Ally Tibbitt, Rob Edwards | The Ferret | July 13, 2021 | theferret.scot
Nearly a third of Scotland’s biggest wind farms have owners with links to offshore tax havens in the Cayman Islands, Luxembourg, Guernsey and Jersey.
An investigation by The Ferret has also revealed that 39 of the largest 50 wind farms are ultimately owned outwith Scotland in England, Spain, France, Germany, Norway, China and elsewhere.
Campaigners allege that the wind industry’s tax havens have deprived public services of “many millions” of pounds, while boosting private profits. Scotland’s renewable energy wealth is being “looted” by international tax avoiders, and profits “siphoned overseas”, they say.
According to experts, wind farm ownership is “opaque” and “secretive”. The “bright green image” promoted by the renewable energy industry is “more a murky shade of grey”, says one.
The Scottish Government criticises companies that exploit “artificial arrangements simply to reduce their tax liabilities”. But it points out that corporation tax is controlled by Westminster.
Some wind farm owners defend the use of tax havens as “standard across the industry” to ensure that “investors are not in a disadvantageous tax position”. Others stress that their offshore companies have “no connection” to their wind farms, and that the beneficiaries include UK pension funds.
Companies also point out they pay taxes that are due “in the markets in which they operate”. There is no evidence that any of the companies are breaking the law.
Wind is now the largest generator of electricity in Scotland, with a massive nine gigawatts of power installed over the last 20 years. On windy days, it can provide all the electricity the country needs.
It is seen by many as the industry that is ousting North Sea oil as the economy’s dominant energy supplier. Because wind turbines do not emit carbon, they are also regarded as vital in the battle to cut climate pollution.
But concerns have been growing about who is benefitting from the wind power boom, with some fearing that “big wind” could emulate “big oil” in avoiding taxes, exporting profits and short-changing communities.
In November 2020 The Ferret reported that one leading wind farm company, Ventient Energy, was under fire for avoiding tax. It was registered in Luxembourg in Europe and owned in the Cayman Islands, a British overseas territory in the western Caribbean Sea.
Now we have analysed the ownership of all of Scotland’s 50 biggest wind farms. We drew on the database of energy projects maintained by the industry body, RenewableUK, as well as records held by the UK Government’s Companies House and company reports.
We discovered that the use of offshore tax havens is widespread. At least 16 of the 50 farms have owners with verifiable links to the Cayman Islands and Luxembourg, as well as to the islands of Guernsey and Jersey in the English Channel.
These are all places highlighted by campaign group, the Tax Justice Network, as helping multinationals to hide and avoid tax. They are listed amongst the world’s worst 20 jurisdictions for financial secrecy and tax avoidance.
The Cayman Islands are ranked worst in the network’s financial secrecy index and second worst in its tax haven index. Luxembourg is sixth worst in both the tax haven and secrecy indexes.
Jersey is the eighth worst tax haven and 16th worst on financial secrecy. Guernsey is the 11th worst for financial secrecy and the 17th worst tax haven.
Many of the wind farms have multiple owners, involving up to four different companies. Sometimes the links to tax havens are direct and clear, but in other instances they are indirect.
We have identified eight owners or part-owners linked to tax havens, in addition to Ventient Energy. They are multinational asset and investment management firms, often with complex webs of different companies in different countries.
The investment company, Equitix, which owns 17.5 per cent of the huge Beatrice wind farm in the Moray Firth, is registered in the Cayman Islands. Its parent company, Tetragon, is registered in Guernsey.
The Renewables Infrastructure Group also owns 17.5 per cent of Beatrice, as well as 49 per cent of Crystal Rig in Scottish Borders, Paul’s Hill and Rothes in Moray and Mid Hill in Aberdeenshire. It is based in Guernsey.
Dalmore Capital owns a quarter of the Dorenell wind farm in Moray and a quarter of Corriemoillie, near Garve in Highland region. It has three companies registered in Jersey.
Aviva Investors owns 49 per cent of Brockloch Rig extension at Carsphairn in Dumfries and Galloway. Its infrastructure income unit trust is registered in Jersey.
Blackcraig wind farm at Balmaclellan in Dumfries and Galloway is controlled by Gravis Capital Management and Temporis Capital. The former has two investment companies registered in Jersey, while the latter has two companies in the Cayman Islands.
Harburnhead wind farm in West Lothian is half-owned and managed by Gresham House companies. Gresham House also owns an investment management company in Guernsey.
Fallago Rig in the Lammermuir Hills is 80 per cent owned by a subsidiary of Hermes Infrastructure. Hermes has a company in Guernsey, but said it was “entirely unrelated” to the wind farm, whose owner paid UK taxes.
Two other wind farms at Aikengall in East Lothian are owned by a company called Community Windpower. According to Companies House, it was controlled by Swiss Renewable Energies based in Jersey until 31 May 2018.
Altogether Scotland’s biggest 50 wind farms, ranked by the amount of electricity they are capable of generating, have 31 owners. Just 11 are owned in Scotland by Scottish companies.
The remaining owners are in England (12), Spain (10), Norway (8), France (3), Germany (2) and elsewhere. Two Chinese companies, Gingko Tree Investment and Red Rock Power, have stakes in four wind farms.
The analysis of wind farm ownership was carried out by renewable energy consultant, Helen Snodin, in conjunction with The Ferret. “The renewable energy sector is unrecognisable from its niche beginnings,” she said.
“Wind power is the present day conventional technology and with that comes social as well as environmental responsibility. Ultimately we should care about tax revenues, and the destination of investment and profit.”
She pointed out that Scotland had lost some state and private owners, and cautioned that the use of tax havens could rise. Some foreign ownership outwith havens could bring benefits, she argued.
“Ownership isn’t necessarily indicative of investment. There are plenty of examples of foreign domiciled owners with a great track record of investment in, and commitment to, Scotland.”
The private finance think tank, European Services Strategy Unit, attacked the use of tax havens. “Company accounts are so opaque, it’s hard to know for sure how much tax they have avoided paying,” said the unit’s director, Dexter Whitfield.
“But these firms could well have deprived the public sector of many millions of pounds over years, while boosting their profits. They register in secretive offshore tax havens solely to increase profits for shareholders by avoiding UK tax.”
He added: “This ultimately reduces government revenue to fund public services and the welfare state. It’s hardly the bright green image promoted by the renewable energy industry – more a murky shade of grey.”
Whitfield argued that The Ferret’s analysis raised the question of who should ultimately own and control renewable energy in Scotland. “It is a vital part of a just transition strategy for climate change and for the future of local and regional economies,” he said.
The Tax Justice Network warned that the pattern of wind farm ownership would result in “significant revenue losses” for Scotland. “Without pointing the finger at individual companies, the evidence is clear,” said the network’s chief executive, Alex Cobham.
“On average investments that are made through financial secrecy jurisdictions and corporate tax havens will result in much higher levels of tax abuse.”
According to Friends of the Earth Scotland, wind farm ownership was “sometimes stuck in the tax avoiding excesses” of the past. “Climate change has been created by the unrestrained pursuit of profit,” said the environmental group’s director, Dr Richard Dixon.
“Addressing climate change needs to be more than business as usual with a different technology. Any company that wants to be seen as part of the solution needs to be contributing back to society, including paying proper taxes.”
Scottish Labour warned that wind industry links to offshore tax havens “undermined democratic control” of the energy sector. “SNP ministers have allowed our wind farms to be owned and controlled by shadowy overseas interests, instead of communities in Scotland reaping the rewards,” said the party’s energy spokesperson, Monica Lennon MSP.
Labour MSP, Paul Sweeney, added: “The huge renewable energy wealth potential in Scotland is being looted from our people by international tax avoidance through these elaborate offshore ownership structures.
“Despite its vast wealth-generating potential for the country, the profits from generation are being siphoned overseas. It truly is a national scandal, and fixing it must start by asserting Scottish ownership across the whole energy sector.”
The Scottish Greens criticised successive UK governments for failing to tackle tax avoidance. “It’s vital that serious action is taken to end this unscrupulous behaviour,” said the party’s co-leader, Lorna Slater MSP.
“Scotland’s fairer and greener future cannot be built on the back of tax avoidance.”
The Scottish Government pointed out that it had no powers over corporation tax, which was reserved to the UK parliament. “We believe that businesses have an ethical obligation to deal openly with their tax affairs and not to engage in artificial arrangements simply to reduce their tax liabilities,” said a government spokesperson.
“These principles sit at the core of our Scottish approach to taxation. We believe in fair taxation that supports economic growth and protects Scotland’s position as an attractive proposition for overseas investors.”
Tax havens ‘standard across the industry’
The Ferret contacted all the wind farm owners with links to offshore tax havens for checks and comments. One, which didn’t wish to be directly quoted, defended the practice.
“The use of offshore funds structures is standard across the industry and helps enhance the returns for investors, including ultimately retail customers and pension funds,” it said.
“They ensure that the investment returns on their assets accrue in the country where they are tax resident. In addition, as with any other major asset management company, our objective is to attract a global client base and non-UK structures are often the most efficient way for us to do that.”
The company stressed that the ultimate investors were UK pension funds. “Any revenues we earn from managing our investors’ assets in the funds we manage are fully subject to tax in the jurisdiction where the asset manager of that fund is resident, typically the UK.”
The Renewables Infrastructure Group (TRIG) was open about being registered in Guernsey. “TRIG is a Guernsey-registered investment company, which is not uncommon for UK-listed investment companies,” it said.
“Tax is paid by the portfolio companies in the markets in which they operate and by the company’s shareholders on the dividends they receive, according to the jurisdiction and taxation status of each shareholder.”
The company added: “The structure ensures investors are not in a disadvantageous tax position compared to direct investors in infrastructure projects. In effect this emulates the structure formalised for real estate investors.”
A TRIG spokesperson also pointed out that the company held the London Stock Exchange’s green economy mark. “TRIG’s shareholder register is over 90 per cent UK based and comprises institutional investors, such as pension funds and multi-asset managers,” the spokesperson said.
A spokesperson for Gravis Capital Management (GCP) said: “I can confirm Gravis Capital Management Limited is a fund manager and does not own renewable energy assets. GCP Infrastructure Investments Limited and GCP Asset Backed Income Limited are investment companies listed on the London Stock Exchange, incorporated in Jersey.”
A spokesperson for Gresham House said: “The Harburnhead wind farm is part-owned by an institutional fund that is a limited partnership registered in England and Wales, managed by Gresham House Asset Management Limited on a discretionary basis, on behalf of UK institutional clients (local authority and corporate pension schemes) and UK private clients.”
The company added that there was “no connection” between the firm that part-owned the wind farm and the Gresham House investment company in Guernsey – other than the fact that the management company and the Guernsey company were both “wholly owned subsidiaries of Gresham House plc.”
Hermes Infrastructure pointed out that the “owning entity” of Fallago Rig wind farm was based in Scotland and was “fully compliant” with UK tax requirements. The Hermes infrastructure company registered in Guernsey “is entirely unrelated to Fallago Rig Wind Farm”, a spokesperson said.
A report on public engagement by Hermes in 2019 highlighted the problems that could be caused by avoiding paying tax. “Tax avoidance has a serious knock-on effect on society as governments are less able to fund schools, hospitals and other vital services,” it said.
Aviva Investors confirmed that its infrastructure income unit trust was registered in Jersey. Scottish Renewables, which represents the industry, declined to comment, as did Equitix, Dalmore Capital, Temporis Capital, Ventient Energy, and Community Windpower.
Making Tax Fair
Companies that bid for public wind farm contracts should have to prove that they pay their taxes fairly and openly, says the campaign group, Tax Justice Network.
It is calling on politicians to require firms to sign up to the Fair Tax Mark. This is an independent accreditation system that recognises firms that “pay the right amount of corporation tax at the right time and in the right place”.
Alex Cobham, chief executive of the Tax Justice Network and a technical advisor to the Fair Tax Mark, argued that good companies would be keen to show that they paid a fair share of taxes.
“Companies seeking to benefit from clean energy subsidies should be completely transparent about their finances, including their tax conduct,” he said.
“To protect Scottish revenues, and to limit the damage that is done when tax-compliant local businesses are unfairly outcompeted, politicians should consider requiring the Fair Tax Mark from all companies in this sector.”
Cobham pointed out that the issue had been discussed in the last Scottish Parliament. “One issue was that the approach might have clashed with European Union procurement rules – but of course these no longer apply,” he said.
One leading Scottish energy company, Perth-based SSE, has already been awarded the Fair Tax Mark. Its business, SSE Renewables, owns or part-owns nine of the biggest 50 wind farms in Scotland.
“Tax matters. It helps to fund vital public goods and services and when paid fairly, it ensures a level playing field for businesses large and small,” the company said.
“SSE does not take an aggressive stance in its interpretation of tax legislation and will not use artificial tax avoidance schemes or tax havens to reduce its costs. SSE’s profits are taxed in the locations where it has business substance.”
The Scottish Government didn’t comment directly on the Fair Tax Mark. But it stressed that wind farm companies should help make sure that Scotland benefits from their investments.
“We expect developers who benefit from Scotland’s natural wind resource to engage with the domestic supply chain, from the outset, to ensure that businesses and communities located in Scotland are in a position to maximise the economic opportunities that the construction of wind farms offers,” said a government spokesperson.
Scottish ministers have also backed Community Energy Scotland, a charity which supports locally-run renewable projects. It highlighted research in June 2021 suggesting that community owned wind farms paid communities 34 times more than private companies.
The consultancy, Aquatera, compared nine community owned and four private wind farms in Scotland. It found that returns from the community owned farms averaged £170,000 per installed megawatt per annum, far exceeding the £5,000 paid by commercial firms.
The research was commissioned by the Point and Sandwick Development Trust, which owns the UK’s largest community wind farm on the Isle of Lewis. “Community energy punches way above its weight in financial and economic terms,” said the trust’s chair, Norman Mackenzie.
“If governments really want to level-up and to spread the benefits of the green economy to all parts of the country, then they need to make community energy a central pillar of their climate policy and not just a nice-to-have.”
Community Energy Scotland is working to increase community ownership to maximise local benefits. “We would support Community Land Scotland in their endeavour to increase community ownership and to favour the use of credit unions, ethical finance and co-operative models of ownership,” said the charity’s chief executive, Janet Foggie.
“If capital is being brought in for commercial projects then we would argue strongly for ethical banking approaches, and favour community benefit payments as a means of ensuring at least some benefit is returned to local people. However community ownership is still the preferred model.”
A spreadsheet summarising ownership of Scotland’s biggest wind farms can be downloaded here.
URL to article: https://www.wind-watch.org/news/2021/07/13/windfall-one-third-of-scotlands-biggest-wind-farms-linked-to-tax-havens/