Agenda item

Briefing Note of the Director of People

The Scrutiny Board considered a Briefing Note of the Director of People and Facilities, together with a comprehensive presentation at the meeting, which provided an update on the funding of Heatline to date, its historic performance and future proposals for the network. The Scrutiny Board also considered a corresponding private Briefing Note which contained commercially sensitive information relating to this matter (Minute 25 below refers).

The Coventry Heatline district heat network currently supplies recovered heat from the Energy to Waste (EfW) Facility on London Road to 9 city centre buildings including 3 offices, 2 sports facilities, a Museum, a Hotel, the Cathedral and a Student Accommodation Block via its 4km network of underground pipework. 

The presentation covered:-

·  The existing contract arrangements:-

o  Coventry District Energy Company (CDEC) responsible for:-

§  Recovering heat from steam

§  Distributing heat to customers

§  Generating any additional heat required by customers

§  Selling heat to customers

o  A summary of the concession contract

§  25 year operating concession

§  Due to expire in 2038

§  Contract procurement allows for maximum term until 2045

§  CDEC fully responsible for operating and maintenance costs

§  “Super profits” protection with profit share mechanism

·  A breakdown of Heatline Funding-

o  Original network total cost - £5.6m

o  To date 35% public sector financed

o  CDEC has been the largest investor in Heatline to date

·  The financial performance to date:-

o  Key outcomes (reviewed 2024 compared to 2012 financial model:-

§  Revenues have been lower and operating costs have been higher

§  Increased capital investment for same customer demand

§  Net operating profit is lower than originally forecast

o  Key factors:

§  Lower inflation than allowed for

§  Slower buildout of Friargate Business District

§  Unexpected maintenance at Bar Road

·  Current activities to address – Renewed efforts to expand the network by supporting customers with funding bids which will treble the customer demand connected to the network by 2028.

·  Forecast breakdown of investment – extending the concession to 2043 enables significant grant funding to be accessed. This rebalance of investment profile will enable CDEC financial performance to move back towards original expectations without contributions coming from Coventry City Council.

·  Social Value Impacts:-

o  Avoidance of carbon emissions

o  To date 14,716 tCO2 avoided

o  Following expansion – 7,300 tCO2/year

o  Direct workforce

o  Indirect workforce

·  Impact of forthcoming legislation

The Scrutiny Board asked question, made comments and sought assurances on a number of issues, including:-

·  Information relating to financial elements of the contract. It was noted that the requested information regarding the “super profit” element of the contract would be circulated to the Scrutiny Board.

·  Further information and explanation in relation to the proposals and funding to extend the current network to 11 Coventry University buildings, 2 Ministry of Justice court buildings and 6 new public sector connections in Hillfields. The Scrutiny Board also noted that City Centre South and the Friargate regeneration areas were also expected to connect as they build out. The expansion of the network was welcomed.

·  Details regarding the proposal to extend the current contract to 2043 to enable grant support to be maximised for the above expansion proposals.

·  The environmental benefits of Heatline and the impact on the City’s emissions and air quality.

·  Technical details in relation to the Waste to Energy Plant.

RESOLVED that, subject to the consideration of the information contained in the corresponding private Briefing Note, the Business, Economy and Enterprise Scrutiny Board (3):

1)  Notes the information provided about the current status of the Heatline District Heat Network.

2)  Notes the forthcoming changes to the context of heat networks in the UK.

3)  Notes the proposed extension of the Concession Contract to 2043 to enable grant support to be maximised.