In the autumn of 2019 Jackie (not her real name) followed her local financial broker’s advice and invested €100,000 in a renewable energy investment product from Dublin loan-note specialist Solar 21.
t promised a potential 30pc return after just three and a half years – which seemed an offer too good to turn down.
“It was supposed to mature in November, but it’s been delayed,” said Jackie, who works in services.
Investing in Solar 21’s proposed waste-to-energy plant in East Yorkshire was her first large investment. On her broker’s advice, she used most of her Irish Life-managed pension to buy Solar 21 loan notes.
She has been aware of reports that deeper delays in repayment could lie ahead – her voice shaking at the thoughts of a risk to her nest egg.
Solar 21 says there is no such risk.
The big draw for investors was the high rate of return over a short period
It has engaged legal firms and accountancy firm EY to help it come up with a plan that could see it sell off assets and raise new finance to resume payments to investors.
In its 2018 prospectus it allowed for an extension period of up to two years in which to repay investors if it could not make repayments by the maturity date, during which time a “default interest rate” of 9pc per annum of the principal would apply.
Investors now suffering delays have been told this is now accruing and brokers have been promised that Solar 21 will next month reveal the details of its plan to sort out the problems.
Solar 21, founded by Achill Island brothers Michael and Andrew Bradley, is one of numerous investment companies that set up over the past decade to sell loan-note based investments. Since 2018 it has raised a whopping £300m in Ireland.
Michael and Andrew Bradley of Solar 21
Along with Naas-based Wealth Options Trustees, a distribution partner for many of its investment products, Solar 21 has been one of the most prolific promoters of a form of finance that has quietly boomed in Ireland over the past decade. It has used loan notes to develop solar farms, wind energy and a €35m biofuel plant that it opened in the UK in 2020.
Although often sold by regulated financial brokers, who earn commissions of up to 12pc on some products, loan notes are an unregulated form of investment that provide a very direct link between project promoters and small investors.
The big draw for investors – particularly in an environment of low interest rates – was the high rate of return over a short period. Solar 21 has always made it clear in its literature that these types of investments are high-risk high-reward.
In 2018 it launched its most ambitious project yet – the building of a major waste-to-energy plant at Melton near Hull in East Yorkshire. It was known as EFW Project 1 – and, at the time, the total fundraise was expected to be £120m.
The plan captured people’s imagination, and money flowed in from small-time investors through a network of financial brokers in small towns right across rural Ireland – the midlands, northwest and Border areas in particular.
Investors included pharmacy owners, plant-hire operators, mushroom growers, glaziers, creche owners, and a wide range of other small business owners, as well as many others too.
The standard investment was €100,000 with a targeted return of 30pc after three years – but many business owners who got involved opted for a multiple of this.
One investor – a rural hardware shop owner – who has been waiting for a year for his money to be repaid is now deeply frustrated.
“I’ve been trying to get information and was thinking of putting an ad in the newspaper to try and find other investors to see what we can do together. I’m struggling to get information.”
He recalls going along to meeting with up to 60 other potential investors in a Co Louth hotel.
They had first been brought on a tour of a nearby operational biofuel plant and he was highly impressed. Back at the hotel, a senior director of Wealth Options explained the detail of the Solar 21 investment, he says. He made a €100,000 investment.
“I did that on the back of my father, who put in €300,000,” he said.
His father’s retired accountant also invested in the proposed waste-to-energy plant.
Repayment of this has been delayed since last April.
Michael Bradley of Solar 21, with directors of Wealth Options Brian Flynn and Eanna McCloskey at Solar 21’s Tansterne Biomass plant near Hull in the UK
“I’m not in any financial difficulty at all, but I have serious overheads at the moment with the increase in everything,” he said. “If I could get that money it would be a great help.”
The three years after the launch of EFW Project 1 were extremely busy for Solar 21. By April 2021 (the last time any of the more than 10 companies that make up the group were required to file financial accounts), it had raised just over £300m in funding from mainly Irish-based investors.
At least £240m of that was raised by companies linked to the energy-to-waste plant at Melton in east Yorkshire.
About £40m was raised by companies linked to a second potentially even more ambitious project called the North Lincolnshire Green Park – or EFW Project 2 – which was subsequently made available to financial brokers by Solar 21.
EFW Project 2 is currently making its way through the UK planning system and repayments of loan notes to fund it have not come due yet. Solar 21 has not indicated to investors that there will be any delay with repayment when they do.
But the Melton project has been hit by a range of challenges, including “the unprecedented backdrop of Brexit, the prolonged effects of Covid, and enforced changes in design because of the recently published Clean Growth Strategy have meant the works on site have not progressed as quickly as possible,” according to Solar 21.
‘These products bring novel risks that may not be fully understood’
“The effects of these challenges are a delay in the repayment of investor loans which mature on various dates between November 2021 and October 2023.”
By the end of April 2021, accounts show that EFW 21 Renewable Energy Ltd – the main Solar 21 group firm linked to the Melton project – had raised investor loans of £211m.
The accounts show that EFW 21 Renewable Energy Ltd had also loaned other firms in the Solar 21 group £162m – that the accounts said was secured in favour of the company.
During the year, accounts show that four other subsidiaries in the group had repaid loans to investors totalling £123m.
That money was repaid by three group companies, Biomas 21 Renewable Energy Ltd, Biogas 21 Renewable Energy, Solar 21 Renewable Energy Ireland Ltd, and Biogas 21 Renewable Energy Project 2 Ltd.
Between them, accounts show that, during that period, those four companies had borrowed £148.8m from other companies in the group. The accounts do not detail which companies within the group provided the loans. Solar 21 has declined to respond to detailed questions.
‘Sometimes investments don’t pay off. I don’t lose any sleep over it’
The Central Bank has made public its concerns in recent weeks about the wider loan note market.
“We are concerned that there are risks for consumers from the rapid rise of the marketing of new types of unregulated financial products. These products bring novel risks that may not be fully understood or properly explained by those marketing them,” it said.
“We would encourage all investors and their professional advisers to be certain they fully understand the investment product and the risks involved before entering into or advising on any financial transaction, particularly when investing in a product that is not covered by financial services legislation.”
Solar 21 investors contacted by the Sunday Independent had varying reactions depending on their circumstances. Some were deeply frustrated and upset by the delay in repayments, while others, whose repayments were not yet due, had heard nothing about the funding issues at Solar 21.
“I’m going to ring my broker now and ask him. I’m supposed to get my money back next month,” said one man who operates an agricultural business near the Border.
The owner of a well-known regional newspaper who invested about €100,000 in Solar 21 on the advice of a local financial broker was well aware of the issues, but remains confident that he will get his money back.
“I’m just holding tight. You just have to hope for the best,” he said.
Another man, a pharmacy owner from the midlands, was sanguine about his more than €100,000 investment.
“I know that when you are doing this sort of thing anything can happen. I’m not green. It’s a tough game.”
But, he said, other loan-note investors do not always take the risks into account.
“A lot of people aren’t realistic when it comes to these types of things. People don’t understand what they are getting into. It’s like backing horses. I expect my broker to have done his due diligence – but you only use money that you can afford to lose.”
He also enjoys backing horses, and says he sees his loan-note investments in a similar light.
“I’m a gambler,” he said. “Sometimes investments don’t pay off. I don’t lose any sleep over it.”