One of Scotland’s leading wind power companies has come under attack for allegedly avoiding millions of pounds of tax by being owned in the Cayman Islands.
Ventient Energy, which operates 13 wind farms in Scotland and is headquartered in Edinburgh, is a subsidiary of a company registered in Luxembourg. That company is in turn owned by a firm in the Caymans, a new report has revealed.
Luxembourg and the Caymans are both legally used as tax havens to help reduce the amount of money companies have to pay to governments – and to keep finances secret.
Ventient is also closely tied to the biggest US bank, J P Morgan Chase. It is seen by some as the bank’s “European renewable energy platform”.
Campaigners have criticised Ventient as “profiteers” after “quick cash rather than quick carbon reductions”. They say tax havens are a way of “hiding profits” and reduce community benefits.
Ventient Energy was launched in 2017 and has acquired 134 wind farms in Scotland, England, Belgium, France, Germany, Portugal and Spain. It describes itself as “the largest independent generator of onshore wind energy in Europe”.
The biggest of its 13 wind farms in Scotland is at Farr, 13 kilometres south of Inverness, where 40 turbines generate enough electricity to power over 58,000 homes. It also runs large farms at Novar in Easter Ross, Galawhistle in South Lanarkshire and Causeymire in Caithness, as well as 21 farms in England and Wales.
In 2019 Ventient’s new headquarters on Blenheim Place in Edinburgh were opened by the Scottish Government’s energy minister, Paul Wheelhouse. He described the company’s expansion as “a vote of confidence in the future of onshore wind energy in Scotland”.
But now a new report by the private finance think tank, European Services Strategy Unit, has revealed that Ventient is wholly owned in offshore tax havens. As a result, according to the report’s author, Dexter Whitfield, the company is likely to “avoid millions of pounds in tax”.
In a note towards the end of its 2019 annual report, Ventient said that the accounts of its immediate parent company, Ventient Energy UK Holdco, were “consolidated” into the accounts of Ventient Energy Sarl, which was registered in Luxembourg.
“The ultimate parent company is IIF International Holding LP, an entity 100 per cent owned by institutional investors and so there is no ultimate controlling party,” said the annual report.
“IIF Holding LP is a Cayman Islands exempted limited partnership advised by J P Morgan Investment Management.”
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The Tax Justice Network, which campaigns to reform taxes, ranked the Cayman Islands top of its financial secrecy index for 2020. The autonomous British overseas territory offered a “low-tax, regulation-light environment for financial players from around the world,” said the network.
The network also listed Luxembourg as the sixth worst country in the world on financial secrecy. It was said to be expanding its role “providing letterbox companies to help multinational corporations avoid paying tax”.
Private finance expert Whitfield pointed out that in three deals during 2019-20 Ventient bought up wind farms across Europe for £1.6 billion. The company reported that its revenue for 2019 was £152 million, with an “operating profit” of £26 million.
The company benefited from the advice of its partner, J P Morgan Chase. The US bank reportedly has global assets worth £2.4 trillion and advises many companies in the Cayman Islands.
But Ventient’s financial arrangements did not benefit Scotland, Whitfield argued. “This raises urgent questions about how to achieve public ownership of Scotland’s renewable energy assets,” he told The Ferret.
His report also estimated that 626 renewable energy projects worth £218 billion were bought and sold across the world over 20 months in 2019-20. This secondary market in renewable assets, he said, “creates new opportunities for profiteering from renewable energy generation”.
Some 140 of the transactions involved a parent company or subsidiaries registered in tax havens, and 159 involved private equity funds. “Revenue from the sale of assets accrues to the parent company that owns the equity and does not directly benefit the project, local economy or community,” Whitfield argued.
“Companies sell because they want to extract development profits, recycle their investment elsewhere, avoid construction risks or want to sell operational projects to maximise profits.”
The Tax Justice Network agreed that being owned in the Cayman Islands could lead to investors or companies escaping tax. “It is worrying to see how deeply private equity has penetrated the renewable energy sector,” said the network’s Nicholas Shaxson, author of the book, The Finance Curse.
“Private equity uses financial engineering to strip money out of the companies they buy, resulting in weakened and more indebted companies but huge profits in finance. The fact that the parent is in Cayman suggests that the tax authorities will take a hit too.”
The network’s state of tax justice report for 2020 released on 20 November estimated that countries worldwide lost £322 billion to corporate and individual tax avoidance. More than half the losses were attributed to the use of tax havens.
Friends of the Earth Scotland stressed that wind farms were essential to combat climate change. “But it is very dangerous if they are attracting profiteers and speculators after quick cash rather than quick carbon reductions,” said the environmental group’s director, Dr Richard Dixon.
“Whatever the truth, any company based in a tax haven is immediately suspected of being more interested in making money than in anything else.”
Dixon argued that the publicly-owned energy company due to be set up by the Scottish Government before March 2021 should be “creating new renewable energy schemes as soon as possible.”
Community Energy Scotland, which supports locally-run renewable projects, argued that communities should gain maximum benefit from wind farms. “Anything which acts to extract significant value for distant shareholders from our renewable energy resources is undesirable,” said the group’s chief executive, Nicholas Gubbins.
“Balancing the need for external investment to get projects going, and community ownership, can be challenging. But we have demonstrated that it is possible, not least through local investment schemes.”
Scottish Labour warned that renewable energy seemed to bring “joy to all the wrong people”. Companies that profited from Scotland’s natural resources should pay a “fair share” of tax, said the party’s energy spokesperson, Lewis Macdonald MSP.
“Instead of bringing benefits to Scottish communities, it seems that many of our onshore wind farms have become tradeable commodities for the benefit of secretive global companies which hide their profits in tax havens like the Cayman Islands,” he added.
The Scottish Greens also called for companies to reinvest in the economies they profit from. “Taxes are a critical way to fund the industrial strategy needed to grow the renewables supply chain, and tax avoidance undermines the whole sector,” said the party’s energy spokesperson, Mark Ruskell MSP.
The Scottish Government pointed out that most business taxes were the responsibility of the UK government. “The Scottish Government is committed to taking the toughest possible approach to tackling tax avoidance where we have the powers to do so,” said a spokesperson.
“The Scottish Government continues to support and champion onshore wind as an essential part of Scotland’s current and future energy mix, recognising its ability to meet our energy needs and contribute to our significant net-zero targets.”
Ventient Energy, J P Morgan and Scottish Renewables, which represents wind farm companies, declined to comment.
Ventient’s website states that the company is backed by a wide group of pension funds, including Scottish public sector funds. “We’re a young and ambitious business with a clear plan for sustainable growth based on asset acquisition and operational excellence, underpinned by strong and reliable relationships with all our stakeholders,” the company says.
“Our success is recognised by the strong support of the pension fund, advised by J P Morgan Asset Management, that chooses to invest in us. Their backing means we can provide renewable energy to even more households while ensuring a long-term financial return for the millions of people who trust us as a source of stable retirement income.”
According to Ventient, in 2019 it contributed over £1.7 million to local initiatives, helping to improve facilities in 35 local communities. “We take pride in supporting the communities around our wind farms,” the company adds.
“We’re keen to play our part in both local and global communities and our ambitious plans will see us generate even more renewable energy in the coming years, helping us to secure the future of people and the planet.”
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