GIB weighs up AD sector with £50m investment consideration

The findings of the study will be used to inform GIB’s strategy on the potential for debt investment in the AD sector – it is actively exploring opportunities to raise capital for AD projects to the tune of £50m.

Government research has indicated that AD could deliver between 3 and 5 TWh of electricity by 2020. However, the industry has expressed concerns about its ability to access funding, in particular senior debt finance.

According to the GIB study, the identified development pipeline requires capital investment of approximately £650m.

Although the AD market has indicated that it is in need of debt funding, the report points out that equity may be more appropriate in many cases due to the fact the sector is still relatively young and unestablished.

In terms of capacity, the study revealed that there was 106MW of electrical output installed or in construction by the end of the 2012 financial year, more than double that of 2010. An additional 148MW of specific capacity has been identified as potentially available to be developed.

The market is also somewhat fragmented – the top five operators account for less than 28% of the sector, which compares to 71% in the offshore wind sector.

The majority of AD facilities in the UK have been in operation for less than three years. This presents a funding challenge, as it lacks an established and informed investor community.

The report highlighted several factors thought to be critical to project success. These were: feedstock selectivity; understanding of, and access to local markets for digestate; dedicated operating personnel; and active process management.

Meanwhile on an operational level, Tamar Energy’s plans for a UK-wide AD network are taking shape with four facilities now under construction in Hampshire, Lincolnshire, Nottinghamshire and Essex.

The four sites will have a combined capacity of 8MW. Tamar Energy also has a further 14 sites in various stages of development – its vision is to create a network of around 40 plants by 2018.

Maxine Perella