Investing in Community Energy
Investors in Pre Power Co-operatives buy a stream of income where the income received each month is flexible, depending on the needs of the investor or the co-op. Examples of the returns on $10,000 are:
- $83.33 per month for 20 years
- $125.00 per month for 10 years
- $208.33 per month for 5 years
If the grid price of electricity increases, the payments per month will increase by the same percentage. If the grid price decreases the payments per month will stay the same.
If investors use their monthly income to buy electricity from the Co-operative, they will receive a return on investment by paying 35% of the grid price for twenty years.
Investors can sell their income stream at its current value. For example, if a $10,000 flexible stream for 20 years is sold in year 10 then it will sell for $5,000, assuming all income payments have been received each month for 10 years.
The closest thing to a Pre Power Investment in the regular financial world is an annuity or an allocated pension. Pre Power Co-operatives return the equivalent of a flexible annuity of 10% for 20 years. MoneySmart on the ASIC website provides a calculator where you can check the income of these financial products. In August 2019 a Pre Power Investment returns twice as much to the investor as a commercial annuity or an allocated pension.
Superannuation Contribution Investments
The best Industry Superannuation Funds return around 9% over five years or around 8% over ten years. If the Co-operative permits reinvestment it will return 10% in Reward discounts over twenty years.
For example, if the Co-operative allows the investor to reinvest their monthly payments then at the end of twenty years the investor’s $10,000 would have a value of $30,000 (of which $20,000 is future Reward discounts) that would return $375 per month for 10 years.
The investor can add to their investment and take money out in much the same way as they would a fixed deposit savings account. Our understanding is that the extra money the investor receives, over and above their investment, is treated as a capital gain for taxation purposes. If the extra value is taken as a discount on electricity there should be no capital gain.
Direct Comparison with Superannuation
The superannuation industry publishes calculators that give annuity streams for superannuants. https://www.industrysuper.com/retirement-info/retirement-calculators/retirement-needs-calculator/
Using this calculator a couple who retire needing $60,994 to live on for 20 years will need to have $1,211,810 in their superannuation account.
With a Pre Power Co-operative, a couple would get the same income for the same number of years with $609,940 invested or 50.33% of the superannuation account.
The reason for the difference is that with superannuation most funds are invested in financial products and the financial products extract rent before giving a return. With Pre Power, the balance is in panels and batteries and the returns remain high and are secure.
