the value of those withdrawn shares from members for up to one year after their withdrawal.


Generation

The Society’s assumptions around potential renewable energy generation levels are based on figures provided by Lark Energy in the EPC contract (installed capacity of 999 kWp with yield of 1,026,983 kWh in first year ). Any variance from this will be met through the award of liquidated damages, or where variance to contract has been accepted through the allocated contingency budget.


Electricity prices

Wholesale prices of electricity fluctuate, which will have an impact on sale prices for the Society’s exported electricity and therefore revenue. There is also no guarantee that the Society will secure a satisfactory power purchase agreement beyond the first year contract that has been signed with Good Energy. However, UK Government forecasts suggest that, overall, the long term trend is for wholesale electricity prices to increase. The Power Purchase Agreement (PPA) is made up of a fixed price per unit of electricity and an estimate of additional embedded benefits which arise due to the solar farm exporting electricity into the local electricity network. The PPA price used in the modelling is based on an estimated all in one price for power and embedded benefits provided by Good Energy; embedded benefits may decrease. The directors are committed to securing the best possible price for the electricity produced on an annual basis, including investigating local supply model options.


Renewables obligation accreditation

At the point of launch, Gower Regeneration Ltd has not received evidence of accreditation for RO. Prospective members can be assured that their investment will not be drawn down from Ethex until Gower Regeneration Ltd has had full confirmation of successful accreditation. If accreditation is not secured, investors can be assured all monies will be returned by Ethex.


Renewables obligation certificates

Over 50% of the Society’s forecasted income is generated from Renewables Obligation Certificates; a government support mechanism. Renewables Obligation Certificates are issued to operators of accredited renewable generating stations for the eligible renewable electricity they generate. Renewables Obligation Certificates will be awarded to the solar farm for every MWh of electricity generated. Suppliers are obligated to buy a certain number of Certificates every year or pay the ROC ‘buy-out’ price. Operators can trade ROCs with other parties and are ultimately used by suppliers to demonstrate that they have met their obligation. A Renewables Obligation Order is issued annually detailing the level of the obligation on suppliers and the ‘buy-out’ price. The price for the ROCs secured for the first year (95% of the ROC buy-out price) is assumed to increase with inflation within our modelling.


Refinancing

In our modelling we have assumed successfully refinancing the construction loan from Finance Wales either through the share offer or through an alternative lender. The costs for doing this and the rate of interest have been estimated based on discussions with potential re-financing partners and other offers in the market place. If they end up being higher than estimated, this will affect the amount of funds there are for delivering our Social Impact plan or at worst reduce payments to members in early years. If this happens the Society aims to make sure that payments in later years are increased to make up for this reduction.


UK energy policies

Changes in the law surrounding the RO could have a negative impact on the revenues and profits of the Society. The RO is subject to regular review though all UK Governments have so far avoided changes which impact projects retrospectively by adopting a grandfathering policy for operational projects. That is, post accreditation by Ofgem, RO will remain in place for the full 20 year period.

Offer Closed

 As of the 8th November 2017

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