Agenda item

Bridgend Town Heat Network Project Phase 1


The Corporate Director Communities presented a report which:


sought agreement from Cabinet to present a report to Council seeking approval to include a capital budget of £3.4m in the capital programme for the Bridgend Town Heat Network Project (Phase 1),


sought approval to establish a Special Purpose Vehicle (SPV) for the development of the Bridgend Town Heat Network Project based on recommendations within the report on the form and structure of the SPV and how it will be governed and managed,


sought Council approval to provide a loan of £1.821m to the Special Purpose Vehicle to enable the project to progress. The £1.821m forms part of the £3.4m capital budget for the project, with the remaining balance of the funding being provided by a Heat Network Investment Programme (HNIP) grant (£1m), BCBC contribution from its Capital Programme (£0.5m), connection charges and share capital (£0.068m).


She explained that some of the other Councils that were progressing heat networks via this route were Barking and Dagenham, Bristol, Leads, Durham, Maidstone, and in Wales, Cardiff and Bridgend. She added that the delivery of the Bridgend Town Heat Network Project is ultimately predicated on the capital cost for the project being affordable. This will be determined by the outcome of the current procurement exercise for a contractor to construct the scheme.


The Corporate Director Communities provided background surrounding the heat network project and the Councils aim for decarbonisation by 2030. Further background was at section 3 of the report.


The Corporate Director Communities explained that the proposed name for the SPV be called Bridgend Heat & Power Ltd, and stated that to establish an SPV each of the following factors must be considered:


The benefits and risks of establishing an SPV, notwithstanding the HNIP


  • The form of entity to be established.
  • The constitution of the SPV.
  • The practical arrangements for governance, management and administration of the SPV.
  • The contracts required between the Council and the SPV.


The Corporate Director Communities stated that the Council had the power to establish an SPV and details of this were at section 4.3 of the report. She added that there were a number of benefits associated with establishing an SPV, while also hosting potential risks. The risks and benefits of establishing an SPV were at section 4.4 of the report.


The Corporate Director Communities highlighted the following topics as per the report:

  • Objects/aims of the SPV
  • SPV Constitution
  • Contracts with the SPV
  • Administrative and Management Services
  • SPV Governance and Oversight


The Corporate Director Communities outlined the financial implications and alluded to a small error in the figure at Table 1. The BCBC loan to SPV was £1,821,267, as was listed in Table 2. She advised that the total cost of the project was £3.389m, and details of the breakdown were in Table 1 and Table 2 of the report.


The Cabinet Member Communities welcomed the report and stated that the SPV was necessary to kickstart phase 1 of the project and enable future investment into the Bridgend Heat Network to be easier and streamlined. He added that the Council was looking to lead by example and understand the commitments under the 2030 decarbonisation agenda.


The Leader echoed the comments of the Cabinet Member and stated that this project was a long time in the making as it was a complex and innovative project and was proud to be the first Local authority in Wales to be undertaking this type of initiative. The Leader asked for confirmation that the funding that was secured from the UK Government was predicated on us creating an SPV, and if the project were to not go ahead, would impact the Councils progress in reducing the carbon footprint.


The Corporate Director Communities confirmed that the Heat Network Investment Programme (HNIP) was predicated on us setting up an SPV to deliver this network. The funding was one of a number of conditions for the grant and all Local authorities as previously mentioned had done the same. She stressed that the funding offered had to be used for this purpose, and if we were not to take advantage of it, the funding would go to another organisation that applied for it.


The Cabinet Member Wellbeing and Future Generations welcomed the report saying that it was an interesting report with a great level of detail, including the risks and how the Council will mitigate these risks. She was pleased to see that an annual review of the costs was in place as its not uncommon for costs to build up or increase over time. She added that it was pleasing to see the terms of the loan being positive, and that past loans had often created a burden on future generations with heavy end interest placed on them.


RESOLVED: That Cabinet:


1.    Approved a report being presented to Council on 10th March 2021 to amend the Capital Programme 2021-2022 for the inclusion of this scheme in the Capital Programme, noting that there is already £500,000 included within the Capital Programme towards the scheme;


2.    Subject to Council approval of the inclusion of this scheme in the Capital Programme and borrowing for the Bridgend Town DHN Project, Cabinet:


i.              Recommended that Council provides a loan to the SPV on the terms set out in this report for the purposes of the Bridgend Town DHN Project and delegates authority to the Chief Executive to agree and approve the final terms of the Loan Agreement and arrange execution of the Loan Agreement on behalf of the Council subject to such powers being exercised in consultation with the Chief Officer - Legal, HR & Regulatory Services and the Interim Chief Officer Finance, Performance and Change.


ii.            Approved the formation of a Special Purpose Vehicle as a Company Limited by shares as set out in this report (“the Company”);


iii.           Approved the use of ‘Bridgend Heat & Power Ltd’ as the name of the Company;


iv.           Approved the appointment of the Corporate Director - Communities, Head of Operations Community Services and Head of Partnership Services as Directors of the Company for the purpose of representing the interests of the Council;


v.            Delegated authority to the Chief Officer - Legal, HR & Regulatory Services to enter into the following and any other related agreements to enable the Company to be established:


-           Articles of Association

-           Shareholder Agreement

-           Management Services Agreement


vi.           Approved the implementation of the governance and oversight measures set out in the report;


Approved entering into a Management Services Agreement with the Company at a fixed annual / monthly fee, which is funded by the Company and delegated authority to the Chief Executive and the Interim Chief Officer – Finance, Performance and Change, to finalise the management fee and agree the terms of the Management Services Agreement in consultation with the Chief Officer - Legal, HR & Regulatory Services.



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