The report to Cabinet on 16 June 2021 outlined a loan investment to be made to Low Carbon Hub (LCH) of £3,019,561 fully funded by the Public Sector Decarbonisation Scheme grant awarded to the council by Salix Finance Ltd a wholly owned Government department funded by the Business Energy and Industrial Strategy Department (BEIS) to finance the project costs of a solar farm project at Ray Valley.

The Head of Financial Services has encountered difficulties in drafting the loan agreement with Low Carbon Hub. External legal advice has raised concern with the draft agreement which has to date been relied on to make the transaction in that it is ‘light’ in terms of what they would expect to see in what is effectively a development agreement. Specifically the draft agreement does not pull across the conditions on the Council for accepting the grant funding from Salix Bank and there are concerns around the enforceability of the security for the loan based on revenue income streams from existing LCH assets.

There is a pressing need to make a decision and make payment to the LCH by 6^th August 2021 for the project to stay on track. It is likely that without such funding the project will be stopped (it is already on site) resulting in reputational damage to the LCH and the City Council as well as financial issues for the LCH. 

A payment to LCH cannot be made without a loan agreement and time is short to get this issue resolved if payment is to be made on 6^th August. There is insufficient time to resolve all of the issues raised by the external legal advice and therefore it is not possible to make the payment as a loan from the Council with funding from the Salix Bank.

The Council does have an existing, tried and tested, ‘revolving loan facility’ of £2.3 million approved by Cabinet on 25 May 2019 and by Council on 22^nd July 2019 for a period of 3 years to finance ‘green energy schemes’. The LCH has previously drawn down an amount of £3.6 million on this facility and has always repaid on time. There are currently no loans outstanding. Loan security has previously been provided on income streams from LCH existing installations and this has always to date been satisfactory. While there may be similar concerns about the enforcement of the security in a similar manner to that of the draft Salix backed agreement, the revolving loan facility is still available, and the use in this way would be appropriate and within the terms of the existing and extant agreement that already exists between the Council and LCH.

In order to keep the Ray Valley Solar (RVS) scheme on track the decision taken is to use the existing revolving loan facility approved by Cabinet on 29 May 2019 to make a payment of £2.3 million to LCH under the existing terms. The temporary nature of this loan should provide additional time to attempt to draw up a loan agreement for the Salix backed loan. Moreover, the Council is also exploring the option of converting the Salix based loan into a grant from Salix, which would ultimately remove the need for any securitisation, but would also remove any long-term financial benefit for the Council.

Drawing up and signing a loan agreement for a revolving £2.3m fund with the Low Carbon Hub following decision of Council on 22 July 2019.

Council considered a report of the Head of Financial Services submitted to the Cabinet on 29 May 2019 seeking approval of a revolving loan facility for the Low Carbon Hub IPS (Industrial and Provident Society).

Councillor Turner, the Cabinet Member for Finance and Asset Management presented the report and answered questions. He moved the recommendations, which were agreed on being seconded and put to the vote.

Council resolved to make budget provision of £2.3 million to enable the revolving loan facility to the Low Carbon Hub to be created.