£17 million could be wiped off value of Bristol Energy
As much as £17 million could be wiped off the value of Bristol City Council’s investment in Bristol Energy, according to a last-minute change to the local authority’s financial accounts.
Councillors who signed off the council’s Statement of Accounts for 2018/19 made the change against the advice of the council’s top accountant.
A previous version of the council’s 2018/19 accounts advised market conditions and the coronavirus pandemic were likely to wipe up to £7million off the value of the council’s investment in the debt-ridden energy firm.
The final version approved by the council’s audit committee states the value of that investment is likely to be “materially” affected by a combination of market conditions, the coronavirus pandemic and the possible sale of Bristol Energy. “Material”, as explained by a committee member, “means £17 million”.
The council’s chief finance officer, Denise Murray, fiercely opposed the amendment agreed by a majority on 25 June. She and her team had already revised the note in the accounts after members had refused to sign off the earlier version suggesting £6-7 million could be lost from the investment value.
The finance team’s revised note stated market conditions, the pandemic and uncertainty about the future of Bristol Energy would likely have a “significant” but unquantifiable impact on the value of the council’s investment in the firm.
Murray told members of the committee the revised wording was recommended by Grant Thornton, the accounting firm which audits the local authority’s accounts. “You’re as good as asking for a figure to be incorporated where we don’t believe a figure can be quantified,” she said.
But Tory councillor Geoff Gollop, who is also a qualified accountant, said: “I believe it is misleading in a note to the accounts to say that it is unquantifiable when I categorically can state that it is.
“I feel this is something that’s so fundamentally wrong that I could not allow these accounts to go forward as they currently stand.”
Cllr Gollop was not able to explain his reasoning without reference to confidential information so he argued his case behind closed during an exempt portion of the meeting.
When the meeting resumed in public nearly two hours later, committee members voted four to two to amend the wording of the note, before voting unanimously to approve the accounts with the amended wording.
The committee is made up of Labour, Conservative, Liberal Democrat and Green Party councillors.
The note with the amended wording reads: “During the last six months of 2019/20 there has been a down turn in the market conditions Bristol Energy operates under.
“This, in part, has been caused by a sharp fall in oil, gas and electricity retail prices along with weather-related reduced customer consumption.
“These conditions were not in place at the end of 2018/19 and could not have been reasonably forecasted at the time.
“Since 31 March 2019 the Council has invested a further £7.7million of its planned cash investment in Bristol Holding Limited [the council-owned parent company of Bristol Energy].
“However, given market conditions, the coronavirus pandemic and more recently the uncertainty regarding the final outcomes of decisions the council may take regarding Bristol Energy’s future (including its recent decision to progress the sale of the business and or assets), it is anticipated that the carrying value of this investment, or the liability arising from the council’s parent company guarantees, is likely to be materially impacted at the end of March 2020.”
“Material”, as defined in the accounts, is at least £16.5million which is 1.5% of the council’s gross expenditure. “Material” as it relates to the group of companies owned by the council, which include Bristol Energy, is £17.5million which is 1.5% of the group’s gross expenditure.
For more reporting on Bristol Energy, click here.
