The Community Energy Fund, run on behalf of the sector by Robert Owen Community Banking, is entering a new phase. Whilst it still has loan finance available to help develop new community energy schemes, it has also capitalised a new fund that can invest in the installation of schemes. If you have a project that needs an injection of cash to move forward, the Community Energy Fund aims to be both responsive and helpful. The Fund is particularly keen to ensure that no schemes with pre-accreditation deadlines looming lose out on the opportunity to install.
The Fund offers two different types of loan product on offer.
For scheme development, up to £90k is available to support projects from inception, through planning to ‘spade readiness’. This is high risk territory, as there is no guarantee that schemes worked on at this stage will get built, particularly under new FIT and RHI regimes. The Community Energy Fund seeks to shoulder this risk – the finance it advances does not need to be repaid if the scheme fails to be built. If everything goes to plan, the loan is repaid when the capital to install the scheme is raised. The Fund charges a fee at this point, which contributes to sustaining it against losses it may have incurred on other community energy projects. We estimate a one in four scheme failure rate, so the fee currently stands at 25% of the finance borrowed. This is a one of fee, whether the money is paid back after one year or three, and should not be confused with a % APR.
In addition, the Community Energy Fund also has finance available to help install schemes. This is short term finance (average term of two years) to help get schemes installed and generating quickly, allowing time for refinancing options to be negotiated later, either through long term loans or local share offers. This is a more standard loan product working out at an APR of around 7%, but with no interest or instalments to pay until full repayment at the end of the loan term. The amount available to borrow per scheme is looked at on a case by case basis.
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