Agenda item

The establishment of the Committee was intended to underline the separation between the Council's two roles as lender and as waste disposal authority. The Cabinet, not the Committee, would remain responsible for decisions in respect of the operation of the waste contract or any waste disposal authority executive functions.  The Cabinet would have no supervisory or other responsibility for the Committee.

Council had agreed that Mr W P Gretton would be appointed Chairman and Mr L C R Mallett as Vice-Chairman. Council also agreed that the Committee would be cross-party with 9 members established in accordance with the legal requirements of political balance and would not include any members of Cabinet.

At the meeting of Council on 15 May, it was reported that meetings of this Committee would be anticipated to be held approximately every other month during the construction phase of the Energy from Waste plant, and less frequently thereafter.  It was therefore proposed that meetings of the Committee be arranged on this basis.

The Chief Financial Officer made the following points in introducing the terms of reference:

·         The Chief Financial Officer explained that the Committee needed to understand the risks associated with the contract and be comfortable with how the risks were being discharged or mitigated. A report on the risk register would be brought to a future meeting

·         The Committee needed to be satisfied that the loan repayment targets were being met by Mercia Waste Management (Mercia). It was likely that in the future, Mercia would wish to vary the contract (by means of a waiver or consent). In most circumstances such a request would be delegated to the Chief Financial Officer, however he would bring significant matters to the Committee for example, matters that could lead to default in repayment. However all such matters would be reported to the Committee, whether delegated or not

·         There were various actions that the County Council as lender could take in a default situation to provide security for the loan for example, taking on shares or assets in Mercia in lieu of repayment of the loan. However he anticipated that such arrangements would not be necessary.

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

·         Who had responsibility for monitoring the project management aspects of the contract and for delivering the project on time and to cost? The Chief Financial Officer explained that Mercia Waste Management were responsible for ensuring that the project was delivered on time and to cost. Even if the facility was not built on time, Mercia was still committed to repaying the loan. In addition a number of obligations had been included in the contract (termed a "security package") to protect the loan arrangements. The Council had managed to negotiate arrangements that were better than the market could provide 

·         In response to a query about the governance arrangements associated with the contract, the Chief Financial Officer commented that governance of the loan arrangements for the contract had been separated from the executive function of the Council. Council had established this Committee to oversee the loan arrangements whilst Cabinet oversaw the purchaser side of the arrangements. It was important that there was a separation of these responsibilities for example, should the loan repayments be at such a risk that the senior term loan facility may enter into default. This would impact on the service provision and therefore there may be a potential conflict of interest if both duties were discharged by Cabinet. The decision to call on loan default was therefore reserved for Council

·         Would the Committee meeting every two months be too frequent? The Chief Financial Officer stated that it was potentially too early to judge at this stage but a clearer picture would be given after the first couple of meetings once the Committee were able to consider the items arising at each meeting.

RESOLVED that:

a)    the Terms of Reference for the Waste Credit Governance Committee be noted; and

b)    meetings be held approximately every other month during the construction phase of the Energy from Waste plant, and less frequently thereafter.