Ecotricity launches ‘Ecobonds’ as Government faces FITs legal challenge

Ecotricity, the UK's largest renewable energy company, is launching a second issue of its popular 'Ecobonds', worth £10 million.

The move comes as Friends of the Earth issue a challenge to the Government to revise its plan to change the Feed-in Tariffs (FITs) given to owners of solar photovoltaic installations.

Ecotricity's 'Ecobond Two' will enable any UK-based individuals, companies, trusts, charities and other legal entities to invest directly in building new sources of green energy in the UK, starting with a minimum of just £500 of investment.

Its first Ecobonds, issued thirteen months ago, were heavily oversubscribed, exceeding a £10 million target by 50%, and becoming the UK's largest ever private bond issue.

They funded the construction of the UK's first 1MW Solar Park at Fen Farm in Lincolnshire, a third wind turbine to power Ford's Dagenham Diesel Centre, and a wind turbine at the G24i plant in Cardiff that makes solar panels.

Director Dale Vince expects 'Ecobond Two' to be just as popular. "Our ecobonds give people the opportunity to share in the financial benefits of green energy without the needing to stick anything on their roof," he said.

"And crucially we cut out the middlemen, the banks, and pay people the same rate of interest on ecobonds that banks would charge us if we borrowed the money from them."

The capital raised will contribute towards installing 19 wind turbines, already with planning approval, and a further 78 for which it is seeking planning approval.

"This might prove an attractive option for people who want to be green and also get an attractive rate of return, but can't - or don't want to - put solar panels on their roof, especially in light of [last] week's Feed-in Tariff (FiT) rates fiasco," said Vince.
Feed-in-Tariffs

Friends of the Earth has written to Climate Change Minister Greg Barker saying that unless the Government agrees to amend its proposals by 4pm on Friday 11 November, it will apply for a judicial review of its proposal to impose lower feed-in tariff payments on installations completed after 12 December.

It has taken legal advice that says this cut-off point, two weeks before the Government's consultation ends, is unlawful and will lead to unfinished or planned projects being abandoned.

Friends of the Earth's Policy and Campaigns Director Craig Bennett said: "The Government is breaking the law with its plans to fast-track a solar industry kill-off - as well as jeopardising thousands of jobs and countless clean energy projects across the country.

"Significant time and money has been invested planning solar schemes for homes, schools and libraries - giving them just six weeks to install is completely unacceptable, and schemes have already been scrapped.

"With soaring fossil fuel bills and mounting anger about the Big Six energy firms, the Government should be encouraging people and communities to generate their own clean electricity."

High rate of return

This is precisely the aim of Ecotricity's Ecobond Two. This will provide a fixed rate of return of 6.5% for four years for existing or new Ecotricity customers. Non-customers will receive a return of 6%.

Although lower than last year's 7.5% rate, this would be above the 4.5% - 5% rate available through Feed-in-Tariffs (FITs) for solar PV installations under the revised levels likely to be introduced after December 12.

Profits at Ecotricity have dipped in the last financial year, due to increased overheads and its acquisition of 71% of local club Forest Green Rovers FC for £695,000, according to its latest accounts for the year ended 30 April 2011.

Pre-tax profit fell to £1.7m, compared with £3.8m in 2010, although turnover grew by more than 19.8% to £44.2m.

It is a 'not for dividend' company with no outside shareholders to answer to.

Its plans include building over 1,000MW of renewable electricity generation capacity and supplying over 500,000 customers in the next ten years.

Its current base is 53 wind turbines at 17 wind parks, and 55,000 clients, up 30% on the previous year.

A spokesperson added: "Since the start of May 2011, on the generation side of the business, we've opened the UK's first large-scale solar farm in Lincolnshire and installed another wind turbine to power one of the biggest manufacturers of diesel-engines.

"In addition we now have 19 windmills ready to go with with planning permission and another 78 going through planning at various sites around the country."
Investment gap

Dale Vince recently criticised the 'Big Six' energy companies, saying, "There is a big problem in the energy market, but it's not only about how much money the big six energy companies are making - it's about what they are doing with that money."

He observed that out of the £125 they each make per customer per year, only £5 is spent on building new green energy sources.

"The reason for the lack of investment is not just weak regulation but because four of the Big Six energy companies are foreign owned and their interests are not aligned with the interest of the British public," he said.

"These multinationals take bill money from customers here in Britain and spend it in Germany or France or pay out dividends to shareholders."

He said that, by contrast, Ecotricity "invests more per capita in building new sources of green energy than any other UK electricity company".

It is the only energy supplier supported by Oxfam and the Soil Association.

Ecotricity is one of a new breed of renewable energy companies that also include Good Energy, Ebico and Ovo Energy.

Ecobond Two will be issued by Ecotricity Bonds plc, a wholly-owned subsidiary of the Ecotricity Group Limited (Ecotricity), which has guaranteed the payment obligations of Ecotricity Bonds plc for Ecobond Two.

Green bonds

The popularity of these green bonds can be seen in relation to the refusal by the Treasury to let the Green Investment Bank issue state-guaranteed green bonds to pay for the development of clean energy infrastructure.

Such a move was advocated by the cross-party Environmental Audit Committee last March.

Such bonds are already issued by institutions like the World Bank, and the idea was originally proposed in June 2010 by the former chairman of Merrill Lynch in Europe Bob Wigley, leader of the Green Investment Bank Commission.

Bu the Government has rejected the idea of letting ordinary people buy such bonds as a way of raising the much-needed finance to build low carbon Britain.

Its reasons include the fact that the National Association of Pension Funds, whose members would be major customers, said they would expect to be bribed with a higher yield because the market in the bonds would be "illiquid compared to the broader sovereign market".

Additionally, some way would need to be found to ensure that the bonds did not count as UK state debt for accounting purposes.

The Treasury was also worried that green bonds could crowd out its own funding programme.

But if Ecotricity's new bonds proved to be as popular as the first issue, this would show that there is a strong public appetite, whetted by FITs, for investment in renewable energy.
Green football

Interestingly, Ecotricity intends to make its acquisition Forest Green Rovers the UK's first green football club.

Dale Vince has become chairman of the Blue Square Premier side since purchasing the club and has started greening it by ordering its grounds to be made solar powered and the creation of an organic grass pitch.

He has also stopped players eating red meat and banned the selling of all red meat products at the grounds.