Trustees asked for £6.3 million to take windfarm to construction stage
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.”