UK: Tidal Lagoon Launches Community Share Offer for Swasea Bay Project

Tidal Lagoon (Swansea Bay) Plc has announced the launch of a £2m local community share offer to give the people of Wales the opportunity to be early stage investors in the planning and design development phase of the Swansea Bay Tidal Lagoon proposal.

The £2m Community Share offer is part of the Company’s current fundraising round. This is expected to raise a total of £5m from EIS qualifying shares and offers investment terms identical to a parallel £5m share offer to the wider professional investment community. With no minimum stake required, shares are priced at £800. The share offer will be open for five weeks and those living in Wales will be given priority.

In launching the offer, Mark Shorrock, CEO of Tidal Lagoon Swansea Bay plc described the share offer as: “a rare opportunity to help shape the future of the country and change the balance of the UK’s energy mix by harnessing the natural power of the sea.”

He says: “The share offer is a high risk investment as the proposed funds raised, being £10m in total, will be spent on the development phase; preparing the planning application for the lagoon and the associated Planning Inspectorate planning process as well as the turbine and breakwater design and optimisation and the completion of environmental survey work. There is no guarantee of securing development consent or securing construction finance thereafter, which is expected to be in the region of £650m to £750m. Realising value from this investment opportunity is not guaranteed. However, I do want to underscore that as an investor you will be joining us in taking these risks although through your financial support you will be strengthening this Project and help ensure it becomes a reality.”

“The UK has 16 power stations, representing a quarter of the UK’s total generating capacity, which are coming to their end of life between now and 2023.Given the consequential significant forecast reduction in the UK’s capacity to meet demand for electricity from the end of 2015, we believe that now is the right time for the UK to consider harnessing one of its major natural resources, the sea, to provide 10% of the UK’s electricity Base Load requirements through the creation of a programme of tidal lagoons.

“We believe that tidal lagoons are a viable, large scale alternative to traditional fossil fuel and nuclear electricity production. They combine proven technologies and civil engineering construction methodologies in an innovative configuration to generate predictable, clean electricity for our children, grandchildren and great grandchildren.”

“The Board of Tidal Lagoon (Swansea Bay) Plc is therefore delighted to launch this opportunity to help bring tidal lagoons into reality and to enable the community to share in the potential benefits of the UK’s first tidal lagoon.”

“We are now inviting investors with a minimum of £800 to join us. We have a detailed programme of actions over the next 18 months to address the key risks of the Project and table our planning application for the UK’s first tidal lagoon in Swansea Bay with an estimated installed capacity in excess of 240MW. We believe that there is a very strong chance that we will secure development consent and the requisite construction funds for the Project which we believe in turn will lead to the possibility of investors being able to exit after three years.”

The Company has commenced the detailed development phase, for which it is now seeking investment. As part of this phase, it is progressing construction methodology, designs and specifications for turbines and turbine housings to optimise energy output whilst balancing this against construction costs and investor returns to ensure that the Project is ultimately commercially viable. In parallel and, as a Nationally Significant Infrastructure Project, the Company is also seeking development consent through the Planning Inspectorate. As part of this application, a full Environmental Impact Assessment is being undertaken.

As well as giving individuals the opportunity to invest in a large-scale renewable energy project – normally backed by larger financial institutions – the community share scheme offers local investors a range of Government approved tax benefits. The Company has received advance HMRC Assurance, that it is an Enterprise Investment Scheme qualifying investment with the associated tax benefits this brings.

It is envisaged that this high profile, renewable energy project will also help facilitate local regeneration objectives in Swansea Bay, create a renewable energy education and visitor resource, an impactful art and cultural icon and a national water venue suitable for sailing, triathlon, canoeing and rowing events. It will produce sustainable and predictable electricity during its expected useful economic life of over 100 years.

“The launch of our community share offer creates a great opportunity for the people of Swansea and Wales to back an initiative that seeks to harness the power of the tides in Swansea Bay, help create local low carbon jobs and join us in the first of what will hopefully be a series of lagoons along the UK coastline. Our aim is is to reconnect local people to the energy they use so we’d like to get as many local people as possible investing in the project.” said Mr Shorrock.

Monies raised will be used to further support the R&D and optimisation required to adapt existing hydro technology, breakwater construction and design to facilitate this first-of-kind tidal lagoon environment.

The Project benefits from an encouraging welcome to date with extensive consultation with over 230 local and statutory stakeholders. Swansea Councillor Francis Davies, Chair of the City and County of Swansea Development Committee, has described the project ‘as the most exciting he has seen in Swansea for 30 years’.

The following are key risks associated with the project:

RISK FACTORS

An investment in the Company is speculative and involves a High Degree of Risk and may not be suitable for all of its recipients

Before making an investment decision, prospective investors are advised to consult a professional adviser authorised under the Financial Services and Markets Act 2000 who specialises in advising on investments of the kind described in this document. Prospective investors should consider carefully whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them.

An investment in the Company is only suitable for investors capable of evaluating the risks and merits of such investment and who have sufficient resources to bear any loss which may result from the investment.

Investors may only subscribe for shares in the Company once they have received a copy of the Information Memorandum and your attention is specifically drawn to the risk factors set out in Part IV of the Information memorandum.

Risks

There are a significant number of risks to be considered before making an investment in this Project.

Investors should note that if the Company does not raise in total, £10m from the Community Offer and the parallel non-EIS Offer, the Company may be unable to carry out its development phase strategy in full, which could result in investors losing all of their investment. The Company may be forced to seek further funding which may not be on commercially advantageous terms or may result in the issue of Ordinary Shares by the Company at a price lower than the offer price, resulting in material dilution to existing investors.

Most significantly, investors are only likely to receive a return if the Company raises the necessary construction finance or is able to sell the scheme on to a third party. This requires a number of issues to have been resolved including:

• the grant of development consent;

• the securing of land options over the site;

• being granted a Contract for Difference from the UK government at a strike price and term consistent with those in the financial model; and

Once the development phase is complete, the Company will need to raise significant construction finance, estimated to be in the region of £650m to £750m, or sell the scheme on to a third party or determine an alternative investor exit route that provides funds to enable the Company to deliver a return to investors.

Additionally, the Offer Shares are non-transferrable. At the point of an anticipated exit, arrangements will be proposed to facilitate the exit such as changes to the articles of the Company which may require Shareholder approval at a General Meeting. There is no guarantee that any proposed changes will be approved. As a consequence, in the interim Shareholders will not be able to dispose of their Offer Shares.

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Press Release, June 10, 2013