Published 2026-04-01 · By Commercial Solar Finance editorial team
850kWp on a Black Country precision engineer
A profitable family-owned engineering firm wanted solar but didn't want to lock up working capital. We blended a green loan with a capital deposit to deliver capital-purchase tax efficiency without the cash-flow hit.
850kWp
£680k
£172k
3.9 yrs
Situation
A second-generation family-owned precision engineering firm in the Black Country, supplying tier-2 components to UK and European automotive OEMs. Annual turnover £18m, ~120 employees, two production facilities totalling 32,000m² across Wolverhampton and Walsall. Three-shift operation Monday–Saturday with continuous baseload from CNC machining, presses, and HVAC. Annual electricity spend £340k across both sites at average 23p/kWh blended rate.
Constraint
The business was profitable and could in theory have funded the system from cash. But the directors wanted the £700k+ working capital available for a planned plant upgrade in the next 18 months. They were also clear they didn't want to give away control of the asset — PPA structures had been pitched to them and rejected. The brief: capital-purchase economics, but with most of the capital provided by a lender.
Structure
We modelled six finance routes side by side. The winning structure was a 70/30 blend: 70% green loan (£476k) at 6.8% over 10 years from a specialist green-debt provider; 30% capital deposit (£204k) from the company. The green loan was secured on the asset with a debenture and personal guarantees from the directors. The blend let the company retain 100% of the capital allowances (50% First Year Allowance plus AIA on the deposit portion), kept enough capital available for the planned plant upgrade, and produced a year-one cash position that was positive after debt service and tax saving.
Numbers
| Year-one debt service (interest + capital) | £64,500 |
| Year-one electricity saving (89% self-consumption) | £172,000 |
| FYA tax saving (year one) | £85,000 |
| AIA tax saving on £204k deposit (year one) | £51,000 |
| Net year-one cash position | +£243,500 |
| Simple payback | 3.9 yrs |
| Post-tax effective payback | 2.8 yrs |
| Pre-tax IRR (25 years) | 17.2% |
| 25-year cumulative free cash flow | +£3.4m |
Why this was the right structure
- Capital allowances captured in full. Both the FYA and the AIA flowed to the company because the green loan structure leaves ownership with the borrower from day one.
- Working capital preserved. The company kept ~£500k of capital available for the planned plant upgrade.
- Year-one positive cash. The combined effect of electricity saving plus tax saving plus modest debt service produced positive year-one cash flow — no cash hit to the operating business.
- Independence from lender pressure. The blend gave the company room to refinance or repay early without prepayment penalties.
What we ruled out
Pure capital purchase was attractive on long-term economics but failed the working-capital test.
Operating lease was the second-best on year-one cash but lost the FYA — at 25% corporation tax, that was £170k of tax relief gifted to the lessor.
PPA was specifically rejected by the directors who wanted ownership.
Model your project
Every project is different — same six structures, different optimal blend.
Request a finance review