Peterborough council ‘exposed itself to loss’ from £23m solar panel loan, auditors conclude
A £23 million loan for solar panels left Peterborough City Council “exposed to loss,” a report from its auditors has concluded.
The report from Ernst & Young backs up comments made by its partner Neil Harris at a recent council scrutiny committee where he said the deal had left the authority “at risk” and that there were “lessons to be learned”.
The report states: “We believe there have been significant weaknesses in the governance arrangements with Empower Community Management LLP during the 2020/2021 financial year which has exposed the authority to financial loss.”
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The money was lent by the council in December 2014 to install solar panels on more than 7,700 rooftops of housing association homes across the country, including 426 in Peterborough.
At the time the scheme was lauded as being the first of its type in the country, with residents and the council able to both make money from it.
It was also anticipated that Empower would find a buyer to take on the scheme and repay the loan to the council in 2017, but despite being granted several time extensions this never happened.
A final attempt to extend the loan’s repayment over a 15 year period has now also failed.
The council has said that the value of the loan has reduced by £2.6 million, on top of a “write-off” of £430,000, but that the authority has made a profit of £4.4 million so far from interest payments.
The report from Ernst & Young said the council had “taken the appropriate steps to seek specialist legal, professional and commercial advice” with regards the re-financing of the loan, which it said included “aggressive assumptions on debt/equity ratios”.
It recommended that the council reviews similar finance arrangements it has in place, as well as its loans policy for capital (infrastructure) projects.
However, council chiefs have defended the Empower loan, with leader Cllr Wayne Fitzgerald telling a recent Cabinet meeting: “We have made money on this deal, we have not lost money on this deal, it is not a disaster.”
The council now has to decide whether to take over the solar panel scheme itself (for which it has no expertise), or try to sell it to another party, although this is likely to prove difficult due to the coronavirus pandemic.
Moreover, selling off the scheme may only bring in an estimated £15.4 million, according to analysis by Deloitte LLP.
The situation is complicated by the fact that the council is unsure how much money it can generate in profit from running the scheme itself.