Agenda item

Members were provided with an opportunity to ask questions around the loan relationship for the Energy from Waste contract.  Members were reminded that the purpose of this Committee was not to review the decision-making process.

In the ensuing debate, the following questions were raised:

·         Did the £6.6m uplift in the Unitary Charge from the point of operation of the EfW plant, as compared to the £6m indicative affordability envelope, mean that the Council could benefit from an extra £600,000 per annum?  The Chief Financial Officer commented that at the closure of negotiations, an uplift of £3.5m had been agreed which was significantly below the £6 million affordability

·         In response to a query, the Chief Financial Officer explained that a security package had been negotiated with Mercia and the EPC Contractor that protected the Council as the lender from risks associated with the construction of the plant to the extent that would be expected within an STLFA negotiated by a commercial bank

·         Was the interest rate on the loan to Mercia variable?  The Chief Financial Officer explained that the loan was at a fixed rate

·         Would an increase in the interest rate on the PWLB loan have an impact on the financial arrangements for the Council? The Chief Financial Officer commented that such an increase would have an impact on the Council's surplus generated from the loan arrangements however if the rate decreased, it would benefit the Council. The Council's balance sheet had £12m set aside to cover risks of this nature

·         Within the contract, the Council was liaising with Swiss and Spanish companies, had the impact of exchange rates been taken into account in the funding of the loan arrangements? The Chief Financial Officer stated that Mercia's construction firm contractor had entered into forward contracts for the purchase of foreign currencies to mitigate this risk

·         What was the reason for the Council taking over the banking arrangements for the loan? The Chief Financial Officer stated that at the time the arrangements were being negotiated, banks were unwilling to make loan arrangements for these types of projects or offering them at a significant premium due to the impact of the global financial crisis. In addition, the Council was able to put the loan arrangements into effect at a faster rate than a commercial bank would be able to do.

RESOLVED that the contents of the Cabinet Report to Council on 16 January 2014 be noted.