£23m solar panel loan ‘left Peterborough council at risk’
There are “lessons to be learnt” following the collapse of a £23 million loan by Peterborough City Council for a landmark solar panel scheme, according to its auditors, which said the authority had left itself “at risk” from the contract.
The council recently terminated its deal with social enterprise Empower Community Management LLP which is alleged to have defaulted on its repayments.
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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.
At Monday’s extraordinary meeting of the authority’s Audit Committee, Cllr Mohammed Farooq (Conservative, Hargate & Hempsted) asked Neil Harris, partner at Ernst and Young: “In terms of the collapse of the Empower loan, you will have been told that this is something we are in the process of renegotiating, taking control of the assets – the solar panels and associated equipment – and trying to deal with in-house.
“Would you say that we have the resources and expertise, and do you think this is something that we are capable of dealing with equitably, or should we be looking to an outside organisation to deal with the matter?”
Mr Harris replied: “The steps that have brought the council to where it is today in respect of the arrangement with Empower, and the loan to that company, have brought us to the conclusion that the council should look at what has been learned through the process.
“If the council were to bring matters dealing with Empower in-house, so to speak, then we feel there needs to be an external assessment of the value of the assets so that is brought up to date.
“Indeed, should the council decide to enter into another credit arrangement, then we would expect another credit/loss assessment report to be undertaken as well.
“Entering into what we believed was an aggressive facility with Empower did put the council at risk, and therefore we do believe that there are some lessons to be learned from what has happened here.
“We feel the council should put certain steps in place to review any similar financial arrangements it has so as to avoid anything like this happening again in the future.”
Peter Carpenter, council director for resources, answered: “In terms of the papers that went to Cabinet this morning regarding the collapse of the Empower loan, we are looking to handle the matter in-house in overall terms.
“We’ve brought somebody in for the short-term to look at how we bring that back in-house and the mechanisms to do it. But, we will have to tender out for the asset manager to manage it on our behalf because we don’t have that ability in-house at the moment.
“And while there are others out there in the market who can do that, Empower can apply if they wish to do, to be that asset manager. But what we need to prove is that we get full value for money from the people who are going to asset manage this on our behalf.
“In the wider scheme of things, I reported earlier today to Cabinet that, overall, we are something in the region of £4.4 million up on the deal – that is direct income from interest on the loan deal with Empower.
“On the capital side of things, we’ve got a capital cost impairment of £2.6 million, and there is £400,000 of bad debt.
“So, in overall cash terms – and I will say ‘cash’ – we’re about one million pounds up... but, it’s not all ‘apples and pears’ because some of it is revenue, some of it is capital, and some of it is debt.
“In a roundabout number, that’s where it sits at the moment, and again that’s set out in the Cabinet report and the report to our external auditors.”