Open letter to trustees of Shetland Charitable Trust

I am writing to you on behalf of Sustainable Shetland regarding Shetland Charitable Trust. We were concerned by the gravity of the situation which prompted OSCR to intervene to prohibit trustees convening a meeting at short notice for the purpose of deciding whether to commit £6.3 million of charitable trust funds to the Viking Energy project.

In the light of this intervention, we have written to OSCR for clarification on the current position and would ask you to consider the following points before taking further action in this matter.

1) Regarding the proposed meeting on 30th April OSCR stated that “Given our ongoing inquiries into the governance of the trust we considered it appropriate to take precautionary action and prevent any binding decision being made at this time … (the Viking Energy project) has been the subject of divided opinion not only between the current trustees but also in the community served by the charity. In this context, the trustees require to be particularly careful to make investment decisions with due care and diligence and with all the relevant independent advice that is appropriate – both legal and financial.”

• It is questionable whether it is acceptable for a decision on funding to be taken before the “systemic conflicts of interest” within the trust have been addressed by a revised governance structure.

• It is questionable whether trustees would be acting with “due care and diligence” were a decision to be taken before new trustees have had time to gain some experience in their role as trustees and in the detail of the Viking Energy proposals and finance.

2) As of 1st May 2012 Sustainable Shetland membership stood at 826 – a significant figure in a population of 22,000. Members of Sustainable Shetland are deeply opposed to the Viking Energy project and the use of public money to support it. Moreover the project, if it goes ahead, will impact directly and negatively on the quality of life of many members and non-members alike. At no point to date have trustees attempted any consultation or engagement with the community on whose behalf they act, and the information presented to them has tended to paint the project in an entirely positive light.

• It may be appropriate to consult and engage with the community represented by the charitable trust before making any decision on investment in the Viking Energy project, or indeed any project of this size, scale and expense that has such potential negative impact on the social, economic and environmental character of Shetland.

• It may be inappropriate to invest money which is held in trust to benefit the Shetland community in a project which may benefit the community financially, but certainly would significantly damage the quality of life for many members of that community.

3) There is a lack of clarity regarding the finance of the Viking Energy project. No details on the valuation of the project by Quayle Munro have been made publicly available. It is not clear whether the financial projections have been revised given that consent was granted for only 103 of the 127 turbines proposed. There is further uncertainty as to how the Ofgem charges set out in Project TransmiT on Friday 4th May will impact on the Quayle Munro estimates and there have been many conflicting comments from interested parties.

Scottish energy minister Fergus Ewing: “We share the industry’s huge disappointment that Ofgem has delivered no solution to Scotland’s islands, where there is huge potential to generate clean, green energy that can contribute to Scottish, UK and European targets.” (“Ofgem strike blow to Viking Energy”, 7th May 2012, Shetland News).

Aaron Priest, Viking Energy project manager: “This is not a blow to Viking at all. It is an expected outcome of an industry process that will now move on to the next stage. There will be further engagement between the regulator and the industry and National Grid.” (“Ofgem move no threat to viability of Viking windfarm“, 8th May 2012, Shetland Times).

Jeremy Baster, grid consultant to Orkney Islands Council: ” … it will make people think quite hard about doing projects in the islands and people will consider alternative locations. The Scottish government and local authorities are encouraging renewables, but having these high charges sends out the opposite signal. It’s a serious blow.” (“Ofgem strike blow to Viking Energy”, 7th May 2012, Shetland News).

Bill Manson, Viking Energy chairman: “Rumours are rife that Project TransmiT will kill off Viking and nothing could be further from the truth. We have always been very cautious about our financial projections … the estimates for future projected transmission charges have been higher than £100 per kilowatt, so the figures now being suggested are better.” (NB: It could be argued that by his ill-advised comments Mr Manson has reduced any incentive Ofgem might have had to lower the charges). (“Transmission charges pose no risk to Viking windfarm, insists chairman“, 10th May 2012, Shetland Times).

Chris Bunyan, Windfarm Supporters Group: “… it is in fact good news … The proposed charges are still too high  … but they make the Viking Energy investment look more attractive, not less. The proposed charges are nearly half what Viking Energy has been using when drawing up its investment plans. This could mean more money for the Charitable Trust. When looking at the costs of the windfarm Viking Energy has been using estimates of up to £127 per kilowatt. So even if the proposed unfair charges do not change, it does not have an effect on investment plans – except to probably make them even more attractive.” (NB: It is not clear how Mr Bunyan is privy to the VE calculations). (“Viking still viable with high charges”, 10th May 2012, Shetland News).

In March The Shetland Times quoted charitable trust financial controller Jeff Goddard as saying : “Overall, assuming that Quayle Munro’s estimates of value are in the right ‘ball park’ further investment in Viking Energy would be financially attractive.” (“Trustees asked for £6.3 million to take windfarm to construction stage“, 27th March 2012, Shetland Times).

• Given that the “ball park” may have changed due to these recent developments it may be appropriate for trustees to hold off on making an investment decision until a detailed financial breakdown based on the reduced number of turbines and the charges proposed by Ofgem is prepared.

4) There is a lack of transparency regarding the agreement between Shetland Charitable Trust and Scottish and Southern Energy. We understand that an agreement was initially signed between Scottish and Southern Energy Plc on behalf of Scottish and Southern Energy Viking, and Shetland Islands Council on behalf of Viking Energy Limited. Shetland Islands Council subsequently “sold” Viking Energy Ltd to the Shetland Charitable Trust and we believe that the partnership is now a Limited Liability Partnership. However, the agreement seems to be shrouded in such secrecy that several of the recent Shetland Charitable Trust trustees claim not to have seen it.

• It may be appropriate for all trustees to make themselves aware of the contents of this agreement to ensure that they are acting in the best interests of the charity and the community it was set up to serve.

Andrew Halcrow
Chairman,
Sustainable Shetland
Da Cro,
Burra.