Issue - decisions

1.

Title of Item/Report

Tees Valley Waste Project - Energy Reduction Facility (ERF) Update

2.

Record of the Decision

Consideration was given to a report on the Tees Valley Waste Project - Energy Reduction Facility (ERF).

The five Tees Valley Authorities, Durham County Council and Newcastle City Council (together ”the Councils”) have joined together to create an opportunity for a contractor to design, build, operate and finance a new Energy Recovery Facility (ERF) to be located in the Tees Valley.

A Special Purpose Vehicle (SPV) would be created, which would be a limited company owned by all 7 councils, to enter into the contract with the preferred bidder, Viridor. The SPV would manage the contract throughout the design, build, operation and financing of the ERF.   

Cabinet had previously made the principal decisions to progress the joint waste facility and now a number of additional, ancillary legal agreements were required to progress the scheme to financial completion, to implement the project and ensure it’s ongoing good governance.

In July 2020 Cabinet approved the First Inter Authority Agreement between the five Tees Valley Authorities, Durham County Council and Newcastle City Council to agree the governance arrangements between them in order to pursue a joint waste facility and approved the commencement of the procurement process to procure a contractor to design, build, operate and finance the ERF. The Cabinet Report of 16 July 2020 contained more details. 

In March 2022 Cabinet approved the creation of the Special Purpose Vehicle (SPV) and delegated the authority for the entering into of the Shareholder’s Agreement and the Waste Supply and Support Agreement between the Council’s and the SPV, and delegated the authority for the SPV to award the contract, enter into the Project Agreement with the successful contractor and the lease for the land with STDC (Teesworks) on which the ERF would be built.

The March 2022 decision by Cabinet also delegated authority to officers to enter into two Guarantees, one to the SPV for the Project Agreement and the second to provide a guarantee that the SPV will meet its requirements under the lease. Cabinet further delegated authority to finalise and agree the Business Plan and sufficient resources to allow the SPV to reach financial close and to monitor and manage the contract on behalf of the Councils.   

The Cabinet Report of 17 March 2022 contained more details.   

The Council’s had selected a Preferred Bidder for the contract, Viridor, so the project was moving towards financial completion. 

The documents in paragraphs 1 to 3 had been progressing and were almost ready to complete, however DLA Piper LLP, on behalf of the Council’s, were producing the associated and ancillary suite of documents needed to ensure the governance of the contract and its future monitoring and management. 

The Council was required to have a Director on the Board of the SPV to represent the interests of the council and would require the authority to make Board decisions without needing to return to Cabinet or the approval of a delegated officer before each decision can be made.  This would effectively be the same authority that the Director of Environment, Leisure and Culture had to manage and monitor waste disposal contract.  

Each of the 7 Councils would acquire one share each in the SPV which would entitle them to one vote each. It was proposed that the Council would be a Shareholder and therefore would require a Shareholder Representative to make decisions on behalf of the Council in it’s role as shareholder in the company. SPV decisions would be made by the Management Team, appointed Board Director or Shareholder, the governance of which would be set out in the Shareholder’s Agreement, Second Inter Authority Agreement and articles of association of the SPV. 

In parallel with financial close being reached the First Inter Authority Agreement would end. The Waste Supply and Support Agreement and Shareholder Agreement would govern the management and monitoring of the contract.

Redcar and Cleveland Borough Council would be providing support services, such as Finance, HR, Legal and IT services, amongst others, to the SPV therefore a Service Level Agreement between Redcar and Cleveland Borough Council and the SPV was proposed, along with a secondment agreement to second officers from Redcar and Cleveland Borough Council to the SPV.

Whilst Cabinet had approved the Council providing a Guarantee to the SPV with regard to the Project Agreement the SPV would also need to provide a similar guarantee to the contractor that the SPV would comply with its obligations under the Project Agreement.

Hartlepool Borough Council entered into an Option to lease the land from STDC (Teesworks) for the land on which the ERF would be built. Once the SPV had been formed and financial close reached Hartlepool would novate (transfer) the option agreement to the SPV.      

A side deed between the SPV and South Tees Development Ltd, Teesworks and South Tees Development Corporation would set out how wider site issues for the remainder of the STDC estate would be dealt with, for example, abnormal loads, fly tipping and service charges.   

The environmental deed, which would form part of the Lease of the site, would deal specifically with contamination and how it would be dealt with, by whom etc, should any contamination be identified.

Whilst Cabinet had approved the Council providing a Guarantee to the SPV with regard to the Lease from STDC , the SPV would also need to provide a similar guarantee to the contractor that the SPV would comply with its obligations under the sub-lease from the SPV to the contractor.

RESOLVED that:-

1. The Assistant Director – Community Services and Transport, Craig Willows, be appointed as Stockton-on-Tees Borough Council’s Director on the Board of the SPV and to authorise them, and any successors, to take all decisions as set out in the SPV agreements any approved Articles of Association, and associated documents for the good governance of the SPV and ERF.

2. The Council be authorised subscribing for shares in the SPV.

3. The Council be endorsed being the Shareholder in the SPV and the Section 151 Officer be appointed as the Shareholder Representative and to authorise that shareholder representative to appoint an alternate representative to act as their substitute or deputy and authorise the Shareholder Representative and their alternate to make decisions under the Shareholder Agreement, articles of association etc including the making of shareholder resolutions on behalf of the Council.    

4. Delegated authority be given to the Director of Community Services, Environment and Culture in consultation with the Director of Corporate Services and Cabinet Member for Environment, Leisure and Culture to enter into the following agreements on behalf of the Council

a.         The Shareholder Agreement

b.         The Second Inter Authority Agreement

5. Delegated authority be given to the Director of Community Services, Environment and Culture in consultation with the Director of Corporate Services and Cabinet Member for Environment, Leisure and Culture to authorise the LA SPV to enter into the following agreements:-

a.         Shareholders Agreement

b.         Service Level Agreement

c.         Secondment Agreement

d.         Council Guarantee of the Project Agreement

e.         Novation of the Option Agreement

f.          Side Deed with the estate owner

g.         Environmental Deed

h.         Lease Guarantee

6. Delegated authority be given to the Director of Community Services, Environment and Culture in consultation with the Director of Corporate Services, Chief Finance Officer and Cabinet Member for Environment, Leisure and Culture to enter into all other necessary agreements or legal documents on behalf of the Council or the SPV to enable the project to reach financial completion and monitor and manage the contract. 

3.

Reasons for the Decision

External solicitors, DLA Piper LLP, were appointed by the lead authority, Hartlepool Borough Council, to advise and represent the Councils and have been advising on the necessary documentation to implement the project and ensure the project meets all of our requirements.

4.

Alternative Options Considered and Rejected

None

5.

Declared (Cabinet Member) Conflicts of Interest

None

6.

Details of any Dispensations

None

7.

Date and Time by which Call In must be executed

Midnight, 26 September 2025