Agendas, Meetings and Minutes - Agenda and minutes

Agenda and minutes

Venue: County Hall, Worcester

Contact: Simon Lewis  Committee Officer

Items
No. Item

Available papers

The Members had before them:

 

A.    The Agenda papers (previously circulated); and

 

B.    The Minutes of the meeting held on 20 October 2014 (previously circulated).

9.

Named Substitutes (Agenda item 1)

Minutes:

None.

10.

Apologies/ Declarations of Interest (Agenda item 2)

Minutes:

None.

11.

Public Participation (Agenda item 3) pdf icon PDF 236 KB

Members of the public wishing to take part should notify the Director of Resources in writing or by email indicating the nature and content of their proposed participation no later than 9.00am on the working day before the meeting (in this case, 12 December 2014). Further details are available on the Council's website. Enquiries can be made through the telephone number/e-mail below.

Minutes:

Mr Rob Wilden addressed the Committee. He asked a series of questions in connection with issues raised in the Minutes of the Committee meeting held on 20 October 2014. The full text of the representation is appended to these Minutes together with the response that was sent to him.

 

Mr Sheridan Tranter addressed to the Committee. He raised concerns about plant viability and air quality monitoring. The full text of his speech is attached as an appendix to these Minutes together with the response that was sent to him.

 

Mrs Eve Jones addressed the Committee. She asked a series of questions in connection with issues raised in the Minutes of the Committee meeting held on 20 October 2014. The full text of the representation is appended to these Minutes together with the response that was sent to her.

12.

Confirmation of Minutes (Agenda item 4)

To confirm the Minutes of the meeting held on 20 October 2014. (previously circulated)

Minutes:

RESOLVED that the Minutes of the meeting held on 20 October 2014 be confirmed as a correct record and signed by the Chairman.

 

At the request of the Chairman, the Chief Financial Officer explained the Terms of Reference of the Committee.

 

In response to the Chief Financial Officer's explanation, the following principal points were raised:

 

·         It was apparent that the Technical Advisors – Fichtner Consulting Engineers were providing advice to the Council and to Mercia Waste Management. Did this represent a conflict of interest and as a result represent a major risk to the project? The Chief Financial Officer responded that there was a contractual obligation for the two teams within Fichtner Consulting Engineers to act completely separate from each other. He was satisfied that the assurance that had been given by the Technical Advisors regarding the creation of a "chinese wall" within their organisation mitigated any possible risks

·         Were the questions raised by the public participants in relation to the technical operations of the facility within the remit of this Committee? The Chief Financial Officer explained that some of the issues raised by the public participants were outside the remit of the Committee. Their points had been addressed in three ways. Firstly, through the Cabinet decision-making process in the Council's capacity of Waste Disposal Authority; secondly, through the strategic commissioning arrangements; and thirdly, through on-site consultation

·         In response to a query, the Chief Financial Officer undertook to make copies of his responses to the questions raised by the public participants available to members of the Committee

·         It was important to understand that the role of the Committee was to consider the contract going forward and not re-examine previous decisions about the operation of the plant which were outside its remit.         

13.

Progress update from financial advisors (Agenda item 5) pdf icon PDF 125 KB

Minutes:

The Committee received a verbal update from a representative of Deloitte, the financial advisors to the Council.

 

The Chief Financial Officer introduced Tim Dean who was a Manager at Deloitte. He explained that Deloitte had been engaged by the Council to act as the financial advisors to the Council. They had been appointed after a competitive tendering process and had been successful on the basis of their outstanding knowledge and experience in supporting the activities of commercial banks. Its role was to check the quality of the cash-flow tests and provide financial advice should any issues arise during the project. The cost of the service provided by Deloitte was fully rechargeable to Mercia Waste Management.

 

Tim Dean, the representative from Deloitte, informed the Committee that in relation to the latest cash-flow test, information had been received from Mercia Waste Management and further questions of clarification had been raised with them. A conclusion would be reached as soon as Mercia Waste Management had satisfied these queries. A Professional Standards Review would then be undertaken and the outcome of which would be reported to the Council. Mercia Waste Management was content that it had satisfied the terms of the agreement.

 

He added that Deloitte was also responsible for monitoring the draw down arrangements to ensure that they were in accordance with the financial model. To date, he was satisfied that the draw down arrangements were broadly in line with the model. Deloitte was responsible for reviewing the financial implications of construction period reports and at this stage there was nothing of significance to report to the Committee.

 

In the ensuing debate, the following principal points were raised:

 

·         Did the cash-flow tests relate to all activities of Mercia Waste Management or specifically to this contract? The Chief Financial Officer advised that the tests related solely to the financial model for the project and the operations on site during the construction period

·         Did the financial analysis of the project take into account the profitability to the shareholders? The Chief Financial Officer stated that due diligence tests had been carried out in relation to shareholders but the key issue was the status of the joint vehicle arrangements  

·         The report indicated that there was an excess cash-flow amount of £72,000, had this been confirmed by the cash-flow test? Tim Dean commented that the process included a series of tests and professional judgements by Deloitte. He would liaise with the Chief Financial Officer to ensure that any professional judgements were kept within the context of the contract

·         When would Deloitte be issuing the latest financial certificate to the Council and how frequently would it report in the future? Tim Dean explained that a certificate would be issued as soon as he was satisfied that Mercia Waste Management had supplied all the necessary information and provided satisfactory answers to the questions raised. He anticipated that a certificate would be issued shortly. Future certificates would be issued on a quarterly basis

·         How much of the loan had Mercia Waste  ...  view the full minutes text for item 13.

14.

Progress summary from technical advisors (Agenda item 6) pdf icon PDF 139 KB

Report to follow.

Additional documents:

Minutes:

The Committee received a progress summary from the technical advisors for October 2014.

 

The Chief Financial Officer introduced the report. He commented that:

 

·         The summary report had been redacted to protect the commercial confidentiality of contractors and sub-contractors operating at the site

·         The plant was due to open in 2017. Mercia Waste Management would still be required to repay the loan even if the plant failed to open on time

·         The contractors working on behalf of Mercia Waste Management were aiming to open the plant 3 months ahead of schedule which therefore allowed a degree of slippage in the timescale for completion of the works on site

·         At present work on site was four weeks behind schedule. The operators had begun dualling activities on the site and it was anticipated that the work would be on schedule by the end of quarter 2. At the moment the work programme was not considered to be at risk. Any major issues related to the timescale of the planned works would be reported to this Committee.

 

In the ensuing debate, the following principal points were raised:

 

·         In response to a query, the Chief Financial Officer confirmed that Fichtner were one of the seven partner organisations that had approved the planned programme

·         Committee reports should be as open as possible therefore concern was expressed that the report had been redacted on the basis explained by the Chief Financial Officer. The Chief Financial Officer undertook to raise the matter of redaction of future reports with the Monitoring Officer.

 

RESOLVED that the summary report from Fichtner Consulting Engineers – Technical Advisors be noted.

15.

Risk Register (Agenda item 7) pdf icon PDF 85 KB

Additional documents:

Minutes:

The Committee considered the unmitigated and mitigated risks of the EfW project as set out in the Risk Register.

 

The Chief Financial Officer introduced the report and indicated that there were six key risks associated with the project. None of the residual risk scores had been identified as being red following mitigation measures.

 

The Committee considered each risk separately and in the ensuing debate, the following principal points were raised:

 

a) Default of loan repayments by borrower to lenders due to SPV (Mercia) or HZI falling into administration.

 

·         The Chief Financial Officer explained that the maximum exposure of this risk to the Council was £6m. For this risk to become an eventuality, all seven companies involved in the project would need to go out of business. To mitigate that risk, the Council maintained a reserve of £12m. The risk to the Council would relate to the need to procure someone to replace Mercia Waste Management. He would maintain a watching brief on behalf of the Council over the financial affairs of all the companies involved in the project

·         Was the Chief Financial Officer satisfied with the assurances being provided for the £600m refinancing of HZI? The Chief Financial Officer had raised the matter with representatives of the company and received assurances that its balance sheet had been strengthened by cash moved into the company as a result of its reorganisation

·         On what basis was it determined that the maximum exposure of this risk to the Council be limited to £6m? The Chief Financial Officer explained that a range of financial security packages had been introduced at each stage of the supply chain e.g. insurances, bonds. Should each of the security packages need to be activated, then the maximum risk exposure to the Council would be £6m

·         If the maximum exposure to the Council of the risk was £6m, why had the Council set aside a reserve of £12m? The Chief Financial Officer advised that the amount had been agreed by Cabinet and Council as a prudent approach to handling the risk

·         The Chief Financial Officer undertook to inform members of the full name of the Spanish company providing the Parent Company Guarantee.

 

b) Construction completion date of EFW is delayed and delays repayment of loan to lenders.

 

·         The Chief Financial Officer explained that any delay in the construction of the plant and consequently the planned takeover of the plant by the County Council would not impact on the loan being repaid by Mercia Waste Management. Mercia Waste Management had taken out insurance policies to mitigate the risks

·         In response to a query about the risks borne by Mercia Waste Management, the Chief Financial Officer stated the liquidated damages were to pay back the loan in the first instance. The first money at risk would be Mercia Waste Management's return on the £30m and the 30m itself

·         What was meant by the reference in the mitigated action to a "long stop date"? The Chief Financial Officer explained that this was  ...  view the full minutes text for item 15.

16.

Waivers granted (Agenda item 8)

A verbal update will be provided at the meeting.

Minutes:

The Chief Financial Officer informed members of the Committee that there were no waivers/consents to report for the first quarter.

 

The Committee noted that no waivers or consents were granted by the Chief Financial Officer in the last quarter.