FAQs for Investors

Homestead Solar Farm is a community owned solar array, owned by its members who have invested in the project, and receive annual interest on their investment. Investors were sought and signed up at a share raise in 2015. It is envisaged that there will be a further share raise in 2022.

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 its business 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.

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 can elect up to 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 Directors and Staff 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.

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. No directors are paid by WCE. The non-executive directors put their time in on a voluntary basis.
Q. What are the costs of operating the Society?
A. 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 Bright Renewables to cover performance monitoring, liaison with energy purchaser and regulatory bodies, troubleshooting, contractor liaison and management, bookkeeping, contribution to overheads and d) loan interest and repayment of the principal sum. After paying all these, any surplus enables 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 ‘Sources of income’.
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 1,100 kWh/kWp, enough to supply the equivalent of around 1,340 homes.

In addition the Community Fund will also aim to support further local community projects that reduce carbon emissions and address fuel poverty, for example energy efficiency improvements, local food production or sustainable transport initiatives.

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 governs all activities to be undertaken during the 25 year project lifespan.
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.
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 is built is low quality agricultural land and is being transformed into a new wildflower meadow. In 25 years, once the system is decommissioned the land can continue as grassland or put under a suitable crop.
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.
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.
Q. How robust is the projected income?
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. Any changes in the FIT scheme only affect future projects and do not affect Homestead.

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 25 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.

Q. What are the key risks to the project?
A. A significant part of the income comes from the Feed in Tariff (FiT), so as long as the project operates during the 20 years in which the solar PV systems will benefit from the FiT scheme, WCE 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 FiT 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 WCE could vary over time, but these are a small element of the total cost.

• 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.

• 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.

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.
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.’

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.

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.
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.
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.
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.
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. The monies are donated to an independent charity and will be allocated to projects brought forward by communities in the vicinity of the project.
To date, WCE has paid around £8,000 per annum to the Community Fund. Acceptance of this amount will be subject to a member’s vote at WCE’s AGM.

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