25th May 2018
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Trustees asked for £6.3 million to take windfarm to construction stage

3 comments, , by , in News

Trustees of Shetland Charitable Trust will decide this week whether to invest a further £6.3 million to take the Viking Energy windfarm through to the construction stage, assuming it is granted approval by Scottish ministers.

They will consider a short report by financial controller Jeff Goddard which states that a £14 million sum will be required to finalise connection and transmission charging, procurement and construction contracts, turbine warranty and maintenance, long-term trading deals for the electricity output, debt arrangements, payments for land use and ground investigation work.

It is estimated that this work will take from 18 months to two years to complete, meaning construction work is unlikely to begin before 2014.

The trust will be liable for £6.3 million of the fresh investment, Viking Wind Ltd, which owns five per cent of the project, £700,000 and SSE the other £7 million to reach this point, known as in the jargon as “financial close”.

Ministers are considering whether to grant consent to the windfarm under section 36 of the Electricity Act 1989. They can grant consent or partial consent, order a local public inquiry or turn the project down.

The application is for 127 turbines in the Central Mainland, but it is understood Viking now accepts that 24 of these will have to be removed to comply with Civil Aviation Authority rules regarding the approach to Scatsta Airport. In his report Mr Goddard states: “The exact number of turbines will depend on the detail of the ministers’ determination.”

Mr Goddard recommends that trustees note the financial success of their £3.42 million investment in the project so far – this would be worth upwards of £72 million should consent be granted for the full 127 turbines, he states – and agree to the new investment “to take the project through to the next milestone”.

Further decisions would then be required on whether to commit to contracts for turbines, civil engineering and project finance.

However, he goes on to say that should there be a delay, or if the minister decides to order a public inquiry, trustees should agree an interim budget of £360,000 “to provide sufficient continuity and cash flow to protect its current investment”. And if consent is refused, his recommendations would be null and void.

Quayle Munro, a specialist corporate financial advisory business based in Edinburgh and London, estimates that the capital value of the Shetland share of the project would be £194 million at financial close (£388 million for the entire windfarm).

The extra investment would take the trust’s total investment up to almost £10 million, or five per cent of its portfolio. 

“The trust has other investments of this order of size: £7 million in the new offices at the North Ness (through Slap); £8 million in the redevelopment of Scatsta Airport (through Slap); £20 million in commercial property funds (the trust itself, managed by Schroders); and £23 million in the land at Sullom Voe Oil Terminal (the trust itself).

“Overall, assuming that Quayle Munro’s estimates of value are in the right ‘ball park’ further investment in Viking Energy would be financially attractive.”

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3 comments

  1. Alan Skinner

    It is absolutely essential that Quayle Munro’s estimates of value should be fully published. I simply do not believe the figures and need to understand the assumptions that they are making. If these figures were remotely accurate, there would a long queue of private equity investors seeking to become co-investors. I am not aware of that demand.
    We also need to understand who instructed Quayle Munro’s valuation, and what instructions they were given.
    Please, please test the validity of these figures to the extreme, before committing any more of Shetland’s precious money to this project.

    Reply
  2. Kathy Greaves

    It appears to me that there is a bit of a rush to obtain consent from current SCT trustees to approve the £6.3mil needed by Viking Energy to take the giant windfarm to construction stage – could this be because of the forthcoming local elections and possible change of faces at the town hall?

    I hope that the trustees will vote to wait until a new panel of trustees has been elected, trustees who will be able to demonstrate that they are all totally independent of council and VEL influences.

    New trustees might want to wait until planning permission is granted (which I hope it will not be), and most importantly, that the project has the backing of the people of Shetland.

    The amount of money spent by VE and/or the SCT on sending dozens of people south on ‘learning trips’ to view windfarms would have more than covered the cost of an islands’-wide poll.

    Kathy Greaves

    Reply
  3. Alec Miller

    The Charitable Trust’s tactic of asking for more funding “to protect our investment” reminds me of the logic used by SIC officials and councillors to continue with an open-ended spend on a list of now failed projects, including Bressay Bridge, Anderson High School, Norona etc etc.
    Hopefully, the SIC Chief Executve’s anticipated report on the background to the Bressay Bridge fiasco will highlight the use of this tactic.

    Reply

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