Crowdfunding in renewable energies what it is and how it works in Italy

In this study we will explain what crowdfunding is and how it is used in the italian energy market. We will also tell you about a successful case history that saw us protagonists together with the Ener2crowd platform.

 

 

With the Anglo-Saxon term crowdfunding (crowd of financiers) or better still as collective financing, we intend to define the financial contribution by multiple subjects, of any nature and gender, for the development, for example, of entrepreneurial, artistic and related initiatives cultural heritage, innovative entrepreneurship, scientific research etc. Crowdfunding is certainly a tool used today as opposed to the traditional financial world.

 

Who promotes crowdfunding campaigns

In Italy and in particular in all developed economies, crowdfunding is promoted by web platforms, mostly innovative start-ups authorized by central banks (for their role as financial intermediaries) and by various control bodies, such as in Italy by CONSOB.

 

Types of crowdfunding

There are various and widespread types of crowdfunding, let’s see some:

 

• Reward crowdfunding

This type of collective financing is the most common for the number of platforms. It provides the investor with a reward commensurate with the contribution. Usually the platform gives two or more contribution choices defined by entities associated with the respective reward level.

Depending on whether the funding target has been met or not, the platforms follow two types of scenarios:

• • Keep-it-all (mantieni tutto). Solo al raggiungimento dell’obiettivo di raccolta prefissato dalla piattaforma i fondi vengono trasferiti al proponente del progetto e la relativa percentuale (success fee) viene corrisposta alla piattaforma;

or

• • All-or-nothing (tutto o niente). Only upon reaching the collection target set by the platform are the funds transferred to the proposer of the project and the relative percentage (success fee) is paid to the platform;

 

• Civic collective crowdfunding

Civic collective financing is one of the types of funding that is having the greatest success in the world of public administrations. A growing number of institutional subjects such as municipalities, provincial bodies, municipalities etc. he is using it to finance mainly the public works.

 

• Equity Crowdfunding

Financing in the form of risk capital. It is a financing method that allows unlisted companies to collect financial resources in the market for equity shares. According to the definition adopted by the supervisory bodies, in Italy by Consob, we speak of equity crowdfunding when through the on-line investment you buy a real holding of a company. In this case, the investor who finances in all respects becomes a partner and holder of the property and administrative rights that derive from the participation in the company.

 

• Lending Crowdfunding

Also known as a loan model, it is a collective financing model through which natural and legal persons can decide to lend funds, at a more or less high interest rate defined at a contractual level, with expected returns diluted over time. The loan that the investor makes is always aimed at a specific project, such as in cases of peer-to-peer lending (P2P). This model is certainly growing strongly in Italy and more mature than the others.

 

 

A Successful Case History: Inveco Holding & Ener2Crowd

Target reached in less than 12 hours (actually the first collection bracket set with the ENER2CROWD platform at € 30,000 was reached in an hour). In just under twelve hours, our crowd campaign went overfunded, i.e. it reached the second target group of 40,000 euros.

This recent experience has given us the impetus to face the future and new projects with a new awareness.

We started precisely from the end, or rather from the “happy ending” of a new business initiative that saw us protagonists in facing a new green project, in the post-covid era.

Let’s now retrace the steps that led INVECO HOLDING SPA to promote a collection of lending crowdfunding together with the ENER2CROWD platform. Everything starts from the conception of a new energy project, a medium-sized photovoltaic system to be installed on the industrial roof of a property owned by our client Modulo Srl.

 

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INVECO E MODULO (end customer) in November 2019 sign a LOI aimed at defining the legal and commercial cornerstones of the future operating lease contract that will govern this new business model, that is, the creation of a new turnkey photovoltaic project and last generation of the nominal power of 384 kw.

 

In December 2019, the ENER2CROWD platform was contacted by INVECO, a young innovative start-up based in Milan in strong growth, authorized by BANCA D’ITALIA to subscribe and promote lending crowdfunding campaigns and collections for investments and green projects. ENER2CROWD, in fact, is authorized to operate as Agent of the Lemonway Payment Institute, in accordance with the provisions contained in Resolution no. 586 of 2016 of the Bank of Italy.

At the end of 2019, the pre-due diligence parameters were immediately defined. The actual operations started in the first days of June 2020. In mid-July the due-diligence was completed and the lending crowdfunding campaign was launched quickly – 28 July. We have already described the outcome, a real success in all respects.

 

The project

Between January and February 2020 INVECO draws up the entire technical feasibility and design study of the new investment. In less than 60 days, the new project as a whole is actually defined at a technical and economic level.

During the lockdown period the parties involved their respective legal advisors who assisted them in drafting the “operating lease contract“. It has as its object the investment by Inveco of over 400,000 euros in total for the realization of the project. The plant is made up of four distinct photovoltaic fields sectioned on as many industrial roofs of the customer’s Modulo Srl plant in Umbertide (PG). They will be managed by 6 multi-string inverters.

In the face of this investment and once the plant enters into operation, Modulo will recognize Inveco for its exclusive use, a fixed and constant monthly rental over time.

To date, the progress of the installation works is 40%.

 

Main phases of the photovoltaic project.

 

Step 1: the feasibility of the project

The first step dealt with was the definition of the project and the commercial agreement with the end customer Modulo Srl. To do this we started from the history of energy consumption (last 3 years) of the client Modulo Srl, the only user and consumer of the energy produced and self-consumed by the network.

We subsequently sized the photovoltaic system specifically for the customer. This operation was carried out both at a technical level, taking into account the morphology of the exploitable industrial roofs, their geographical exposure and their static and structural characteristics. The plant project was also prepared at an economic level having defined the minimum and maximum power thresholds, such as not to generate economic production and producibility surpluses of the plant itself.

 

Step 2: definition of the financial needs to meet the investment.

Once the preliminary project was drawn up, we built the investment budget.

After defining the budget, we decided to make equity of 40%, requested a traditional bank loan of 50% and finally we decided to promote a lending crowdfunding campaign of 10%.

A lending crowdfunding campaign should not be confused with a bank loan, mortgage and / or leasing that is, this is a basic aspect that must be understood immediately. Although conceived as loan capital, a collection campaign must never exceed 10% of the total investment.

 

Step 3: construction and installation

Installation and shipbuilding is the main part of the whole operation. In the specific case of Modulo, we have decided to use the latest generation of technologies (modules, inverters, monitoring system). The choice of aluminum as a material for the support structures also followed the same logic. In fact, it is a guarantee of lightness and durability over time. A well-installed photovoltaic system is the main technical insurance towards the customer and investors so that the investment is guaranteed in the long term.

In the specific case of Modulo, the works gantt has a total duration of 6 months. We emphasize that our construction phases will go on in continuity with industrial production, safeguarding the customer from production stoppages and in full compliance with safety regulations.

 

In the coming months we will follow the construction site step by step, we will make photographic reports attesting the progress of the work and with the help of drones we will film the installation of the modules from above, thus giving a complete view of the project.

 

Visit also the website of the ENER2CROWD platform and their social media channels to stay updated on the energy crowdfunding world.