In UK Scandal, A Chauffeur, Leaked Dash-Cam Tape, A Half-Billion Loss

A hard-pressed local authority in the UK has bet hundreds of millions of pounds on solar energy.

When a struggling local authority in southern England wanted to shore up its finances, it turned to a novel idea: hundreds of millions of pounds worth of leveraged bets on solar energy.

For Essex’s Thurrock Council, it sounded like a surefire winner. Instead, the gambling backfired spectacularly.

Last month the council announced a loss of £470m ($572m) for the current financial year after its various investments went wrong – about £2,670 for each of the region’s 176,000 residents who now face higher taxes , while the local authority seeks a national government bailout.

The debacle underscores concern over how some UK local authorities have invested taxpayers’ money in risky initiatives. It has also thrown the spotlight on entrepreneur Liam Kavanagh, who owned the solar farms.

Following reports by the Bureau of Investigative Journalism of his business relationship with Thurrock, Kavanagh said in June 2020 that he “will never again raise a pound from a local authority,” according to recent court filings from a case in which the financier is suing his former Chauffeur.

Kavanagh’s companies, which operate solar farms across the UK, had received hundreds of millions of pounds worth of investment from Thurrock Council, which oversees a region along the River Thames east of London.

Two years later, Thurrock is in a huge annual deficit and has been robbed of its financial strength. The previous Council President has resigned.

Mark Coxshall, current leader of Thurrock Council, described the losses as “shocking” but added: “The first stage in creating a good recovery plan is understanding the full extent of the problem.”

When the sun is shining

The story goes back at least to June 2016, when Thurrock Council helped fund the purchase of a solar farm in Swindon, England, through bonds marketed by Rockfire Capital, a Kavanagh-owned company. In the years that followed, Thurrock helped fund 53 solar farms across the UK, all of which eventually belonged to Kavanagh.

The arrangement was not without precedent. UK local authorities are known to be borrowing money to invest in new projects to top up revenues squeezed in the years following the financial crisis. Now they face another bottleneck as Prime Minister Rishi Sunak cuts spending to rectify the ill-fated seven-week reign of his predecessor Liz Truss.

Other investments have gone wrong. Last year Slough Council in Berkshire was taken over by ministers after a series of commercial takeovers blew a £100m hole in its budget. In Spelthorne, in Surrey, the council used hundreds of millions from the Public Works Loans Board to buy commercial property – at one point to borrow £1.1 billion.

These councils were spurred on by the 2010-15 coalition government, which wanted local authorities to be more businesslike. In 2016, when Thurrock made its first investment in a solar farm, the local authority said it was a “pro-revenue-generating council” and would “continue to look for similar opportunities.”

“People in Thurrock can rest assured that not only are we taking care of their money, but we are also doing our part to protect the environment by reducing the amount of carbon produced by burning fossil fuels,” said Shane Webb, a Tory councilor in 2016.

To make it big in renewable energy, Thurrock has borrowed £1billion at low interest rates from more than 100 other local bodies including the Greater London Authority, Cornwall and Leicester Councils.

At one point his debt reached £1.4bn, almost 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 inquiry.

“I and other Council members have been raising concerns about the Council’s borrowing and investment strategy for over two years,” Kent wrote in July of this year. “Consistently we have been ignored, falsely reassured, fobbed off and misled.”

Toucan Energy

Some details emerged in a Supreme Court ruling released in April last year in 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 farms.

Toucan is seeking around £30million in damages over alleged shortcomings at the parks. In the end, the judge dismissed most of the lawsuits.

Although Thurrock was not a party to the case, his dealings with Rockfire Capital and Kavanagh were mentioned in the proceedings. The court heard Rockfire Capital had approached Thurrock in 2018 with an opportunity to invest £145m in bonds linked to the parks – on top of the hundreds of millions it had already invested in the solar parks.

Kavanagh was a witness in the case and not a party. During the case, it emerged that a £5million commission charged to Thurrock by Rockfire Capital was not included in a prospectus sent to the council. Kavanagh told the court that he saw no reason to include details of the fee in the document because all of his business partners knew Rockfire Capital “always charges a commission.”

The ruling also quoted Daniel Kirk, who worked at Toucan Energy, who said in a message to a colleague he “doesn’t work for someone who just treats us like an ATM for their own equity if [the] Taxpayers and signed contracts [sit] above its equity.”

During the trial, he told the court that these comments were “rather a personal failure on my part at this time to properly guide and communicate with Mr Kavanagh”. Kirk declined comment when contacted by Bloomberg News about this article.

In another message cited in the case, Kirk said Kavanagh “took” two payments – reportedly £350,000 and £650,000 – and complained: “These are intended to cover our costs, not his cars.” The judge in the case, Judge Andrew Henshaw, concluded: “Mr. Kirk’s contemporaneous view that Mr. Kavanagh is making money out of the deal for his own benefit is clear.”

The chauffeur

Kavanagh himself has gone to court to protect his reputation, filing a case against his former chauffeur Tony Tremlin, who allegedly gave a copy of dashcam footage to a journalist with the Bureau of Investigative Journalism.

The court filings refer to footage of Kavanagh allegedly complaining about BIJ articles about him. Kavanagh says the dash cam was for vehicle security, “not to obtain and keep secret recordings” of his conversations.

The financier was caught on tape speaking about how he planned to wind up one of his deals: “You take risks, you get in and out.” Bloomberg has seen a partial transcript of this recording in publicly available court filings.

The quotes attributed to Kavanagh in the filing include saying he must “protect everyone’s interests and money” and “get rid of” Rockfire Capital in the wake of a BIJ story.

“That doesn’t bother me now,” he is said to have said. “I will never raise a pound from a local authority again.”

Tremlin said in his defense filings that disclosure of the footage was in the public interest. He accused Kavanagh of liquidating companies that owed £655million in public money without Thurrock’s approval.

Kavanagh claims that the information given to the journalists is confidential and that he “does not advertise”. The case is ongoing, and Tremlin has been filing his defense for the past few weeks.

In response to Toucan Energy Holdings 1 Ltd. went into administration last month, Kavanagh said in an emailed statement: “I cannot comment on the decision to place the company into administration as I had no role in that decision or in running the Toucan business have. I installed a new management team in June 2022 and as far as I know the underlying business has developed strongly.”

In the statement, Kavanagh added, “I am confident this is a business with a positive future, especially given the recent and current growth in the green energy market.”

Tremlin did not respond to a request for comment.

emergency rescue

Thurrock’s financial health has continued to deteriorate. In September, ministers stripped him of some powers and put Essex County Council in charge of his finances. Thurrock has been ordered to refinance its soft loans to repay neighboring local authorities and has borrowed money from Britain’s Public Loans Works Board at an interest rate of between 4% and 5%.

Rob Gledhill, former chairman of the council, resigned. At the time, Gledhill said he welcomed government support but “the political money stays with him.” He declined to comment on this article. Sean Clark, a former corporate director of finance 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, Kavanagh’s holding company, filed for bankruptcy. Interpath Advisory, a restructuring firm, was tasked with finding a buyer for the farms. Coxshall, the current leader of Thurrock Council, said in a statement the move would “maximize” recovery for taxpayers.

The full extent of the potential losses to the taxpayer was revealed last month. Thurrock disclosed a deficit of £470m for the current financial year and wrote off four investments costing £275m. It said it had made a further provision of £129million to cover other losses.

Thurrock has appealed to the national government for an emergency financial bailout, warning of further cuts and a likely sale of buildings, land and other assets – along with tax increases for local residents.