Rame Energy plc (LON:RAME) Chief Financial Officer Kevin McNair caught up with DirectorsTalk for an exclusive interview to discuss the launch of their UK solar generated subsidiary
Q1: You recently announced that Rame has launched a UK solar generated subsidiary that will own and operate up to 4 UK rooftop PV projects and that will have a capacity of 120 kilowatts. Could you give us an outline of the thinking behind this new activity?
A1: Certainly. We think it’s a great area to get involved in and is the focus right now for some of the best feed-in tariffs from the government. So there’s an opportunity, first and simply there’s a demand because we can provide cheaper power to customers through PPA’S, usually at 15 to 20 years, and also because effectively feed-in tariff underwrites the investment. These are projects that can be delivered very quickly, very cleanly and they don’t require an enormous capital investment.
Q2: Speaking of which, how does the financing work?
A2: What happens is we start our customers up to a PPA where they agree to buy power from us at a set price and as we generate power, they obviously consume a certain amount of it, they may consume all of it, anything that isn’t consumed gets fed into the grid and we then earn the feed-in tariff. So we’ve got 2 sources of income, it’s effectively underwritten by the feed-in tariff. These first few projects we’ve funded internally but we’ve set up a structure so that going forward, we can bring in external financing structures such as corporate bonds and things like that. Because of the long term nature of these assets and the clear visibility on revenues, there are a variety of different ways we can fund these quite reasonably.
Q3: So with the financing in place, there’s obviously a potential for growth. Can you tell us about that?
A3: The focus in the UK thus far has really been on ground mounted solar, rooftop mounted solar hasn’t been a focus either of the developer in solar community or really of the government through the feed-in tariffs, the feed-in tariffs and the pricing for ground mounted solar is becoming more difficult. In reality, particularly in the south-west where most of the UK solar is located, they’re running out of room and they don’t really want to develop much more ground based solar. So the future is going to be rooftop, there are enormous numbers of good sized commercial rooftops available and up to this point, they really haven’t been exploited and that’s what we see as a great opportunity.
Q4: You’ve got some large projects going on in Chile, does this mean then that your focus is shifting to the smaller projects?
A4: No, the core of the business is Chile and will continue to be so. We acquired Beco last year which was the UK base in solar and we did that principally to gain additional solar skills that we can deploy in Chile and we have been doing that. Having said that, we’ve got a UK business that is doing well and has an opportunity to grow and we see this as one of the best ways for them to develop their business.
