Our LED Project Business Model
Overview
The business model we are proposing is a simple repayment arrangement between CCEL and a Client organisation whereby CCEL provide a complete service including finance to install state-of-art LED lighting in community/public buildings and the Client organisation pays back the capital invested over a number of years from the resulting savings in the cost of electricity. We eventually intend to investigate the wider replication of this model into other areas such as schools, social housing (particularly for communal areas), home-owners and small businesses. The service is to be offered to qualifying organisations in the unitary borough of Chester and West Cheshire.
Approval to Provide Credit
We are required to be approved by the Financial Conduct Authority to provide credit in the form of providing the initial cost of the LED lighting. Without such approval, the project cannot proceed.
Raising Investment Capital
We propose raising capital using our status as a community benefit society to offer shares to our existing members and new investors. We will do this in share issues that will provide enough finance to install lighting in 4 or 5 community buildings at a time. The share offer will be advertised on our website, on social media, in the local press and disseminated using the networking organisations we are affiliated to. The target amount would be in the order of £15,000 for each individual share offer.
Recovering Capital Investment
We propose to recover all share capital, interest and sundry costs plus an amount for community benefit from quarterly payments made to CCEL from Client organisations. The amount to be paid and the repayment period will be calculated from data provided by each Client during a survey of the Client’s building. The annual amounts paid back will be calculated to not exceed 95% of the saving in lighting costs. This will be done on a theoretical basis as data on measured power usage for lighting alone will not be available. The calculations will be computed on a spreadsheet which will be checked by 2 CCEL directors for accuracy.
Contracts
CCEL and the Client organisation will be required to enter into a legally binding contract. This will take the form of a standard agreement provided by the Consumer Credit Association. CCEL will undertake to provide a new lighting installation in the Client’s building in accordance with the information contained in a proposal document in return for regular payments made over a period of time as specified in the contract. One of the challenges of the project is to establish a method of legally binding the two parties without the requirement to employ a solicitor for each installation.
Criteria for Qualifying Buildings
• The existing lighting uses outdated lamp technology such as incandescent, florescent or halogen lamps.
• The building is well used throughout the week.
• The lighting is used in the summer months to some extent.
• The building has enough lamps to generate sufficient savings in electricity to make the work of organising and installing the lighting worthwhile.
Surveying
A survey of the existing lighting will be required to establish the financially viability of installing new lighting for each building that has agreed in principle to engage with the project. There will be an initial screening survey carried out by CCEL and if this proves to be a viable project a further survey carried out by professionals to establish an accurate lighting specification and cost. The CCEL survey will be recorded on a template designed in the R & D phase. The lighting used for each room and each day will be recorded and each lamp identified in order to provide its power rating. Surveys will be carried out with the building manager at times to suit the booking schedule of the building. Data required for other energy/cost saving measures could be recorded at this time and the opportunity used by the electrical contractor(s) for estimating purposes. The survey will also provide an opportunity to obtain other useful data such as room dimensions.
Current Electrical System Condition Report Required
The electrical system of the building must comply with current, relevant regulations in order to eliminate any problems being caused to the replacement lighting by faulty wiring, switches or other components. CCEL will require that a certificate for the mandatory 5 year inspection of the electrical system is provided.
Client Consultation
The consultation could be carried out during the survey visit or later. Its purpose is to understand the lighting requirements for different rooms and different activities. LED lighting offers a range of fittings, brightness and colour. It is essential that the new lighting is perceived as superior in illumination and suitable for different rooms and uses. The selection of the optimum fitting, lamp, brightness and colour establishes the cost for each fitting and thus the material cost element of the estimate. It would be desirable, but not essential for the electrical contractor to be present at the consultation to provide practical knowledge and experience.
Calculation/ Estimating
Calculations are required to provide an accurate estimate of the cost saving of electrical power and the total cost of the new lighting installation. From these two estimates the time to repay the capital cost can be calculated and the project viability established. We consider that a repayment period of up to five years would be acceptable to a Client and if this condition is satisfied the project would move on to the next stage. All the calculations will be done on a bespoke spreadsheet which has been checked by an independent qualified consultant. The project cost estimate will later be adjusted to incorporate the electrical contractor’s fixed price quotation and the electrical wholesalers fitting prices and the repayment period and/or quarterly payments re-calculated.
Electrical Contractor’s Quotation
We have had quotations from 5 electrical contractors and established which one is likely to provide best value based on price and reputation. Our preference is to work closely with one contractor to save time and create an efficient working relationship.
Client Quotation & Contract Signing
Once a building has been assessed as technically and financially viable, a quotation will be prepared which clearly states all the information that the Client requires in order to make a decision to proceed or not. The quotation will state the financial, technical and legal bases for the proposed installation. For the purpose of openness and trust, all the relevant calculations will be appended. If the Client is satisfied with the proposal, he/she will sign and return the quotation. The date for the installation work will be fixed to suit the Client’s requirements and the contractor’s workload.
Installation Work
The installation work will typically take between 1 to 4 days. The contractor will establish times of work to cause as little disruption as possible to the running of the building. When the new installation is complete, the Client’s representative will be required to approve the work for payment.
Maintenance
The electrical contractor will be contracted to replace defective materials for the various lamps and equipment within their respective warranty period stated in the electrical contractor’s quotation, all as stated in Quotation. If the repayment period is of longer duration that the warranty periods then the client will be responsible for replacing faulty materials at its own cost within the repayment period and outwith the warranty periods.
