Resonance Limited has recently completed one of the first true equity investments into a Community Interest Company (CIC).Resonance, a specialist financial intermediary, has been working with Water Power Enterprises (h2oPE) over the last few months securing £200,000 of pre-development capital for its low-head hydro electric schemes which use river weirs togenerate renewable electricity.
The final deal brought together 3 parties; a charitable foundation, a leading CDFI (Community Development Finance Institution) and a private angel investor. Daniel Brewer, Director of Resonance, said: "This is a groundbreaking achievement which hopefully will pave the way for many more equity investments into CICs". h2oPE look to generate renewable energy and reduce carbon emissions through two types of site: sub 50kW community led schemes and 50kW+ schemes which also deliver community benefit. h2oPE acts as developer, project manager and facilitator. These schemes are typically below the radar of utility company developers yet beyond the capability of most landowners. To date h2oPE has delivered three projects to operation, with one more about to start construction and two more in fundraising.
Doug Everard, a Director of h2oPE, was delighted with the investment. "This is a major step forward and will now enable h2oPE to expand its work significantly. We plan to deliver over £20 million of low-head hydro projects on rivers around the UK over the next few years, using this seed corn cash for pre-development work at our risk." The £200,000 investment was only made possible following the relaxation of the dividend cap by the CIC regulator in 2010. However, the task was still not straightforward as the CIC structure struggles to recognize sweat equity on behalf of the management team and investors still do not seem keen on dividend caps. This obviously adds to the complexity of what is always a delicate negotiation.
Sara Burgess, CIC regulator, comments: “This type of backing for CICs is a great example of what we hoped to achieve by relaxing the dividend cap and simplifying some other rules last year. We will continue working to ensure CICs can thrive by offering attractive propositions for investors, whilst delivering genuine community benefit.“ Investors interested in supporting h2oPE with its next stage of development should contact Resonance on 0845 0043432 or email firstname.lastname@example.org.