Agenda item

To receive a report of the Executive Director of Resources on the expansion of Energetik’s Heat Network.

The Council is asked to:

1.    Approve the addition of £5m to the Capital Programme, in addition to the £32m budget approved by Council in March (KD5210), for the purpose of extending the Energetik heat network as detailed within Appendix A.

2.    Approve the total investment in the proposed expansion identified in Appendix A of £49m, comprising £12m grant funding and £37m borrowing as included within the Capital Programme, to fund the proposed expansions, as follows:

a.    £12m grant funding from the Heat Networks Investment Project (HNIP), to be invested in the company as equity funding;

b.    £12m loan from HNIP at an interest rate to the Council of 0.01%, to be on-lent to the company at a negotiated interest rate compliant with Subsidy Control regulation;

c.    £25m loan funded from either the Mayor’s Energy Efficiency Fund (MEEF or Public Works Loans Board (PWLB) or a combination of both.

3.    Delegate to the Executive Director of Resources, in consultation with the Director of Law and Governance, authority to execute on-lending and subscription agreements with Energetik to transfer the funding in paragraph 5, these agreements to at minimum mirror and reflect the requirements identified within Appendices Ci and Cii. To approve that as part of these agreements Energetik will be required to present the Executive Director of Resources with a quarterly connection statement detailing confirmed and perspective property connections compared to projections, prior to the release of required funding.

4.    Approve the revisions to the company’s 40-year Business Plan as outlined within the company’s   Business Plan second Addendum, whilst working with the company Directors to implement the  financial model updates, in recognition of the observations in the Ernst & Young review.

5.    To instruct the Director of Legal and Governance, in collaboration with Company Directors and council officers, to undertake an options appraisal and strategic review identifying a preferred strategy to support the company’s future growth with external funding and knowledge by November 2021 and consider options to reduce the Council’s interest as referenced in paragraph 56. No further funding beyond this report to be agreed until this review is complete, and a clear strategic financing direction identified and approved by Cabinet.

6.    To note the ongoing discussions between Energetik and LB Haringey and LB Hackney to supply heat to residents of other north London boroughs, as included in the Energetik business plan.

Councillor Mary Maguire moved the report of the Executive Director of Resources, and Councillor Taylor seconded.

NOTED:

1.    The report and its recommendations were noted

2.    The following key points were highlighted by the Cabinet Member for Finance, Councillor Maguire, when moving the report:

a.    The investment from the Council will create the infrastructure the borough will need for the future.

b.    The expansion of Energetik’s heat work will reduce the current impacts on the environment

c.    Before any funding is release a demonstration of its quality would be required. This will be conducted with EY to ensure best value is received.

d.    The expansion would lead out of Meridian Water linking many homes to the network in the borough.

3.    The comments from the Majority Group included:

·         The expansion of the heat work aims to reduce fuel poverty within the borough, and climate change, by connecting homes to low cost water and heating.

·         The expansion is required ahead of a ban on using gas in new build homes. Energetic is looking into how to retrofit homes to connect to the network.

·         This supports the administrations aims to be carbon neutral by 2040.

·         Financial loss can occur during the asset building stage, but the financial benefits would be felt in the future.

·         The expansion of the heat network would be a great opportunity for the borough as the network could have capacity to heat 25,000 dwellings.

·         EY have assured the Council the proposed model is sustainable.

4.    The comments from the Majority Opposition included:

·         Large sums of money had already been spent on Energetic, although it was noted that some of the investment would come from grants.

·         Concerns were raised on the climate emergency as 1% of the Council’s fleet of cars were currently electric.

·         Energetic had already reached a number of its targets, however, there was concern that the incinerator in the borough remains the networks primary source of power.

·         Residents being able to have the right to choose their energy suppliers is fundamental.

·         A planning application had not been considered by Planning Committee yet, but by agreeing this it could be seen as the members of the Planning Committee as having already having made a decision on a future item which could lead into a legal battle.

5.    The comments from the Minority Opposition included:

·         Feedback the Group had received from residents had indicated they did not feel Energetic would be value for money.

·         There were concerns about increasing the Council’s debt.

·         It was felt there were inconsistencies within this report and the draft Local Plan.

·         Increasing the building of dwellings would not be sustainable in order to maintain the heat network.

·         It would be preferred for the independent review of Energetic to take place prior to further investment being agreed.

Following the discussion members took a vote on the recommendation.

For: 33

Against: 24

Abstain: 0

AGREED:

1.    To approve the addition of £5m to the Capital Programme, in addition to the £32m budget approved by Council in March 2021, for the purpose of extending the Energetik heat network.

2.    To approve the total investment in the proposed expansion identified in Appendix A of the report of £49m, comprising £12m grant funding and £37m borrowing as included within the Capital Programme, to fund the proposed expansions, as follows:

a.    £12m grant funding from the Heat Networks Investment Project (HNIP), to be invested in the company as equity funding;

b.    £12m loan from HNIP at an interest rate to the Council of 0.01%, to be on-lent to the company at a negotiated interest rate compliant with Subsidy Control regulation;

c.    £25m loan funded from either the Mayor’s Energy Efficiency Fund (MEEF or Public Works Loans Board (PWLB) or a combination of both. 

3.    To delegate to the Executive Director of Resources, in consultation with the Director of Law and Governance, authority to execute on-lending and subscription agreements with Energetik to transfer the funding in paragraph 5 of the report, these agreements to at minimum mirror and reflect the requirements identified within Appendices Ci and Cii.

4.    To approve that as part of these agreements Energetik will be required to present the Executive Director of Resources with a quarterly connection statement detailing confirmed and perspective property connections compared to projections, prior to the release of required funding.

5.    To approve the revisions to the company’s 40-year Business Plan as outlined within the company’s Business Plan second Addendum, whilst working with the company Directors to implement the  financial model updates, in recognition of the observations in the Ernst & Young review.

6.    To instruct the Director of Legal and Governance, in collaboration with Company Directors and council officers, to undertake an options appraisal and strategic review identifying a preferred strategy to support the company’s future growth with external funding and knowledge by November 2021 and consider options to reduce the Council’s interest as referenced in paragraph 56 of the report. No further funding beyond this report to be agreed until this review is complete, and a clear strategic financing direction identified and approved by Cabinet.

7.    To note the ongoing discussions between Energetik and the London boroughs of Haringey and Hackney to supply heat to residents of other north London boroughs, as included in the Energetik business plan.