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True Extent Of Welsh Govt Subsidies To Swansea Bay Revealed

October 29, 2018

By Paul Homewood

  

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https://www.parliament.uk/business/committees/committees-a-z/commons-select/business-energy-industrial-strategy/news-parliament-2017/swansea-bay-documents-published-17-19/

 

The BEIS Select Committee has now published a series of documents relating to the Swansea Bay Tidal Lagoon, which the government finally rejected a couple of months ago.

In particular they have published the final offer made by Mark Shorrock in February this year. The documents reveal just what a poor deal it would have been for the taxpayer.

 

Just to recap, Shorrock announced at the Select Committee hearing in May that he had submitted an offer of £92.50/MWh for electricity from Swansea Bay, based on a standard 35-year CfD. This offer was designed to match the price agreed with Hinkley Point. (Reading the transcript carefully, it was apparent how Shorrock wriggled under questioning, and attempted to avoid actually stating this).

At the time, I was very dubious how this offer could be viable, given that Hinkley will have 50 times the output of Swansea Bay, but only about 15 times the cost. Shorrock also confirmed that his running costs would be substantial at £16m/yr, or £33/MWh.

The offer documents show that this price relies on large taxpayer subsidies, without which the price would need to be much higher.

Below is Shorrock’s letter outlining the structure of the deal, and the Offer Document:

 

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These are the key points:

 

  • The Welsh Govt has to provide £200m at 2% interest. As this is subordinated to bank debt, it would be high risk.
  • The Welsh Govt would also have to provide top up revenue support of £281m, to allow equity investors to earn 9% return on capital.
  • In return for this revenue support, the Welsh Govt would own the equity (estimated value – £195m) outright after 35 years, but crucially also take on liability for outstanding debt of £822m. Hardly a bargain!

You will note that there are actually two scenarios for the top up support. Appendix D, which I have not shown, reduces the cost to £134m. However, this involves the Welsh Govt itself borrowing the money, which would therefore be at a lower rate of interest.

This would effectively put the Welsh taxpayer on the rack if the scheme ran into problems. it would of course also raise the question whether such borrowing could have been put to better use, given that there is no magic money tree.

Even if the project was still worth something in 35 years time, Welsh taxpayers would have had to stump up to £281m for no benefit at all in the interim.

 

In comparison, the standard 35 year CfD, without Welsh Govt subsidies and cheap loans, as offered by Shorrock in 2015, would have needed a strike price of £174.50/MWh:

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I have long suspected that Shorrock and co would milk Swansea Bay in the early days of CfD, but when their contract ended, there might not be the cash flow available to keep the show on the road. Particularly if major expenditure was required to deal with silting problems, or major refurbishment of turbines and other equipment.

Under this offer, all of these problems would be the responsibility of the Welsh Govt. Meanwhile, Shorrock and his equity investors would have earnt their 9% and had their capital paid back to boot.

Nice one Cyril!

 

At the moment, Swansea Bay is with the rest of the Living Dead, to all intents bankrupt. Shorrock however is hoping that Jeremy Corbyn might appear over the horizon, with his magic money tree under his arm.

Welsh taxpayers have been warned!

14 Comments
  1. October 29, 2018 2:59 pm

    Welsh taxpayer may have been warned, but Welsh taxpayers have no influence over the stupidity of the Welsh Government. As usual with all green energy projects, the taxpayer and electricity consumer get fleeced by the corrupt green energy industry.

  2. mikewaite permalink
    October 29, 2018 3:17 pm

    Congratulations for bringing it to our attention.
    How will the BBC play this information I wonder?
    Difficult to see how even Heap or Harrabin could put lipstick on this particular pig, so probably they will simply ignore it.

    • BLACK PEARL permalink
      October 29, 2018 3:50 pm

      The public dont need to know this

    • October 29, 2018 3:59 pm

      I Imagine it will be the normal procedure.
      Actual costs totally ignored.
      Proposed unattainable benefits massively hyped, and government blamed for not pouring money into the trough.

  3. Athelstan permalink
    October 29, 2018 3:35 pm

    Shovelling taxpayers/consumers hard earned down a black hole while the returns are nothing to < negligible………….now where have I heard that before?

    Boondoggles$UKscam – the UK does 'em best – ask that grinning hyena dale vince.

    Rip off, RIP Swansea and good riddance to bad ****, now where, when can we start to get a grips on the great, the massive, the colossal universal whirlygig/PV array fraud?

    That too big for BEIS……………running away from reality,

    Again?

    • Gerry, England permalink
      October 30, 2018 1:47 pm

      Sounds like everything government gets involved with. How well did De Lorean work out?

  4. John F. Hultquist permalink
    October 29, 2018 3:50 pm

    . . .in year 35, the project has a further 85 years of operational life . . .

    We have been warned, 97% confidence, that Earth has only 12 years remaining as a viable entity.

    Seriously: Tidal Lagoon Swansea Bay is a stupendously stupid concept. I hope everyone associated with this white elephant has taken a major hit to the bank account.
    All planning documents for the project should be confiscated and burned. This will slow the resurrection of this zombie when next it is proposed.

    • Eric Johnson permalink
      October 29, 2018 7:15 pm

      John,

      Not burned, but eviscerated front to back, chapter by chapter, paragraph by paragraph for future generations’ reading pleasure. Mute point if the “12 year window” slams shut on our fingers.

  5. MrGrimNasty permalink
    October 29, 2018 7:35 pm

    O/T

    I think the BBC just unintentionally made the case that battery transportation (i.e. cars) is impractical rubbish, and there are already better bets.

    https://www.bbc.co.uk/news/av/science-environment-45985510/are-hydrogen-trains-the-future-of-uk-travel

    Of course there is the usual delusion that all this hydrogen will be made from excess windpower and not fossil fuels.

    • John, UK permalink
      October 29, 2018 7:57 pm

      BBC bollocks on the hydrogen train showed us a steam loco and two diesels as comparison for emissions from previous railway power sources, They didnt however point out that – never mind the age of the steam train – the diesels they showed were in excess of 60 years old and a modern 3000hp or equivalent unit would never produce anything like the level of exhaust fumes being produced from the museum pieces.It was a railway equivalent of the back-lit power station cooling towers pollution scam.
      Incidentally I understand hydrogen fuel on the german experimental unit to be held in ceiling tanks which would vent to the atmosphere above the train in the event of tank puncture. Given the restricted british loading gauge it is much more likely that the holding tanks would be underfloor on any british version. I wouldn’t want to be on one of those things if there was a fire.

      • MrGrimNasty permalink
        October 29, 2018 9:54 pm

        You wouldn’t want to be near an explosive lithium battery short or fire either.

        Yes, I spotted the ancient diesel loco spewing soot!

        I loved the way he spat the word ‘filthy’ for the steam loco.

        The main point was speed of refueling, decent range, and no need for expensive new infrastructure – but of course they didn’t mention the ‘filthy’ battery manufacturing secrets.

  6. Bertie Bassett permalink
    October 29, 2018 9:43 pm

    Will the Welsh Government continue to support this boondoggle now they realise that Shorrock’s great gambit involved them stumping up £481m in exchange for a large silted up pond, conking out turbines and the prospect of having to flat pack the lot? Despite Shorrock filing two voluntary insolvencies, no doubt he will have made sure his fat cat fees are counted out before he turns the chandeliers off, moves on and starts touting shares in his next green wheeze. This time it was Swansea Bay. Where will he try next? What idea will he attempt to ride like he stole it?

  7. It doesn't add up... permalink
    October 30, 2018 5:34 pm

    I’m hanging on to the data I have on tidal schemes just in case it rears its ugly head again. I do admit, I enjoyed doing the research and pulling the different strands together to show that it simply doesn’t make sense (and nor do the plans for multiple schemes). But I’d enjoy it even more to be working on something that produces a positive outcome in the form of cheap and reliable energy. Of course, my career was built on that.

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