thumbnail of Monnow Valley Biomass Debenture 1

Monnow Valley Biomass Debenture 1

Return 8.0% IRR
Term 19 years
Total Invested £300k
299  investors
Maturity date 31 Dec 2034
thumbnail of Monnow Valley Biomass Debenture 1

What does the company do?

Monnow Valley Biomass provides sustainable heating and electricity solutions to small businesses, providing more efficient heating using biomass systems to reduce their heating costs while switching to a renewable fuel source.

The company installs and maintains the biomass system for the businesses and in return receives revenues from the sale of heat to the businesses and payments through the Renewable Heat Incentive (RHI) scheme for those boilers that are accredited.

The company owns and operates systems at the following locations:

The Old Court Hotel – the hotel’s oil-fired boilers were replaced by a more efficient biomass system which is accredited for the RHI.

Darren Mill – combining a home and 3 holiday lets, Darren Mill involved installing 2 boilers in a separate plant room with 4 plate exchangers in each detached property. The boilers provide hot water and space heating throughout, generating savings on the old oil-fired and electricity fired heating systems. The biomass system installed is accredited for the RHI.

The Bell Hotel – situated on the Welsh-English border, The Bell Hotel replaced and upgraded its heating system at the same time as it expanded its facilities to include a new kitchen and staff quarters plus a function area. The biomass system installed is accredited for the RHI.

Treworgan Farm – located in rural Monmouthshire, the farm has 850 acres of arable land on which maize and oats are grown to feed its 1,100 goats plus wheat, grass and beans for the premium seed markets. A 999 kWth Froling Lambdamat wood chip boiler was installed to modernise its use of energy and make the farm more sustainable. After a lengthy delay, this biomass system is accredited for the RHI.

Certainly Wood – Certainly Wood, established in 2005, is a large kiln dryer of logs and has a range of wood products that it sells for the open fire and log burners market. At the business’s premises, there are static caravans on site which house farmworkers all year round. An Organic Rankine Cycle CHP (combined heat and power) system was installed that generates 70 kW of electrical capacity for Certainly Wood and produces 605 kW of lower temperature heat which has been directed to a new warm room to dry a wood-based firelighter product similar to kindling. After a lengthy process, Ofgem rejected this biomass system’s RHI application.

Why did the company raise money?

This was Monnow Valley Biomass’ first investment on Abundance in 2015. The money raised funded the installation of 6 biomass boilers at three businesses including two hotels (The Old Court Hotel and the Bell Hotel) and a residential and holiday let property (Darren Mill).

How does the company expect to repay the investment?

Monnow Valley Biomass’ intention was to repay investors from the operational revenues it expected to earn over the life of the investment from the sale of heat and payments through the Renewable Heat Incentive. With the significant loss of revenue from its biomass portfolio (see Updates), the company is now in the process of selling the assets of the business to return some capital to investors.

How is the company making an impact?

The renewable heat generated is sold to the businesses where the boilers are situated, which reduces the environmental cost of their heating requirements while saving them money on their energy bills.

The biomass boilers are very similar in operation to those burning fossil fuels but with the advantage of using biomass that is considered a renewable and carbon neutral fuel source. As per the requirements of the RHI scheme only biomass that meets certain sourcing and sustainability criteria can be used.

The Old Court Hotel, where biomass boilers replaced inefficient heating systems
The Old Court Hotel, where biomass boilers replaced inefficient heating systems

Key terms

Issuer Monnow Valley Biomass
Return 8.0% IRR
Term period 19 years
Start date 1 January 2016
Maturity date 31 December 2034
Capital repayment Regular instalments
Amount raised £300,000.00
Return structure

The interest and capital is paid in equal instalments every 6 months the life of the investment.

Secured or unsecured Unsecured
Early repayment options

The company can only make an early repayment of the investment in certain circumstances, such as a change of control of the company (for example, if some or all of the company was sold to a new owner) or a regulatory/tax requirement.

See the Debenture Deed for details of all circumstances in which the option for early repayment may be exercised.

Documents

Debenture Deed
Download PDF The debenture deed sets out the legal agreement and terms for this investment.

Payment schedule

This table gives a breakdown of what is due to be paid back on this investment, based on an example investment of £1,000.

Payment schedule table
Payment date Capital repayment Interest Total
8 September 2016 £26.32 £25.74 £52.06
11 March 2017 £26.32 £25.74 £52.06
8 September 2017 £26.32 £25.74 £52.06
9 March 2018 £26.32 £25.74 £52.06
7 September 2018 £26.32 £25.74 £52.06
11 March 2019 £26.32 £25.74 £52.06
6 September 2019 £26.32 £25.74 £52.06
10 March 2020 £26.32 £25.74 £52.06
8 September 2020 £26.32 £25.74 £52.06
11 March 2021 £26.32 £25.74 £52.06
8 September 2021 £26.32 £25.74 £52.06
11 March 2022 £26.32 £25.74 £52.06
8 September 2022 £26.32 £25.74 £52.06
10 March 2023 £26.32 £25.74 £52.06
8 September 2023 £26.32 £25.74 £52.06
10 March 2024 £26.32 £25.74 £52.06
8 September 2024 £26.32 £25.74 £52.06
11 March 2025 £26.32 £25.74 £52.06
8 September 2025 £26.32 £25.74 £52.06
11 March 2026 £26.32 £25.74 £52.06
8 September 2026 £26.32 £25.74 £52.06
11 March 2027 £26.32 £25.74 £52.06
8 September 2027 £26.32 £25.74 £52.06
10 March 2028 £26.32 £25.74 £52.06
8 September 2028 £26.32 £25.74 £52.06
11 March 2029 £26.32 £25.74 £52.06
8 September 2029 £26.32 £25.74 £52.06
11 March 2030 £26.32 £25.74 £52.06
8 September 2030 £26.32 £25.74 £52.06
11 March 2031 £26.32 £25.74 £52.06
8 September 2031 £26.32 £25.74 £52.06
10 March 2032 £26.32 £25.74 £52.06
8 September 2032 £26.32 £25.74 £52.06
11 March 2033 £26.32 £25.74 £52.06
8 September 2033 £26.32 £25.74 £52.06
11 March 2034 £26.32 £25.74 £52.06
8 September 2034 £26.32 £25.74 £52.06
11 March 2035 £26.16 £25.74 £51.90
Total £1,000.00 £978.12 £1,978.12

Updates

These updates tell the story of the investment over its life and include information reported to investors by the company or council behind the investment. The updates are provided for informational purposes only and do not constitute an inducement or invitation to invest. Information provided at the time of publishing may no longer be accurate.

This is a short update from Monnow Valley Biomass to keep investors up to date with the process of winding up the company:

We have been going through the process of selling each of our biomass assets, with 5 of our systems now sold.

There were two sites remaining to be sold in our previous update. The sale of one of the systems received a satisfactory bid and this is now being concluded - the deposit payment has been paid and the balancing payment will be made once the RHI accreditation is transferred to the new owner.

Discussions are ongoing around the Treworgan Farm asset. This asset is our largest site and holds the most value out of all the systems in our portfolio.

We are also now taking advice from a licensed insolvency practitioner on how best to wrap up this process.

This has been a much lengthier process than we expected and we apologise for this. We will update you again as soon as there is material progress on the Treworgan Farm asset and the winding of the company.

This is a short update from Monnow Valley Biomass, ahead of a fuller update once the current process completes.

“The process to sell the remaining biomass assets is ongoing as we extended the bid deadlines until this Friday (25 August). If we receive satisfactory bids, as previously mentioned to you there will then be a process to conclude the sales before distributing any amounts recovered (after costs of the sales) to you. This process will include a deposit payment and then balancing payment once the RHI accreditations have been transferred to the new owners. If we do not receive satisfactory bids, or we are otherwise unable to conclude a sale of the assets to allow us to wind up the business, we will initiate a liquidation process for a professional insolvency practitioner to oversee the asset sales through other routes. We will provide a further, more detailed update in due course, but wanted to provide this holding update in the meantime to explain the current status of the business and process of winding up the company.“

Thank you for your patience and time while we have undergone the process of selling the business and its assets. We are now in the final stages of concluding this.

We have explored a number of leads but have unfortunately faced a worsened market backdrop, in particular very high wood fuel prices which remain at over £500 per tonne (compared to £360 per tonne last summer and £210 per tonne 12 months before then) caused by the shortage of supply due to the Ukraine Russia war. This, plus the uncertainties related to both Ofgem/RHI income and the ongoing concern at some of our customer businesses, has meant a sale of the business as a whole has not been possible.

The alternative route has been to sell the individual systems. We contacted the current customers (being the ideal buyers of the systems to ensure their sites continue to be heated by renewable energy and to avoid dismantling and moving costs) and have also used our network to identify other suitable buyers. A process was run with the assistance of an independent advisor for bid submissions and we are currently in the process of finalising the sale of each of the systems. For those systems which are accredited for the RHI, we will receive a deposit of 25% from each buyer, with the balance of the sale price paid once the system's RHI accreditations have been transferred to the new owners – a process that is stated by Ofgem to take around 2 to 3 months (note, with anything Ofgem related there is a risk that it may take longer).

We are not able to provide further detail at this stage while these are still being negotiated, but with the 12 month deadline to action the sale coming up at the end of this month we did want to update you and confirm that we are now close to selling the assets, distributing recovered funds to our investors and closing the company. For the reasons given previously (see our investor update from last year), the recoverable value from selling our assets is significantly less than is owed to you, which we deeply regret.

We will provide another update as soon as the sale of the sites has been concluded and will set out the figures and expected timing of the distribution of proceeds that you will receive.

Voting has now closed with investors choosing to give the company up to 12 months to look to sell the company as a whole or its assets.

Thank you to all those who voted on the proposal Monnow Valley Biomass.

As a reminder, the vote was on whether to give the company up to 12 months to look to sell the company or its assets (Option 1), or to call a default and appoint an administrator (Option 2). The proposal can be found here.

For a default to be called, investors holding 25% of the Debentures had to vote in favour of Option 2, however this threshold was not met for either Debenture 1 or Debenture 2. For Debenture 1, investors holding 3.1% of the Debentures voted for a default, with 55.8% voting to give the company up to 12 months to complete a sale process. For Debenture 2, investors holding 3.2% of the Debentures voted for a default, with 42.0% voting for Option 1.

Monnow Valley Biomass will now continue its work to look to sell the company as a whole, or the individual biomass systems in a way that maximises the amount that can be distributed to Debenture holders. The company will continue to provide investors with updates as this progresses.

Monnow Valley Biomass has asked investors to vote on the next step for the business.

With the company unable to meet the payments due to you under the debentures, Monnow Valley Biomass is proposing to sell the business as a whole or its assets and return any proceeds to Abundance debenture holders. This is likely to return a small proportion of your invested capital only, however it is the only option remaining given the current status of the business and its long-term future.

Monnow Valley Biomass would like to arrange the sale of the company or its assets themselves over a period of no more than 12 months, to maximise the value it can hopefully get from selling its assets to distribute to Abundance investors. However investors also have the option of calling a default which would trigger the appointment of an administrator to handle the sale process, likely over a shorter timeframe.

What do you need to do?

  • Read the proposal from the company which sets out the current status of the business, the valuation it has received and the considerations for what could be returned to investors from a sale of the business or its assets.
  • Place your vote on your preferred option for the handling of the sale process. Please place your vote by 5pm, 20 May 2022.

Monnow Valley Biomass expects to be able to provide a further update for investors in late February with more information on the options available.

Please read the full update here

Due to the ongoing issues affecting Monnow Valley Biomass, the company has not been able to make the Cash Return payment today. The company is currently in the process of preparing an update for investors.

We are awaiting the Non Domestic RHI accreditation for the Treworgan Farm system which was first submitted to Ofgem in the spring of 2020. We believe that Ofgem have completed their review and expect to receive notification of the accreditation decision shortly in the next few weeks.

As soon as we have this, we can complete the review of the sites in our portfolio and forecast the likely income potential in the light of the RHI accreditations received and the impact of Covid 19 on the underlying customer’s trading. We are continuing to work on evaluating all options available to us meanwhile. Following the review we will outline the most likely options that the business has to move on in a manner that will deliver the most return to debenture holders.

Please read the full update here

Those investors who sent emails should now have received a generic short response from Ofgem stating that it is are unable to provide details to anyone other than the scheme participant. However, the emails seem to have prompted a few things to happen, principally related to Monnow Valley CHP, the sister company of Monnow Valley Biomass.

Ofgem has written to Monnow Valley CHP in response to the company’s own letter to its MP (Jesse Norman) on 9 July. The letter states that Ofgem must treat all scheme participants equally but has inaccuracies which require a response and which have prompted more questions for the company regarding how Ofgem is claiming to treat Monnow Valley CHP equally. Monnow Valley CHP has also received notice of a further Ofgem audit with a request for information which happened last Wednesday 12 August and was uneventful (a previous audit happened in February, however the company has received no information on its findings).

Ofgem’s response makes no reference to Monnow Valley Biomass but this is not unexpected at this stage given the RHI application for the Certainly Wood installation is not yet submitted (to be done shortly).

Monnow Valley Biomass will provide a further fuller update to investors once the issues above have been raised with Ofgem and on receipt of its response.

Please read the full update here

Dear investors,

We are writing to you today to give you an update on the current situation with Monnow Valley Biomass and to request your help.

We have provided a separate update on the operations across our various sites, with some improvement after the recent impacts from flooding and the coronavirus pandemic. However, our focus remains on our installation at Certainly Wood given its importance to the business and our revenues. We intend to submit the application to receive the Renewable Heat Incentive for our installation at Certainly Wood in the near future. If this is successful, it makes a significant positive difference to the value of the company and having exhausted all other possible options, there is nothing to lose at this point in applying.

Success of the application hangs on whether Ofgem will decide that the firelighter product the heat from the installation will dry is deemed to be a fuel or not. As a reminder, the RHI regulations changed in 2018, after we raised the money and bought the equipment for the plant, to exclude drying fuel as an eligible use for the renewable heat. We do not believe a firelighter is a fuel (one reason being it would not be economic to use it as a fuel) and it would not be in the spirit of the rules for it to be considered so, however Ofgem’s rules are ambiguous and therefore we cannot be sure on how they will interpret them. In addition, the extended time between submitting meter readings and receiving the subsidy payments from Ofgem that we are entitled to adds to the stress on the business, making it harder to get ahead and reduce our exposure to further knocks.

As you know, we have experienced a number of very significant challenges including the pandemic, flooding and most frustratingly and materially, Ofgem, both in terms of their original unlawful rejection of our sister company’s RHI application (which delayed our own installation) and the lengthy delays in payment we are experiencing for both companies. We can see a way to succeed but Ofgem’s practices stand in the way.

In conjunction with Abundance, we have tried a number of ways to escalate the issues we have faced as a result of poor Ofgem processes and performance. This includes visiting and writing to our MP, the Rt Hon Jesse Norman, and to Kwasi Kwarteng, Sec of State for Energy, and to senior Ofgem management through Abundance and the Renewable Energy Association since the issues we experience are widespread through the sector. Our most recent letter to our MP was written on 9 July 2020, and the REA raised our issues at Abundance’s request on both 9 and 10 July. None of these have made any difference. Abundance is also writing directly to the Chief Executive and Chairman of Ofgem.

With time running out to save the business and maximise the chance we are able to repay your capital and interest, we want to give you the opportunity for your voice to be heard, and for Ofgem to understand the impact their practices are having on small businesses across the UK and investors such as yourselves. Therefore, we are asking if you would consider forwarding a message to the Chairman (Martin Cave) and the Chief Executive (Jonathan Brearley) of Ofgem with your support for the business and expressing your concern about Ofgem’s practices. We, with the help of Abundance, have prepared a template letter for you to send, which you are free to edit as you wish and we have emailed investors with instructions on how you can help.

The reason this is relevant now is that a different but reasonable approach by Ofgem could allow us to get the company back on track. We hope that Ofgem can be persuaded to act in a timely fashion and consistent with the spirit of a recent Sunday Times interview with Jonathan Brearley who said “So, in the difficult months ahead, I urge the industry to apply the same collective spirit that has characterised the response to Covid-19 and work with us to help get Britain building and to protect consumers from climate change as well".

Please read the full update here

Please read the full update here

We are very conscious that it is quite a bit longer than we had indicated that we would be in touch again. The business of navigating the RHI application process continues to present challenges that are hard to foresee. Below is an update on both installations.

Update on the 2 installations and the applications for RHI

Treworgan Farm

It came to light that technical planning permission was required for the boiler house building. This was applied for over the summer, and we were advised it would be granted. It has subsequently taken several months to try and pin down the written confirmation. At which point, and unexpectedly, we have been advised that the planning department has now requested an air quality assessment.

In principle this is not a significant issue. The assessment will check that the permissible particulate outputs from the boiler are not travelling so far as to be able to affect people in the adjacent farm houses and farm offices. In the event that they are not dispersing enough, the flue lengths will need to be increased which can be done relatively easily.

As soon as planning is forthcoming, we can finally submit the application for RHI.

Certainly Wood

We are seeking a view on our RHI application from the same barrister that helped our sister company, Monnow Valley CHP, before we complete the installation and submitter application. This is in case there is anything that we can or should do differently and to assist us in presenting our application in order to help avoid contest from Ofgem. The decision to pursue this legal opinion has been taken in the light of input and experience from others in their dealings with Ofgem when an issue is not completely black and white, which is true of a significant proportion of the regulations.

Although we remain confident of the validity of our application, we can see the increased scrutiny and rate of rejection that has come since the publication of the National Audit Office’s report last February 2018 (the number of applications submitted, accepted and rejected is published on a quarterly basis). Although there have been some changes to the RHI scheme, the marked increase in rejections in our view can only be down to a changed approach in reviewing and assessing applications.

What next for your investment

We want to have both RHI applications submitted before making a proposal to you on what next for your investment. The reason for this is that submission should give us a better estimate of when we can expect to know the outcome of our applications – review timetables are about 12 months currently and with the number of applications now declining, we don’t expect that these should get longer.

The high level of summary of what we are considering is as follows:

  • As previously indicated, we hope to reach a situation where we are able to get your investment back on track including making up the lost ground created by the delays. This will depend on both of our applications for RHI at Treworgan Farm and Certainly Wood being successful. RHI begins to accrue from the date an application is submitted as long as the application is subsequently approved.
  • As soon as both applications have been submitted, we will put together a formal proposal for your approval which will involve varying the terms of both issues of Debentures to set new dates for when we will make payments and in what amounts.
  • With a 12 month review timetable at Ofgem and some time required before RHI payments start to be made, we would expect to set the first payment date 18 months out from that point.
  • If either application fails OR we are unable to make the payment on the new date we propose (assuming it is accepted by you), then we would be required to look for a buyer of some or all of the accredited installations and to return as much of your capital and accrued interest as possible. The value of the portfolio should be much greater with a successful accreditation of the Certainly Wood installation given its size. The installation at Treworgan Farm is also valuable since there is scope to expand the heat network there and maximise the output.
  • Any revision to the terms of the Debentures requires the approval of 75% of the principal outstanding for both issues of Debentures.

We will be working on the detail of this proposal as we wait for the legal view regarding Certainly Wood. It will include what the options are if investors do not want to approve our proposal.

We would welcome your questions and comments in the meantime and will endeavour to consider and address them as part of this next stage.

We appreciate the unsatisfactory nature of this situation – it is deeply frustrating and upsetting to us that our efforts and your investment in support of a government initiative to help improve the sustainability of heating is dealt with in such a slow and opaque manner.

We are doing everything we can with Abundance’s support to try and steer a way through this that first and foremost gives a chance to get your investment back on track, and provides you some assurance that if we are unsuccessful, we will try and create an orderly sale process to return as much capital to you as possible.

Operational update on the portfolio

Biomass boiler performance

Some of you may have been aware of the River Wye flooding recently – this affected The Bell Hotel at Skenfrith where one of our biomass boilers is situated, which is right by the river. The flooding was anticipated and precautionary action taken – the boiler is fine although some moisture got into the fuel store. However, the hotel was affected and therefore is not currently open for business. The boiler output is now being used to help with drying out the hotel. We are manually filling the fuel hoppers and excavating the fuel from the fuel store in order to be able assess any damage caused to the fuel delivery system. The owner has confirmed that the plant is insured for flood damage and consequential loss. The hotel is expected to reopen in March/April.

Otherwise, all the other boilers have been running smoothly.

Wood ship supply

Both Treworgan Farm and Certainly Wood use wood chip for fuel. We have also recently become aware that the UK sawmill industry is suffering from a huge forestry cull in Germany, Czech Republic and Poland which has been caused by bark beetles killing vast swathes of forestry in as little as 4 weeks. Estimates are that 110,000 hectares of forest is affected in Germany alone and, to have any chance of curtailing the spread, affected trees need to be felled and disposed of.

Unfortunately, the only part of the felled trees that can be processed into a useful product is the main core which can be used for house building products, not for wood chip. This wood is being exported to other markets, including the UK, at prices that are undercutting domestic sawmills. As a result, the UK sawmills are having to significantly reduce operations and the knock-on effect is a significant decrease in wood chip production.

It is estimated the processing of beetle affected trees and this market disruption may continue through to March and the full extent will only materialise as we go through the winter. We and Biomass Partners (who are responsible for supplying our wood chip) will be very carefully monitoring this situation but do anticipate that obtaining sufficient levels of wood chip during this period may be a challenge. We will issue further updates to you when there are any material developments on this.

"

This is just a holding update until we provide a fuller update and note to you in about 2 to 3 weeks time.

Since our last update we have successfully been ramping up performance at Certainly Wood and Treworgan Farm. Unfortunately though we have met further delays with the RHI accreditation applications for these systems and we are now a number of months behind schedule on this.

We are aware that the next cash return date, 8th September, is coming up soon. While the business can currently keep running without the RHI revenues, we are not making sufficient operating income to pay the cash returns. We regretfully confirm that we will not be able to make this upcoming cash return payment. From 8th September we will also enter into an event of default position under the Debenture Deed as it has been 12 months since the first cash return we missed.

We are still working hard to complete and submit the applications for RHI in respect of both systems - the Treworgan Farm application can be submitted imminently; we are doing some legal work in respect of Certainly Wood to help ensure it has a smooth passage at Ofgem which has been taking a much tougher stance on all aspects since the National Audit Office report last February which criticised it. The expected length of processing time for applications is still - unacceptably in our view - about a year.

We are therefore working with legal advisers and Abundance to put together a comprehensive note to explain our plan going forward as well as all the options available to you. We will get this to you as soon as possible, but expect it may take a further few weeks to be up to date on both applications and therefore the options, so please bear with us. Thank you for your continued patience and we will be in touch very soon.

An investment return from Monnow Valley Biomass Debenture 1 was paid today.

Please read the full update here

We have continued to progress the installation at Certainly Wood and commissioning has now taken place. This means that we are now able to submit our application for approval under the Combined Heat and Power Quality Assurance (CHPQA) Programme. In November, gaining this Certification was brought in by Ofgem as a new requirement prior to being able to submit an RHI application (previously, the two applications could be run in tandem). Due to the timescales taken for a CHPQA approval, we envisage that our RHI application will be submitted in April.

Now that we have a clear view on the timescales for submitting the RHI application, we are assessing the impact on Cash Returns and putting together a plan on how we intend to ‘make up’ missed payments. As ever, thank you for your continued patience whilst we carry out this work. We intend to let you know the results of our assessment within the next couple of weeks.

Monnow Valley Biomass has provided an update on the progress on site at Certainly Wood and the planned RHI application. If you are an investor and have not received this email, please contact Abundance.

Since our last update, we have been working hard to progress the installation at Certainly Wood and also looking at ways to de-risk the project, particularly in relation to the use of the heat we expect to generate.

We are naturally very cautious about submitting an RHI application to Ofgem given our experience at Monnow Valley CHP and the extended process before we eventually succeeded in getting its systems accredited for the RHI. The fact that this is another application in respect of heat for fuel drying which was the core of the issue at Monnow Valley CHP is also significant.

In addition, we have recently discovered further discrepancies between the legislation and Ofgem’s recent guidance around what constitutes ‘completion’ of a project pre-application. We know first hand that Ofgem is taking a much tougher approach than previously in this area. For these reasons we felt that putting in an RHI application last week, to meet the deadline for projects looking to dry wood fuel, could lead to extended delays in the RHI process and a risk that our application would not be successful.

For these reasons, rather than press on with an application to meet the deadline around fuel-drying which was last week, we have decided to alter the design of the installation and change the basis of our application. Certainly Wood produces a number of wood based “lighting” products, such as wax based flamers and kindling wood. These are used to light fires and are not categorised as wood fuel as they do not generate any useful heat themselves. Certainly Wood is keen for us to use the heat generated from our installation to dry these products in a separate drying room as this will free up capacity in its existing drying kilns and enhance its overall productivity. We have also identified a number of opportunities to dry agri-fuels, such as grain, barley or wheat for third party customers. Both these uses of heat are eligible under the current RHI regulations.

Taking more time now to complete the installation and submit an RHI application that is not for wood drying should significantly lower the risk of dispute and delay (which is not to say that we don’t expect processing to still take several months). Our target is to submit an RHI application under this new plan by January.

We continue to be extremely appreciative of your patience while we work through all this and get the installation at Certainly Wood installed, operational and accredited. We will provide another update to you in January. At this point we will have been able to revise our cashflow forecasts more accurately, with a better understanding of Ofgem’s current turnaround times for applications. We will then be able to provide you with more clarity on the impact on Cash Returns and a plan on how we intend to ‘make up’ missed payments.

Monnow Valley Biomass has provided an update on work now underway on site at Certainly Wood:

It has been a few weeks since we wrote to you but we have been very busy in the interim. At Monnow Valley CHP, Ofgem has finally confirmed that we can expect the applications to be accredited this week (we are hugely frustrated, if unsurprised, that it has taken so long). This has been important in respect of a couple of our suppliers to Monnow Valley Biomass where there is overlap between the 2 businesses.

As well as the Ofgem progress, at Monnow Valley Biomass we have engaged with everyone needed to complete the Certainly Wood installation and there is lots of activity again now on site. There is a deadline (6 months after the date of the new reforms) for us to submit the application for accreditation to the RHI Scheme in order to gain eligibility for the wood-drying we intend to do which we mentioned briefly in our last update. The 2011 Regulations were replaced on 21 May 2018 by 2018 Regulations which no longer allow wood-drying as an eligible use for the heat. However, BEIS has allowed for a transition period as set out below in its response to an earlier consultation:

“The Government will put in place a transition period for plant that are demonstrably already in development at the point the Government response is published. Where applicants can demonstrate to Ofgem that they had started development before the date of publication of this response, they will be given a six month period after the date the reforms come into effect to apply for accreditation to the RHI.”

It has been good to get back on site and back to work. As we said in our previous update, we remain confident of the eligibility of our installation and, although there is a lot to be done, of completing what is required to meet the deadline. Having said that, we are not taking a smooth passage with Ofgem in any way for granted and are thinking about what other actions we can take around our application to avoid any negative rerun of our experience to date.

Monnow Valley Biomass has provided an update on developments regarding Monnow Valley Biomass and its sister company, Monnow Valley CHP.

Since we wrote to advise you that the decision to reject the applications at Monnow Valley CHP (MVCHP) had been overturned, we have been in further contact with our legal team regarding the contents of the letter, in particular from your perspective regarding the implications of the reference to our installation at Certainly Wood. We were concerned by the messaging in the letter which appeared to us to suggest that, although the decisions had been overturned, the argument had not been won. Our legal team has confirmed that since the reason given for the rejection was based only around a split of revenues, overturning the decision means this cannot be used at any point in the future for the units at Monnow Valley CHP or any other application including Certainly Wood.

We are very unhappy with the nature of the letter: its lack of clarity yet again is unhelpful, but a misquoted reference to an unrelated project where no application has yet been lodged is in our view misplaced and highly unprofessional. Principally, we feared the same RHI vs non-RHI income test may again appear when the application to accredit our system at Certainly Wood is lodged. With confirmation from our legal team that this would be unlawful, we have written to the Head of Legal at Ofgem to express our concerns about the letter and to remind him that with Ofgem’s acceptance of the arguments that contested its original decision to reject, this reasoning cannot be applied elsewhere.

We did not ask for a response to this letter since we know Ofgem cannot provide any guidance or assurance as to accreditation outside the formal application. As yet, other than an acknowledgment of its receipt, we have not had a reply.

In the meantime, we have been working through the design of our application with our RHI consultant to check its eligibility in the light of Ofgem’s recent behaviour towards applications that involve wood-drying. We remain highly confident of the eligibility of our installation at Certainly Wood which in our firm view is captured by the savings provisions of the new 2018 Regulations.

We will provide a further update in due course.

Monnow Valley Biomass has been unable to make the Cash Return for the period ending 30 June 2018, due by 7 September 2018. Monnow Valley Biomass will be providing investors with an update in due course regarding the next steps once they have reviewed Ofgem’s response to the Statutory Review.

Monnow Valley Biomass has provided an update on the response received back from Ofgem regarding the Statutory Review:

We received notice of the outcome of the Statutory Review in respect of Monnow Valley CHP (MVCHP) on Friday afternoon and have been advised that the initial decisions to reject all our applications have been overturned subject to conditions. We have included the full text of the letter (Statutory Review Response) since it directly references our installation at Certainly Wood although the implications are once again unclear.

Although this is clearly a positive step, as you know it has been at great cost to us, to our investors in both companies and to many of our suppliers and we need to ask your continued patience whilst we understand better Ofgem’s conditions and complete the process with it and whilst we try to understand the implications for Certainly Wood and prepare a plan.

The next steps for the group are:

  1. to work out what is required to get Biomass Partners and the group back on its feet
  2. to work out what next for the installation at Certainly Wood and therefore for MVB
  3. as well as to understand what is being required of MVCHP since this is not set out in the letter.

We have previously indicated that we would be unlikely to be able to make the forthcoming cash return payment – although a corner has been turned, regretfully we are still quite some way from that state of affairs changing.

This is a sensitive time for the group and we would ask that you respect the information in this update for the benefit of your fellow investors.

We will be in touch soon.

This is a short update to let investors know the status of the Statutory Review submitted by Monnow Valley CHP to Ofgem. The outcome and/or information learnt from the Statutory Review will inform the next steps for Monnow Valley Biomass. Ofgem responded to Monnow Valley CHP on Monday 20 August with a short holding email to say that they would be providing a “further response” on 24 August. It is not clear if this will be an update on the ongoing Statutory Review or a decision. In any case, Monnow Valley Biomass will provide a further update to investors next week.

Monnow Valley Biomass has provided an update on developments regarding Monnow Valley Biomass (MVB)’s sister company, Monnow Valley CHP:

This is a short update to keep you informed about the actions being taken to resolve the situation at Monnow Valley CHP (MVCHP) that is now impacting Monnow Valley Biomass (MVB) and both companies’ shareholder Biomass Partners UK Ltd.

As we previously explained, Ofgem recently rejected all of the applications to the RHI scheme submitted by MVCHP without giving sufficient detail as to why, and this has created 2 issues:

  • Uncertainty around whether MVB’s installation at Certainly Wood will be impacted, and;
  • Cashflow problems across the group.

MVCHP has appointed legal counsel including a barrister who wrote to Ofgem last week requiring that further information is provided. MVCHP will be reviewing the information received back with a view to requesting a statutory review of the decisions to Ofgem by 23 July.

At the same time, MVCHP is assessing all options for the investors in those debentures although that process can only be completed with a proper understanding of Ofgem’s issue. It does include a review of alternative uses for the heat in the event this is the root of the problem and which may also be of relevance therefore for MVB. This work is still at an early stage but we will be looking to provide further detail to investors in due course.

We continue to work closely with Abundance Investment throughout and will continue to do so in order to minimise the impact on all our investors and will keep you updated as developments unfold.

Monnow Valley Biomass has provided an important update to investors concerning the negative developments in Monnow Valley Biomass (MVB)’s sister company, Monnow Valley CHP:

Dear investor,

We are writing to provide you an update given recent negative developments in Monnow Valley Biomass (MVB)’s sister company, Monnow Valley CHP (MVCHP) which, with deep regret, we have to inform is now impacting on Biomass Partners UK Ltd and in turn therefore on MVB (Biomass Partners UK Ltd owns 100% of both companies).

Some of you are also investors in MVCHP and will be aware that Ofgem recently rejected our applications for accreditation to the RHI scheme. The reason for the rejection is not clear and has come out of the blue, despite the very extended time (18 months) it has taken to get there. We are reviewing with legal counsel what our position is and what next course of action to take, and will be meeting with those MVCHP investors that would like to and are available this week.

In the autumn of last year, MVB raised funding through a second offer of Debentures to install two biomass systems, one of which was a combined heat and power (CHP) system at Certainly Wood. Our plan was to install the CHP system using excess heat from an existing boiler on Certainly Wood’s premises to generate electricity using an Organic Rankine Cycle CHP system. The heat generated from that process is then to be used in a drying room to dry a wood-based firelighter product.

In early February, when it became apparent that Ofgem had a number of additional, unexpected questions regarding our MVCHP applications, we felt it prudent to suspend the final stages of the work at Certainly Wood until we had understood and resolved their underlying concerns. As a consequence there is around £200,000 of spend to complete the installation with around £650,000 already spent on equipment and labour at this time.

With no reason to expect that we would not address Ofgem’s concerns (we had been advised by our case officer over 4 months ago that the applications had been passed for approval), we have been waiting for accreditation at MVCHP to ease what have become increasingly significant cash flow issues for Biomass Partners.

In summary, the length of time to reach a decision and the fact that the decision is negative against the expectations of us, our dedicated RHI consultant and other advisors, have created 2 problems for MVB:

1. we remain unclear as to the underlying reason for rejection of our applications at MVCHP and therefore whether or not we could expect anything similar with the installation at Certainly Wood

2. financial resources at the level of Biomass Partners have been significantly strained with the delays to the start of RHI payments (not forthcoming for now).

What is the impact for you as an investor in either of the Monnow Valley Biomass debentures

Until we received the rejection letters from Ofgem last week regarding MVCHP, we had been able to manage our cashflow at the Biomass Partners level. Our expectation was that accreditation would ultimately be forthcoming – potentially with conditions to address whatever the concerns may have been. With that in hand, we expected to be able to complete the installation at Certainly Wood, submit our application for the RHI and to manage the delay in receiving income from the scheme (we estimate that the RHI from the Certainly Wood installation should account for approximately 60% of MVB’s overall revenues).

Until we are able to resolve the situation at MVCHP and in turn at Biomass Partners, we are unable to resume work at Certainly Wood and would not be confident to do so until the reason for rejection has been properly provided. We expect this will take some weeks at least. This means that we expect this will impact our ability to pay the next Cash Return due to our investors in both MVB Debentures.

We are incredibly frustrated and angry about the situation and the lack of regard Ofgem has shown for us, our suppliers and our investors in both MVCHP and MVB. This is despite making their team fully aware of the consequences of their protracted deliberations and lack of transparency.

We have been working closely with Abundance Investment throughout and will continue to do so in order to minimise the impact on all our investors. We appreciate this update is likely to leave a number of questions unanswered – please do forward them to Abundance who will collate them and we will do our best to respond as soon as we can.

We will in any event provide regular updates to you as developments unfold. As well as working on how to resolve the issues at MVCHP, we will continue to examine options for MVB. We continue to firmly believe that Ofgem is mistaken in its conclusions and that it has run a very poor process and we are committed to working that through with our advisors, our investors and Abundance.

The amount of heat generated from the 6 biomass systems was 77.2% of the forecasted generation in this period, largely due to lower than expected heat usage at the sites. Monnow Valley Biomass has made a number of improvements to increase the amount of heat used on site in 2017. As part of the improvements made, one of the boilers at Darren Mill is being moved to a new location at Penblaith Farm as Darren Mill had less heat requirements than expected. Biomass Partners have reduced the cost of the biomass fuel to Monnow Valley Biomass to make up for the lower amount of heat generated so far.

An investment return from Monnow Valley Biomass Debenture 1 was paid today.

An investment return from Monnow Valley Biomass Debenture 1 was paid today.

The amount of heat generated from the 6 biomass systems was 73.1% of the forecasted generation in this period, largely due to lower than expected heat usage at the sites. The system at the Bell Hotel has now been fully installed.

An investment return from Monnow Valley Biomass Debenture 1 was paid today.

The amount of heat generated from the 6 biomass systems was 61.4% of the forecasted generation in this period, largely due to a delay in the installation of the boiler in the Bell Hotel and lower than expected heat usage at the sites.

This investment closed today.

Monnow Valley Biomass Debenture 1 opened for investment today.