Investors pledge £1.5m to Isle of Harris distillery

Group Business Editor

Friday 21 December 2012

TWO new investors, one from Asia and the other from the UK, have pledged a total of £1.5 million of equity funding for the proposed £10m project to build the first-ever legal Scotch whisky distillery on the Isle of Harris.

DRIVING FORCE: Drinks industry veteran Simon Erlanger is the man behind Isle of Harris Distillers, and is seeking £10m to get the business off the ground in the first eight years.

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ian Mcconnell business editor

First Minister Alex Salmond has also voiced his support for the planned distillery at Tarbert.

Simon Erlanger, the drinks industry veteran who is managing director-designate of Isle of Harris Distillers, revealed talks were continuing with other potential investors. He hopes to secure the final £1.3m tranche of the required private equity funding "in the next month or two".

He declined to reveal the identities of the two new investors who have committed to putting up the £1.5m, subject to due diligence. These planned investments follow commitments from other investors, in the UK and continental Europe.Mr Erlanger said private equity would make up "most" of the £10m required to fund the building of the distillery and operations for the first eight years, until the business became cash-positive.He projected all of the equity funding would come from less than 20 investors in total. He said the investors had a love of Scotland, or of the Outer Hebrides, or of whisky, or all three. Mr Erlanger, a former sales and marketing director of Scotch whisky distiller Glenmorangie, said: "The commitment of our new investors is a fantastic boost, taking us so close to our equity financing target."He added that Isle of Harris Distillers expected to finalise fundraising by the early part of next year, to make it possible for the distillery to open "in the latter part of 2014".Isle of Harris Distillers remains confident of raising funding from the public sector.It has been talking to economic development agencies Scottish Enterprise and Highlands & Islands Enterprise about supporting a project which Mr Erlanger emphasised would help regenerate "a very precarious economy". Isle of Harris Distillers expects to create about 20 direct jobs, while also boosting tourism.Signalling important developments in the talks with the enterprise agencies were imminent, Mr Erlanger said: "We should be able to understand the public (sector) support for the project in its entirety by the end of January. The project is heading towards the next couple of months being defining, in terms of filling the private equity gap we have left and in understanding in what way the public sector will support the project."Asked if support from the public sector could come through Regional Selective Assistance, Mr Erlanger replied: "We are looking at a number of routes in which they might be able to help."He said the public sector was interested in "the significant economic benefit" the distillery could bring to the Harris, and wider Outer Hebridean, economy.Mr Salmond said: "The development has huge potential for the island, its economy and its people. Other industries should be learning from the long-term strategy and continuing investment of the Scotch whisky industry, which sees exports at an all-time high."He added: "Harris's natural resources will undoubtedly lend themselves to creating another exceptional and unique island malt."Mr Erlanger, who has in the past noted there has never been a licensed distillery on Harris before, highlighted hopes of producing spirit by the end of 2014. He still envisages that the first whisky could be sold within about five years of spirit being laid down, but emphasised it would not be bottled before it was ready. Asked about the character of the whisky which the company planned to produce, Mr Erlanger replied: "We are looking at a few options. I would not really want to say too much about that at the moment, except to say that the character of the island is going to be quite important in defining the flavour of the whisky."On whether he was confident about raising all of the £10m required, he said: "We are increasingly encouraged. We are finding private equity investors who are sharing the vision that we have. The majority of investors would expect to see short-term returns when they put money into a venture. We are seeing investors who really like the long-term nature of this."Mr Erlanger said a decision on the planning application for the distillery, from local authority Western Isles Council, was expected in mid to late-January.He added that Isle of Harris Distillers did not envisage any problems with this, declaring there had not been a single objection and highlighting formal support from The Harris Tweed Authority and others.

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Investors pledge £1.5m to Isle of Harris distillery

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