You are here: Home - Investing - Experienced Investor - News -

Hold onto your geothermals, new bond pays 12% income

0
Written by:
26/07/2017
Investors can help build the first commercial geothermal electricity power station in the UK via an 18-month bond paying 12% per year, with a new offer from United Downs Geothermal and ethical peer-to-peer platform Abundance.

The United Downs Geothermal bond will pay the equivalent of 12% per year at the end of the 18-month term.  The bond can be held in an Abundance Innovative Finance ISA, meaning the income is tax free.

The Bond aims to raise £5m to help construct the UK’s first commercial geothermal plant near Redruth in Cornwall. The project has recently been awarded a £10.6m grant from the European Regional Development Fund and £2.4m of public funding from Cornwall County Council.

Geothermal energy is heat energy generated and stored in the earth. There are currently projects in Italy and Iceland but it hasn’t been used in the UK to generate electricity. The first stage of the project is to drill a well down to 2.5 km, followed by a second deeper well of 4.5 km to create a geothermal circuit to power the electricity generation plant built on the surface. The project is designed to create enough energy to power 5,500 typical homes each year.

Ryan Law, managing director of Geothermal Engineering, said: “The geothermal resource beneath our feet is extensive, and, if properly managed, inexhaustible. The granite rocks of Cornwall have the highest heat flow in the UK and are the best place for the development of geothermal power.  The United Downs project is at the cutting edge of geothermal technology and we want to give the local community the chance to be involved in this project.”

People can invest directly, from a minimum of £5. Abundance has raised c£8m in the last two months to support tidal energy (Atlantis Resources) and energy efficiency (Green Deal Financial Services) through debenture offers.

A 2012 study by Sinclair Knight Merz  ‘Geothermal potential in Great Britain and Northern Ireland’ estimated that geothermal energy – which captures the heat held in rocks far beneath the earth’s surface – has the potential to meet up to 20% of UK electricity needs, with zero carbon emissions and it also provides a constant supply.

YourMoney.com verdict

12% is a chunky yield, when interest rates are at 0.25%, a 10-year gilt pays around 1.2% and stock market dividends average around 3.5%. However, it is not guaranteed and reflects the risks that are involved in the project.

Ben Yearsley, director at Shore Financial Planning, said: “The return on offer reflects the risk associated with the project. With this bond you are taking construction risk and then refinancing risk by the looks of it as to repay the bond, the underlying company will need to raise additional finance in 18 months’ time. While I have invested in a number of renewable energy projects and I like the space, I prefer lending money to projects already up and running and generating.”

If investors are still tempted, the key is to invest relatively small amounts and keep the remainder of your savings in safer options.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
GiveMoney
Santander customers ditched bank as 1|2|3 rate cut took hold

Santander attracted hundreds of thousands of savers with its current account offering but figures show users switched out following interest...

Close