Decision details

The Director of Resources and Housing:
a) Approved the establishment of the Leeds District Heating PipeCo Limited SPV on the terms set out in this report and its appendices and request Addleshaw Goddard to enact that decision.
b) Ensured all agreements and documents are to be executed, signed and despatched in accordance with the governance arrangements of Leeds City Council including the constitution and sub-delegations schemes.
c) Noted that the grant offer is £50k lower than our application and therefore increase the supported prudential borrowing to £3.243m.
d) Approved the award of a NEC3 option A contract to Vital Energi Utilities Limited for the phase 2 works, based on a minor variation of the existing Design and Build contract for phase 1, with a value of £4.952m.
e) Gave permission to immediately novate the phase 2 contract with Vital Energi to the Leeds District Heating PipeCo Limited SPV once established and to sell the partially complete network to the SPV at cost plus VAT and to provide a PCG to the benefit of Vital Energi guaranteeing the SPV’s performance under the novated contract, and grant authority to the Chief Officer, Sustainable Energy and Air Quality to enter into all other agreements required to give effect to this decision.
f) Agreed to passport the full grant value of £2.439m to the Leeds District Heating PipeCo Limited SPV once received, with no mark up or deductions, and through a funding agreement require the SPV to meet the terms of the HNIP grant agreement.
g) Agreed that the council will loan the SPV £2.9m at 4.94% fixed at the point leant over 38 years, the minimum state aid compliant rate, in consultation with the Section 151 officer.
h) Agreed to pay the SPV an annual use of system charge of £200,000 indexed for the right to transport heat through the SPVs district heating network.
i) Approved the award of a contract to Ove Arup and Partners Ltd to provide NEC3 PM and supervisor services during the construction of phase 2, based on a minor variation of the District Heating Project – Project Manager and Supervisor Services contract, with a value of £100k.
j) Agreed to immediately novate the phase 2 contract with Ove Arup and Partners Ltd to the Leeds District Heating PipeCo Limited SPV once established and grant authority to the Chief Officer, Sustainable Energy and Air Quality to enter into all other agreements required to give effect to this decision.
k) Agreed to add the Leeds District Heating PipeCo Limited to the council’s employer’s liability insurance and public liability insurance.
l) Agreed the SPV should use the council’s bank account, with appropriate FMS separation, subject to HMRC approval and to cashflow losses in the early years up to an estimated £1.5m, prior to the SPV turning a profit.
m) Enact the April 2019 Exec Board report decision to connect the Town Hall, Civic Hall, Museum, St George House and Library/Art Gallery to the district heating network via the phase 1 contract with Vital, at a cost of £344k to be funded by general fund prudential borrowing.
n) Noted that any construction cost overruns will be funded via increased council lending to the SPV supported by an increased service charge and to take this decision in consultation with the Section 151 officer.