Selling shares

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Selling shares is a common and effective way to raise money to fund the activities of community energy projects. Not only can this means of fundraising enable large amounts of money to be raised from a wide range of people, but it can also encourage local people to take ownership of the project and have a stake in the outcome – literally!

In order to raise money through selling shares, you will need to consider the following:

Legal structure and project plan. The right legal structure and a well-thought-out project are essential prerequisites for developing a share offer. Selling shares is only possible if your legal structure allows it, and without a project plan, you will have nothing to persuade people to invest in! You will also need to develop a sound financial model in order to communicate the investment potential and likely returns from your project. This will require consideration of expected revenues and costs, and their implications for cash flow and profit and loss. Assistance from an accountant or other financial expert at this stage is likely to be invaluable. Given that developing a project plan can be a costly and time-consuming business, some community projects have sought start-up capital through a pioneer share offer to support this work.

Gauging interest and testing the offer. Once you have an appropriate legal structure, project plan and financial model, it is worth assessing local interest in investing before launching your share offer. This will enable you to review the attractiveness of your offer and how much money you are likely to raise, which in turn will help to determine whether you are ready to launch your offer and if any changes need to be made. Such an assessment could be carried out by keeping a record of potentially interested people, through a database or a pledges scheme, or by carrying out research through surveys or questionnaires.

Developing the share offer. Next you will need to prepare a share offer document, which is similar to a business plan, setting out the business case for the project and the details of membership. The business case needs to be credible and evidence-based – make sure you scrutinise your financial model and assumptions to check your figures are as accurate as possible. It could be worth seeking professional advice and assistance to help with this. Be honest and realistic – although small returns are not as attractive as big profits, it is likely that there will be people within your community who are not primarily motivated by financial returns in any case.

Your community are likely to be more attracted to invest if the share offer is structured to focus on social and environmental benefits, rather than financial returns. Income generated from your project could be used to promote social and environmental benefits through supporting a specific activity of a particular organisation, or through creating a pot of money which members of the community can apply for funding from. The value of your shares and the minimum number people are required to purchase will determine how inclusive your project is and the range of people who can become involved - it is worth trying to set the threshold low to ensure no one is prevented from becoming a member who might want to.

Marketing and publicity. Major share offers will need a serious publicity campaign to raise the sums of money desired. This goes beyond promotion of the share offer document – you will want to consider running events and public meetings, seeking publicity through the press, radio and TV, and producing your own marketing materials in the form of banners, posters and via online channels. You may want to seek support from marketing professionals and designers at this stage – if you can recruit someone with these skills to provide voluntary support, then even better!

Case Studies
Country: UK

Resilient Energy Great Dunkiln (REGD) is a joint venture between The Resilience Centre, a landowner and the community of St Briavels. Together they raised £1.4 million in five months to install a 500kW wind turbine in 2012 in the parish of St Briavels. The funding target was met using a crowdfunding process developed by REGD and Abundance Generation; share offers started from as little as £5 to £50,000 and the return on investment is expected to typically deliver between 7 and 8 percent annually over 20 years. 

As well as the inclusive minimum share offer the project committed to an annual community donation of £15,000 - £20,000 over 20 years. The calculation of monies going to the fund is transparent and based on 4 percent of turnover, not surplus, so is linked to total energy generated and revenue. The community fund’s purpose is to help the local area meet its current and future needs; applicants to the fund must demonstrate how they will make the village more resilient.

The community donation is administered by a rolling panel made up of locals from all sectors within the community who are separate from the primary stakeholders. Local people and organisations can write in twice a year to the fund requesting a grant demonstrating how they intend to use the money and over what period. With minimal red tape, applications are discussed and debated by the panel based on how closely they meet the criteria detailed above. Beneficiaries include a local charity helping to provide suitable accommodation for the elderly, the creation of a local handyman service, maintaining the availability of the publicly accessible village defibrillators and helping the local playgroup to replace and upgrade their equipment. 

Country: UK

Gamlingay Community Turbine use income from their community-owned wind turbine to provide a long-term income stream to support environmentally friendly projects for the benefit of the whole community. They give 10% of the net income, after all running costs, to a community fund. Applications for funding are open to any individual or organisation within the Parish of Gamlingay and should benefit more than just a single person or family, and preferable result in an environmental benefit. No more than two applications can be submitted by any particular individual or organisation within one year, and a maximum grant of £3,000 on any single application will be awarded, but all applications are welcome and will be considered equally, however small.

Country: UK

Sustainable Charlbury aim to ensure that the whole community benefits from their project, rather than just those individuals who are able to buy shares. They do this by encouraging groups such as the Charlbury School Association to pool their smaller individual sums to buy shares collectively. In addition, they focused the returns on benefiting the community by limiting the financial returns to shareholders to no more than 5%, which would enable them to generate a community benefit  of up to £100,000 a year. The community will be consulted on how this money should be used, and they are committed to spending the money to further Sustainable Charlbury’s mission of reducing carbon emissions.

Country: UK

Brighton Energy Co-operative launched a pioneer share offer in order to raise the cash required to get the ball rolling to take their community-owned solar PV project forward. The costs of setting up the organisation, in terms of printing, hall hires, web support, branding, were all starting to add up and were only going to grow, and so the pioneer share offer would provide much needed start-up capital. To support the pioneer offer, they wrote a business plan detailing where the organisation was heading, how it would get there and how much this would cost. They then had to market the pioneer offer - the team organised a public meeting, both to update people on how things were progressing and where the organisation had got to, and circulated their plans to their mailing list. At the public meeting they went through details of the business plan and outlined the money they required. Over the course of the next few months, the team also held one-to-one meetings with local people who had expressed an interest in joining and investing in the project. At this stage it was fundamental for the team and the project idea to remain credible, so they intensively rehearsed all presentations as well as answers to potential questions, with each director being allocated specific subject areas. Eight people subsequently bought shares, and they successfully raised £18,000.

Source: Community-Led Photovoltaic Initiatives action pack

Country: UK

Brighton Energy Co-operative have a pledge scheme on their website to keep a record of those who are interested in investing in their community-owned solar PV projects. Before their first public share offer, the pledge scheme was used to enable anyone interested in becoming a shareholder to pledge the amount they would like to invest and to send the group their contact details. Over a few months the group had more than £100,000 pledged – and hence an excellent list of potential members when the time came to launch their share offer.