Energy Bond

John_Parridge · 8 May 2017 at 9:55AM

not had much dealings with them so remaining impartial

John_Parridge · 8 May 2017 at 9:57AM

didnt invest but that was for personal reasons as opposed to the company

abitsmith · 9 November 2017 at 8:58AM

Hi Bonnie. I enquired about this and the offer sounds very good - too good to be true?
Did you invest?
It's not backed by the government, but rather depends on government subsidies that were offered to renewable energy companies (which were recently reduced). For that reason, FRE no longer builds wind farms because they don't return as much as they did.
They have "just launched Phase Four", in which they are not building new wind farms, but purchasing operational sites that continue to benefit from the large govt subsidy available in 2015. So their revenue streams are (a) govt subsidy fixed for a further 18 years and (b) energy sales. I'm being offered up to 10% yield, which is unheard of in this market. I would have been pleased with
I need to invest a small sum and I am not keen on equities for ethical reasons, which is why I was looking at debt-based vehicles.
The salesman says the bond is administered by Talbot Capital, that its capital assets (land, turbines, etc.) have been surrendered and that bond holders have First Legal Charge should the company go under. It has now been trading for several years and paying dividends. What else can I do to check that it is indeed too good to be true?

Malthusian · 9 November 2017 at 10:41AM

abitsmith wrote: »

The salesman says the bond is administered by Talbot Capital, that its capital assets (land, turbines, etc.) have been surrendered and that bond holders have First Legal Charge should the company go under. It has now been trading for several years and paying dividends. What else can I do to check that it is indeed too good to be true?

It's not too good to be true, it's an ultra-high-risk investment that can lose 100% of your money. 10% yield is at best par for the course. Similar yields are available from corporate loans to UK banks. Not that I'd lend money to them either, but they've been around for longer and have a longer history of paying returns to bondholders than this outfit.

First Legal Charge on what? What assurance is there that the collateral, if sold, will be sufficient to repay bondholders? Assuming that the collateral is the wind farm, how much are the liquidators likely to get for a bunch of giant fans that couldn't generate enough electricity to be viable?

Why do you feel owning part of a company is unethical but loaning money to it not unethical?

It's a strange set of ethics that says that owning part of a company is unethical but cold calling unsophisticated investors to flog them "everything from carbon credits to diamonds to land now in bonds in a wind turbine" and fail to pay the promised returns is perfectly ethical because it's green. (See David Chippard's posts currently #20 and #21. We can assume these facts are true, because someone's lawyers have been at this thread judging by the amount of "text removed by MSE Forum Team", so if they weren't true they'd've been removed.)

dunstonh · 9 November 2017 at 10:44AM

abitsmith wrote: »

Hi Bonnie. I enquired about this and the offer sounds very good - too good to be true?
Did you invest?
It's not backed by the government, but rather depends on government subsidies that were offered to renewable energy companies (which were recently reduced). For that reason, FRE no longer builds wind farms because they don't return as much as they did.
They have "just launched Phase Four", in which they are not building new wind farms, but purchasing operational sites that continue to benefit from the large govt subsidy available in 2015. So their revenue streams are (a) govt subsidy fixed for a further 18 years and (b) energy sales. I'm being offered up to 10% yield, which is unheard of in this market. I would have been pleased with
I need to invest a small sum and I am not keen on equities for ethical reasons, which is why I was looking at debt-based vehicles.
The salesman says the bond is administered by Talbot Capital, that its capital assets (land, turbines, etc.) have been surrendered and that bond holders have First Legal Charge should the company go under. It has now been trading for several years and paying dividends. What else can I do to check that it is indeed too good to be true?

Take a read of post #3 on this thread.

A number of mini-bonds have failed in the last few years with 100% loss to the investors. This is not a retail financial product. It is a high risk unregulated 100% capital at risk instrument.

All those mini bonds that failed also paid out successfully for many years before failing. It is one of the risks you have to accept. That is why these are restricted in how they can be marketed. They are not meant for inexperienced investors. Even professional investors wouldnt put more than 5% of their investable wealth in such a thing.

Your ethical stance is interesting. Owning a company is unethical to you but loaning money to a company is fine?

bostonerimus · 9 November 2017 at 2:13PM

mini-bond......7% to 9.25%.....those are enough reasons not to bother with this "investment".

I like bonds to reduce the volatility of my portfolio, not increase it. I would only buy individual bonds, debentures etc. from either G7 governments or of corporate investment quality. I also like to spread risk by using bond funds, even with the issue of rising interest rates.

abitsmith · 11 November 2017 at 9:17AM

I just needed someone to confirm my instinct that this investment was not for me. I wasn't hoping for a virtual slap, but I'll take it as part of the package.

Yes my ethics are strange. I don't like the stock market very much because it places companies' legal responsibility to shareholders above customers, employees, the environment or the communities in which they operate and requires a permanent state of economic growth, which is inherently unsustainable. I would prefer to invest in bonds than equities is all. But this company is a PLC, so it is part of that system anyway.

NB there was no cold call. That would have been a red flag. I went looking for debt instruments investing in an ethical product. I immediately suspected this was not a good idea which is why I asked. Thanks again for setting me straight.

abitsmith · 11 November 2017 at 9:49AM

Can anyone recommend a debt instrument that is ethical, safe and provides a halfway decent return? I'm not expecting 10% or anything like that, but stumbled across FRE in my search.

I can ask my IFA but I will pay 3% for the guidance so I started looking for myself. I had planned to put my money towards buying a property, but given the trajectory of that market I thought it better to rent for a while and wait until prices drop a bit further.

le_loup · 11 November 2017 at 10:16AM

abitsmith wrote: »

I wasn't hoping for a virtual slap, but I'll take it as part of the package.

Don't take it as a slap. The strong comments only arise because those making them know the dangers of such "investment opportunities". In order to guide people, they put up all the warnings that are not prominent in adverts and web sites.

If something is blindingly obvious to people they sometimes can't understand why it's not blindingly obvious to everyone.

So, welcome to this site and if you need anymore help don't be put off.

dunstonh · 11 November 2017 at 1:41PM

I can ask my IFA but I will pay 3% for the guidance so I started looking for myself.

IFAs dont give guidance. They give advice. Each IFA has their own charging structure. Its not 3% across the board. You will get good value ones and expensive ones. You will get prestige firms and local service firms. Rural and city firms and those with different business models and target markets.

However, one thing you will find consistent across the board is that they will not recommend a mini-bond for an inexperienced investor.

Can anyone recommend a debt instrument that is ethical, safe and provides a halfway decent return?

No such thing exists that meets that criteria.

Energy Bond

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