Green Finance for your Business - 24 March 2011


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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.

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Green Finance for your Business - 24 March 2011

  1. 1. Green FinanceA breakfast time guide to finance and support available in the South West(Cornwall) to Businesses looking to embrace Low Carbon/Renewables
  2. 2. AdministrationAdminTimetablePresenters…
  3. 3. Presenters3
  4. 4. Green FinancePresentations• Summary of „green finance‟• „Low Carbon Grant Fund‟• SW Cleantech Co-Investment Fund• Venture Capital• Investment ReadinessQ&A session4
  5. 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 EconomyRichard Wadman, Corporate Finance Director, Winter Rule LLP5
  6. 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
  7. 7. Caveats and acknowledgements…7
  8. 8. Fluid: watch this spaceIn 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
  9. 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? • • Budget (yesterday) – £3bn to be in funds by 2012/13; able to borrow in 2015Business Link Capital Grants • Close 31 March (- 10 days)9
  10. 10. What’s outEIS/ VCT for investment in companies whosetrade exists whose trade [ ] in the receipt ofFITs • where commercial electricity production commences after 6 April 2012 • For shares issued after 23 March 201110
  11. 11. Green Finance: What’s in and/or coming soon? National SW Region/ CornwallRenewable Energy FITs and ROCs Low Carbon Grant FundProduction RHIs RDPECarbon reduction/ The Carbon Trust – Property Gap FundingEnergy and/or Resource interest free loansEfficiency RDPE - SWARM „Green Equipment Finance – SiemensCleantech 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 Energy11
  12. 12. Finance: Renewable EnergyFITs • 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
  13. 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?•
  14. 14. Finance: Renewable Energy/ Energy EfficiencyLow Carbon Grant FundRDPE• 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.info14
  15. 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• The Carbon Trust • Interest Free Loans – until 28 March 2011 •
  16. 16. Finance: Cleantech• Business Angels •• Venture Capital • E.g., Horatio Investments• South West Cleantech Co-Investment Fund16
  17. 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
  18. 18. The Low Carbon GrantFund (LCGF).Stuart Farmer - Cornwall Development Company (CDC)Josie Gough - South West Regional Development Agency(SWRDA)24 March 2011
  19. 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...?
  20. 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
  21. 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)
  22. 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
  23. 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
  24. 24. Stage One Stage Two Expected Receive and appraise Design LCGF September 2011 Full ApplicationCurrently Here 1st Stage EOI No Letter AdvisingExpected 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 ApplicationLate July 2011 Yes Expected Grant Awarded Early 2012 Monitoring & Contract Management
  25. 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
  26. 26. Thanks For Your TimeCornwall CouncilCounty HallTruro TR1 3AYTel: 0300 1234
  27. 27. South West Cleantech Co-investment FundA fund aimed at stimulating equity investment into Cleantech businesses in theSouth WestRichard Wadman, Corporate Finance Director, Winter Rule LLP27
  28. 28. SW Cleantech Co-investment FundThe “concept” • „At Risk‟ Funds Loaned • Encouragement for equity investment from Business Angels and VC‟sTargeted at • Cleantech sector • SW RegionAmount • Min £50k, Max £100k • Match with equity in investment28
  29. 29. Risk FundsTerm 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. 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 fundFees • Arrangement fee of 2% • Annual monitoring fee 1%30
  31. 31. Fund SecretariatImplications • Keystone Investor required • Experienced investor • „Sign off‟ by SWAIN • 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 required31
  32. 32. Cleantech?Companies which“support and deliver low carbon‟ technologies”Low carbon/CleantechKnowledge based products or services, that: Provide superior performance at lower Greatly reducing or eliminating carbon production, Improving the productive and responsible use of natural resources32
  33. 33. Cleantech?Cleantech: areas of activityCore technologies Other technologies?Energy Generation AgricultureEnergy Infrastructure MaterialsEnergy Efficiency Recycling & WasteEnergy Storage Water & WastewaterTransportation Manufacturing/Industrial Air & EnvironmentCertification process33
  34. 34. Application ProcessPre-Application • SWAIN • Keystone Investor • Qualifying Company – SME based in SW • Cleantech certification34
  35. 35. Application ProcessApplication • Fund Secretariat • Application Form, including Carbon Compass • Cleantech and Keystone InvestorDraw-Down • Fund Secretariat • Draw Down Form35
  36. 36. Applications to date and issues...Issues Existing relationship b/w Investor and Co Cleantech? No Keystone Investor SW?One offer made36
  37. 37. Post investmentMonitoring Financial Employment Environmental37
  38. 38. Summary• Matched funding for Investment in Cleantech companies• Keystone Investor required• Initial enquires to SWAIN• More information
  39. 39. Andrew Maynard
  40. 40.  Horatio Investments What do Venture Capitalists look for? What does Horatio look for? Some dos and don’ts Is Cleantech different?
  41. 41.  Opportunities for strong returns Very selective – 2% succeed Alignment (in theory) More than just ideas Ultimately a “Leap of Faith”
  42. 42.  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
  43. 43.  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
  44. 44.  Not really Technical knowledge Market Factors Specific sources of funding
  45. 45. Winter Rule 24 MarchUEC Enterprises LtdDr Mark Scibor-RylskiRob Misselbrook CFA 47
  46. 46. What we do 48
  47. 47. How we select – Proactive approach to-Value Proposition – why will customers buy your product orservice-Market Potential – local, UK, International-Barriers – IP, know-how, relationships-Management – Experience, knowledge-Financials – What’s required, structure[ESI Impact – Environmental Benefit, Job Creation] 49