Concern as workers’ pensions invested in wind energy scheme

Martin Shipton

A campaign group has raised concerns about the decision of local authority pension schemes in Wales to invest £68m in a controversial onshore wind power project that could see turbines and pylons erected across mid Wales.

Seven members of the Wales Pension Partnership (WPP), managing the pensions of workers employed by Carmarthensire, Swansea, Cardiff, Flintshire, Gwynedd, Rhondda Cynon Taf and Torfaen councils, are investing money in the scheme.

Collateral

Jenny Chryss, who chairs the RE-Think campaign group which opposes the project, largely on environmental grounds, said: “I have asked WPP what measures are in place to protect the pension funds invested into Bute Energy Development Holdings through Capital Dynamics. They say the loan is backed by the collateral of 16 onshore wind projects – providing protection through diversification if any fail – and has been made through a development loan ranking senior to Bute’s equity. It also includes customary lender protections.

“However, filings at Companies House show that there is already a floating charge against the assets of Bute Energy Development Holdings and Bute Energy which was registered by Copenhagen Infrastructure’s fund CI IV Dragon Lender Ltd in March 2022. As far as I am aware that would take precedence over the WPP/Capital Dynamics loan.

“The accounts of Bute Energy Development Holdings also show that the company sold call options to CI IV, giving them the option to acquire the remaining 99.9% of the shares in the energy parks and the power line (Green Gen Cymru) not currently held by them.

“In addition, the accounts show that Bute Energy Development Holdings only owns 11 of the group’s proposed onshore wind projects, not 16. Other planned projects are owned by a different Bute Energy subsidiary, so I am unsure as to where they fit in as potential diversified security.

“On the face of it all this would appear to undermine the reliance of WPP and Capital Dynamics on security provided by the energy parks. I will be following up asking for further documentation and information. I have absolutely no reason to doubt that due diligence has been properly undertaken by WPP, but the full facts need to be in the public domain for all those interested to see and understand.

“Not one of these energy parks has yet got planning permission and Bute doesn’t even have an electricity distribution licence let alone planning consent for the power line. Unless someone knows something that the people of Wales don’t know, there is no guarantee at all that any of these schemes are ever going to materialise. Therefore, having fully transparent, financially watertight security in place to protect the pension funds is absolutely vital.

“Powys County Council has decided not to invest in Bute Energy’s projects through this fund, as I understand it following thorough due diligence. I assume that the authorities which have decided to take part have done so only after conducting equally rigorous research.”

Green energy

In response to Ms Chryss’ comments, Bute Energy and the WPP issued a joint statement which said: “The investment into the Bute Energy onshore wind projects will generate clean, green energy and supports the Welsh Government’s target for electricity to be 100% renewable by 2035.

“Public sector workers across the country are investing in projects that will power our homes, businesses, schools and hospitals in the future. They are not only investing in their future, but also the health and wellbeing of future generations in Wales.

“Bute Energy’s ambition is to empower communities through investment, jobs, and skills and they share the WPP’s values of long term, stable and sustainable investment.

“The Welsh Government is determined that the benefit, value and wealth from the green revolution will come to and stay in Wales and this investment will help to guarantee that. We are at a critical time for society as we attempt to address climate change and the cost-of-living crisis and WPP are pleased to have the opportunity to invest into Bute Energy, meaning the members are contributing to addressing these issues while also retaining the wealth from renewable energy in Wales.

“WPP’s investment in Bute Energy is through a development loan alongside CIP which ranks senior to Bute Energy’s equity and includes customary lender protections – including a floating charge. This ranks equivalent to CIP, not subordinate.

“The loan is backed by collateral of 16 onshore wind projects, providing diversification if certain projects do not move forward. 11 of those projects have, so far, reached their initial development phase, with a further five expected to move forward in coming months.

“Ahead of investing into Bute Energy, WPP completed thorough due diligence and were advised by independent clean energy asset manager Capital Dynamics. Capital Dynamics have extensive experience investing in global renewable energy infrastructure, with over £3bn under management.

“There is wide political support in Wales for pension funds to invest in projects that respond to the climate emergency, with a Senedd debate and vote in favour of the divestment of public sector pension schemes from fossil fuels and stronger investment into the renewables sector.”

Powys county councillor Peter Lewis, who chairs the authority’s pensions and investment committee, said: “The committee took professional advice and decided that investing in Bute Energy did not fit in with our pension scheme’s current investment portfolio.”