Author: Fiduciam Team

Fiduciam is an established provider of bridging and development finance to Western European clients with diverse business needs.  Typically, Fiduciam receives financing requests from SMEs and entrepreneurs active in the real estate, care, hospitality, leisure, manufacturing, logistics and agricultural sectors, but now also the renewable energy sector.  Fiduciam’s renewable energy bridging loan is designed to finance the acquisition, and where necessary some or all of the costs of the renewable energy development.   

A case in point is a renewable energy bridging loan of €3.3 million Fiduciam granted last month to an established Dutch sustainable energy entrepreneur.

The renewable energy business opportunity

Fiduciam’s client, an established entrepreneur specialising in renewable energy projects, recognised a unique opportunity to take advantage of the challenges faced by the Dutch energy grid in stabilising demand and supply. The key to grid stabilisation lies in rapidly supplying and taking off energy as required. Once the client had identified a property suitable for this project, Fiduciam was approached to finance its acquisition via a renewable energy bridging loan.

The property is a vacant greenhouse complex which benefits from a high-voltage energy grid connection. This connection is capable of swiftly supplying energy to and taking energy from the grid when required by the national energy management company TenneT.  Such high-voltage type of connection is unique and is not often installed, due to the planning requirements and other national grid priorities.

The complex spans almost 100,000 sqm of greenhouse space, containing 5,500 electricity-intensive lamps used for traditional crop cultivation until now. These lamps can be switched on (on TenneT’s request) to stabilise the grid during periods of energy oversupply.

The property also contains three combined heat and power units (CHPs), including a suitable gas connection to power them, previously used to heat the greenhouses, which will now supply energy to the grid when energy demands peak.

To provide further sustainable energy generation, Fiduciam’s client will install solar panels on the roofs of the vacant greenhouses, which cover 100,000 sqm.

To create a complete power plant, the client plans to install energy storage systems (EOS) to ensure that surplus generated sustainable energy would not go to waste in time of decreased demand.

The greenhouses will be used for a new farming technology, also referred to as dark farming, which no longer requires sunlight.

Complex valuation

Bridging loans are typically underwritten on a loan-to-value basis, and this was no different in this case, requiring the sustainable energy project to be valued.  Needless to say, the value of a sustainable energy project depends very much on the projected cash flows, and the certainty of these cash flows; the major difference being that these are harder to model than for traditional cash flows such as rental income.  In the case it hand, the grid stabilisation agreement with TenneT is a major driver of cash flow, as well as the offtake agreement for the renewable solar energy.  Despite the importance of sustainable energy, the number of valuers that can handle the valuation of such project is much smaller than those that typically value real estate projects.

Complex legal and technical aspects

The business plan’s technical nature, the technology being used (including the combined heat and power units and the energy storage systems), and the multitude of parties involved, made this transaction a daunting challenge for most lenders. Underwriting such a transaction and understanding the associated risks requires in-depth knowledge of the technology and a carefully structured assortment of security instruments.

Fiduciam’s experienced Dutch team did not shy away from the challenge and was able to find a pathway through the complex legal structure of security instruments involved in the transaction, facilitating an innovative renewable energy bridging loan for its client and managing to complete prior to the deadline stipulated in the purchase contract.

Key terms of the renewable energy bridging loan

Fiduciam offered the client a €3.3 million loan with a maturity of 12 months at an annual interest rate of 9.5% (rolled up). Recognising that the project would not attract significant cashflow in its first year, Fiduciam structured the interest into the loan amount, relieving the client of monthly interest payment concerns and allowing them to focus on their business operations.

Conclusion

Fiduciam provides its clients with a quick, flexible, and personalised lending process. This entrepreneurial mindset aligns with clients’ needs and makes Fiduciam an agile partner for entrepreneurs.

Director Marieke Eskens commented: “Renewable energy is becoming an increasingly important part of our clients’ businesses. Whether you are a property developer, a real estate manager or indeed an entrepreneur looking to contribute to the development of renewable energy solutions, it is not easy to find a bridging loan to finance renewable energy developments. I am very proud that our team has the flexibility and the in-house knowledge to support requests for renewable energy bridging loans. To structure this innovative renewable energy bridging loan, close cooperation between the client and the valuer was paramount. We developed a close relationship, and we hope to finance more sustainable energy projects for this client soon!”

The year 2022 came with its challenges, even for Santa. Yet we end the year on a high, with a Santa loan to help him overcome the energy crisis and to make him ESG friendly. Kids all around the world can breathe relief! We wish all our clients and partners a Merry Christmas and Happy New Year; and we hope you enjoy this new episode of The Office.

Whilst we look forward to 2022 filled with the promise of the return to normalcy the year 2021 came with its challenges, even for Santa: elf-labour shortages due to COVID-19, then followed by the global supply chains crisis. Fortunately we were able to assist with a working capital loan. It required a visit to the North Pole in freezing temperatures, a pledge over reindeer and sleighs, and AML onboarding with a long out-of-date passport and no proof of source of funds. We wish all our clients a happy and prosperous 2022!

Fiduciam, the institutionally funded short-term lender, has just completed a Coronavirus Business Interruption Loan Scheme (CBILS) loan for £840,000.  The loan was to a children’s nursery in Leytonstone, in North East London, called Harvey House. 

The CBILS was designed to support the continued provision of finance to smaller UK businesses (SMEs) that have been impacted by the COVID-19 pandemic. The loans are delivered through lenders accredited by the British Business Bank (BBB).

CBILS has been playing an important role in supporting local business and communities throughout the Covid-19 crisis, as the case of Harvey House demonstrates well.  Navneet Bansal, who has been a child carer for many years, took the initiative to open up her own children’s nursery, addressing a shortage of childcare in Leytonstone.  It was a proud moment when Harvey House opened in December 2019, but only four months later it was forced to close because of Covid-19.     

This hit the owners hard as they had to make debt service payments of £113,000 per annum, which quickly became unsustainable as the nursery waited months to hear when children could return to nursery care.

Fiduciam provided a two-year CBILS loan which decreases the debt servicing cost by 64% for the next two years.  This puts the nursery on a stable financial footing, also allowing it to deal with potential future Covid-19 hurdles.

The nursery qualified for the CBILS loan because it met the requirement of being a viable business before the outbreak of the pandemic and one that is expected to do very well in a more normal trading environment.  The nursery employs 17 staff to provide a high-quality childcare service, which is reflected in its 9.5/10 rating on daynurseries.co.uk.

Despite such rapid success and Navneet having an excellent personal history in the childcare sector, the high street banks were unable to provide a CBILS loan as the nursery businesses did not yet have a track record for the required length of time.

For Fiduciam, as an alternative lender, this was not an obstacle. The lender got to know the owner, Navneet, and inspected the nursery in operation. Having witnessed the professionalism and passion of the staff and owner, it was clear that such a nursery was very much in need in Leytonstone and therefore offered a very strong proposition. 

The Fiduciam CBILS loan now allows the nursery to establish a track record the next two years so that it can then refinance with a cheap high street bank loan.

Johan Groothaert, CEO of Fiduciam commented, “As a start-up SME, it is difficult to get finance in the best of times.  Thanks to CBILS we have been able to lower the financing costs for such SMEs.  Harvey House is run very professionally by experienced and passionate staff – we love to lend to such enterprises.

“It is thanks to the brave step of Navneet, setting up their own children’s nursery that Leytonstone’s shortage of high-quality children nursery places is being addressed.  We are confident that Harvey House will be very successful and provide an excellent early learning experience for hundreds of children in the coming years.” 

Navneet Bansal, owner of the nursery, commented, “We are very glad to have received the Fiduciam CBILS loan.  Without it, finance costs would have been overbearing and we did not want to pass on the cost to the parents or cut the quality of our childcare.  The Fiduciam CBILS loan puts our nursery on a very stable financial footing and ensures that all children continue to receive the discovery and learning experience they deserve.  We were also impressed by the efficiency of the Fiduciam CBILS loan application process.”