Report of the Strategic Director – Growth and Development attached

The Executive considered a report of the Strategic Director – Growth and Development, which provided an update to Members on the progress that had been made to date in respect of the Civic Quarter Heat Network (CQHN) project and next steps  It also provided a position statement on the ongoing external assurance work that was to be completed before the project moved into the operational phase.

The energy centre and pipework was scheduled to be completed in January 2021, however, there had been a number of delays to various elements of the project due to the impact of COVID and delays within the supply chain for specific elements of the project.

The contractual responsibility for the delivery of the gas connection rested with Vital Energi and their sub-contractor, Energy Assets Utilities (EAU) who were an experienced contractor delivering gas, electricity, and water networks in the UK’s public and private sectors.  Once all of the outstanding issues had been resolved the final connections to the buildings could be completed. 

The current approved budget for the project was £24m. In addition to this there was also a further £2m capital budget approved to provide additional capacity in the form of a second engine, if there was enough demand.  Any drawdown of the additional funding would be subject to a further business case.         It was currently forecasted that the project would be within budget. 

The report provided an overview of the elements associated with the build of the CQHN:-

·                Operational Phase - Financial Modelling (including Working Capital, Due Diligence, Risk and Mitigation);

·                Legal Assurance;

·                Structure and Governance; and

·                Business Plan

It was reported that both the confirmation of the final budget position (once the position in relation to the gas connection was resolved) and the final business plan would be presented to Executive in June 2021, following completion of the external assurance exercise by EY and approval by the Commercial Board.

Following a question on whether the possibility of introducing ground source heat pump cost had been accounted for in the overall budget, the Director – Commercial and operations advised that the cost of the heat pumps had not been included in the overall cost of the project.  There was potential government grant funding for these, but if this was not available it would be considered in the context of the  revenues being generated from the project.  This would be picked up in more detail in the Business Plan.

Decisions

The Executive:-

(1)      Note the progress that has been made to date.

(2)      Note that the final Business Plan associated for the project is to be presented to Executive in June 2021 for approval.

(3)      Endorse the previously agreed delegated authority to the Strategic Director (Development), the Deputy Chief Executive and City Treasurer, and the City Solicitor, in consultation with the Leader, Executive Member for the Environment and the Executive Member for Finance and Human Resources, to negotiate and finalise the terms of any remaining contractual and property arrangements necessary to give effect to the delivery of the project and proposals set out in the report.

(4)      Delegate authority to the City Solicitor to enter into and complete all documents or agreements necessary to give effect to the above recommendations.