Infrastructure finance fit for the future
Thanks to solar developer Public Power Solutions (PPS) working in partnership with leading peer-to-peer finance company Abundance Investment, ordinary people have been able to invest directly in two council-owned solar farms and can now hold their investments tax-free in an Innovative Finance ISA.
PPS is a wholly-owned company of Swindon Borough Council and devised a unique blend of public sector and community investment to finance a 4.8 MW solar farm on council-owned land at Common Farm in Wroughton. The community element came via Abundance, who launched the UK’s first council solar bond - a debenture instrument with a minimum investment of just £5 so it is open to almost anyone – raising £1.8 million from the public. SBC invested £3 million alongside the public to complete the finance needed to build the project.
Things moved quickly: the bond offer, launched in March 2016, was so successful it closed a month early, with the solar farm built and generating power by July. Local benefits aren’t limited to the supply of green power: 65% of profits from the solar farm are going towards funding community initiatives, with the remaining 35% direct to the Council.
Building on this success, a second Swindon council solar bond offer was launched in November 2016 to finance a 5MW solar farm at Chapel Farm, a former landfill site near Blunsdon. This marked another first for Abundance: following new legislation, the bonds could be held in the UK’s first green energy Innovative Finance ISA which allows ordinary people to invest directly in renewables, tax-free.
This one went even faster. Ten days after launch, it had achieved over £1 million in investment. It closed six weeks early, selling out just before Christmas, raising a total of £2.4 million from 800 investors. While all investments carry an element of risk, both bonds offered investors an average annual return of 6% over 20 years which proved highly attractive especially while interest rates are at record lows.
All councils need to find new and innovative ways to fund the vital work that they do for their communities, and Swindon now has a template other local authorities are looking to follow. As well as the direct return on its investment, from selling the electricity generated and the Renewables Obligation subsidy, the council will earn an additional £1 million in business rates and rent by 2020 from owning both solar farms.
Equally important, it’s taking Swindon to 80% of its goal to install 200MW of renewable capacity by 2020, enough to meet the equivalent electricity requirements of every home in the Borough.