Paul Healy Regional Agricultural Manager 26 June 2012

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1 Bank of Scotland & Lloyds TSB Agriculture Paul Healy Regional Agricultural Manager 26 June 2012 Bank of Scotland & Lloyds TSB Agriculture

2 Money to Burn.. Paul Healy Regional Agricultural Manager 26 June 2012

3 or Burn to Money.. Paul Healy Regional Agricultural Manager 26 June 2012

4 Agenda Bank view of Agriculture Finance for your project - Presenting effective borrowing proposals - Why Biomass and Key points to cover - Example of funding available Lloyds Banking Group and Agriculture Outlook for interest rates and exchange rates

5 Total income from farming

6 Total income from farming per AWU

7 Efficiency of farming

8 Total income from farming

9 Total income from farming

10 TIFF and exchange rates

11 Population (millions) The Opportunity for Farming Population 500 to 2007 Population projections 2008 to 2050

12 What are the drivers of the new era Population growth means 50% more people to feed by 2050; Rising living standards in developing nations will significantly increase this demand; Non-food products not just bio-fuels will increasingly compete for land; Climate change and limited water will cut farm output in parts of the world;

13 Presenting effective borrowing proposals Understanding your audience Attractions of farm scale biomass What does the Bank look for? Key points

14 What does the Bank want? To lend you money.. and receive deposits. To have happy customers. To receive recommendations. Whilst keeping Regulators and Auditors happy. Maybe help with communication and influence.

15 You have a captive audience If it is right for you it should also be right for your bank

16 What makes farm scale Biomass attractive to the Bank? Attracted to Agriculture Technology is established Ready source of fuel from own holding On farm / estate use for heat generated

17 What makes farm scale Biomass attractive to the Bank? RHI Security of energy supply / sustainability Improving efficiency Good returns and short payback

18 rate the degree of difficulty you have experienced or are experiencing in OBTAINING PLANNING CONSENT for the following? Degree of difficulty of obtaining PLANNING CONSENT on a scale of 1 to 5: 1 = not, 5 = very not at all difficult very difficult No. responding % % % % % Hydro power (19) Solar power (PV) (26) Wind power (127) Wood Fuel heating (22) % 4 87%

19 rate the degree of difficulty you have experienced or are experiencing in FINANCING THE INVESTMENT for the following? Degree of difficulty of obtaining FINANCING THE INVESTMENT on a scale of 1 to 5: 1 = not, 5 = very not at all difficult very difficult (No. responding ) % % % % % Hydro power (17) Solar power (PV) (27) % 4 Wind power (113) 27 41% Wood Fuel heating (17) % 0 59%

20 rate how its income has performed against expectations for the following? EXPECTATIONS on a scale of 1 to 5: 1 = fallen well below, 5 = greatly exceeded Fallen well Fallen In line Exceeded Greatly below below with exceeded expectations (No. % % % % % responding ) Solar power (PV) (15) Wind power (22) Wood fuel heating (8) 0 41%

21 Presenting Effective borrowing Proposals What does the Bank look for?

22 Be clear 16

23 To understand the people and business Background & track record Skills & Knowledge Net worth Aims and aspirations

24 To understand the existing business What does the business do? Trading history and trends Aims and plans Capital needs Cash generation and ability to repay debt Budgets / Forecasts Risks and approach to risk management

25 Your Biomass Project What and why? What advice has been taken? Feasibility Study and Financial projections? Planning permission Technology Suppliers and project partners

26 Your Biomass Project Project costs Project schedule Manufacturer warranties Operation and maintenance agreements Insurance Risk management

27 Risk Management Explain the risks at each stage of the plan And how these will be managed / mitigated What contingencies have been built in? Monitoring performance.

28 KEY POINTS Banks do want to lend. Farm scale biomass is attractive. Understand the ability of your business to generate cash and what your capital requirements are. Highlight the risks and how you will manage them The amount of detail will depend on circumstances

29 Finance Available National Loan Guarantee Scheme 1% discount for 1 st 5 years Example ( 300,000, to Agricultural business, secured, over 7 years); - Base + 2% % for first 5 years - 3.4% Fixed for 5 years

30 Bank of Scotland & Lloyds TSB Agriculture Bank of Scotland Agriculture Lloyds TSB Agriculture AMC (Separate Subsidiary) 200 Staff dedicated to Agriculture 23,000 Customers Chosen Charity No 1 Key Market

31 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Lending to and deposits from agriculture 14,000,000,000 12,000,000,000 10,000,000,000 Total advances to agriculture 8,000,000,000 6,000,000,000 4,000,000,000 Total deposits from agriculture LBG advances to agriculture 2,000,000,000 - LBG deposits from agriculture

32 Average Lending Balance Growth and Market Share 18% 16% 14% 12% % 6 8% 4 6% 2 4% 2% 0 Lloyds Banking Group Market 0% AMC Lloyds BoS Industry BoS & LTSB

33 What makes us a great bank for farmers 1. We only bank farms and rural businesses. We take farming seriously and focus only on this sector. Farmers can be sure they ve come to the right place. 2. Our managers understand agriculture. Our knowledge and experience means we can get to work supporting farm businesses from day one. Our managers have autonomy and can make decisions locally. 3. We re open for business. We re keen to lend and ready to support sound farm businesses year in, year out. We lent more money to farmers last year than any previous year.

34 What makes us a great bank for farmers 5 Specialist managers and support teams. Specialist managers available at your farm gate and support teams in nearby towns to assist you with your day-to-day banking. 6 Contact us directly. We publish the mobile and office numbers and addresses of all our agriculture managers. You don t have to navigate a call centre before speaking to us. 7 Farmers like our service. In 2011, over 900 farmers switched their banking to us. 8 We support agriculture. Even through challenging times for the industry, we have proven ourselves to be truly committed to the sector, not just fair-weather friends.

35 How we help farm businesses Modern and efficient banking facilities delivered with a focus on great customer service Single Farm Payment (SFP) hedging Interest risk management Business income protection Flexible options including fixed, variable, interest-only loans Machinery and equipment finance Investment in infrastructure

36 How we help farmers and their families Pension annuity services Life policies, Inheritance tax planning, estate planning IHT and succession planning Savings and investments Pension annuity services Tax management Personal current account and overdraft facilities

37 Our farming ambassador I wouldn't want to say there's only one way of running a farm, but I believe that its hard to beat a local, knowledgeable, experienced and accessible bank manager. Adam Henson, Cotswold farmer and BBC presenter of Countryfile And if that manager works for a bank who has demonstrated, year in, year out, that it is committed to the agricultural sector and is open for business, then I think the combination is unbeatable. That's why I bank with Lloyds TSB Agriculture.