Recently, I got a chance to interview Gerry McGowan, CEO of global energy company CBD Energy, about the UK market for solar energy (and why it’s ripe!), and about the company’s Energy Bonds.
3P: Does the UK have a suitable geography for investing in Solar Energy?
GM: Although it seems the sun rarely shines in the UK, solar power is still perfectly viable. In fact the UK enjoys a very similar climate and quality of irradiation to Germany, and the investment in renewables there has been colossal. Investors accept half the returns available in the UK for a renewable project.
3P: Why did you choose bonds to raise money over other traditional financial routes?
GM: We live in the age of crowd-funding and peer-to-peer lending, and with many banks seemingly reluctant to lend, or roll-over longstanding credit facilities, many firms have become alienated from their banks and traditional lending channels. Growing numbers of companies are looking to take control of the way in which they finance their business and are embracing these new channels. For the banks, life may never be the same, ever again.
What is more, customers feel the major high street banks have made excessive profits in recent years – bank bonuses are still a hot topic – with little value offered to savers during this prolonged period of low interest rates. This has created the perfect storm for companies like us. Through retail bonds our investors can engage directly with companies like ourselves, cut out the middle man, and earn an attractive and sustainable income on their capital.
3P: Your previous bond raised over £7,500,000 and you have another offer launching soon. Do you have any future plans to use the bond platform to help future developments going forward?
GM: The retail bonds market is still in its infancy, but growing numbers of companies, in all sorts of markets and sectors, have observed the success others have enjoyed raising capital in this way, and the many advantages that a retail bond can offer relative to traditional forms of finance – not least the opportunity to engage with customers and prospects.
We haven’t touched the tip of the iceberg yet, but we have enjoyed our experience with the retail bonds market, and as long as we can deliver a competitive return to investors, and at the same time great savings on their energy bills to the businesses and organisations that house the solar installations, we will remain keen to raise growth capital in this way.
3P: You’ve already completed your first project in the South East of England at Sluice Farm, how else is the money raised being spent?
GM: We have allocated our capital where we believe we can make a real difference, with almost all of the funds raised from our last bond targeted at a programme of 22 installations in schools, all around the UK. All are in, or about to go into, construction and should be completed for the Summer!
3P: Retail “mini” bonds are considered high risk, how are your Energy Bonds different?
GM: It is easy to get confused with the many terms associated with this type of investment. There are bonds which can be traded on the Stock Exchange’s Order Retail Book, which are usually referred to as retail bonds. Then there are mini-bonds, which are not tradable, and not covered by the Financial Services Compensation Scheme, but both constitute retail bonds.
We elected to launch a mini-bond, and mindful of the criticisms which are usually tabled, we looked to give investors a layer of security not normally associated with this kind of bond. We wanted to create a product which was ethical in every sense – an investment based on clean energy, and structured with our investors’ best interests at heart. We offered an investment free of ‘fish hooks’ i.e. with no small print lock-in clauses, and gave investors security over the assets of Secured Energy Bonds plc, a new and wholly owned subsidiary of CBD Energy. These measures significantly reduce the investment risks normally associated with this type of investment.
3P: Where do you see the UK energy market in 10 years?
GM: Renewables are expected to deliver approximately 20% of the UK’s energy requirements by 2020, and as much as 80% reduction in carbon emissions by 2050, in keeping with Government policy.
We observe a growing appetite for investing in renewable energy projects, which bodes well for a greener, cleaner future.
Those wishing to apply online for the Energy Bonds should visit http://www.energybonds.co.uk/ for more information about the bonds.