To update the committee on the current status of the energy from waste loan arrangement to enable the committee to fulfil its delegated functions.

The Head of Strategic Finance (HSF) introduced the report the purpose of which was to update the Audit and Governance Committee on the current status of the energy from waste loan arrangement and to enable the Committee to fulfil its delegated functions. The following principal points were made:

1.     The HSF explained that the Council acted as a joint lender with Worcestershire County Council to Mercia Waste Management limited (MWML). The loan was used to buy and operate an energy from waste plant in Hartlebury in Worcestershire. The asset is used to recycle and recover energy from waste collected across the two counties.

2.     The report confirms that the repayments have been made by the borrower in line with the loan agreement.

3.     The HSF explained that financial covenants look at the position and performance of the borrower and provide assurance over the risk of their ability to meet future debt repayments. It was confirmed that these had been met by the borrower. 

In response to committee questions, it was noted:

                        I.         The HSF provided the committee with further explanation of the “ratios” listed on page 75 paragraph 9.

                       II.         The HSF explained that there are a number of working papers underneath the assessment of compliance and that some of that information will be available in those companies accounts but in terms of cash flow it is not reported on a monthly basis in a set of published or audited accounts but is information that is provided to the Council as part of the requirement of the agreement with MWML.

                     III.         The HSF explained the compliance value is the value set within the loan agreement (the value that we are expecting them to meet) and the actual value is how they have performed.

                     IV.         The HSF was unable to confirm that the loan agreement would be repaid by the end of its term, however confirmed the terms and conditions of the loan agreement and provided assurance through this mechanism that they are currently meeting the conditions within that loan so the current loan agreement provides for the repayment of the outstanding balance in full in January 2029 via a bullet payment for the remaining balance.

                      V.         The HSF confirmed a review had taken place by an external body in the last 12 months of the loan agreement which included a review of the conditions attached and the compliance ratios.

Resolved that:

a)    The risks to the Council, as lender, were confirmed as being reasonable and appropriate having regard to the risks typically assumed by long term senior funders to waste projects in the United Kingdom and best banking practice; and

b)    Arrangements for the administration of the loan were reviewed and confirmed as satisfactory.