Joint venture

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Shared Community Ownership

of Renewable Energy systems

All about shared community ownership under the Community Energy Strategy's voluntary protocol

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Courtesy: Neilston Community Windfarm

Example of joint ownership

Carbon Free Developments and Neilston Development Trust (NDT) created a Limited Liability Partnership to develop a wind farm south of Neilston in 2009.

In exchange for NDT supporting the development, Carbon Free agreed to manage and fund the pre-consent development process at no risk to NDT.

If consent was received, NDT could invest up to half of the equity requirement on the same terms as Carbon Free.

In fact NDT raised 28.3%. Governance of the development is shared jointly.

Useful link

DECC guide to community ownership

Joint ownership

This approach involves a community enterprise and a commercial company each owning part of a joint venture company, which undertakes the project

Ownership and maintenance of the assets

The commercial operator and the community enterprise work together and set up a joint venture company - often known as a special purpose vehicle or SPV - to develop, own and manage the renewables scheme, local to the community.

The SPV owns the plant and is responsible for its operation and maintenance. Often the ongoing asset amangement is provided, on agreed terms, by the commercial partner.

The communitiy's ownership takes the form of shares in the joint venture company (so would not normally be eligible for Enterprise Investment Scheme tax relief). It will usually also have representation on the board or management committee of the SPV.

Some benefits and considerations

The community benefits from partnering with a commercial developer who carries the risks at the early stages and brings the experience and competency required to bring the project from the drawing board into reality. This is particularly attractive for community groups which do not have the time, money, technical expertise or experience to take a scheme to the operational stage.

This approach can also benefit a developer in working with the community and receiving its support, and provides a further source of funding.

The eventual project is co-owned by the two parties, so the commercial developer is less free to bundle its share into a wider portfolio or sell it on.

The community enterprise is unlikely to be able to benefit from Enterprise Investment Scheme (EIS) tax relief under this arrangement.

If one of the partners has a minority share of the ownership there will need to be agreement about minority protection, i,e, which decisions need to be approved by both partners before they can be implemented.