CEPRO community microgrid projects

We are working with developer Clean Energy Prospector (Cepro) on their innovative community microgrid projects. Cepro plan, construct and operate fully managed community microgrids that support maximised installations of onsite renewables in both the new build and retrofit housing markets.

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A typical project sees a private electric microgrid installed for a small community, behind the grid supply point. Batteries are also installed to store rooftop generated electricity not consumed at time of generation, whilst communal ground source heat pumps provide heat to the houses.

We have worked with Cepro to develop the funding models, the commercial structuring and the suite of contracts for project delivery. We look forward to continue to work with the client to further scale the projects as a template for decentralised, decarbonised and democratised energy solutions.

Leapfrog finances utility scale solar and battery storage plants

In 2016, we originally advised Leapfrog Bridge Finance Limited on their bridge loan, which enabled a “community interest company” (Verdant Community Energy CIC) to own two adjacent utility scale solar parks.

This was the UK’s largest community solar project at the time (9.3MW including a shared grid connection arrangement with an adjacent commercial solar park). The 2016 financing was an innovative 100% debt (0% equity) bridging loan to enable the acquisition of Verdant Community Energy CIC, by community-focused developer and asset manager Communities for Renewables (CfR), from Gamma Energy.

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In December 2017, we then advised Leapfrog on the refinancing and restructuring of the debt, with Leapfrog’s facility being repaid in part by Triodos Bank (as incoming senior lender) with the remaining Leapfrog debt restructured as mezzanine debt.

Finally, in 2018, an innovative (and largest at the time) 18-year community investment bond offer (circa £4 million with 5% inflation linked bonds) was launched to local retail investors, underwritten by Triodos Bank and Big Society Capital. The result was to refinance Leapfrog in full.

Our role was to conduct the full legal due diligence on the project, and we prepared and negotiated the finance documentation throughout the various iterations of the project from 2016 until 2018. We ensured the community-focused approach was maintained at all times (across the senior, mezzanine and shareholder documentation) to guarantee surplus cashflows for the local community.

The projects are innovative in that they have a guaranteed return for the local community, ahead of equity distributions, and the potential to generate approximately £3 million of income for local community organisations and projects over the next 20 years, an achievement all parties involved can be proud of – thanks primarily to the vision and commitment of everyone involved who made this project happen, and the power of the sun!

A link to Leapfrog’s website is here: www.pureleapfrog.org

First of a kind incubator for community energy sector

As part of our long-standing partnership with Leapfrog and our shared commitment to scaling the capacity of community energy and the social impact market in the UK, we established in 2018 a first-of-kind incubator for the community energy sector, “Leapfrog Launchpad”. This brings together commercial, legal and financial expertise, in a fully co-ordinated ‘complete package’ approach, designed to develop new and replicable business models in a post-subsidy environment which has seen a deceleration in the growth of community energy sector. Other partners include global technical advisory firm, ITP Energised, and there are a close alliances established with accountants, Johnston Carmichael, as well as PfalzSolar, a co-operatively owned contractor with a track record in the UK and Europe.

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A critical strength of the incubator are the partnerships that are forged. Each model is undertaken with a community energy partner who will pilot the concept and have shared ownership in its design and delivery. We envisage developing 2-3 new models a year. The services delivered under the incubator are provided on an “at risk” basis until the pilot project can be funded.

The incubator has had early success in developing three new models for local ownership/ delivery which are being taken forward:

1. Private wire solar for water utilities under a long-term corporate/customer PPA, being championed by Community Energy South and Southern Water.

2. Solar into electrified railways to power our trains (“Riding Sunbeams”), being championed by 10:10, Community Energy South and Network Rail.

3. A solar investment model being pioneered by a licenced supplier to give their retail customers an opportunity to participate in one or more solar parks, with a credit made to their energy bill related to the value of the energy generated by their share of the solar farm.

We look forward to creating more sustainable social impact as our models commercialise.

A link to Leapfrog’s website is here.

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Community Owned Renewable Energy and Environmental Finance acquire portfolio of community solar projects

We are incredibly proud of our common journey with Community Owned Renewable Energy LLP (“CORE”), CORE’s asset manager, Environmental Finance (“EF”) and the community-owned asset management business Bright Renewables (“Bright”), financed by CORE.

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We have acted for CORE and EF since 2017. Initially, we advised on the fund management agreement, and structured the equity investment of Power to Change and Big Society Capital, to capitalise CORE, while also negotiating an arms-length debt facility with Big Society Capital. Together, these financial instruments provide CORE with liquid funds to enable CORE to acquire ground-mounted solar parks in England and Wales from commercial developers and operators (including funds). The strategic aim is to then transition each asset into long term community ownership over time.

The Fund has recently (March 2019) completed a number of additional acquisitions, bringing the total portfolio size to approximately 35MW, with more on the horizon. Our work on each of the acquisitions included full asset due diligence, negotiation of the share purchase agreements, putting in place the financing arrangements and, where necessary, refinancing existing bank debt. Approximately half the portfolio is already in community ownership, and this proportion is set to increase steadily.

CORE and EF are incredibly driven to achieve the best possible outcome for the communities that the assets serve, and we really enjoy being part of this common effort to harness the positive impact of renewable energy. Not only for the environment, but for local people, too.

An article can be found here.

Since early 2019, Bright Renewables have joined this like-minded group, with start-up funding from CORE. Bright offers professional asset management services to CORE’s subsidiaries as well as non-affiliated projects, and it is owned by the communities that it serves. This means that all profits ultimately go back into the community – an excellent way of reinforcing the circular economy and maximising the benefit to the communities.

An article about Bright can be found here.

Most recently, we assisted Bright in its dispute with a construction contractor, thereby helping realise a significant additional amount that will now be available for the benefit of the community.

Our work with CORE, EF and Bright is incredibly satisfying and we look forward to the next part of the journey!

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“The Lux Nova team have been our legal advisers ever since we set out on the journey of creating the CORE fund and acquiring its first assets in 2017. Since then, we have built an excellent working relationship and a joint sense of purpose. Louisa and Nikola fully understand and support our mission to create value for local communities – assisting us with innovative structuring solutions that enhance the deliverability of our projects, fair pricing and quick work of high quality. We look forward to continuing our journey with them.”

— Richard Speak, Founder of Environmental Finance Limited and CORE

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Leapfrog Finance go from strength to strength

We are incredibly proud of our long-standing partnership with Leapfrog. We have provided pro bono advice to the Charity arm of Leapfrog (now Pure Leapfrog) for over 10+ years.  In 2015, shortly after setting up Lux Nova, we advised on the initial structuring (including state aid compliance) setting up and securing £15 million investment from Big Society Capital for a commercially operated finance arm (Leapfrog Finance) to the existing charity division.

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This addition was needed in order to address a market failure, namely lack of affordable debt capital available to social and community enterprises to develop their own utility-scale renewable energy assets. The bridge fund remains the only source of debt capital available to fund 100% of the project development/construction cost or acquisition cost (if already constructed), providing a breathing space and assistance to the community organisation to then raise long-term debt capital and secure equity funding through undertaking a community share or bond offer.

Leapfrog has deployed approximately £40 million loan commitments (including co-funding commitments from a community-oriented energy supply company secured in 2018, which we advised on). The fund supports a range of technologies from ground mounted solar & rooftop in conjunction with battery to heat and energy efficiency that will create long-term social and environmental benefits for local communities, with a specific focus on targeting communities in areas of highest deprivation.

Since setting up the fund, we have acted for Leapfrog on the deployment of all of their loans (including providing due diligence, structuring advice and preparing and negotiating loan and security documentation) covering various construction, acquisition and bridge loans, and underwriting of share offers. To date, this includes an aggregate of 117MW of community- and publicly owned renewable energy projects, and where the initial bridge term is complete the majority of the loans have been refinanced with long-term debt from commercial banks (we have acted for Leapfrog on all of these refinancings).

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As a most recent example of our work with Leapfrog, we advised them on their £11 million mezzanine revolving construction bridge funding to GRIDSERVE, as developer, undertaking the UK’s largest subsidy-free integrated solar and battery farm developments (circa 60.4MW solar, 27MW battery storage) across two sites in the North of England. Once commissioned the two parks will be acquired by Warrington Borough Council, which will make Warrington the first local authority to produce all of its own electricity from clean sources. Leapfrog funded these projects alongside Investec Bank (as senior lender in a common bridge financing structure), playing an active role (with our support) in the structuring of both the contractual and acquisition documentation as well as the financing documentation (including intercreditor arrangements). The panels and tracking system are a new design for the UK. The projects are expected to generate over £2.25 million of community benefit over their life.

It has been incredibly satisfying to drive such a critical element of the community solar market, making projects happen that otherwise may not have materialised. We are already focussed on further and even bolder innovation, together with the Leapfrog team – watch this space!

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“The knowledge and professionalism that Louisa brought to the deal was second-to-none, addressing project financing risks, the complexities of a commercial & local authority transaction and enabling Leapfrog to secure £2.25m in community benefit funds to help local people in the Warrington area. We are enormously proud to partner with Lux Nova.”

— Claire Hanratty, CEO, Leapfrog

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Further reading here.