An alternative investment that promised money for solar panels and 6.5 per cent annual returns – and claimed to be "protected, stable and socially responsible" – looks to have gone bust, potentially leaving thousands of UK investors out of pocket.
Secured Energy Bonds rode a wave of green investment popularity in 2013: their launch was oversubscribed and they attracted more than £7.5m of UK investors' money. But the Australian company behind the bonds went into administration in November and this week Capita, the registrar, told investors that the bonds had been suspended and it had ceased providing services to the company.
Significantly, these would be the first retail bonds to fail to meet their obligations – sending out a warning of the dangers of putting cash into non-regulated investments.
A range of companies have turned to retail bonds to raise cash, attracting investors with interest promises of 6 per cent or more. The likes of Severn Trent, Tesco and the Jockey Club had successful launches but their popularity led the City watchdog to warn that the bonds should only be sold to sophisticated investors due to the high risk and inflexibility.
The Secured Energy Bonds proved so risky that despite an apparent range of safeguards – including appointing Independent Portfolio Managers, a firm authorised by the Financial Conduct Authority, to sit on the board – a corporate collapse thousands of miles away looks to have left investors out of pocket.
The bonds are a subsidiary of the Australian firm CBD Energy, which had been set up by the entrepreneur Gerry McGowan, who had formerly launched and then sold the budget airline Impulse.
CBD was put into administration late last year, with Mr McGowan being forced to step down as chief executive. A report from the Australian administrators suggests that money from the UK energy bonds earmarked for solar panels was instead siphoned off by the parent company. In fact, it seems that just five of a planned 22 solar panel projects in UK schools have been completed.
There seems little confidence that money is left to pay out to UK investors, although there should be some income stream from the solar projects that have been completed.
When the bonds were launched in October 2013, Mr McGowan flew to the UK to glad-hand finance journalists, but in reporting the story The Independent warned: "It's important to understand the risks when you stray from the mainstream".
In fact, in the same week, we reported on a fund promising 6 per cent, which invested in solar infrastructure; a corporate bond from an energy company offering 7.25 per cent; and a renewable-energy projects debenture offering 6.5 per cent.
The three are still looking healthy, suggesting that in the right hands investing in green energy can still be a positive move. Bruce Davis is co-founder of the crowdfunding specialist Abundance Generation, which was behind the 7.25 per cent debenture, and has subsequently been involved in several other similar crowdfunding launches.
He said this week: "The news shows why we have been arguing so strongly for the regulation of the sector, to ensure the right protections are in place for consumers."
He criticised the way in which the bond had been set up: "The use of the mini-bond structure provided an exemption from regulatory requirements of investment crowdfunding." In particular he slated "the use of the word 'secured' in their marketing", which gave investors a misleading sense of security.
"Alternative finance needs to take a step away from the arrogance and attitude which brought down traditional finance institutions, and look to the needs of the investor above all," he said. "The democratisation of investment is about putting ordinary investors in the driving seat."
Meanwhile Independent Portfolio Managers, in its role as trustee, yesterday wrote to bondholders to explain the current situation. It has set aside part of its website atipm.fm to keep investors abreast of the latest information about their holdings.
Solar power: the new generation
Solar power has almost doubled in generating capacity in the past year, according to official figures published by the Department of Energy and Climate Change on Thursday.
Solar electricity generation in the UK climbed to almost 5GW of capacity at the end of 2014, up from 2.8GW at the end of 2013. That's enough power to supply the equivalent of 1.5 million homes.
The UK now has more than 650,000 solar installations – across homes, offices, schools, churches, warehouses, farms, police stations, train stations and even a bridge – according to Paul Barwell, chief of the Solar Trade Association.
He said: "We are now well under way to a million solar installations, of all shapes and sizes, across the country. Analysis has shown that solar is the most popular form of energy generation, and could provide 50,000 jobs by 2030 if given the right support.
"Solar could by 2020 be cost-competitive with gas and no longer need any kind of government support at all on homes and commercial roofs," he added.
The association has developed a "Solar Independence Plan" that it claims could in effect double solar implementation at little extra cost.Reuse content