Guy Macpherson-Grant, Director of EGS Energy, talks about his experience of raising finance for deep geothermal projects.
All businesses need to take risks to succeed, but at EGS Energy we make sure that they are quantified, deliberate decisions.
Having won top position in the DECC Deep Geothermal Challenge Fund with our bid to develop a power plant at the Eden Project in Cornwall – one of the UK’s two geothermal plants, we are determined to prove that our Cornish based company can deliver world leading renewable energy development.
To back their vision the other directors of EGS Energy and I have so far raised more than £3 million for the power plant’s development. My advice for others raising funding is this:
Know your audience, and look strategically for new investors. My starting point is to make sure the fundamentals of any proposal match the interests of the private equity fund being approached.
You need to be ready to react to interest from unexpected sources but for us the focus from the start has been industry investors. It’s about working with companies that understand quickly what’s involved. It’s about building the future we want with our investors – in terms of scale, profitability, reputation and geographic footprint. Having said that, we haven’t yet completed the financial consortium for the Cornwall based power plant and so this is work in progress.
Pay good attention to your financial model. With the renewable energy sector increasingly under the spotlight the need to avoid complacency and make sure you’re putting your best financial foot forward is vital. With so much of the return on renewable energy based on public subsidy, all projects will be under intense scrutiny from investors and DECC alike.
Investors are also keen to see what master investor Warren Buffett calls having ‘skin in the game’ – the fact is that investors prefer businesses where the directors have a personal stake in the enterprise.
So what’s next? Yes, the overall economic climate is a distraction from the renewable sector but getting in place unambiguous legislative and financial support will bring jobs and wealth creation, energy security and help the country meet its 2020 targets.
Supporting this renewable energy mantra with every step, Cornwall is busy playing to its natural resources of solar, geothermal, wind and marine power. For instance the county is making moves to ensure it’s well placed to capitalise on national strategies like the government’s commitment to the future development of Marine Energy Parks.
In solar, with changes to the Feed in Tariff in early 2011 bringing a set back to large scale projects, that still doesn’t change Cornwall’s ideal geographic position for generating solar power. Of course this kind of change to policy temporarily effects investor confidence but as the market continues to mature and as economies of scale are reached other solar opportunities are presenting themselves to enterprising entrepreneurs.
Daring to be different had always been a hallmark of Cornwall’s rich engineering heritage – as well as the catalyst for truly excellent innovation. Cornwall may be a small region of the country but it’s beginning to make a big impact across the renewable energy sector.
I will be talking further about EGS Energy’s experience in raising funding for their Cornwall-based power plant at the Envirotech & Clean Energy Investor Summit in London (9 November). I will cover the challenges and pitfalls in getting this power plant project off the ground, as well as the broader opportunities in Cornwall for new projects, new entrants to the market, and growth in the region – more information here
- What are your thoughts on attracting investment to renewable energy projects? Add your thoughts in this forum discussion.
- See our video which explains the future for the geothermal plant at the Eden Project in Cornwall.