community · 2020. 11. 2. · community share offer, and a registered society works far better than...

COMMUNITY SHARE OFFER2020

RENEWABLE POWER PEMBROKESHIREA COMMUNITY ENERGY PEMBROKESHIRE PROJECT

1 For information about the Feed in Tariff, see https://www.ofgem.gov.uk/environmental-programmes/fit/about-fit-scheme

SUMMARYThis document is an offer to you to buy community shares in a community owned wind turbine in Pembrokeshire.

Our turbine has already been commissioned and has been generating since 20th March 2020. It is a 900kW turbine with a blade span of 54 metres. If our projections are correct, it should generate enough power to supply the equivalent of 665 households, and save more than 11,000 tonnes of CO2 from entering the atmosphere in the first 20 years of its operation.

Because of the tight deadlines imposed by the Feed in Tariff1, we obtained a loan from the Development Bank of Wales that enabled us to build the turbine by our deadline. We would now like to convert part of that loan into community shares, so that the turbine is genuinely owned by the community.

The turbine is operated by, and the shares will be issued by Renewable Power Pembrokeshire Limited. This is a community benefit society, a form of registered society, registered with the Financial Conduct Authority. For more details on what it means to be a shareholder and member of a community benefit society, please read this share offer document in full.

Our share offer will open on 21 September 2020 and close on 21 December 2020 and you can buy as few as 100 and as many as 50,000 £1 shares. We are projecting that the shares will earn interest, that will average out at an overall rate of 4% (as measured by IRR).

We have set no minimum target to reach. We would like to attain a target of at least 300,000 shares and the maximum raise would be £1.4M which would entirely eliminate our loan, but we are not expecting to reach this amount. We will accept all valid applications that we receive under this maximum.

Interest on shares will be delivered by lower interest rates in the early years, followed by higher interest rates in later years. This is explained more fully in the Finance section of this document. This interest is not guaranteed if performance and yield is significantly below the level our consultants have advised us to expect at this site.

Capital at risk warning: You could lose some, or all, of the money you invest in this share offer, without recourse to the Financial Services

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OUR SOCIETYRenewable Power Pembrokeshire (RPP) is a community benefit society (Originally established in March 2014 but dormant until February 2019 when it was acquired by the project to be used to set up this turbine as a community project). Our registration number is 32319R and our registered address is c/o PLANED, The Old School, Narberth, SA67 7DU

Community benefit societies and co-operatives are collectively known as registered societies They are governed by rules that are registered with the FCA. Our rules can be viewed on our website at http://www.communityenergypembrokeshire.org/renewable-power-pembrokeshire.html and are based on model rules developed by Co-operatives UK. The FCA requires that registered society rules ensure that the society operates to high ethical standards, including open membership, democratic member control, transparency, autonomy, independence and concern for the community. Some key elements of our rules are:cial Services

• Membership is open to any individual over the age of 16, and any incorporated organisation

• One member one vote, not one share one vote as is the case with companies.

• Any member over the age of 18 is eligible to stand for election to the board, and board elections are held at each AGM

• There is an asset lock, which means that if the society were dissolved for any reason, any funds released, after settlement of any liabilities, would be used to pay shareholders back their capital, but if there is any surplus left after payment of this capital, this would be gifted to an organisation with similar objectives and an asset lock, and this surplus cannot be distributed to members. Shares cannot go up in value (return to shareholders is in the form of interest, rather than uplift in the value of shares) but shares can go down in value of the society gets into financial difficulties.

A registered society is permitted to issue withdrawable non-transferrable shares to the general public and to pay fair interest on these shares.

Prior to transferring the project into a community benefit society, the project had been developed inside a Community Interest Company (CIC) called Community Energy Pembrokeshire. The intention was always to raise some of the capital through a community share offer, and a registered society works far better than a CIC for running a community share offer. Hence the reason for acquiring a registered society, and transferring all the rights and assets of the project (primarily the option to lease, and the grid connection offer) from the CIC into our society.

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OUR COMMUNITYOur story began with the establishment of PSEEG, (Pembrokeshire South East Energy Group) back in 2008, looking for any ways to save carbon, but soon turned their mind to the possibility of setting up a renewable generator. Most of the many hard-working individuals that have contributed to the project over the years have come from SE Pembrokeshire, but we have support from much further afield and we like to think our community is anyone interested in community-owned renewable generation.

We have links with other community energy schemes in the area and welcome members from anywhere in Wales, the UK or further afield. It would be great if we could have a few international members because the problem this turbine is helping to solve (climate change) is an international one.

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COMMUNITY BENEFITThe primary incentive for most of the individuals involved in this project has been to help address climate change. This turbine will generate electricity without creating carbon dioxide, and will displace fossil fuelled generators from the system. There will have been CO2 produced during the manufacturer and installation of the turbine, but many studies have been carried out to determine what the carbon pay-back period is for a wind turbine and the consensus is that this is typically around 7 – 9 months2.

This turbine will prevent many tonnes of CO2 from entering the atmosphere during its lifetime by displacing fossil-fueled generation. The conventional way of approximating this is to assume that the generation our turbine displaces has a carbon footprint equal to the current average carbon footprint of grid electricity. The most recent carbon footprint of grid electricity published by BEIS (published June 2020) is 0.23314 Kg CO2 /kWh. Using this figure and our predicted central yield of 2,530 MWh would suggest a carbon saving of 11,800 tonnes across 20 years. In reality, the figure will be far higher than this because the generation plant our turbine will displace will for the majority of the time be fossil-fueled generation (gas or coal) which has a far higher carbon footprint than the BEIS grid average figure which includes carbon-free generation such as existing solar PV, wind turbines, hydro and nuclear generation.

If we achieve our central target on yield, there should also be surplus that can be used to establish a community fund. The amount will strongly depend in performance, but the society will consult with members and with the local community to determine how this should be spent, with the overall intention to benefit communities in the South-East of Pembrokeshire. We will be gifting £3000 for community benefit as a goodwill gesture during our first year of operation.

In addition, we have tried where possible to use local contractors, and the turbine is providing some supplementary income to two local farms.

2 https://www.newscientist.com/lastword/mg24332461-400-what-is-the-carbon-payback-period-for-a-wind-turbine/

OUR BOARD

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Day to day business of the society is managed by the board. The board is elected at each AGM.

Each AGM, one third (rounded to nearest whole number) of the current board, being those who have been in position the longest, have to stand down but may put themselves up for re-election.

The rules specify that the board shall consist of between 3 and 9 directors and the board has the option of co-opting up to two additional directors, who do not have to be members, if they feel that additional skills are needed on the board.

The present board is as follows:

Peter Davies is the former Commissioner for Sustainable Futures and was instrumental in the development of the new Wellbeing of Future Generations Act 2015. Peter holds the following Board roles:

• Chair – Wales Council for Voluntary Action

• Chair – Dwr Cymru Welsh Water Customer Challenge Group

• Chair and co-Founder – Size of Wales

• Chair – Teach First Cymru Advisory Board

• Trustee – Foundation for Democracy and Sustainable DevelopmentHe is also Professor of Practice - University of Wales Trinity St David and provides consultancy support to Welsh Government on rural and marine issues.

Peter Davies CBE (Chair)

Roxanne is a Bachelor of Laws and a PRINCE2 Project Management Practitioner. Prior to going freelance as a Research and Funding consultant specialising in rural regeneration, she ran a successful national conservation company before working for Local Government in the field of European & External funding.

She divides her time between being Mum to two young children, CEP, her consultancy business Redford Research and her work with the charity Tempo Time Credits as their Evaluation Manager.

Roxanne is a Co-ordinator for the pan-Wales programme Renew Wales, mentor for Enterprising Solutions and is and a Town Councillor in her hometown of Laugharne.

She is also a former Director of Carmarthenshire Energy, a Community Benefit Society that built a £1.5m renewable energy project - a 500kW wind turbine - following a successful community share offer campaign that she led.

Roxanne Treacy

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Jane is a Bachelor of Environmental Studies and has an engineering Masters in Energy Management and Conservation. Having worked in the sector for 30 years, Jane has extensive experience of sustainable development, funding delivery and management, and partnership working.

In North Wales, she worked collaboratively with Welsh partners to set up an independent Energy Efficiency Advice Centre (EEAC) and in the Northwest developed a large charity - Energy Projects Plus - serving 3 counties with 3 advice centres.

She has managed a technical team developing projects with regional renewable energy forums, consisting of public and private sector partners. Jane has also successfully developed, managed and implemented energy efficiency, Climate Change and carbon reduction schemes on behalf of: local authorities, housing trusts, health care sector, fire service, utilities and consortiums.

She successfully developed and managed 9 HecAction award schemes (£3.5 million), with several consortiums and individual authorities.Other funding partnership work includes the Innovation programme, and European funded programmes.

Jane O’Brien

Felix Merry is a Civil Engineer and contracts manager for Natural Resources Wales, helping to keep the mud out of rivers and the rivers out of houses.He has previously run projects to deliver off-grid renewable power to offshore wind farms, commercial developments, London Olympics, remote households and festivals - working all over the UK and from Scandinavia to Kazakhstan and Ukraine.

Before that he was a Graduate Engineer with Atkins working on the inception stages of Crossrail amongst other projects.

He gained a Distinction MEng degree in Civil and Structural Engineering in 2002 from the University of Bradford, and a NEBOSH certificate in the years since then.

In his spare time, he helps to run the family smallholding and sings with Carmarthen Male Voice Choir.

Felix Merry

Brian lives off grid in Llandudoch, near Aberteifi and is a retired commercial building services engineer having been a founding partner of Fulcrum Consulting, at one point a 200+ engineer, specialist sustainable engineering consultancy.

Brian is an expert on low energy building and city design including integrated, local renewable energy generation and as such was asked to serve on the Renewables Advisory Board, advising central government on the best method to achieve all national, Kyoto and EU based renewable energy targets.

Brian is a deep believer in the advantages of community ownership of assets including energy generation and has local experience of the successful delivery of such community ownership schemes as a director of 4CG for several years (the highly successful community development organisation based in Aberteifi).

Brian Mark

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Board Practices Board positions are voluntary and unpaid, but directors may claim for expenses incurred as a result of their duties as a director. There are no other benefits for directors. Day-to-day operations will be managed by the board.

Conflicts of interest Board positions are voluntary and unpaid, but directors may claim for expenses incurred as a result of their duties as a director. There are no other benefits for directors. Day-to-day operations will be managed by the board.

Legal ProceedingsThere have been no governmental, legal or arbitration proceedings relating to the society and none are pending or threatened which could have a significant effect on the financial position or profitability of the society.

Disclosure None of the directors of the society have, for at least the past five years, received any convictions (for any fraudulent offence or otherwise), or been involved in any bankruptcies or receiverships, or received any public recrimination or sanction by a statutory or regulatory authority or designated professional body, or been disqualified from any function by any court.

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OUR PROJECTThe story of this turbine started in 2009 when Pembrokeshire South East Energy Group (PSEEG) obtained some funding to pay for a feasibility study to find a site for a community wind turbine in Pembrokeshire. Eight sites were originally identified, of which only 3 appeared to be viable, of which one was most suitable. However, the landowner on this site was not interested is having a turbine on his land.

It however transpired that his neighbour was, and had a very similar site, and this is how our site came to be. Our turbine site is at Prouts Park Farm in South Pembrokeshire, close to the village of East Williamson. (The turbine is on private land and not accessible to the public, but for those that wish to see it, the turbine can be seen from Devonshire Drive, off the A478 Tenby road).

There followed many years of hard work to obtain the necessary consents, primarily the planning permission, an option to lease, and the grid connection agreement. A new CIC, Community Energy Pembrokeshire, was set up to drive the project and to hold all the consents. We were fortunate to have support from several other organisations during this time, primarily from PLANED, and from Ynni’r Fro (the Welsh government support mechanism for community energy at that time) and from the present Welsh Government Energy Service (WGES). Another key organisation during this time was Seren Energy, led by Steve Hack, who masterminded much of the original development work including preparation of the planning application.

All was not plain sailing. Our planning application was submitted in July 2015 but was turned down by one vote, only to be passed on appeal in September 2016, but by this time, the Feed in Tariff had fallen, meaning that our business model no longer added up.

At this time, grid constraints were an issue in Pembrokeshire and we were not able to secure our grid connection. This led to more delays which were eventually resolved when the grid operator rolled out a more sophisticated Active Network Management system, which actually then led to us being able to increase the capacity for our turbine from 500kW to 900kW.

Our business plan again became viable, we changed from our original intention to install a 500kW refurbished turbine, to installing a new 900kW EWT turbine, and pre-registered for the Feed in Tariff in October 2018, giving us 18 months to finance and build the turbine. Renewable Power Pembrokeshire was established and all rights associated with the project were transferred into this, which would enable us to raise some of the capital through a community share offer.

Work on site started in earnest in October 2019, with the turbine finally being erected on site in late January 2020. The turbine was officially commissioned on March 20th, 11 days prior to our Feed in Tariff deadline of 31st March.

Our turbine is an EWT DW54 turbine on a 50m tower. This turbine has a blade span of 54m and is a direct drive design meaning that it does need a gearbox. EWT is a Dutch manufacturer with over 600 installations across the world in the capacity range 250kW – 1000kW. At least 3 other community energy schemes in Wales have a similar EWT turbine to the one we have installed.

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3 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/295244/Revisions_to_DECC_domestic_energy_bill_estimates.pdf

RELIABILITYThe yield estimates above assume that the turbine has an availability of 96.8%. Being “available” means capable of generating, as long as there is some wind.

Clearly, we will only achieve this yield if our actual availability meets this level. To ensure this, we have taken out a maintenance contract with the turbine manufacturer EWT that includes an availability guarantee. This guarantees an availability of 95%, i.e. if EWT do not achieve this threshold availability, EWT would have to pay us compensation. This incentivises EWT to make sure that the turbine does achieve this level of availability. We know from other turbine sites that availability of EWT turbines is typically well in excess of 97%.

YIELDEstimating how much energy we will produce is obviously key to our profitability. Our financial models are based on statistical computer analysis carried out by a consultancy called Prevailing Wind Farm Analysis (PWFA) (now part of K2 Management). PWFA provided financial-grade analysis and engineering services for onshore and offshore wind farms. Most wind speed analysis for modern wind farm sites is now carried out using computer modelling rather than physical measurement.

This analysis considers a wide range of factors, e.g. height of hub, surrounding vegetation, likely reliability of various components, electrical losses etc to come up with a range of estimates for the yield of the turbine, with different levels of confidence. The most important of these results are the so called P50 and P90 estimates.

The P50 estimate is the “central” estimate, by which is meant that the statistical analysis predicts that our actual annual yield, has an equal probability of being higher or lower than this value. Our P50 projected yield is 2,530 MWh (2,530,000 kWh)

The P90 estimate is the “pessimistic” estimate, a lower number that the statistical analysis indicates we have a 90% chance of exceeding, and a 10% chance of not meeting. Our P90 yield is 1,960 MWh (1,960,000 kWh).

We have carried out financial modelling for both these scenarios to test how robust our business model is to different outcomes.

To get a feel for how much electricity this is, the most recent government estimate of average UK domestic electricity consumption per house (excluding economy 7 usage) is 3,800 kWh per year3. At this rate, if we achieve our central target, we will generate enough for about 665 households.

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ONGOING OPERATIONRPP are responsible for all running costs of the turbine. These will include:

Maintenance costs: RPP have a maintenance contract with availability guarantee with the manufacturer as mentioned above.

Insurance: We have insurance against damage and for public liability.

Rent and Rates: The formula for calculation of rent is defined in the lease for the whole 25 years. We have budgeted for payment of business rates.

Administration: RPP have budgeted for costs of society administration to include bookkeeping, annual accounts and regulatory compliance, communication with members and management of the membership, metering and administration of the FIT and sale of electricity.

Monitoring and Metering: We have a budget for maintenance and communications for the metering and monitoring systems.

The operational budget includes a contingency allowance to cover unanticipated costs.

APPLICATION OF SURPLUSDue to the drastic reduction in the Feed in Tariff, we may not be able to contribute a very significant community fund. Most of our surplus will be used in paying the projected interest to our members. However, any surplus we make beyond what is necessary to pay interest would be dedicated to a community fund and spent after consultation with our members.

PROJECT END OF LIFE / FUTURE PLANSOur lease is for 28 years, but our financial model is based on all shareholders having their capital returned by year 20, and for any surplus that the turbine delivers beyond this to be put into a community fund and a fund to pay for any decommissioning required. At the point that the turbine reaches the end of its life, or by the time the lease expires, the board at that time will consider whether to decommission the turbine, or whether to apply to extend the lease and replace or refurbish the turbine. Our financial model assumes that the turbine is decommissioned at this point and the society dissolved.DEVELOPMENT OF

ADDITIONAL SITESWe have no plans currently to develop any additional sites. This is not ruled out but if we did so, this would only be after consulting with members and protecting the investment of our existing members.

ACCOUNTSThe year-end of RPP is 31st March. Accounts up to 31st March 2019 have been prepared and were accepted at our AGM on 7 July 2020. These accounts are available on our website at http://www.communityenergypembrokeshire.org/renewable-power-pembrokeshire.html. The only financial transactions that have taken place have been associated with the development, construction and operation of this turbine.

The turbine cost a total of £1,475,000 to build, including purchase of the site rights, legal costs, grid connection, raising finance and the purchase and erection of the turbine. This funding has come entirely from grants from the Welsh Government Local Energy Service, and from a loan from the Development Bank of Wales.

Although our turbine is viable with the existing loan in place, if we can raise finance to replace the loan at a lower interest rate, this will enable us to increase the amount that we can channel into our community fund. If we raise some of this from shares, it also enables more people to become members to spread the ownership further into the community. We are hoping that this share offer will result in over 100 individuals becoming members, and hence joint owners, of this turbine.

The intention for the construction phase was to raise at least part of this capital from a community share offer, but the deadline for the Feed in Tariff (18 months to commission from our registration date) would have made this very difficult. For this reason, the decision was made to raise the construction finance from a loan, but that part of this would be refinanced with community shares once the turbine was commissioned.

This also had the advantage that the highest risk in the project, that we might not achieve the Feed in Tariff deadline, would be settled before we launched a share offer, making the share offer a far less risky proposition and therefore likely to raise more capital.

This share offer is the culmination of this, the proceeds of this share offer will be used to repay part of the loan we now hold with the Development Bank of Wales.

We are very grateful to the Welsh Government, through the Development Bank of Wales and the Welsh Local Energy Service, for providing crucial financial support to this project.

FINANCE13

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INCOMEIncome will be received from the Feed in Tariff and from sale of electricity.

Because we built by our Feed in Tariff deadline, we are eligible to receive the Feed in Tariff subsidy for our output for 20 years. The initial value of this tariff is 1.72p/kWh, and this will inflate with RPI over the next 20 years. The income from this source is estimated to be about £46,000 in our first year of operation.

We also sell our electricity to the grid. We have the option of selling it through the FIT scheme at the fixed rate of the FIT export tariff (currently 5.5p/kWh and rising with RPI) or negotiating a Power Purchase arrangement with an electricity supplier. We have based our financial projections on the guaranteed FIT export tariff but will each year investigate if we can get a PPA at a price higher than the FIT Export tariff.

We are currently on a one year PPA with Bristol Energy to be reviewed in January. Historically, PPAs have offered better prices than the FIT export tariff, but wholesale electricity prices, and hence the price of PPAs, has been falling recently so the two options are currently very similar in value. Assuming P50 generation yield, our income from sale of electricity should be about £139,000 in our first year.

DEPRECIATIONWe have assumed that the turbine will be depreciated over a 25 year period as this is its likely lifetime. However, our models show all loan and share capital being repaid within 20 years, so any extra revenue we manage to obtain beyond this point would be a bonus that we could use to support an enhanced community fund at that time.

Our model shows that our surplus increases significantly in the last years of the FIT period. We would ensure that a significant sum (to be determined nearer the time) were set aside to cover any decommissioning costs that we may have to pay for.

EXPENDITUREOur financial projections included estimates for maintenance, insurance, rent, admin, metering and electricity consumption. We have estimated these by comparing against other turbines and other similar community energy schemes.

FINANCIAL PROJECTIONSWe have prepared financial projections showing how we expect the turbine to perform over the next 25 years. These projections are not exact as there are some variables that we cannot predict accurately, the most significant being yield, but we have made estimates based on the best available evidence to us.

Yield was estimated pre-construction as described above based on a computer model of the wind flow created by industry specialist Prevailing Wind Farm Analysis. This still forms our best evidence, because even though we have now been generating for over 5 months, statistically five months is not a large set of data and the computer modelling is likely to be more representative of the long-term mean. We can say however that the data we have already collected over the last five months is in line with these projections.

We have therefore prepared three main projections,

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• The first one based on the “central” estimate of yield that the computer modelling predicts. This is labelled the P50 projection.

• The second is a “pessimistic” estimate, based on the P90 projection, which is the wind speed the computer modelling says that we are 90% certain to be above.

• We have also modelled the situation where we only raise half the share target through this offer. This is to verify that we can still give the same returns on shares if we do not reach our target.

These three scenarios have been modelled to demonstrate whether the society will be able to return a surplus over its lifetime.

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SCENARIO 1: THE CENTRAL SCENARIOIn this scenario, we raise £300,000 in shares and the long-term average yield is equal to the central estimate in the computer predictions.

Table 1 below illustrates the profit and cashflow for this scenario. We have assumed for this scenario that inflation (RPI) and the rate at which electricity prices rise (electricity inflation) both average 2% over this period.

Table 1: Predicted profit/loss and cashflow for the P50 scenario

Year of operation 0 1 2 3 4 5 6 7 8 9 8 11 12 13 14 15 16 17 18 19 20

Generation (MWh) 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530

PROFIT/LOSS ACCOUNT

FIT income 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 62 63 64 65 67

Electricity sales income 139 142 145 148 151 154 157 160 163 166 170 173 176 180 184 187 191 195 199 203

Income 185 189 192 196 200 204 208 212 217 221 225 230 235 239 244 249 254 259 264 269

Depreciation 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59

Other running costs 29 30 41 41 42 54 55 56 57 58 60 61 62 64 65 66 68 69 70 72

Community fund 10 10 10 11 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 15

Loan interest 74 57 55 53 51 49 47 44 42 39 36 34 30 27 24 20 17 13 9 4

Expenditure 181 165 174 173 173 182 182 181 180 179 178 177 176 174 173 171 169 167 165 162

Profit 0 4 24 18 23 28 22 27 32 37 42 47 53 59 65 71 78 85 92 99 107

Bank interest received 0.0 0.0 0.0 0.5 0.9 1.1 1.4 1.7 1.9 2.2 2.5 2.8 3.2 3.6 3.7 3.9 4.1 4.4 4.7 5.0 5.4

Distributable profit 0 4 28 46 58 72 82 96 115 141 171 207 249 298 354 418 490 571 660 759 867

CASHFLOW

Opening balance 0 0 27 73 99 127 157 180 205 234 266 300 337 348 363 382 406 435 469 507 551

Capital expenditure (1,475) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Loan capital 1,475 (336) (37) (39) (41) (43) (45) (48) (50) (53) (55) (58) (61) (64) (67) (70) (74) (78) (81) (86) (90)

Income 0 185 189 192 196 200 204 208 212 217 221 225 230 235 239 244 249 254 259 264 269

Bank interest received 0 0.0 0.0 0.5 0.9 1.1 1.4 1.7 1.9 2.2 2.5 2.8 3.2 3.6 3.7 3.9 4.1 4.4 4.7 5.0 5.4

Expenditure (minus depreciation) 0 (122) (106) (115) (114) (114) (123) (123) (122) (121) (120) (119) (118) (117) (115) (114) (112) (110) (108) (106) (103)

Interest to members 0 0 0 (12) (14) (14) (14) (14) (14) (14) (14) (14) (14) (13) (11) (10) (8) (7) (6) (4) (3)

Share capital (receipt and repayment) 0 300 0 0 0 0 0 0 0 0 0 0 (30) (30) (30) (30) (30) (30) (30) (30) (30)

Closing balance 0 27 73 99 127 157 180 205 234 266 300 337 348 363 382 406 435 469 507 551 599

IRR interest on shares 4.0%

This financial projection gives shares issued through this share offer an average interest rate of 4%. This scenario also manages to support a community fund of around £10,000 per year.

Scenario 1: P50 with 300,000 in shares all values in £,000s

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SCENARIO 2: THE PESSIMISTIC SCENARIO (P90)We have also modelled the situation where central prediction of yield is not achieved and we only achieve the lower P90 yield from the computer modelling. This is the yield the computer model says that there is a 90% probability that we will exceed.

Our income is clearly lower in this scenario (reaching about £143,000 in year one, compared to £185,000 for the central scenario). Most of our expenses will remain the same.

The table below summarises our prediction for our surplus and cashflow in this scenario.

What we see from this is that in this scenario we can maintain a surplus and keep the average returns on shares the same as in the P50 scenario (4%) but the interest only starts to be paid later in the term. Once we are able to pay interest, the interest rate is higher than in scenario 1 such that the average rate (measured by IRR) is the same.

Note there is no community fund in this scenario. If our surplus is not able to support both the projected interest rate to shareholders and a community fund, our first commitment is to maintain the interest payment to our shareholders, and pay into the community fund any remainder. The reason for this is that we have to be able to attract people to buy shares, and will not do so unless these investors can be reasonably sure that they will get the fair but modest returns that we project that they will receive if they buy these shares.


Generation (MWh) 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960 1,960

PROFIT/LOSS ACCOUNT

FIT income 35 36 37 38 38 39 40 41 42 42 43 44 45 46 47 48 49 50 51 52


Income 143 146 149 152 155 158 161 165 168 171 175 178 182 185 189 193 197 201 205 209

Depreciation 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59


Community fund 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Loan interest 74 57 55 53 51 49 47 44 42 39 36 34 30 27 24 20 17 13 9 4

Expenditure 161 144 153 152 151 160 159 157 156 154 153 151 150 148 145 143 141 138 135 133

Profit 0 -17 2 -4 0 5 -2 3 7 12 17 21 27 32 38 44 50 56 62 69 76



CASHFLOW

opening balance 0 0 6 30 46 64 85 98 113 131 150 161 156 116 83 55 33 17 6 2 4

capital expenditure (1,475) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Loan capital 1,475 (336) (37) (39) (41) (43) (45) (48) (50) (53) (55) (58) (61) (64) (67) (70) (74) (78) (81) (86) (90)

Income 0 143 146 149 152 155 158 161 165 168 171 175 178 182 185 189 193 197 201 205 209


Expenditure(minus depreciation) 0 (102) (85) (94) (93) (92) (101) (100) (98) (97) (95) (94) (92) (91) (89) (86) (84) (82) (79) (76) (74)

Interest to members 0 0 0 0 0 0 0 0 0 0 (11) (30) (36) (32) (29) (25) (22) (18) (14) (11) (7)


Closing balance 0 6 30 46 64 85 98 113 131 150 161 156 116 83 55 33 17 6 2 4 13



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SCENARIO 3: LOW UPTAKE ON SHARE OFFERThe final scenario we have modelled is where we achieve our P50 yield (central) but the number of shares we sell through this offer is only half of our target (i.e. 150,000 shares).

The profit and loss and cashflow become as follows:

We can see that even if the take-up is low, we are able to maintain our interest payments to shareholders and maintain a community fund of £10,000.

The explanation of this is that difference in interest rate between our loan, and the rate we wish to pay on shares, is not great, so our financial viability is not significantly influenced by the balance of loans and shares.


Generation (MWh) 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530

PROFIT/LOSS ACCOUNT

FIT income 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 62 63 64 65 67


Income 185 189 192 196 200 204 208 212 217 221 225 230 235 239 244 249 254 259 264 269

Depreciation 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 59


Community fund 10 10 10 11 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 15

Loan interest 74 64 62 60 58 55 53 50 47 44 41 38 34 31 27 23 19 14 10 5

Expenditure 181 172 181 180 179 189 188 186 185 184 183 181 180 178 176 173 171 169 166 163

Profit 0 4 16 11 16 21 16 21 26 32 37 43 49 55 62 68 75 83 90 98 106



CASHFLOW

opening balance 0 0 23 56 76 99 124 141 162 185 211 240 272 291 315 342 374 409 449 493 542

capital expenditure (1,475) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Loan capital 1,475 (190) (42) (44) (46) (49) (51) (54) (56) (59) (62) (65) (69) (72) (76) (79) (83) (87) (92) (96) (101)

Income 0 185 189 192 196 200 204 208 212 217 221 225 230 235 239 244 249 254 259 264 269


Expenditure (minus depreciation) 0 (122) (113) (122) (121) (120) (130) (129) (127) (126) (125) (124) (122) (121) (119) (117) (114) (112) (110) (107) (104)

Interest to members 0 0 0 (6) (7) (7) (7) (7) (7) (7) (7) (7) (7) (6) (6) (5) (4) (4) (3) (2) (1)


Closing balance 0 23 56 76 99 124 141 162 185 211 240 272 291 315 342 374 409 449 493 542 595



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CASHFLOW TO SHAREHOLDERSShare cashflow not uniform throughout the 20 year term, but is delivered by a lower interest during the first years, and higher interest in the later years. In Scenario 1, for a purchase of £100 shares, the table below illustrates the likely return of capital and payment of interest.

Note, there is no interest after the first year of operation, then interest starts at 4% after the second year of operation. The interest rate from year 2 onwards is 4.7% leading to an overall IRR if 4% if you leave the shares in for the whole 20 years.

In this example, there is no capital repayment for the first 10 years, then the capital is returned in instalments over the final 10 years. Once we reach the 10 year point, and while we still have loan capital unpaid, we may give shareholders the option of starting to gradually recover their share capital, or to leave their share capital in for longer allowing us to eliminate our loan faster. We will aim, within our cashflow constraints, to be as flexible as we can with return of shareholder capital.

Share interest is paid after the rate has been approved at the AGM, so interest payments occur annually shortly after the AGM relating to that financial year.

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Scenario 2 is rather different. For this scenario, there is a longer delay until we are able to start paying interest, but that the interest rates will be higher after that point. Our yield modelling indicates there is only a 10% probability that we will find ourselves in this situation. The table below shows shareholder cashflow in this scenario.

Note, in the event that our yield only achieves the level in this P90 pessimistic scenario, we still predict that the long term return on shares will achieve our target of 4% IRR, but interest payments would not start until about year 8. This means that if you apply to withdraw your shares early, your overall return will be significantly less than 4%. If you applied to withdraw your shares before year 8, you would get all your capital back, but you would have got no interest on your shares.

It is possible that other factors in our modelling turn out to be different from the values we have assumed and we cannot guarantee that you will receive this overall interest rate.

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SENIORITYIf the society were to end up in financial trouble, the different forms of finance have different levels of “seniority”, i.e. there is a priority order that money is paid back to investors if there is not enough to go round.

The commercial loan is the most senior debt, this capital and any interest would be paid with highest priority.

Shares are last in seniority. This means that if the society were to run into financial trouble, shareholders would only have any capital returned if the loan was all fully refunded first.

CORPORATION TAXCorporation tax will be payable on any retained profit after payment of member interest and after any gift of surplus to charitable organisations.

RPP will aim to gift most retained profit to qualifying charitable organisations, but where a gift is made to an organisation that is not a registered charity, this may create a corporation tax liability. Any community fund giving will need to take this into account and the amounts available will be reduced by the amount of corporation tax that RPP is liable to pay.

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THE SHARE OFFEROur target is to sell 300,000 through this share offer at a par value of £1 but we will accept applications up to a theoretical maximum of £1,400,000 (this would refinance all of our loan, but is an unrealistic target). These are withdrawable non-transferable shares. Shares will be issued on acceptance of a valid application on the Terms and Conditions of this Offer Document.

WITHDRAWABLE NON-TRANSFERABLE SHARESWithdrawable shares are created under the Co-operative and Community benefit societies Act 2014 and are different to the “transferable shares” normally issued for companies. One of the most significant differences is that shares cannot be transferred to another individual (with one exception, see below) and can only be sold back to the society. The value of the shares will never rise higher than the issue price (£1). The shares are not traded on any stock exchange.

MINIMUM AND MAXIMUM INDIVIDUAL APPLICATIONApplicants can apply for a minimum of 100 shares. This minimum is set as a balance between reducing barriers as much as possible for anyone to become a member while not creating a very expensive administrative burden for the society from large numbers of very small shareholdings.

The maximum number of shares that can be owned by any member is 50,000. This limit is so that no one shareholder would hold a disproportionately large number of the issued shares.

Multiple subscriptions will be admitted providing that they do not result in a member holding more than the maximum.

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BUYING SHARES ON BEHALF OF CHILDRENYou may name one or more children to whom you would like some of your shares to pass when they reach the age of membership. RPP agrees to withdraw shares from your share account and to issue new shares to the child on their 16th birthday.

When this birthday is reached, you will receive a new share certificate in the name of the child and the child would become a member. The child would have to affirm that they wish to become a member of the society at that point.

Please note this is an administrative arrangement and not a legally binding nomination and you may revoke it at any time. The child does not have to be a relative of the member. For each child please indicate name, date of birth and number of shares when filling in the application form.

SHARE OFFER TIMETABLEThis share offer opens on 10 October and will close on 7 December 2020.

MEMBERSHIPEach person or organisation issued with Shares becomes a member of the society, with membership rights defined in the rules. The principal rights are:

• Each member has one vote, regardless of the number of Shares held.

• The right to receive a proportionate annual interest payment as a return on the investment in shares (subject to available surplus).

• The right to the return of share capital at the end of the life of the Installation (subject to available surplus assets and any new business of the society).

• As a member, eligibility for election to the board (once the member reaches the age of 18)

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SHARE REDEMPTION PROVISIONSRedemption of Shares may take place in accordance with the rules. Members do not have the right to withdraw share capital but the board of the society has the power to permit shares in the society to be withdrawn by agreement between the board and the member. In addition, the board has the power to return share capital to members at its discretion.

Although the board cannot guarantee that a request for withdrawal of shares will he accepted, the board takes a view that flexibility should be offered where this is possible and will agree to withdrawal requests unless there is good reason to refuse.

Requests for withdrawal may be for all or part of the shares held by a member and the board has the discretion to agree to the requested withdrawal in whole or in part.

INTEREST PAYMENTSAll members are entitled to share interest subject to the society making sufficient surplus to cover the interest payments.

All interest payments are paid annually after the AGM. Share Interest will be paid on the balance of each member’s account on the date the interest payment is made. If surplus allows, we will pay interest at the rates shows in the interest profile for the Scenario 1. If the surplus is not sufficient for this, rates will be adjusted with the aim of achieving an overall IRR of 4% by year 20.

PROVISIONS ON DEATH OF A MEMBERIn accordance with the society’s rules, on the death of a member of the society, their personal representative can apply for withdrawal of the share capital or for transfer of the shares to another person (this is the one exception to the non-transferability rule). Return of share capital under this provision will be prioritised by the board over any other return of members’ capital but will be subject to affordability in line with any other withdrawal application.

ELIGIBILITYMembership is open either to any individual (at least 16 years of age) or to any incorporated organisation (i.e. any registered company, registered society or registered charity).

Where an incorporated organisation applies to become a member, the application needs to include the name of a nominated representative, but the nominated representative can be changed in the future by appropriate notification to RPP by the registered organisation.

There is no provision for joint membership or for membership of un-incorporated organisations.

PRICING, TRADING AND DEALING ARRANGEMENTSShares are offered at their par value of £1. The underlying asset value of each Share cannot exceed £1 and would only be reduced in the case of very poor project performance. Shares are not tradable or transferable.

PURPOSE OF THE SHARE OFFERThe proceeds of the share offer will be used to refinance construction loans used to construct the turbine. The reduction in interest payments will enable us to increase the amount of money that will go into our community fund.

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SHARE ALLOCATIONAll valid applications will result in shares being issued. Successful applicants will receive certificates and their details and holdings will be recorded in a register to be kept by the society.

There is no geographical restriction- we welcome applications from the UK and beyond. To incentivise as much uptake from the nearby community as possible, we are carrying out promotional events at the towns and villages closest to site.

TAXATION ON INTEREST PAYMENTSInterest payments will be made gross and subscribers will be responsible for declaring this income on their tax returns. Tax relief on the interest payments are available through the Personal Savings Allowance. Look on the HMRC website for more details.

APPLICATION PROCEDUREShares shall be applied for using either the application Form at the end of this document or the online application form on the website.

By making an application an Applicant offers to subscribe, on these Terms and Conditions, for the number of Shares specified, or such lesser number as may be allocated.

An application once made cannot be withdrawn.

Before completing an application, you should consider taking appropriate financial and other advice. In signing the application Form you are making an irrevocable offer to enter into a contract with the society. Under Money Laundering Regulations, you may be required to produce satisfactory evidence of your identity and it is a condition of the Offer that you do so as requested. Non-UK residents must take responsibility for ensuring that there are no laws or regulations in their own country that would prevent them from investing in or receiving income from a UK society.

PROCEDURES ON APPLICATION RECEIPT Any cheques/bankers’ drafts will be presented on receipt and may be rejected if they do not clear.

Applications may be rejected at the discretion of the board.

Monies in respect of any rejected applications shall be returned no later than one month after the end of the Offer.

No interest is payable on submitted application monies which become returnable. Application monies will be held in a dedicated bank account and will not be used for any purpose until either converted into shares or returned to the applicant.

Incomplete or inaccurate application forms may be accepted as if complete and accurate.

PAYMENTIf applying using the paper form, please attach a cheque or bankers draft, drawn on a UK bank or building society, for the exact amount shown in the box under ‘total amount’. You may also pay by bank transfer (detail on the application form). There are payment options of cheque, bank transfer, direct debit, credit card or debit card via the online application form.

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RISKSInvestment in RPP is less risky now than it would have been before commissioning because our turbine is up and running, so we know exactly what it cost to build and we know that we definitely met our FIT deadline, but there are still risks, and this section makes sure that you are aware of them.

We have made every effort to minimise risks, but below we summarise key assumptions and risks, along with measures we have taken to minimise them.

Financial assumptionsWe assume an inflation rate of 2% on electricity prices and all costs, and interest on long-term bank deposits of 0.5%. Lower inflation rates would reduce performance (although they would also be likely to reduce returns from alternative investments). We have used conservative figures reflecting current low values with a small adjustment for historic trends on the 20-year timescale.

Mitigation – the financial projections are based on figures which have been repeatedly scrutinised by external, independent bodies, including our lenders Banc of Wales, their engineers and solicitors and by Sharenergy.

Wind speedWind projections and projections on yield are based on computer modelling by Prevailing Wind Farm Analysis, which is both ‘bankable’ and rigorously tested. The wind speed at the site will vary from day to day and year to year, so projections are based on an average wind speed for the site. Lower average wind speeds in the long term would affect overall performance. The lowest likely average wind speed over the long term has been modelled and is shown to be viable and for shareholder interest payments to be honoured.

The turbine has already been running for 5 months, but statistically this does not give us much certainty about what our performance will be over a 20 year period. However, the signs are good.

Mitigation – There is little which can be done to mitigate risk; RPP choose a turbine which is known to perform well at sites with both lower and high wind speeds means that there it is likely to generate well, even if wind speed is lower than modelled.

Feed-in tariffWe have now eliminated the risk of any FIT deadline not being met as the turbine has already been commissioned.

Electricity priceThe projections assume electricity is sold at a price of 5.5p plus RPI via the OFGEM export tariff which is guaranteed. It may be possible to exceed this if a PPA at a higher rate can be obtained, but this assumption of using the OFGEM tariff is the guaranteed lowest price that would be obtained.

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Operational costsHigher costs for admin, insurance and rates would reduce performance. It is clearly difficult to model prices for 10 or even 15 years from now, so the figures are based on today’s prices with an allowance for inflation. Operational insurance and Operation & Maintenance contracts are in place and will be maintained.

MitigationThe financial projections on operational costs are as far as possible, based on fully known costs (signed contracts, clear quotes, or known costs from other very similar projects) and allow for an increase in costs in-line with inflation. In addition, there is a modest contingency fund allowed for each year to cover fluctuations in costs and to contribute to a larger pot in the event of a major event. Our maintenance contract with EWT is for a 15 year period.

RPP complies with statutory requirements and those of the Financial Conduct Authority. As the Shares will not be listed, the society is not obliged to comply with The Combined Code on Corporate Governance.

Those interested in investing should do so only after reading this document in full and taking appropriate financial and other advice. This share offer is not covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme.

Excessive down-timeThe energy yields in our projections assume that the turbine maintains a level of operational availability of 97%.

Mitigation: We have an availability guarantee with the manufacturer. In addition, we have evidence from a neighbouring site with an identical turbine that the availability has been well in excess of 97%.

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OUR PARTNERSThe deadlines for this project were very tight due the need to commission in time to meet the terms of our Feed in Tariff preliminary accreditation. These deadlines were only met because of the enthusiasm and cooperation of our partner organisations.

Seren Energy – is a wind turbine developer based in Wales. Seren obtained all the necessary permits and consents (planning permission, landowner agreements) that were necessary for the site to be developed. RPP purchased these rights from Seren Energy in 2017.

WGES. Renewable Power Pembrokeshire has received support, loan financing and grant funding from the Welsh Government through its Welsh Government Energy Service and from previous similar schemes (Ynni’r Fro and Ynni Lleol)

The Welsh Government’s Energy service provides financial and technical support to help social enterprises and SMEs across Wales to develop their own renewable energy schemes. https://gov.wales/energy-service-public-sector-and-community-groups

Windcare The turbine has been installed, including the civil engineering, construction ofaccess track, foundations and construction on siteby Windcare Ltd, a civil engineering company based in Yorkshire.

PLANED – is a community-led partnership. They have supported RPP with staff time and meeting space, and provide us with our registered address.

Sharenergy This share offer document and the financial models have been produced in collaboration with Sharenergy, a social enterprise based in Shrewsbury that has a long history of helping groups to set up renewable energy community schemes and raising capital through community share offers.

APPLICATION FORM Please note you can also apply and pay online from our website www.communityenergypembrokeshire.org/renewable-power-pembrokeshire.html

I wish to buy a total amount of shares in RPP at £1.00 per share.(minimum: £100 maximum: £50,000)

Title (Mr/Mrs/Ms/other): Forenames:

Surname:

Please do provide your email address if you have one to keep admin costs down

Postal Address:

Post code:

Day-time Telephone:

If applying on behalf of an incorporated organisation please also provide:

Organisation name: Type of organisation:

Organisation address:

Registration number: Registered with: Companies House / FCA:

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Your Position within Org:

Email:

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(You must be authorised to sign on behalf of the organisation. Please supply notification of this appointment by the governing body with this application form)

If you are buying shares on behalf of one or more children, please give their names, date(s) of birth and the number of shares you intend to allocated to them. For details of how this arrangement works, see section on the share offer in the main text.. Use a separate sheet if you wish to include more than three names.

Name Date Of Birth Number Of Shares

If you would like payments from the society to you to be made by bank transfer, please provide your bank details:

Bank Account number: Sort Code:

Please tick to confirm:I have read this document and am not relying on any other source of information about the society. I am over 16 and eligible to apply. I have considered whether I need to take financial advice or other advice. I authorise the society to make enquiries to confirm the eligibility of this application if required. I understand that this application may be withdrawn if a supplementary offer document is issued, but not otherwise and if and when accepted by the society forms a contract in law on the Terms and Conditions of the offer document.

Signature: Date:

CHEQUE. If paying by cheque make payable to Renewable Power Pembrokeshire Ltd and cross a/c Payee.

TRANSFER. If paying by transfer please use these details: HSBC Limited. Sort Code: 40 16 23 Account no: 41736981

Please use the Applicant initials and postcode as the reference attached to the transfer to help us link the bank transaction to the application.

Send this completed form to Renewable Power Pembrokeshire, The Pump House, Coton Hill, Shrewsbury, SY1 2DP or sign, scan and email to [email protected]

CONTACT US For all enquiries contact [email protected] via [email protected]

Our website can be found at www.communityenergypembrokeshire.org/renewable-power-pembrokeshire.html

Renewable Power Pembrokeshire Limited is a registered society registered with the Financial Conduct Authority. Our registered number is 32319R

Photo credits: Community Energy Pembrokeshire

Renewable Power PembrokeshireCC Website

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