When a struggling local authority in the south of England was looking to boost its finances, it turned to an innovative idea: leveraged bets worth hundreds of millions of pounds on energy solar.
For Thurrock Council in Essex County, it looked like a surefire winner. Instead, the bet backfired dramatically.
The council last month revealed a loss of 470 million pounds ($572 million) for the current financial year after its various investments went awry – around 2,670 pounds for each of the area’s 176,000 people, who now face higher taxes as the local authority seeks a national government bailout.
The debacle highlights concerns over the way some UK local authorities have been pouring taxpayers’ money into high-risk initiatives. He also spotlighted the entrepreneur who owned the solar farms, Liam Kavanagh.
Following reports from the Bureau of Investigative Journalism about his business relationship with Thurrock, Kavanagh said in June 2020 that he was “never going to lift a pound from any local authority again”, according to recent court documents regarding a case in which the financier is suing his former driver.
The Kavanagh companies, which operated solar farms across the UK, had received hundreds of millions of pounds in investment from Thurrock Council, which oversees a region along the River Thames east of London.
Two years later, Thurrock is struggling with a huge annual deficit and has been stripped of its financial powers. The former head of the council resigned.
Mark Coxshall, current leader of Thurrock Council, called his losses “shocking”, but added: “The first step in creating a good recovery plan is to understand the full extent of the problem.
When the sun shines
The story dates back to at least June 2016, when Thurrock Council helped fund the purchase of a solar farm in Swindon, England, through bonds marketed by Rockfire Capital, a company owned by Kavanagh. Over the next few years, Thurrock helped fund 53 solar farms across the UK, all of which were owned by Kavanagh.
The arrangement was not unprecedented. UK councils are notorious for borrowing money to invest in new projects, in a bid to supplement compressed incomes in the years following the financial crisis. Now they face another pressure, as Prime Minister Rishi Sunak cuts spending in an attempt to fix the calamitous seven-week rule of his predecessor Liz Truss.
Other investments have gone wrong. Last year, Slough Council in Berkshire was taken over by ministers after it gouged a £100million hole in its budget following a series of business acquisitions. In Spelthorne, Surrey, the council used hundreds of millions from the Public Work Loans Board to buy commercial property – at one point borrowing £1.1billion.
This advice was encouraged by the 2010-2015 coalition government, which wanted local authorities to behave more professionally. In 2016, when Thurrock made its first investment in a solar farm, the local authority said it was a ‘pro revenue-generating consultancy’ and that it would ‘continue to seek similar opportunities’.
“The people of Thurrock can rest assured that not only are we taking care of their money, but we are also doing our part to help protect the environment by reducing the amount of carbon produced by burning fossil fuels,” said Shane Webb. , a conservative adviser. in 2016.
To bet big on renewables, Thurrock has borrowed £1 billion at low interest rates from more than 100 other local entities, including the Greater London Authority, Cornwall and Leicester councils.
At one point, his debts reached £1.4 billion, nearly 10 times his spending on local services.
The investments prompted John Kent, leader of the opposition Labor Party on the council, to write to the National Government demanding an investigation.
“I and other advisers have been raising concerns about the council’s borrowing and investing strategy for over two years,” Kent wrote in July this year. “All this time we have been ignored, falsely reassured, deceived and misled.
Some details emerged in a High Court judgment, published in April last year, relating to a dispute between one of Kavanagh’s companies, Toucan Energy Holdings Ltd., and another company, Wirsol Energy Ltd., over the construction and sale of 19 solar parks.
Toucan has sought around £30million in damages over alleged faults in the parks. Ultimately, the judge dismissed most of the claims.
Although Thurrock was not a party to the case, its relationships with Rockfire Capital and Kavanagh were mentioned in the proceedings. The court heard that Rockfire Capital approached Thurrock in 2018 with the possibility of investing £145m in park bonds – on top of the hundreds of millions it had already invested in solar farms.
Kavanagh was a witness in the case, not a party. During the case it emerged that a £5million commission charged by Rockfire Capital to Thurrock was not included in a prospectus sent to the council. Kavanagh told the court he saw no reason to include fee details in the document because all of his business partners knew Rockfire Capital “always charged a commission.”
The judgment also quotes Daniel Kirk, who worked at Toucan Energy, saying in a message to a colleague that he “didn’t work for someone who just treats us like an ATM for his own capital when [the] taxpayers and contracts signed [sit] above his capital.
During the case, he told the court that those comments were “more of a personal failure on my part at this stage to properly manage and communicate with Mr. Kavanagh.” Kirk declined to comment when contacted by Bloomberg News for this story.
In another message quoted in the case, Kirk said Kavanagh was ‘taking’ two payments – said to be £350,000 and £650,000 – and complained: ‘these are designed to cover our costs and not his cars”. The judge handling the case, Judge Andrew Henshaw, concluded: ‘Mr Kirk’s contemporary view that Mr Kavanagh was taking money from the business for his own benefit is clear.’
Kavanagh himself has taken to court to protect his reputation, suing his former driver, Tony Tremlin, who allegedly gave a copy of the dashcam footage to a Bureau of Investigative Journalism reporter.
The court documents refer to images in which Kavanagh allegedly complains about BIJ articles about him. Kavanagh says the dash cam was for vehicle safety, “not to obtain and keep surreptitious recordings” of his conversations.
The financier was filmed discussing how he planned to liquidate one of his businesses: “You take risks, you go in and you go out.” Bloomberg has seen a partial transcript of this recording in publicly available court documents.
Quotes attributed to Kavanagh in the documents include him saying he had to “protect everyone’s interests and the money” and “get rid of” Rockfire Capital following a BIJ story.
“I’m not bothered now,” he reportedly said. “I’m never going to lift a pound from a local authority again.”
Tremlin said in his defense documents that releasing the footage was in the public interest. He accused Kavanagh of putting companies – owing £655m of public money – into liquidation, without Thurrock’s consent.
Kavanagh says information given to reporters was confidential and he “does not court publicity”. The case is ongoing, with Tremlin filing his defense in recent weeks.
Responding to the entry into administration of Toucan Energy Holdings 1 Ltd. Kavanagh said in an emailed statement last month: “I cannot comment on the decision to put the company into administration having played no role in that decision or even in the management of the Toucan business. J installed a new management team in June 2022 and, as far as I can tell, the underlying business has traded strongly.”
In the statement, Kavanagh added “I am confident this is a company with a positive future, particularly given the recent and ongoing growth in the green energy market.”
Tremlin did not respond to a request for comment.
Thurrock’s financial health continued to crumble. In September, ministers stripped him of some powers and gave Essex County Council responsibility for his finances. Thurrock was ordered to refinance its low interest loans to pay off neighboring councils and borrowed money from the UK Public Loans Works Board at an interest rate of between 4% and 5% .
Rob Gledhill, former leader of the council, has resigned. At the time, Gledhill said he welcomed the government’s support, but “the political responsibility stops with him”. He declined to comment for this article. Sean Clark, a former chief financial officer at Thurrock who was involved in investment decisions, was suspended from his post in September, the BBC reported. Clark did not respond to a request for comment.
On November 10, Toucan Energy Holdings 1, the holding company owned by Kavanagh, went into administration. Interpath Advisory, a restructuring company, was commissioned to find a buyer for the farms. Coxshall, the current leader of Thurrock Council, said in a statement that the move would “maximize the clawback” for taxpayers.
Last month, the magnitude of the potential losses for the taxpayer was unveiled. Thurrock revealed a £470m deficit for the current financial year and canceled four investments at a cost of £275m. It said it had made an additional provision of £129million to cover other losses.
Thurrock appealed to the national government for an emergency financial bailout and warned of further cuts and a likely sale of buildings, land and other assets – as well as tax increases for local residents .
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