Fund raising now successfully completed for the Marechale Renewable Energy AD Fund

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Date22 Jul 2013
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Fund raising now successfully completed for the Marechale Renewable Energy AD Fund. No further monies being raised at present.

Re: Egmere Investment

On behalf of Marechale Capital PLC (“Marechale”), the investment advisor to the Anaerobic Digestion Renewable Energy EIS Fund 1 (“AD Fund”), I am pleased to be able to report back to you on recent progress on the prospective investment in the 400m3/hr gas injection plant on the Holkham Estate in Norfolk (“Egmere”) and to set out a proposal in respect of the final funding requirements.
 
Background
 
The management team of Future Biogas Limited (“FBL”), the commercial operators of the proposed Egmere project, has now refined the business plan and wish to complete the financing within the coming weeks, with the intent that operations will commence during Q2 2014.  The projected operating performance of the plant  and returns to investors remain unchanged from the business plan that was prepared in Q4 2012 and presented to investors in Q1 2013, however the capital expenditure has increased by c. 10% to accommodate a higher cost of connecting the gas to the National Grid network. As a result, the overall funding requirement, including a contingency of up to 5%, has increased to £9.6 million from the original £8.6 million. 
 
The AD Fund has commissioned external due diligence from an experienced firm of energy consultants, Ark Energy Limited (“Ark”), who has reported back to the AD Fund Investment Committee and has strongly endorsed the proposed business plan and, in particular, the strength of the operating team within FBL. The report from Ark is available and we would be delighted to provide you with a copy if requested. On the back of this report and subject to satisfactory funding commitments and documentation, the Investment Committee of the AD Fund has recommended that the project be moved forward to completion.
 
The funders have also agreed to appoint Gleeds Woldwide, a well-established international firm of quantity surveyors to assist FBL in the control of the project during the build phase.
 
Funding Proposal
 
With total funding requirements of £9.6 million, Marechale has secured the support of £6.6 million of equity and £3.0 million of debt finance to fully fund the project.  The debt component of £3.0 million, which will be provided by a family office, is £0.5 million lower than we envisaged in the original business plan however the repayment profile and covenants are more advantageous than we would have obtained from a commercial bank.  The equity component has therefore increased from £5.0 million to £6.6 million to be provided by the AD Fund (£4.15 million), a co-investment EIS Fund (£2.3 million) and the Holkham Estate (£0.15 million); £5.0 million (75.8%) will be invested on completion in 2013/14 with the balance of £1.6 million (24.2%) in 2014/15 in order to comply with the tax limits under current EIS legislation. We are delighted to have been able to secure the support of third party funding alongside our own commitments, as well as a substantial commitment from the Estate to fund this highly attractive project.
 
After extensive discussions with our co-investment partners as to how the equity investment will be allocated between the two EIS funds, both of whom are seeking to maximise the allocation in 2013/14, we are proposing the following allocations:
 
AD Fund:                                             £3.5 million (84.3%) in 2013/14 and £0.65 million (15.6%) in 2014/15
Co-investment EIS Fund:                    £1.5 million (65.2%) in 2013/14 and £0.8 million (34.8%) in 2014/15
Holkham Estate:                                £0.15 million in 2014/15