April 20, 2012
Scotland

Scottish and Southern Energy: we’ll go on without you

by John Robertson, The Shetland Times, www.shetlandtimes.co.uk 19 April 2012

Scottish and Southern Energy has reaffirmed its intention to build the Viking windfarm regardless of whether the Shetland community continues as its partner.

The power company’s determination to proceed with the 103 giant turbines consented by the government suggests that the choice facing Shetland is not if it shall have a windfarm but whether or not it still wants to be part of it.

In a statement to The Shetland Times SSE said: “Throughout the development process we have always said that our preference would be to partner with the Shetland community but that if they chose not to be involved we would continue with plans to develop the windfarm.”

With some urgency Shetland Charitable Trust will have to decide whether to continue to invest to reap rewards later of potentially £20 million a year or sell up its 45 per cent share for £58.5 million now and peanuts thereafter.

The trouble is the trust is riven with doubt about its involvement in Viking and is currently incapable of discussing it because too few trustees are both available and agreeable to doing windfarm business.

Its problems over Viking came to a head again on Monday when it met to sanction a £6.3 million payment required as its contribution to the £14 million to be spent by the partners getting the project ready for the final decision in less than two years time.

The charity’s chairman Bill Manson, who also chairs Viking Energy, said the failure to approve the funds left the local half of the partnership, comprising the trust and the Burradale windfarm owners, in a situation which was “pretty parlous” and “very difficult if not close to crisis”.

Monday’s aborted meeting was the second failed attempt, the previous one being scuppered the day before the meeting on 29th March when it was realised that too many trustees were out of Shetland.

A third attempt is being made to organise a last-gasp trust meeting for next week – but once again it seems too many trustees will be out of Shetland or just unavailable, due largely to the council elections and those winding down from councillor life.

The next scheduled meeting is not until 24th May but with at least 11 new councillors taking their seats as trustees for the first time that day following the elections they will need a period to get up to speed on Viking and their responsibilities as trustees and investors before contemplating multi-million pound history-shaping deals. So that would suggest June or July at the earliest – if the trust’s partners in the venture can hold on that long.

Mr Manson said: “We have got serious difficulties as a company but the project is not being hindered. It is ploughing on.”

With the long-awaited planning consent having been granted on Wednesday 4th April the partners are keen to make progress. New work is already getting under way, believed to include monitoring of the bird breeding season, and with the trust having no money to put towards future bills the directors might have to cease trading and have the company wound up.

Mr Manson said: “There is no way the project has even paused. It is just that Viking Energy Limited’s ability to participate, other than talking about things, is now severely shackled. We are literally, from now on, living on the goodwill of our partners.

“We are currently the unreliable partner. Can the Shetland public imagine what the reception would be if one of our partners was expecting us to carry them for a spell with no knowledge of whether they were going to come up with money or when? There would be outrage.”

It has been suggested that perhaps the trust should consider an instalment instead of the full commitment to £6.3 million. But Mr Manson said that presented difficulties because of the cost of contracts being entered into in the near future.

About half the £14 million spend on bringing the project to the final decision stage would be on detailed site investigations in the hills of the central Mainland. The rest is for investment auditing, technical and construction studies, wages and other costs of running the business.

Given the unseemly problems that Viking has visited on the trust it has been suggested that Shetland Islands Council might even wish to buy back its project after selling it to the trust five years ago.

The unexpected problem of securing funding from the trust will be high on the agenda for a meeting of all the Viking partners next week. SSE appeared relaxed about the trust’s constipation this week. It said: “We are not concerned by the discussions that are taking place and it is only to be expected when dealing with an investment decision of this scale.”

The company declined to comment further on the dispute within the trust which it said was a matter for the trust.

The other partner, Viking Wind, made up of the four local owners of the Burradale windfarm, is considering its position before commenting.

Mr Manson said he would be “astonished” if both the trust’s partners did not have concerns about its funding crisis. He felt “frustrated” and “deeply concerned”, blaming some trustees for losing their nerve.

“I think they are not serving the trust and they are being influenced by a pressure group. I am more satisfied than I have been in the past that although the noise is coming from one quarter actually the support is greater than the opposition.”

He believed even some Sustainable Shetland supporters would be very concerned that the project was going ahead with possibly greatly reduced local content. “I think whether you support or are against the windfarm, one of the worst scenarios that people can imagine is that the thing just goes ahead – which it is doing – but without any major local community involvement. He who pays the piper calls the tune and reaps the profit.”

That scenario has been punted before and dismissed as scaremongering. But Mr Manson insisted: “I don’t know how I can say it any more plainly: it is going ahead. It has partners who are not constrained by their funding. Both these [SSE and VW] are people who operate windfarms. They know what they’ve got to do. They are not breaking particularly new ground for them. They’re just getting on with the business they are in.”

In theory at least Viking Wind holds sway at this stage despite having only a five per cent share in the project overall. The agreement between the trust and VW is secret but it is understood that either partner can step in and take over if the other fails to provide the required funds, also gradually gaining an unknown percentage of the other’s shares. Ironically, the deal was written with a view to the funding problem perhaps befalling Viking Wind rather than the £220 million trust.

The £3.4 million spent by the trust on Viking so far was to get the project to the consent stage, which it has done. Now, into a new financial year, there is only enough cash left to keep the operation ticking over for a short while, paying the staff at the Gutters’ Hut their wages.

The trust cannot pay anything towards the major programme of works to be done between now and early 2014 when a final decision has to be made about going ahead or selling out the trust’s share.

If the bills rack up the trust could find itself having to ask Viking Wind and/or SSE not only to subsidise it but not to punish it for being what Mr Manson called “a flaky partner” by taking away some of its shares.

He said: “Any partner in this venture is entitled to say: ‘We’re entering into commitments here and we now have no knowledge of whether you are going to live up to your share of it. That could be raised at a fairly early stage if there are big commitments to be entered into.”

Ultimately, the others could press on without the trust and without the trustees even having to formally decide what to do.

Despite the sense of frustration and possibly a little panic in the ranks at the charitable trust, others are doubtful about the real need to rush. However, there are a number of reasons for a degree of urgency in making progress over the next 18-24 months. These include:

* making best use of the summer to start the multi-million pound detailed ground investigations in the hills;

* the connection agreement with National Grid means an interconnector cable and transmission network should be ready for April 2016, when turbines are expected to be turning;

* the government subsidy regime is set to change in April 2017 for new windfarms which could see a further reduction in the value of renewable obligation certificates (Rocs) for generating power from onshore wind for the last 20 years of the scheme, due to end in 2037;

* Viking will have to join the queue for turbine delivery. It still has to decide which make and power rating of turbine to go for, which is expected to happen sometime around the end of the year.

There are also construction contracts, power purchase agreements, supply contracts and the crucial issue of raising the £556 million funding.

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