Q1. What is Gower Power?
A. Gower Power (the “Society”) is an industrial and provident society set up for community benefit (a Community Benefit Society). This means it is governed by a set of rules that specify its business and how it should be run to ensure community benefit. Gower Power is in business to develop and operate community owned renewable energy projects. It expects to pay its members a return on their investment and benefit the wider local community through developing new projects and allocating profits to a community fund. The Society is owned by its members and each member has one vote at AGMs, regardless of amount invested.
Q2. Who runs Gower Power and how can I be sure that the organisation is managed properly?
A. Gower Power is run by a group of people with significant experience of renewable energy, community enterprises and business management. The board is made up of directors who provide professional expertise, local knowledge and continuity to the operation of the board. The members can elect non-executive directors on the basis of one member one vote, with non-execs able to serve for three years before resigning or being re-elected. See the About Us page for further information about the skills and experience of the board.
The Society is governed by a constitution, and the constitution rules can only be changed by member vote. The financial returns will be independently audited and published to members with full transparency on financial performance and ongoing viability of the business. An AGM will be held every year to review performance and for members to vote on resolutions proposed, including the re-election of non-executive directors.
Q3. Will the Directors benefit personally?
A. Two of Gower Power’s Directors have part-time employment contracts to ensure the smooth running of the Society. The non-executive directors put their time in on a voluntary basis. The Directors who have invested in the Society have done so on exactly the same terms as new and prospective members.
Q4. What impact will projects like Brynwhilach have on efforts to address climate change?
A. The Brynwhilach solar array will export electricity to the national grid, thereby contributing to the process of de-carbonising the grid and resulting in a significant reduction in carbon emissions equivalent to over 45,000 tonnes of CO2 over the lifetime of the project. The solar farm is expected to generate 4.8GWh per year, enough to supply clean energy to the equivalent of around 1,650 homes.
In addition the Community Fund will also aim to support further local community projects that reduce carbon emissions, improve ecosystem resilience and, support shortening supply chains, for example, local food production. Some examples of the types of projects we have supported in the past can be found here.
Q5. What is the wildlife situation at the Brynwhilach Farm site and how will it be affected?
A. Previously the fields were relatively poor grazing land which did not support any significant wildlife. The existing hedgerows are now complemented with wildflower rich grassland that acts as foraging habitat for small mammals, bats, birds, reptiles and invertebrates, and there are opportunities to develop this further. This will also complement the surrounding habitat and improve it for local wildlife. A Wildlife Management and Enhancement Plan governs all activities to be undertaken during the 23 year project lifespan.
Q6. Why are you acquiring a solar array built on open land, shouldn’t this be used for agricultural purposes?
A. The site on which the array is built is moderate to low quality agricultural land. In 23 years, once the system is decommissioned the soil and biodiversity will have been significantly improved.
Q7. Why do you talk about members being paid interest rather than a dividend?
A. As specified by the Society’s Rules, payments made to members are deemed as interest and so a cost on the business, rather than a dividend and are treated as such for tax purposes.
Q8. When will members’ interest payments be made?
A. Gower Power’s financial year ends on 31st December. When annual accounts have been prepared, the directors will review the surplus generated in the year and make a proposal on the level of interest to be paid to members for that year. This proposal needs to be approved at the AGM of members which must take place within 6 months of the year end (i.e. by 30 June). Once a proposal is approved interest payments can be made.
Q9. How robust is the income projection?
A. The return to investors is reliant on the Renewable Obligation Certificate and the performance of the system. The ROC payment is a subsidy for renewable electricity generation guaranteed by the UK Government for a 20 year period and the payments are RPI linked. (Any changes in the ROC scheme only affect future projects and do not affect Brynwhilach.)
For solar projects, the performance of the system is sunshine dependent. The output will therefore vary a little year by year but should continue over the expected 20 plus year lifetime of the solar PV installations. We use standard projections of efficiency of solar panels based on manufacturer projections, including degradation in performance over the expected 23 year lifetime. The project is covered by leases with the landowners and by operations and maintenance contracts with the installer and insured against damage and loss of income.
Q10. What are the key risks to the project?
A. A significant part of the income comes from the Renewable Obligation Certificate scheme (ROC), so during the 20 years in which the solar PV systems will benefit from the ROC scheme, Gower Power will continue to receive this income. This 20 year RPI linked income is set by government legislation and will not be affected by any future changes in ROC tariffs for new projects. Therefore the main risks to the financial security of the project are:
• Lower than expected sunshine over the 20 year lifetime of the project – whilst this may affect individual years, our projections are based on conservative estimates of average sunshine hours which are very reliable over the long term.
• Increases in operational costs – the majority of the costs are contractual and therefore predictable over the lifetime of the installation. The management costs of Gower Power could vary over time, but these are a small element of the total cost.
• Physical security/continued operation of equipment – The equipment is guaranteed by the manufacturer for 20 years and insured against damage/theft.
• Increases to finance costs – the cost of finance is directly linked to interest rates, but in practice our loans are at fixed rates of interest.
• The project finances are cross-collateralised – The associated risks and others are described in more detail in our share offer document which can be downloaded on our webpage at Ethex.
Q11. Is my investment protected in any way?
A. No. As a Community Benefit Society, Gower Power does not need to be authorised by the Financial Conduct Authority to issue withdrawable shares which are non-transferable. This exempts the share offering from the requirements of an approved share offering required by section 85(1) of Financial Services and Markets Act 2000 (FSMA). Therefore, your investment is not protected by any investor compensation or dispute resolution scheme. The shares are not specified investments for the purposes of section 22 of FSMA pursuant to paragraph 76 of FSMA (Regulated Activities) Order 2001. Therefore you do not have the protection that you would otherwise be offered under FSMA. In particular, the share offer documents do not need approval by an authorised person under FSMA. Our project has however undergone due diligence checks from both legal and financial experts connected to the debt finance already secured. Further, if debt finance is required to provide the balance of the total project costs, the loan provider has security over the project and in the event of a default on the loan, may have the ability to take ownership of the project.
Please see our share offer document (at our Ethex webpage) for more detailed information on risks we have identified and how they are mitigated.
Q12. Under what circumstances could Gower Power go bust, and what would happen to my investment then?
A. Gower Power could go bust if it was unable to meet its financial obligations, which would primarily be the repayment of debt. The debt finance secured for this project is on terms such that the projected revenue from the Renewables Obligation Certificate(ROC) income, under conservative assumptions, would cover the repayments and still allow Gower Power to pay the projected return to members and contribute to the Community Fund.’
In the event that revenue was significantly below expectations, the order in which payments to stakeholders would be made would be: first, debt repayments; then member interest; and finally the Community Fund. There is only a risk of insolvency if revenue fell so dramatically that Gower Power had insufficient cash to meet debt repayments, which would require a very significant fall from our financial projections. In the event that Gower Power did become insolvent, it would be wound up. The debt provider would have a first claim over assets (i.e. the installed energy generation equipment) and any surplus assets would have to be transferred to another society with similar rules and this would be agreed by members at the time.
Q13. Can I sell or withdraw my investment?
A. Withdrawable shares in Gower Power cannot be sold or traded. You may withdraw some or all of your shares after the first five years of subscription, at the sole discretion of the Directors.
Q14. Can my investment increase or decrease in value?
A. As specified by the Society’s rules, Gower Power cannot pay you more than you originally paid for your shares, and you may not be able to withdraw the full price you paid for them if Gower Power has insufficient funds available at the time you wish to withdraw. The return to investors comes from the interest payments over 23 years based on financial projections that assume full return of initial investment. Our financial projections assume that some members will want to withdraw their shares before the end of this period.
Q15. What are the tax implications of the investment?
A. Shares in Gower Power will normally be exempt from inheritance tax providing they are held for two years as they should qualify for business property relief.
For UK residents interest is paid gross and is potentially taxable. Standard rate taxpayers can currently earn interest up to £1,000 per annum tax free. It is your responsibility to declare this to HMRC. For non-UK residents the interest is paid net and the society will pay the tax to HMRC.
Q16. What happens if I die before my shares are repaid?
A. If you wish, you can prepare for this eventuality by nominating another person to whom the shares would be transferred in the event of your death or by holding shares on behalf of children under the age of 16. In both cases the share value will count towards your shareholding limit and you will receive the interest paid. Should neither of these possibilities be in place, the executors of your will would need to apply to Gower Power for the shares either to be repaid or transferred to another person.
Q17. How much will be generated for the Community Fund?
A. Once we have covered our operating costs, paid members interest on their shareholding and retained some funds to cover the Society’s growth then our rules state that any surplus can be used for social and charitable purposes. We will channel such funds into the Community Benefit Fund. To date, Gower Power has distributed over £55,000 to local community projects. Acceptance of the annual amount will be subject to a member’s vote at Gower Power’s AGM.
Q18. How do I invest?
A. Please go to our page at Ethex and review the share offer document. You will be able to make an investment through Ethex’ website : https://www.ethex.org.uk/invest/gower2023