Decision Maker: Cabinet Member for Resources
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: No
With the approval of the Chairman of the Growth, Environment and Resources Scrutiny Committee Urgency, Special Urgency and waiver of call-in procedures have been invoked to suspend the requirement to advertise the decision for 28 days, publish the decision for 5 days prior to publication, and to suspend the 3 day call-in period.
The urgent timescale is driven by external commercial factors. The Council had been reassured by Empower that full refinancing was progressing within agreed timescales. When it became clear that neither was the case the Council needed to spend time investigating and understanding why the outcome of Empower's refinancing process was not as expected, while considering the range of options now available to it. Those refinancing and other options currently under discussion with Empower LLP and external parties have only now reached a point at which specific recommendations and decisions can be made. The loan facility currently expires on 30 November 2018.
The Cabinet Member:
1. Approved the amendment of the terms of the Strategic Partnership with Empower Community Management LLP
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. Delegated to the Corporate Director, Resources and Director of Law and Governance the ability to finalise matters 1 to 3 above.
5. Delegated to the Corporate Director, Resources the ability to extend the funding facility which will be included in the financing agreement at 3. above on a monthly basis for up to 4months based on the methodology for extending the facility set out in this report
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.
Decision JUL18/CMDN/01 approved the extension of the facility for a further two months to the 30 September 2018
Decision OCT18/CMDN/40 approved the extension of the facility for a further two months to the end of November 2018. During this time the Council continued to receive a commercial rate on the loan and all advisor costs were recharged to Empower.
Progress since October 2018
The refinance of the Council’s loan facility was progressing with Triodos Bank to provide the senior debt and Thrive Renewables the junior debt to Empower during October and November. The Council continued to receive a commercial rate on the loan and all advisor costs continue to be recharged to Empower
The due diligence process has now completed and following from this process the suitability of the original proposed refinance proposal is now to be reviewed in the light of alternative sources of finance available in the long term renewables financing market.
The details of the due diligence completed and a summary of the alternative sources of finance options and providers are detailed in Appendix 1
Proposed Extension of Bridge Loan Facility
It is proposed that the Corporate Director, Resources in consultation with the Corporate Director, Law and Governance will authorise extension of the loan facility on a monthly basis under delegation from this report. This decision will be informed by a weekly progress call with Empower and the Council’s legal and financial advisors to maintain momentum. In respect of each additional month authorised the Corporate Director, Resources will complete a delegation report in consultation with the Corporate Director, Law and Governance confirming their decision. This decision will also be subject to the following 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 December 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 refinancing negotiation 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.
Cabinet Report JULY17/CAB/16
Councillor Member Decision Notice MAR18/CMDN/123
Councillor Member Decision Notice JUL18/CMDN/01
Councillor Member Decision Notice OCT18/CMDN/40
Urgent item?: Yes
Publication date: 30/11/2018
Date of decision: 30/11/2018