Massive loan to SSDC Opium
South Somerset District Council is making a loan to SSDC Opium Power Ltd of £1,351,649.84. The decision was made by the Chief Executive in consultation with the Council Leader and Portfolio Holder for Property, Climate Change and Income Generation. That decision now has to be ratified by the South Somerset District Executive on Thursday.
SSDC Opium Power Ltd is the joint venture company set up when SSDC granted a contract to Opium Power to build a battery park for energy storage. It is 50:50 owned between SSDC and Opium.
As we reported at the time, Opium Power was a shell company with no track record and no substantial assets.
Now it appears that between SSDC and Opium there has been a misunderstanding of the VAT rules on importing the batteries from China.
The company has been advised by the shipping handlers and transporters importing the batteries that VAT is initially payable on the 18 battery storage containers. The containers cannot be released until the VAT is paid.
SSDC Opium Power Ltd believe they can reclaim the VAT on the containers at least by the end of March.
SSDC are now stuck. Of course the joint venture company has tried to find alternative sources of finance. But given that Opium was a shell company, unsurprisingly the only funding available came with conditions where “the security terms are unacceptable to SSDC”
So now SSDC is putting up the money itself.
And SSDC have got a letter from their accountants who “have provided a statement to support the requirement of this loan for short term VAT cashflow requirements.”
It would be nice if they had also obtained a letter from the same accountants to reassure the council that the VAT could indeed be reclaimed the following month. But they do not appear to have done that.
The loan is being offered by SSDC on proper commercial terms, at 5.25% interest, which is certainly a tick in the box for the deal.
The question that SSDC have not asked themselves is how on earth did those involved in the contract not know something as basic as the VAT treatment on the only major asset required for the project?
And now taxpayers are being asked to loan over £1.3m to cover that lack of basic knowledge.