Start Your Own Power Company

Listening to a radio phone-in, on the way to work this morning, caused me to think again about something that had never previously appealed.

If someone offered you the chance to invest £10,000 in a fund that returned eight per cent a year, index-linked, guaranteed and tax-free, you’d probably snap their hand off, wouldn’t you? After all, that’s more than double the best High St returns, even leaving aside the tax-free bit. Well if you would, it may be time to look at the benefits of installing solar panels.

Thanks to government subsidies, and a scheme whereby it’s possible to offset your own power usage and then sell back surplus power to the grid, solar panels have become a serious investment proposition, irrespective of their green credentials. The bloke I was listening to this morning was pulling in £1,600 a year. Apparently, you can expect to pay off the cost within 10 years, and the units are expected to be still operating at 85% capacity, 25 years from now.

What’s the catch? I can see four potential stumbling blocks.

1. You need a south facing roof to make this work.

2. If you’re going to move house, you can’t take the roof with you.

3. It’s not aesthetically pleasing to most

4. If a future government removes or alters the subsidies, the whole game changes.

Something to think about though, particularly if you have a few quid sitting in a bank account paying 0.5%

Share News

Let's start the week with a share tip from Robert Sutherland-Smith at UK350.com, part of Tom's t1ps.com group of sites. It's to buy United Utilities. Here's why...

'The water company United Utilities (UU) supplies a product for which there is a strong core need both today and in the long-term. The company is a powerful generator of cash from operations. Last year it produced operating cash of £800 million valuing the equity at just over four times operating cash. Cash in the balance sheet of £302 million represented a cash yield of 8.9 per cent.

Apart from a dividend payout that looks handsome in relation to what you get from your local friendly high street bank, United Utilities equity is backed by a massive attributable asset position and, in turn, commands an even larger total asset enterprise value should a bidder appear. Very simply, balance sheet assets attributable to shareholders last year were worth an estimated 221p a share or around 40 per cent of the share price.

On that basis, if the remaining 348.5p of the share price is the value paid for earnings, the price to earnings multiple estimated for this year falls to 11 times and 10.6 times next year's estimated earnings per share. With a good forward dividend income based on a recently reconfigured cash payout to shareholders, and well backed by attributable assets and the massive enterprise value of the business, the shares are a buy.'

All for now. I'm currently trying to put together a top 10 list of low-cost biz-opps for members - more on that soon as I know it's something that interests many members.