• BWCE members at the AGM in front of solar array at Hartham Park

FAQs


We have prepared a list of likely and useful questions you may wish to ask. These FAQs were generated at the time of our first fundraise in October 2011, but most are still relevant now. If you cannot find the answer to a question you have or need some further information, do not hesitate to contact us. (Contact)

Q. What is BWCE?
Q. Who runs BWCE?
Q. Will the Directors benefit personally?
Q. What is the purpose of the fund raising?
Q. Why establish a partnership with SSE plc?
Q. How much do you expect to raise?
Q. What are the costs of operating the Society?
Q. What impact will this have on efforts to address climate change or peak oil?
Q. What returns can I expect as a member?
Q. When will member’s interest payments be made?
Q. How realistic are the projected returns?
Q. What are the key risks to earning the projected returns?
Q. Are the returns dependent on future expansion and further fundraising by BWCE?
Q. Is my investment protected in any way?
Q. How can I be sure that BWCE is managed properly?
Q. A substantial amount of the capital cost of BWCE’s projects is financed by debt from SSE.  What risks does this raise for investors?
Q. Under what circumstances could BWCE go bust, and what would happen to my investment then?
Q. Can I sell or withdraw my investment?
Q. Can my investment increase or decrease in value?
Q.  What are the tax implications of the investment?
Q. How confident are you that the investment qualifies for EIS?
Q. How much will be generated for the Community Fund?
Q. How will you work with local communities?


Q. What is BWCE?

A. BWCE (or the Society) is an industrial and provident society set up for community benefit  (Community Benefit Society). This means it is governed by a set of rules which specify how it is governed and what it is in business to do.  BWCE is in business to develop and operate renewable energy projects.  It expects to pay its members a return on their investment and benefit the wider local community through money allocated to a community trust fund.  The Society is owned by its members and each member has one vote, regardless of amount invested.  The members elect the board of directors (the Board), save for two executive directors who are co-opted by the Board, and make other key decisions, usually at the Annual General Meeting (AGM)
Back to the top

Q. Who runs BWCE?

A. BWCE is run by a group of local people with experience of renewable energy, community enterprises and business management (please see the share offer document for details).  The directors intend to put themselves up for election at the first AGM of members following the current fund raising.
Back to the top

Q. Will the Directors benefit personally?

A.  Each director is a member, so is expected to receive interest on their membership in the same way as other members will.  To date none of the directors have been paid for their time managing BWCE. The Board has contracted some directors and project developers to work on the basis of success fees, i.e. fees are only payable when projects are completed and income to the Society is secured. These contracts are at standard market rates. In the future, once the organisation is established, we anticipate that non executive directors will not be paid whilst executive directors who will make significant time commitments will be paid a fee for their time. For more information see our Statement of Directors’ Earnings.
Back to the top

Q. What is the purpose of the fund raising?

A. To raise money from members to invest in renewable energy projects.  BWCE has 12 solar PV projects which are in progress and expected to be installed and operational be the end of this year, most on school buildings in the local area.  The total cost of these projects is approximately £1.15m.  BWCE has raised a £1 million loan from SSE plc towards the cost of these installations for which bank finance is not available.   This enables BWCE to retain 100% ownership of the solar PV projects being installed.  However once the projects are established through the SSE loan and local investment, banks may be interested in re-financing the projects, thereby enabling BWCE to re-invest the funds freed up in further projects.
Back to the top

Q Why establish a partnership with SSE plc?

A. SSE is enabling BWCE to retain 100% ownership of the solar PV projects being installed by providing a £1 million loan on preferential terms, enabling as a result more secure returns to local investors. The scale of project being looked at here is very difficult to get bank finance for. However once the projects are established through the SSE loan and local investment, banks may be interested in re-financing the projects, thereby enabling BWCE to re-invest the funds freed up in further projects. SSE is therefore playing a crucial enabling role in helping to establish BWCE as a financially viable, locally owned community enterprise.

SSE’s contracting team will be installing, monitoring and maintaining the PV systems after providing competitive quotes for the work, based on high quality installation standards and solar PV systems, providing projects attractive to bank finance. BWCE are currently in discussions with SSE about increasing the level of local installer involvement and working with local apprentice schemes in order to support our aspirations around building local supply chains.

Without significant investment from companies like SSE it is difficult to see how the community energy sector will be able to flourish and grow with the speed necessary to move community action from a niche activity into mainstream delivery. BWCE is keen to see other community initiatives benefit from the collective experience gained through this partnership and welcomes SSE’s aspirations in this area.
Back to the top

Q. How much do you expect to raise?

A. We are aiming to raise £400,000 with a minimum of £150,000.  Each member can invest between £500 and £20,000 in BWCE.   £20,000 is an upper limit set by the legislation governing industrial and provident societies and applies to all investors other than industrial and provident societies. .
Back to the top

Q. What are the costs of operating the Society?

A.  It is expected that the income from the solar PV feed in tariff (FIT) will be used to pay operating costs of the Society which are a) insurance for the solar PV systems b) maintenance costs c) overhead costs for management and book-keeping and d) loan interest and repayment of the principal sum. After paying all these costs we are estimating that the solar PV projects will generate a net return of 9%, from which we can pay members interest on their investment and contribute to the Community Fund.
Back to the top

Q. What impact will this have on efforts to address climate change or peak oil?

A. The solar PV panels installed as a result of this offer will supply free electricity to schools and community buildings on which they are built, resulting in a significant reduction in the use of grid electricity and a corresponding reduction in carbon emissions. BWCE is focussing on the installation of renewable energy projects in the first instance in order to also establish a financially viable community enterprise via income from the FIT. However once established BWCE will be looking to also develop opportunities to improve the energy efficiency of homes and businesses and reduce energy demand through partnerships with public and private sector partners. In addition the Community Fund, generated as a result of the renewable energy projects established by BWCE, will also look to support further local low carbon projects that might involve for example, energy efficiency improvements, local food production or sustainable transport initiatives.
Back to the top

Q.  What returns can I expect as a member?

 A. The return to members comes in the form of an interest payment.  This comes from the surplus  BWCE expects to make from the renewable energy projects (ie difference between FIT revenue and operating costs above).  We aim to be able to pay members an average annual return of 3-4% above the long run average retail price index (RPI) over the lifetime of the business (equivalent to about 7% with long run average RPI at 3.5%).   This is not guaranteed and is subject to risks as outlined in the share offer document.   For members eligible for and taking advantage of the Enterprise Investment Scheme (EIS) the income tax rebate will increase the annual return since 30% of the investment can be reclaimed against tax

The structure of the Society means that shares cannot increase in value.  They can be withdrawn by members at the discretion of directors after 3 years from the date of issue. You may not be able to withdraw the full price paid if BWCE does not have sufficient capital available in the business.  The shares could fall in value if the Society makes insufficient returns, but our financial projections are based on the full return of members’ investment in addition to the annual return over 25 years.
Back to the top

Q When will member’s interest payments be made?

A.   BWCE’s financial year ends on 31 December.    When annual accounts have been prepared, the directors will review the surplus generated in the year and make a proposal on the level of interest to be paid to members for that year.   This proposal needs to be approved at the AGM of members which must take place within 6 months of the year end (ie by 30 June).   Once a proposal is approved interest payments can be made.
Back to the top

Q. How realistic are the projected returns?

A. The return is calculated by taking the income from the FIT and deducting the expected costs of installing and operating the solar panels, and the expected costs of operating BWCE.  As the return comes from a portfolio of projects for which we have already agreed a fixed price and which will be installed by the end of the year, we are confident of the capital and operational costs of these projects.  The FIT payment is guaranteed by UK Government for the 25 year period which the FIT scheme is in operation for and increases by RPI each year.  For solar projects, the income is sunshine dependent.  Our projections are based on conservative estimates of average sunshine for this latitude.  This will vary year by year but should be a good indication of sunshine over the expected 25 year lifetime of the solar PV installations.  The FIT is guaranteed once solar PV projects are commissioned and meet the FIT criteria – which our projects will do.  We use standard projections of efficiency of solar panels based on manufacturer projections, including expected degradation in performance over the expected 25 year lifetime.  All projects will be covered by leases with the site owners and by operations and maintenance contracts with SSE, and insured against damage or loss, to minimise the risk of unexpected costs or loss of revenue.
Back to the top

Q. What are the key risks to earning the projected returns?

A. The main part of the return comes from the FIT, so, as long as the solar PV project installations are in operation for the 25 years in which the solar PV systems will benefit from the FIT scheme, BWCE will continue to receive this return. Once commissioned this 25 year RPI linked income is set by government legislation and will not be affected by any future changes in FIT tariffs for new projects.  Therefore the main risks to the projected return are:

-        Lower than expected sunshine over the 25 year lifetime of the project – whilst this may affect individual years, our projections are based on conservative estimates of average sunshine hours which are very reliable over the long term.

-        Higher operational costs than planned – the majority of the costs are contractual and therefore predictable over the lifetime of the installation.  The management costs of BWCE could vary over time, but these are a small element of the total cost.

-        Physical security/continued operation of equipment – The equipment is guaranteed by the manufacturer for 25 years, and insured against damage/theft.

-        Continued operation of BWCE– see below.
Back to the top

Q. Are the returns dependent on future expansion and further fundraising by BWCE?

A. No.  While our business plan has the objective to grow BWCE into a much larger society with up to 25MW of generating capacity, the financial projections of the business are based on each portfolio of projects. The funds we raise from members in this initial fund raising will be used to finance our initial portfolio of solar PV installations for which finance has already been secured. If BWCE was unable to commission any further installations than those already financed, the projected returns to members would still be expected to be achieved.  Future projects will only be undertaken where we are confident the target returns can be met and when additional finance is in place to support these projects. Rule 65 of our constitution states that the profits we make should be allocated to the following priorities (in such manner and in such proportion as the Board may decide):  to pay members interest on their shareholding; to develop the business and for social and charitable purposes (The Community Fund).
Back to the top

Q. Is my investment protected in any way?

A. No.  As a Community Benefit Society, BWCE does not need to be authorised by the Financial Services Authority to issue withdrawable shares which are non transferable. This exempts the share offering from the requirements of an approved share offering required by section 85(1) of Financial Services and Markets Act 2000 (FSMA).  Therefore your investment is not protected by any investor compensation or dispute resolution scheme.  The shares are not specified investments for the purposes of section 22 of FSMA pursuant to paragraph 76 of FSMA (Regulated Activities) Order 2001.  Therefore you do not have the protection that you would otherwise be offered under FSMA.  In particular, the share offer documents do not need approval by an authorised person under FSMA.   Further SSE has security over the assets of the portfolio of solar PV projects and in the event of a default on the SSE loan,  SSE has the ability to take ownership of the projects.
Back to the top

Q. How can I be sure that BWCE is managed properly?

A. The Board will be elected by members on the basis of 1 member, 1 vote.  Independent non-executive directors will be elected by members to ensure executive directors are accountable to members.  These non executive directors will co-opt 2 executive directors who will be responsible for the day to day management of the Society.    The Society is governed by a constitution, and the constitution rules can only be changed by member vote.  The financial returns will be independently audited and published to members with full transparency on financial performance and ongoing viability of the business.  An AGM will be held every year to review performance and for members to vote on resolutions proposed including the re-election of non-executive directors.
Back to the top

Q. A substantial amount of the capital cost of BWCE’s projects is financed by debt from SSE.  What risks does this raise for investors?

A. Debt funding is appropriate given the stable long term income streams and enhances the return to investors.  The debt is secured on the assets of BWCE so ultimately the loan provider could seize the assets in the event of default.  The loan is fixed interest so the cost of servicing is known and built into the financial projections.  Individual members have no liability to the debt provider other than the financial risk to their invested capital.  SSE is also investing £20,000 as equity in the company, showing the confidence they have in the business.   The loan is repayable over a 15 year period but BWCE can elect to repay it earlier without any penalty.
Back to the top

Q. Under what circumstances could BWCE go bust, and what would happen to my investment then?

A. BWCE could go bust if it was unable to meet its financial obligations, which are primarily the repayment of debt.  The debt terms we have negotiated are such that the repayments can be covered by the projected revenue from the FIT income, under conservative assumptions, allowing BWCE to pay the projected return to members and contribute to the Community Fund.  In the event that revenue was significantly below expectations, the order in which payments to stakeholders would be made would be: first, debt repayments; then member interest; and finally the Community Fund.  There is only a risk of insolvency if revenue fell so dramatically that BWCE had insufficient cash to meet debt repayments, which would require a significant fall from our financial projections.  In the event that BWCE did become insolvent, it would be wound up.  The debt provider would have a first claim over assets (i.e. the installed energy generation equipment) and any surplus assets would have to be transferred to another society with similar rules and this would be agreed by members at the time (rule 69).
Back to the top

Q. Can I sell or withdraw my investment?

A.  Shares in BWCE cannot be sold or traded.  You may withdraw some or all of your shares after the first three years of subscription on 90 days’ notice at the discretion of the Directors.

Q. Can my investment increase or decrease in value?

A. Under the Society’s rules, BWCE will not pay you more than you originally paid for your shares, and you may not be able to withdraw the full price you paid for them if BWCE has insufficient funds available at the time you wish to withdraw.  The return to investors comes from the interest payments over the 25 year solar PV FIT period based on financial projections which assume full return of initial investment.    Our financial projections assume that some members will want to withdraw their shares before the end of this period.
Back to the top

Q.  What are the tax implications of the investment?

A.  The initial sum invested will be eligible under the Enterprise Investment Scheme (EIS) which means that you will receive a 30% tax rebate on the amount you invest, provided you pay at least that much in tax during that tax year. This means for every £1,000 you invest you would receive a tax rebate of £300.  The interest payments will be regarded as income and so will be taxable and should be declared on your tax return.
Back to the top

Q. How confident are you that the investment qualifies for EIS?

A. We have confirmed with HM Revenue & Customs that BWCE meets the eligibility criteria for EIS.  However, BWCE must continue to meet the criteria for three years in order for EIS relief to be preserved.
Back to the top

Q. How much will be generated for the Community Fund?

A. Once we have covered our operating costs, paid members interest on their shareholding and retained some funds to cover the Society’s growth then our rules state that any surplus can be used for social and charitable purposes.  We intend to channel such funds into the Community Fund.  It will take several years to build up a significant fund and the amount generated will depend on the amount we invest.  For example if we succeed in our medium term targets and install 4.5 MW of renewable energy capacity we estimate that the Community Fund could average out at about £275,000 per year.  However this is dependent on the range of factors outlined above.
Back to the top

Q. How will you work with local communities?

A. BWCE was established through two community groups, Transition Bath and Transition Community Corsham (Transcoco) and so we understand the importance of community partnership. BCWE will work closely with communities as part of developing individual renewable energy projects and will maximise the recycling of project profits back into the community through paying interest to local investors and allocating funding via the community fund.

BWCE will also help local communities that want to take greater responsibility and retain greater control set up their own community enterprise. If these local community enterprises operate as part of the BCWE family they can benefit from BCWE’s development expertise and ability to draw in capital finance. As a result BWCE plans to balance the advantages of operating at greater scale with the need to retain local community identity.
Back to the top