Decision details

Oldham Community Power - Council underwriting of Phase 1

Decision Maker: Cabinet Member - Housing (Cllr Hannah Roberts)

Decision status: Recommendations Approved

Is Key decision?: Yes

Is subject to call in?: No

Purpose:

Oldham Community Power (OCP) Ltd is the Community Benefit Society delivering the Generation Oldham programme, which aims to install solar photovoltaic (PV) systems on the roofs of Council-owned schools and community centres, funded through a community share issue. OCP aims to raise around £300,000 to fund Phase 1 of the scheme. The buildings to be included in Phase 1 can be found in Appendix A of this report. OCP’s share issue is currently live and investors so far include the Council (£15,000 of Pioneer Shares), local residents (around £20,000) and further verbal pledges from small investors (£5,000-£10,000). The share issue will officially close on 12 August 2016. A number of large community partners including Big Local Oldham and Action Together have also suggested that they could invest £100K each into the scheme, but timescales for these investments potentially stretch beyond the end of the 12 August deadline. However, these investments could constitute the majority of the funding required to complete Phase 1. OCP needs to complete the solar PV installations by the end of September in order to meet the deadline when the Feed In Tariff (FIT) falls, after which OCP can no longer offer their target of a 4% rate of return to Members of the Society. It is therefore proposed that the Council underwrite/guarantee the cost of Phase 1 of the scheme to enable OCP to complete the solar PV installations by the September FIT deadline. The Council will either be repaid from community investments received after the share offer officially closes on 12 August, or will convert a proportion of the funds underwritten either into a shareholding in OCP or a long-term loan paying a reasonable rate of interest back to the Council. The Council funds underwriting the scheme will be secured on the FIT and also on the Power Purchase Agreements (PPAs) that OCP holds with the building occupiers. Throughout the Generation Oldham project, the Council has played an enabling role to support the community without itself taking control, and this proposal is in keeping with this principle. It will enable OCP to maximise the benefits of the project for all stakeholders.

Decision:

1.That the Cabinet Member agrees Option 2 of this report, namely:- The Council underwrites/guarantees Phase 1 of the scheme. Under this option:- •The Council will make available up to £274,000 to underwrite/guarantee the installation of solar PV on Phase 1 of the scheme. This funding will be secured against earnings from the FIT and PPA to ensure the Council is paid back in the final instance •Oldham Community Power will complete installations on the full list of buildings in Phase 1 (please see Appendix A) by the end of September •The scheme will fulfil the 4% return stated in the Share Offer Document, including on the Council’s £15,000 Pioneer Share Holding. •Organisations wishing to invest in OCP which cannot obtain sign-off for their investment by 12 August 2016 will still be able to take advantage of the opportunity to invest •The proportion of the installation cost finally met by the Council will either be reimbursed by OCP from investments made after the 12 August deadline or converted into a shareholding in OCP or a long-term loan to be repaid with a reasonable rate of interest to the Council

Reasons for the decision:

Option 1: The Council does not underwrite/guarantee Phase 1 of the scheme. Under this option:- •The Council will not provide any funding to underwrite/guarantee the installation of solar PV on Phase 1 of the scheme •Oldham Community Power will carry out solar PV installations on a portfolio of buildings according to how much community funding they have raised by 12 August 2016 •The scheme will probably offer less than the 4% return stated in the Share Offer Document, and so OCP will need to seek the permission of their Members to go ahead with a scheme at a lower rate of return. This includes the Council which already has a £15,000 Pioneer Share Holding in OCP •Organisations wishing to invest in OCP which cannot obtain sign-off for their investment by 12 August 2016 will not be able to take advantage of the opportunity to invest Option 2: The Council underwrites/guarantees Phase 1 of the scheme. Under this option:- •The Council will make available up to £274,000 to underwrite/guarantee the installation of solar PV on Phase 1 of the scheme on a commercial basis. This funding will be secured against earnings from the FIT and PPA to ensure the Council is paid back in the final instance •Oldham Community Power will complete installations on the full list of buildings in Phase 1 (please see Appendix A) by the end of September •The scheme will fulfil the 4% return stated in the Share Offer Document, including on the Council’s £15,000 Pioneer Share Holding. •Organisations wishing to invest in OCP which cannot obtain sign-off for their investment by 12 August 2016 will still be able to take advantage of the opportunity to invest •The proportion of the installation cost finally met by the Council will either be reimbursed by OCP from investments made after the 12 August deadline or converted into a shareholding in OCP or a long-term loan to be repaid with a reasonable rate of interest to the Council

Alternative options considered:

Option 2: The Council underwrites/guarantees Phase 1 of the scheme. Under this option:- •The Council will make available up to £274,000 to underwrite/guarantee the installation of solar PV on Phase 1 of the scheme on a commercial basis. This funding will be secured against earnings from the FIT and PPA to ensure the Council is paid back in the final instance •Oldham Community Power will complete installations on the full list of buildings in Phase 1 (please see Appendix A) by the end of September •The scheme will fulfil the 4% return stated in the Share Offer Document, including on the Council’s £15,000 Pioneer Share Holding. •Organisations wishing to invest in OCP which cannot obtain sign-off for their investment by 12 August 2016 will still be able to take advantage of the opportunity to invest •The proportion of the installation cost finally met by the Council will either be reimbursed by OCP from investments made after the 12 August deadline or converted into a shareholding in OCP or a long-term loan to be repaid with a reasonable rate of interest to the Council

Publication date: 16/08/2016

Date of decision: 02/08/2016

Accompanying Documents: