The following are examples of how some shared ownership models may work in practice.
Example 1
Joint venture (JV) 1: where each party contributes a percentage of the investment costs and owns part of the assets
Legal ownership: joint venture (JV) company.
Shareholders: 2 x community, 3 x private developer (where there are 5 turbines).
Development risk: normally with the private developer who may charge the JV a development fee, which the community will need to negotiate to ensure it is still making suitable returns. The question is when does the community start engaging.
Equity funding: 2 x community, 3 x private developer.
Debt funding: Community funds for the community*; private developer funds or could finance from own resources (on balance sheet) for the private developer.
Maintenance and operations: with the JV (normally arranged by the developer), which the community will need to negotiate to ensure the costs are reasonable.
Profits to each party: 20% of wind from 1, 2, 3, 4 and 5 to the community (x 2); 20% from wind from 1, 2, 3, 4 and 5 to the private developer (x 3).
*the problem is that unless the private developers and the community have the same bank, then no commercial bank is likely to lend to the community as loan cannot be secured against assets. This means that the community may need to find softer debt finance (eg REIF or crowd funder) that may be prepared to lend.
Example 2
Joint venture (JV) 2: where each party contributes a percentage of the equity and owns part of asset, but JV secures debt
Legal ownership: JV company
Shareholders: 2 x community, 3 x private developer (where there are 5 turbines).
Development risk: normally with the private developer who may charge the JV a development fee, which the community will need to negotiate to ensure it is still making suitable returns. The question is when does the community start engaging.
Equity funding: 2 x community, 3 x private developer.
Debt funding: JV finds one debt financier.
Maintenance and operations: with the JV (normally arranged by the developer), which the community will need to negotiate to ensure the costs are reasonable.
Profits to each party: 20% of wind from 1, 2, 3, 4 and 5 to the community (x 2); 20% from wind from 1, 2, 3, 4 and 5 to the private developer (x 3).
Example 3
Shared revenue. Similar to JV1, except even harder to secure debt as community owns no assets.
Legal ownership: Private Special Purpose Vehicle (SPV) company.
Shareholders: 2 x community, 3 x private developer (where there are 5 turbines).
Development risk: normally with the private developer who may charge the SPV a development fee, which the community will need to negotiate to ensure it is still making suitable returns.
Equity funding: 2 x community, 3 x private developer.
Debt funding: Community funds for the community*; private developer funds or could finance from own resources (on balance sheet) for the private developer.
Maintenance and operations: with the SPV (normally arranged by the private developer), which the community will need to negotiate to ensure the costs are reasonable.
Profits to each party: 20% of wind from 1, 2, 3, 4 and 5 to the community (x 2); 20% from wind from 1, 2, 3, 4 and 5 to the private developer (x 3).
*As the community do not own any of the assets, it is unlikely a bank will be prepared to lend money to the community. This means that the community may need to find softer debt finance (eg REIF or crowd funder) that may be prepared to lend.
Example 4
Split ownership.
Legal ownership: 2 x community ownership, 2 x private company (where there are 5 turbines).
Shareholders: 2 x community, 3 x private developer.
Development risk: for the community, the risk is either on their own or private developer who may charge the community a development fee, which the community will need to negotiate to ensure it is still making suitable returns. The question is when does the community start engaging. For the private company, the risk is either on its own or the private developer may charge the private company a development fee.
Equity funding: 2 x community, 3 x private developer.
Debt funding: for the community for the community turbines; for the private company for the private company turbines.
Maintenance and operations: for the community, on their own or a deal with a private company; for the private company, with the private company.
Profits to each party: for the community, 50% wind from each of the two turbines; for the private company, 33.33% of wind from 3, 4, and 5 to the private developer.
