€25,000 per year

myshirt

callaway92 wrote: »

Most important post of the thread.

Lot more to be gained here if you're feeling up for it. Definitely have to have some stipulation where if inflation occurs you will get the extra moneys worth but NOT below 25k. Stake in their business even perhaps??

It isn't as simple as snapping the hand off them anyway imo.

I thought the op said it was index linked? No?

Op - get some professional advice if you haven't a rashers. And sound professional advice, not some from some rogue solicitor who hasn't a clue himself. Keep yourself on your toes and be wide for these fellas, a lot of them out there winging it. Other than that, use some common sense in your approach:

- Never 'snap the hand' off someone on the first offer if they are a sophisticated investor. For all you know, they have low-balled you. Do 'snap the hand' off someone who has ballsed up the offer as they don't really understand how to price the thing.
- In the wind industry, you might want sight of P50's and P90's. Get something equivalent from these gents.
- Ask for parent company guarantees. Remember, you are at risk of the land being ruined if the operation goes wallop for one reason or another.
- Get an accountant to review their numbers and see what state they are in
- Find something 'similar' and see what they are earning as a % of the revenue of the operation
- Ask for sight of their PPA agreements (sign a NDA if you have to)

If it was me, and just looking at this very quickly, I'd ask myself a few things, and I'd do a few things:
- Have you any alternative use for the land? Is there anything else that could be done with the land (at any time in the next 20 years!) that would make you money. If there isn't, then remember these guys have you somewhat by the short and curlies.
- I'd get sight of the PPA agreement; say it is 15 years; I'd lock in at a base rate benchmarked to that, plus allow for uplift, and settle on 10 years with an option to extend for 5 or pay towards restoring the land. Cap and collar it if you have to, but just remember you want to move with the business but you also want to have a baseline to operate off. 15 years is a good time to then review, both for you and for them, as the UEL of the equipment is likely approaching nil at that stage. Someone might say to you, sher you're mad to give up extra years 'guaranteed' income, but the fact is you are not. If they can't pay, they won't pay. And you're gone. If they can pay, you want to know how much, so you are not short changed.

Ultimately, this all comes down to appetite. If you want a no-pain, fixed-income approach then the biggest thing that sticks out in this for me is managing the risk. I would have a sneaking suspicion you could do a lot better on the deal though, but that's all down to what your appetite is for this game. Get a good advisor on side. Might be a nice one to get the teeth into and bang out a deal on.

callaway92

myshirt wrote: »

I thought the op said it was index linked? No?
.

Ah you're right I missed that so!

Would still not (as you said) snap accept it.

Man11

Be careful if you have other land . If you try and sell or build they can block it .

robp

Although good Considering how much land is involved, €25,000 a year is not a particularly special return at all. Especially if it really is good land.

The_Conductor

Depends really on what you'd get were you to use the land for other uses.
Also- given what the OP has told us about the location- the red flag I see is potential planning issues- I don't see how it would be allowed.

Gumbo

The_Conductor wrote: »

Depends really on what you'd get were you to use the land for other uses.
Also- given what the OP has told us about the location- the red flag I see is potential planning issues- I don't see how it would be allowed.

OP says they are already planning approved.

Marcusm

davo10 wrote: »

If it's for a solar farm, most likely it is in the back of beyonds on the side of a mountain as the company is unlikely to get through the planning stage if it was close to a residential area. Also development land would be worth a hell of a lot more than the amounts the op is talking about.

Solar farm will almost certainly neither be in the back of beyonds or on the side of a mountain as it needs to feed into the grid (less likely) or power a local need (more likely) - it would not surprise me if it was intended to feed electricity into a server farm or data storage site, in which case it would not be remote at all.

ted1

The_Conductor wrote: »

Does the land have any other viable use- including the likes of forestry- and how does the current proposal stack up against alternate uses.

Any income from this proposal- is taxable- forestry, and a limited range of other options- might be tax free- or tax efficient- how does this proposal stack up on a net revenue basis......?

The company concerned- what are their credentials?

Have you looked at the industry- and seen whats happening in Germany and the UK (which arguably are more viable as solar farm locations than Ireland). How would the removal of subsidies for solar power generation- as is happening elsewhere- affect the business model? Could you end up with the company being wound up- you with an unenforceable contract- and the land out of commission with panels and high capacity power lines limiting other use, until you got the place cleaned up?

If the benefit of this to you- is you get to sit back and get 25k into your hands annually- with no work involved- are there alternates that might suit your proposed lifestyle (forestry or wind for example).

Are there other solar farms in the area- and have their faced regulatory or planning issues (whatever difficulties wind may have for people- I can only imagine you'd get far more complaints over a solar farm, than you would over a wind farm).

Just how viable is their proposed business model- I'm sorry- from the little research I've done down the years- these type projects tend to based on a premise of abnormally high fees per unit power generated- they do not stack up other than as a subsidised form of power production (even locations like Spain are removing the subsidies- and by god, solar farms are a lot more viable in those sort locatoins- than in Ireland..........) If solar farms are not viable without subsidies in Spain- surely this would have alarm bells ringing in an Irish context?

Personally- I think its a hare-brained idea- I can see why its attractive to you- but as a business model- I don't see how it could possibly work in an Irish context.

I'd explore all the other land use alternates- and critically assess this as a proposal- because it certainly is not as simple as you get 25k into your hand per annum (index linked), sit back and ride into the sunset..........

Removing the FIT in Spain had nothing to do with its viability. That happens for a number of reasons, They have reached the desired penetration level, the €/MWH Z has reached a level where it's not needed, the industry is well established and no longer needs support.

Solar PV is at a price point where it makes perfect sense even with the low price of fossil fuel. There's a good few in the planning stage at the moment.

There's very little maintenance, the output is largely predictable ( unlike wind), unless they have a tracker to track the au there is no moving parts. They require no fuel.

Marcusm

Mirror game wrote: »

Ok, just have a short time to reply here but will look at thread more later.

It's a 25 acre site 3km from a large town and 500m from esb substation. Its good quality land only about 1.5km from built up area on outskirts of town and about 500m from land zoned residential.

I'm believe that the distance from the substation in a key factor for them as it keeps the connection costs down. Most sub stations only have the capacity for one 25 acre solar farm but some of the newer ones have more, I think.

There is a bond in place, if ever they go bust the panels will be removed.

Solar farm boundary fence is 2.4m and the top of panels are lower, no noise from panels.

sheep or smaller animals hens, geese etc may be allowed, as it is done in uk, but no guarantee as their insurance might not allow it.

I also believe if it all works out the way that they're planning, the amount that I get will only be a tiny % of what they'll be raking in. If I'm selling I'll be waiting until the whole project is up and running and rent coming in, that way it would help remove any potential investor doubt about what will happen down the line.

OP

You have marked it as good quality land but what do you think it is worth? Average agricultural land value in Ireland is about €10k an acre but this varies widely with location and use (arable v high qualty pasture v low quality pasture). If you etimated a €250k value for your land then that is a 10% gross yield which for a 25 year index linked no hassle investment, would be very attractive (but be careful what index it is linked to).

It is entirely appropriate that you would be receiving only a tiny portion of the revenues from the solar farm - you recognise yourself that they will spend €5m overall on the project and ther eis no reason for you to get a significant portion of the revenue - their capital investment is high and they carry the project risk.

Frankly, based on these numbers, it is nonsensical for them not to simply purchase land outright other than perhaps for the fact that they can get a tax deduction for paying the rent while the purchase cost would not be deductible.

The issue for you is to determine whether this is the best money you can earn from the land bearing in mind that you will not have to spend time tending to or farming it.

ted1

Marcusm wrote: »

Solar farm will almost certainly neither be in the back of beyonds or on the side of a mountain as it needs to feed into the grid (less likely) or power a local need (more likely) - it would not surprise me if it was intended to feed electricity into a server farm or data storage site, in which case it would not be remote at all.

That would suprise me , once it feeds into the grid it came be located anywhere on the island. The best W/M^2 is in the south east, and the big Data centres are in Clonee, Dublin, Athenry...

Mirror game

VincePP wrote: »

A long term investment fund would look at a 5%-6% return assuming the solar company has a good financial rating.

Ballpark you could sell it for circa € 400,000 - €500,000

Investment fund can be an individual with a pension or one of the larger funds.

If the solar company has an A financial rating (quite possible) then price will be at higher end.

A good commercial estate agent such as savills would give you a very accurate figure as they deal with this type of stuff everyday.

Thanks I'll look into this.

The_Conductor wrote: »

(whatever difficulties wind may have for people- I can only imagine you'd get far more complaints over a solar farm, than you would over a wind farm).
.

What complaints do you think people might have?

robp wrote: »

Although good Considering how much land is involved, €25,000 a year is not a particularly special return at all. Especially if it really is good land.

There isn't anything you can do with land that will give you €1000 per acre return. Forestry or any of the many types farming systems don't even come close.
I don't have any money worth talking about to invest and even if I did I don't know of anything that would give such returns.

The_Conductor wrote: »

Also- given what the OP has told us about the location- the red flag I see is potential planning issues- I don't see how it would be allowed.

What do you think will cause problems with the planning?

ixus

A 375k mortgage at 4.5% over 25 years is approx 625k. It's probably a good estimate off the max you could achieve up front. Though, investor would probably want higher yield (reduced capital to you) to acvount for risks associated with deal (non completion of contract, duration & inflation risk).

Depending on security of deal for you, you could probably borrow against it if required.

Another option is to place income into pension to reduce tax burden.

Mirror game

ixus wrote: »

A 375k mortgage at 4.5% over 25 years is approx 625k. It's probably a good estimate off the max you could achieve up front. Though, investor would probably want higher yield (reduced capital to you) to acvount for risks associated with deal (non completion of contract, duration & inflation risk).

Depending on security of deal for you, you could probably borrow against it if required.

Another option is to place income into pension to reduce tax burden.

I thought it might be valued much more up front.

Supposing the security on the deal was very good how much could hope to borrow?

davo10

Mirror game wrote: »

I thought it might be valued much more up front.

Supposing the security on the deal was very good how much could hope to borrow?

You need to talk to your bank but it is typically 3 times your yearly income so if you are asking how much of a mortgage you could get, €75k if this is your only source of income.

Marcusm

ted1 wrote: »

That would suprise me , once it feeds into the grid it came be located anywhere on the island. The best W/M^2 is in the south east, and the big Data centres are in Clonee, Dublin, Athenry...

You're actually supporting my position; the south east is neither remote nor mountainous. Mountainous remote regions have limited grid infrastructure. T reason I cited data centres is the attraction of pseudo corporate sustainability PR which is often sought through vanity style (as opposed to commercial) projects. Irrespective, it sounds as if the income level proposed for the OP is dramatically better than his alternative use income sources.

If the OP is interested in a capital sum rather than income he should consider selling the land outright to the power company or to someone seeking a relatively sustainable income. The size is small so his multiple will, IMO, not exceed the 10 times income.

robp

Mirror game wrote: »

Thanks I'll look into this.


What complaints do you think people might have?


There isn't anything you can do with land that will give you €1000 per acre return. Forestry or any of the many types farming systems don't even come close.
I don't have any money worth talking about to invest and even if I did I don't know of anything that would give such returns.

The average price of farmland is €10,500 per acre but if the land is good land, near a town and very suitable for solar its not average. We don't have all the details but it might be worth more. If it is worth €14,000 per acre its yield is about 7% which is more average and roughly the average return of stock market. The solar project's strength is the predictability of its return unlike a stock market.

Mirror game

Marcusm wrote: »

Frankly, based on these numbers, it is nonsensical for them not to simply purchase land outright other than perhaps for the fact that they can get a tax deduction for paying the rent while the purchase cost would not be deductible.
.

ted1 wrote: »

That would suprise me , once it feeds into the grid it came be located anywhere on the island. The best W/M^2 is in the south east, and the big Data centres are in Clonee, Dublin, Athenry...

From my experience genuine companies are only interested in acquiring land within 1 mile of esb substations, with the capacity to take one of more 25 acre solar farms. I not claiming to know anything about the technical side of making a grid connection but I reckon companies that are looking for land in any location could be doing this just to secure a grid connection. and if there is nothing tying them to that land folio they'll probably move off to a better location once they have got a grid connection. I had to tie the company to my land in case they tried to move to a more suitable location closer to the substation.

Buying land that's for sale is relatively straight forward but for company's that have invested hundreds of millions into wind farms or solar abroad to go around the country trying to buy land not advertised for sale that's different matter .
If it was an option for the solar companies to go anywhere they would've just got there grid connection on any piece of cheap land and worked from there and if the FIT doesn't happen they could just sell it back again it would be very small money to them.

robp wrote: »

The average price of farmland is €10,500 per acre but if the land is good land, near a town and very suitable for solar its not average. We don't have all the details but it might be worth more. If it is worth €14,000 per acre its yield is about 7% which is more average and roughly the average return of stock market. The solar project's strength is the predictability of its return unlike a stock market.

Yeah I'd say about 13k/14k but its impossible to know until it goes under the hammer, locally good land has gone for €9000 to €20000+ it all depends on who's looking for it.

Mirror game

Mirror game wrote: »

What complaints do you think people might have?




What do you think will cause problems with the planning?

Anyone want to answer either of these questions.

<mod snip > just interested to know what issues people might have to a 25 acre solar farm being built say 300m down the road.

blacklilly

Op we've been approached by the same company (I presume), We're more than likely not going to go ahead with it.

If we entered into an agreement the land use would change from agricultural to commercial, we'd loose part of our single farm payment, would effect inheritance tax, there are no tax incentives for this type of enterprise. We're not entirely confident in the covenant type and don't like the idea of signing a lease that has been presented to us by the people looking to rent our land.
You've also got the factor in the cost of keeping sheep or other livestock on the land. There'll also be an onus of the owner of the land for the duration of the lease to have the land grazed.


Professionally I work in the property sector and am very familiar with commercial Leases, that together with legal and tax advice has ruled us out.

Mirror game

blacklilly wrote: »

If we entered into an agreement the land use would change from agricultural to commercial

I'm 100% certain that you don't know this.

blacklilly wrote: »

we'd loose part of our single farm payment

I'm 100% certain that you don't know this.

blacklilly wrote: »

You've also got the factor in the cost of keeping sheep or other livestock on the land. There'll also be an onus of the owner of the land for the duration of the lease to have the land grazed.

For me, these issues were sorted out between just myself and solar company, about 20mins into our first meeting, that was prior to 3mths of meetings with solicitor, accountant and teagasc advisor. I doubt we're dealing with the same company.

Thargor

Why would grazing be a problem? A few sheep would keep it done if all you wanted was to keep the grass cut.

How many acres roughly are generating the 25k OP?

Mirror game

Thargor wrote: »

Why would grazing be a problem? A few sheep would keep it done if all you wanted was to keep the grass cut.

How many acres roughly are generating the 25k OP?

25 acres of land, the 25k is index linked, my accountant has assured me that the index it's linked to is standard/sound.

Mirror game

Thargor wrote: »

Why would grazing be a problem? A few sheep would keep it done if all you wanted was to keep the grass cut.

There isn't a definite answer to allowing sheep on the lands yet, it's done in u.k so it's likely to happen here. Allowing sheep or smaller (geese, hens etc) has more to do with a farmer retaining his farmer status and s.f.p payments etc.

The ultimate maintenance of a site that cost 5 million+ to construct is in way going to be left up to the farmer.That wouldn't work from an insurance standpoint also it's entirely impractical, today farmers can't even spray chemical on their land without the proper training.

blacklilly

Mirror game wrote: »

I'm 100% certain that you don't know this.

So tell me how someone can receive money from a commercial entity on the same land they are receiving a single farm payment for?

Furthermore, the actual planning application will form part of a change of use of the land.

Unless you've some ridiculously imaginative accountants, I'm not at all sure how you'd retain the sfp.

Another thing worth taking into consideration is how is agriculture going to evolve over the next 20,30,40 yrs?
Will solar power be the leading force in renewable energy or will more advanced technology be invented, which may leave the panels on your land redundant. Will the company you're entering into a lease with (a lease which they've had drafted for land you own!) continue to invest in research and technologies to ensure their survival going forward?

In our case they were looking for just short of 100 acres .

You're obviously not that confident of the proposal as you've come on here looking for advice, even after 3 months of liaising with your solicitor.

blacklilly

Thargor wrote: »

Why would grazing be a problem? A few sheep would keep it done if all you wanted was to keep the grass cut.

How many acres roughly are generating the 25k OP?

Sheep are a lot of work, ask any farmer, they're probably the most labour intensive livestock to keep.

Mirror game

blacklilly wrote: »

So tell me how someone can receive money from a commercial entity on the same land they are receiving a single farm payment for?

I can't tell you that, because I don't know what happens to the SFP, nobody does right now! this is well understood by all the other landowners I know that are considering a solar deal.

blacklilly wrote: »

Furthermore, the actual planning application will form part of a change of use of the land.

The options for how the land is classified after a successful solar planning is again, unknown. I've met with a number landowners in the same position as myself and it is well understood that the issues you're claiming to know about are unknown. I'll add, that everyone I've met also employed a solicitor, teagasc advisor and accountants

blacklilly wrote: »

Unless you've some ridiculously imaginative accountants, I'm not at all sure how you'd retain the sfp.

And again, I'm also not sure how ill retain my SFP or if it can be done, nor have I or my accountant claimed that I'd be able.Its UNKNOWN.

blacklilly wrote: »

Will solar power be the leading force in renewable energy or will more advanced technology be invented, which may leave the panels on your land redundant. Will the company you're entering into a lease with (a lease which they've had drafted for land you own!) continue to invest in research and technologies to ensure their survival going forward?

While the viability of solar is relevant, it is far more of a concern for those making the investment, my main concern is having a secure bond in place in case it all goes wrong down the line. As I've already said, I've a bond that will ensure the removal of all equipment.
Yes the solar company draft the initial lease agreement but the final one, the one that matters! looks nothing like the original draft.

blacklilly wrote: »

You're obviously not that confident of the proposal as you've come on here looking for advice, even after 3 months of liaising with your solicitor.

If you read over the thread you'll see that I've never once looked for advice in relation to "will I/won't I" sign up. I said at the beginning that if the deal is sound, I'll be signing up, I'm here trying to get an idea about the value of the site once the deal is in place. There is much more to these deals that I haven't even mentioned (connection payments etc), because it isn't relevant to what I'm looking for.

Since it has come up, I'm now also interested in the questions asked in post 43 and again in post 50

TeaBagMania

Be careful you don’t want to end up like that guy that leased Arthur Guinness his land for 45 pounds per annum for 9000 years

Mirror game

Thanks for the heads-up teabagmania, anyone calling round about a 9000 year old lease, I'll be ready for um!

athtrasna

Mirror game wrote: »

If you read over the thread you'll see that I've never once looked for advice in relation to "will I/won't I" sign up. I said at the beginning that if the deal is sound, I'll be signing up, I'm here trying to get an idea about the value of the site once the deal is in place. There is much more to these deals that I haven't even mentioned (connection payments etc), because it isn't relevant to what I'm looking for.

Since it has come up, I'm now also interested in the questions asked in post 43 and again in post 50

Moderator Note

People are trying to help. Please appreciate the time and effort posters put into replying and trust the mods to intervene when discussion strays too far off topic. Thanks.

Mirror game

athtrasna wrote: »

People are trying to help. Please appreciate the time and effort posters put into replying and trust the mods to intervene when discussion strays too far off topic. Thanks.

Thats fair enough by me. I do appreciate the time and effort posters have put into replying and overall I'm happy with the discussion.