Business Plan
For
Cymdeithas Cwm Arian Association
“To establish the Silver Valley area of North Pembrokeshire as
an area of best practice for energy efficiency by providing a
clean, renewable energy source.”
Presented by
Michael Parcell
Business plan date
19th September 2009
Contact details
Michael Parcell
Llwynhelyg,
Hermon,
Glogue,
Pembs.
SA36 0DT
Tel: 01239 831458
Email: mrjparcell@aol.com
Contacts
Client
Michael Parcell
Cymdeithas Cwm Arian Association
Llwynhelyg,
Hermon,
Glogue,
Pembs.
SA36 0DT
Tel:
Email:
01239 831458
mrjparcell@aol.com
Accountant
Currently Cris Tomos is carrying out all accounting requirements of the renewable energy working group. CCAA will
appoint accountants when the necessity for this arises.
Bank
The working group will set up a bank account specifically for the renewable energy project. This will be with the
Charity Bank who will also help fund the project via a loan.
Business Consultant
West Wales Consulting Ltd
PO Box 99
Haverfordwest
SA61 9AR
Tel:
Email:
01550 777040.
westwalesconsult@aol.com
Renewable Energy Consultant (Feasibility Study)
Dulas Ltd
Unit 1
Dyfi Eco Park
Machynlleth
Powys
SY20 8AX
Tel. 01654 705000
Business Plan for Cymdeithas Cwm Arian Association
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Table of Contents
1. Executive Summary
2. Business Background
4
8
2.1 Projected Business Activity
2.2 Legal Business Description
2.3 VAT Status
2.4 Owner’s Experience
2.5 Support Team
2.6 External Support
8
9
9
10
10
10
3. Aims and Objectives
11
3.1 Mission Statement
3.2 Business Objectives
3.3 Critical Success Factors
3.4 Key Performance Indicators
11
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12
12
4. Delivery of Products and Services
13
4.1 Products and/or Services
4.2 Customer Service
4.3 Terms of Business
4.4 Technology, Processes and Equipment
4.5 Suppliers and Terms of Trade
4.6 Premises
4.7 Distribution
4.8 Legislation
4.9 Insurances
4.10 Future Staff Requirements
4.11 Employment Policy
4.12 Training Policy and Plan
4.13 Equal Opportunities Policy
4.14 Health and Safety Policy
4.15 Welsh Language Policy
4.16 Environmental Policy
4.17 IT and eBusiness Policy
4.18 Confidentiality Policy
13
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15
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15
19
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5. The Market
23
5.1 Market Overview
5.2 Customer Profile
5.3 Competition
5.5 Competitive Advantage
5.6 External Influences
23
26
27
27
27
6. Marketing
30
6.1 Message
6.2 Positioning
6.3 Branding
6.4 Pricing Objectives
6.5 Price Determination
6.6 Price Adjustment Strategies
6.7 Marketing Methods
30
30
30
30
30
31
31
7. Sales
33
7.1 Sales Channels
7.2 Sales Personnel
7.3 Managing Enquiries
7.4 Invoicing and/or Payment Collection
33
33
33
33
8. Finance
34
8.1 Financial Accounts of Existing or Acquired Business
8.2 Financial Projections
8.3 Sensitivity Analysis
8.4 Existing Assets
8.5 Funding Requirement
34
34
34
34
34
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8.6 Sources of Funding
8.7 Assumptions
8.8 Case for Grant
8.9 Benefits of Grant
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36
39
40
Appendices
40
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1. Executive Summary
Purpose of Plan
The purpose of this plan is to present a written document indicating how
Cymdeithas Cwm Arian Association (CCAA) proposes to trade. This plan will
be used to (1) ensure the renewable energy project is successfully developed
and (2) thereafter, that its performance is monitored according to the plan.
The plan may also be used to engage the support of appropriate third parties
(banks, accountants, grant providers).
Projected Business Activity
The Ynni Cwm Arian Energy working group was formed to enable background
research to be carried out into utilising Renewable Energy resources and to
investigate Lowering Carbon Footprint by 50% and Energy Efficiency for local
households in the Silver Valley area, and the Neighouring 4 wards of Clydau,
Crymych, Trelech and Llanboidy in West Carmarthenshire and North
Pembrokeshire.
A study carried out by Dulas Ltd (with funding from PLANED and a small
Sustainable Development Fund grant) identified a site that looked promising
for the siting of two wind turbines on the hills behind Llanfyrnach. These wind
turbines would provide income from selling the generated electricity to the
National Grid; this would generate money that can be put back into the
community for the benefit of its residents.
On satisfactory completion of wind speed tests and gaining planning
permission work will begin to build 1.2 million Megawatt turbines. It is
estimated that from selling electricity generated to the National Grid, Cwm
Arian will bring in an income of over £300,000 pa. Once costs are covered the
surplus would be used for local community development.
The purchase and installation costs of two turbines is circa £1,100,000
Committee Experience
The key members of the Community Association who are going to take
responsibility for this project are as follows:
Mike Parcell – Design Engineer
Cris Tomos – Chairman of community
Bill Davies – Vice Chairman
Aidan Langdon – Secretary
Products and/or Services
The wind turbines will be formatted as two 1200 kW turbines to give a total of
2400 kW. This will produce an estimated Annual output of 5,256,000 kWh
based on the plant working at 25% of capacity.
These wind turbines would provide income from selling the generated
electricity to the National Grid. Once costs are covered the surplus would be
Business Plan for Cymdeithas Cwm Arian Association
Page 4
used for local community development and in the education of the local
population in further energy saving techniques.
Market
The Renewable Obligation (RO) is the mechanism by which the Government
is intending to achieve its target of 10% Renewable Electricity (RE) supply by
2010. It is a requirement on all licensed electricity suppliers in England and
Wales to supply a proportion of their electricity from RE generation. The
obligation on each supplier will rise to 10.4% by the year ending 31st March
2010.
The RO will run until 2026 providing a guaranteed market for renewable
energy. The expected market for eligible renewables is expected to expand
three fold from the present level of 10TWh to 25TWh in 2010. Government
estimates that by 2010 the Renewables Obligation and Climate Change Levy
will be worth £1bn a year to the renewables sector.
The Welsh Assembly Government has committed to achieving 800
megawatts (MW) onshore wind by 2010. This target was published in TAN8,
their national planning policy statement on renewable energy.
Financial Projections
As a result of our findings we are very confident that a market exists for
provision of renewable energy for sale to the National Grid and for the
services that CCAA offer to the local community. As such, in the next five
years we are confidently forecasting income and profits of:
Year
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
Projected Turnover
£0
£9,616
£325,039
£336,939
£349,191
Profit Before Drawings/Tax
-£83
-£15,184
£198,844
£208,231
£221,834
Funding Requirement
The success of CCAA’s renewable energy initiative is dependent on an
investment of £1,210,000 to cover essential start up and ongoing
maintenance costs as detailed below:
Development Costs
Land Cost
Wind Testing Cost
Planning Cost
£0
£0
£40,000
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Plant & Equipment Cost
Building Cost
Financial Service Cost
Legal Cost
Insurance Cost
Project Management
Other Project Start Up Costs
£600,000
£386,600
£18,000
£4,500
£9,000
£25,000
£66,000
£1,149,100
Cash Flow Requirements
Total Funding Requirement
£60,900
£1,210,000
This investment will help ensure the successful launch and long-term
prosperity of the wind turbine project.
In addition, a restoration fund will be set up in order to establish an account
that can be used to either restore the site at the end of the life of the project
(15 – 20 years) or be used to re-instate a new turbine on the site. This will
commence after five years of turbine revenue generation in order that ongoing
costs can be reduced by repayment of much of the loans that are financing
the project and a fund for the support of local initiatives and education can
commence immediately revenue is generated.
Sources of Funding
CCAA hopes to raise the finance as detailed below:
Source of Funding
Unity Bank
Low Carbon Communities Fund
Community Share Offer (Credit Union Support)
Other Funding*
Total
* Other Funding -
Amount
£300,000
£500,000
£300,000
£110,000
£1,210,000
is required in order to finance the Planning process
(£40,000) and the repayments of the Finance Wales and
Charity Bank Loans prior to revenue generation
(£70,000).
This additional funding will be via a combination of
sponsorship, grant funding and other loan schemes which
are to be identified.
Case for Grant
Due it’s environmental and community development nature, the CCAA wind
turbine project will be eligible for some grant. The scheme will generate a
significant new income stream into the local community and create both direct
and indirect local employment. An example of an eligible grant scheme is
Environmental Goods and Services for £20,000 of grant funding.
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Benefits of Grant
By supporting this scheme the Welsh Assembly Government (WAG) would
demonstrate support of a community based environmental project. This
project will also help WAG to achieve its commitments to their Renewable
Obligation and to achieving targets set by TAN8. In addition permanent jobs
and revenue will be generated within a rural community and there are no
displacement issues.
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2. Business Background
2.1 Projected Business Activity
Achievements To Date
The Ynni Cwm Arian Energy working group was formed to enable background
research to be carried out into utilising Renewable Energy resources and to
investigate Energy Efficiency for local households in the Silver Valley area, of
North Pembrokeshire.
Part of the work being carried out in the Heritage work identified various
historical means of using water power on farms, mills and in Glogue Quarry.
An investigation into the use of local streams for modern micro-hydro systems
was carried out. This investigation identified one existing unused water turbine
and three potential micro-hydro sites. A Preliminary Feasibility Study was
produced which included calculations of potential energy production and
example diagrams of installations.
Using this study as an example of the Energy Group’s credentials, an
application was made to the Pembrokeshire Coastal National Park Authority
for a Sustainable Development Fund (SDF) grant to carry out a wider study
into all forms of sustainable energy within the Silver valley area. In December
2005, the group was awarded a small SDF grant to employ a specialist
company to undertake this study. PLANED also came forward with some
match-funding to cover the ancillary costs of the work. After tendering, the
work was awarded to Dulas Ltd of Machynlleth to carry out a feasibility study
into the possibilities of using wind, water and biomass sources to generate
electricity locally and to advise in the implementing of Energy Efficiency in the
home.
Over January, February and March of 2006, Dulas carried out site visits to
investigate wind and water sites, met with the Energy Group and carried deskbased work using specialised computer packages. The finalised
Renewable Energy Feasibility Study Report was presented to the Silver
Valley association in late March and public meetings were held to broadcast
the findings. In addition, a questionnaire was delivered by hand to all the
households within the area to invite comment upon various aspects of Energy
Efficiency and Renewable Energy.
The study identified a site that looked promising for the siting of two wind
turbines on the hills behind Llanfyrnach. These wind turbines would provide
income from selling the generated electricity to the National Grid; this would
generate money that can be put back into the community for the benefit of its
residents. The micro-hydro and biomass options appeared less viable and
have been put on hold for the time being.
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A pre-planning application including the findings of the Dulas Report was
submitted in May 2007 and the committee are awaiting a response from the
planning department in response to this.
Projected Activity
The group is now considering the next phase of undertaking a detailed study
of the identified wind-power site to take measurements over a period of 3-6
months. CCAA are investigating the possibility of using readings from another
nearby site to satisfy this for planning application and financial forecasting
purposes and it is assumed that this is possible within this plan. If this is not
acceptable it is estimated that the study will cost circa £3,000 to complete and
the committee are currently identifying possible funding options in order to
proceed with this.
At the same time CCAA will be identifying possibilities for funding the full
project on the assumption that full planning permissions are gained and that
the wind tests confirm the projections made within the Dulas report.
On completion the two 1.2 million Megawatt turbines, it is estimated that from
selling electricity generated to the National Grid, Cwm Arian will bring in an
income of £300,000 pa. Once costs are covered the surplus would be used
for local community development.
The purchase and installation costs of two turbines is circa £1,100,000
2.2 Legal Business Description
The proposed renewable energy project is currently being organised by
Cwmdeithas Cwm Arian Community Association. However due to the
significant investment and revenue potential involved it is proposed that a
separate business entity is set up.
The community Association will take legal, accountancy and business advice
(including from the Wales Co-Operative Network) as to the best trading format
for the new business. It is intended that the business will operate as a social
enterprise.
2.3 VAT Status
Having spoken to an independent energy consultant CCAA have been
advised that they will have to become VAT registered on commencing the
project and that energy sold to the national grid will be charged at 17.5%.
The price per kWh quoted in the financial plan is inclusive of all Renewable
Obligation Ceritificates (ROCs) and Climate Change Levy Exemption
Certificates (LECs).
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2.4 Committee Experience
The key members of the Community Association who are going to take
responsibility for this project are as follows:
Mike Parcell – Design Engineer. Worked as an energy manager with local
authority.
Cris Tomos – Chairman of community
Bill Davies – Vice Chairman
Aidan Langdon – Secretary.
2.5 Support Team
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Dulas Ltd – Renewable Energy Consultants
Welsh Assembly Government
Pembrokeshire County Council Planning Department and Pembrokeshire
National Parks
Sustainable Development Fund
Members of the Community Association
The local population to Hermon and surrounding areas
Land Owner, on whose property the turbines will be built.
2.6 External Support
Source(s) of Funding:
Accountant:
Bank:
Business Consultant:
Finance Wales
Unity Bank
Sponsorship
Earned Revenue
Cris Tomos
LloydsTSB Bank
West Wales Consulting, Haverfordwest.
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3. Aims and Objectives
3.1 Mission Statement
To establish the Silver Valley area of North Pembrokeshire as an area of best
practice for energy efficiency by providing a clean renewable energy source.
3.2 Business Objectives
Year One Key Objectives
 Complete wind testing by January 2009
 Obtain full planning approval by June 2010
 Secure Funding required.

Year Two Key Objectives
 Apply won funding to capital works
 Complete All building works and turbine erection by June 2011.
Year Three Key Objectives
 Commence electricity generation in July 2011
 Generate turnover of over £300,000
 Employ a maintenance/monitoring employee in July 2010
 Employ a community energy liaison officer in January 2010
 Commence reducing Household Carbon Footprint by 50%
 Establish a profit level of over £190,000 for investment into local community
schemes.
Year Four Key Objectives
 Maintain all staffing in line with the plan
 Generate turnover of over £300,000
 Set 10 year goals for a total annual Carbon Tonnage Reduction of 12,500
tonnes across 2834 house holds (population of 6,827)
 Establish a profit level of over £200,000 for investment into local community
schemes.
Year Five Key Objectives
 Maintain all staffing in line with the plan
 Generate turnover of over £320,000
 Monitor Carbon usage to and average of 4.4 tonnes per household down
from 8.8 tonnes
 Establish a profit level of over £200,000 for investment into local community
schemes.
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3.3 Critical Success Factors
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Gaining Planning Permission in a timely fashion and to budget
Wind Tests support evidence from existing research to erect the turbines
Support of Landowner
Securing full funding to complete work
Maintaining local resident support for the project
Arranging or being able to provide facilities/services that local people want
and are willing to support
Monitoring each household Carbon Tonnage usage
Maintaining the continued support of main stakeholders during the
planning and building process
Maintaining continuity and ongoing commitment of the existing Committee
3.4 Key Performance Indicators
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Results from the wind tests as compared with projections made within this
plan.
Price paid by the National Grid in comparison to projected pricing
Actual kWh output level generated once in operation
Revenue generated that can be used to support local initiatives
The number of local initiatives promoted as a result of the project
Reduction of 12,500 Carbon Tonnes per annum from 2834 households.
The number of local residents directly affected by initiatives introduced as
a result of the project
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4. Delivery of Products and Services
4.1 Products and/or Services
The potential technologies have been assessed by the ReSolutions team at Dulas
and are summarised in the table below as the potential for implementation in Cwm
Arian.
This illustrates that other than general promotion of energy efficiency the Wind
Turbine is the only suitable technology available for a large scale
development in this area. For the full analysis of all the options available
please see the ReSolutions Report.
Wind Turbine
The wind turbines will be formatted as two 1200 kW turbines to give a total of
2400 kW. This will produce an estimated Annual output of 5,256,000 kWh
based on the plant working at 25% of capacity.
These wind turbines would provide income from selling the generated
electricity to the National Grid; this would generate money that can be put
back into the community for the benefit of its residents. Once costs are
covered the surplus would be used for local community development and in
the education of the local population in further energy saving techniques.
Carbon Foot Print Reduction & Energy Efficiency
This community based education will focus on how sustainable energy can
help to tackle many of the problems that confront individuals and communities
in the following areas:
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Save money and reduce debts
Reduce waste and improve the environment
Improve housing conditions
Create jobs and training opportunities
Improve health
Contribute to community regeneration
This will be achieved via community initiatives and education that will focus on
the following areas:
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Using energy more efficiently
 Behavioural changes
 Measures (e.g. loft and cavity wall insulation)
 Appliances
 Reducing lighting costs
 Reducing water usage
Low carbon technologies
 Using technologies which produce less or no carbon dioxide when
generating energy
 Identification of grants available to community associations and individuals
to help implement strategies
Other Association Activity
As well as the promotion of better energy efficiency to the local community,
CCAA will also carry out work through a number of working groups in support
of the local community in the following areas:
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The Environment
Local Heritage
Recycling
Promotion of Tourism
Promotion Business / Local Employment
Development of Community Facilities/Resources
Transport Traffic and Rights of Way.
We have plans to utilise the revenues from the sale of wind energy assits with
household revenue to be spent as follows
40% of revenue - capital cost grants to households for the installation of
insulation/ draught-proofing, solar hot water systems, biomass heating
systems and energy efficiency measures.
20% of revenue - refurbishment of community buildings followed by support
for local affordable housing.
10% - information leaflets/ house to house training about carbon footprinting.
10% - initiatives that support a reduction in travel through the establishment of
car-share schemes and timetabled bus services.
10% - support for local initiatives that assist with community carbon reduction
(such as community composting initiatives, mobile shop/service provision)
10% - administrative fees Cwm Arian
4.2 Customer Service
CCAA understand that they need the support of the local community if they
are to achieve their mission. They encourage two way communications with
local residents and hold regular meetings to show transparency and inclusion.
A questionnaire has also been distributed to every household in the local area
to encourage further feedback.
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4.3 Terms of Business
CCAA will offer standard trade terms with the National Grid for payment of
electricity produced from the win turbines.
4.4 Technology, Processes and Equipment
CCAA, in association with their support network, will make excellent use of
technology and equipment to establish the feasibility of the site for wind power
and the impact this will have on the local environment. This includes the
software and equipment used to produce the Dulas Report as well as future
use of anemometers to establish wind speeds at the site. On construction the
site will offer two 1.2MW wind turbines.
4.5 Suppliers and Terms of Trade
Post development there will be little requirement for formal suppliers. Where
regular transactions are envisaged with a supplier trade account, terms of 30
days credit would be arranged.
4.6 Premises
The map below shows the area in which the turbines are to be situated and
the local area to be served:
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Initial site identification was undertaken via a desk based study scoping the
area for suitable sites for electricity generation using large scale wind
turbines. Two sites were identified - these being at the cross roads above
Rhos-y-llyn at grid reference 239 320, and along the ridge above
Pantygwyddel at grid reference 230 300, as follows:
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Preferred site due to good
access
thus
requiring
minimal roadway investment
An idea of the sizes of such plant can be gained from the illustration below, as well
as an indication of the level of electricity output.
Using Windfarmer software and the GIS information which provides topographical
information it is possible to assess the field of visual impact on the surrounding area.
The map below shows the zones from where any installed turbines may be seen,
based on the proposed 1.2MW machines, known as a Zone of Visual Impact (ZVI).
Smaller machines will have shorter towers and a smaller blade diameter and hence
will have less of a visual impact than the largest machines modeled. The ZVI
generated is considered by Dulas’ experts to be favourable for the site, especially as
there is little impact to the National Park.
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Grid Connection
It is known that the Dyffryn Brodyn windfarm connects to the grid at a
substation in Llanfrynach. There should be potential to connect to the grid for
the community wind power scheme at this point with the proximity to the
potential site helping to minimise the capital cost of connection. Should the
scheme proceed at the site a full investigation and negotiation with the
network operator will be required.
Ecological Impact Issues
The impact of large turbines on the ecology of the surrounding area is
relatively benign. The main impacts are during construction and installation
when foundations must be dug and concreted; access roads and crane
standings must also be built. The impact of these operations will be assessed,
and mitigated, as with any construction works. On completion of the
construction phase, foundations will be overfilled and made good allowing
uninterrupted use of the land right up to the foot of the turbine tower. Access
roads and crane standings will see a degree of vegetation overgrow reducing
their visibility.
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A full noise assessment, including background noise monitoring, would need
to be carried out to assess whether it is feasible to have turbines of a
particular size located on this site.
4.7 Distribution
The energy produced by the wind turbines will be sold to the National Grid. It
is however the revenue from this sale that will offer the real benefit to the local
community. A more detailed analysis of the local population can be viewed in
section 5.1.
4.8 Legislation
CCAA will have to comply with Planning Permission rules and regulations
including an Environmental Survey.
Once the legal business type has been established the business will have to
run within the appropriate legal framework.
If details of committee members, member or donators are kept then the CCAA
must comply with the Data Protection Act 1998, which covers confidentiality
issues surrounding the retention of personal information.
When CCAA provide employment they must comply with health and safety
and employment law legislation. Key regulations include the:

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
Health and Safety at Work etc. Act 1974 and the Health and Safety
(Miscellaneous Amendments) Regulations 2002, which set out general
obligations towards staff, clients and members of the public in terms of
health and safety.
Fire Precautions (Workplace) Regulations 1997 and the Regulatory
Reform (Fire Safety) Order 2005.
Other employment considerations include National Minimum Wage
legislation, arranging employer's liability insurance and ensuring equality of
treatment in recruitment.
4.9 Insurances
It is estimated that insurance costs at the development stage will be circa
£6,000 and that ongoing annual insurances during the life of the operational
period will be in the region of £6,000. The insurer chosen will specialise in
this type of installation.
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4.10 Future Staff Requirements
On completion of the project, CCAA would like to train a new employee to be
responsible for the running of the project in the form of the ongoing monitoring
and maintenance of the wind turbines.
In addition, CCAA would like to employ a liaison officer whose responsibility
will be to help educate the local community in relation to energy efficiency.
This officer would also help with formal bids and awards of grants for energy
efficiency initiatives within the community.
A budget of £15,000 per annum has been set aside for employment. This will
be £7,500 for the monitor/maintenance engineer and £7,500 for the
community liaison officer.
As well as direct employment CCAA will also generate significant indirect
work such as installation of energy saving devices etc.
4.11 Employment Policy
In all matters relating to future staff employment, CCAA will give utmost
consideration to the preservation of good staff relations, training, development
and employment best practice.
4.12 Training Policy and Plan
CCAA will ensure that training requirements of the committee, volunteers and
staff are monitored on a regular basis and that relevant training/development
is provided where necessary or beneficial.
4.13 Equal Opportunities Policy
All job applicants and staff in post will be treated equally regardless of ethnic
or national origins, race, gender, age, disability, language ability, literacy,
religious belief, sexual orientation or any other improper grounds.
All employees are to be recruited, maintained in employment, trained and
promoted on the basis of ability to fulfil the requirements of the role.
The aim is to allow individuals fair and equal opportunities to develop abilities
and realise potential. Also, to actively promote tolerance and understanding
amongst staff based on an awareness of inherent attitudes, customs and
beliefs of others.
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Page 20
4.14 Health and Safety Policy
CCAA is committed to ensuring the health, safety and welfare of the public, its
Committee, volunteers and any employees. CCAA will ensure that its
statutory duties are met at all times. Each Committee member and employee
will be given such information, instruction and training as is necessary to
enable the safe performance of activities. It is the duty of the Committee to
ensure that all processes and systems are designed to take account of health
and safety.
4.15 Welsh Language Policy
CCAA is committed to the promotion of the Welsh language. Signage and
promotion will carry both Welsh and English. Also, new employees who are
bilingual would be advantageous but not essential.
4.16 Environmental Policy
This project is intended to become a model for an environmentally friendly
community. It is also intended to be seen as a centre of best practice and
education with regards to environmental and energy reduction issues.
CCAA’s environmental and energy policies will include the following:
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Undertaking activities that are respectful of the natural environment and
which seek to protect it
Imparting knowledge indicating a caring, environmental stance
Developing customers, suppliers and other stakeholders own responsibility
and knowledge for protection of the environment
Advising customers, suppliers and other stakeholders where possible on
processes or options which help preserve the environment
Choosing the most environmentally friendly route where requirements and
economics allow
Promotion of recycling and/or reusing materials used
Promotion of safe disposal of any waste products which may be harmful to
the environment
Saving energy where possible and educating others of how to do this.
4.17 IT and eBusiness Policy
CCAA is committed to the appropriate use of IT in delivering services and will
seek advice as to best practice within this field. A review of IT usage and
improvements to delivery would take place annually.
Business Plan for Cymdeithas Cwm Arian Association
Page 21
4.18 Confidentiality Policy
CCAA will adhere to the Data Protection Act (1994) in all matters relating to
customer, visitor, stakeholder and employee information that may be held. No
information will be disclosed to third parties without the prior knowledge and
consent of the persons concerned.
Business Plan for Cymdeithas Cwm Arian Association
Page 22
5. The Market
5.1 Market Overview
Market Background
Renewable energy sources have been known for many years, but it is only
during the past 20 years that modern technology and investment has been
applied to produce viable alternatives to fossil fuel that can produce energy on
a useful scale.
The stimulus to develop renewables is being driven by several factors:

Carbon emissions from fossil fuels are causing global warming and there is
pressure to reduce the amount of carbon dioxide produced in energy
production.
 The UK is soon to become a net importer of gas and later of oil, as North
Sea reserves are depleted. By 2020, the country could be dependent on
imported energy for 75% of its primary energy needs.
 Rising gas prices.
As a result renewable energy is now formally part of the government energy
policy to reduce carbon emissions and to diversify the UK's energy supply.
Alternative methods have to be found for:
The Renewable Obligation
The Renewable Obligation (RO) is the mechanism by which the Government
is intending to achieve its target of 10% Renewable Electricity (RE) supply by
2010. It is a requirement on all licensed electricity suppliers in England and
Wales to supply a proportion of their electricity from RE generation. The
obligation on each supplier will rise to 10.4% by the year ending 31st March
2010.
The RO will run until 2026 providing a guaranteed market for renewable
energy. The expected market for eligible renewables is expected to expand
three fold from the present level of 10TWh to 25TWh in 2010. Government
estimates that by 2010 the Renewables Obligation and Climate Change Levy
will be worth £1bn a year to the renewables sector.
Industry Growth
In 2005, the UK became one of only eight countries in the world to break the 1
gigawatt installed capacity barrier and the following graphs show that this
period of growth is set to continue.
Business Plan for Cymdeithas Cwm Arian Association
Page 23
Source: The British Wind Energy Association (BWEA) Annual Report for 2005
Welsh Assembly Commitment
The Welsh Assembly Government's has committed to achieving 800
megawatts (MW) onshore wind by 2010. This target was published in TAN8,
their national planning policy statement on renewable energy.
Energy Efficiency at a Local Level
Via the program of community based initiatives and education, CCAA will aim
to tackle some of the issues relating to domestic energy use as highlighted
below:






Domestic Households are responsible for 25% of CO2 emissions. This
could be reduced to 18% through better energy efficiency.
The average UK household spends £620 on fuel and power every year and
could save £250 through better efficiency
Households spending more than 10% of their income on fuel are in fuel
poverty
1.2 million UK households are in fuel poverty
Low income pensioners and single parents are at higher risk from fuel
poverty
2 million gas customers are in debt (OFGEM)
Business Plan for Cymdeithas Cwm Arian Association
Page 24



30,000 people die of cold-related illnesses every year
A third of all housing falls below the decent home standard
Non decent housing leads to cold and damp-related illnesses such as
hypothermia and respiratory problems
Local Population Analysis - Census 2001
At the time of the Census in April 2001, the
resident population of LSOA Pembrokeshire
001D (the LSOA in which the project is to be
placed) was 1,124 of whom 49 per cent were
male and 51 per cent were female. This
compared with a resident population in
Pembrokeshire of 114,131 people, of whom
48 per cent were male and 52 per cent were
female.
The average age of the population in LSOA
Pembrokeshire 001D was 37.7 years. This
compared with an average age for England
and Wales of 38.7 years.
Resident population: percentage in each
age band, April 2001:
The populations with settlements in the Crymych Electoral Division is shown
below.
Business Plan for Cymdeithas Cwm Arian Association
Page 25
Settlement
Population
BRYNBERIAN
30
BRYNBWA
25
CROSSWELL
30
CRYMYCH
610
EGLWYSWRW
180
GLANDWR
55
GLOGUE
50
HERMON
185
LLANFYRNACH
60
PENYGROES
10
POSTGWYN
20
RHYDWENFACH
10
It is important to note that the
settlements listed opposite are
located within the Crymych Electoral
Division (total population of 2,340)
which covers a wider area than the
LSOA on which the previous figures
are based.
The population in settlements within
the Electoral division clearly shows
that nearly half of the population live
in rural locations outside these main
settlements.
It is estimated that through Analysis of these figures together with local
knowledge and distribution and return of the questionnaires that the total local
population in the three main areas directly affected by this project is roughly:
Focus Population to kick off Low Carbon Reduction.
GLOGUE
120
HERMON
385
LLANFYRNACH
110
Total Local Inhabitants
615
Wider 4 Wards Population and Households (2007 stats)
Population
Households
Crymych
1,170
502
Clydau
1,494
640
Trelech
2,075
861
Llanboidy
2,088
831
Total
6,827
2,834
5.2 Customer Profile
The customer for the generated power is clearly identified as the National Grid
who are under pressure to increase energy from renewable sources in Wales
in light of the TAN8 policy statement by the Welsh Assembly Government.
In addition to the sale of energy CCAA’s customers can also be identified as
the local residents of the area. Although these residents will not make a
financial transaction they are the ones that will benefit from the direct action
that CCAA will implement in the form of further environmental education as
well as support of local causes that will aim to improve the standard of living
for residents.
Business Plan for Cymdeithas Cwm Arian Association
Page 26
5.3 Competition
Although there are other sites offering wind generated (and other renewable
forms such as solar, hydro etc) power due to the commitments to the TAN8
policy it is estimated that demand for renewable power will continue to be
greater than available supply for some time into the future.
The lifespan of the CCAA project is 20 years and although the market place
may have changed dramatically within this time (for instance the proposed
wave power development in the Milford Haven estuary) it is still expected that
there will be demand for as much energy that can be produced throughout the
life of the project and certainly for the number of years until CCAA achieve
breakeven.
5.5 Competitive Advantage
CCAA will achieve competitive advantage through a combination of the
following factors:

Strong foundation of committee members who are committed to developing
the project and helping the local community on a voluntary basis.
 Support of the land owners on which the wind turbines are to be sited.
 Support of the local community
 The ability to call upon other community based projects to establish best
practice
5.6 External Influences
The external influences relating to CCAA are shown below:
Business Plan for Cymdeithas Cwm Arian Association
Page 27
SOCIOLOGICAL
TECHNOLOGICAL
Pembrokeshire made up of 97% micro SME’s,
very few large businesses.
Internet allows quick, interactive and low cost
communication.
Pembrokeshire
economy.
service
WWW and web site presence can aid
business profile and generate business
Population in rural and coastal areas is
increasing, which means higher service sector
requirement.
Renewable energy sources such as wind
power are capable of producing useful energy
at local level. This feature could lead to a
redistribution of energy with less reliance on a
transmission network and more locally
generated power.
is
primarily
a
Society is recognising the dangers of
continued global warming and many are
committed to reducing carbon emissions and
supportive of Eco policies.
Due to the visual nature of Wind Farms there
will be the inevitable ‘Not In My Back Yard’
(NIMBY’s) response from areas within the
local community.
Wind Power is currently the cheapest form of
renewable energy that can be produced on a
large scale.
ENVIRONMENTAL
ECONOMICAL
Planning sensitivities, especially in Pembs.
National park area.
Recycling and minimum wastage policies.
Current significant central funds available
dependent on project/business need for
SME’s/social
enterprises.(e.g.
Objective
1/matched funding etc)
Use of materials with high insulation/energy
saving characteristics
Subsidised consultancy fees for
through central funding schemes.
Environmental
businesses
commercial
Grant funding available from various public
bodies.
Carbon emissions from fossil fuels are
causing global warming and there is pressure
to reduce the amount of carbon dioxide
produced in energy production.
Integration of the Euro into the UK over the
next 5-10 years.
grants
for
SME’s
Salary/earnings levels in rural areas are below
the Welsh average.
National minimum wage
The UK is now facing a situation in which it
will soon become a net importer of energy,
first for gas and second for oil. Although
renewable energy will only make a small
contribution to import substitution, its
contribution will grow.
POLITICAL
LEGAL
Welsh Assembly committed to development of
SME’s in Wales
Insurance implications such as vehicle
insurances, public/ employer’s liability and PI.
Stable political climate in Wales encouraging
significant inward investment.
National Minimum wage
EU legislation regarding new entrants to EU.
This could reduce the amount of fund
available to support Welsh businesses.
Ongoing commitment to regeneration in key
areas in Wales.
There will be continued pressure from the
Government
reduce carbon
emissions
Business
Plan fortoCymdeithas
Cwm Arian
Associationand
renewable energy will continue to be an
important part of this strategy. Commitment to
the Renewable Obligation (RO) is evidence of
this.
Data Protection Act
Employment contracts
statutory rights
and
employees
Planning Regulations
Page 28
Business Plan for Cymdeithas Cwm Arian Association
Page 29
6. Marketing
6.1 Message
To establish the Silver Valley area of North Pembrokeshire as an area of best
practice with regards to energy efficiency and by provision of a clean
renewable energy source.
6.2 Positioning
CCAA will position themselves as a provider of a renewable energy source for
sale to the National Grid.
CCAA will position themselves within the community as a source of
information and education in relation to energy efficiency and in the support of
local good causes.
6.3 Branding
The branding for CCAA as displayed on the Association’s web site is
illustrated below:
This branding is simple yet effective at portraying the environment in which
the Association works. This, together with other marketing material and
information published, will help to explain the particular challenges that the
local area faces and strengthen CCAA’s message in facing these challenges.
6.4 Pricing Objectives
CCAA will look to maximise the pricing received from the National Grid from
the renewable energy production.
Depending on the activity CCAA aims to provide other local services at a
nominal rate or free of charge.
6.5 Price Determination
Renewable energy price will be determined by the current price offered by the
National Grid. Due to the size of the operation it is expected that there will be
little room to negotiate pricing.
Business Plan for Cymdeithas Cwm Arian Association
Page 30
Where a nominal price is charged for CCAA’s other services/events this will
be to cover costs incurred by the Association and to fund other projects or
support local charities.
6.6 Price Adjustment Strategies
Pricing for local services/events will be determined on a case by case basis
and all pricing will be justified by a clear statement of how these funds are to
be used by the Association.
6.7 Marketing Methods
Direct Liaison with the National Grid
Due to the government targets for renewable energy sources CCAA will not
have to market their services to the National Grid but rather establish a
communication structure to negotiate and liaise with the National Grid. This
contact will be made via telephone, e-mail, letter, fax and face to face
meetings where appropriate.
Marketing of Other Services
The revenue generated from the sale of energy to the National Grid is
designed to make a difference to the local community in the form of education
to reduce in energy usage and costs including awarding a number of grants to
help make the changes required. In addition this revenue will help other
community based schemes and local charities. It is this message that needs
to be portrayed in order to help to establish local support for the scheme.
After the scheme has been implemented and revenue is being received it is
important that all events and initiatives are well publicised so that the largest
proportion of the local community can be reached.
In order to market these messages to the local community the following media
will be utilised:
Questionnaires – to establish the type of services wanted by the local
community
Newsletter –
to maintain regular contact with the community and to
notify of progress and future initiatives
Leaflets –
for promoting specific events
Web Site with updates on the scheme progress and to notify of
future initiatives
Local Meetings – to act as a forum in which the community can voice their
views
Word of Mouth – CCAA should encourage the local community to discuss
the initiatives being proposed
Business Plan for Cymdeithas Cwm Arian Association
Page 31
Local Signage –
The Association will place local signs in strategic places
around the local community in order to raise awareness
of events.
Press Releases - CCAA will make regular press releases to the local media
such as the Western Telegraph and Radio
Pembrokeshire to try and gain free exposure.
Meetings/Events - The events organised by CCAA should be used as a
platform in which to promote future events and initiatives.
Business Plan for Cymdeithas Cwm Arian Association
Page 32
7. Sales
Current research indicates that the following turnover for CCAA is realistically
achievable:
Year
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
Projected Turnover
£0
£9,616
£325,039
£336,939
£349,191
It is important to note that further wind tests are to be conducted which will
offer further evidence to projected turnover.
7.1 Sales Channels
Any enquiries would be handled by the nominated committee member
responsible for the activity in question.
7.2 Sales Personnel
The chair of the management committee and other committee members will
take responsibility for promoting the services and facilities provided. In
addition other voluntary members of the local community may help to promote
CCAA’s work through organised activity or word of mouth.
7.3 Managing Enquiries
Enquiries about CCAA will be dealt with by a member of the management
committee. All enquires would be dealt with within 48 hours. Enquiries would
be dealt with via telephone, email and at organised events.
7.4 Invoicing and/or Payment Collection
For the purposes of this plan it is assumed that payment from the National
Grid will be on a monthly basis in arrears.
Business Plan for Cymdeithas Cwm Arian Association
Page 33
8. Finance
8.1 Financial Accounts of Existing or Acquired Business
As the Renwable Energy project is being run by a new Working Group there
are no existing Financial Accounts available.
8.2 Financial Projections
As a result of our findings we are very confident that a market exists for
provision of renewable energy for sale to the National Grid and for the
services that CCAA offer to the local community. As such, in the next five
years we are confidently forecasting sales and profits of:
Year
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
Projected Turnover
£0
£9,616
£325,039
£336,939
£349,191
Profit Before Drawings/Tax
-£83
-£15,184
£198,844
£208,231
£221,834
8.3 Sensitivity Analysis
The breakeven point of the business is shown below:
Year 1
Year 2
Year 3
Income
£0
£9,616
£325,039
Fixed Costs
£83 £24,800
£114,945
Variable costs
£0
£0
£11,250
Profit
-£83 -£15,184
£198,844
Breakeven income
n/a
£24,800
£119,066
Year 4
£336,939
£113,708
£15,000
£208,231
Year 5
£349,191
£112,357
£15,000
£221,834
£119,006
£117,400
8.4 Existing Assets
CCAA do not currently have any owned assets. The land on which the
turbines will be built will be leased.
8.5 Funding Requirement
The success of CCAA’s renewable energy initiative is dependent on an
investment of £1,210,000 to cover essential start up and ongoing
maintenance costs as detailed below:
Development Costs
Land Cost
Wind Testing Cost
Planning Cost
£0
£0
£40,000
Business Plan for Cymdeithas Cwm Arian Association
Page 34
Plant & Equipment Cost
Building Cost
Financial Service Cost
Legal Cost
Insurance Cost
Project Management
Other Project Start Up Costs
£600,000
£386,600
£18,000
£4,500
£9,000
£25,000
£66,000
£1,149,100
Cash Flow Requirements
Total Funding Requirement
£60,900
£1,210,000
This investment will help ensure the successful launch and long-term
prosperity of the wind turbine project.
In addition a restoration fund will be set up to establish an account that can be
used to either restore the site at the end of the life of the project (15 – 20
years) or be used to re-instate a new turbine on the site. This will commence
after five years of turbine revenue generation so that ongoing costs can be
reduced by repayment of much of the loans that are financing the project and
a fund for the support of local initiatives and education can commence
immediately revenue is generated.
8.6 Sources of Funding
CCAA hopes to raise the finance as detailed below:
Source of Funding
Unity Bank
Low Carbon Communities Fund
Community Share Offer (Credit Union Support)
Other Funding*
Total
* Other Funding -
Amount
£300,000
£500,000
£300,000
£110,000
£1,210,000
is required in order to finance the Planning process
(£40,000) and the repayments of the Finance Wales and
Charity Bank Loans prior to revenue generation
(£70,000).
This additional funding will be via a combination of sponsorship, grant funding
(such as £20,000 from Environmental Goods and Services) and other loan
schemes (such as Pembrokeshire Lottery Interest Free Loan) which are to be
identified. CCAA will also approach the loan providers to establish the
possibility of having a payment holiday at the start of the loan until revenue
generation starts.
Business Plan for Cymdeithas Cwm Arian Association
Page 35
8.7 Assumptions
The revenue and cost assumption on which the financial plan is based can be
viewed in the following pages.
Business Plan for Cymdeithas Cwm Arian Association
Page 36
Cost Assumptions
Development Costs
Land Cost
Wind Testing Cost
Planning Cost
Plant & Equipment Cost
Building Cost
Financial Service Cost
Legal Cost
Insurance Cost
Project Management
Other Project Start Up Costs
£0
£0
£40,000
£600,000
£386,600
£18,000
£4,500
£9,000
£25,000
£66,000
Planning cost incurred in year one. All other development costs incurred in year two.
£1,149,100
Jul
£0
£0
£0
Year 1
Year 2
Year 3
Operational Costs
Maintenance & Consumables
Insurance
Land Rental
Business Rates
Overheads
Refurbishment
Year 1
Year 2
Year 3
Year 4
Year 5
% Increase
0%
0%
0%
1%
1%
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Total
£0
£0
£0
£0
£0
£6,667
£6,667
£6,667
£6,667
£6,667
£6,667
40,000
£0 £110,910 £110,910 £110,910 £110,910 £110,910 £110,910 £110,910 £110,910 £110,910 £110,910 1,109,100
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
0
1,149,100
£53,663
£5,926
£8,015
£3,860
£9,475
£0
£80,939
The schedule for these costs are illustrated below:
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
£6,745
£6,812
£6,880
Business Plan for Cymdeithas Cwm Arian Association
Page 37
Total
£0
£0
£80,939
£81,748
£82,566
Revenue Assumptions
Estimated Annual Production (kWh)
Revenue Per kWh produced*
Total Yearly Revenue
5,256,000
£0.0610
£320,616
*The revenue per kWh shown is inclusive of all Renewable Obligation Certificates (ROCs) and Climate Change Levy Exemption Certificates (LECs).
Revenue Breakdown:
Year 1
Year 2
Year 3
Year 4
Year 5
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
£26,718
£26,985
£27,255
Jun
Total
£0
£0
£26,718 £320,616
£26,985 £323,822
£27,255 £327,060
The assumption has been made that revenue per kWh produced will increase 1% year on year.
Estimated Annual Production (kWh) is based on 25% of maximum production levels possible.
It is important to note that no costs have been shown for investment by CCAA into community schemes. The level of investment
possible is shown on the next sheet which summarises the total profit possible throughout the life of the scheme.
Business Plan for Cymdeithas Cwm Arian Association
Page 38
Summarised Breakeven and Whole of Life Project Profit/Loss
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
Development Costs
£1,149,100
Loans Repayments
£13,010
£13,010
£13,010
£13,010
£13,010
£13,010
£13,010
£13,010
£13,010
Ongoing Maintenance Costs
Revenue
£80,939
£81,748
£82,566
£83,392
£84,225
£85,068
£85,918
£86,778
£87,645
£88,522
£89,407
£90,301
£91,204
£92,116
£93,037
£93,968
£94,907
£95,856
£96,815
£320,616
£323,822
£327,060
£330,331
£333,634
£336,971
£340,340
£343,744
£347,181
£350,653
£354,160
£357,701
£361,278
£364,891
£368,540
£372,225
£375,947
£379,707
£383,504
Cumulative Profit/Loss
-£1,162,110
-£935,444
-£706,381
-£474,897
-£240,968
-£4,569
£234,323
£475,735
£719,690
£979,226
£1,241,357
£1,506,110
£1,773,510
£2,043,584
£2,316,359
£2,591,861
£2,870,119
£3,151,159
£3,435,010
£3,721,699
Assumptions:
Development costs are those identified in the Dulas Report
Loan Repayments - the assumption is made that all Development Costs are financed via a 10 year loan at 6%
Ongoing Maintenance Costs and Revenue are assumed to rise by 1% each year
Summary:
Breakeven in identified as being achieved in Year 7
The total profit over 20 years is over £3.5m which can be used to support local community development.
A separate fund for the reinstatement or rebuild at the site at the end of the life of the project must be taken out of the profit figure.
Business Plan for Cymdeithas Cwm Arian Association
Page 39
8.8 Case for Grant
Due it’s environmental and community development nature the CCAA wind
turbine project will be eligible for grant. The scheme will generate a significant
new income stream into the local community and will create both direct and
indirect local employment. An example of an eligible grant scheme is
Environmental Goods and Services for £20,000 of grant funding.
8.9 Benefits of Grant
By supporting this scheme the Welsh Assembly Government (WAG) would
demonstrate support of a community based environmental project. This
project will also help WAG to achieve its commitments to their Renewable
Obligation and to achieving targets set by TAN8. the In addition jobs and
revenue
will
be
generated
within
a
rural
community.
Business Plan for Cymdeithas Cwm Arian Association
Page 40
Appendices
SWOT Analysis
 Strengths
 Weaknesses
 Opportunities
 Threats
Business Plan for Cymdeithas Cwm Arian Association
Page 41
SWOT Analysis
Strengths
 Dedicated voluntary committee with wide ranging skills
 Support of the land owner
 CCAA is an existing Association so the infrastructure is already in place to
market this new project to the local community.
 Strong Community Spirit
 Attractive Rural Setting of the three villages
Weaknesses
 Lack of experience amongst committee members in relation to setting up or
running large scale energy projects.
 Reliance on external funding
 Reliance on planning permission
 Reliance upon voluntary help in order to establish the project
 Outside the TAN8 areas.
Opportunities
 Ongoing Government support of schemes producing renewable energy
 Future Energy Initiatives
 Grant Funding Support
Threats




Wind Tests show that under 25% utilisation is possible
Unable to obtain planning permissions
Unable to secure external funding
Resistance from the local community to the construction of wind turbines
Business Plan for Cymdeithas Cwm Arian Association
Page 42