Publicly owned district heat networks in Bristol, set to be sold to Sweden, are “almost certainly undervalued”, a councillor has claimed.
The city’s heat networks will likely be sold this autumn to Vattenfall, a Swedish state-owned energy company. The networks currently belong to Bristol City Council, which built the networks with government grants, and estimates the value to be £20 million.
On Tuesday, July 12, the cabinet voted to move the ownership of the networks into holding company Bristol Heat Networks Limited, ahead of the sale. But a senior Conservative councillor has raised concerns that council chiefs aren’t getting value for money.
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Councillor Geoff Gollop, Tory finance spokesman, said: “I’m troubled by the way in which yet another major commercial venture is being handled. The authority is normally obliged to achieve best value for its assets and any disposal should be at the best price reasonably obtainable. But the published figure almost certainly represents an undervaluation.”
Heat networks are being installed in Old Market, Redcliffe and Bedminster, with a new project under development in Temple. District heat networks are a key technology for decarbonising heating, as they don’t rely on fossil fuels like natural gas, unlike traditional boilers. Networks send hot water through a giant web of underground pipes, connecting several buildings.
Heat networks in Bristol will be massively expanded over the next few years, with a potential huge pipe running from Avonmouth to carry and reuse waste heat from industrial processes. As part of the council’s major City Leap deal, Vattenfall will run, maintain and expand the heat networks across the city. But an accounting quirk could mean Vattenfall underpaying.
Council chiefs estimated the value of the heat networks as £20 million, using their ‘book value’ which looks at the initial cost of installing the networks and buying the equipment. According to Cllr Gollop, book value is “not a normal accounting metric”, and the council should also factor in the income now generated from the networks, from heating buildings.
During the cabinet meeting, he said: “My concern is about the valuation, because the assets are being transferred at book value. Book value is not a valuation, but the historic cost of purchasing those assets. We’re paying out huge fees to lawyers and accountants but we haven’t got them to come up with a valuation.”
However, more work will be done before the final sale of the networks to Vattenfall, according to council chiefs. And other companies bidded similar amounts for the networks, which means their value has already been “tested”. Vattenfall also runs heat networks in Amsterdam, Berlin, and cities in Sweden.
Cllr Kye Dudd, cabinet member for climate, said: “A value of £20 million is an estimate at this stage. The final price will be decided and there’s a process yet to go through. A number of the assets haven’t been built yet or are in the process of being built, so it’s hard to value something that is being built as we speak. We hope to complete that on August 1.”
Deputy mayor Craig Cheney added: “We do of course feel that we tested the value as part of the procurement process, through the various partners that bidded, who each bidded similarish values for the assets. So I think we’re relatively comfortable with that.”
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