Agenda item

Joint Report

Further to Minute 79/14 of the Cabinet, the City Council considered a report of the Executive Director, Resources and the Executive Director, Place, which set out proposals to invest in an Energy Performance Contract.  A corresponding private report, detailing commercially confidential aspects of the proposal was also submitted to this meeting for consideration (minute 99 below).

The Council had made a commitment in its Carbon Management Plan to achieve a 35% reduction in carbon emissions by 2020.  The refurbishment of existing buildings was a key requirement to reduce the carbon emissions to support the achievement of the ambitious carbon reduction targets.  The use of an energy performance contract like Re:Fit would support the Council in being able to make energy cost and carbon savings.  The contract model would transfer the risk of performance to the Re:Fit contractor / Energy Service Company (ESCo’s), as they have to guarantee the energy savings to be made over an agreed period.  The initial capital investment would be offset by the guaranteed savings offered by the ESCO’s, providing a cost neutral solution for energy efficiency projects over a specific term.

In addition to the Council buildings, the initial phase of the project would include a number of schools and Coombe Abbey Park Hotel.  The total value of the project and the capital investment for Re:Fit was estimated to be £1m (plus fees for due diligence and for access to the framework contract), with over 60% of the required funding being sought from Salix Finance.  Salix provide interest free loans for public sector investment in low carbon and energy efficiency measures, with the remaining funding being sought from prudential borrowing. 

It was proposed that the Council prudentially borrowed up to a cap of £0.37m to provide investment for the Re:Fit programme as an addition to the existing approved capital programme.  Local Partnerships, a joint local government association (LGA) and Treasury agency had undertaken some initial work on the selected buildings.  For the Council owned and occupied buildings they had estimated savings of £0.03m pa, for a capital investment of £0.23m funded from prudential borrowing and Salix Finance.

The majority of the prudential borrowing would be used to provide a loan to Coombe Abbey Park Limited (CAPL) to enable them to meet the capital costs for the project.  This funding would be provided on commercial terms, allowing the Council to generate a surplus on the margin applied to the capital financing costs.  Any costs associated with the due diligence for loan financing would be passed to the CAPL, by adding it to the value of the loan.  Energy savings would be used to repay the loan finance secured.

The exact value of the capital investment would not be known until the contractors on the framework returned their procurement response. The project had already received approval to proceed to procurement by the Place Panel, subject to the availability of funding.

RESOLVED that the City Council:

(1)  Approve the use of its powers under the Local Government Act 2003 to prudentially borrow the sum of £0.37m to provide investment for the Re:Fit Programme as an addition to the existing approved Capital Programme.

(2)  Approve the Council entering into a contract with Salix for access to interest free loan finance (£0.16m) for investment in the Council buildings, where the energy efficiency measures meet the conditions for such funding, reducing the need for prudential borrowing.

(3)   Approve the Council acting as a guarantor for the Salix funding (£0.50m) provided to schools participating in the Re:Fit Programme. 

(4)  Approve the use of its powers under the Localism Act 2011 to provide a loan to Coombe Abbey Park Limited (CAPL) plus the costs of any due diligence, on commercial terms, to be met from prudential borrowing (as detailed in recommendation 1 above)

(5)  Delegate authority to the Executive Director, Resources and the Council Solicitor to agree detailed terms of the transaction between CAPL and the Council.

(6)  Delegate authority to the Executive Director, Resources and the Council Solicitor as appropriate, to sign the loan agreement and other ancillary documentation as is necessary to complete the financing transaction with CAPL, based on the proposals detailed in the report.