Can you start by explaining how Energise Barnsley started?

I’m co-founder of Gen Community, which became one of Energise Barnsley’s project partners. Gen Community had worked on other community energy projects, but always had to fall in line behind a developer. We wanted to be the developer. We received a Cabinet Office grant from the Investment and Contract Readiness Fund, which meant we could then bid for projects costing over £1 million pounds. We teamed up with Social Finance and British Gas Solar so that we could approach local authorities and housing associations.

Barnsley Metropolitan Borough Council responded. Like us, they were keen to launch a solar project that was for both residential and commercial buildings, and they wanted to enable local people to invest in the scheme. And that’s how Energise Barnsley started.

You raised £800,000 through a community bond. Where did the Charity Bank loan come in?

We launched Energise Barnsley in 2015. The very same day, the government announced that there was going to be a cut in subsidies. Before that announcement, the project was going to be valued at £20 million. We needed to deliver the project before the subsidy change, but that meant reducing our ambitions and moving quickly.

Fortunately, we had a social investment fund called Ignite willing to underwrite the project. But we needed a financial provider who could work with the underwriter and ourselves in this triangular relationship, in order to see the project to full financial close. And that's where Charity Bank fitted in so well.

Why did you decide to use Charity Bank for the loan? Did you have an existing relationship?

We didn't have an existing relationship with Charity Bank. And we did approach other institutions, both commercial ones with an interest in the community energy sector and other institutions funded by large social investment houses. But this was 2015/16; we were installing solar with the last fixed tariffs and our return to investors was always going to be a lot lower than for ground-mounted solar projects. And also, we were doing solar in Barnsley, which doesn’t have the same level of sunshine (and so financial gains) as other areas.

So we had to work with somebody who could provide the loan at an attractive rate, otherwise the finances just wouldn't have worked. We met with Charity Bank and got on well; they understood the business and what Energise Barnsley was trying to achieve. And that initial bond really helped us plough through the legal and financial paperwork.

Could you have achieved the project without the loan? Done something on a smaller scale for example?

With Energise Barnsley, we were always ambitious. Other community energy projects were a lot smaller, say £50,000 to £100,000. Nobody else was approaching residential or rooftop solar in the same way. We wanted to do something that had real impact and which could be replicated elsewhere. Plus, you need to do almost as much work for smaller projects as you do for larger ones.

The original target for the community bond was £1.2 million. As it was our first raise, we probably couldn't have reached the target, let alone achieve the full amount we needed.

Did you have any concerns about taking out the loan?

One concern was about it being a variable loan – as rates go up, so do your loan repayments. So we needed third-party due diligence and there were also other additional costs, which you typically wouldn't have for smaller projects.

We actually enjoyed the learning curve of the loan process. And it’s all stood us in good stead, particularly now that we’re coming up to our five-year anniversary. We have the chance to refinance the community bond, knowing we've got a good set of legal and financial paperwork behind us. And the variable rate has actually gone down.

As the loan process proved a learning curve, was it more work than you were expecting?

Well, you don't go into community energy in order to burn the midnight oil on intercreditor agreements! I left finance (happily) in 2007. And then, all of a sudden, I found myself back in at the deep end. Because of this triangular relationship with the underwriter and Charity Bank, we had to do intercreditor agreements as well as the bank due diligence. It was interesting, but I was ready for that glass of wine once we got to financial close!

Were there any particular challenges that came up?

For the project as a whole, we had challenges all the way. Fixed subsidies did their job in terms of deploying solar at scale. But they also meant that the finance was always the tail wagging the dog, and there were those looming deadlines when the feed-in tariff and certain policies were going to change. So those were the headwinds, which we had all the time.

There was also the challenge of trying to tally all that with both the local authority and our community investors. And it was a terrible summer of terrorist attacks all over Europe, so it wasn't exactly a great time to raise money for a new venture. So yes, we did have headwinds, but we got through to the other side.

When it comes to the loan process, is there anything societies can do to make things easier?

You definitely want someone who’s enthusiastic and knowledgeable about these things on your team. If nobody has the skillset, then whoever takes on the responsibility is going to have a steep learning curve. So it might be the opportune moment to get somebody on board who's keen to learn or who has gone through the process before.

Would you recommend Charity Bank to other charities and social enterprises?

Yes, I definitely recommend speaking to Charity Bank, because of their ethos and how they go about their business. One thing that really stood out for us, was not having early exit penalties or other early repayment charges. Part of our mission is to increase our local community investment. Knowing that we can over-raise and pay some money back to Charity Bank without being stung in the pocket, makes a huge difference. Ultimately, any penalties would affect our bottom line and our community fund.

I also love the approach of organisations who will meet you face-to-face to begin with, get to understand your business and then perhaps send you relevant questions rather than you having to explain every little detail about what you do. In our case, the people-to-people side worked very well.

So it helped having a dedicated Charity Bank Relationship Manager?

The personal relationship definitely helped us. Both Jeremy and Adam are really nice people and went out of their way to help. And even after financial close, we’ve re-done a few things to simplify matters. So that relationship has continued.

I’m very happy to sing Charity Bank’s praises as it has been a pleasure working with them.

Do you think it's important that not-for-profit organisations have ethical lenders who understand the sector?

Yes, definitely. It helps if you have a lender who can wear two hats. They can wear their finance hat and know what to say to their finance board. But also, they can understand where the community is coming from. As a small group, we could never reach the financial hurdles of lenders who are purely focused on the financial side. Charity Bank did well to merge the two sides – community interest and financial understanding, and to offer a deal that was very attractive to us.

What other plans do you have?

We have a programme of work underway to digitalise, decarbonise and make homes smarter and more flexible. With that in mind, we’re leading the BEIS Domestic Demand Side Response Project with Oxford Brookes University, Passiv, Sonnen and Northern Powergrid.

Our aim is to help tenants to lower their bills, and also to support the goal of decarbonising homes by 2030.

We’ve received funding from Energy Redress Fund, in partnership with Age UK Barnsley, to install another 75 batteries for our elderly tenants in Barnsley to increase their solar self-consumption. Batteries have come down in cost now. Without batteries and an understanding of solar energy, a tenant might only end up using 20% of the energy their home is generating, with the rest just spilling onto the grid.

We see the next step in solar being home energy management systems, which connect the battery to solar around a heating system, combined with air source heat pumps. And we want tenants to have an app on their phone to give them more control over these technologies and the chance to reduce their bills further.

Energise Barnsley is the largest project of its kind in the UK. Visit www.energisebarnsley.co.uk to find out more.

If you want a loan provider that can ‘wear two hats’, please call us on 01732 441919.

About Charity Bank

Charity Bank is the loans and savings bank owned by and committed to supporting the social sector. Since 2002, we have used our savers’ money to make more than 1000 loans totalling over £350m to housing, education, social care, community and other social purpose organisations.

Find out more about us here.

Nothing in this article constitutes an invitation to engage in investment activity nor is it advice or a recommendation and professional advice should be taken before any course of action is pursued.