Used cooking oil powers investor returns

Written by Rebecca O'Connor on 23rd June 2016

It has powered hippy caravans for years. Now, used cooking oil has become an investible asset, through its growing use as a fuel for diesel generators.

The new investment opportunity, through Abundance Investments, which has built up a back catalogue of successful wind and solar raises through issuing debentures worth a minimum of £5 to everyday investors, is in a company that operates cooking-oil powered generators.

The new bond offers an effective return of 8% a year over 7 years and is the third from Abundance to offer a higher return over a shorter period, albeit at a higher risk, than the platform’s bread and butter lower return, 20-year debentures.

The generators are designed to top-up the electricity supply to the National Grid during peak periods and unexpected power outages and it is the sale of this supply to the grid that generates the returns for investors. Diesel generators have long been used to provide instant power to the grid at short notice to cover times when there is a surge in demand, such as half-time in a big football match, or when a traditional power station goes offline unexpectedly due to unforeseen technical problems.

Green-minded investors will be pleased to hear that there is no chemical waste resulting from the process that turns the cooking oil into fuel. It can replace the biofuels made less efficiently and from crops grown on agricultural land, and the energy produced will be far less carbon-intensive than from generators using fossil fuels. The new fuel is also eligible for the ‘Renewables Obligation’ which is a payment made to generators for producing renewable electricity, helping to boost the return for investors.

The company behind the generators, Living Power, is using the £2.47mn it hopes to raise to refinance loans it took out to purchase the diesel generators. Living Power is owned by Renewable Energy Generation Ltd (REG), a successful business that has secured funding via Abundance in the past.

Bruce Davis, cofounder and joint MD of Abundance said:While this project offers the ‘win win’ investment that we know our investors are looking for – good returns from a project that is good for society – it is a slight departure because of its shorter term and higher return. It is also unusual through being the very first enterprise to make use of this exciting new biofuel, produced through the patented recycling of something as commonplace and plentiful as used cooking oil, whether from homes or businesses.

“The project is a great example of the future of renewables – building on the success of wind and solar with new innovation and technology. Its great strength is how innovation has allowed full use of existing infrastructure with no disruption, and a recycled source material in abundant supply made useful via a highly efficient, low energy process. This is the kind of development that will reinvigorate the renewable energy sector, boosting its diversity, effectiveness and the genuine prospect of slashing our country’s carbon emissions.”      

Living Power is an operational business, already producing and supplying green energy to the National Grid using the new bioliquid patented and supplied by its sister company.

Investment is made using tradable debentures – a regulated “IOU” issued by a business which promises to repay the owner the money lent, plus a return, over the term in half-yearly cash instalments.

Abundance is authorised and regulated by the FCA to offer direct investments, including an Innovative Finance ISA and SIPPs.