Around the south coast of NSW, community group Repower Shoalhaven has plugged a gap for investors who want to back renewable energy by offering shares in solar systems on local businesses.
Households and industry are attracted to solar because, if it’s done right, energy bills will be lower and the burden on pollution-pluming power plants will be eased. That’s what’s called a win-win.
But investors can be hard-nosed about things. They want their capital to earn a decent return and they want all principal returned at a set date.
Where the return, or yield, is low, the risk of the capital being returned is usually low. Where yield is high, there is inevitably more risk about getting all your money back.
Every investment has to tick a few other boxes, of course. Someone might have no problem lending to the TAB (by investing in its listed debt instruments, which are a bit like bonds), in return for a competitive yield, but someone else might not feel good about the gambling sector and look around for something else.
Around the south coast of NSW, community group Repower Shoalhaven has plugged a gap for investors who want to back renewable energy by offering shares in solar systems on local businesses.
“We only expected local investors to begin with but it’s been so popular that it’s spread interstate,” says Repower Shoalhaven treasurer Jessica Bug. “We have investors in Western Australia, Queensland, Canberra … I think there’s even one in Tasmania.”
Three projects are complete and one has just been financed. Repower One raised $119,800 for a 99kW system on the Shoalhaven Heads Bowling and Recreation Club, operating since 2014; Repower Two raised $53,300 for a 15kW system on the Nowra City Church and a 15kW system on Figtree Anglican Church; Repower Three raised $143,500 for a 30kW system on Anderson & Sons Dairy Farm, 12.5kW for the Milkwood Bakery, 20kW for John Hills Signs and 30kW for South Pacific Roof & Trusses; and Repower Four was fully subscribed in two days, with about $140,000 raised for a 45kW system on the Nowra Bowling Club, 30kW on the Eagle Park Dairy and 20kW on Ogdens Timber & Hardware.
For investors, the returns have been juicy: the first three projects paid yields between 6% and 8%, Burg says, and the latest is paying 5.19%. Term deposits are paying less than 3%.
Minimum investment varies for each project, where “loan notes”, or shares, are priced at one-hundredth the cost of a project. The minimum investment for Repower Four was one share (worth about $1,400 in that case) and the biggest single investor took 15, worth about $20,000.
Over the four projects so far, 86% of investors have been individuals, 8% self-managed superannuation funds, 4% trusts, 1% community groups and 1% companies.
Principal is repaid in equal amounts throughout the 10-year term, along with the yield.
The host sites enter 10-year power purchase agreements for electricity supply from the solar systems, with the agreed starting amount indexed to inflation. At the end of 10 years the system is gifted to the host and final repayments of capital and income distributions are paid to investors.
“We look at what their current energy rate is and how much they use, and we model that to see what rate we can come up with that is a financial benefit to them and the investors,” Burg says. “That’s why all the rates vary, especially when they’re grouped in with a couple of other businesses.”
In the majority of cases the rate for electricity offered by Repower Shoalhaven is lower than that paid to the host’s retailer.
Repower Four was exclusive to new investors, Burg says, to allow for building demand. Some investors had committed to three projects and it was time to cast the net wider. “We wanted to give everyone a chance who hadn’t invested already.” The offer was fully subscribed after two days.
Investors are attracted through the membership base, which grows incrementally after market stalls and fundraising events. Repower Shoalhaven also produces a monthly newsletter and attracts interest on Facebook.
Investor demand has been so strong that the real job is finding new host sites, Burg says, to keep the momentum going.
“When we go out to market stalls or attend events it’s not purely aimed at investors; it’s more aimed at finding host sites,” she says. “The investors come to us without us having to do much marketing aimed at them.”