INVESTING FOR THE FINANCIAL RETURNS
A more in-depth look at the financial aspects of the SCE share offer - read on to see why this is an attractive opportunity, the potential impact of inflation on your investment and when capital is returned.
The expected return
5% annual interest
An individual investing £10,000 can expect to receive £18,321, of which £10,000 is the repaid capital and £8,321 the interest
As a community benefit society, we pay interest to investor-members on their shareholdings.
We anticipate paying an average annual return of 5%. Unlike dividends – which can only be paid from company profits – interest is paid before profit is calculated.
How the project creates returns
Southill Community Energy is an operating company just like any other. It will generate revenues through selling the energy generated to the grid, and through the Renewables Obligation scheme.
After paying for the operating costs of the solar plant and other expenditures like financing costs, any surplus will be distributed to shareholders.
The nice thing about revenues from electricity generation is that they are reasonably stable. Sales of electricity generated are contracted with the buyer with inflation protection.
With contracted operating costs, the returns made to shareholders should be relatively stable too.
Income of 9.4p/kWh from:
guaranteed payments under the feed-in tariff scheme at rates secured with Ofgem for 20 years (4.49p/kWh)
sale of electricity under the Minimum Export Tariff of 4.91p/kWh
Getting your capital back
The directors plan to incrementally return capital to shareholders from year 6. Additional requests for withdrawals will be considered by the directors, but any repayments will be at their discretion and dependent on funds available at the time.
Shares cannot be sold, but will be transferred to a nominated person on death.
Repayment of capital over 25 years starting from year 6 and at intervals thereafter.
How the 5% return is calculated
There is precedent.
See how westmill solar
IS CURRENTLY EXCEEDING PROJECTIONS:
This is an average return (known as an Internal Rate of Return) based on our central financial forecast. Our forecast takes into account a range of factors such as future energy costs and general inflation. It is impossible to precisely predict the future of course, and the actual return may be higher or lower.
Major factors are the rate of inflation and the cost of debt financing.
The risks from inflation
Inflation is contracted into the project’s revenues, which mitigates inflation risks. All other things being equal, low inflation will lower the project returns, whilst higher inflation would enhance them. That means that the project could have the effect of protecting your investment against the effects of inflation.