Amenity trust faces 25 per cent maintenance cut
Adam GuestDifficult choices lie ahead for Shetland Amenity Trust as the pot of money used to maintain old buildings such as camping böds and lighthouses could be cut by 25 per cent.
That is the view of amenity trust chairman Brian Gregson who admitted some work would have to be delayed if the “pretty draconian” cut was to go ahead.
He said the trust had a large and varied range of buildings, and it would be difficult to maintain them with the budget being reduced by a quarter in 2015/16.
The decision is due to be made when Shetland Charitable Trust holds its next meeting on Thursday.
The charitable trust provides money for the budget and it is understood that it could be cutting its planned maintenance budget by a quarter.
The planned maintenance programme “ensures that certain buildings, equipment and other assets that the Shetland Charitable Trust have invested in are well maintained and in good working condition,” according to the charitable trust.
It is not clear whether the proposed maintenance cuts will affect Shetland Recreational Trust and Shetland Arts, which also receive budgets from the charitable trust.
Shetland Arts general manager Graeme Howell did not wish to comment on the matter, nor did recreational trust chairman Bryan Leask.
Charitable trust chief executive Ann Black was asked by The Shetland Times about the reduction in money for planned maintenance.
She said the charitable trust was due to discuss the budget report on Thursday and chairman Bobby Hunter would be in a position to comment on the decisions “after the meeting”.
Mr Gregson said the amenity trust was aware of the charitable trust reducing its spending and said he understood that was the charitable trust’s decision.
But he said there were no signs of the budget being maintained and described the possible 25 per cent cut as “pretty draconian”.
He said: “Are we going to do the roof on this building or repaint that one? … You can’t do everything like we used to and there’s going to be some pretty difficult choices along the way.”
Mr Gregson said there was a danger of building up problems for the future if maintenance wasn’t upheld. When you cut a budget by a quarter, you could only do three quarters of what you planned to.
He said: “The concern for the amenity trust as far as this is concerned is that it means some of our heritage and heritage buildings are definitely under threat.”
Asked about looking to external funding to help with planned maintenance, Mr Gregson said for things like painting camping böds and lighthouses, that money had to be “Shetland money”.
He added: “Unless you can make something a project that can attract external funding then it’s something that has to be paid for within Shetland.
• This week’s newspaper will include a report from the charitable trust meeting.
Michael Garriock
….and so it starts. The loss of income to the SCT from removing circa £70 Million capital in current investments and placing it in VE, has to be reflected in corresponding reductions in grants the SCT makes to its benefactors.
This is just the thin end of the wedge, based on the very vague and dated figures currently available, benefactors can expect to experience circa 50% reductions in grant assistance by the time the whole circa £70 Million has been received by VE.
Michael Garriock
For ‘benefactors’ in my reply above, please read ‘beneficiaries’, apologies.
Cllr. Jonathan Wills
Check your facts before you sound off. This is ignorant nonsense. The trust has invested £10m in Viking to date, not £70m. The reason for the proposed cut in maintenance budgets is that for years the trust has been spending more than it earned, a legacy of the days when the council used it as a piggy bank. John Scott and I pointed this out six years ago and now the trust is doing something about it.
I hope that one day the vociferous critics of the trust will come to understand that Viking is the only plausible source of new funds to help the valuable work of the amenity trust and the other trusts we support. That is why the trust invested in it.
Michael Garriock
Disingenuous Mr. Wills, disingenuous. I stated “….and so it starts”, and “This is the thin end of the wedge….” You know as well as I do (or at least you should), that various figures between £60 and £81 Million have been put in to the public domain by VE/SCT, as the estimated total investment capital the SCT will have to drawn from its own funds for the VE project. At the time those figures were made public, the SCT stated it held invested funds of circa £168 Million. Allowing for a reasonable safety margin for VE project ovespend, I would argue that making a claim that the SCT will have to invest 50% of its own funds is not an unreasonable one, and that it logically follows re-investing that sum elsewhere than at present will have the knock on effect of reducing the SCT income by an percentage roughly equal to the percentage of SCT capital involved, until, unless and *if* that sum resumes earning again (which I don’t believe it will in VE). In such circumstances it is inevitable that the SCT will have, at least for a temporary period of unknown duration, if not permanently, only circa 50% of its current income available to distribute to its beneficiaries.
In plain language, based on the recent past the SCT claims to distribute something in the regions of £12 Million annually, if you remove 50% of the SCT’s funds from where they are currently invested and reinvest them in VE, there will inevitably be a period of unknown duration where the SCT has only £6 Million (50% of its current income) to distribute. The SCT/VE, according to their own admission need to commit their share of the VE investment to the project (estimated circa £70 Million) to facilitate access to the borrowings which are proposed to finance the remainder of their share of the project. The SCT’s own money, plus the money they propose borrowing on the strength of spending that money, all needs to be spent to build the necessary infrastructure to produce and transport product to customer, customer won’t be making any payments in return until and unless product is delivered. There is an inevitable delay between the point money is expended, and returns are received. No different to man builds boat, pays for materials, builder(s) for work etc, and then has to wait to sell his first fish or acquire his first paying passenger to see any of that investment back again.
I made no claim that the current proposal to reduce the SCT grant to the Amenity Trust for building maintenance by 25% was in any way linked to any SCT capital committment to VE so far. Although now that you have mentioned it, it bears saying that if the SCT hadn’t already invested the £10 Million you state has been invested in VE so far, and that still remained invested elsewhere along with the rest of the SCT’s funds, the income from that £10 Million could have helped if not eliminate the need for this proposed cut. I simply asserted that in my opinion the proposed cut in the SCT grant to the Amenity Trust for building maintenance by 25%, is the first in what will inevitably be a long series of harsh cuts designed to trim back SCT disbursements to be within the circa £6 Million spending budget it will have to live within when it has made its full investment to the VE project.
I’m not going to dispute that this cut in and of itself may also be driven by the SCT’s wish to live within its current means, however it goes without saying that to be able to live within reduced future means, the first step towards getting there is to achieve living within current means. It also bears saying, that if the SCT have been aware they were living beyond their means, and have allowed that situation to exist for at least six years before effectively addressing it, it brings in to serious question the quality and effectiveness of the governance of the SCT.
Critics of the SCT *might* come to understand a very many things, *if* they were provided with verifiable evidence of them. As I have said before, as far as the SCT goes, and especially as far as their activities with VE go, the overwhelming message received by the public is, “trust us, we know what we’re doing”, yet the vague crumbs of evidence which do filter out in to the public domain, very clearly, to more than a few at least, suggests completely the opposite. Telling people the sun is shining brightly, when they can clearly see its heavily overcast, not only makes them disbelieve the statement made, but also makes them distrustful of whomever made the statement.
Based on now quite outdated, and vague at best figures, but what appear to be the best of a bad lot readily found in the public domain. It would appear the SCT currently has a disposable income equivalent to very roughly 7.5% of their investment, but best case scenario estimated returns for their proposed investment in VE comes in at equally roughly just under 6%. Those are the numbers anyone going out there on the web and using what data they can find are quite likely to arrive at, if they are wrong, its because the SCT/VE have failed to make readily available to the public adequate data to arrive at any other outcome, but if they are in any way reasonably representative of actual, it would be extremely interesting to hear how, in your opinion, you believe re-investing 50% of the SCT’s current fund in a project giving an estimated best case scenario return of 1.5% less than current investment, is in any way “a source of new funds”, or even a desirable move to make.
While you are at it, perhaps you might wish to elaborate on the very curious comments your fellow trustee, Mr. Ratter made during a recent BBC Radio Shetland broadcast, in which he first assured listeners VE “would be profitable”, but shortly afterwards admitted he “didn’t know how much it might earn”. I’ve always been given to understand those two claims were virtually if not wholly mutually exclusive.
Ali Inkster
Such a pity the pot won’t be getting refilled from the Total development.
Cllr. Jonathan Wills
More ignorant nonsense. The Total development will make payments to the council, not the trust
Johan Adamson
Why SIC and not in trust for us like the money in SCT?
David Spence
It is the start of the demise of the SCT, and their duty to look after the people of Shetland, businesses related to local trade, tourism and places of historical/cultural interest etc etc.
What a price Shetlander’s are paying now as a consequence of 1 ‘ get rich quick mentality, allegedly ‘ project called Viking Energy Project……….which is already sucking the blood out of the SCT.
No doubt, as time progresses, more cuts by the SCT will be in the pipeline.
Watch this space, as they say lol
Cllr. Jonathan Wills
No one is getting rich quickly, thanks to the attempts to sabotage Viking. Those who will benefit in the longer term are not individual trustees, who are unpaid, but the entire population of Shetland, who enjoy the services provided by the many charities the trust supports.
John Tulloch
Quhat aboot “da trusties” at wis peyd directors a’ Vikin’ afore?
Johan Adamson
No one is getting rich quickly, due to there being no cable. I think over half of us that are not in favour of the wind farm are grateful to Sustainable. Can we get to know who is helped by the SCT so that we can make up our own minds if the SCT benefits the whole population of Shetland?
Michael Garriock
No, the only people who will benefit are SSE, the financiers who lend the capital for the project, and a few local land owners and occupiers upon whose property whatever parts of VE gets built rests.
The Charitable Trust is in way over its head in every sense of the phrase, as long as it remains committed to VE as at present, the trust is on a fast track to being a very pale shadow of its former self, if not more likely bankruptcy and total oblivion.
Either way, folk need to start getting used to the cuts in, if not total removal of the services currently provided by the likes of Recreational, Amenity and Arts trusts etc, as if the SCT moves forward with their current plans for VE on their proposed timeline, the income they have to distribute (if they still exist) will be minimal if not zero ten years from now.
If I’m wrong, the SCT/VE only need to publish their business plan figures to prove I am, and I’ll withdraw my comments. By business plan figures I mean that real ones, the ones that are shown to and accepted by whomever agrees to provide the £200 odd Million borrowing SCT/VE propose to make, not the “holiday brochure” style pretty shiny ones we’ve been patronised with so far.
Suzy Jolly
No doubt the SCT will respond by saying they have a deficit this year if they don’t delve into their capital (just short of £200 million?). But they intend taking £70 million out of that capital pot. They’ll have to pay interest. That means they will be investing less each year on the stock exchange via their investment funds. Yes, a change in fund managers did take place and they have improved the return compared to previous fund managers, if memory serves me correctly. So if they are currently getting around £12 million a year, they will get less each year if they are investing less.
Take this as Year 1. That £70 million is a down payment to borrow a lot more. There will be interest to be paid back at some point.
How precisely does the SCT intend to fund all those dependent on monies from them over the next 10 years? VE isn’t even forecasted to make any money for 10 years. Welcome to the first year of 10 years of cuts … if it manages to last 10 years, that is.
Cllr. Jonathan Wills
Ms Jolly, the trust intends nothing of the kind. Your factoids are completely wrong. If you bothered to read the publicly available information, you would know that the trust is currently earning between £8 and £9m a year and that trustees will not invest any more money in Viking unless and until they have taken the best professional investment advice. There is, indeed, a proposal to hire such advisers before the trust meeting later this week.
The trust’s existing stake in Viking is an approved trustee investment under HMRC rules. You can read these online. With all due respect, I suggest that HMRC and the Office of the Scottish Charities Regulator may have more knowledge about these matters than the amateur cyber-snipers and investment experts who infest The Shetland Times online comment pages.
No-one has ever suggested investing half of the trust fund (which currently has a value of about £220m) in a single venture. There are various ways of raising capital for projects such as Viking. That is what the trust will be advised upon, annoying as it may be for the many uninformed but vociferous critics shouting advice from the electronic touchlines.
Suzy Jolly
Are you seriously advising that the SCT did not and have not hired professional investment advisors regarding Viking up to this point?
You know, there’s an old saying that you’ve already lost the argument if you have to revert to attacking the poster.
Having worked in the City of London, I’m more than aware that there are ways of raising capital but be it through bonds, loans, venture capital, etc., those investors want something back in return and they don’t just hand out dosh for the fun of it; they’ll look at the risks and what’s in it for them. The more desperate you are, the more stringent the terms attached.
How about you try something foreign and actually answer the question raised, namely “How precisely does the SCT intend to fund all those dependent on monies from them over the next 10 years?”
Johan Adamson
So SSE and SCT will attract inward investment. Thats a positive I guess but means no control for us. Everything will be foisted on us, everything imported, you just give them our money. Honestly, I think you’d be better sticking with the less risky portfolio where you have a little more control. There must be a limit on investment so that SCT’s accounts does not become consolidated with those of Viking? Would it still go ahead without the community involvement?
Johan Adamson
THIS IS SHOUTING. This is not
Michael Garriock
“No-one has ever suggested investing half of the trust fund (which currently has a value of about £220m) in a single venture.”
Really?
A little detour in basic arithmetic. Your £220 Million SCT fund today is the equivalent of £188.08 Million in 2010 when inflation is allowed for. This is important, as the most recent comprehensive costings for SCT’s involvement in VE which appear to be currently available online are from 2010. (If there are newer figures available online, I am sure you will, and I would appreciate it if you could, provide a link to them).
In 2010 the total cost of VE stood at an estimated £685 Million. It was proposed at that time that 80% of that cost was likely to be financed by borrowings against the value of the project. I am led to believe that the maximum VE can expect to be likely financed in this manner in the present has been lowered to something closer to 75%. If I have been misinformed on this point, I am sure you will correct me.
That said, 75% of £685 Million equates to £513.75 Million to be financed by the means as detailed above, leaving some £171.25 Million of the project to be financed from elsewhere. SSE are responsible for 50% of that, some £85.625 Million, the minority shareholders 10% of the remaining 50%, some £8.5625 Million, totalling £94.1875 Million, leaving the SCT to find £77.0625 Million.
In October 2010, when the SCT believed 80% of the overall cost of VE would be met by initial borrowings raised against the project itself, and consequently they would only be required to provide £62 Million, instead of the current £77 Million as a result of initial borrowing being limited to 75%, this was stated.
“Trustees will have to decide whether to simply sell stockmarket shares to raise all of this sum, or……” SCT Financial Controller. October 4th 2010.
That to me is a clear statement that withdrawing £77 Million (the now more likely amount necessary, rather that the £62 Million believed in 2010) from the SCT’s funds (which represents 41% of the trust’s current funds corrected for inflation to 2010 values) to part finance VE is one of the options on the table. How near to half of SCT funds do you wish to risk going and still claim its “not half”? The project going as little as 10% over budget takes the SCT share if wholly self-financed to £84.6 Million, equal to 45% of its funds, 15% over raises that to £88.55 Million, 47% of their funds…. Can you, Mr. Wills, as a SCT trustee, provide a categoric written assurance that the option to self-finance from their own funds all of their stake in VE, has been rejected by the SCT and has been wholly removed from the table?
David Spence
A Good Point, Ali.
I am intrigued to know if, excuse my ignorance, the SIC had renegotiations with Total and BP, in light of the expansion of Sullom Voe, and the expected increased of production of gas or oil?
It certainly would have been a great opportunity for the islands in terms of income to draft up a new agreement, and for the islands to benefit further from the expansion of Sullom Voe?
May be somebody can enlighten me on this? If indeed there is anything to say about it ?
Johan Adamson
Yes, community owned windfarm. Owned by trust that no longer gives to the community
Jonathan Wills
It gives over £8m a year. All this is public knowledge.
Suzy Jolly
And what is not public knowledge, JW, is how precisely the SCT will continue to do so during the period that VE is being built and afterwards. Are you saying there is a business plan for the SCT during the construction period of VE already in existence to demonstrate how it will be funded?
The SCT appear to be ‘banging on’ about how VE will make money. A strike price set by the Government was mentioned of £115 per megawatt hour for the electricity. That figure is subject to change and can go up or down in the future once the 15 years is up and the agreement with the Government has not yet been signed, has it? £115 is not income if your outgoings to cover the cost of building the windfarm, maintaining it, paying the interest on LOANS, etc., are, hypothetically speaking, £150 (or more) per megawatt hour. Whilst that might indeed be the price set, we don’t know what the additional charges related to the interconnector would be – can the SSE subsidiary company charge VE for utilising it? The Government do not buy electricity. Is the SSE or one of their subsidiaries going to buy all the electricity generated? What if they go bust? Why would they continue to buy power from VE when their own gas turbine power stations elsewhere in the UK produce power at a lower cost than VE?
So just what information are you not putting in the public domain? Shetlanders have no idea of the wording of the agreement signed by SSE Chairman and Ratter at Busta House in 2007. We have no idea if either party can pull out. Does the SCT have the option to pull out of the agreement at any stage with no financial penalties and likewise the SSE? Can either party sell its shares without the prior agreement of the other?
As far as I’m concerned, your figures do not add up and you have cherry-picked. You most certainly are not winning over ‘hearts and minds’ and besides, some of us know how to use a calculator.
I put it to you that all SSE have done is ‘earmark’ Shetland. They know that right now it does not make economic sense but by being involved, it prevents other developers from being able to use those sites reserved for VE turbines.
Johan Adamson
If we could trust the SCT to use the money for charity then I think more would be inclined to think the investment in Viking worth it.
Although most would still realise we have more to lose with this gamble than money.
David Spence
Jonathan, I am sure the Shetland public would like to know
a) Who has an invested interest in the VEP?
b) How much have people or companies contributed towards the VEP ?
c) What percentage in terms of shareholding do these investors have ?
d) What is the expected return once the project is up and running for the SCT and other investors ?
e) Who will benefit from compensation of land rental and how much will they be getting and where will this money be coming from ? and
f) The expected annual maintenance costs of the project, and where or who will be expected to pay ?
I may be entirely wrong, but the expected return for the SCT is minuscule compared to the overall cost of the project. In fact, I would very much question why the SCT has been advised to invest in the VEP.
Personally speaking, I think there should be a public enquiry into the SCT as the people of Shetland have a right to know who advised the SCT to invest in the VEP and is the SCT being forced, as recent events have shown, to make cuts to keep its share holding of the VEP?
Cllr. Jonathan Wills
The answers to a, b & c are already in the public domain and have been for some time. I would have thought you would know them before parading your expertise before the public.
The answers to the other questions are not yet known with precision but if you can spare the time from roaring in cyberspace then you might like to call at the offices of Viking at North Ness, Lerwick, where you will find the staff happy to help you with these inquiries.
Your are indeed entirely wrong about the expected returns but with your depth of knowledge you will of course realise that it is too early to put precise numbers on the returns.
Before you write your book, it might be an idea to do some basic research and acquaint yourself with the facts. I assume you are writing a book. It seems a pity to waste such vituperative talent.
John Tulloch
Jonathan! Fur sic an a wye ta spaek til a felluw “Peerie Muscovite”!
James Mackenzie
“No one is getting rich quickly, thanks to the attempts to sabotage Viking,” writes Cllr Jonathan Wills. An interesting turn of phrase in the first part of that sentence: I didn’t realise that the purpose of the Viking Windfarm was to make us all rich quickly.
As to the second part, there are other factors which have delayed this project, and continue to do so. Only in November 2014 did SSE have this to report, regarding transmission links (i.e., interconnectors), and please remember this also applies to the Western Isles where there has been no Judicial Review to “sabotage” developments:
“For its part SHE Transmission has made it clear that, in line with its operating licence, it would be
prepared to submit a needs case to Ofgem for an appropriate transmission solution at the right time but making such a case without greater certainty on the scale of development and its timing is not practically possible.” In the same paragraph SSE refer to “finding solutions for this exceptionally complex situation.”(SSE plc Interim results for the six months to 30 September 2014 -12 November 2014).
If all that was down to Sustainable Shetland’s legal action I’d be prepared to eat my hat, and there is plenty of evidence to point otherwise. The assumed financial benefits to SCT from the Viking Windfarm are I fear as far away as they ever were and, I also fear, outwith local control.
Jonathan Wills
If you’re following the correspondence, James, it was Mr Spence, not I, who first used the phrase “get rich quick”.
Ali Inkster
Three questions I and many others would like answered Jonathon.
1: Does the ZCC act still apply?
2: If not when was it overturned?
3: If it does still exist, why then was it not used to replenish the CT funds from the Total development?
See if you can manage 3 straight answers to 3 straight questions.
David Spence
No Jonathan, I am not planning to write a book as I feel the sales would be rather low due to lack of interest, I anticipate.
However though, I am sure the VEP Saga would make an interesting documentary and the impact VEP is having on the community of Shetland. A classic example of business greed taking priority over the community regardless to what damage this business venture may cause or pose to the community and to Shetland itself.
It reminds me of the documentary film called ‘ Wind Fall ‘, and how the community of Meredith in New York State, were torn apart by the bribes, lies and threatening law suits by the private electric companies on the community if they didn’t see things their way. It transpired that the sanctioning of the project was illegal due to the Mayor of Meredith and a few Councillors had invested interests and shares with the private electric companies illegally demanding farmers and people within the community comply. Thankfully the Mayor and the respected Councillors were booted out after elections, and the whole project was turned down by the newly elected Mayor.
Something, I would say, VEP should adhere to………which is not what is happening just now.
Alan Skinner
I am overjoyed to hear Dr Wills say that SCT may seek “best professional investment advice” on their Viking Energy investment. There is no doubt that SCT do have the best professional investment advice on their quoted investments, but I have never seen evidence of their having taken serious investment advice on Viking Energy.
It will be interesting to see whether any credible firm is prepared to put its name to a valuation. If they are prepared to do so, it would be incredibly reassuring to see a sale of a small holding, perhaps by reducing SCT’s stake from 45% to 30%, to prove the valuation.
Alan Skinner
New House
Cullivoe
Yell
Suzy Jolly
Could Mr J Wills please indicate which points he is answering as a trustee and which points he is answering as a councillor, given that it would appear he has replied wearing both hats.
I’m not really surprised that he keeps telling people to visit the VE hut in order to get the answers but surely as a trustee he should answer the questions that beneficiaries place before him. Some information is on the VE website but not everyone has access to the internet.
Also, is Mr Wills willing to put his money where his mouth is and act as guarantor in this gamble? Or is the SCT or the SIC expected to act as a guarantor? An LLP is just that, a limited liability partnership but who in their right mind would want to finance a project unless they were getting shares, assets or a slice of the action back in return, thus diminishing the alleged benefits to Shetlanders. £23 million as an average return over the life span of the project does not equate to £23 million annually, perhaps Mr Wills with his Trustee hat on would care to share the annual financial projections (year by year) for the first 15 years?
David Spence
I was informed that the return from the VEP for the SCT was between £20 – £23 million a year, Suzy?
Even so, that is almost laughable if you take into consideration the projected cost to get the project going, and no doubt, the high costs of maintenance? Which I am intrigued to know who will fit the bill for this?
£20 – £23 million a year is not even a drop in the ocean in terms of a fruitful return on your investment.
Jonathan, harks on about certain figures are not yet known with precision, which may be valid. However, surely any business plan being drafted up, and the need to attract investors, would incorporate these figures, albeit they may be projected. Surely these figures would be part of the business plan?
So Jonathan, so, despite what I may have written down, what is the return per annum for the SCT, and what is the projected maintenance costs (including staff salaries, rent of land, payment to Her Majesty’s Treasury for the Inter-Connector Cable lying on the sea bed between Shetland and mainland Scotland….but to name a few) per annum, and who will be fitting the bill?
Suzy Jolly
@David Spence
Given that JW is so fond of us referring to information freely available in the public domain, if you refer to that, it refers to average more than once. I’m sure that as a trustee wanting to keep beneficiaries fully advised, he will, no doubt, be more than happy to provide the link to the information, given it’s so freely available. In addition, it was only recently on the radio that Drew Ratter said that they couldn’t say what the income would be.
David Spence
I may be wrong, but I was informed that Her Majesty’s Treasury were wanting £55,000 a year for a Fibre-Optic Cable lying on the seabed between Shetland and mainland Scotland? Quite rightly, Shetland businesses refused to pay this, and the Fibre-Optic Cable was taken from the Faroe Islands?
If this was the case, I would anticipate the cost of an Inter-Connector Cable between Shetland and mainland Scotland, would be considerably more. What would this cost be?
Kathy Greaves
No one knows how much the VE giant wind farm could cost to build, maintain, pay compensation over its viable term or how much the interconnector could cost,or indeed who would pay for it.
Personally I never buy anything I don’t know the price of.
Shetland Charitable Trust trustees need to think again as to their part in the VE project as it currently stands.