The Corporate Director – Communities and the Interim Chief Officer – Finance, Performance and Change submitted a joint report, the purpose of which, was to:

·          update Council on the development of the Bridgend Town Heat Network Project;

·          seek approval for the inclusion of a budget of £3.4m within the capital programme for the project;

·          seek approval for a loan of £1.821m to be made from the Council to the proposed Special Purpose Vehicle (SPV). 

The Corporate Director – Communities commenced, by advising that Bridgend County Borough Council (BCBC) initially started looking at the opportunities for the development of heat networks in Bridgend County Borough in 2012, with drivers for the projects identified as decarbonisation, economic and social reasons, as expanded upon in paragraph 3.1 of the report.

The Bridgend Town Heat Network Project is included as a project within the BCBC Smart Energy Plan (SEP) (approved by Cabinet in February 2019). This Plan details the projects that BCBC will participate in during the period 2019 – 2025. This proposes to test various technologies, consumer propositions and business models, to provide a pathway to the decarbonisation of Bridgend County Borough. It was also a key contributor to the Welsh Government’s decarbonisation strategy (published March 2019) “Prosperity for All: A Low Carbon Wales”.

She continued by stating that the Bridgend Town Heat Network Project proposed to deliver heat (via a gas combined heat and power engine located within the Bridgend Life Centre) to the Bridgend Life Centre, Civic Offices and the Bridgend Bowls Hall. The project would also provide electricity to the Life Centre, Civic Offices and Bowls Hall.

A capital grant application had been made to UK Government via its Heat Network Investment Programme (HNIP) in April 2019. This had been approved in December 2019 for: (i) £1,000,000 capital investment towards the construction of the heat network; and (ii) £241,000 for pre-construction activities.

The Corporate Director – Communities continued further, by stating that at its meeting of 19 January 2021, Cabinet approved the continued delivery of the Bridgend Town District Heat Network project. Progression of the scheme involved certain financial decisions. One was to note that the Treasury Management Strategy will need to be revised to enable the Council to make a loan of £1.821 million to the SPV; that this was to be reflected in the draft Treasury Management Strategy 2021-22 that was presented to the Audit Committee on 28 January 2021 and then subsequently to Council for approval in February 2021.

She added that, Cabinet had also agreed that a report be taken to Council, recommending that the capital programme be amended to include the Bridgend Town District Heat Network project and that Council agrees the loan to the SPV, subject to approval to changes to the Treasury Management Strategy. As Members were aware, Council had since approved this at its previous Budget meeting.

The Corporate Director – Communities, stated that Cabinet approved the procurement of a Design Build Operate Maintain contractor for the Bridgend District Heat Network by utilising the negotiated procedure with prior call for competition under the Utilities Contract Regulations 2016. It had been agreed to Brodies LLP (legal advisers for the Council on this scheme) running the procurement of the Design Build Operate Maintain Contractor under the negotiated procedure with prior call for competition under the Utilities Contract Regulations 2016 on behalf of the Council.

A further report is scheduled to be presented to Cabinet, following the conclusion of the procurement of the Design Build Operate Maintain contractor, for a decision on whether to award the contract.

The Corporate Director – Communities explained, that with regard to future phases of the Bridgend Town District Heat Network, Cabinet had also approved the procurement of and subsequent appointments of a technical/financial consultant and a legal advisor, to prepare an Outline Business Case for Phase 2 of the Bridgend Town Heat Network Project. This included delegating authority to the Corporate Director - Communities to tender for the technical/financial consultant and Legal Advisor to prepare an Outline Business Case for Phase 2 of the Bridgend Town Heat Network Project and awarding the contracts to the successful tenderers, with the contractual terms of the contracts to be approved by the Corporate Director - Communities in consultation with the Chief Officer – Legal, HR and Regulatory Services.

A further report on the creation of the Special Purpose Vehicle which will provide the commercial delivery mechanism for the project, would also be presented to Cabinet in due course, she added.

Cabinet have recommended to Council that the Capital Programme be amended to the full value of the project as outlined in paragraph 8 of the report and that a loan be provided to the SPV for the Bridgend Town District Heat Network Project.

The report before Council, was therefore seeking approval for the inclusion of a budget of £3.4m within the capital programme for the Bridgend Town Heat Network Project. Further details on the breakdown of the funding was also highlighted in paragraph 8 of the report. The Corporate Director – Communities concluded, that Council will likely need to borrow the funding itself, (within the terms of the approved Treasury Management Strategy), and then on-lend this to the proposed Special Purpose Vehicle (SPV). The interest rate charged to the SPV, will ensure there is no detriment to the Council.

A Member confirmed that he was supportive of anything that improved the Local Energy infrastructure. However, it was his understanding that Local Heat Networks such as this, had a shelf life resulting in them becoming less efficient with time. He asked what the expected shelf life was this for this particular Heat Network Project and what support mechanisms were in place longer term, to upgrade it as necessary, so that its efficiency level is maintained.

The Corporate Director – Communities confirmed that the life span of the project would be 40 years, ie to coincide with the loan period. What was proposed presently, was Phase 1 of the scheme only, which included work to 3 buildings. This would be looked to be expanded though to other public sector buildings, for example such as Bridgend College and the POW Hospital. This would increase the capacity and benefits the Heat Network had to offer further afield. She recognised that the technology elements of the project would change with time, so therefore built into the financial model was a Capital Contingency fund, in order to support the carrying out of infrastructure upgrades over the life span of the project.

Table 3 in the report, showed the various costs for the operation of the project, and these would ensure the efficient operation of the Network Project going forward. The SPV would also be supported by a Board of Directors which would monitor and provide increased management support to the project.

The Cabinet Member – Communities advised that the proposals of the report, would bring about a significant change to the way energy was supplied in Bridgend. This was required, in order to comply with Government targets of areas becoming carbon free. This was a new and innovative scheme, which other local authorities had successfully pursued as new ventures. The proposals would help address the climate crisis, which formed an integral part of the Council’s De-carbonisation Strategy.

A Member sought assurance that that with regard to any public funds committed to the Bridgend Heat Network Project and the resulting profit that comes from this, these would not end up going to large profit making companies, that will be involved in supporting the project, including to the  Board of Directors.

The Corporate Director – Communities advised that the Board of Directors would receive no remuneration package and any external people to be invited to sit on the Board, would only receive travelling expenses. Any capital made from the project would be ploughed back into its further development and/or, to commit to other energy efficiency proposals, such as tackling for example, fuel poverty.

A Member felt that the presentation of the project was untimely and too much of a financial commitment, in a year where people had suffered both financially and from a mental health perspective, due to the Covid-19 pandemic. This had been compounded by people losing their jobs and facing poverty.

The Interim Chief Officer – Finance, Performance and Change, advised that with regards to committing any profit back into the Bridgend Town Heat Network Project, she reminded Members that at last Council the Treasury Management Strategy had been approved. In conjunction with this, she had made the point at that meeting, that the Council borrowing just for yield would present a situation whereby the Authority would then be unable to borrow for any Capital Schemes in the future. Therefore, she reaffirmed that any income derived from the project, would be fed back into it, rather than be profited by any companies involved in the support of this.

The Leader concluded debate on the item, by advising Members that whilst the Council had some choices and manoeuvrability in terms of schemes in its Capital Programme, there was no choice as to where to commit the £1m grant from the UK Government for this particular project. If the Council did not give a commitment towards the Bridgend Town Heat Network Project, it could not use the funding for anything else, the money would simply just have to be returned. He reminded Members that there was a climate emergency to address, that was impacting detrimentally on communities within South Wales, such as ever increasing problems with flooding and with this in mind, it was imperative that avenues were urgently pursued in order to alleviate these problems.       

As some Members were not in support of the recommendations of the report, it was agreed that an electronic vote be conducted, as follows:-

For: (the recommendations of the report)

Councillors SE Baldwin, T Beedle, JP Blundell, NA Burnett, M Clarke, N Clarke, RJ Collins, HJ David, P Davies, PA Davies, DK Edwards, J Gebbie, RM Granville, CA Green, G Howells, RM James, B Jones, M Jones, M Kearn, DRW Lewis, JE Lewis, JR McCarthy, D Patel, JC Radcliffe, B Sedgebeer, RMI Shaw, CE Smith, SG Smith, G Thomas, R Thomas, T Thomas, KJ Watts, DBF White, PJ White, AJ Williams, HM Williams and RE Young = 37 votes

Against:

Councillors S Aspey, A Pucella, A Williams and J Williams = 4 votes

Abstentions:

Councillors T Giffard, KL Rowlands, S Vidal and L Walters = 4 votes

It was therefore,

RESOLVED:                                       That Council:

1.          Approved the inclusion of the Bridgend Town Heat Network Project within the capital programme with a budget of £3.4m.

2.          Further approved a loan of £1.821m to the Special Purpose Vehicle on the terms set out in the report, and delegated 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, with such powers being exercised in consultation with the Chief Officer - Legal, HR & Regulatory Services and the Interim Chief Officer, Finance, Performance and Change.