Time to face reality

The front page main headline in last week’s Shetland Times almost sent an icy shiver down my spine. It read “Banks eager to lend lion’s share of £800 million for windfarm”.

Remembering how years ago thousands of investors rushed to pour their money into a project, the Channel Tunnel, that, it was claimed, could not fail to make huge profits and pay large dividends, and remembering how it eventually cost almost twice as much to construct as was estimated, and how the banks were only willing to lend the required capital to complete the project in exchange for virtually all the equity, and in effect ended up owning the company, I could not help feeling fearful for the money of Shetland folk if and when the projected costs of the proposed Viking Energy windfarm spiral upwards as all projected costs almost inevitably do.

How would Shetland raise perhaps a further £100 million? The Channel Tunnel is virtually owned by the banks and it is the banks which take all the profits which the tunnel is now beginning to make. But these profits are used to pay the interest on the loans which the banks paid to enable the tunnel to be completed.

The banks are quite happy with the situation, they are making money, but the original investors have not only lost their money, they receive no dividend income either. Shetland could wind up hundreds of millions out of pocket and have no income from its investment as the banks would demand payment of interest on their loans as first call on any income from the sale of any electricity generated and sold to southern consumers.

When an investment turns out to be a disastrous mistake it is useless to try to ask for the money back, as Sandy Cluness discovered when he tried to recover the millions poured into the Smyril Line. Perhaps Shetland should be content with what it is fortunate to have and the benefit which will accrue from the Total development at Sullom Voe.

There is no doubt that potentially the Viking Energy project could make a handful of people extremely wealthy, but as stated in the front page article, the venture would change the landscape face of Shetland and either bring huge riches into the community purse or financial disaster.

Perhaps the time has finally come for the SIC to face reality and live within its means and not desperately go looking for another pot of gold to solve the problems which it has brought upon itself. This is a matter of extreme importance affecting every person who lives in Shetland and whose money it is that would be put at risk.

If ever there was a case for a referendum then surely this is it.

Allan Pring
East Voe,


Add Your Comment
  • Jeff Goddard

    • June 29th, 2010 17:56

    If you read my report which is available on SCT’s website, you will see that the project finance referred to is known as ‘non-recourse’ finance. In this type of finance, any cost over run, should one occur is financed by the banks, not the ‘equity’ partners. In any case, should Viking energy manage to get to the point of the particpants having decisions to make about committing, the construction contract will be on a job and finish type basis. There are risks, but not the same ones as the tunnel channel investors faced (and presumably did nt understand at the time they made theirinvestment).

    I am pleased to have stimulated any debate, and hopefully helped readers understand a bit more about what may be proposed, should all the neccessary boxes get a tick.

    Jeff Goddard

    This submission is on my own account and is meant to be informative rather than dictatorial (but also short).


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