Background
Coigach Community Development Company (CCDC) and the Scottish Wildlife Trust have a shared interest in bringing about social, economic and environmental benefits to the area through the Coigach – Assynt Living Landscape project.
CCDC was established in 2010 by Coigach's community to secure its future as an attractive area for people to live, work and play. Its focus is on providing affordable housing allowing younger people to move into the area, supporting local employment opportunities, undertaking environmental projects for locals and visitors to enjoy, upgrading broadband, improving its piers and supporting training.
Since 2010, the communities of Coigach and Assynt have been working together as part of the Coigach – Assynt Living Landscape, a project initiated by the Scottish Wildlife Trust, to achieve improved understanding of the environment and the impacts of climate change; shared active management providing a diverse range of connected and resilient habitats; and creation of local employment and training opportunities, all building on the communities' strong cultural heritage linked to the land.
What did we set out to achieve?
Jointly committed to delivering benefits to the community, both organisations recognised that renewables projects had the potential to generate a sustainable source of income to support delivery of their aspirations.
CCDC and the Scottish Wildlife Trust therefore entered into a joint venture to develop a hydro power project on land in Achiltibuie. The joint venture company is Ben Mor Hydro Ltd.
What steps have been undertaken since then?
The project secured planning permission consent, a controlled activities regulations licence, an accepted grid connection offer, design of civils works, pre-accreditation and property agreements. It successfully secured loan funding from Local Energy Scotland to develop the feasibility works. The project also secured grant funding from Highlands and Islands Enterprise which has helped to fund the project managers.
The project has tendered for civils contractors and turbine suppliers but is yet to finalise these contracts. It is going through due diligence with lenders.
What has changed/come to light since the start?
In late 2015, it became clear that the hydro project was not viable at the agreed 420kw. Financial projections showed a marginal viability level if the project could operate at 500kw.
The only way of funding the project was to secure additional funding which also had ownership rights – diluting the share of future surpluses to the existing owners.
Unavoidable delays meant timescales became increasingly squeezed and a decision was required whether to make critical payments ahead of funding being in place. Due to a number of high level risks which remained in place, the owners of BMH felt uncomfortable about the level of risks involved, particularly given the marginal level of return longer-term.
The project has been under more pressure because of recent changes affecting the renewables sector.
What conclusions have we reached about the way forward?
The Board of BMH reluctantly agreed that it was inappropriate to proceed. However it was recognised that there was an opportunity for an organisation with the funds and greater risk appetite.
A period of negotiation followed and it was agreed to transfer ownership of Ben Mor Hydro at the face value of the shares. Community interest has been maintained with an agreement that 25% of future surpluses, in perpetuity, go to the community (50:50 between CCDC Trading Ltd (a wholly owned subsidiary of CCDC) and the Scottish Wildlife Trust).
What does this mean in practice and what will happen next?
On 31 March 2016 ownership of Ben Mor Hydro transferred to the new owners who are now wholly responsible for the successful completion of the hydro project and management thereafter. The existing owners now step away from management of the company and all risks and responsibilities transfer to the new owners. Should the scheme be successful, a quarter of all future surpluses will be given back to the community, split evenly between CCDC (Trading) and the Scottish Wildlife Trust.
For more information, please contact: Iain Muir, Chair of CCDC – 01854 622302.