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Peer2Peer Finance News | June 26, 2019

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Ofgem rejection leaves Abundance debenture in limbo

Ofgem rejection leaves Abundance debenture in limbo
Kathryn Gaw

ABUNDANCE investors have been left in limbo after Ofgem rejected an application for subsidies on a Monnow Valley CHP (MVCHP) debenture.

Earlier this year, the energy regulator blocked the Monnow Valley biomass facility from benefitting from the Renewable Heat Incentive (RHI), meaning that MVCHP would be unable to make an income from the heat generator. As a result, investors’ capital is now at risk.

Bruce Davis, joint managing director of Abundance, told Peer2Peer Finance News that the peer-to-peer lender is working with investors and MVCHP to appeal the Ofgem decision via a statutory review. He added that the company is prepared to take the case to a judicial review, if necessary.

Read more: Abundance launches biomass project fundraising

“We are continuing to work with both the investors and the management team of MVCHP to find a resolution to this issue,” said Davis. “Investors have been kept fully informed of all developments regarding its application for RHI and how it affects their investment in the company.

“The company is appealing Ofgem’s rejection of its application for the incentive payments in regard to its heat production on what it believes is a sound legal basis.

“If the appeal is successful, the business will have the opportunity to refinance the debentures as originally planned but it is prudently exploring alternative options for the consideration of investors if that appeal fails. These include restructure, sale or potential legal action against Ofgem itself to recover value for investors.”

The £3.9m loan is now listed as ‘overdue’ on the Abundance website, although Davis confirmed that investors had received the 12 per cent interest which was expected from the loan.

Read more: Green loans dry up as lenders target “low hanging fruit”

All affected investors received a full update on the situation last week, and Abundance said that it has been in regular contact with the lenders and borrower since the problem first arose in February.
Abundance has hosted two meetings with investors.

“We are working hard to find a resolution to what has been a frustrating and at time exasperating process for the company and investors alike,” said Colin Bennett, director of MVCHP.

“MVCHP are confident of the legal basis of our appeal of this decision and are very grateful for the support and understanding of our investors through this difficult time. We are determined to find the best outcome we can for investors who backed a small local company trying to build a successful business in the UK green energy sector.”

The MVCHP debenture was funded in late 2016, with £3.9m raised from Abundance investors within a few weeks. The money was used to fund the purchase and installation of 10 combined heat and power units and two biomass boilers in Herefordshire. These units would supply sustainable and renewable electricity from dried wood chips to a local business park, while the heat would also be sold on to nearby biomass boilers.

However, despite initially indicating that the project would be eligible for RHI subsidies, Ofgem then rejected the application. No explanation has yet been given for the rejection, although a response is expected after 17 August.

“We do not understand why Ofgem has decided to reject this application and are frustrated by their apparent lack of rationale provided in their written responses,” said Davis.

“Green finance will only flourish in the UK if investors can trust that the policy environment is open, fair and consistent. Nothing we have seen in the actions of Ofgem to date would fit that description.

“The investors – of whom I am one – are looking at their options recover their money through various channels,” Davis added. “But we’re in a state of limbo at the moment.”

Read more: The power of green