FAQs

We have prepared a list of likely and useful questions you may wish to ask. These Frequently Asked Questions will be updated as required during the 2016 Public Share Offer. If you cannot find the answer to a question you have or need some further information, do not hesitate to contact us.

Q. What is Wight Community Energy (WCE)?
Q. Who runs WCE and how can I be sure that the organisation is managed properly?
Q. Will the Directors benefit personally?
Q. What is the purpose of the fund raising and how much do you expect to raise?
Q. What will you do if you don’t raise sufficient finance in this fundraise?
Q. What are the costs of operating the Society?
Q. What impact will this project have on efforts to address climate change or peak oil?
Q. What is the wildlife situation at the Homestead Farm site and how will it be affected?
Q. Why is the Array sited at Homestead Farm?
Q. Why are you building a solar array on open land, shouldn’t this be used for agricultural purposes?
Q. What returns can I expect as a member?
Q. Why do you talk about members being paid interest rather than a dividend?
Q. When will interest on my investment start accruing?
Q. When will members’ interest payments be made?
Q. How realistic are the projected returns?
Q. What are the key risks to earning the projected returns?
Q. Are the returns dependent on future expansion and further fundraising by WCE?
Q. Is my investment protected in any way?
Q. Under what circumstances could WCE go bust, and what would happen to my investment then?
Q. Can I sell or withdraw my investment?
Q. Can my investment increase or decrease in value?
Q. What are the tax implications of the investment?
Q. Can I invest in WCE on behalf of my children or grandchildren?
Q. What happens if I die before my shares are repaid?
Q. How much will be generated for the Community Fund?


Q. What is WCE?

A. WCE (or 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 what it is in business to do and how it should be run to ensure community benefit. WCE 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 money allocated to a community fund. The Society is owned by its members and each member has one vote at AGMs, regardless of amount invested.

WCE has a longer term vision to develop and deliver energy efficiency programmes and offer energy supply direct to local consumers.
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Q. Who runs WCE and how can I be sure that the organisation is managed properly?

A. WCE is run by a group of people with significant experience of renewable energy, community enterprises and business management. The members will elect five 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. The rest of the board is made up of 4 founding directors including the chair who provide professional expertise, local knowledge and continuity to the operation of the board. See the share offer document and Our Team 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.
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Q. Will the Directors benefit personally?

A. Each director is a member and will receive interest on any investment in exactly the same way as other members.

The non executive directors put their time in on a voluntary basis. Executive directors are paid an amount by Mongoose Energy to cover their professional costs. No directors are paid by WCE.
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Q. What is the purpose of the fund raising and how much do you expect to raise?

A. We aim to raise £800,000 to invest in the Homestead Farm Solar Array. The total cost of this project including site acquisition, fundraising costs, grid connection, site clearance, solar panels & installation is approximately £5.56m. The funds targeted by this fundraise, together with debt finance already negotiated and possibly additional funds through a separate bond offer, will allow us to move the project into community ownership.
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Q. What will you do if you don’t raise sufficient finance in this fundraise?

A. If WCE doesn’t raise a minimum of £270,000 during this fundraise and has been unable to secure other planned finance, the project will not be taken into community ownership and all funds raised as part of this share offer will be returned to investors.

If WCE doesn’t raise £800,000 as part of this fundraise but raises the balancing amount via other planned or unplanned finance the project may still go ahead without impact on member’s returns.
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Q. What are the costs of operating the Society?

A. It is expected that the income from the solar PV Feed in Tariff (FiT) and from exporting electricity to the grid will be used to pay the operating costs of the Society which are a) insurance for the solar PV systems b) maintenance costs c) administration fee to Mongoose Energy to cover performance monitoring, liaison with energy purchaser and regulatory bodies, troubleshooting, contractor liaison and management, book keeping, contribution to overheads and d) loan interest and repayment of the principal sum. After paying all these costs we are estimating that the solar PV project will generate a net return that will enable us to pay members interest on their investment and contribute to the Community Fund. The FiT is explained in more detail in answer to the question ‘How realistic are the projected returns’.
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Q. What impact will this project have on efforts to address climate change or peak oil?

A. The 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 100,00 tonnes of CO2 over the lifetime of the project. The solar farm is expected to have an annual yield of 1,186 kWh/kWp, enough to supply the equivalent of around 1,340 homes.

In addition the Community Fund will also look to support further local community projects that reduce carbon emissions, for example energy efficiency improvements, local food production or sustainable transport initiatives.
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Q. What is the wildlife situation at the Homestead Farm site and how will it be affected?

A. Previously the fields were relatively poor grazing land which did not support any significant wildlife. There are opportunities, however, to complement the existing hedgerows with wildflower rich grassland that would act as foraging habitat for small mammals, bats, birds, reptiles and invertebrates. This will also complement the surrounding habitat and improve it for local wildlife. A Wildlife Management and Enhancement Plan will govern all activities to be undertaken during the 25 year project lifespan.
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Q. Why is the Array sited at Homestead Farm?

A. The Isle of Wight is heavily constrained by lack of grid connection capacity, this is one of the last sites found with suitable connection to the 33kV electricity network right next to the Shalfleet substation. The project has been designed to minimise the visual impact. Enhancement of existing hedges and new planting means that the solar farm will have only a small impact on the landscape.
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Q. Why are you building a solar array on open land, shouldn’t this be used for agricultural purposes?

A. The site on which the array will be built will remain agricultural land with sheep grazing on a new wildflower meadow. In 25 years once the system is decommissioned the land can continue as grassland or put back to a suitable crop.
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Q. What returns can I expect as a member?

A. The return to members comes in the form of an interest payment. We aim to pay members a real return in excess of the long term Retail Price index (RPi) averages. We are projecting an annual return of about 7.0% assuming the long term RPi averages 2.6% per annum (this has been the average for the last 14 years).

If long term RPi drops below 2.6% we may need to reduce the interest payments. Please note that the return to investors is not guaranteed – we would recommend that you review the risks outlined within the share offer document.

If projects perform above forecast we will pay excess surplus into the community fund rather than pay more than 7% to members, in line with our rules as a Community Benefit Society. We will also be able to repay members capital more quickly if required.

The structure of the Society means that shares cannot increase in value. Shares can be withdrawn by members, at the sole discretion of directors, after 4 years from the date of issue. You will not be able to withdraw the full price paid if WCE does not have sufficient capital available in the business. The shares could fall in value if the Society makes insufficient returns, but our financial projections are based on the full return of members’ investment in addition to the annual return on that investment over 20 years.
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Q. 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.
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Q. When will interest on my investment start accruing?

A. Interest will start accruing at the point when the shares are issued. Shares may be issued earlier if £800,000 is raised before the share off closes.
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Q. When will members’ interest payments be made?

A. WCE’s financial year ends on 31 March. 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 (ie by 30 September). Once a proposal is approved interest payments can be made.
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Q. How realistic are the projected returns?

A. The return to investors is reliant on the Feed in Tariff (FiT) and the performance of the system. The FiT payment is a subsidy for renewable electricity generation guaranteed by the UK Government for a 20 year period and the payments are RPI linked. The FiT is guaranteed once the solar PV project is commissioned and meets the FiT criteria – which our project does. Changes in the FIT scheme after this project is registered will only affect future projects and will not affect this one.

For solar projects, the performance of the system is sunshine dependent. Our projections are based on conservative estimates of average sunshine for this latitude. This will vary year by year but should be a good indication of sunshine 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 25 year lifetime. This and all future projects will be covered by leases with the land or site owner and by operations and maintenance contracts with the installer and insured against damage and loss of income.
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Q. What are the key risks to earning the projected returns?

A. The main part of the return comes from the Feed in Tariff (FiT), so, as long as the solar PV project installations are in operation for the 20 years in which the solar PV systems will benefit from the FiT scheme, WCE will continue to receive this return. The FiT is explained in more detail in answer to the question above. Once commissioned this 20 year RPI linked income is set by government legislation and will not be affected by any future changes in FiT tariffs for new projects. Therefore the main risks to the projected return 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.
  • Higher operational costs than planned – the majority of the costs are contractual and therefore predictable over the lifetime of the installation. The management costs of WCE 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.
  • Continued operation of WCE – see below.

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Q. Are the returns dependent on future expansion and further fundraising by WCE?

A. No. WCE may develop further projects in the future. However even if WCE was unable to commission any further projects at all, the projected returns to members would still be expected to be achieved. Future projects will only be undertaken where we are confident the target returns can be met and when additional finance is in place to support these projects.
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Q. Is my investment protected in any way?

A. No. As a Community Benefit Society, WCE 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 may have security over the project and in the event of a default on the loan, may have the ability to take ownership of the project.
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Q. Under what circumstances could WCE go bust, and what would happen to my investment then?

A. WCE 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 Feed in Tariff (FiT) income, under conservative assumptions, would cover the repayments and still allow WCE to pay the projected return to members and contribute to the Community Fund. The FiT is explained in more detail in answer to the question ‘How realistic are the projected returns?’

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 WCE had insufficient cash to meet debt repayments, which would require a significant fall from our financial projections. In the event that WCE 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.
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Q. Can I sell or withdraw my investment?

A. Withdrawable shares in WCE cannot be sold or traded. You may withdraw some or all of your shares after the first four years of subscription on 90 days’ notice, at the sole discretion of the Directors.
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Q. Can my investment increase or decrease in value?

A. As specified by the Society’s rules, WCE 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 WCE has insufficient funds available at the time you wish to withdraw. The return to investors comes from the interest payments over 20 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.
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Q. What are the tax implications of the investment?

A.

Shares in WCE will normally be exempt from inheritance tax providing they are held for two years as they should qualify for business property relief.
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Q. Can I invest in WCE on behalf of my children or grandchildren?

A. You can hold shares on behalf of anyone who is under 16. Just complete the appropriate form in the share offer document.
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Q. 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 WCE for the shares either to be repaid or transferred to another person.
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Q. 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 Fund.

We estimate that the Homestead Farm Solar Array will provide over £2.4m during the 25 year lifetime of the project with around £20,000 per annum in the early years but rising far quicker in later years. Acceptance of this amount will be subject to a member’s vote at WCE’s AGM. The monies will then be donated to an independent charity and will be allocated to projects brought forward by communities in the vicinity of the project.
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