Renewable Finance: Turning chicken waste on an egg farm into green energy
Renewable energy is a key concern for both the government and the public as we look towards the future. But for business owners with high energy costs, the attraction of renewable energy, particularly self-generated renewable energy, is about more than just good practice. However, these projects often require significant investment, which is where we can help with renewable finance.
UK Agricultural Finance has a wealth of knowledge and experience in dealing with renewable finance, including a range of renewable technologies from hydroelectric plants such as this project to biomass projects like this one.
Why did the borrowers require renewable finance?
For many farmers, energy costs over the last two years have been a serious concern, with price rises occurring almost daily. The situation is even more extreme for poultry farmers, who have high energy requirements to maintain the welfare of their animals. However, many poultry farmers are also well-placed to make use of renewable energy options such as solar panels, ground source heat pumps and biomass boilers.
Our Central BDM, Sue, recently dealt with a case from such a farmer. The borrower in question was a family-run farm with an egg production and processing business that extended to almost 1 billion eggs per year. The borrowers wanted to find a greener source of energy while also future-proofing their business from further energy price changes by producing their own energy on farm. To achieve this, they wanted to install a CHP Combustion Plant, which effectively runs on chicken muck to produce energy without the need for fossil fuels.
To produce energy, the borrowers would collect the waste from the birds, transport it to their storage area and then into a drying shed. Once dried, it would then go into the burner to be converted into electricity for the farms, and the over spill would go into the national grid. The borrowers had invested plenty of time into planning the processes, such that if any part of the plant broke down, it could be isolated and repaired without impacting the rest of the plant. This highlighted to Sue how prepared and innovative the borrowers were.
The cost of the project was insignificant, but the borrowers had been able to obtain deals with the plant manufacturers that would reduce the upfront cost in exchange for some publicity. We were able to supply the remaining renewable finance with a LTV of 60% against land and property owned by the family.
How have the borrowers used innovation to save money and future-proof their farm?
The family farm was started in 1955 originally as dairy farmers, but following a trip to observe other farming methods and approaches internationally, were inspired to move into automated egg production. Since then, the business expanded to be one of the largest egg production operations in Europe. Despite their size, the borrowers pride themselves on still being family owned and run, with various members of the family being involved in the business and most of their employees having worked for them for over 10 years.
The success of this family operation is, in part, because each key family member has a specific, defined role. These roles have been supported through the structure of the core business and by adding diversification projects such as chick rearing and dry/liquid egg production.
Their processing plant has allowed the business to diversify by purchasing surplus eggs in the marketplace when the prices are low, storing as either liquid or dry eggs and then selling on to other suppliers. The demand for processed liquid eggs and egg products grew as food services and processes want UK Lion traceability due to provenance.
On top of this, the family worked hard to reduce costs, future-proof the business and ensure they had control over their input costs. This included the installation of solar panels, which has saved them around £150k since 2014, and rain water harvesting, which has allowed them to produce clean drinking water for the hens while saving them £120K per year on water charges. The business also maintains its own fleet of 30 vehicles, which ensures efficient and reliable service of egg distribution and collection of eggs on the way back.
Assessing the quality of the borrowers for this renewable finance loan
All our BDMs are extremely experienced in assessing the quality and background of a borrower. Their expertise in the agricultural sector mean they are able to quickly understand the opportunities and challenges facing a farm and assess how the borrower has tackled these.
Sue was very pleased to see the quality of this borrower, not only from their innovative planning and business acumen, but also from the smaller personal elements. For example, the farm is now being run by the second and third generations respectively, showing the clear succession planning which is in place.
Additionally, whilst on site, the borrowers took the time to present their detailed business strategy to Sue, which not only demonstrated their expertise but highlighted their passion for the business and the industry.
The family are so well respected within the industry that when the government minster wants advice on ‘egg production’, he speaks to one of the key family members. There are many years of experience between them all and a great deal of knowledge of the egg industry.
Their expertise is also well-demonstrated by the number of awards they have won, including awards from leading industry publications such as Farmer’s Weekly. They also have an international lifetime achieve award within the industry for the head of the family.