COMMERCIAL IN CONFIDENCE: RESTRICTED INFORMATION
COMBINED AUTHORITY INVESTMENT FUND:
NETA SKILLS CENTRE
SUMMARY OF APPRAISAL AND RECOMMENDATIONS
APPLICANT DETAILSLead Organisation: / Stockton Riverside College (SRC)
Registered Address: / Harvard Avenue, Thornaby, Stockton-on-Tees, TS17 6FB
Details of Any Joint Venture or Consortium Arrangements:
None
PROJECT DETAILS
Project Title / NETA Skills Centre
Project Location / The project will take place at two sites in Stockton:
§ NETA (1): NETA’s current premises on Pennine Avenue, North Tees Industrial Estate, Portrack Lane, Stockton on Tees, TS18 2RJ.
§ NETA (2): NETA’s new premises in Units B&G, Lustrum Trade Park, Cheltenham Road, off Portrack Lane, Stockton-on-Tees.
Project description:
Refurbishment of existing building NETA 1 alterations and new equipment for NETA 2.
This is in response to a strategic review following the merger of NETA with Stockton Riverside College. This review highlighted the need for significant investment to upgrade facilities to maintain and grow its business.
The creation of a ‘Skills Hub’ is to increase engagement in Science, Technology, Engineering and Maths (STEM) provision for young people aged 14 and over by upgrading and improving existing and securing new accommodation to meet the needs of the renewable and low carbon sector, establishing an independent technical assessment centre.
The improved facilities will help NETA deliver the following:
· Formula 1 Schools Challenge
· The Sustainability Centre
· Technical testing and Reskilling Centre
· Welding Provision (relevant to current needs of industry)
The Single Pot (£824,000) will pay for equipment costs and the College will pay for the refurbishment works at both sites.
Project Variations:
XX
XX
XX
HIGH LEVEL FUNDING SUMMARY
Funding type / 2016/17 / 2017/18 / 2018/19 / Total / Status
LGF / £824,000 / £824,000 / Applied for
Match Funding HCFE Investment / £300,079 / £300,079 / Approved
Total / £1,124,079 / £1,124,079
APPRAISAL SUMMARY
Case / Result / Comment
Strategic / Good / 1. The projects is in line with the key ambitions of the Strategic Economic Plan (SEP) namely;
· Ambition 1 Drive the Transition to the High Value Low Carbon Economy
· Ambition 2 Create a More Diversified and Inclusive Economy.
2. The scheme will deliver against SEP key objectives:
· Support Innovation and Sector Development
· Develop The Workforce - secure improved skills levels to address future demand in growth sectors and in existing industries
· Attract and Retain Wealth - create and retain wealth by developing the tees valley as a place to live in, work and visit.
3. Strategic case also makes reference to a number of other national and regional strategies to which the project will contribute.
4. XX
Economic
Economic cont…. / Satisfactory
Satisfactory / 5. The evidence of need is drawn primarily from a 2016 Market Analysis Report by New Skills Consulting. This is an analysis of NETA’s target sectors, skills gaps and current training provision.
· XX
6. The project works closely with the themes of the market analysis and has been designed specifically to;
· Address key needs within engineering, energy and construction
· Respond to specific demand from employers and learners
· Complement existing skills and training provision within Tees Valley for these industries.
In addition to the strategic need the business case highlights market failure stating that :
· Education is a public good and there is no incentive for the private market to create the optimum level of education provision.
· Imperfect information in new and emerging sectors eg low carbon, means that scale and pace of growth is uncertain and recent Brexit decision means uncertainty which leads to investment plans being put on hold. This uncertainty means investment in large scale facilities is not viable without public support.
XX
7. A number of options have been considered. Critical success factors (CSFs) are the key criteria for the Programme against which the options have been appraised. In addition to the CSFs, options have been assessed in terms of their contribution to the SMART objectives and 6 options have been considered following a logical and systematic approach.
8. XX
9. Outputs are considered acceptable for a project of this nature and include 906 sqm refurbished training /learning space, 16 jobs connected to the intervention and 8 jobs safeguarded, 8,615 increase in skills levels (level 2, 3 and 4), and 115 apprenticeships completed.
10. BCR is 3.9 and is considered satisfactory.
Commercial / Satisfactory (with conditions) / 11. Scheme is to be delivered by SRC and NETA (a wholly owned subsidiary).
12. Once capital investment is complete NETA will be responsible for delivering learning provision and recruiting new staff required. There is a revenue projection prepared by SRC/NETA to show sustainability of the project. This is based upon some key assumptions around growth in learner numbers and income based on these new areas of provision, and current funding rates published by SFA for apprenticeships. XX
13. Subject to these uncertainties we consider the project is feasible and viable.
14. There is a high level risk register which seems to be a fair assessment of the situation. We would prefer a RAG rating system to be used with clear ownership of individual risks going forward.
15. Procurement – Details of SRC procurement processes has been provided and these are considered to be acceptable.
Financial / Satisfactory (with condition) / 16. SRC is a charitable organisation. In August 2015 it acquired another charity, NETA Training Trust (‘NETA’), by becoming the sole member of NETA. The applicant has explained that NETA and SRC operate as separate organisations. Our initial understanding was that SRC intended to deliver the capital project, with NETA delivering the subsequent learning provision for which the new facilities will provide capacity. However, forecasts supplied by the applicant for NETA indicate that the cash outflows for the capital project are borne by NETA.
17. In terms of the financial position of the applicant (SRC and the group), the working capital position appears to be healthy, XX. The forecasts show sufficient operational cash is being generated to cover financial commitments.
18. XX
19. Back up quotes for the project costs been supplied and agree to the costs in the application, although certain items as documented above relate to work being done by NETA itself.
20. There is no possibility of the applicant recovering the VAT as it delivers VAT exempt services and therefore VAT registration is not available
21. The financial reporting, particularly on forecasts, would benefit from a more robust approach. Based on the existing information, it is not possible to visualise forecasted monthly group cash flows or to identify the project cash flows within the context of the group forecasts. It appears that the relevant information to enable fully integrated forecasts to be prepared, covering profit and loss, cash flows balance sheets does exist.
22. We recommend that TVCA makes arrangements so that it can access funds of SRC and NETA and any other connected companies in the group, in the event that clawbacks are required or if the project doesn’t proceed in accordance with agreements. This will need to be reflected within the funding agreement.
23. Match funding of £300,079 for the project is being provided by Stockton Riverside College which has been generated from the sale of NETA’s premises in Billingham. The match funding has been available since the 1st August 2016, and has been used to cover some of the initial items of expenditure i.e. the lease on Units B and G at Lustrum Trade Park, and initial internal works at Pennine Avenue to create the F1 in Schools classroom. We understand that this work needed to take place in late August / early September to minimise disruption to learners based at the Pennine Avenue site. XX.
24. The minutes of the meeting of the Finance & Employment Committee of 28 Sept 2016 discuss sale of the NETA Billingham Site and agreed to a project development budget and the approval and submission of the LGF application, although there are no references to specific levels of match funding within the minutes.
25. Based on a review of the financial statements, grants have been received by the applicant in the past in relation to property purchases, and there may be conditions attached to the grant award whereby grant money has to be paid back to the grant provider in the case of a sale of the relevant grant-financed property. Therefore the details of the property and any related grants should be confirmed as a precondition of funding.
26. Payback – None.
Management & Legal / Satisfactory (with condition) / 27. XX
28. No site investigation works have been carried out, or are required at the Lustrum Trade Park site, and site investigation works are not required for the works at Pennine Avenue. This site is already in use by NETA, and only slight internal modifications are planned for the building (e.g. construction of temporary walls to create new classroom space for the F1 in Schools programme).
29. Planning Permission – approved on 9th November 2016.
30. Minutes of College’s Board of Governors (Finance and Employment Committee 28 September 2016 discuss sale of the NETA Billingham Site and agreed to a project development budget and the approval and submission of the LGF application, although there are no references to specific levels of match funding within the minutes.
31. Timescales - The business case shows funding split across two financial years but it is not feasible to enter into a funding agreement and make a grant claim in the time available, hence we have profiled all expenditure in 2017/18. Overall timetable still achievable as College has proceeded at risk.
32. Track Record – applicant provides examples of a number of relevant projects and gives details of their project management and structure.
33. Evaluation – The applicant has outlined how the project will be monitored and have stated they will agree the monitoring and evaluation activities in discussion with Tees Valley Combined Authority. This should be subject to standard grant evaluation conditions.
34. XX
35. XX
36. XX
RECOMMENDATION
The project is recommended for approval subject to the conditions recommended by the Independent Appraiser and completion of the standard funding agreement.
Recommended / Recommended
(with conditions) / Defer/Reject
CONDITIONS
Pre-Conditions (to be satisfied before entering a Funding Agreement)
1. Based upon a review of the financial statements, grants have been received by the applicant in the past in relation to property purchases, and there may be conditions attached to the grant award whereby grant money has to be paid back to the grant provider in the case of a sale of relevant grant financed property. Therefore the details of the property and any related grants must be confirmed and risk assessed.
2. Applicant to obtain a final version of state aid advice from their lawyers contemporaneously with completion of the funding agreement and to specifically confirm they accept the risk associated with this advice.
3. Applicant to confirm that overall programme is still deliverable on timescales indicated in milestones.
Essential Conditions (to be included in the Funding Agreement)
4. Risk register to include named owners of risks and overall RAG ratings based upon impact and probability
5. Funding agreement to allow access the funds of SRC and NETA and any other connected companies in the group, in the event that clawback is required if the project does not proceed in accordance with the agreement.
6. First grant claim to be made within 7 days of completing funding agreement.
TVU LEAD APPRAISER:
PRINT NAME / Sarah Walker, Investment Planning Manager
SIGNATURE /
DATE / 3 April 2017
TO BE COMPLETED AFTER TEES VALLEY MANAGEMENT GROUP: RECORD OF DECISION
TVCA Board Approval: / 24th August 2016
TV Management Group CHAIR: / Kevin Parkes (Middlesbrough Council)
DATE OF TV Management Group MEETING: / 19th April 2017
Sign off by TVCA Managing Director:
NOTE: When a decision is made this document will become unclassified and will be available on the Combined Authority website to meet the requirements of the Assurance Framework. Confidential information will be redacted.
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