Renewable energy specialist Farmgen has secured a £2.1million loan from the Co-operative Bank – marking the first bank debt-financed on-farm anaerobic digestion (AD) plant in the UK.
The pioneering 11-year deal will support the construction and operation phases of the AD plant at Carr Farm, in Lancashire – which will become the blueprint for Farmgen’s future sites.
Central to the funding structure and securing the loan for Carr Farm is a 20-year Feed in Tariff, the Government backed scheme that guarantees payments for electricity generated from renewable sources.
In addition, Marks & Spencer has signed a five-year contract to buy the energy generated from the plant at a fixed price – in keeping with the retailer’s commitment to procure more renewable electricity from small-scale energy sources.
Manchester-based solicitors Heatons advised Farmgen on the deal, which represents a major milestone in the company’s plans to drive the biggest AD ‘energy farming’ expansion programme in the UK.
The construction of the £3m AD plant at Carr Farm, near Preston, is now well underway. When the plant becomes fully operation in spring 2011 it will generate 800kW of electricity – the equivalent of powering more than 1,000 homes.
Ed Cattigan, Chief Operating Officer at Blackpool-based Farmgen and broker of the deal, said: “This arrangement is the first of its kind for an AD plant in the UK. The Co-op was chosen as the bank has previous experience in this type of deal for wind farms and this philosophy was utilised in the brokering of the loan.
“To have secured such a deal with the Co-op Bank is testament to how robust our offering to the market is and the growing belief in what AD plants can deliver in the UK.”
Matthew Andrews, Senior Corporate Advisor of The Co-operative Bank, added: “The bank recognises the importance of renewable energy in helping the UK's transition to a low carbon economy and is committed to supporting projects that not only fit perfectly with our ethical values but also make full use of sustainable energy resources.
“Farmgen was able to obtain the long term contracts that are fundamental to a project finance package and the bank was delighted to be able to assist in making the development of the facility at Carr Farm a reality.”
Mervyn Bowden, Head of Energy Management at M&S, said: “Since 2006 we’ve been actively encouraging the development of Anaerobic Digestion as a technology for generating renewable electricity.
“We’re delighted to see this plant going ahead. For M&S it helps to support our commitments under Plan A, our sustainability programme, to procure 100% ‘green’ electricity by 2012. For farmers and landowners it’s a great case study on how to get involved with renewable energy generation.”
James Flynn, Partner at Heatons LLP, added: “This deal represented a new direction for the Co-operative but Farmgen’s plans for the plant are absolutely ground breaking. This was a real team effort that encompassed a number of different specialisms within the firm and it was very rewarding to manage the project from inception through to financial close.”
The plant is also being supported by funding from a small group of major private investors, including Simon Rigby, the founder and former CEO of Spice plc.
Established in 2009, Farmgen is now Britain’s leading specialist in farm-based AD power generation. The company has several other sites in the pipeline in Cumbria, Lancashire, Yorkshire and the Midlands. Construction on a second Farmgen plant in Silloth, Cumbria is set to begin later this year.
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