How does Brixton Energy make money? Where do the profits come from?

The solar PV array will be registered under the Government’s Feed-in Tariff (FIT) programme, which requires energy companies to pay a tariff for the generation and export of energy for 20 years. The current generation tariff is 14.5p/kWh and the current export tariff is 3.1p/kWh and both of these tariffs will be adjusted annually for inflation (through the Retail Price Index). Instead of claiming the export tariff, BES2 intends to sell energy to the operator of Styles Gardens (United Residents Housing) for immediate use on site.

What happens to the rest of the profits?

BES2 is a co-operative organisation and, accordingly, the members will determine collectively how to distribute any profits from the project. The Co-operative’s Rules provide that profits of the project will be applied in such proportions as the members of the Co-operative shall decide at each annual general meeting, in accordance with the following principles:

  1. to a general reserve for continuation and development of the Co-operative;
  2. to pay a share interest to members; and
  3. to make payments for social or charitable purposes (e.g., the Community Energy Efficiency Fund).

The current directors have proposed that, after an appropriate amount is set aside for the continuation and development of BES2, the remaining profit would be distributed 80% as share interest and 20% for the Community Energy Efficiency Fund.

Is my investment at risk?

The directors consider that this project is lower risk than many long-term investments because it is underpinned by the Feed-in Tariff (FIT), which is a Government-sponsored programme that guarantees payment for the energy generated for 20 years. Nevertheless, there are a number of risks you should consider. Please refer to the “Risk Factors” section of the Share Offer document for more information. In addition, you should seek independent advice if you have additional questions.

What if something gets damaged? Am I liable? Will get a bill in 5 years saying you owe £5,000?

No. As a shareholder in BES2, the extent of your liability is limited to the amount of money you invest in the project and you are not responsible for damages or additional liabilities. These things, like maintenance and insurance and inverter replacement are all factored in the project’s financial model.

The interest is ‘up to 3%’, but what is the range and is there a minimum?

We have used references to interest to provide an indication of the return you might expect from this investment. In reality, the project and revenue generated will be more variable for different reasons. Any payments of interest will depend on the success of the project and the collective decision of the Co-operative’s members to distribute profits. See also FAQ below on “How is interest calculated?”

How is interest calculated?

The annual share payment of 3 % is estimate on the performance of the solar panels based on manufacturers’ specifications and siting/solar orientation of the project and ongoing maintenance insurance etc are paid. The project’s actual performance (i.e., the amount of energy they generate) over 20 years may be greater or less than estimated, and this will affect the amount of revenue generated. In addition, BES2 is a co-operative organisation and the amount of interest paid to members will be determined collectively by all of the members and we are not able to determine how the members will manage the organisation.

When is the interest paid?

An annual general meeting (AGM) of all members of the co-operative will be held within seven months of the end of any financial year (i.e., by the end of July each year). Following agreement at each annual AGM, BES2 will pay annual interest payments to members in a timely manner thereafter.

How will the interest be paid to me? I am not sure I will be at the same address in 20 years?

BES2 will keep a directory of all active members in the Co-operative, including current address and e-mail. You will be able to notify the Co-operative of any address change and interest payments to you will be made accordingly.

When is their AGM, When can I use my vote?

The Rules of the Co-operative provide for an annual general meeting to be held within seven months of the end of the organisation’s financial year (i.e., by the end of July). Every member will be invited to attend and cast their vote on relevant matters at each AGM.

How does the Brixton Energy organisation work? Is there a management team? Who administers the scheme?

BES2 is an Industrial and Provident Society formed as a co-operative. Accordingly, all decisions will be made collectively by the co-operative on a one person, one vote basis (regardless of size of shareholding). The members of the Co-operative will determine at each annual general meeting (AGM) how the project will be managed and administered and what decisions or work will be delegated to the board of directors or other nominated individuals. The members will annually elect three to seven individuals to serve on the board of directors. The Co-operative’s initial directors until the first annual general meeting were appointed by the founding members. They will step down at the first AGM and may stand for re-election.

Should the scheme not work out, or make a profit, what provisions are in place to return investors’ money?

The project will be registered under the Government’s Feed-in Tariff programme, which requires energy companies to pay for the generation and export of energy generated for 20 years. You should refer to “Financial Model” section of the Share Offer document for more information about the projected revenues from the project.
The directors consider that this project is lower risk than many long-term investments because it is underpinned by the FIT. Nevertheless, by investing your money in BES2, you are taking a financial risk and you should refer to the “Risk Factors” section of the Share Offer document for more information and seek independent advice if you have additional questions.

If the project is abandoned prior to the purchase of solar panels, money will be returned to investors.

Does the scheme have any secured creditors?

Payment for the capital expenditure to install this project will come exclusively from the equity investment from individuals and organisations and no loans or debts will be used. Accordingly, the project is not designed to have any secured creditors.

What is the mechanism for selling shares? eg. Will the scheme always buy shares back?

Shares in an Industrial and Provident Society like BES2 are different than shares you may have in public or other private companies. By law, you are not able to sell or otherwise transfer your investment and the project has been designed to encourage long-term investment.

However, a provision for withdrawal of shares is available through application to the Co-operatvive’s board of directors (on 180 days’ notice and only after the first three years of the project). The Co-operative will set aside a portion of money annually to allow for withdrawal and buyback of shares throughout the life and for payback at the end of the project’s life.

Withdrawals will be honoured so long as, in the sole discretion of the Co-operative’s board of directors, they do not jeopardise the financial strength of the Co-operative. For instance, the board of directors has the right to change the notice period for withdrawals, or to suspend withdrawals, but it does not presently intend to do so except in exceptional circumstances.

Is the scheme relying on a government initiative for part funding? If so, can the project survive without this funding?

The project will be registered under the Government’s Feed-in Tariff (FIT) programme. The FIT is not a subsidy or funding from the Government but is legislation that requires energy companies to pay a guaranteed tariff for 20 years. If the FIT were rescinded or abolished for exiting projects before the end of 20 years, we believe that BES2 (along with every other installer of solar PV in the country) would have a legitimate claim for any remaining expected revenue.

Is there any other single investor, creditor or donor that the scheme could not survive without the support of?

The project has been developed to rely on the equity investment of the community and does not involve credit, debt or donation being provided by any individual or organisation. Investment is open to all British citizens and/or UK residents above the age of 16, as well as companies and organisations, and we are unable to indicate how many investors we will have or how much they will invest (though, by law, no individual or organisation may invest more than £20,000). Once investments are made, BES2 will be run as a co-operative organisation (i.e., one person, one vote regardless of the amount of investment).

Will the accounts of the scheme be published?

All accounts will be published (and submitted to the Financial Services Authority) at the end of each financial year.

Does Repowering South London have any published accounts?

Repowering South London is in the process of being registered as a charity and will have its accounts published

Does Repowering South London have experience in running investment vehicles?

Yes, the team has executive-level experience in running investment vehicles in finance, and at a multi-national renewable energy company.

Does Brixton Energy accept investments from private companies?

Investment is open to all companies or organisations that are registered in the UK and agree to abide by the Co-operative’s Rules. This means that a company will nominate an individual to represent its interests in the Co-operative and will have one vote, like any other organisation or individual. As with individuals, investment must be between £250 and £20,000.

What happens at the end of 20 years to my money, and to the solar panels?

The project has been structured to run for at least 20 years because that is the term of the Government’s Feed-in Tariff (FIT) programme and the lease with Lambeth Council to use the site. In addition to annual interest payments, provisions will be made through the life of the project to repay investors the amount of their initial investment at the end of 20 years.

In reality, what happens after 20 years will be determined much closer to that time. Solar PV panels generally have a useful life well beyond 20 years and, therefore, there will likely be ongoing opportunities to use them after 20 years. For instance, there may be new tariff programmes or other opportunities to sell energy generated from the project. In the unlikely event that it is not possible to continue using and selling energy from the panels, the Co-operative will decide collectively what to do (for instance, selling panels to a different project or the panels for scrap).