General investment risks
- The value of shares can fluctuate according to the value of the underlying business Offer
- shares will not be transferable or tradeable on a recognised stock exchange
- Interest payment on shares is not guaranteed
- The shares should be considered as a long term investment. Members wishing to withdraw their share capital will be able to apply to the Board for this purpose after the fifth year of operation. Withdrawal of share capital is at the discretion of the Board
- The Financial Services Compensation Scheme (FSFC) or the Financial Ombudsman Service (FOS) does not apply to Members’ shareholdings. This share offer is exempt from regulation and does not require authorisation from the Financial Conduct Authority
Renewable energy industry risks
- Government policy towards renewable energy may change. However, throughout the operation of the FiT and previous similar schemes such as ROC and NFFO, the Government has maintained the commitment to the process of ‘grandfathering’, which ensures that whatever tariff a project is registered for at the commencement of operation, will remain the same for the duration of the FiT period, which is 20 years. Therefore, revenue from FiTs for the Society should not be affected by any future changes to the FiT scheme. This payment is also index linked to RPI. The figures used here are those secured for this project.
- Changes to the FiT that occur before the wind turbine is commissioned could result in a change to projections, or in the worst case, non-viability of the project. However, HoTTWind@ Longley has received Preliminary FiT Accreditation which will guarantee the current FiT level, provided that the wind turbine is commissioned by 23rd September 2015.
- New technology inventions and developments may render existing technologies and equipment obsolete. However, wind turbines are a stable technology and so technological advances of this magnitude within the life of the project are considered unlikely. The wind turbine supplier and model selected are proven and have reference sites in the UK.
- Long-term changes to weather patterns could result in lower levels of production. However, there is no evidence that HoTTWind@Longley is aware of that will affect energy production at this site.
- Abnormal short-term weather conditions could affect expected levels of generation, although overall patterns outside anticipated parameters are unlikely.
- Operational costs may rise faster than anticipated during the life of the Project; a cash reserve will be established
Risks specific to HoTTWind@Longley
- The volume of electricity generated is linked to the wind speed, however our projections are based on five years of wind speed data from the previous Longley turbine installation. In addition an independent assessment of wind speed has been carried out by comparisons with other local wind turbine sites and with national data.
- There may be interruptions to generation of electricity caused by mechanical and/or electrical equipment failure. This could increase maintenance costs and impact on power sales revenue. However, warranties and insurance will be in place in the event of breakdown of the equipment. Our Availability Warranty with the manufacturer will compensate HoTTWind@Longley for the value of lost FiT payments should the turbine availability fall below 95%, subject to an annual cap of £75,000. Accidental and malicious damage will also be covered under insurance as well as public liability cover.
- The wind turbine manufacturer may cease to trade before the turbine is delivered. In this situation, some capital may be at risk, however the turbine supply and installation contract has been structured to minimise any losses to Members as a result.
- The wind turbine manufacturer may cease to trade during the life of the project and this may make it difficult to obtain spares or enforce availability guarantees. Six other Turbowinds T400-34 turbines are operational in the UK and a further three are in design/ construction (excluding HottWind@ Longley). It is anticipated that five more will be ordered for the UK market this year; the turbine installer, Enviko, believes this provides a critical mass for maintaining essential spares and provision of long term maintenance services. The turbine itself is built of ‘bought-in’ components. Turbowinds does not itself manufacture any bespoke parts, thus it is expected that these components could be sourced from the original manufacturer in the event that Turbowinds ceases to trade.
- Kirklees Council has ruled that HoTTWind@Longley is liable for business rates, because it is selling electricity to Longley Farm. The local valuation office has estimated the rateable value of the turbine at £8,000, based on its capacity and the projected average annual output. The rateable value will be finalised after the turbine is commissioned. Using the current small business rate multiplier we expect to be liable for a payment of £3,800 per annum. This provision for business rates has been included in the financial projections. Any exemptions will increase the projected surplus.
- In the event of a sale or closure of the Longley Farm dairy business, there is a risk that export to the grid from the turbine may be prevented, requiring the wind turbine to be shut down. This is because the wind turbine is connected to the grid distribution network via a substation embedded within and owned by Longley Farm. However, the partnership agreement endeavours to minimise this risk by requiring Longley Farm to take all reasonable steps to enable HoTTWind@Longley to procure connection to the grid in such circumstances. Furthermore, the partnership agreement is transferable to subsequent owners of the Longley Farm dairy business who would then receive preferential electricity prices, incentivising them to continue the partnership, so this risk is considered small.
- The Project could be delayed due to other technical, legal, financial or other matters. This would increase costs and lead to loss of revenue, and at worst, loss of FiTs eligibility. In this extreme event it would be possible for members to vote on whether to accept a lower return on investment or choose not to take the option to purchase the turbine, in which case, members’ funds would be returned.