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Solar Cities Scotland 2012 Conference

Business Case for Solar PV Investment Paul Adderley 15 June 2012 Š Sustainable Opportunity Solutions Ltd 2012

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Is it worth it? !   Since March 1, 2012, system delivered: –  15,700 kWh –  Income equals 100% of Electricity Bills –  8.5 TCO2e Carbon Saving

! ! ! !

  100% Loan Finance (low interest)   Tax Benefits   Better Staff Engagement   Strengthens Reputation © Sustainable Opportunity Solutions Ltd 2012

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OUTLINE !   Case Study Background !   Business Case !   Integrated Due Diligence Approach !   System Performance (Energy, Carbon, Cash) !   Key Messages © Sustainable Opportunity Solutions Ltd 2012

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Case Study Background !   Blue Chip Customers:

!   MD’s Leadership !   Average Energy Spend: £7000 pa !   Low Carbon Reputation

© Sustainable Opportunity Solutions Ltd 2012

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Business Case for Solar PV (50kW) !   Additional revenue (FiTs) generation £11.5k pa !   RPI linked for 25 years (20 years from 1 Aug’12) !   Reduce exposure to energy price volatility !   Engage staff in “Tangible” low carbon project !   Easy access to 5% loan finance up to £100K !   Benefit of £25k Annual Investment Allowance © Sustainable Opportunity Solutions Ltd 2012

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Approach: Integrated Due Diligence

Technical

Optimal Investment

Financial & Carbon Returns

Supplier

Š Sustainable Opportunity Solutions Ltd 2012

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Technical

Initial Assessment

Technology

Structural Considerations Panel Efficiency & System Size Š Sustainable Opportunity Solutions Ltd 2012

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Supplier Selection: 3 Stage Process 1. MCS Suppliers/Installers -> Mandatory for FiTs 2. Short List: –  Seek Recommendations –  Local Case Studies

–  Financial Position (Companies House / Credit Check) –  Telephone Interview © Sustainable Opportunity Solutions Ltd 2012

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Supplier Selection 3. Tender List: - Customer Site Visits & Feedback - Review of Contractual Terms: “Ownership” - Rigourous Assessment of Assumptions - Benchmark to industry averages (EST) Selection: Installer that remained committed, & managed risk © Sustainable Opportunity Solutions Ltd 2012

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De-Select Suppliers Flawed Assumptions - 90% proportion for Own Use - Incorrect Feed-in-Tariff Rates - Optimistic System Yields Lack of Transparency

Š Sustainable Opportunity Solutions Ltd 2012

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Financial: Investment Models !   Reflect Savings of Energy Efficiency Energy for Own Use (~60%) System Degradation (20%) Seasonality

!   Impact of Loan on Weighted Cost of Capital !   Net Present Value –  Discount Rates: Benchmark @ 10% , Project Specific @ 5% © Sustainable Opportunity Solutions Ltd 2012

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!   Tax: Capital Allowances –  Solar PV ineligible for Enhanced Capital Allowances –  Annual Investment Allowance (General P&M) –  £25K at 100% Allowance in Year 1 –  £5k Cash saving

!   Value Added Tax –  Must have export contract to recover VAT paid –  £100k System = £20k “cash saving” in next return.

© Sustainable Opportunity Solutions Ltd 2012

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!   Financing: Energy Saving Scotland Loan –  Only for SMEs, landlords –  5% interest rate –  Loan Up to £100,000 repayable over 8 years –  100% LTV –  Solar PV Income covers 67% Repayments

© Sustainable Opportunity Solutions Ltd 2012

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Financial: Managing Uncertainty At 4th Feb 2012 Energy Yield  (kWh)     Carbon  Saving  (KG  CO2e)   CAPEX  £’000     Low  FiTs:  15.2p  (NPV  @10%) High  FiTs:  32.9p  (NPV  @10%) Additional  CAPEX  Funds    

Option 1    Option  2    33,500  37,000  18,250  20,150          

© Sustainable Opportunity Solutions Ltd 2012

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Key Messages for Business

Key Messages for Installers

✓  Optimise ROI: Avoid >

✓  Commitment Wins

Efficiency > Renewables ✓  Uncertainty requires robust Financial models ✓  Balanced Assessment of

✓  Realistic Assumptions & Transparent Quotes ✓  No longer a “No-Brainer” ✓  Engage with Accountants

Multiple Benefits

© Sustainable Opportunity Solutions Ltd 2012

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Thank you for your time Paul Adderley Managing Director: pauladderley@sos4business.uk.com Tel: 0845 475 1275 / 07917 372573 Web: www.sos4business.uk.com

Š Sustainable Opportunity Solutions Ltd 2012

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SOS Solar Cities Presentation  

Discover how Solar PV investment can benefit your business with this presentation.