Tidal Lagoon Swansea Bay Launches GBP 10 Million Share Offer (UK)

Tidal Lagoon (Swansea Bay) Plc has launched a £10m investment offering, providing private investors with a tax efficient opportunity to back the development of the UK’s largest tidal range power project based in Swansea Bay.  A further local community share offering will be launched within the next few months.

With technology similar to large scale run of river hydro projects, developers say the hydro turbines will produce an estimated 450,000MWh of renewable electricity, which is enough to power over 105,000 homes, covering the whole of Swansea and Neath Port Talbot’s domestic electricity use.

The Company is issuing £5m of qualifying Enterprise Investment Scheme (EIS) shares (which has a minimum investment size of £24,000), alongside £5m of non-EIS qualifying shares (at £800 per share).

The Project benefits from an encouraging welcome to date with extensive consultation with over 110 local and statutory stakeholders, gaining support from key planning statutory consultees, and substantive research into means of materially reducing costs of construction to make the project economically viable. Swansea Councillor Francis Davies, Chair of the City and County of Swansea Development Committee, has described the project ‘as the most exciting he has seen in Swansea for 30 years’.

The initial £5m EIS round, which has already obtained HMRC Advance Assurance, is to further support the R&D and optimisation required to adapt existing hydro technology, breakwater construction and design to facilitate this first-of-kind tidal lagoon environment.  The other £5m of shares is to be allocated in parallel to the development activities required to deliver the necessary planning permissions.

This high profile, renewable energy project will also help facilitate local regeneration objectives in Swansea Bay, create a renewable energy education and visitor resource, an impactful art and cultural icon and a national water venue suitable for sailing, triathlon, canoeing and rowing events. It will produce sustainable and predictable electricity during its expected useful economic life of over 100 years.

As well as giving individuals the opportunity to invest in a large-scale renewable energy project – normally backed by larger financial institutions – the EIS offers investors a range of Government approved tax benefits, which provided they are held for a minimum of 3 years include: 30% income tax relief, 28% Capital Gains Tax allowance, 100% Inheritance Tax mitigation and tax-free capital growth on investment of up to £1m in a single tax year.  The investment also features the ability to carry back the whole of this allowance to the previous tax year and if the shares were to be sold at a loss, Capital Loss Relief could be offset against the Investor’s other income or capital gains, resulting in potential tax savings at marginal tax rates of currently up to 50% and 28% respectively.

Mark Shorrock, CEO of TLSB commented: “The UK imports 65% of its energy needs from sources such as Qatari LPG, French nuclear electricity, Australian coal and Saudi oil. The UK has a political imperative to assure security of supply and has a legally binding commitment to deliver 15% of its energy from renewables by 2020. It currently achieves just 5% from renewable sources.  We are creating the world’s first bi-directional hydro power plant and the Lagoon will produce carbon savings in excess of 200,000 tonnes CO2 per annum.  Outside of the attractive projected return on this investment, by backing this project investors will be providing a key role in helping the UK to change its energy mix to home grown low carbon energy.”

Formal consultation is due to begin in June with consent decision expected in October 2014. Once given the go ahead by Ministers, the project value at this point could be equated to the market value estimated at 3.5x the principle investment not including the tax reliefs on top.  The next phase of funding, estimated at £650m and expected to be provided by pension funds and banks who will be able to lend against export credit guarantees provided by turbine manufacturers will take the consented development forward.  The expected return to investors once the Lagoon is operational in Summer 2017, is targeted to be in excess of four and a half times the initial principle invested.

Mark Shorrock, CEO of TLSB adds: “The project represents an investment of £650 million, and is a significant opportunity for Wales to take the lead in the tidal industry for the UK. The plans have been welcomed by the local community and we have a vision for the Swansea Bay project to mark the first in a network of lagoons around the UK coastline.”

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Press release, April 10, 2013; Image: tidallagoonswanseabay