In times of crisis, obscure investment opportunities seem to rise to the fore, and none come more alternative than the new offering from utility company Spark Energy.

The Spark Energy bond aims to pay 6% pa interest; in addition it is offering free gas and electricity to investors (provided that they switch to Spark Energy as their suppliers) for two years - the lifetime of the bond - to a limit of £1,000 pa.

It is hoped that £1m will be raised through investment in the bond, to be used for working capital by Spark, based in Scotland, to invest in new technology and distribute next generation power meters for all of its customers. It will also use the capital to purchase utilities for the future.

Minimum investment in the bond is £5,000 and each investor can apply for up to £25,000 worth of bonds. There are no AMC, performance fees
or initial charges attached to the bond.

In the past, several companies have offered shareholder perks as an investment incentive. Examples include the Channel Tunnel that originally offered free or subsidised travel to all investors in the original public offering. P&O European Ferries also offered discounted ferry fares to investors and Sketchley's offered discounted dry cleaning.

This latest launch is positioned as an alternative to traditional fixed rate bonds, and Beer & Partners, the investment adviser administrating the bond, believes that direct investment in small business is becoming an increasingly attractive option during the downturn.

The possibility of saving £2,000 on gas and electricity in a time of rising prices also adds to the appeal. According to uSwitch.com, the average annual household cost of gas and electricity currentiy stands at £1,239, which means that huge savings will be made on utility bills.

This added incentive outstrips the best two year fixed rate bond currently available on the market, currently the AA two year fixed rate bond, which is paying 4.35% - just taking the £2,000 worth of utilities equates to a 20% return alone, regardless of whether any interest is paid.

The 6% pa interest, paid quarterly, will be taken from Spark Energy profits but if the company becomes insolvent, or does not make a big enough return - a
possibility in the current climate - it may not be able to pay the full 6%, or any interest payments at all. The exact value of the free utilities over the two years also depends on how much Spark charges for a unit of gas or electricity compared to other suppliers, as higher unit prices would dilute the value.

According to uSwitch.com, Spark's energy prices are about average at present.

Money Management Magazine, September 2009