HYDROPOWER

AN INTRODUCTION TO GILKES ENERGY PROJECT FINANCE AND DEVELOPMENT

AN INTRODUCTION TO GILKES ENERGY

GILKES ENERGY LTD IS A WHOLLY-OWNED SUBSIDIARY OF GILBERT GILKES & GORDON LTD AND WAS ESTABLISHED IN 2008 IN ORDER TO HELP OUR CLIENTS DEVELOP AND FINANCE HYDROPOWER PROJECTS.
Hydro projects are capital intensive and time consuming but if structured and financed correctly can provide secure income streams for more than 50 years. We can explain your options in simple no-nonsense terms and help you structure and finance your project in the most tax-efficient, fair and low-risk way. We also develop our own projects and invest into other projects in the form of Joint Ventures (JVs) with estates and landowners. JVs can be more than just raising capital - with the correct partner they are an ideal way of bringing in external expertise and maximizing the potential success of the project.

FINANCE OPTIONS INCLUDE:

ONE
Gilkes funding the early planning and feasibility costs with the estate/ landowner investing at a later date when some risk has been removed

TWO
Gilkes investing equity alongside the estate/ landowner at the same time, for example a 50/50 joint venture

THREE
Gilkes financing the whole development with a rental paid to the estate/landowner

FOUR
Gilkes providing technical and financial modelling services but not actually providing any funding

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GILKES ENERGY PROVIDES THREE MAIN SERVICES:

Project feasibility
To help you decide if your proposed scheme is technically feasible and economically attractive.

Project investment & financing

To help you structure and finance your project in the most tax-efficient, fair and low-risk way.

Project management & maintenance

We work very closely with our partners, suppliers and contractors to manage projects to fruition.

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PROJECT FEASIBILITY
LOGANBECK PENN

LOGANBECK BRIDGE INTAKE

LOW PARK

RIVER DUDDON POWERHOUSE BECKFOOT

IF YOU ARE A LANDOWNER OR FARMER WITH A DUDDON RIVER OR HALL SMALLTHWAITE STREAM CROSSING YOUR LAND, A HYDRO DEVELOPMENT MAY BE A WAY OF GENERATING VALUABLE LONG-TERM INCOME.
Hydro developments can last in excess of 50 years, and structured correctly could provide financial security for the farm/estate for generations. We work very closely with a number of hydro consultants and other experts to help you understand the key issues associated with your potential project and assess its economic and technical feasibility. We will work with you to develop a number of alternative options and work through the various technical and financial issues in order to develop the optimum solution for your individual circumstances.

PROJECT FEASIBILITY STEPS INCLUDE:

4 Catchment mapping and flow analysis

To provide an estimate of the likely flow available throughout the year (Flow Duration Curve).

4 Turbine selection and optimisation

Choosing the optimum turbine and generator configuration for your project.

4 Energy generation analysis 4 Financial modeling and structuring

To calculate and estimate the expected project capital costs, operating costs and revenues and to help you calculate the optimum combination of bank debt/equity, in order to finance your project.

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PROJECT INVESTMENT & FINANCING

HYDRO PROJECTS ARE CAPITAL INTENSIVE AND TIME CONSUMING BUT IF STRUCTURED AND FINANCED CORRECTLY CAN PROVIDE AN ATTRACTIVE LONG TERM INVESTMENT.
The UK Feed-In-Tariff (FiTs) provides a guaranteed price for electricity generated by hydro projects. This price is indexed against the Retail Price Index (RPI) so protects your investment against the effects of inflation. However, the equity requirement necessary to bring a project to fruition can be significant even after borrowing a loan from the bank. We can step-in and help plug the gap in order that the scheme can be fully funded. Our partners are usually reassured to have an expert developer rather than a passive investor as a fellow shareholder. Once we are a partner in a JV we are partners for the long term, share the risks and rewards of the project and are incentivised to keep the scheme running as efficiently as possible over the longterm. We have developed a number of investment and financing structures (more details below) to help our customers and partners realize their projects. We aim to be as flexible as possible in order to maximize the deliverability of any project and have developed a sophisticated financial model which calculates the estimated income, funding requirement and all the necessary ratios required by a bank. This model helps us select the optimum structure, raise debt finance from a bank and generally expedite the project through to fruition.

FINANCING AND INVESTMENT SERVICES TO HELP YOUR SCHEME:

4 Early-stage feasibility and planning costs

Early-stage feasibility costs can be expensive and if outcomes are uncertain and you are reluctant to take this risk we are willing to fund these initial costs in exchange for a minority share in the scheme. If the scheme fails to proceed for any reason then all costs are met by Gilkes. As with most developments of this kind investment made at an early-stage would normally equate to a slightly higher proportion of the equity relative to investment which is made later on in the project. This is known as a development premium or risk premium and is a common way of compensating the early-stage investor for the risk of schemes not proceeding. The simplest form of Joint Venture is a 50/50JV where both the landowner and Gilkes each fund 50% of the equity and own 50% of the project. If investment is applied from both parties at the same time throughout the project then no risk premium is applied. Gilkes takes a flexible approach and other forms of JV are possible for example 60/40 or 40/60 depending on the landowners capital available and attitude to risk.

4 Joint Ventures

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PROJECT MANAGEMENT & MAINTENANCE

WE WORK VERY CLOSELY WITH OUR PARTNERS, SUPPLIERS AND CONTRACTORS TO MANAGE PROJECTS TO FRUITION.
As a JV partner Gilkes interests are aligned completely with those of the estate/landowner. Projects are managed with a focus on keeping the construction phase to time and budget. We recognise that a project which is late or has cost overruns erodes the Return On Investment (ROI) for the landowner and having Gilkes as a JV partner provides a reassuring incentive to manage the project as effectively as possible. Once the scheme is operational, Gilkes would normally take responsibility for the maintenance and monitoring of the scheme in order to keep the equipment running as efficiently as possible throughout its lifetime.

REMOTE MONITORING

4 Remote monitoring equipment will

be installed to allow Gilkes and the landowner to monitor power output, operate the plant and troubleshoot when necessary. energy generation, intake level sensor position, spear control valve position and running speed are all displayed on a password-protected website.

4 Metrics such as power output, total

4 The website is then available to anyone

with a web-connected PC or handheld device such as a Blackberry or iPhone (with the appropriate security).

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CASE STUDY LOGAN GILL

Gross Head: 96.5m Net Head at Design Flow: 90.19m Flow: 0.6 m/s Turbine type: Twin Jet Turgo 16.5 HCTI_TJ Speed: 1000rpm Output power: 450kW 1,500 MWh/year

Logan Gill forms a tributary of the River Duddon, with the site being located just two miles from the village of Broughton-in-Furness. This site is situated in the Lake District National Park and hence added mitigations were necessary in order to preserve the natural environment. The inlet of the scheme is located on Corney Fell before the water travels 1km down a 600mm pipe to the traditionally stoned turbine house. The scheme is known as a run of river scheme which means the water is used as the river provides it and not stored or impounded before use. The turbine used in this scheme was a 16.5 HCTI Twin Jet Turgo system which has peak power of 450kW and generates approx 1,500MWh of energy per annum, enough to supply approx 300 average sized households. The project is one of the first in the UK to use the Feed In Tariff scheme (FiTs) which provides renewable generators with a guaranteed energy price. The project is a Joint Venture between Gilkes and Ellergreen Hydro www.ellergreen.com a developer of hydro schemes focussed on England and Wales.

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CONTACT
Email: energy@gilkes.com Tel: 01539 720028 Fax: 01539 732110 www.gilkesenergy.com Gilkes Energy Ltd A wholly owned subsidiary of Gilbert Gilkes & Gordon Ltd Kendal, Cumbria, LA9 7BZ Registration No.173768 London.