SHETLAND Islands Council has strongly defended its position after it emerged that the local authority provides a multi million pound guarantee for the controversial Viking Energy wind farm project.
Shetland Islands Council provides a £1.9 million security cover in the form of an “irrevocable letter of credit” to the National Grid, parts of which would become payable should the Viking Energy project be abandoned.
The council’s 45% share in the company was sold to the Shetland Charitable Trust in 2007, but the security cover, entered into in 2004, stayed with the council pending discussions with the trust.
This was agreed by councillors in September 2007 when they approved a report by the then head of finance Graham Johnston.
Knowledge of the existence of the potential liability for the council resurfaced again on Monday during a meeting of the audit and standards committee, when councillor Allison Duncan found the value of guarantee being itemised in the council’s annual accounts.
He said he had no previous knowledge the arrangement and queried why this had not been transferred to the trust.
Shetland Islands Council said councillor Duncan and others should have known as this was “not a new arrangement”.
“The amount is reviewed and reported to members each year.
“This subsequently formed part of the partnership arrangement between Shetland Islands Council, Shetland Charitable Trust, Viking Energy and Scottish and Southern Energy.
“The council’s support, by way of a guarantee, ensured the continuation of the project (at that stage in its development) and was aligned to the council’s overall economic development objectives around the Viking Energy project in particular, and the council’s more general aspirations to develop renewable energy, including marine renewable projects, in the future,” a council statement said.
On Friday, Mr Duncan said he only became a councillor in May 2007 and had never been made aware of the guarantee’s existence.
He added that he had meanwhile received some answers from interim head of finance Hazel Sutherland, but would like to know more.
“Should there be a default of Viking Energy then, I think, this payment should come from the Shetland Charitable Trust and not from the council,” he said.
The council’s executive manager for government and law, Jan Riise, said councillor Duncan didn’t know about the security cover because he usually declares an interest when Viking Energy issues were being discussed and then leaves the meeting.
Chairman of anti-Viking Energy campaign group Sustainable Shetland, Billy Fox said the issue “amplifies” councillor’s conflicts of interest, an opinion strongly disputed by Mr Riise.
Mr Fox said: “No councillor/trustee can claim impartiality when discussing Viking Energy when they know there will be a £1.896m penalty imposed on the SIC should the project and interconnector cable not go ahead!
“The current situation means Shetland Islands Council is undertaking a financial guarantee in a company and for a project in which it has no shareholding, but is a statutory consultee in the planning process.”
Mr Riise replied that national planning legislation was quite clear that councillors could act as planning authority on projects where the council was contributing financially to projects of another body or the council was a beneficiary of a project because they owned land.
“The discovery of additional liabilities like this and the far reaching questions it raises about the conduct of both councillors and officials, adds to the public perception that Viking Energy is a toxic project,” Mr Fox said.
It is common practice for a potential electricity generator to underwrite the development cost incurred by the National Grid to protect the consumer in case the developer terminates the connection agreement.
Viking Energy signed such a connection agreement in 2004, long before the company formed a joint venture with Scottish & Southern Energy.
SSE has a similar guarantee in place for the separate wind farm project it started to develop prior to entering into the Viking Energy Partnership.
Shetland Charitable Trust chairman, and director of Viking Energy, Bill Manson said: “In the event of the whole venture being aborted then the cost will be shared between all the applicants, so the council and SSE would pick up 50 per cent of what is being expended.”
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