FAQs

We have prepared a list of likely and useful questions you may wish to ask. These Frequently Asked Questions will be updated as required during the 2014 Public Share Offer. If you cannot find the answer to a question you have or need some further information, do not hesitate to contact us.

Q. What is BWCE?
Q. Who runs BWCE and how can I be sure that the organisation is managed properly?
Q. Will the Directors benefit personally?
Q. What is the purpose of the fund raising and how much do you expect to raise?
Q. What’s the difference between debt and underwriting finance?
Q. What will you do if you don’t raise sufficient finance in this fundraise?
Q. What are the costs of operating the Society?
Q. What impact will this project have on efforts to address climate change or peak oil?
Q. What is the wildlife situation at the Wilmington Farm site and how will it be affected?
Q. Why is the Array sited at Wilmington Farm?
Q. Why are you building a solar array on open land, shouldn’t this be used for agricultural purposes?
Q. What returns can I expect as a member?
Q. Why do you talk about members being paid interest rather than a dividend?
Q. When will interest on my investment start accruing?
Q. When will members’ interest payments be made? 
Q. How realistic are the projected returns? 
Q. What are the key risks to earning the projected returns?
Q. How does the performance of BWCE’s existing projects affect my investment?
Q. Are the returns dependent on future expansion and further fundraising by BWCE?
Q. Is my investment protected in any way?
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. Can I invest in BWCE on behalf of my children or grandchildren?
Q. What happens if I die before my shares are repaid?
Q. How much will be generated for the Community Fund?


Q. What is BWCE?

A. BWCE (or the Society) is an industrial and provident society set up for community benefit (a Community Benefit Society). This means it is governed by a set of rules that specify what it is in business to do and how it should be run to ensure community benefit. BWCE is in business to develop and operate community owned 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 fund. The Society is owned by its members and each member has one vote at AGMs, regardless of amount invested.

BWCE has a longer term vision to deliver over 25% of the local renewable energy target via a strong community model as well as developing and delivering energy efficiency programmes and offering energy supply direct to local consumers.
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Q. Who runs BWCE and how can I be sure that the organisation is managed properly?

A. BWCE is run by a group of local people with significant experience of renewable energy, community enterprises and business management. The members elect five non executive directors on the basis of one member one vote, with non execs able to serve for three years before resigning or being re-elected. The rest of the board is made up of 3 executive directors, the chair, managing director and finance director who provide professional expertise and continuity to the operation of the board.  See the share offer document and Our Team for further information about the skills and experience of the board.

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.

BWCE has a strong business strategy and a team in place that has proven its ability to deliver successful projects and generate its target return to members over the last three years. For more information please see BWCE’s Business Plan Update, available to download from BWCE’s website, www.bwce.coop. BWCE is well linked into the wider sector both nationally and regionally and is well placed to adapt its business strategy in the light of changes that might occur in the future.
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Q. Will the Directors benefit personally?

A.  Each director is a member and will receive interest on any investment in exactly the same way as other members. The executive directors are paid a mixture of success fees as and when projects successfully reach financial close and a basic to cover the operation of the community business. You can see a statement of directors’ earnings here.

The non executive directors put their time in on a voluntary basis.
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Q. What is the purpose of the fund raising and how much do you expect to raise?

A. We aim to raise £1.6 million from to invest in the 2.34 MW Wilmington Farm Solar Array. The total cost of this project including site acquisition, fundraising costs, grid connection, site clearance, solar panels & installation is approximately £2.6m. The funds targeted by this fundraise, together with debt and underwriting finance that we are negotiating, and £500,000 already raised from our existing members, will allow us to contract for project commissioning in December 2014.
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Q. What’s the difference between debt and underwriting finance?

A. We are in advanced discussions with Bath & North East Somerset Council for a loan of £500,000. This will be repaid over 15 years at an interest rate of 6.5%. The underwriting finance will only be used if we don’t raise all the £1.6 million targeted by this fund raise. It gives investors and us greater confidence that we will be able to proceed.

We are negotiating an underwriting facility of £600,000. If we do have to draw down any of this we will be charged at a slightly higher rate than the debt. As a result we will only draw it down if we have to and then we will look to re-finance it as soon as possible next year with either cheaper debt or a further share offer.

We had the same arrangement with the share offer we supported Low Carbon Gordano with that closed recently, raising the full amount of £2.2 million and therefore not needing the underwriting finance.
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Q. What will you do if you don’t raise sufficient finance in this fundraise?

A. If BWCE doesn’t raise a minimum of £1 million during this fundraise and BWCE has been unable to secure underwriting finance, the project will not be built and all funds raised as part of this share offer will be returned to investors.

Members that have invested in the advance fundraise will not lose their investment. The equipment purchased will be sold and the funds will be used to build smaller projects already in BWCE’s pipeline.

If BWCE doesn’t raise £1.6 million as part of this fundraise but raises the balancing amount via short-term underwriting finance the project will go ahead without impact on member’s returns. BWCE will then re-finance the short-term loan during 2015 through a second share offer or via a longer-term loan once the project has been built.
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Q. What are the costs of operating the Society?

A.  It is expected that the income from the solar PV Feed in Tariff (FiT) and from exporting electricity to the grid will be used to pay the operating costs of the Society which are a) insurance for the solar PV systems b) maintenance costs c) administration fee to BWCE of 1% of capex (or approx. £22,000/yr plus RPI) to cover performance monitoring, liaison with energy purchaser and regulatory bodies, troubleshooting, contractor liaison and management, book keeping, contribution to overheads and d) loan interest and repayment of the principal sum, if debt finance is necessary. After paying all these costs we are estimating that the solar PV project will generate a net return of 8.9%, from which we can pay members interest on their investment and contribute to the Community Fund. The FiT is explained in more detail in answer to the question ‘How realistic are the projected returns’.
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Q. What impact will this project have on efforts to address climate change or peak oil?

A. The 2.3 MW solar PV array installed as a result of this fundraise will export electricity to the national grid, thereby contributing to the process of de-carbonising the grid and resulting in a significant reduction in carbon emissions equivalent to approximately 1,150 tonnes of CO2 per year. The solar PV array will generate around 2,223 MWh of electricity in its first full year of operation, enough to supply the equivalent of around 650 homes.

In addition the Community Fund, generated as a result of the renewable energy projects established by BWCE, will also look to support further local community projects that reduce carbon emissions, for example energy efficiency improvements, local food production or sustainable transport initiatives.
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Q.  What is the wildlife situation at the Wilmington Farm site and how will it be affected?

 A. The current agricultural field does not support any significant wildlife.  There are opportunities, however, to complement the existing hedgerows and standing trees with wildflower rich grassland that would act as foraging habitat for small mammals, bats, birds, reptiles and invertebrates.  This will also complement the woodland habitat to the north of the site and improve it for local wildlife. A Wildlife Management and Enhancement Plan will govern all activities to be undertaken during the 25 year project lifespan.
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Q. Why is the Array sited at Wilmington Farm?

A. Bath and North East Somerset is heavily constrained by lack of grid connection capacity, this is one of the few sites found with suitable connection to the 33kV electricity network. The project has been substantially reduced in size to minimize the visual impact. Enhancement of existing hedges and new planting means that the solar farm will have only a small impact on the landscape.
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Q. Why are you building a solar array on open land, shouldn’t this be used for agricultural purposes?

A. The site on which the array will be built is grade 3b agricultural land which is currently used for winter wheat. It is of moderate quality capable of producing moderate yields of a narrow range of crops or high yields of grass which can be grazed or harvested over most of the year. It is suitable therefore to have a solar array on the site with wildflower grassland underneath and to establish a grazing and cutting regime underneath the panels to ensure that this is maintained in good condition.  In 25 years once the system is decommissioned the land can continue as grassland or put back to a suitable crop.
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Q. What returns can I expect as a member?

A. The return to members comes in the form of an interest payment. We aim to pay members a real return in excess of the long term Retail Price index (RPi) averages. We are projecting an annual return of about 7.0% assuming the long term RPi averages 3% per annum (this has been the average for the last 14 years).

If long term RPi drops below 3% we may need to reduce the interest payments. Please note that the return to investors is not guaranteed – we would recommend that you review the risks outlined within the share offer document.

If projects perform above forecast (as BWCE’s projects have on average done to date) we will pay excess surplus into the community fund rather than pay more than 7% to members, in line with our rules as a Community Benefit Society. We will also be able to repay members capital more quickly if required.

The structure of the Society means that shares cannot increase in value. Shares can be withdrawn by members, at the sole discretion of directors, after 3 years from the date of issue. You will 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 on that investment over 20 years.
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Q. Why do you talk about members being paid interest rather than a dividend?

A. As specified by the Society’s Rules, payments made to members are deemed as interest and so a cost on the business, rather than a dividend and are treated as such for tax purposes.
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Q. When will interest on my investment start accruing?

A. Interest will start accruing at the point when the shares are issued. Shares are currently scheduled to be issued before the 21st November, but share may be issued earlier if £1m is raised before the share off closes.
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Q. When will members’ interest payments be made? 

A. BWCE’s financial year ends on 31 March. 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 September). Once a proposal is approved interest payments can be made. To date Interest payments have been made by the end of September or early October following an AGM in July.
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Q. How realistic are the projected returns? 

A. The return to investors is reliant on the Feed in Tariff (FiT) and the performance of the system. The FiT payment is a subsidy for renewable electricity generation guaranteed by the UK Government for a 20 year period and the payments are RPI linked. The FiT is guaranteed once the solar PV project is commissioned and meets the FiT criteria – which our project will do.  For more information on the FiT see here.  Changes in the FIT scheme after this project is registered will only affect future projects and will not affect this one.

For solar projects, the performance of the system 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 20 plus year lifetime of the solar PV installations. We use standard projections of efficiency of solar panels based on manufacturer projections, including degradation in performance over the expected 25 year lifetime. This and all future projects will be covered by leases with the land or site owner and by operations and maintenance contracts with the installer and insured against damage and loss of income.

BWCE’s projects have on average exceeded forecast performance by between 5-10%. BWCE has also paid 7% interest to members in each of the last 3 years since BWCE started trading.
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Q. What are the key risks to earning the projected returns?

A. The main part of the return comes from the Feed in Tariff (FiT), so, as long as the solar PV project installations are in operation for the 20 years in which the solar PV systems will benefit from the FiT scheme, BWCE will continue to receive this return. The FiT is explained in more detail in answer to the question above. Once commissioned this 20 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 20 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 20 years, and insured against damage/theft.
  • Continued operation of BWCE – see below.

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Q. How does the performance of BWCE’s existing projects affect my investment?

A.  As well as the Wilmington Farm Solar Array, your investment will be affected by BWCE’s existing portfolio of projects, which includes 612kW of solar PV across 11 other smaller sites. For details of BWCE existing portfolio of projects see Our Projects. BWCE are also in the process of installing a further 60kW at Stowey Farm South of Bath and Lewis House in Bath city centre.

The main risk of existing projects having a negative impact is if they underperformed. However, all existing projects are fully insured with operating and maintenance contracts and have demonstrated overall average performance to date of 5-10% above forecast. A diverse portfolio of projects strengthens overall performance.
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Q. Are the returns dependent on future expansion and further fundraising by BWCE?

A. No. BWCE may develop further projects in the future. However even if BWCE was unable to commission any further projects at all, 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.
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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 Conduct 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. Our share offer document has however had independent input from both legal and financial experts. Further, if debt finance is required to provide the balance of the total project costs, the loan provider may have security over the project and in the event of a default on the loan, may have the ability to take ownership of the project.
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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 would primarily be the repayment of debt. If debt finance were secured for this project it would only be on terms such that the projected revenue from the Feed in Tariff (FiT) income, under conservative assumptions, would cover the repayments and still allow BWCE to pay the projected return to members and contribute to the Community Fund. The FiT is explained in more detail in answer to the question ‘How realistic are the projected returns?’

In the event that revenue was significantly below expectations, the order in which payments to stakeholders would be made would be: first, debt repayments (if debt required); 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.
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Q. Can I sell or withdraw my investment?

A. Withdrawable 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 sole discretion of the Directors.
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Q. Can my investment increase or decrease in value?

A. As specified by the Society’s rules, BWCE cannot 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 20 years based on financial projections that 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.
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Q.  What are the tax implications of the investment?

A.  We have received from HM Revenue and Customs (HMRC) advance assurance that the shares will be eligible for tax relief under the Enterprise investment Scheme (EIS), a government-backed scheme designed to encourage investment in smaller companies.

As EIS status has been granted, investments will qualify for 30% tax relief for qualifying income tax payers (up to the amount of tax paid in the year). For example, a tax-payer investing £10,000 in the scheme would be entitled to a £3,000 tax rebate in the following tax year provided their total tax payable is at least £3,000 for that year.

EIS status also qualifies investments for Capital Gains Tax deferral relief. The means that any tax due on a prior capital gain up to the amount of the investment can be deferred until the shares are withdrawn. For more information on tax relief visit www.hmrc.gov.uk/eis/index.htm and consult a financial advisor.

Shares in BWCE will normally be exempt from inheritance tax providing they are held for two years as they should qualify for business property relief.
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Q. How confident are you that the investment qualifies for Enterprise investment Scheme (EIS)?

A. We have had advance assurance from HM Revenue & Customs that the share are eligible for EIS tax relief.
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Q. Can I invest in BWCE on behalf of my children or grandchildren?

A.  You can hold shares on behalf of anyone who is under 16. Just complete the appropriate form in the share offer document. The shares you hold will count towards the £100,000 limit of withdrawable shares any one person can have, interest will be paid to you and will be treated the same as investing directly in your name when considering eligibility for EIS tax relief. See answer to question on EIS eligibility above.
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Q. What happens if I die before my shares are repaid?

A. You, if you wish, can prepare for this eventuality by nominating another person to whom the shares would be transferred in the event of your death or by holding shares on behalf of children under the age of 16. In both cases the share value will count towards your shareholding limit and you will receive the interest paid. Should neither of these possibilities be in place, the executors of your will would need to apply to BWCE for the shares either to be repaid or transferred to another person.
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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 will channel such funds into the Community Fund.

We estimate that the Wilmington Farm Solar Array when built will provide £17,000 per annum rising in line with RPI during the early years, rising far quicker in later years. Acceptance of this amount will be subject to a member’s vote at BWCE’s AGM. The monies will then be donated to the independent charity, the Bath & West Low Carbon Community Fund and will be allocated to projects brought forward by communities in the vicinity of the project. We expect that the Wilmington Farm Solar Array will generate approximately £700,000 over 25 years.
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