1. Funding Routes Debt or Equity ? Financial Viability
Introduction: Very divers group of people : from manufacturing companies to individuals seeking to reduce their carbon footprint or to enter a financially viable renewable energy project.
Presentation will spend 10 minutes on touching on the many routes available to get to money to fund these projects. And 5 minutes on demonstrating a business case about fill in here .
Energy Now February 8th, 2017

2. What shall we talk about?
Intro
Which routes are there to funding?
Funding
Impact of different capital structures?
D/E
Scenario analysis
Scenarios
Own equity
FFF (family friends followers and fools)
Dip into the pension fund it is perfectly legal to combine all the SME owner’s assets in to a SIPP (self invested pension plan ) or a SSAS ( small self administrated pension) which can be used to purchase or lease and sell back independently valued property held within the company. E.g. a company was paying £60,000 pa in interest on loans and overdraft and by using the pension fund to purchase the free hold of the property they cut their costs and put the reduced mortgage payments into the pension fund.
Business angels

3. Debt = interest bearing
What are debt and equity?
Debt = interest bearing
Equity = everything else
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
Return
Risk
Security
Tax Benefits
DEBT
Cheaper fixed cost
Lower
Usually
Yes
EQUITY
High Potential
High No
Generally No

4. Venture Capitalist (Trust)
Equity
Intro
Own equity
FFF (F)
Funding
Private equity
Business Angels
D/E
Venture Capitalist (Trust)
Scenarios
Commercial debt: is available as most banks have now dedicated renewable energy teams. They are unlikely to lend against RHI and FiTs or ROCs but if you have security or an existing business to offer as guarantee, this is a route available.
Some points to bear in mind here are
1. the process can be lengthy – start on time
2. It will pay off to seek assistance to make a proper business plan containing projections and backed up arguments
3. In addition using technology providers, installers & project managers with a track record will substantially increase chances: 1st time round.
Carbon Trust Loan:
Peer to Peer Lending explain principle
Leasing This is the financing of a specific asset which in itself will be the security of the financing. The attractions of leasing versus conventional bank borrowing lie in the fact that borrowers don’t need to offer security and the financing cannot be recalled during the life of the contract. The lender’s security is the value of the leased asset itself.
Factoring for credit support / Invoice Discounting / Auction invoices : aimed at the SME with an annual turnover from about £500,000 upwards with factoring you get paid about 70 to 85% of the value of your receivables and the remainder when the factor gets paid ( minus a factor) / with invoice discounting the system works very much like an overdraft which allows you to draw down an amount of up to 80% of the value the invoices. You get charged an interest rate in line with the amount drawn down. Whilst it improves the cash flow it may end up more expensive than normal bank debt and you obviously reduce your asset base. Auctioning is going onto a platform on the internet and ‘selling your invoice’.

5. Peer to Peer Lending (Crowd Funding)
Debt
Intro
Commercial Bank Debt
Peer to Peer Lending (Crowd Funding)
Funding
Leasing
D/E
Factoring for Credit Support
Commercial debt: is available as most banks have now dedicated renewable energy teams. They are unlikely to lend against RHI and FiTs or ROCs but if you have security or an existing business to offer as guarantee, this is a route available.
Some points to bear in mind here are
1. the process can be lengthy – start on time
2. It will pay off to seek assistance to make a proper business plan containing projections and backed up arguments
3. In addition using technology providers, installers & project managers with a track record will substantially increase chances: 1st time round.
Carbon Trust Loan:
Peer to Peer Lending explain principle
Leasing This is the financing of a specific asset which in itself will be the security of the financing. The attractions of leasing versus conventional bank borrowing lie in the fact that borrowers don’t need to offer security and the financing cannot be recalled during the life of the contract. The lender’s security is the value of the leased asset itself.
Factoring for credit support / Invoice Discounting / Auction invoices : aimed at the SME with an annual turnover from about £500,000 upwards with factoring you get paid about 70 to 85% of the value of your receivables and the remainder when the factor gets paid ( minus a factor) / with invoice discounting the system works very much like an overdraft which allows you to draw down an amount of up to 80% of the value the invoices. You get charged an interest rate in line with the amount drawn down. Whilst it improves the cash flow it may end up more expensive than normal bank debt and you obviously reduce your asset base. Auctioning is going onto a platform on the internet and ‘selling your invoice’.
Invoice Discounting
Scenarios
Auction Invoices

6. What mixture of Debt and Equity ?
gets paid first
if secured = cheap
If unsecured = expensive
EQUITY
unknown returns
hidden costs
sleep easier (or worse)
Intro
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

7. 20 year financial analysis Debt supplied at 5%
Case study on D/E impact
Intro
Base information
£1.6m 250kw AD plant
20 year financial analysis
Debt supplied at 5%
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

8. Debt % 0% 30% 70% 100% Project IRR Equity in Equity returns
Impact of Debt / Equity Structure
Debt % 0%
30%
70%
100%
Project IRR
Equity in
Equity returns
Equity net balance
Equity IRR
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
£1.6m 250kw AD plant years -

9. Debt % 0% 30% 70% 100% Project IRR 13.3% Equity in £1.6m
Impact of Debt / Equity Structure
Debt % 0%
30%
70%
100%
Project IRR
13.3%
Equity in
£1.6m
Equity returns
£3.7m
Equity net balance
£2.1m
Equity IRR
14.6%
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
£1.6m 250kw AD plant years -

10. Debt % 0% 30% 70% 100% Project IRR 13.3% 13.4% Equity in £1.6m £1.2m
Impact of Debt / Equity Structure
Debt % 0%
30%
70%
100%
Project IRR
13.3%
13.4%
Equity in
£1.6m
£1.2m
Equity returns
£3.7m
£3.4m
Equity net balance
£2.1m
£2.2m
Equity IRR
14.6%
14.9%
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
£1.6m 250kw AD plant years -

11. Debt % 0% 30% 70% 100% Project IRR 13.3% 13.4% 13.5% Equity in £1.6m
Impact of Debt / Equity Structure
Debt % 0%
30%
70%
100%
Project IRR
13.3%
13.4%
13.5%
Equity in
£1.6m
£1.2m
£0.5m
Equity returns
£3.7m
£3.4m
£3.3m
Equity net balance
£2.1m
£2.2m
£2.8m
Equity IRR
14.6%
14.9%
15.8%
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
£1.6m 250kw AD plant years -

12. Debt % 0% 30% 70% 100% Project IRR 13.3% 13.4% 13.5% 13.6% Equity in
Impact of Debt / Equity Structure
Debt % 0%
30%
70%
100%
Project IRR
13.3%
13.4%
13.5%
13.6%
Equity in
£1.6m
£1.2m
£0.5m
£0m
Equity returns
£3.7m
£3.4m
£3.3m
£2.3m
Equity net balance
£2.1m
£2.2m
£2.8m
Equity IRR
14.6%
14.9%
15.8% ∞
Intro
Funding
D/E
Scenarios
GIB: since Oct 2012, a public company with £3bn to invest in sustainable projects, based on the principle that public money will be used to support private money. Its major impact is indirectly rather than directly as it funds deal such as the Green Deal (see there)
Energy from waste projects, including anaerobic digestion, are a priority for the bank, as is off-shore wind farms. Investment in none-core areas, such as bioenergy, will also be considered but it limited to amount to maximum 20% of total funds. A number of projects, such as the TEG Group’s anaerobic digestion facility in East London have benefitted from GIB funds.
WRAP Loan for AD £400,000 and for REDF £130,000.
Anaerobic Digestion Loan Fund 1. Will the project seeking funding contribute towards the building of additional AD capacity for food waste? * Yes No 2. Is the funding required for an asset purchase? * Yes No 3. Is the project based in England? * Yes No
4. Is the term of the loan for less than 5 years? * Yes No 5. Is the funding required between £50,000 and £1,000,000? * Yes No
6. Is the project capable of achieving PAS 110 and the Quality Protocol for digestate? * Yes No 7. Is the project connected (directly, i.e. a relative, or indirectly, i.e. an interest held) to any individual employed by WRAP? * Yes No
£1.6m 250kw AD plant years -

13. A reasonable level of debt overall is beneficial
D/E Conclusion
Intro
A reasonable level of debt overall is beneficial
Funding
Magnifies equity returns
Increasing Debt = Increase Overall Riks
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

14. Sensitivities IRR Inflation Rate Too low Intro Funding D/E Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

15. Sensitivities IRR Inflation Rate Too low +1.13% Intro Funding D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

16. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

17. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

18. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

19. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included %
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

20. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included %
Digestate
Income frm Year 4
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

21. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included %
Digestate
Income frm Year 4
+1.5%
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

22. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included %
Digestate
Income frm Year 4
+1.5%
CHP Efficiency
- 10%
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

23. Sensitivities IRR Inflation Rate Too low +1.13% Taxation Too high
Intro
IRR
Inflation Rate
Too low
+1.13%
Taxation
Too high %
District Heating
Not included %
Digestate
Income frm Year 4
+1.5%
CHP Efficiency
- 10%
-1.8%
Funding
D/E
Scenarios
Many SMEs are unaware of the cash trapped in their businesses, which can be released in order to reduce on-going finance requirements. Perhaps because of an over-emphasis on operations and sales or a lack of time, some simple opportunities to save cash are missed.
With a focus on financial controls in general and working capital in particular (debtor and creditor management), companies can free-up cash and increase profits without having to generate extra sales.
Give example here : turnover £1mm – debtors days improved by 10 days - released £20,000 permanently

24. Alpha-Financials Environmental
Where Environment and Finance Meet
Peter Harding - Director
ENERGY NOW STAND 11