Highland estate’s future is secured with hydro power funding package
When Frank Spencer-Nairn, owner of a farm business near Inverness was reviewing his estate looking for additional earnings to bolster diversified income streams, the obvious asset was the powerful water course cutting through. The Neaty Burn had the head, flow and access needed for a hydroelectric scheme and therefore seemed like a tailor-made opportunity to harness a clean natural energy resource.
Income from shooting, fishing, deer and sheep farming and five holiday lets all contributed significant sums to the farm’s income, but Frank wanted to develop an additional revenue source to strengthen the farm’s finances. “I wanted to improve our viability and provide security. It’s always been my ambition for the estate to stand on its own feet,” says the owner of Culligran Estate, in Beauly.
With part of the SSE Affric/Beauly scheme already on his land, and with knowledge of water power, Frank set about investigating whether he could harness the burn to the benefit of his farm and the local economy. “I was familiar with the hydro industry. The fact that there was a high voltage power line nearby seemed to offer the prospect of a simple grid connection, and I put in a lot of research time to assess the project’s feasibility,” he says.
Frank entered a joint venture, as majority shareholder, with his accountant, James Hair, and hydro developer Gilkes Energy as partners in Torrential Potential to develop the power plant. The £2.5m capital cost was funded through a combination of equity and debt. Bank of Scotland was keen to show Frank and his partners that it had an appetite for the project and that it has the agility and flexibility to deliver innovative solutions for SMEs. “We could also give Frank the confidence that we understood the complex project, that we could provide the funding on an asset rather than project basis within the timescale and that we could secure competitive prices,” says Paul Healy, Relationship Director at Bank of Scotland.
Bank of Scotland Relationship Manager Derek Weir concludes: “It’s great to see such a well-established family florist continue to blossom. Bank of Scotland is committed to providing a variety of financing options to help businesses grow and meet increasing customer demand.” Financing the hydro scheme proved to be a sound decision. “The project came in on time and budget, which is exactly what a bank likes to see,” says Paul, noting that funding was secured under a European Investment Bank scheme* with the client fixing the rate on £1m over 10 years.
Securing the future
Frank’s emphasis on minimising financial risk from the start was central to his success in securing funding. Research on seasonal flows, a feasibility study and applying for licences and grid connections early on in the process helped to ensure the project ran relatively smoothly. There were challenges. For example, Frank notes, there was a large number of legal agreements to work through, with patience, determination and teamwork keeping the partners on track. For Frank, the hydro scheme has proved transformational for the estate. The additional revenue stream has helped to secure the farm’s future and created the scope for the estate owner to consider other investments. “This project is a major long term investment which has been thoroughly and professionally researched and designed and all parties are committed to ensuring its success,” he says. “If the existing hydro schemes in this glen and elsewhere had been structured to bring in an income for the estates, what a difference that would have made. This scheme hopefully will do just that,” adds Frank.
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“I wanted to improve our viability and provide security. It’s always been my ambition for the estate to stand on its own feet.” Frank Spencer-Nairn, Owner, Culligran Estate.