FiT for Investors

Aviva, on of the UK’s largest financial investment operations has bought up 23MW of domestic PV installations from Homesun, one of the UK’s largest installers of “free” solar panels.

How does Homesun provide people with free solar panels? It allows homeowners to benefit from the electricity generated (if they are at home during the day to use it) but keeps the Feed in Tariff (FiT) payments. Obviously Homesun will have done their homework to ensure that all their installations are on optimally sited roofs (they don’t do installations in Scotland) and as a business I’d guess that they are knocking out installations for little more than £5,000 each with a return of £1,000 PA from the FiT. Of course Homesun don’t use their own money for the installations, they borrow money and now pay a hansom return on those loans, keeping a healthy profit for themselves into the bargain.

Does this sound familiar? In March 2010 I wrote in this blog that FiTs were a public subsidy for the rich and I have gone into print predicting that they would become a means of funneling tax payer’s money to the bankers.

So why would Aviva be interested in Homesun? When the financial markets are in turmoil investors run for low risk investments, typically gilts, but with concerns about sovereign debt even those are not guaranteed anymore. So imagine the attractiveness of a government guaranteed annual payment well in excess of the rate on gilts. That is what Aviva bought when it bought Homesun’s 23MW portfolio, a guaranteed annual income of around £9M. No wonder they were happy to pay some £100M for it.

As I’ve said before: everybody wins, the homeowner with free electricity, Homesun’s shareholders and Aviva’s investors. The only people who lose are those who Homesun judged to have unsuitable roofs, who will fund the FiT payments through increased electricity bills.

Since the recent cut in FiTs, Homesun no longer offers “free” PV installations.

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