jjc
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Post by jjc on Nov 9, 2014 19:34:41 GMT
I’m not sure I agree bigfoot. A florid AM is key to the success of a platform. More forward-looking operators like AC I think have understood this, which is one of the reasons why the soon to become world-famous shraplenator (amongst other things) has been adopted in the new upgrade – as many have already noticed it definitely helps AM liquidity. Other operators are also trying, in their own way, to get a more effective AM up & running. They do this because they know that the AM is perhaps the most important tool not only for diversification, but also investor exit, rebalancing, yield-chasing (all perhaps better bundled together into the concept of risk management)… & hence for getting lenders to invest on their platforms.. As a way of getting more business it’s a no-brainer.
For those who didn’t know, HM Treasury & the FCA are also actively seeking to promote effective AM’s with P2P operators. In their ongoing ISA-P2P consultation they are even looking at the possibility of setting a maximum period of time for which a loan must be traded if the investor so desires (or bought up by the platform/3rd party).
"The government could require that for a peer-to-peer loan to be ISA-qualifying, it must be facilitated by a firm operating a platform that provides a facility for the investor to seek a third party purchaser for the loan, throughout the term of the loan. In other words, it must provide access to a secondary market at all times."
"The government could address this by insisting that, for a peer-to-peer loan to be ISA eligible, there must be arrangements in place under which the loan could be sold at market value within a specified period (say, twenty days) at the investor’s request."
"One way firms operating platforms could achieve this would be for them to put in place a contractual commitment that either the firm itself or a third party would offer to purchase loans from investors at their market value if they remain unsold after a specified period. This would ensure that loans could be sold (and therefore transfers of the cash realised could take place) within a reasonable time period, even where either no secondary market existed, or where no willing buyer had been found via such a market ."
So, whilst nothing has (yet) been decided the direction of travel – both for business-driven & regulatory reasons - is very clear.
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jjc
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Post by jjc on Nov 9, 2014 19:22:44 GMT
Good to have you here Tonyr. I think the point that small lenders are trying to make is not that there must definitely be a conspiracy among uw’s but simply that with things as they stand now it’s very difficult for us to make any judgements (& hence “informed” investment decisions).
You guys have done a sterling job of getting the loans brought on for us. But (if our reading of things isn’t wrong) you’re now in a bit of a fix because there simply aren’t enough small lenders (perhaps particularly new ones who starting from scratch can afford to enter any loan they consider ok just to get started) to buy those loans off you.
Us small lenders (who like everyone else is out first & foremost for their own interests) could ofcourse think “tough cookies on the uws I don’t care let them dig themselves out of this mess”. And we are to a certain extent (simply by being careful where we invest). In reality though we’re all bound together in one big loop, you guys not freeing up capital means more loans can’t get issued, we can’t diversify, the wheel grinds to a halt.
So not good for you = not good for us = not good for you (ad infinitum)
I think it’s good we’re talking. I also think there are solutions round this. And I hope they’re on their way.
In the meantime it may be worthwhile you add your voice to those asking for more lenders to get this wheel a’turning again.
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jjc
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Post by jjc on Nov 7, 2014 13:56:34 GMT
I’m glad anyway that others have raised (& that AC are thinking about) the sales process for loans, not just the purchases. Exit is fundamental to investors, without a clear path out they will put much less in, & some none at all. (Think of the peeps used to buying & selling equities/ETF’s/bonds & the like at the click of a button… the first question they will be asking themselves when looking at P2P for the first time will be… ok, sounds good, but how can I get OUT?!?)
Leading platforms like AC will not only need to have the right algorithms in place but also a very clear & publically declared explanation as to how it works. Linked from somewhere near the top of their homepage most likely..
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jjc
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Post by jjc on Nov 7, 2014 13:51:27 GMT
Shraplenator is fantastic :-) Returning to other points raised earlier though My feeling is that – concerns re number of transactions aside (which I understand but think is a different problem which AC will find a way of handling) - the vast majority of lenders will prefer the gradual “everyone gets a bit sold off” process rather than the lightning strike lucky hit. In a rapidly growing market like P2P there should be very healthy demand from new lenders for units offered for sale, so non-problematic loans should be taken up very quickly whatever system is adopted. Problematic loan cases might be different though. There’s at least 3 ways these sales could be handled 1. At random (lucky bolt of lightning for someone & maybe nowt for others) 2. Gradual everyone gets a bit sold off 3. First to the exit door (ie first units to be listed are first to get sold off) My guess is that the random one will be the most unpopular with exiting lenders, it’s harder to justify as a “fair” system. 2 & 3 above are fairer & each with its own merits. In a super-charged AC platform operating at the speed of light in a large marketplace of buyers & sellers I’m guessing the difference between these 2 options could even be minimal. Underwriter sell-offs may have to be handled differently says Chris (due to existing formal agreements) , & if so will mean they would have to continue to be marked as different units by the system (in which case I throw my tuppence in again for making this visible to lenders, it’s info sorely missing right now that we used to have before & can only encourage investments). That said, it’s unclear to me anyway what sort of a problem we have with the underwriters for their sell-offs. I can imagine the agreements in place are one of the following: - a. First uw INTO the loan gets first priority to sell-off - b. First to list for sale gets first right to exit (his entire slice) - c. Something more “complex” (over a certain £x underwritten you get the right to jump the exit queue in some way, or maybe simply BIGGEST FIRST) Others have pointed out that in a thriving marketplace there should be little difference as to what system is adopted even for uw’s sell-offs. Wrt the “here & now discussion to be had with uw’s” though, I may well be missing something but surely this can be sorted fairly easily? If the current agreement is a. then the onus is on the uw to get into the loan first (his decision), ditto if it’s b (heck if you’ve stuck a big 5 or 6 figure sum into something surely you should be looking at managing its sale once the loan is offered) & ditto if it’s c. (the rules of the game are clear & uw’s can decide how much to put in based on these) May be missing something, if not what’s the problem chris? Whatever the case, my guess is that if uw’s are edgy about this issue the fundamental reason behind it is the situation we are ALL in now, ie not enough small lenders taking up the slack. So it’s THIS that needs to get sorted out asap. Sorry to bang on about it but just by way of example… loan 120...fairly mainstream AC meat’n’potatoes property loan..mid-size…1st charge…rate in line with where the wind seems to be on AC (with maybe even a cashback/bonus during auction?)… offered to lenders back in July (wow, was hot then I seem to recall)…. & finally drawn down this week… following not exactly on the heels of a long tail of property loans… & there’s still (4 months after being offered to us) two thirds of it sitting on the market. Plus (who knows) maybe more sitting with uw’s & not listed yet? Last point (on the issue of “Strange activity on the AM” raised in another thread), again may have misunderstood but it would seem to me that in all 3 of the above a/b/c scenarios above it would NOT be in the uw’s interests to shuffle any of his positions across loans. So why are they doing this?
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jjc
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Post by jjc on Nov 7, 2014 10:56:03 GMT
chris, here is the chaser you asked for
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jjc
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Post by jjc on Nov 4, 2014 22:42:09 GMT
No probs chris, when you have a mo, I know you're busy.
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Post by jjc on Nov 3, 2014 11:12:04 GMT
Top item for me. As would be anything else that helps hands-free/low maintenance management for manual investors. Good to see it's top of the list. Updates section mentioned by others hence also very welcome.
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jjc
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Post by jjc on Nov 2, 2014 13:26:40 GMT
Sorry for that OG! I think you fell for it though, was testing YOU really. Youngsters are amazing what they can do with phones & websites (even whilst driving) Reading that bumpf whilst peeling a banana (or 3) though... that would be really impressive!
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jjc
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Post by jjc on Nov 2, 2014 13:05:52 GMT
Hi Chris, had a wee think on this, some off-the-cuff misc questions & comments for you.
1. good to hear you share us ordinary lender’s concerns. Having trouble tbh understanding what “commercial considerations” there could be that may sway AC not to provide additional information on loan make-up…?...?
2. Have had a look & (as already mentioned by others) the “strange activity” on the AM can only be explained by big lenders/uws shifting positions across loans. This raises questions, some perhaps “serious” that one would imagine AC were aware were going to come to light at some point or other - & I personally think the sooner they are the better for everyone. They won’t necessarily be easy to deal with, I appreciate that, but I do think a discussion with your lending base can only help to find the best way forward. Let me explain some possible issues/concerns:
a. with the new sys lenders have no possibility to see the make-up of a loan (previously the horse-shoe at least told us if there were uw’s present or not… which was a start)
b. right now we (ordinary retail lenders at least) have no visibility. Do uw’s have any? (I would in any case hazard a guess that even if they DON’T formally in terms of system display they are likely to be in a better position to guage or even “know” this compared to small lenders by virtue of the previous info they will have obtained/gleaned/have made available to them whether formally or informally from their previous uw/lending activities on AC & perhaps other platforms too, or info they can exchange between them unbeknownst to us ordinary lenders or even AC.)
So today as a small lender my view is likely to be 1. That I know less on the new sys than I did with the old sys 2. Bigger lenders/uws now know probably quite a lot more than me
not to mention 3. Bigger lenders/uws can block smaller lenders both entering (they get first bite of the cherry so to speak on any loans if I’ve understood the new delivery system for loans) & exiting (clogging up the AM).
mmm.. not sure how happy I should feel about that all. But let’s continue the thought process…
3. In recent days there’s been some fairly substantial yo-yo-ing on many of the loans on the AM. For the mo I’d like to focus only on 4 of these – the 3 windies (106, 90, 93) & a non-windie (101).
The volumes available for these 4 loans on the AM have swung (sometimes repeatedly up & down) between 110 & 200k (106), 170 & 260k (90), 560 & 930k (93), 938 & 1236k (101). This is only what I’ve noticed when I’ve looked, there may have been even bigger swings at other times.
My own personal reading of this (I won’t go into details here suffice to say I feel confident I’m not far off the mark) is that the above swings have been made by between 2 & perhaps 5-6 (most likely scenario ) or maybe even 10-12 big lenders/uw’s (possible but less likely) shifting things around.
A small lender will (naturally) question himself as to the who’s & why’s as to this activity. Some of the things he’s likely to come up with are:
- Is this big lenders/uw’s simply rebalancing their portfolio?
- Is this big lenders/uw’s looking to exit some of their loans?
- (maybe most important of all) are these big lenders/uw’s acting individually without any knowledge of their peers’ movements (or alternatively could there be some “teaming-up” between 2 or more big lenders)?
I don’t know. Right now the only comment I feel qualified to say is that if it’s a result of either rebalancing or looking for exit they could have just as easily done it another way (putting only small volumes of each loan up for sale, seeing which sold & then as & when they get taken up adding a bit more on etc). And on the “teaming up” question..mmm.. well with the small numbers of big lenders involved that wouldn’t be difficult to organise surely if someone wanted to do it.. is this practice in any case allowed/encouraged/discouraged/forbidden by AC?
In any event, by shifting fairly substantial volumes across loans in very short periods of time the net effect of big lenders’ loan-shuffling (whether it is out of laziness/panic/playfulness/ simply testing the market or whatever other reasons we could read into this) has been to “distort” the market, or at very least distort the picture of any given loan at any point in time. Just by way of example if a new small lender (& you imply there’s quite a few of these now – great btw) comes on to AC & sees there’s only 30k of units available of a 2m loan he may well think “great let’s go for that, won’t be hard to exit it if I need to”… only to find say a few days (or hours) later that there’s suddenly 500k on the AM for it… Is that fair to the new lender? Is it likely to build his confidence in investing further on the platform?
4. It may very well be a simple coincidence but the movements on the AM have happened at the same time as AC’s launch of the Green Income Account & other new products. Again (looked at through the eyes of an ordinary lender) I could be asking myself “Is the rapid sell-down of windie loans due to AC buying them up for the GIA?” If it is then great most likely this will be targeted to many new lenders helping them come onboard & get better returns & helping all of us exit more easily in future if we wish to do so. If it isn’t then it opens up other scenarios. One of these could be that the big lenders/uw’s have quite cleverly played around with the windies “under cover” of the imminent GIA, helping them exit these perhaps more easily than they would otherwise. To be fair my own personal take is NOT this (won’t go into details & can’t be sure but I honestly think that although there may have been 1 or 2 acting this way there could just as well have been none & actually I think that’s the more likely scenario that played out). But that’s almost beside the point really. The real issue is that by not knowing what’s going on, or at the very least if there are any big positions in these loans, I have no way of gauging things…so… could (naturally) think it’s safer to steer clear of these loans…
mmmm…not sure how good that is for AC if lots of people think that way
5. There’s lot of good things going on at AC. I have faith in your management, the general direction, your software, many things… & honestly think you are without question (right now) the best equipped & most professional P2P outfit (if still to be tested in some aspects) out there. Early days ofcourse, both for you guys & P2P in general, but from this lender’s point of view I think (may be mistaken as I am not privy to inside info) your biggest challenges you need to work on further are:
- deal flow (more loans, including smaller ones which in recent months seem to have suffered much more than big ones)
- a larger retail lending base, made up of many (x4 or 5 min as a first step) more smaller lenders
- drawdowns (don’t be fooled by the new sys doing this “behind the scenes” now, even uw/big lenders’ funds are finite, so the bigger the loans the harder to fill & the harder for these guys to exit, making it in turn harder for them to underwrite further new loans… so the whole process stays slow…things are still all linked up even if we can’t see them so imho takes us back to the above 2 points … the way to get a quicker & sustained flow of new loans over the next X months with a stable AM backing them up is for AC to offer many more smaller ones – even if this costs you a tad more in margins - & have lots more ordinary little lenders taking on the loans from the bigger guys..)
6. That said there are lots of new things that are going to happen in the P2P space as the market grows & matures. I personally think that one of the key decisions platforms will be needing to make as the market grows is how to capture this growth.. lots of many small lenders…or perhaps some of these but also a few bigger lenders that maybe handle lots of other people’s money for example.
Every P2P provider will be free to choose what he thinks is best at any point in time, & whilst I must respect this as only a very small member of a growing community I do hope you will also look at the many small lenders side of things. These are the guys that make your platform more “solid”, leave much less of a hole if/when they pull out, keep your AM liquid & stable (a healthy & successful AM is a KEY feature of a successful platform, still hugely under-rated imho by many P2P outfits – even those that have them), helping bring in new lenders with them whether by word-of-mouth (watch this space next 6-12 months imho) or the granularity they offer.
How the software works in each platform to balance the interests of the many parties will therefore be fundamental to a platform’s growth. This is likely to be a complex task (wouldn’t want to be in your shoes!) & twill not be easy to please everyone, or perhaps even enough folk enough of the time.
7. (last one, promise) back to the matter in hand… the “strange stuff” on the AM… & what could (& I think WILL) happen in future along this vein… - there is a strong case for creating some visibility on the make-up of loans. One way could be “Top X Lenders %” or “X% of loans held by Y lenders” (should avoid the muddying issues you mentioned). Something anyway that gives us enough info to feel confident we have some idea how long are funds are likely to be tied up in a given loan. Others brighter than me will probably have interesting suggestions, all I can say from my side on this is that unless we get convincing reasons from AC as to why loan make-up shouldn’t be visible small lenders are likely to either limit their lending or kick up a helluva lot more fuss in future than they have to date. Neither good for AC, the sooner you deal with it the better imo.
- tools &/or (even temporary) restrictions for sales on the AM. These could include the ability to markdown units on the AM (we had this before, why not now?), perhaps a restriction on big lenders/uw putting up more than £X on the AM at a time (blunter instrument & I guess not easy to introduce, but perhaps worth considering even for short-term/occasional periods to avoid AM distortion in critical/key phases of AC’s development?)
That’s all. Can’t think of more now & apologies for the lengthiness but wanted to articulate some thoughts here & invite further participation both from lenders that may have different views/better ideas & new lenders that may not have thought about these things yet & could at some point find they have run into a spot of bother coz things weren’t thought out well enough beforehand.
You’ll find some questions above underlined on which I look forward to your thoughts, any other comments ofcourse also most welcome.
Good luck.
Ps. What’s API?
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jjc
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Post by jjc on Oct 31, 2014 19:01:20 GMT
Thanks chris. Some encouraging news there. To the matter in hand though.. I haven’t done the numbers but would hazard a pretty safe guess that the “jumpiness” there’s been on the AM (BL’s aside, I personally see the behavior there as needing no explanation) can’t be wholly (or maybe even significantly) explained by the recent DD/SB’s & must be down to your bigger lenders/underwriters/whatever you want to call them being “jumpy” (or shifting things around like tonyr says), not us little folk. As a lender I have to ask myself why? And what do they know that I don’t? And (ofcourse) should I be worried about it? Who knows what direction AC (& P2P lending in general) could take over the coming months.. who knows what types of money..lenders..hybrids of what we now call underwriters or big lenders…emerge & what pots of money they manage… So I ask the question… given (just by way of example) mikes1513’s concerns… have you guys thought about the possibility of providing some more visibility to ordinary retail lenders such as ourselves on the big positions held by lenders on each loan? Thinking aloud here.. for example… “Underwriters’ holdings %”, or “Strategic Lenders %”, or “Top 5/10/X Lenders %” just so we have some sort of reference as to the make-up of a loan? This would help the ordinary retail lender not only make more informed decisions, but also help him to explain to himself why when things happen on the AM it isn’t really the sky that’s falling down. A related question.. given AC has always said it prices to risk… & bearing in mind that large lenders/uw’s obtain (presumably) better rates than ordinary folk.. & can easily close the market (exit or entry) to us little folk with their movements… in the absence of any measures taken to provide us ordinary fellers a means to assess things better than we can right now… are we not in effect being asked in practical terms to take on a higher risk at a lower rate? Just some thoughts..
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jjc
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Post by jjc on Oct 31, 2014 17:20:59 GMT
So from your comment chris we can presume the system is functioning ok? I'm probably a fair bit calmer on AC (& still the BL's funnily enough) than Merlin but.... everyone is entitled to their opinion (however diverse)... and whilst the sky Chris you're right is not always falling a lender will (& should) question what's going on whenever blue or any other coloured bits of things start flying around. It's part of our job.. As mikes1513 points out that's harder to do now with the new sys.
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jjc
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Post by jjc on Oct 31, 2014 16:10:08 GMT
Anyone else noticed? Big volumes of loan units for the following have appeared recently: B/L's 137 over 50k more (now 52,6k) 129 over 50k more (now 82k) 130 over 100k more (now 163k) Windies 106 70k more (now 179k) 101 over 200k more (& over 330k more than a couple of days ago) now 1236k 93 370k more (now 929k) 90 41k more (now 219k) 83 38k suddenly on now (none for yonks) Others 78 40k just come on 99 20k just come on 89 25k just come on tots up to a cool mil I think.. & leaves you wondering... a. system fault/reload/IT flaw? b. a big uw (or more than 1) is exiting / fallen out with AC? c. Green Energy Income Account rethink/delay/uw position renegotiation? (would explain the windies which IMO are the most unusual) d. ?? anyone have any other possible explanations? The world is a funny ole place & lotsa weirdnwunnaful things can happen but... am wondering if lenders should be worried 'bout something? One thing we lose with the new sys ofcourse is visibility of the big uw positions... mmmm... not sure how comfortable that should be for us lil peeps...
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Post by jjc on Oct 31, 2014 13:47:19 GMT
Amazing. A couple of hours in & already nearly half the loan gone.
Despite no sight of a VR, or even the basis for the 300k. GDV? wooah, that can shift the LTV...
Btw who "valued" it anyway?
Other wee things that spring to mind, who decides & on what basis when the next tranche is paid out? Are there steps in the development build-out that need to met to trigger this? Have/Will FS appoint a Monitoring Surveyor to check on this? If so who is he / what track record does he have?
Seems the developer is experienced, good. But seems we also have to take FS' word on this (less good). I'd prefer things to be more transparent (it's good also for the developer I think, gets his name noted for future deals & a bit of free advertising never did anyone any harm). Also even experienced developers can run into trouble on individual deals. How much cash has he got now, is he using other borrowed funds too & how much does he need to complete the development? Will the FS funding cover this comfortably, or is there a risk there could be a further shortfall & if so can this be dealt with eg downspeccing finishings a touch without impacting GDV or could we's be in a spot of bother? Any possibility of other developments he's working on (coz they're running over-budget etc) impacting this one?
At what stage exactly is the development of the 4 houses & when is completion expected? What likelihood if the loan rolling over? Any terms on the PP we as lenders should be aware of? Who's a gonna sell em?
Where (town, county, or if it's a state secret even region?) is the property located. Heck some lenders might just want a whiff of an idea to get a feel for property price risk on LTV.
So many questions, so little info oh deary me.
(Ofcourse I'm not expecting answers on every single one of them, this level of detail is not always provided for property loans issued by experienced specialists on other platforms. That said, there's usually enough beef to enable you to read between the lines on them, & get a feel for the various elements of risk if not put an actual number against each one. That is sadly lacking here.)
I like FS & this I hope is a helpful nudge. It may well be they're testing lenders' response, the type of funding they can raise, at what speed & on what types of deals - all perfectly legitimate. What I don't like - as a lender - is shooting in the dark.
So call me a dummy (I probably am) but my view is P2P is still a boutique biz in the larger scheme of things & for the mo I'll go to the butchers for my meat, the mongers for my fish & the fruit & veg stall for my greens. Even when there's a nice looking bit of salmon hidden amongst his lemons.
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jjc
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Post by jjc on Oct 29, 2014 17:58:00 GMT
I’m with RR & PP on this. I like FS (also for their different business model) & whilst it’s good to see them bringing on new bigger loans we can deploy on, in addition to RR’s wise comments my take is that I wouldn’t personally wish to encourage platforms too wander off too easily into the property space without 1. being well organised for this 2. providing us lenders with some insight into their plans so we can assess things properly.
The “valuation” letter prepared by the estate agents was done in June without even an onsite visit, so there was plenty of time to get a proper VR drawn up for lending purposes..
No info was provided on who/how FS(?) will get the legals prepared for the loan/charges, & who would be responsible for this & any enforcement if it comes to that. A brief letter from (for example) a solicitor in Scotland contracted by FS for the legals of this loan, would have been a positive step.
Lastly, FS don’t usually provide info on the reasons why a borrower is looking to raise funds, which given the nature of their core business is understandable. In the case of this loan however some insight would have been helpful. Is it a bridging loan (due to the borrower “downsizing” as mentioned in the estate agent’s letter), is it to fund development of the property, or is it for something else? Imho this may not be irrelevant to the risk profile of the loan, low LTV aside.
I’ve made a modest cash bid, but a gentle nudge to FS to perhaps provide us a little more visibility on their plans & organisation for new areas they’re planning to venture into it would perhaps be of benefit to all.
I’m obviously in a minority though, loan already gobbled up!
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Post by jjc on Oct 27, 2014 22:42:45 GMT
Recon turbines do have an impact on the cost of deploying in the small-mid wind deals that have so far been typical on AC, that's right Ton. The other factor however is the decreasing cost of capital funding these projects. This extends across most of the renewable technologies (wind, solar, biomass, anaerobic digestion etc), big money is coming in from institutional investors, including pension funds. This will continue to drive down the rates but on the other hand will also make it harder for a potential pesky future govt to renege on any incentive schemes. Renewables are quickly becoming an asset class ideal for long term, inflation-indexed returns. I don't think anyone can say there will never be any political risk to these schemes, but it's less than some of the press would have you believe & in any case isn't there some in everything (interest rates)?
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