Funding platform pain

In 2012 I was approached by a community trust of the local village of Crail to ask if we would be willing to rent them a piece of land to site a community wind turbine.

We had just won a bruising 10-year planning battle to build a new caravan park, so at that point the idea of letting someone else do all the work and receive a reasonable rent for the land seemed like a good plan. With the proviso that their project was shared with Anstruther, our closest village, we struck a deal with the two communities.

Progress seemed slow, the thoughts on size and type of turbine evolved with the project and planning permission was granted in May 2014.

This was when the project faltered, diminishing feed-in tariffs and very cautious banks meant no one would finance the community project with only the turbine as security.

We were asked to invest and successfully approached our on bank to fund one third of the project.

We took over the management and decided on a Vestas Wind Turbine which had operated in Europe for 20 years and then remanufactured in Denmark to original tolerances, downgraded to 400kw to match our grid connection and tower shortened to comply with planning.

The total project cost was to be around £750k, a new limited company was formed with the two community trusts and ourselves, and we were ready to order the turbine in August 15.

Finance for the communities was still a massive challenge; there were still few offers to fund the communities.

The best option seemed to be a funding platform, underwritten by a facilitator at between 10 and 11% interest. The due diligence process was sold to us as ‘simple and straightforward completed in around two weeks’.

The process was the most torturous gravy train I have been involved in. City lawyers were engaged by the facilitator, who seemed to take exception to every aspect of the project from the supply contract of the turbine itself and covering every possible scenario going forward.

The funding platform now have step in rights if any default takes place and are sitting on interest and loan repayments for the first 12 months, money which the project is paying for but will never see.

The costs for this part of the process were £25k for consultancy, referral and facilitation and an eye-watering £55k in legal fees. They obviously worked on the basis that anyone using this service had few options and any resistance to the process was met with the response that if you want the money from us you have to do it.

We intend to refinance, with a more mainstream financier, once the turbine has a track record, hopefully in around 12 months. If we factor in the costs on to the interest payments the actual interest rate will be well over 20%.

Anyone tempted by the seductive tones on funding platform websites, should be well warned that in our experience it can be a very painful process.

Finance secured the project is now moving apace and the turbine is on its way and should be fully commissioned by the end of May.