Agenda item

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 Management drawn-down to date? The Chief Financial Officer stated that to date, Mercia Waste Management had drawn-down £20m of the total loan amount of £165m. This money had been necessary for the enabling work at the site. It was anticipated that Mercia Waste Management would need to draw down funds at a faster rate as work on-site progressed

·         In response to a query about the clarifications requested from Mercia Waste Management by Deloitte, Tim Dean commented that they related to some small differences between the financial information provided by Mercia Waste Management and the requirements set out in the financial model

·         What was the timescale for the production of the next financial certificate? Tim Dean advised that this certificate had taken some time to prepare as this was a new process. He anticipated that future certificates would be produced more quickly. The Chief Financial Officer concurred and added that he was satisfied that there was not an issue with the project at present

·         In response to a query, the Chief Financial Officer confirmed that the slippage of the schedule of the work on site would not have an impact on the cash-flow arrangements at this stage.

RESOLVED that the verbal update by Deloitte – Financial Advisors be noted.