Below is an overview of the history of the Merk Hydro Project from when the initial concept was discussed through to the realisation of the project and construction commencing.
2006-2008
The possibility of a joint venture hydro project was discussed between Roy Foster of CRF Hydro Power and Christina Noble of Here We Are. It was proposed to be a 50/50 equal share venture between a local hydro developer and a community organisation. The Merk Burn catchment area was discussed as the proposed site.
With grant funding becoming increasingly difficult, Here We Are saw hydro generation as an opportunity for HWA, and for its community initiatives, to be self-supporting into the future. Roy Foster has connections with the Cairndow community and assessed the proposed site as being promising, though challenging.
The proposal was suggested to Community Energy Scotland, resulting in discussions as to whether they could fund a feasibility which involved a joint venture with a private investor.
Summer 2008
Gregor Cameron of Gregor Cameron Consultancy Ltd was appointed as the Project Director.
October 2008
Gregor won £5,000 for the project at the Dragons Den at the Senscot ceilidh at New Lanark; the first cash injection into the project.
2008-2009
The feasibility and development phase of the project commenced and was funded by Community Energy Scotland. This covered consultants for desktop work and hillside design.
Discussions commenced on the proposed legal structure via JV and the issue of state aid as well as discussions with Social Investment Fund (later Social Investment Scotland) regarding the possibility of grant and loan funding.
The selected site involved a lease with two landlords. At this stage, terms were unable to be agreed with one of the landlords, therefore the scheme had to be redesigned. This in turn resulted in a year’s delay, the new route was more difficult and more expensive to construct and financial predictions had to be recalculated. Subsequently, this involved an increase in costs to cover the Project Director’s time and ultimately a considerable portion of his time was pro bono. Similarly with Roy Foster’s and Christina Noble’s time.
2010-2011
The second phase of the development stage commenced and was funded by the Scottish Government 3rd sector. This phase of the process included payment to all consultancies to proceed with the project through the planning application stage. Payments were also made to the Project Director and again a considerable amount of time was given pro bono. Legal fees in relation to the land lease were covered and the lease was agreed with Ardkinglas Estate. The appointment of the the board of ’Our Hydro Ltd’ was made and they were the lease holders.
Discussions regarding funding also commenced and further discussions with Social Investment Fund were carried out in relation to the grant/loan with the successful outcome being a funding package of £980,000 agreed.
June 2011
All approvals were in place for the project including planning consent and a grid connection offer.
Discussions continued regarding the legal arrangement for the grant/loan in relation to the eligibility for Feed-in Tariffs. The outcome was that the grant had to be reduced and the loan increased.
The decision regarding the funding of the project was deferred and the decision was to be dependant on the outcome of the Feed-in Tariff review, due to be announced early December.
December 2011
The Feed-in Tariff review was delayed and subsequently the decision regarding funding was further delayed.
At this point, Here We Are’s financial position was endangered, thus threatening the viability of the Merk Hydro Project as it was originally conceived. HWA staff therefore volunteered to work pro bono for a month. Christina Noble wrote to Michael Russell the local MSP and to John Swinney the Cabinet Secretary for Finance and Sustainable Growth. The result of this was that in January 2012 a CARES loan was arranged via Community Energy Scotland.
2012
Relatively slow progress was made throughout 2012. With the assistance of The Renewables Team within the Scottish Government and Community Energy Scotland, a loan was sanctioned for a detailed excavation of the site.
The Feed-in Tariff review was finally announced and discussions regarding the funding of the project resumed however this could potentially delay the project for another year. This delay was impossible for HWA and CRF Hydro Power. So once again it appeared that the Merk Hydro Scheme was hanging by a thread.
November 2012
MEG Renewables expressed interest in the scheme and conducted a review of the potential funding options, including the possibility of establishing an EIS for the Merk Hydro Project.
January-April 2013
An alternative funding package was arrived at with the new structure having four equal investors, namely Here We Are, MEG Renewables, Richard Grubb and CRF Hydro Power. Negotiations on the terms and conditions of the LLP commenced.
Whilst a four way revenue split was not as was originally envisaged, it allowed the project to proceed. However, there remained an issue with HWA retaining sufficient revenues, after paying off loans, to meet their annual operating costs. With this being a pre-requisite of HWA’s involvement, the project again appeared to have reached a stalemate, with very little time left to resolve the issue of funding HWA’s day to day operations.
The flexibility of the other investors and their express desire to support this community based enterprise, resulted in a facility being established which ensured that operating costs would be underwritten during the loan repayment period. Further supportive gestures on the part of Social Investment Scotland and the landlord should enable Here We Are to fully fund their own operating costs from the Merk Hydro Project, even while they are repaying the loan.
This approach from all of the partners will allow Here We Are to have financial independence from the time the hydro scheme starts to generate electricity in the latter part of 2014.
May 2013
After seven long years, the Merk Hydro Project concept has now begun to be realised and construction commenced. It is anticipated that the scheme will begin generating in Autumn 2014.
If you wish any further information on the history of the Merk Hydro Project, please contact us. |
