Bankers will tell trustees Viking windfarm would be a sound investment

Banks still view the Viking Energy windfarm as a sound investment and their confidence means only £31 million of community funds would have to be put towards it, according to Shetland Charitable Trust.

The controversial issue of funding the £685 million windfarm is to be discussed in public in Lerwick next week with financiers from Lloyds Bank, presenting a rare opportunity for islanders to gain an insight into how corporate investors view the 127-turbine proposal.

Lloyds’ renewable energy project finance director Richard Simon-Lewis will give a presentation to the trust’s 21 councillors and two independent trustees on Thursday morning, joined by Hunter Inkster from Scalloway who works for Lloyds Bank Corporate Markets in Aberdeen.

The windfarm’s main opponents Sustainable Shetland said today they would attend the session.

According to the trust, three significant factors help give the banks “comfort” that Viking would be a sound investment: the strong winds of Shetland; the support of the utility company Scottish and Southern Energy, which is the trust’s partner in the project; and the involvement of local investors like the four Burradale windfarm directors.

Burradale’s productivity is claimed to be more than 50 per cent and its five turbines feature regularly in the top 10 most productive wind turbines in the world.

Trust financial controller Jeff Goddard said today financing Viking had been discussed with several banks, including Lloyds, while SSE has had talks with the EU’s European Investment Bank. There is little new in that because last year he said talks had also taken place with the Royal Bank of Scotland, BNP Paribas Fortis and Barclays in addition to Lloyds.

Lloyds Bank Corporate Markets says it has already underwritten over 40 major projects in the renewable sector worth approximately £3 billion.

Mr Goddard said: “The clear message we are getting from the banks is that this project can be financed and Lloyds Bank Corporate Markets were keen to meet the trustees and give the view of a potential investor.

“The good news for us is that onshore windfarms are seen as an attractive investment opportunity because they use tried-and-tested technology.”

The windfarm application is currently awaiting its fate with the Scottish government’s energy consents unit in Glasgow and the Scottish energy minister. No decision is expected until after the election on 5th May and the trust has said recently that its trustees’ big decision about whether to invest in the windfarm will not be made until next year, about a year after gaining consent.

According to Mr Goddard, most of the £685m costs would be financed through loans from a mix of commercial banks and specialist infrastructure and renewable funds. Security for the loans would be taken against the project itself and therefore would not put any of the trust’s other funds at risk.

He said the trust “might” have to raise £62m to meet its share of the building costs but half of that would be borrowed and the rest raised by selling off some of its existing £200 million investments in the stock markets and local businesses and property.

The trust believes it could earn £23 million a year from its stake in what could be one of the world’s most productive windfarms.

Responding to the Lloyds visit, Sustainable Shetland chairman Billy Fox said talks about bank funding were premature given all the missing pieces in the overall project, including how the interconnector cable to the mainland is to be funded and what electricity transmission charges are to be for exporting power to the National Grid.

He said: “Fair enough it they want to have preliminary talks but it is pretty much putting the cart before the horse really.”

He suspected next week’s event was another opportunity for Viking to bring pressure to bear in its favour. “The cynical view is that this is leverage again coming from the developer to say that this is the best thing going and we must go with this otherwise if the Shetland Charitable Trust doesn’t maintain a position in this then it will happen anyway. All these things are very questionable.”


Add Your Comment
  • James Mackenzie

    • March 20th, 2011 11:37

    I just hate this sort of “news story”, headlining something which hasn’t actually happened yet. Political parties and governments increasingly indulge in the same practice, which devalues genuine debate and is redolent of propaganda and spin.

    That Shetland Charitable Trust is indulging in the practice with regard to its gestating wind farm is lamentable, but not unexpected. The whole energy debate, if you can call it that, is being conducted, at both local and national level, by those who have political and financial interests to pursue, as a cynical exercise.

  • Robert Smith

    • March 20th, 2011 12:12

    I’ve whittered on about the inefficiency of wind turbines in the past and still haven’t seen any credible evidence to the contrary.
    Possibly your readers will be interested in the reality of large scale wind development:

    Will the council (you) have to pay to clean up the mess?

    Since the biblical scale japanese earthquake and tsunami have shown nuclear to be unbelievably safe, shouldn’t we accept reality and build some?

  • Kevin Learmonth

    • March 20th, 2011 17:32

    The UK Government, i.e. taxpayer, owns 65% of Lloyds bank following the folly of casino banking on high-risk ventures.

    Lloyds are giving a presentation to Trustees because these Trustees are responsible for the activities, conduct and strategy of their 90% owned subsidiary company, Viking Energy Limited. Councillors are not bystanders in this process, they are the developer.

    As for borrowing money in order to make your initial down payment a bit smaller.. it’s like taking out a loan from Bank A, in order to use it as a down payment in getting a loan from Bank B, and Bank C says it will underwrite the whole loan against the project.

    Unfortunately these banks could all be very banks bailed out by national taxpayers. The project depends on cost subsidy, government payments and political will for its viability, but the government is strapped for cash because of the banking collapse… In truth the development could become worthless in certain circumstances.

    Trustees should bear in mind 3 facts: loans need to be repaid, decreased risk comes at a price, and there is no such thing as a guaranteed profit.

  • paul barlow

    • March 22nd, 2011 14:25

    keven any loan will be secured on the turbines not the charitable trust.
    there is indeed no guaranteed profit. but one thing Shetland has a lot of is wind. If we are unable to profit from it then your right wind turbines would be a waste. However i suspect the truth will be that we will make a very nice profit over the 20+ years.
    Would you really want to depend on totals generous gifts to Shetland.

  • ali inkster

    • March 22nd, 2011 15:55

    please remember that SSE have to build windfarms, by law they will have to produce a fixed percentage of their power from renewable sources. So even if the VE windfarm never makes a brass farthing in profit SSE are happy even happier that we helped fund it for them, we on the other hand are in the hole for several hundred million pound with a monstrous eyesore to boot.
    The subsidies that make windfarms profitable are not set in stone and the government is already looking at them.
    If as is claimed by the whole VE propaganda machine that a windfarm up here is 50% more efficient than a similar windfarm south please explain how a 100% increase in build cost works in our favour.
    Quite honestly the whole thing stinks from the funding plans for the turbines right back to where they are being sited.


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