FAQs

Q. What is the grid reference for the project.

A. The grid reference for the weir location is NM66893887 and for the turbine house is NM672396

 Q. How long is the CARES Loan for?

A. The CARES loan only starts when we draw down funds during the feasibility phase (now). The loan will finish either when we raise finance for the full cost of the project (from local investors and/or banks like The Cooperative) of if the project fails for some reason (e.g. we do not secure planning permission). In this case, the loan would revert to a grant and we would not have to repay it.

Interest on the loan will accrue in the meantime.

 Q. What happens if the loan is defaulted on?

A. In the event of the project not moving forward then the loan would revert to a grant and the money would not be repaid to the Scottish Government

Q. What happens if after the plant is built it fails – will it cost me as a resident?

A. No, liability for failure of the business would rest with the operating company.

Q. £30,000 in the first year is not a good return on an investment of around £1m

A. £30,000 is an estimate of the operating profit AFTER interest payments have been made to the lenders. This figure has been calculated using a financial modelling spreadsheet developed by Scott Moncrieff – Accountants. 

Q.I have heard that the Burn sometimes dries up – what happens then?

A. Anecdotal evidence from local people suggests that the burn has not run dry for many years. However, the work done by our consultant, Mott MacDonald, has indicated that the water flowing down the burn would be too low for approximately 34% of the year. During these periods of drought, the turbine would not operate to ensure that the minimum flow required by SEPA is maintained. 

Q. What is the downside?

A. Concerns that we have addressed include Noise, Visual impact, Water contamination and financial viability. The turbine itself will be at least 600m or more from the nearest dwelling. The turbine house will be designed to reduce noise emissions. When selecting the type of turbine, we will include noise emission in the criteria. We are targeting no noise impact at all on the dwellings but in any case this will be regulated by the Planning Authority. During construction, the installation of the inlet pipe into a trench will be visible from the road. once completed, the land will regenerate and within a couple of years the work will be invisible. We do not expect the turbine house or the weir to be visible from the A849 road. The Scottish Environmental Protection Agency (SEPA) regulate water abstraction and they will specify to us what measures we need to take to protect the water course from contamination during construction. We anticipate that we will install additional filters at point where water is abstracted from the burn for private water supplies. The financial viability of the project will be checked by investors when we reach the point of seeking finance for the construction of the project. We believe from the financial modelling done in conjunction with Community Energy Scotland that the project will be viable for investors with surpluses available for community benefit.

Q. What consultations have been carried out?

A. Public consultations were held at Craignure Village Hall in March and October 2011. Individual consultations have taken place with the owners of the dwellings in the Garmony settlement.

Q. What is the overall timescale for the project?

A. Assuming that the ballot is successful, we hope to be in a position to award contracts by winter 2013. It is possible we will commission the system in Winter 2014.

Q. What rate of interest will Green Energy Mull pay me for my investment?

A. Green Energy Mull aims to pay approximately 4 -5% interest in arrears on the balance of each investor’s shareholding. However this is subject to the financial performance in the previous year. The interest is not guaranteed and is subject to climatic conditions. The interest is paid gross and not subject to a retained income tax credit – all members must declare their interest received and tax owed to HMRC.

Q. Has a ‘community share offer’ been tried before?

A. Yes. This sort of community share offer is now becoming an established way of raising finance for renewable energy projects that go on to generate a benefit for the community. These include:

  • Harlaw Hydro near Edinburgh
  • Whitby Esk Hydro in Yorkshire
  • Osney Lock Hydro in Oxford
  • Torrs Mill Hydro in Derbyshire

Q. Who owns the land?

A. The hydro site belongs to Forestry Commission Scotland which is offering us initially a 40-year lease on the land. It will be possible to re-negotiate the lease at this time so the scheme could be in place for many, many years. This lease is being arranged via the National Forest Land Scheme (NFLS). Part of the qualifying criteria for the NFLS is that the whole community is balloted on whether there is approval from the community for the scheme to go ahead. The result of the ballot was an overwhelming “Yes” with 96.9% of the 70.6% voting in favour of the project. A total of 2415 ballot papers were distributed, with 1705 papers being returned.

Q. What is the current status of the project?

The scheme has:

  • planning permission
  • Abstraction Licence controlling how it uses the water to generate energy from the Scottish Environmental Protection Agency (SEPA)
  • an agreement to lease land from the Forestry Commission Scotland which will be in place before the work starts
  • an architectural and a landscape design that meet the conditions set by the Planning Permission
  • a full cost report estimate for the project
  • Pre-accreditation from OfGem for the payments of the Feed in Tariff (FiT). This pre-accreditation runs out in December 2014
  • 400kW capacity grid connection from Scottish and Southern Electricity. This connection is due to be made around October 2014

Q. When will building work take place?

A. The construction cannot commence until funding is in place. It is hoped that this will be by the early spring of 2014. After this, it is hoped that construction will start and be completed by winter 2014.

Q. What is the lifespan of the hydro scheme?

A. The concrete footings will be built to last well beyond the initial 40-year lease we have on the land. The turbine is expected to last for equally as long. It is not unknown for hydro systems to last for approaching 100 years without major problems.

Q. How much electricity will the hydro scheme generate?

A. The proposed 400kW hydro installation is estimated to generate, on average, 1136MWh of electricity a year. The amount of electricity generated at any one time will depend on the flow of the river. The performance figures quoted are an average estimate based on projections by the system designer, Campbell of Doune

Q. What will be the hydro’s operating costs once it is up and running?

A. Operating costs include:

  • weekly checking and maintenance: This will ensure that the intake grille within the weir is clear of debris. 
  • annual maintenance checks: These will be carried out through a contract with specialist contractor and is likely to be £4000 per annum.
  • rent: This will be payable to the Forestry Commission Scotland for the lease of the land. We are negotiating this and expect it to fall somewhere between 5 and 7% of annual income. Our financial model assumes 6.5%.
  • business rates: We are working with Argyll and Bute Council to establish whether the project will be liable for business rates and, if so, what the rebate would be for an IPS. 
  • insurances: We are working with our broker to finalise insurance costs for the project and have allowed £6000 per year in our financial model to cover this.
  • administration: We have allowed £12000 per year in our financial model to cover administration and accountancy costs.
  • contingency: Our financial model includes a contingency allowance of 10% of operating costs.
  • We will also keep a reserve in place of 10% of the overall net profit to cover unexpected events
  • We have to raise money to decommission the scheme, so £2,000 per year is put aside for this

Q. Who gets the electricity?

A. It is proposed that the electricity will be sold into the National Grid via a Power Purchase Agreement. Unfortunately electricity cannot be supplied directly to local houses as the grid does not allow for this.

Q. What about any potential negative impact from the project?

A. As well as aiming to maximise the environmental benefits from the project, we have taken great care to minimise possible negative impacts of the scheme and have commissioned a number of independent expert assessments looking at its potential impact on biodiversity, archaeology, noise and flooding. This information formed a key part of the rigorous process we have been through in order to be granted planning permission and for our application to be supported by the Scottish Environmental Protection Agency. 

Q. Who will manage the hydro scheme?

A. The hydro scheme will be owned by Green Energy Mull (GEM). The GEM Board will manage the project, working with professional designers, engineers and project managers to deliver the hydro scheme. The GEM Board will manage the on-going operations and maintenance, working with experienced hydro consultants for the annual maintenance checks.

Q. How do I participate in Green Energy Mull (GEM)?

A. Through purchasing shares you become a member of GEM, giving you the right to participate in its decision-making. GEM will operate for the benefit of the community on a ‘one member, one vote’ principle, irrespective of the size of a member’s shareholding (providing you own the minimum 5 shares). Members will elect the Board of Directors at the Annual General Meeting (AGM) on a three-year rotation, to manage GEM’s affairs.

Q. How will GEM deliver its community benefit?

A. A key part of our vision for the project is the creation of an on-going income stream to support community groups.

In the initial years of the project, we will need to focus income on building up a maintenance and contingency reserve to ensure we can pay for any repairs to the scheme. We also need to pay back our loan and deliver financial returns to investors without whom the project would not be possible.

It is estimated that during the payback period the amount available to community groups will be about £20,000 – £30,000 per year. It is hoped that once the finance is paid off the amount available to the community could be as much as £150,000 per year until the Feed in Tariff payments finish after 20 years. After which the payments will drop back to £20,000 – £30,000 per year based on current rates.

Q. How will revenue be spent by GEM once the hydro is fully operational?

A. The Directors intend that the revenue from the generation, sale and export of electricity by GEM will be used to cover operating costs each year as follows:

  • Legal requirements, e.g. Financial Conduct Authority fees.
  • Necessary administrative services and insurance.
  • Any maintenance, repair etc. for the generating equipment.
  • A contingency fund to cover unexpected events and spare parts for the equipment.
  • Payment of the interest and capital on any loans.
  • Payments to community groups.
  • Investors to be paid interest on their investment.

Q. What happens if GEM does not raise enough money?

A. In the event that this share issue does not raise the full amount needed to finance the hydro scheme GEM Directors will consider and decide on alternative options. If, in the opinion of the Directors, this changes the fundamental nature of the project, you will be given the opportunity to withdraw your application.

Q. What happens if GEM raises enough money before the deadline?

A. In the event that this community share issue raises the full amount needed to finance the hydro installation at Garmony before the deadline, the Directors will give notice of closure of the share offer. Any applications received after notice of closure will be returned to the applicant.

Q. What happens to my shares if I die?

A. If a Member dies the repaid value of the shares will normally be added to the estate for probate purposes. The application form at the end of this document offers the option for you to nominate a recipient for the value of the shares in the event of your death.  If you have claimed SEIS tax relief, you will be able to avoid Inheritance Tax on the shares if you include them in your will.

Q. Can I hold shares on behalf of children?

A. Members must be at least 16 years of age. An investor has the option of holding shares on behalf of someone who is under 16, but these shares are held in trust until the child is 16 (the investor is “the trustee”. Therefore the shares become are the personal property of the trustee until the child reaches 16 years old. If the trustee were to be a member in their own right, they would therefore be a member twice and would have two votes – which unfortunately is not allowed. Hence a trustee owning shares on behalf of a child cannot at the same time be a member in their own right.

There is a form for this purpose at the end of this document to complete if you wish to do this.

Q. Does my investment qualify for Seed Enterprise Investment Scheme (SEIS) and Enterprise investment Scheme (EIS) tax relief?

A. The directors of GEM have sought advance assurance from HM Revenue and Customs that shares in GEM are eligible for tax relief under the SEIS for the first £150,000 of share subscriptions and for EIS thereafter.

SEIS gives individual investors 50% income tax relief on the amount paid for shares if shareholders pay sufficient UK tax.

EIS gives individual investors 30% income tax relief on the amount paid for shares if shareholders pay sufficient tax.

Q. Can I cash in my shares?

A. We encourage prospective members to view their investment as a long-term commitment to the project – a one-off investment to generate a long-term financial benefit to yourself and a lifetime of environmental and social benefit to the community. Shareholders should be prepared to tie up their capital for a number of years. Share capital cannot be withdrawn for the first three years of investment and then only at the Directors’ discretion. Please note, the directors may resolve at any time to return excess capital to members in the proportions in which they provided it to the Society.

2 comments

  1. Hi

    I’m interested in investing but have a few initial questions.

    1 – how many other hydro schemes have been designed by your Doune-based designer ?

    2 – who is to be the main civil and the main turbine contractors ?

    3 – who will project manage the build and what experience have they got with hydro projects ?

    Thanks

    Bill MacGregor

    1. Good Morning Bill

      Thank you for your enquiry to garmonyhydro.info.

      To answer your specific questions:
      1. Campbell of Doune has designed at least 20 other hydro schemes. If you would like details of these I can supply them
      2. The main civil engineering contractor has yet to be chosen as we are in the tendering phase. The turbine is likely to be by a Slovenian manufacturer Tinck. The model we are looking at is a 4 jet vertical Pelton turbine. I can send you a data sheet if you would like
      3. Campbell of Doune will be acting as project manager for the scheme

      I hope this answers your questions, if you have any other queries regarding the scheme, please let me know

      Best regards

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