Looking for a lender who will finance biomass over 15 year term?

[PeteJack]

Hi.

I have a biomass installation which is heating poultry sheds. It is currently financed by a ten year loan. I would like to refinance over a fifteen year term, but my bank has a limit of ten years for biomass.

Does anyone know of any lenders who will provide loans for fifteen years for biomass installations?

Thanks.

 

[Hfd Cattle]

Try AMC

 

[turbofarming]

Try Ben at Peregrine.

 

[PeteJack]

Thank you for your responses.

I apologise for my delayed reply; I don't appear to have received notification that there were responses to my post.

I have previously spoken with AMC; their maximum loan period for biomass sytems is ten years.

Peregrine's website suggests that their maximum term for biomass systems is seven years, but I will call Ben to discuss.

Thanks for the suggestions; they are much appreciated.

 

[Chris F]

@Greenenergyfunder Alex has specialised in this. Or you could try @Borlace1 from Midlands Asset Finace.

 

[PeteJack]

Thank you for the suggestions, which I have been following up.

Almost all borrowing is currently through my bank. All existing loans with the bank (including the biomass loan) are secured against the value of the business (a poultry farm plus biomass installation).

I have now received my bank’s proposed terms for extending the biomass loan to 15 years from system commissioning date (i.e. to expire 12 years from October 2019). They are disappointing, given the business' faultless track record. As an alternative to placing the biomass loan business elsewhere I am therefore now considering changing banks.

Can anyone recommend a bank which would offer a 15 year loan for the biomass facility (or at least more than 7 years as measured from October 2019) as a part of taking on the entire banking business?

The numbers;
£4m: value of the business (valuation carried out in 2019).
£2m: outstanding balance of the biomass loan.
£0.5m: outstanding balance of all other loans, including account overdraft facility.
63%: loan to value ratio.

The business has traded, in its existing form, for 40+ years and has been with the same bank throughout this period. The business is highly profitable and has never recorded a loss. No bad debts, no loan repayment defaults.

I have so far approached (or the business is currently with) the following banks / mortgage companies;
Lloyds
AMC
Barclays

Any suggestions for an alternative bank to approach would be much appreciated.

Thank you.

 

[Deutzdx3]

Get away from the high street banks. They are more risk adverse since 2008. Go to coutts, st James place bank, credit suiss or the likes of. As you have good trading history it shouldn’t be to bad to secure their services and funding.

 

[Chris F]

@Greenenergyfunder Alex has specialised in this. Or you could try @Borlace1 from Midlands Asset Finace.

@PeteJack did you have no luck with the above? I’m surprised neither could quote.
LLoyds also offer discounts interest rates for environmental projects. Did their quote include this discount? You generally have to ask.

 

[farmerm]

£2 million pound biomass plant? That must be a heck of a setup and one heck of an RHI payment. I am not entirely confident that the Gov will honour the 20year RHI guaranteed tax free payments, there have been too many cases where the scheme has not given tax payers value for money.

How does it all stack up if the Gov decides to re-write the rules and pulls the plug on RHI where they view the RHI scheme has been excessively exploited or at least make the income taxable? There is already a escape clause to cease RHI payments... if a critical part of the system fails and the replacement is deemed to therefore be a new commission then this can invalidate your current RHI agreement? I have a small domestic pellet boiler, if the water jacket on the boiler fails that could be game over for my RHI payment, if I had to replace the boiler, this would be classed as a new commission, my RHI agreement would cease to be valid and I would have to re-apply for RHI at the current tariff, a fraction on our current.

 

[Fogg]

RHI payments aren't tax free for non-domestic RHI.

£2m isn't going to be domestic! It does seem like a huge investment to me though, half the value of the business? Really?

FWIW I think the banks are nervous re the poultry sector, what with Brexit uncertainty, a potential US trade deal, plus the rise of vegan activism and whatnot. I've had a few nervy "can you assure me about?" messages from our bank's ag dfepartment, and our borrowing to valuation percentage is nearer to 17%. Lloyds were burnt by Banham's collapse and with the finances of others integrators rumoured to be perilous I guess it's no surprise lenders are chucking money at growers with a bit less enthusiasm.

 

[R J]

Banks don't like doing the biomass stuff over more than 10 years as they know the equipment will be knackered and generally need replacing by then

 

[Greenenergyfunder]

The whole finance / funding market is very cautious at the moment. This is mainly as a result of Banks having rising arrears on their lending portfolios for the first time since 2007 and if you add to that the current political / economic mess, they are reluctant to step in and support without being extremely well secured.

Specialist asset finance lenders will fund renewables still, but they base their lending decisions on debt servicing capacity, not LTV and so for a lend of this size the business needs to be producing strong levels of operating cash flow. Asset finance lenders take the machine as their security, not a fixed charge or debenture over your whole business - and so that may be more attractive to some.

Both options have their benefits, but there are still sensible refinancing facilities available if everything else stacks up.

 

[Exfarmer]

Have you contemplated asking the Insurance companies. They used to be a regular lender to farming at one point, I know my father only got going as Eagle Star backed him. I still have letter from his own bank manager, which had been the family bank since the day dot, advising him that land was at an unprecedented high which they expected to collapse soon.
I understand they have been funding property purchases lately, and this would seem the sort of scale they would be after

 

[D14]

Hi.

I have a biomass installation which is heating poultry sheds. It is currently financed by a ten year loan. I would like to refinance over a fifteen year term, but my bank has a limit of ten years for biomass.

Does anyone know of any lenders who will provide loans for fifteen years for biomass installations?

Thanks.

HSBC do 15 years for biomass as we've had a quote recently from their Ag department. Not the cheapest though but not to far out from the likes of AMC.
HSBC won't however lend money for a property development as we asked about this and was told it would need to be over £3 million plot purchase for them to consider it. Upon questioning they told us that within HSBC globally property development is to high risk presently.

 

[Greenenergyfunder]

Some good info here PeteJack.
It looks like you have the option of 7 years without security at flat rates of 3-4% and based on debt servicing capability, or longer terms with Banks taking a charge over your property / business and basing their decision on LTV.
Good luck, but happy to have a general discussion and have private messaged you, just in case.

 

[renewablejohn]

£2 million pound biomass plant? That must be a heck of a setup and one heck of an RHI payment. I am not entirely confident that the Gov will honour the 20year RHI guaranteed tax free payments, there have been too many cases where the scheme has not given tax payers value for money.

How does it all stack up if the Gov decides to re-write the rules and pulls the plug on RHI where they view the RHI scheme has been excessively exploited or at least make the income taxable? There is already a escape clause to cease RHI payments... if a critical part of the system fails and the replacement is deemed to therefore be a new commission then this can invalidate your current RHI agreement? I have a small domestic pellet boiler, if the water jacket on the boiler fails that could be game over for my RHI payment, if I had to replace the boiler, this would be classed as a new commission, my RHI agreement would cease to be valid and I would have to re-apply for RHI at the current tariff, a fraction on our current.

Thats cheap. I would struggle to find a biomass plant that could service a loan for that sort of figure. Would of thought 5 million would be minimum size today to make the grid connection worthwhile.
Think the problem you have is the biomass boiler is not actually generating an income just giving you a cost reduction. If I was in the situation the boiler would be running a CHP plant with the waste heat being used to heat the sheds but the electric generated used to service the loan then at least you could show the bank income being generated from a third party.

 

[farmerm]

Thats cheap. I would struggle to find a biomass plant that could service a loan for that sort of figure. Would of thought 5 million would be minimum size today to make the grid connection worthwhile.
Think the problem you have is the biomass boiler is not actually generating an income just giving you a cost reduction. If I was in the situation the boiler would be running a CHP plant with the waste heat being used to heat the sheds but the electric generated used to service the loan then at least you could show the bank income being generated from a third party.

£5million for a system to heat a chicken shed? Must surely make more sense to build the shed nearer the equator and ship the product!

 

[renewablejohn]

£5million for a system to heat a chicken shed? Must surely make more sense to build the shed nearer the equator and ship the product!

No I am just saying it would be easier to get a lender to finance a CHP plant for 5 million and then use the waste heat from the CHP plant to heat the chicken shed then to find a lender for 2 million just to heat a chicken shed. Problem with a CHP plant is the cost of the grid connection.

 

[Skintagain]

if you have traded 40 years and got into that sort of LTV there has to be alarm bells ringing for a loan company. Things can't be good if you are having to extend by 5 years either so I think it will be hard work.

 

[betternextyear]

We used Agribank to finance our biomass. 15 years no problem. Although it was a fraction of your amount