COMMERCIAL IN CONFIDENCE: RESTRICTED INFORMATION
COMBINED AUTHORITY INVESTMENT FUND:
NETA SKILLS CENTRE
SUMMARY OF APPRAISAL AND RECOMMENDATIONS
APPLICANT DETAILS
Lead 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
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works at both sites.
Project Variations:
XX
XX
XX
HIGH LEVEL FUNDING SUMMARY
Funding type
2016/17
LGF
Match Funding HCFE
Investment
Total
2017/18
2018/19
Total
Status
£824,000
£824,000
Applied for
£300,079
£300,079
Approved
£1,124,079
£1,124,079
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APPRAISAL SUMMARY
Case
Result
Comment
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.
Strategic
Good
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
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.
Economic
Satisfactory
 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.
7.
Economic
Satisfactory
XX
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
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cont….
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.
11. Scheme is to be delivered by SRC and NETA (a wholly owned
subsidiary).
Commercial
Satisfactory
(with
conditions)
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.
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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.
27. XX
Management
& Legal
Satisfactory
(with
condition)
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
5
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.
2.
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.
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.
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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.
5.
6.
Risk register to include named owners of risks and overall RAG ratings based upon impact and
probability
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.
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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