Ripple Energy

[Nick Thomas]

I have a friend who's invested in this one. I looked at it, but decided not to. The financial benefit wasn't amazing - solar in my own house seemed like a better bet - and being tied to a very short list of retail energy companies gave me the willies.

 

The share offer document is handy, though: https://static.rippleenergy.com/assets/KirkHill/KirkHillShareOffer-2.pdf

 

> The co-op intends to own up to 70% of the wind farm (with the co-investors owning the remainder), hence its contribution to the capital costs will be £22,791k, and its target raise with arrangement fees is £24,705k

 

So the number of co-owners being lower than (capacity / average household power demand) is not particularly worrying. Bunch of other things that can happen in that conversion to introduce some error as well - one might expect co-owners to use more power than an average household, for instance.

 

> Your supplier will pay the co-op for the electricity generated at the wind farm’s operating cost. At about 2p/kWh this cost is lower than the wholesale market price for electricity which is projected to be about 6.3p/kWh¹¹ on average for the life of the wind farm.

 

In March 2021, wholesale electricity costs were 5.3p/kWh, for comparison. If wholesale costs *did* go below 2p for an extended period, the co-op would presumably just go bust, as it would if all the turbines spontaneously caught fire. Investments carry risk; I'd put the first under "nice problem to have", personally ^^.

 

As for withdrawing the shares, you drawdown 5% each year (as part of the discount, not as a separate payment) to reflect depreciation. p27 onwards goes into a lot of detail; the tl;dr is that you'd probably be dependent on some other member buying them to get your money back.

 

I like co-ops in general, but the octopus fan club approach, to me, feels like a better way to get a slice of wind power.

Edited January 4, 2023 by Nick Thomas

[andyscotland]

2 hours ago, Roger440 said:

 

I looked at Ripple a bit a couple of years ago but ultimately decided financially for me at that point it made more sense to put money in traditional investments with dividend/savings returns.

 

But from what I did find at the time:

 

2 hours ago, Roger440 said:

I'd question that. Looking at their accounts, there is no way they are involved in building or maintaining it. Simply not enough money passing through to support that.

 

My understanding is Ripple are a service provider. They get the ball rolling on site finding/planning/etc then create a standalone company for each separate windfarm - constituted as a co-op - which is wholly owned by the people that invest.

 

So the Ripple accounts show the money flows for their project management etc fees, the larger actual construction/maintenance costs etc are paid direct from WindFarmCo out of the funds raised from the investors. Ripple just organise the work and write the cheques on WindFarmCo's behalf.

 

2 hours ago, Roger440 said:

I reckon prodave has it right, they bought a bunch of shares and are selling them on.

 

I don't think that's correct. They have created a company with shares which they are just doing the admin to transfer to investors as they buy in.

 

The company presumably starts with some nominal value shares owned by Ripple so they can pass the initial resolutions to approve articles, appoint themselves as the first service provider etc, and then authorise a share issue for the actual investor shares.

 

Essentially the financial/shares model is the same as if we all said "let's build a BuildHub windfarm together, but we don't know/want to know how to. So we'll get an off-the-shelf company from an online formation agent, set up a bank account and pay our cash in there in exchange for shares. Then we'll appoint a specialist contractor as the directors to run it all for us and review their performance/vote them out at an AGM.".

 

The difference is just that Ripple are bringing together investors that don't know each other so they've done the first bits of admin to get the new co-op company going before the investors arrive.

 

2 hours ago, Roger440 said:

 They initally tried to use the "its a cooperative" angle, which ripple quite cleary isnt.

 

As above, ripple isn't a co-op, but the company investors are buying shares in is. The company is formed with an agreement to use Ripple as a service provider for X years, and then the investors can vote whether to keep them or appoint someone else (or presumably, appoint normal directors and hire their own staff to run the company, probably not cost effective but it's up to the shareholders).

 

I suppose potentially the investors could also at some point vote to change the profit distribution mechanism e.g. to switch to traditional dividends instead of the discounted electric price model. It's probably written into the company's articles, but usually there's some mechanism for a super-majority of shareholders to change anything in the articles if they want to, unless co-op legislation is more restrictive than ltd co.

 

2 hours ago, Roger440 said:

If prodave is right, then, as far as i can see, you are not protected in any way against them going bust, or otherwise squandering your money. If im wrong on that and its covered by the FCA or similar, im happy to be corrected.

 

I think regardless, you're probably not protected. If it goes bust, or can't deliver sufficient generation income, then you'll likely lose some/all of the benefits and capital. Equally if enough of the other shareholders vote to change e.g. the articles of association in a way that disadvantages you that could be a problem.

 

On the other hand I think you're no more at risk than if you bought shares in any company - there's always a risk that mismanagement means a company doesn't deliver the expected profits, with the only safeguard being that if shareholders find out in time they can sack the management and appoint someone else in the hope they'd be cheaper/better.

 

2 hours ago, ProDave said:

"Made up of 8 turbines in windy west Scotland, Kirk Hill has the potential to power over 20,000 households and businesses with the cheapest and greenest electricity"

 

So this 8 turbine wind farm can power 20,000 households.  So you would expect there to be 20,000 shareholders?

 

This page  https://renews.biz/75861/ripple-opens-membership-for-kirk-hill-wind-farm/   suggests there are 4600 co owners?  And says it expect to start production in "March this year"  (that article was dated February 2022)

 

I think where that article says "With over 4600 reservations, Ripple said its biggest project to date is expected to sell out quickly" means that's the number of shares they've potentially so far, it reads to me like they expect to sell (an unspecified number) more than that?

 

I also wonder if the discrepancy is just a peak demand / annual consumption thing.

 

I think it's pretty common that when suppliers say "x turbine can power up to x households" they are talking wattage - 18.8MW would be about 940W per house on 20k houses if the turbines are generating at full pelt which might be reasonable as an average instantaneous household demand?

 

Whereas the shares model is based on people buying up to 120% of their total annual electricity consumption. But obviously sometimes you will actually be using power from a solar/tidal/gas/nuclear generator, and other times you'll be sharing "your" wind turbine with folk that would otherwise be getting their power from other sources.

 

So I think it's expected that the number of shareholders would be quite a bit lower than the maximum number of houses that could be powered at any given moment.

 

Also in that article you linked there's mention of a £94k a year community benefit fund, which must be coming from generation revenue. So effectively some of the non-shareholder households that are buying power from the turbines are paying for that.

 

2 hours ago, ProDave said:

I am not out to rubbish Ripple, I am doing due diligence before deciding to invest or not, and am uncomfortable with the conflicting evidence I am finding.

 

FWIW I don't think it's a scam. When I looked, the articles of association for the WindFarmCo you'd be investing in and the operating agreement with Ripple were pretty visible on their website and fairly transparent about how it all worked. It seems to me it's as safe/risky as investing in any other newish business with co-investors who you don't know.

 

As a model for funding wind construction, and having it owned by "ordinary" UK citizens rather than overseas finance firms, so the profits stay in our local economies, I think it's not an awful idea.

 

But I do think potentially in trying to make something with mass market appeal (in order to generate investment from non-traditional investors) they have come up with quite a complex model.

 

Personally I think there would probably be fewer variables (and probably less admin cost) if everyone pitched in to build the windfarm and got paid a dividend when it turned a profit. And if people chose to think of that as subsidising their electricity bills that's up to them. So for a serious/considered investment it would be worth looking at other options in wind (if environment is also a consideration) or basically anything if cash is the main motivator.

 

But equally there's probably a fair few people that wouldn't necessarily think of using some of their savings to buy shares in a private company but would be up for "having a flutter" to get cheaper energy bills in future. And it's potentially reasonable from that perspective.

 

2 hours ago, ProDave said:

 

 

[Nick Thomas]

10 minutes ago, andyscotland said:

I suppose potentially the investors could also at some point vote to change the profit distribution mechanism e.g. to switch to traditional dividends instead of the discounted electric price model. It's probably written into the company's articles, but usually there's some mechanism for a super-majority of shareholders to change anything in the articles if they want to, unless co-op legislation is more restrictive than ltd co.

 

https://static.rippleenergy.com/assets/KirkHill/Ripple-Coop2-rules.pdf

 

So you need 75% of members present (not shares) at a general meeting to change the model, and 90% to carpetbag it. Pretty tall order.

[andyscotland]

1 minute ago, Nick Thomas said:

 

https://static.rippleenergy.com/assets/KirkHill/Ripple-Coop2-rules.pdf

 

So you need 75% of members present (not shares) at a general meeting to change the model, and 90% to carpetbag it. Pretty tall order.

 

Indeed. More likely therefore that is a benefit : if the "discounted energy"/retail supplier lock-in model proved to be really not working for anyone you could in theory build a super-majority of shareholders to switch to a simple "charge the grid, pay us a dividend" approach.

 

Likewise gives options if everyone wanted to sack Ripple as the managing agent and it became apparent that there was nobody else willing/able to run it on the Ripple model.

 

Seems pretty unlikely it could be changed in a way that was detrimental to shareholders.

 

 

[HandyAndy]

Stumbled across this debate - v interesting. I have invested because I thought accessing a wind farm's electricity was complementary to my house's PV - will provide electricity at night, and without the cost of batteries (which I think will have a v long payback time). Also, buying into a larger development should bring economies of scale (bigger turbine, better performance). Of course, there are downsides with turbines needing more maintenance than PV, and the management overhead of Ripple. On balance though I'm prepared to take the risk and see what happens ...

As I understand it, they have 3 projects (Graig Fatha - built; Kirk Hill (being built); and a third that's ramping up). I'm in the second one, so no electricity yet though I'm prepared to take the risk of someone else running the site on balance. Obviously you do have to have some faith upfront during the build process, especially as you don't get an immediate return. I'll be able to tell you if it's worked in a bit!

[Roger440]

9 hours ago, HandyAndy said:

Stumbled across this debate - v interesting. I have invested because I thought accessing a wind farm's electricity was complementary to my house's PV - will provide electricity at night, and without the cost of batteries (which I think will have a v long payback time). Also, buying into a larger development should bring economies of scale (bigger turbine, better performance). Of course, there are downsides with turbines needing more maintenance than PV, and the management overhead of Ripple. On balance though I'm prepared to take the risk and see what happens ...

As I understand it, they have 3 projects (Graig Fatha - built; Kirk Hill (being built); and a third that's ramping up). I'm in the second one, so no electricity yet though I'm prepared to take the risk of someone else running the site on balance. Obviously you do have to have some faith upfront during the build process, especially as you don't get an immediate return. I'll be able to tell you if it's worked in a bit!

 

Surely you wont know if its worked for very many years? 

 

Ultimately its an investment with risk attached with a VERY long payback period.