As is the case with all investment opportunities, there are risks associated with this investment opportunity, but these will be mitigated and managed. Calling upon the vast reserves of experience within our team and in consultation with partners and industry experts, we have considered just about every conceivable risk and found workable solutions for them.
We have identified many specific risks, but broadly speaking they can be divided into a few categories that we have dealt with in the following ways:
- Planning risk has been eliminated by accepting only farmers who have already received planning permission as suppliers of the bio-waste for the AD plants and not accepting municipal waste with its associated health and transport issues;
- Development risk has been managed through milestone contracts with one of the world’s leading suppliers of Anaerobic Digesters;
- Revenue risk is virtually zero, as the government feed-in tariff is guaranteed for 20 years and indexed to inflation;
- Plant performance risk has been transferred to AON, and specialists in providing Insurance for Anaerobic Digester plants, through re-insurance of a performance guarantee offered by leading biogas technology providers such as Bioconstruct and MT Energie;
- Damage to the plant will be insured by Royal Sun Alliance, and the liability risks by specialist insurer, Catlin.
- The risk of lack of co-operation from farmers has been mitigated by a feedstock contract that becomes progressively more generous over time and by giving them right of first refusal on buying the AD plant from Raw AD in the first five years after the initial investment in the AD plant on their land has been made;
- Feedstock risk will be protected by the purchase of specific default Bonds from the Bond market to protect against the farmer defaulting on his feedstock agreement with Raw AD;
- Investment risk has been lowered through the 30% tax rebate investors in this opportunity qualify for in terms of the Enterprise Investment Scheme (EIS).
The EIS tax rebate enables high enough returns to be earned to more than offset the cost of insurance and risk management in order to ensure that not only is revenue guaranteed, but real risks such as plant performance, safety and the security of the feedstock contract are insured with leading European insurers.
The result is an investment that delivers respectable low-risk returns with a highly desirable environmental and social impact.