Presentation from seminar hosted by Winter Rule LLP and Low Carbon Team at Cornwall Development Company on subject of finance available to cleantech businesses or low carbon business initiatives in Cornwall/South West.
1. Green Finance
A breakfast time guide to finance and support available in the South West
(Cornwall) to Businesses looking to embrace Low Carbon/Renewables
www.winterrule.co.uk
4. Green Finance
Presentations
• Summary of „green finance‟
• „Low Carbon Grant Fund‟
• SW Cleantech Co-Investment Fund
• Venture Capital
• Investment Readiness
Q&A session
4 www.winterrule.co.uk
5. Green Finance:
what’s out there today? (in 7 minutes)
Summary of „Green Finance‟ potentially available to SW Companies/
Entrepreneurs‟ looking to engage with Low Carbon Economy
Richard Wadman, Corporate Finance Director, Winter Rule LLP
5 www.winterrule.co.uk
6. Assessment: Recognition of opportunity and requirements?
• The Carbon Trust commissioned
independent research which found that:
• While more businesses in the South West see green growth as
an opportunity (67%) compared to the rest of the UK
• And over three quarters recognise the business benefits an
enhanced „green‟ reputation can bring to their organisation
(76%)
• fewer than 1 in 3 are actively developing greener products and
services (30%)
• and two thirds do not have an annual plan to reduce carbon
emissions (65%)
• Attendance at events incl. „M&S event‟
• Finance required to stimulate action?
6 www.winterrule.co.uk
8. Fluid: watch this space
In the past month…
• Green Investment Bank: House of Commons
Report
• “Feed-in Tariffs: Consultation on fast-track
review for small scale low carbon electricity”
- DECC
• “£550m green funding package
unveiled”(Carbon Trust and Siemens)
• Low Carbon Grant Fund?
8 www.winterrule.co.uk
9. Green Finance: What’s not in?
Green Investment Bank
• “£1bn of capital to fund clean energy and low-carbon projects.”
• Report on 12 March by House of Commons Environmental
Audit Committee
• Treasury: ONS classify bank as Public Sector (impact on deficit
reduction?)
• No decision until 2014 / 15 as to whether bank can borrow?
• http://www.guardian.co.uk/politics/2011/mar/18/green-revolution-hit-curbs-bank
• Budget (yesterday) – £3bn to be in funds by 2012/13; able to
borrow in 2015
Business Link Capital Grants
• Close 31 March (- 10 days)
9 www.winterrule.co.uk
10. What’s out
EIS/ VCT for investment in companies whose
trade exists whose trade [ ] in the receipt of
FITs
• where commercial electricity production commences after 6 April
2012
• For shares issued after 23 March 2011
10 www.winterrule.co.uk
11. Green Finance: What’s in and/or coming soon?
National SW Region/ Cornwall
Renewable Energy FITs and ROCs Low Carbon Grant Fund
Production RHIs RDPE
Carbon reduction/ The Carbon Trust – Property Gap Funding
Energy and/or Resource interest free loans
Efficiency RDPE - SWARM
„Green Equipment
Finance – Siemens
Cleantech businesses Venture Capital/ SW Cleantech Co-
Business Angel (Note 1) Investment Fund
Grant for Business
Investment (Note 1)
Note 1: Funding source not explicitly for this
Note 2: Banks, including Triodos, Co-op and Santander and VCTs actively engaged in Renewable Energy
11 www.winterrule.co.uk
12. Finance: Renewable Energy
FITs
• FITs introduced 1 April 2010
• Consultation of Fast Track Review – March 2011
• Solar PV > 50kWh, proposed new FITs
• 50kWh – 150kWh TIC: 19.0p/ kWh (31.4p or 29.3p/kWh + RPI)
• 150kWh – 250kWh TIC: 15.0p/kWh (29.3p/kWh + RPI)
• 250kWh – 5MW TIC and stand alone: 8.5p/kWh (29.3p/kWh + RPI)
• Effective from 1 August 2011
• Farm scale AD (of up to 500kW)
• <250kW TIC: 14.0p/kWh (11.5p/kWh)
• 250kW – 500kw TIC: 13.0/kWh (11.5p/kWh)
• Responses by 6 May 2011
• Cornwall specifically mentioned in consultation document
(6/10 planning permissions for solar PV farms)
12 www.winterrule.co.uk
13. Finance: Renewable Energy
• FITs
• Co-ordinated response from „Cornwall‟?
• Better handling = one key message
• Investors require certainty…
• Electricity Market Reform
• Consultation Document – December 2010
• Responses closed – 10 March 2011
• RHI
• Details announced 10 March 2011
• Two phases – first targeted at „big emitters‟/ non-domestic
• Tariff tables
• Approval by parliament Summer 2011?
• http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/policy/incentive/incentive.aspx
13 www.winterrule.co.uk
14. Finance: Renewable Energy/ Energy Efficiency
Low Carbon Grant Fund
RDPE
• Farmers (R4F and S4P):
• free advice on Resource Management and
• up to £10k grant for capital works
• Food processor (with expansion plans)
• Upgrade of existing equipment (if not replacing like 4 like)
• www.sw-ruralgateway.info
14 www.winterrule.co.uk
15. Finance: Energy Efficiency Finance Scheme
• “Energy Efficiency Finance Scheme”
• Siemens and The Carbon Trust
• Loan: “affordable” payback to mirror energy savings
• 1 to 7+ years
• £1k min; £30k average
• Energy Efficiency Equipment and Low Carbon Technologies
• Efficient Lighting and Biomas Heating
• Carbon Trust List of suppliers +
• Applications open 4 April 2011
• www.carbontrust .co.uk?
• The Carbon Trust
• Interest Free Loans – until 28 March 2011
• www.carbontrust.co.uk
15 www.winterrule.co.uk
16. Finance: Cleantech
• Business Angels
• www.swain.org.uk
• Venture Capital
• E.g., Horatio Investments
• South West Cleantech Co-Investment Fund
16 www.winterrule.co.uk
17. Finance: Low Carbon
• Own Funds
• “Retailer Marks and Spencer is another firm reaping the
benefits of its greener products. Its Plan A initiative saving the
firm £50m a year in efficiency savings alone” – Mike Barry,
Head of Sustainable Business at M&S
• Other
• Triodos Bank „cheap loans to sustainable caterers‟
• Gold or Silver Food for Life Catering Mark from Soil
Association
• > £25,000 @ 1% discount from their normal interest rates
(of 3-6%)
17 www.winterrule.co.uk
18. The Low Carbon Grant
Fund (LCGF).
Stuart Farmer - Cornwall Development Company (CDC)
Josie Gough - South West Regional Development Agency
(SWRDA)
24 March 2011
19. Aim of presentation
To raise awareness early, during LCGF development
Phase
To provide an opportunity for Cornwall and Isles of
Scilly businesses to provide input & comment on design
To answer some key questions we suspect may come up:
What...?
Why...?
Who...?
When...?
Where...?
www.cornwall.gov.uk
20. What is LCGF?
LCGF is a fund up to £4m - £5m (first Call)
which is proposed to support ERDF eligible businesses
Improved their energy / resource efficiency
Enable the generation of low carbon energy
…….. In order to reduce their carbon footprint
www.cornwall.gov.uk
21. What will investment
propositions be judged on?
Key Factor....
Carbon saved per £ invested
Other Factors….
Innovation
Economic benefits to the business (productivity / jobs)
Wider economic benefits to Cornwall & IOS (Supply-chain
development/ R&D Links/ Best practice dissemination)
www.cornwall.gov.uk
22. Why is LCGF needed?
Supports ERDF Convergence cross cutting commitments to
Carbon Reduction
LCGF will invest in projects that have Carbon Reduction as
their primary outcome where
They are not supported through existing schemes (FIT /
RHI etc…..)
Mandated through the existing regulatory framework
Would otherwise be undeliverable due to issues of
commercial viability
www.cornwall.gov.uk
23. Who can be apply for LCGF?
ERDF eligible businesses in Cornwall and the IOS
Projects which are seeking an ERDF Convergence
investment between £70K to £1m (appropriate level of
match will be required)
Further eligibility details will be provided with the call
www.cornwall.gov.uk
24. Stage One Stage Two
Expected
Receive and appraise
Design LCGF September 2011 Full Application
Currently Here 1st Stage EOI
No
Letter Advising
Expected Early Call For EOI’s Unsuccessful Successful
Invites for
May 2011 1st Stage EOI Yes
Expected Late
Expected Close Call
October 2011
ERDF Appraisal
Asses EOI‟s
June 2011
Expected Late Endorsement &
No
Letter Advising November 2011 Advisory Group
Unsuccessful Successful
Yes No
Letter Advising
Unsuccessful Successful
Expected Invite Full Application
Late July 2011 Yes
Expected
Grant Awarded
Early 2012
Monitoring &
Contract Management
www.cornwall.gov.uk
25. Where can business go to engage?
The EOI to be issued in May will contain detailed
information and contact details
An open LCGF workshop will be held in ???? for interested
businesses
We would suggest businesses wait until the call for EOI is
issued. However in the case of any URGENT queries or
points, please contact Janet Bowen at
jbowen@cornwall.go.uk
www.cornwall.gov.uk
26. Thanks For Your Time
Cornwall Council
County Hall
Truro TR1 3AY
Tel: 0300 1234 100
www.cornwall.gov.uk
www.cornwall.gov.uk
27. South West Cleantech Co-
investment Fund
A fund aimed at stimulating equity investment into Cleantech businesses in the
South West
Richard Wadman, Corporate Finance Director, Winter Rule LLP
27 www.winterrule.co.uk
28. SW Cleantech Co-investment Fund
The “concept”
• „At Risk‟ Funds Loaned
• Encouragement for equity investment from Business Angels and
VC‟s
Targeted at
• Cleantech sector
• SW Region
Amount
• Min £50k, Max £100k
• Match with equity in investment
28
29. Risk Funds
Term Loan
• 3 or 5 years
• Interest @ 10%
• “No capital or interest for term of the loan”
Security
• Debenture (subordinated to existing commercial lenders)
29
30. Fund Secretariat (Not Fund Management)
Why?
• Not to be a barrier to applications (costs of DD etc)
• Maximisation of use of funds (£2.5m pot)
How?
• Equity investor does „due diligence‟
• If they invest in ordinary shares then „ok‟ for fund
Fees
• Arrangement fee of 2%
• Annual monitoring fee 1%
30
31. Fund Secretariat
Implications
• Keystone Investor required
• Experienced investor
• „Sign off‟ by SWAIN www.swain.org.uk
• No previous relationship with company
• Can not be connected (EIS rules, < 30%)
• Due Diligence performed by Investor (but no explicit
reliance taken by Fund on this)
• Investment in cash
• Investment to be in ordinary shares
• No business plan required
31
32. Cleantech?
Companies which
“support and deliver low carbon‟ technologies”
Low carbon/Cleantech
Knowledge based products or services, that:
Provide superior performance at lower
Greatly reducing or eliminating carbon production,
Improving the productive and responsible use of natural
resources
32
33. Cleantech?
Cleantech: areas of activity
Core technologies Other technologies?
Energy Generation Agriculture
Energy Infrastructure Materials
Energy Efficiency Recycling & Waste
Energy Storage Water & Wastewater
Transportation Manufacturing/Industrial
Air & Environment
Certification process
33
34. Application Process
Pre-Application
• SWAIN www.swain.org.uk
• Keystone Investor
• Qualifying Company – SME based in SW
• Cleantech certification
34
35. Application Process
Application
• Fund Secretariat
• Application Form, including Carbon Compass
• Cleantech and Keystone Investor
Draw-Down
• Fund Secretariat
• Draw Down Form
35
36. Applications to date and issues...
Issues
Existing relationship b/w Investor and Co
Cleantech?
No Keystone Investor
SW?
One offer made
36
38. Summary
• Matched funding for Investment in
Cleantech companies
• Keystone Investor required
• Initial enquires to SWAIN
www.swain.org.uk
• More information
http://www.swain.org.uk/CleanTech.aspx
38
40. Horatio Investments
What do Venture Capitalists look for?
What does Horatio look for?
Some dos and don’ts
Is Cleantech different?
41.
42. Opportunities for strong returns
Very selective – 2% succeed
Alignment (in theory)
More than just ideas
Ultimately a “Leap of Faith”
43. Opportunity to invest £100k to £500k
Wide range of sectors
Potential for significant growth
Work with the team to develop their business
Based in South West and South Wales
44. Do:
◦ Research the VCs
◦ Prepare a detailed plan
◦ Demonstrate your commitment
Don’t:
◦ Have an unrealistic valuation
◦ Leave it too late
◦ Use a top down sales approach
45. Not really
Technical knowledge
Market Factors
Specific sources of funding
46.
47. Winter Rule 24 March
UEC Enterprises Ltd
Dr Mark Scibor-Rylski
Rob Misselbrook CFA
47
