2013-10-23   facebooktwitterrss
Securing Finance For Wind Energy Not Difficult

Securing finance for a wind energy project needn’t be as difficult as it might seem. John O’Meara of agricultural lending experts AMC offers guidance to would-be borrowers.

Farmers may have struggled to get funding for a wind project in the past, but in recent years lenders have developed a far better understanding of how the systems can perform financially at the farm scale level.

Jennifer Mackenzie
© Jennifer Mackenzie

While this does not mean that every potential project will secure funding support without proper due diligence, with the right planning and a well considered business proposal a farmer has a better chance of getting the financial backing they need.

Business plan

It is important to undertake a thorough feasibility study, and I would recommend having one drawn up by a recognised competent professional with a proven track record in delivering successful projects.

The study should include a proper evaluation of wind speeds, ideally taken from the site over a 12 month period.

Many people are now using online readings rather than choosing to take the readings themselves for a year, but they need to be cautious. Online readings can over-predict wind speeds at a given location, and those over-predictions can result in a considerably lower income than expected.

Feasibility studies should also include projections of income at different levels of turbine capacity and wind speeds, as well as details of the equipment to be used - including the cost and accreditation of equipment and guarantees from the manufacturer.

Details of any maintenance contracts can also be important, as it offers lenders comfort if suitable contracts are in place.

Information on the build costs is also obviously necessary in the plan, which should include the cost of equipment and installation, including foundations and site access.

If the power is to be exported it is also important to provide details of the grid connection charges, which can be substantial. The charges differ depending on distance to the connection and the amount of power being exported and can run to many thousands of pounds, so it is important those details are provided.

Planning

Ideally a lender will want to see planning permission in place, or at least that the planning application has been made. However some potential borrowers will want to make sure they have the finance before they go through the planning process, so it can be a chicken and egg situation.

In my experience, if you are using a competent consultant to draw up your feasibility study they will have a good idea of the planning process and the likelihood of getting the necessary permissions. They should also be able to assist the farmer through the planning process.

It is important when choosing a consultant that you get the right one, so talk to other farmers who have carried out similar projects, or speak to specialist agricultural lending experts who regularly work with technical experts in the industry.

Be aware that having planning doesn't necessarily mean a lender is more likely to support the project - the business plan has to be comprehensive and well thought through and demonstrate that the proposal is viable.

Structuring the business

It is important to consider and take advice from your accountant and others on how the turbine will trade: will it be part of the existing farm business, or do you want to create a separate entity which deals with the turbine?

Which option you pick can affect taxation and the suitability of the security on offer and will therefore affect how a lender will treat the proposal. Whilst some finance providers prefer to lend against the security of the wind turbine itself, others may prefer to take a charge on the farm or part of it.

Where people go wrong

Well-researched, well-informed proposals are most likely to get funding.

The decision to erect a wind turbine should be based on sound research, not on anecdotal evidence from neighbours or nearby windfarms. Without proper planning and research projects are unlikely to receive funding. It’s the groundwork where people fall down more often than not.

Top tips:

- Engage an expert consultant to help you plan the project and to carry out a thorough feasibility study

- Make sure you outline all the details of the equipment and factor in building costs into your proposals

- Don’t over-estimate how much power you are likely to generate

- Talk to your finance provider as early as possible so you understand what information they are looking for

AMC

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