Get a top return from Abundance Generation's latest ethical investment.
Abundance Generation's latest renewable energy project offers investors returns of as much as 7.5% a year, and you can invest from as little at £5.
Abundance's newest crowd-funded project is 'Oakapple Berwickshire', a £3.1 million solar-energy project to mount solar PV (photo-voltaic) systems on the roofs of 749 social housing homes across Berwickshire in the Scottish Borders.
There are a number of obvious positives here. Investors get a great return on their money, it's good for the environment and the Berwickshire Housing Association's tenants will see their energy bills fall by nearly a third, entirely free of charge.
What's not to like? However, before investors dive right in, there are some drawbacks to be aware of.
Your money isn't protected
This is an investment into what's called a debenture. This is a type of corporate bond commonly used by companies to borrow money. In other words, your money buys you an IOU issued by a medium-sized business.
Any cash you put into this is not covered by the £85,000 cash savings net offered by the Financial Services Compensation Scheme.
If Oakapple went bust, then repayment of your capital and bond coupons (interest) could be at risk. Then again, with such renewable-energy schemes backed by Government incentives through Feed-In Tariffs (FITs), an appointed company administrator would be tasked with getting these payments to you.
Likewise, if Abundance Generation (a Financial Conduct Authority-regulated finance platform) were to go under, then this could give small investors a real headache.
As with any investment, your capital is at risk and you could lose everything.
You're in for the long haul
As soon you invest in this project, you're in for the long term. From the date you invest until 1st April next year, you earn initial interest of 7% a year, paid monthly in arrears after the minimum £500,000 investment threshold is reached.
Once the solar panels become fully operational by generating electricity, your capital and interest are returned to you over 20 years, while producing an internal rate of return (IRR) of 7.5%. Your actual yearly returns rise steadily over time, as the bond income increases by 3.3% each year (helping to combat inflation) to give a final return of 7.5% a year.
You are locked into an illiquid investment
This investment is highly illiquid. In other words, while buying into this crowd-funded bond may be easy, selling out could well be a problem, as there is no recognised, licensed exchange for trading these bonds.
That said you can try to sell your holding at any time on Abundance's bulletin board, where all sales to date have been at par (original buying prices) or above.
A wise investment?
Personally, I'm tempted by this investment, and not just because of its ethical nature. 7.5% a year is a decent return for funding a relatively low-risk business venture. And I'm a fan of crowdfunding and all other people-powered forms of finance which are really taking off at the moment.
If you're fed up with earning miserly rates of interest on your spare cash on deposit, want to earn attractive returns on as little as £5, and are keen on ethical investing, then it's well worth taking a good look.
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