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BHESCo

BHESCo 2019 Share Offer

£250 minimum

Risk factors

All investment and commercial activities carry risk, and investors should consider whether Brighton & Hove Energy Services Co-operative Ltd is a suitable investment for them in light of their own personal circumstances.

Investors should take appropriate advice and make their own risk assessment whilst bearing in mind the social and environmental aspects of this investment opportunity. An investment in shares is an investment in a trading business not a loan or deposit. Attention is drawn to the following risks:

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

 


Risks associated with your investment

In particular, you should appreciate that:
  • shares in the Co-operative are not transferable except in the event of your death;
  • a portion of BHESCo’s income is from the Feed-in Tariff and the Renewable Heat Incentive, which are subsidies offered by the Government. The Co-operative’s profitability is dependent on these subsidies continuing to be paid in accordance with current legal regulations and future governments honouring this obligation;
  • descriptions of possible returns are illustrative only and necessarily based on informed assessments relating to variable, changeable and uncertain factors;
  • BHESCo will benefit from inflation-linked income streams on agreement terms of up to 20 years. While every effort is made to match the heat load or electricity consumption and agreement term as accurately as possible, a financial model is carefully developed for each project, there are still underlying risks; 

General Investment Risks – Shares

Fluctuations in value
The value of your shares cannot go up and may go down so that you may not get back the amount you invested. Payment of interest on your shares is dependent on the financial stability of the Co-operative and Members’ approval. Investment in smaller unquoted businesses is likely to involve a higher degree of risk than investment in larger companies and those traded on a stock exchange.
 
Long-term investment 
BHESCo’s business model relies on raising cash for capital investment in its early years, hence your investment should be considered as medium to long term. If your circumstances change, your shares may not be readily convertible into cash. Your shares can be withdrawn (ie redeemed by the Co-operative for the price paid for them) in accordance with the Rules but may not be withdrawable at short notice or when you wish to do so.
 
Unregulated Investment
Shares in the Co-operative are not regulated investments for the purposes of the Financial Services Act 1986 and therefore you do not have the protection provided by that Act. This Share Offer does not need approval and has not been approved by an approved person under the Financial Services Act. This Share Offer is exempt from regulation under the Financial Services and Markets Act 2000 and regulations made under it, so there is no right to complain to an ombudsman. Co-operatives are exempt from the Prospectus Regulations 2005. The Co-operative is registered with but not authorised by the Financial Conduct Authority and therefore the money you pay for your Shares is not safeguarded by any depositor protection scheme or dispute resolution scheme

Renewable energy industry risks

Feed-in Tariff and Renewable Heat Incentive

Changes in legislation, especially to the value or availability of the Feed-in tariff and the Renewable Heat Incentive may affect the Co-operative’s income. In particular the FIT and the RHI may be subject to change at short notice. BHESCo has included the most recent tariff in our finance models for their projects. The government has been consistently reducing the Feed-in tariff subsidy, to the extent that it ceased for new projects on 1 April 2019. We expect that a similar reduction pattern will apply to the Renewable Heat Incentive payments

Mitigation: All agreements are based on the subsidies to be received, ensuring that the agreement term is sufficient for the Co-operative to meet its required rates of return to pay the interest to shareholder members. BHESCo has received Pre-registration approval from OFGEM for FiT for the relevant projects in this share offer. This pre-registration is valid for 12 months.

Projects encounter delays

There is a risk that projects are not installed in time to meet the pre-registration deadline, meaning they will not qualify for FiT payments.

Mitigation: BHESCo have agreed a realistic timeline with our installers such that the projects should be completed by the end of 2019, well inside the 1-year deadline granted by the pre-registration.

Future energy prices

Assumptions of future energy prices used in the Financial Projections may turn out to be incorrect.

Mitigation: BHESCo make estimates based on best estimates informed by historical price fluctuations and market conditions. They also consult industry experts for their opinions. Any shortfall in income arising from a lower than anticipated energy price may be reflected in changes to the agreement term or monthly payment. In cases where the monthly payment is fixed, sufficient margin has been built into the contract to cover this risk

Weather conditions

Atypical short-term weather conditions and equipment loss or damage could affect expected levels of energy generation and therefore income, although overall patterns outside anticipated parameters are unlikely.

Technology failure

Although modern solar panel installations are extremely reliable, electrical or other failure can interrupt the generation of electricity or the distribution network and lead to unexpected costs and interruptions of generation.

Mitigation: Manufacturer warranties and guarantees offer some protection. BHESCo will also insure this risk to the extent possible. BHESCo monitors the performance of their systems remotely to identify shortfalls in energy production as soon as possible to take action to rectify any problems. BHESCo also employ technology to reduce the impacts of shading where needed.
 


Risks in relation to this Offer

Interest rate

The target interest payment is not guaranteed and may not be achieved. BHESCo builds a 5% cost of funds into its agreements which will help secure the Co- operative’s ability to make interest payments to shareholders.

Disrupted income stream

The Co-operative’s income is dependent on the customers to whom it supplies electricity and heat to pay for energy in accordance with their agreement with the Co-operative.

Third-party risk

Equipment purchased by the Co-operative is supported by guarantees from companies believed by the Co-operative to be financially strong, however the risk remains that a third-party could fail to meet their obligations to BHESCo.

£58,95012%
Applied for to date, of
£500,000 target

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