What is SolShare Energy?
Solshare Energy is a cooperative-controlled corporation with the goal of growing community-based renewable electricity generation in BC by engaging residents and investors in projects that offer financial, social, and environmental returns. Residents of BC can purchase shares in the corporation and receive dividends from the lease payments generated by the renewable energy equipment that SolShare owns. SolShare Energy is a project of Vancouver Renewable Energy Co-operative.
How risky is a SolShare Energy investment?
No investment is without risk. However, keep the following in mind when considering an investment in SolShare Energy:
- You become a part-owner of the physical assets of SolShare Energy. That means you own solar energy modules that have a 25 year performance warranty (and are expected to last longer). The equipment you own will be producing energy for a long time.
- Revenue comes form leases that are signed legal contracts with a time frame of 5 to 10 years and which are likely to be renewed – see:
“What happens when the lease expires on a Solshare system?”
- Our business plan is for SolShare to own a diverse portfolio of projects across BC. The performance risk is spread across multiple projects, and so there is less of an impact if one of the projects is performing below expectations.
- Shareholders are not exposed to project development and construction risks. SolShare’s parent company, VREC Solar, takes on the construction costs and only sells the system to SolShare after the commissioning is complete.
How is SolShare different than other community- owned energy projects?
Most community-owned energy projects sell the electricity they generate directly to the utility grid. SolShare has decided not to do this because:
- BC has some of lowest electricity rates in the world
- There is no feed-in-tariff or other significant incentive available
SolShare’s model is different than other projects in three respects:
- We don’t sell electricity directly to the utility but instead to third parties through lease agreements. Third parties are usually the owner(s) of the building where the array is installed.
- We sell electricity at a premium compared to standard electricity rates (but similar to other green power premiums).
- We operate the project with as little overhead as possible to allow us to pay a reasonable dividend.
How do I invest?
You can get started by filling out our contact form. Investment shares are offered during limited periods. We will contact you at the start of the period and send the paperwork necessary to complete the investment. Our first period was January 2016.
You can also review the documents required to invest.
How much do I need to invest?
What will the dividends be?
Dividends were 3.3% for the first year, are currently 4%, and are expected to increase once we have additional projects online. We realize that this is lower than some other investments, but it is an opportunity for people to support local renewable energy. Caution should be used when comparing dividend rates with total returns from other investments. See the information on selling shares below.
Dividends are paid annually. They will be paid more frequently if new projects are commissioned and new shares are sold, to avoid diluting the return.
What if I want to sell the shares I have purchased?
SolShare is not a publicly-traded company, so shareholders cannot sell their shares on an exchange. However, we will maintain a list of people interested in purchasing shares. We may buy back your shares to make shares available to the waiting list. In our business plan we also allocate a portion of profits for a long-term capital reserve. We may use money from this reserve to buy back shares as we are able.
What is the relationship between VREC Solar and SolShare?
Vancouver Renewable Energy Co-operative (VREC Solar) owns the majority of voting shares in SolShare. VREC Solar contributes office costs and staff time to help keep SolShare’s overhead costs down.
VREC Solar will provide the equipment and installation services for many of SolShare’s projects. In some cases VREC Solar may work with other contractors to reduce the cost of installation (for instance, if significant travel is required). SolShare will complete the purchase of the system from VREC Solar when it is commissioned and begins accruing revenue from the lessee of the system. SolShare may make progress payments to VREC Solar as the system is being installed.
What happens when the lease expires on a SolShare system?
Most contracts will be 10 year leases with the option to renew at the end. The lease contract has an escalator where the lease rate will increase each year as the utility (BC Hydro) raises rates. However, the escalation will never be more than 50% of the utility rate increase. So when the lease expires, the customer will be paying a smaller premium compared to the utility rate when the lease began. The customer may even pay less than the utility rate. For this reason we think it will be unlikely that the customer would not renew the lease.
If the customer chooses not to renew the lease, SolShare will remove the equipment and find a new location for the system. It is likely that during those 10 years, the cost of electricity will have increased and SolShare will be able to lease the equipment to a new customer at a higher rate, and this differential will eventually cover the costs of relocating the equipment.
What is meant by “…SUBJECT TO RESTRICTIONS ON RESALE…” in the subscription agreement?
SolShare is not a publicly-traded company, so shareholders cannot sell shares on an exchange. If we have sufficient capital reserves and/or sufficient interested investors waiting to purchase shares, we will buy back shares as requested.
Do you offer lower-cost shares on a monthly or regular purchasing option?
We don’t offer ongoing share purchases, just periodic share offerings as new projects are developed. Our shares are not a revenue stream. They are used for capital expenses related to specific projects. Our revenues come from the sale of electricity from our power plants.
If we were to offer additional shares after raising enough capital for a project, the value of existing shares would be diluted, and we would not be able to offer our investors as good a return on investment.
As well, we are required to file extensive paperwork with the BC Securities commission each time we offer shares. If we offered shares more frequently, our overhead costs would increase, and again reduce the amount we can return to investors.
Our two initial offerings had a minimum $2,000 purchase (40 shares at $50 each). Our next offering will have a minimum $1,000 purchase. The minimum purchase levels also help us keep overhead costs down. Eventually we hope to lower the minimum purchase level to $50.
Is the investment RRSP or TFSA eligible?
Yes, it is eligible for both RRSP and TFSA accounts.
We work with a trust company that charges a $55 annual fee to administer the RRSP/TFSA. With this fee the investment may not be best option for investors who will be buying at the minimal amount. But if you are looking at making a larger contribution it is something to consider.
If you are a client of Western Pacific Trust Company you may be able to add the SolShare Energy shares to your self-directed RRSP / TFSA without any additional fees. If you have a self-directed account with another broker or wealth manager you may want to see if they will allow you to add privately held shares from SolShare. We can provide the legal documentation to support SolShare’s eligibility.