The 2018 Mendip Renewables bond was part funded by the Triodos Community Renewables Underwriting Facility
Triodos Community Renewables Underwriting Facility (T-CRUF) makes available a £10 million affordable patient capital solution* for community renewable energy projects.
According to the UK Energy Research Centre (September 2018) there are currently over 300 different community renewable energy groups operating in the UK, accounting for 1% of the overall UK’s renewable electricity generation.
Although the reduction in the government Feed-In-Tariff has made it a more challenging landscape for community energy groups to operate within, they continue to play a pivotal role in delivering new renewable energy capacity, encouraging local asset ownership and helping to tackle climate change in a ‘post subsidy’ world.
Triodos has been a longstanding supporter of community-led renewable energy generation. The bank’s business banking team provide long term (up to 18 years) loans secured against the projects and its corporate finance team provides structuring advice and help in raising community shares and bonds through our investment crowdfunding platform www.triodoscrowdfunding.co.uk.
However, raising finance to build or buy renewable energy assets can be very challenging for community groups and there is often a funding gap which can be expensive to fill.
For instance, a 5MW ground mounted solar scheme might have a total capital requirement of £5 – 6 million. A bank such as Triodos might typically lend around 60% - 70% of this through a secured project finance facility leaving the community group to raise the balance of £1.5m - £2m through community shares or subordinated debt. In many cases a funding gap arises because the community often struggle to raise this amount of capital locally. The only current solution for many community groups is to take on high cost (7 – 8%), short term (2 – 3 year) subordinated debt funding in order to get the project built or acquired. The cost of securing and then servicing this debt facility often means that profits available for community benefit are squeezed. In addition, the community group are then all too quickly faced with a refinancing challenge which inevitably means more cost and resource.
To address this problem, we have designed a unique product called the Triodos Community Renewables Underwriting Facility - T-CRUF for short. It provides patient affordable long-term bond capital for community groups and is specifically intended to replace the requirement for expensive short-term debt.
Community investors at the Burnham and Weston Energy CIC solar farm
The launch of the £10 million facility follows a successful pilot in 2018 where £2.25m of T-CRUF funds were successfully used to support two community led solar projects. Triodos helped community benefit society Mendip Renewables Limited acquire a 5MW project by raising £1.8 million through a 17-year 5% community bond and enabled Burnham & Weston Energy, a community interest company, to raise £4 million through an 18-year 5% community bond. For more information about both of these projects please read on here.
Dan Hird, head of Corporate Finance at Triodos, said: “Our unique T-CRUF facility succeeds on three levels because it provides certainty of affordable long-term funding, it eliminates the refinancing risk for all parties, and it ensures higher retained profits which can immediately be allocated to local community benefit initiatives. We are delighted to be able to find solution that we hope will help more community energy groups to thrive.”
For more information about T-CRUF please contact Dan Hird (firstname.lastname@example.org), Head of Corporate Finance.
(*NB Patient capital is also known as long term capital)