By JOHN ROBERTSON
Viking Energy has ruled out a referendum to gauge whether Shetland is for or against the giant windfarm.
Chairman Bill Manson said this week he believed islanders should make their feelings known to their SIC councillors instead because they, as elected members or trustees of Shetland Charitable Trust, will ultimately decide if the community risks up to £360 million in the £800m project.
In the early days of the windfarm proposal there was at least a verbal commitment given by councillors that the Shetland community would retain the ultimate power to stop it or allow it to proceed. But the vehicle for exercising that power has never been clear.
It remains to be seen whether the SIC, the Charitable Trust, which Mr Manson also chairs, or another more independent organisation decides to mount a referendum but it is not on the agenda for Viking Energy, which is hoping to build the 150-turbine windfarm.
Mr Manson told The Shetland Times: “I’m not one for referendums. On a national basis it’s not the way we do things. At the time when somebody has to make a decision about it – to invest the money or not, or to take any of the other courses of action – that decision will be taken by either the councillors of Shetland or the trustees of Shetland Charitable Trust.”
The group campaigning against the development, Sustainable Shetland, supports a referendum and believes it has the majority on its side. Chairman Billy Fox dismissed the notion that people could not rely on their councillors on this issue. “They are not representing the electorate of Shetland. What is going on just now is a total affront to democracy.”
The £800 million question which will have to be resolved if the windfarm gets planning consent is whether islanders are for or against it. Both sides firmly believe they are in the majority.
Mr Manson is not particularly impressed by protest group Sustainable Shetland’s petition with as many as 2,800 signatures gathered over the past six months, which he said was before the full information on the windfarm became available.
“It doesn’t strike me as a mass popular movement. There is a huge mass of the population that has never said a word,” he said, before recalling the advice of former councillor John Nicolson who said councillors had to try to hear the voices of those that were saying nothing.
He has received calls from people in his ward and from elsewhere asking when Viking Energy is going to start its own petition so those in favour have something to sign but he said that was up to somebody else not connected to the developer to start that if they wanted to.
Mr Fox is equally adamant that many people have yet to record their opposition. “I have no doubt in my mind the majority of Shetland folk are against this and I have no doubt that most of the councillors know it as well. If Bill Manson thinks there is a silent majority out there that is not being heard then why doesn’t he hold a referendum?”
Of course, both sides are also wary of how the wording of a referendum question could be loaded or slanted to encourage a particular answer. In Mr Fox’s view it has to be a simple Yes or No to the Viking Energy project.
While Scottish ministers will rule, possibly next year, whether the windfarm gets planning consent, it will fall to Shetland Charitable Trust to decide whether to move to the next stage, seeking the finance, which is likely to come mainly from large-scale private investment or banking institutions.
Mr Manson said Viking Energy and the trust had not started looking seriously at the possibilities yet, having put all its energies into producing the voluminous environmental statement accompanying the planning application, the culmination of five years of research, analysis and writing.
He said moves are now afoot to expand the local Viking Energy team so it can begin looking at the next stages.
The leap in costs since last year amount to an incredible 45 per cent, from £552m to £798m. More accurate figures will not be known for several years but Mr Manson said: “The cost of building a windfarm has gone up, albeit it may have steadied up recently. The cost of electricity has gone up by even more and the potential return has gone up.”
Previously it was mooted that the trust might put up £50m of its funds to lever in the rest from other investors. But the soaring cost means potentially around £360 million might have to be raised by the trust, greatly increasing Shetland’s exposure to risk and possibly eroding the confidence of councillors and other trustees.
There would be a number of options to weigh up, including perhaps following the example of Scottish and Southern Energy which has stated its intention to seek funding from the European Investment Bank, the EU’s long-term investment bank which it has used previously. SSE has built giant energy schemes all over Europe and could surely offer advice to its novice windfarm partner in Shetland.
Potentially, a large investor could act like a bank does when providing a house mortgage, taking the property as security, which, if applied to a lucrative-looking windfarm, could save the trust having to fork out a large chunk of its own reserves.
If trustees do get cold feet over such an expensive project another option might be to sell off part of their 90 per cent holding in Viking Energy Limited (it owns 45 per cent of the Viking Energy Partnership) to raise some of the required funding, greatly reducing the amount to be sourced from the money markets. That would obviously cut the level of income to the trust when the windfarm starts turning a profit.
That scenario raises the politically sensitive issue of the trust selling out entirely if, once planning consent had given the project a life and a much enhanced value, the community and/or the trust baulked at further involvement.
The agreement which brought the SIC and SSE into their partnership, signed at Busta in January 2007, has remained confidential and it is not clear whether SSE retains first refusal to buy the trust’s shares.
Mr Manson dismissed as “plain wrong” a claim by Viking’s opponents that he had said Shetland’s community interest could be sold off. He acknowledged the possibility exists but restated the intention that the community interest be retained. However, if it was eventually to prove more lucrative to sell part or all the trust’s share for a large sum in return for no further risk it would have to be considered at least.
“I am going forward here in the confident belief and desire that the best thing for Shetland would be to retain a holding in this and to profit from it in the long term, but if somebody came to me in 18 months or a couple of years time when the financial decision has to be made, the one which is very difficult to slide back from, that the calculations say that if this price is available for it and the best financial move is to sell it, it would be wrong if it wasn’t seriously considered.
“Once we can crystalise the bulk of those unknowns – 18 months or so – consent, lenders of money, quotes for turbines and infrastructure, the selling price of our power – then is the time to assess the risk and whether Shetland can afford to carry that level of risk or whether we should be selling some or all of that share.”
Some will say the development must be stopped at all costs if there is no guarantee it will remain under community control. Mr Manson believes that outlook is simply not realistic because there was going to be at least two applications for large windfarms in Shetland anyway before the council decided to get involved itself. It could, of course, prevent anybody erecting the 43 turbines out of the 150 which are on SIC-owned land in the Busta Estate.
“Whether there was local involvement or not, Scottish and Southern were pursuing a windfarm and there were others coming along who were going to do the same. They might have pursued two separate applications, they might have combined. I can’t say. But there would have been an application or applications on the table today even with no local involvement. That’s one of the arguments I would advance to our detractors – it doesn’t matter how strong or how weak our hand is, at least we have got a seat at the table.”
He does not accept that such a sell-out in future would be to perform a deception on people in the community who are prepared to support the windfarm now if it is part-Shetland owned but might be against it without local control. “I don’t think we’re being deceptive to the Shetland public. I think the Shetland public would want us at each stage, when we have a degree of certainty of the next step, to give the widest consideration to the financials of this and if we felt the best way for Shetland to profit from it … was to sell part or all of our shareholding I think we would be in dereliction of our duty if we did not put the options before them. We are not saying that we should do it. We should let folk know that there are these choices available.”
The windfarm debate has stirred up a lot of emotion so far, some of which has verged on the nasty in the letters pages of The Shetland Times, but Mr Manson said he had experienced little of that in public. He did admit to feeling depressed when people claim the hills are going to be destroyed and peat slides will wreak devastation.
He said he was faced with accusations that councillors were steaming headlong towards another “train wreck” financial investment, which he finds hard to reconcile with the criticism, sometimes in the same breath, that it is wrong that four private Shetland investors could rake in millions from its financial success. “If windfarms are not a good financial spec, why is it that the energy industry, which in the main are private companies, are rattling ahead and building them as fast as they can get permission for them. Why is it that they can get financing for them?”
The £800m potential cost was first revealed last week. Viking Energy project manager Aaron Priest said 70-75 per cent of expenditure would be for the turbines themselves.
The main beneficiaries from the huge spend would be non-UK companies, expected to earn around £413m from the project, including the turbine manufacture. Local consultants AB Associates estimate the five-year windfarm construction would see £98m spent in Shetland with £67.5m of the total injected directly by the project and a further £30.6m of spending as a result of the windfarm work.
Meanwhile, the deliberations of the SIC and the Scottish Government will ultimately count for nothing if the subsea cable to the National Grid in Scotland and a large electricity converter station for the windfarm to go at Upper Kergord, fail to get the go-ahead for planning or financial reasons. It seems likely their fate will be known long before the windfarm’s planning verdict is announced.
SSE is due in Shetland on 10th June to give out the latest details on that project at a public roadshow in the Whiteness and Weisdale hall but it would not divulge any new information this week other than to say that the planning application by its subsidiary SHETL (Scottish Hydro Electric Transmission Limited) is expected to go in “later this year”. The cost last year was estimated at £200m-£300m and no new figure was available.
It is understood there is already early interest from at least one significant renewable energy player in developing wave or tidal power in Shetland by taking advantage of the subsea cable to export its power.