PAPER D

Purpose: For Decision

Committee CABINET

Date TUESDAY, 12 APRIL 2011

Title STAG LANE – EXTENSION OF PREFERRED BIDDER STATUS

TIMESCALE

Report of DEPUTY LEADER AND CABINET MEMBER FOR THE ECONOMY,

TOURISM, LEISURE, PLANNING AND PROPERTY

PURPOSE

1. To agree an extension to the option to purchase the Stag Lane tip site, for the preferred
bidders .

BACKGROUND

2. Following a restricted marketing exercise undertaken by the Council in late 2009/early

2010, with particular reference to supporting the development of suitable renewable energy
schemes, a report was presented to Cabinet on 30 March 2010 (decision reference 96/10)
with the purpose of agreeing the selection of a preferred bidder to enter into detailed
discussions and negotiations for the disposal of the former Stag Lane Tip site for the
purpose of economic regeneration and specifically the development of renewable energy
industries.

3. The decision taken by Cabinet resulted in Real Ventures being selected as the preferred
bidder, with its proposal for a 49 mega watt biomass system.

4. The decision was taken on the basis that “if these negotiations prove abortive it is
recommended that a time limit of 12 months is applied to the negotiations with the preferred
bidder”. The 12 month period expires at the end of April 2011 and contracts have yet to be
exchanged in respect of the transfer of the site to Real Ventures. This is not as a result of
abortive negotiations as Real Ventures have actively pursued their proposals including
agreeing Heads of Terms for the transaction with regards to the site and having undertaken
detailed pre-application discussions with the Planning Department, together with the
preparation of numerous plans and background information.

5. The main outstanding issue relates to negotiations currently underway between Real
Ventures and the Environment Agency in respect of further ground tests required on the
site before the Environment Agency will support development thereon. As this is a dormant
tip site there is a requirement to demonstrate the environmental impact of developing the
site. Whilst previous site investigations have been undertaken, these are now out of date
and the Environment Agency is therefore requesting a series of new bore holes and ground
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 tests be undertaken over a period of up to 12 months in order to provide sufficient
supporting evidence to gain its consent for development purposes.

STRATEGIC CONTEXT

6. The background to the restricted marketing exercise was to ensure proposals in connection
with renewable energy industries that specifically met the following key priority within the
Council’s Corporate Plan:

Regeneration and the Economy

In particular, the proposals had to reflect the economic commitment of:

• Supporting the development of suitable renewable energy schemes

7. In addition this proposal also supports the “Thriving” Corporate Themes and Outcomes of:

• Increase inward investment.

• Protect natural environment.

8. There are not believed to be any adverse human rights issues relating to this proposal. Nor
are there believed to be any adverse crime and disorder issues. Indeed with regards to the
latter, the site is currently subject to break ins for the purpose of parties riding and racing
mini motor bikes across the land. Therefore any proposals in terms of regeneration are
likely to address these crime and disorder issues.

CONSULTATION

9. Prior to the Cabinet Decision of March 2010 a variety of meetings took place between
members of the Isle of Wight Council’s Regeneration Leadership Team and those parties
submitting proposals, together with SEEDA, in order to gain a better understanding of the
proposals, the parties involved and any restrictions or limitations pertaining to the proposals
and how these might be addressed.

10. W M Enterprise, the Council’s appointed regeneration and business advisers, undertook a
review of each of the proposals in light of the Council’s invitation letter and appraised these
according to their contribution to the Isle of Wight Council’s Corporate Plan, particularly the
regeneration and economy priority. The appraisal considered the information supplied by
the respective parties in relation to matters such as anticipated energy production, on and
off Island benefits, investment and funding, job creation, etc and provided a scored
recommendation, with Party B scoring 25, Party C 16 and Party A 15. A copy of the W M
Enterprise appraisal was attached as Appendix E in the 2010 decision, reference 96/10.

11. As W M Enterprise did not comment on the technical aspects of the proposals, it was
decided that the Council should also consult Grontmij, its chosen renewable energy
technical advisers. In light of the scored recommendation from W M Enterprise a decision
was taken for Grontmij just to assess the highest scoring party – Party B. The assessment
was based on a detailed review of the Party B submission; a review and comment on
indicative project timeline / deliverability; and a review and comment on the main
constraints based on information in the submission. Their appraisal summary was
contained in Appendix F of the 2010 Cabinet decision.

12. Further consultation in respect of the proposal to extend the timescale for the preferred
bidder status has subsequently been undertaken with relevant senior officers within the

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 Council together with relevant Cabinet Members.

FINANCIAL BUDGET IMPLICATIONS

13. The Council has no restoration strategy for this former landfill and, dependant upon any
such proposals, the cost of this could be significant. The Council has no funds available for
such a process (on a closed site) nor indeed does it have funds available to remediate the
site sufficient for regeneration or redevelopment purposes. Indeed, one of the proposals put
forward in 2010, which was for regeneration of approximately half only of the Stag Lane
site, estimated that approximately 35,000m3 of waste material would have to be removed
off Island at a cost in the order of between £3.5m and £5m.

14. The current waste management licence dates from 1993 and to quote from one of the
proposals appears “very primitive by current standards with limited information and
controls”. It has been indicated that if the ownership of the site was to change then the new
owner would have to demonstrate to the Environment Agency that it was “fit and proper”
and the requirements of a modern licence would be much more onerous, with associated
costs, and would also incur an initial licence fee in the order of £50,000 per annum. This is
not a figure budgeted for by the Council.

15. Any land transaction, whether freehold or leasehold, would have to reflect the cost of
remediating the site for development purposes and it is likely that the cost of remediation
would outweigh any inherent land value thus resulting in a nominal consideration only being
achievable by the Council for the land.

LEGAL IMPLICATIONS

16. The legal implications stated in the original report of 30th March 2010 (96/10) are still
appropriate to this project. Section 123 of the Local Government Act 1972 allows the
Council to dispose of land. The Council’s duty to achieve best consideration is not limited to
the highest achievable price or rent, but can also include the “value” of other economic or
social benefits, particularly where these further the Council’s corporate objectives.

17. There is no legal reason for the Council not to extend the time period, and this will enable
compliance with the Environment Agency requirements.

PROPERTY IMPLICATIONS

18. Stag Lane tip is a closed site with very limited alternative use value. Neither does it
produce any income at present. The site has remained like this since landfill ceased in the
late 1980’s.

19. In light of the above there is not considered to be any loss to the Council of extending the
length of the preferred bidder status in order to enable appropriate site investigatory works
to satisfy the Environment Agency.

EQUALITY AND DIVERSITY

19. The Council, as a public body, is subject to general and specific duties under equality and
diversity legislation and as such has a duty to impact assess their services, policies /
strategies and decisions with regards to diversity legislation, ie race, disability, gender, age,
sexual orientation and religion / belief.

20. None of the identified groups are likely to be adversely discriminated against by this

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 proposal, particularly as the land currently does not benefit any part of the community.

OPTIONS

21. Cabinet are asked to consider the following three options:

(i) Agree to extend the preferred bidder status by a further 15 months to expire at the
end of July 2012 to enable up to 12 months of ground testing plus subsequent
analysis of findings.

(ii) Do not extend the preferred bidder status but re-offer the site to all of the select
marketing bidders as indicated in the Cabinet report of 30 March 2010.

(iii) Allow the preferred bidder status to lapse.

RISK MANAGEMENT

22. Real Ventures has expended considerable time and effort, together with resources, in
arriving at its current position and could not be accused of causing abortive negotiations.
There is a distinct risk that if the preferred bidder status is not extended Real Ventures may
walk away from the project as it needs a secure position to continue accessing funding to
progress its scheme. To mitigate the risk of Real Ventures withdrawing an extension to the
preferred bidder status is recommended.

23. If the preferred bidder status is extended as recommended there is a risk that one or more
of the under bidders may submit a challenge. This is a possibility, but should be mitigated
by this open process of decision making for the extension of the preferred bidder status.
Clearly however, if Real Ventures had not been actively pursuing their proposals during the
last 12 months, such a challenge by an under bidder would carry far more risk.

24. The selection process undertaken prior to the Cabinet decision reference 96/10 followed a
detailed route, including consultation with the Council’s specialist consultants (both
regeneration and business advisors and renewable energy technical advisors) and this is
how Real Ventures was chosen as preferred bidder. We do not believe therefore that re-
offering the site to all of the select marketing bidders, as per option (ii) is likely to produce a
result any different from that achieved in March 2010.

25. In respect of option (ii) (and therefore also option (i)) the risk management for the
respective schemes is as set out in Cabinet report of 30 March 2010, decision reference
96/10 including confidential Appendix G.

26. Option (iii) is a possibility, although the Council would lose any prospect of achieving a
suitable renewable energy industry development on the site, and would also retain a closed
former tip site with all of the risks that are inherent with this.

EVALUATION

27. Clearly Real Ventures has been actively pursing its proposals for this site and the primary
reason for the proposal to extend the preferred bidder status by a further 15 months is
based upon the need to undertake detailed ground investigation analysis to satisfy the
Environment Agency.

28. The recommendation from Cabinet report decision reference 96/10 was that a time limit of
12 months should be applied to the negotiations with the preferred bidder in case those

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 negotiations prove abortive. It is not considered that these negotiations are abortive.
Heads of Terms have been agreed regarding the transaction. Pre-application discussions
with the Planning Department have also been in great detail, again tending against the
suggestion of abortive negotiations.

29. Supporting the development of suitable renewable energy schemes is an important

element of one of the Council’s key corporate objectives, being Regeneration and
Economy. Real Ventures was chosen as bringing the most appropriate scheme under the
selected bidder marketing to the Council and to risk losing this, for the sake of ground
investigation works being undertaken (that would need to be undertaken by whichever
party is chosen as the selected bidder), would appear short sighted at this stage.

30. For these reasons it is recommended that the preferred bidder status with Real Ventures is
extended by 15 months to expire at the end of July 2012.

RECOMMENDATION

31. The following option is recommended for adoption:

Option (i) – Agree to extend the preferred bidder status by a further 15 months to expire at the
end of July 2012 to enable up to 12 months of ground testing plus subsequent analysis of
findings.

BACKGROUND PAPERS

32. Cabinet Report decision from the Meeting of Cabinet on Tuesday, 30 March 2010 - reference
96/10

Contact Point: Barry Cooke, Head of Strategic Asset Management,

 01983 823266 e-mail barry.cooke@iow.gov.uk

STUART LOVE COUNCILLOR GEORGE BROWN

Director of Economy and Environment Deputy Leader and Cabinet Member for the
Economy, Tourism, Leisure, Planning and
Property

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