Decision details

The Cabinet Member:

1. Approved the amendment of the terms of the Strategic Partnership with Empower Community Management LLP, by extending the term of the existing loan facility for a further 2 months to expire on 30 September on the terms set out below
2. Approved the amendment of the financing agreement with ECS Peterborough 1 LLP
3. Approved the Council entering into such further agreements with ECS Peterborough 1 LLP and any other body necessary to facilitate the arrangements set out in this report.

4.    Delegate to the Corporate Director, Resources and Director of Law and Governance the ability to finalise matters 1 to 3 above.

Proposal to Extend the PCC Funding Facility

JULY17/CAB/16 paragraph 4.2.3 provided that: The Council’s funding facility for ESCP1 is contracted to terminate in October 2017 but the Council has the opportunity to extend the facility to March 2019 and thereby continue to receive the interest on the funding of new projects and existing projects which will complete after September 2017, until they too are completed and refinanced.

In October 2017 a Director’s Award report was signed by the Corporate Director, Resources extending the Facility to the end of March 2018 only.

The decision MAR18/CMDN/123 provided in recommendation 5 to delegate to the Corporate Director, Resources the ability to extend the funding facility on a monthly basis for up to 4 months based on the methodology for extending the facility set out in the report

The Corporate Director Resources extended the facility for a further month at the end of March, April, May and June 2018 respectively.

Progress since March 2018

Empower have explored three refinance options

• Unlevered equity
• Bank Debt and Junior Debt and
• Private Placement Debt and Junior Debt

The second option, Bank Debt and Junior Debt has been progressed and Empower have received and agreed a Term Sheet from Triodos Bank for the senior debt and Thrive Renewables for the junior debt

The offers are subject to technical due diligence and completion of legal agreements, but both of these processes are progressing well.  The Council has had sight of the engagement letters Empower, Triodos and Thrive Renewables have with their Technical and Legal Advisors. 

It is anticipated that technical and legal due diligence and finalisation of the refinancing arrangements generally will complete after the current final month’s loan extension period expires on 31 July 2018.  It is therefore proposed that a further two month extension is granted to Empower to accommodate the completion of the refinancing arrangements.

Proposed Extension of Bridge Loan Facility

The grant of a further 2 month loan extension by the Council to Empower will be subject to the following additional conditions:

1.      Interest accruing on the existing loan will be paid by ECSP1 on existing commercial terms to the Council, in accordance with an agreed payment plan.  Agreement of the payment plan is delegated to the Corporate Director, Resources. 

2.      Charge by the Council of a fee of £10,000 to ECSP1 for each monthly extension of the loan facility, payable in accordance with the agreed payment plan.  These charges reflect additional senior officer time required to resolve and monitor the agreement and seek  input from advisors;

3.      Payment of the Council’s advisor fees (to Pinsent Masons’ and Deloittes’ ) by ECSP1 to date and any additional advisor fees incurred will be payable in accordance with the agreed payment plan

4.      A weekly progress call with Empower and the Council’s legal and financial advisors

The Council will retain and reserve all rights while able to assess the position on a   month by month basis.

If the Council fails to extend the loan, then on 1 August 2018 the loan repayment will be due in full and if it is not made ECSP1 will be placed into default and the Council would be required to exercise its security and take over the assets of the company.  At this point the Council will then have to operate the company either on a long term basis or on a short term basis whilst it sourced an alternative long term funder itself.  This option is not considered to be in the Council’s best interests at this time for the following reasons:

1.      The Council does not have experience of operating in this market and would therefore need to invest considerable resources to acquire the additional skills and personnel required to operate the ECSP1 business, plus the need for additional advice which it is anticipated will be required from Pinsent Masons and Deloitte.

2.      The current refinancing arrangements currently in progress with Triodos and Thrive would most likely be abandoned.

3.      Any due diligence required in connection with ECSP1’s proposed new long term debt financing will be more comprehensive and timely if provided by Empower, as they are active in this market.

4.      Taking ownership of ECSP1 back into the Council may potentially reduce its attractiveness and subsequent value on the open market.

The Council could choose to continue funding for ECSP1 over the life of the solar panel assets, but the loan was not intended as a long term facility and such funding does not form part of the Council’s financial strategy.

None.

Cabinet Report JULY17/CAB/16

Councillor Member Decision Notice MAR18/CMDN/123