Swindon innovates with ISA-eligible solar bond
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Bonded. Swindon backs second solar bond. Photo: Alan Levine, Flickr.
Swindon Borough Council is set to launch the UK’s first ISA-eligible investment through a council-owned company, following the success of its solar farm bond.
In February, the council issued a bond to residents raising £1.8m towards a solar farm investment – hitting its target a month early in June.
Now the authority is to launch a second bond to fund a second version – which will this time use new legislation to allow retail investors to hold the bonds in an ISA portfolio.
Karl Harder, co-founder & director at Abundance Investment, the firm behind the scheme, told Room151: “The legislation allowing crowdfunded bonds to be held within ISAs was laid before Parliament earlier this week and will be live by November.
“The advantage for investors will be that they won’t have to pay tax on their investment.”
The council is investing £3m of its own cash in the scheme and is hoping to raise the remainder needed to fund the project — up to £2.4m — through the bond issue. The offer will be open to investors from outside the borough, as well as residents. Swindon said a balance had to be struck between “maximising local participation and filling the investment offer”.
The council is targeting an annual return of 6% from the solar farm project, through rent and business rates income.
Revenue from solar generation would also raise £140,000 a year, or a total of £3.5m over the project’s 25 year life.
Proceeds will be used by the council to build a noise barrier to shield residents from a nearby dual carriageway.
Like the first scheme, the new project will be delivered through a special purpose vehicle, which will become a public limited company to meet the requirements of the new ISA legislation.
Cllr Dale Heenan, Swindon’s cabinet member for transport and sustainability, said: “The 6% return is fantastic, when compared to most bank saving accounts which are offering less than 0.25%. I’m not a financial adviser, but I would urge residents take a close look at the details.”
The council also revealed that the yield on the first project, which is now live, is 12% higher than originally modelled and the first cash return is on schedule to be paid in March.
