September 12, 2020

Change of Viking Energy ownership had no impact on land leases

Hans J Marter | Shetland News | 11 September 2020 |

Shetland Islands Council has insisted that there was no need to review its lease agreement with Viking Energy when the controversial wind farm project became a solely owned Scottish & Southern Energy (SSE) venture in May last year.

Opponents of the project are claiming that the nature of the project materially changed when Shetland Charitable Trust divested its 45 per cent community stake from the 103-turbine wind farm.

The community stake in the project was initially owned by the council but transferred to the charitable trust in 2007.

Shetland Islands Council, however, is one of 14 landowners who have entered into long-term lease agreements with the developer, and campaigners say that councillors should have been given a say on whether they wanted the Busta Estate to continue being part of the set-up when SSE became the owner and sole investor in the wind farm.

Asked by Shetland News, council convener Malcolm Bell said the changes in the ownership did not impact on the signed agreement.

“The lease of the council’s estate land was not impacted upon by any changes in the ownership of the project, as the signed agreement remained unchanged,” he said.

“The council is one of 14 landowners with interests in the project and, acting as landowner, did not have any remit to influence decisions outwith the scope of the agreed lease terms.

“The Shetland Charitable Trust decision to sell their interest was not a decision that any landowner had influence over, and this change did not impact on the lease terms that had already been agreed.”

The issue briefly surfaced during Wednesday’s meeting of the full council when elected member Moraig Lyall said that since she became a councillor she had regularly been told that “Viking Energy was indeed a done deal and a closed door” whereas information provided to councillors this week indicated that “there was in fact a little ajarment of that door but that in recent days that has now closed”.

The Shetland Central councillor referred to a clause in the lease contract that entitles the SIC as the landlord to terminate the lease of the Busta Estate to Viking Energy Wind Farm LLP should the tenant fail to serve a ‘variation notice’ on or before 1 October 2020.

The developer is required to serve variation notices on the existing lease, which dates back to June 2012, when receiving the necessary permissions, including a consent by the Scottish land court in relation to the development.

The 43-page lease agreement between local landowners, including Shetland Islands Council, and the developer Viking Energy can be found on the Scotland’s Land Information website.

A request to the council’s development department for an updated estimate of how much the SIC expects to gain annually from hosting 17 wind turbines on the Busta Estate land has so far not been responded to.

However, a short economic impact assessment prepared by the council’s director of development Neil Grant in December 2010 in support of the councillors’ decision to support the Viking Energy planning consent application, estimated that the then proposed 127 turbines would generate around £7.8 million annually in land rental.

This would be shared 50/50 between landowners and crofters having grazing entitlements on affected land.

Based on this estimate and taken into consideration an inflation rate of two per cent per year, the annual land rent value per turbine is in the region of £75,000. This is a rough estimate and does not take into consideration rent payments for hosting large compounds, laydown areas and the sub stations.

The same report presented to councillors during the December 2010 meeting also estimated that Shetland would benefit to the tune of £38.2 million per annum – including £23 million of annual profits for the Shetland Charitable Trust – amounting to an “anticipated direct value to the Shetland economy” of “£878.6 million from the operational life, plus £54.5 million over the five year construction phase”.

The same report, still available on the SIC’s website when using the search function in the council business section, also predicted that thanks to the associated wealth creation and “wise reinvestment” as many as 435 full time equivalent (FTE) jobs would created or sustained in Shetland.

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