RESTRICTED INFORMATION
ANNEX 1: LOCAL GROWTH FUND SUMMARY
OF APPRAISAL AND RECOMMENDATIONS
APPLICANT DETAILS
Lead Organisation:
Materials Processing Institute
Teesside Technology Centre
PO Box 11
Eston Road
Grangetown
Middlesbrough
TS6 6US
Details of Any Joint Venture or Consortium Arrangements:
None
Registered Address:
PROJECT DETAILS
Project Title
MPI – Open Access & Innovation Centre
Project Location
Teesside Technology Centre
PO Box 11
Eston Road
Grangetown
Middlesbrough
TS6 6US
Project description:
To create a globally recognised centre of excellence in the development and commercialisation of
technology, for the materials, processing, energy and related industries.
Objectives
1. Develop and commercialise technology solutions for industry and SMEs that increase
profitability, enable growth and reduce environmental impact, in a safe and sustainable way.
2. Work across the materials sector and in collaboration with the Institute of Materials, Minerals
and Mining as the recognised national centre of excellence for materials processing, raising the
profile of UK materials nationally and internationally.
3. Provide challenging and rewarding careers to talented technicians, engineers and researchers.
In so doing, attract, invest in and nurture people to the benefit of the Institute, the individual and
the materials sector as a whole.
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Societal and Ethical Mission
1. Develop technology based solutions for industry and the supply chain, which enable the highest
standards of ethical production without economic disadvantage.
2. Have a lasting positive impact on the surrounding community, as a consequence of the work
undertaken, the way in which business is conducted and the opportunities provided for
education, employment and training.
The project seeks to enhance the existing facilities to provide a new Open Access Innovation
Centre for Industry and SMEs. This is by the creation or provision of;
1.
2.
3.
4.
5.
Modern market standard office accommodation for SMEs within Red-Block
Laboratory and demonstrator space for SMEs within Blue-Block
A hospitality area within Green-Block
Office accommodation for the Doctoral Training Centre within Blue Block
New equipment to enhance the R & D capabilities and service offering.
Changes Since the Original Application
1.
A number of details around which spaces are being developed/refurbished have changed and
some additional equipment following significant developmental work since the last approval
stage.
2.
There have been significant changes to outputs but these are driven by original estimates
including significant double counting and by the inaccurate calculations of safeguarded jobs.
3.
BCR has also changed following assessment by a professional economist rather than MPI’s
commercial team. The basic principle and scale of the project is in line with previous stages.
HIGH LEVEL FUNDING SUMMARY (Full detail to be provided in spreadsheets)
Funding type
2014/15
2015/16
2016/17
LGF
£66,465 £2,023,304
£910,231
Private
£6,410,410
£98,135
£2,702
Total
£6,476,875 £2,121,439
£912,933
2017/18 Status
Project will only be able to
draw down up to £1.5m in
2015/16 and £1.5m in
2016/17 as per approved
allocation.
TOTAL = £9,511,247
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APPRAISAL SUMMARY
Case
Strategic
Result
Comment
Satisfactory
1. Strategic case has been made and this project contributes to
achieving both the SEP and wider Government Strategies through:
 Developing the infrastructure necessary to create an open
access technology centre for the materials, processes and
energy sectors,
 Providing industrial R&D to overcome business challenges
 Supporting SME growth and start up
 Supporting commercialisation of technology
 Strengthening supply chain linkages
 Develop high level skills in key sectors
 Contributing to the transition to a low carbon economy
 Enabling the Tees Valley and the UK to maintain its
comparative advantage in these sectors.
2. Evidence of Need - has some evidence base but could be have
been strengthened by drawing upon information collated for the
SEP and ESIF and further consultation with businesses to better
demonstrate evidence of need within the Tees Valley.
Economic
Satisfactory
3. Options assessment is well made, outputs are lower than
predicted but robustly assessed.
4. BCR is satisfactory at 2.3.
5. Some evidence of demand for services based on initial trading
(although lacking documentary evidence).
6. Procurement conditions to impose as under OJEU threshold.
7. The support/ underwriting of XX is crucial to viability – see finance
section for further details.
Commercial
Satisfactory
(with
condition)
8. Risk section highlighted normal construction issues but does not
consider long -term operational risks. The appraisal references
wider risks to TVU as the funder and identifies the possibility of
legal charge for consideration.
9. MPI has stated that this may be possible during the construction
and grant payment phase but would potentially compromise
funding if imposed beyond that.
10. XX
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11. The introduction of a legal charge will usually add a 3 month
delay on the legal state of the grant offer process which
could impact on the programme.
ACTION: The panel are asked to recommend that a legal charge
is not imposed as it will not offer the security required; thereby
accepting this risk which will be managed accordingly according
to the LGF Programme Management Framework.
12.XX
13 XX
14. XX
Option 1 – Monthly in arrears
Paying in arrears poses a higher risk to project delivery. The LGF
monies are to be paid to SBC in one annual instalment via section 31;
therefore the financial risk in paying monthly in advance is low.
Financial
Satisfactory
(with
condition)
Option 2 - Monthly in advance
This would provide the applicant with the level of cash flow required.
The advanced payment would be evidence based, the details of which
will be discussed and agreed with the applicant on approval. This will
reduce the risk to TVU and minimise any potential loss of grant should
the project get into difficulty, whilst removing the risk to project
delivery due to cash flow.
The standard principle for LGF claims is quarterly as monthly claims
for the whole programme would be unmanageable. Therefore the
Investment Panel should consider this as an exceptional case.
ACTION: On this basis TVU would recommend Option 2 as a
preferred option and ask the Panel to endorse this. If endorsed, a
revised spend profile and cash flow will be required based on the
maximum annual allocation of £1.5m in 2015/16 and £1.5m in
2016/17. The applicant cannot draw down over their annual
allocation.
15. The revised cash flow must not include recoverable VAT.
16. A variety of requirements and conditions around finance to be
satisfied before completion of any funding agreement.
17. XX
Management
& Legal
Satisfactory
(with
condition)
18. The lack of intrusive site investigations is a risk to the project but
acceptable risk given minimal new build and mitigation. A
desktop report from SOLMEK (Nov 2014) has been provided that
gives some comfort around site conditions. The cost plan has
contingency included to cover the risk of ground conditions being
worse than envisaged.
19. XX
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20. Planning permission for the minimal external works has been
submitted to the relevant authority, with a response expected in
the next month. Reassurance has been provided to TVU that the
internal works do not require planning permission. Planning is
therefore considered a low risk but a precondition to draw down
funding.
21. State Aid – A legal opinion has been provided which in broad
terms meets requirement of state aid. However there are a
number of assumptions which are required to backup various
assertions and grant conditions to ensure certain characteristics
of the facility.
22. Until these issues are finalised the state aid position is at
risk. It seems likely that the applicant will be able to address
these issues satisfactorily which would remove this risk and
assure the appraiser of state aid compliancy. The applicant will
also need their legal advisors to address the opinion to SBC as
the accountable body. Not considered as a high risk as
principled stance seems reasonable and conditions are in
place to satisfy requirements.
23. Timetable - is achievable with a suitable professional team in
place (see conditions). Note that due to funding available to this
project in 2015/16 (£1.5m against a requirement of £2m), there
may be a delay in the start date of the project.
24. XX
RECOMMENDATION
The project does have a number of risks which need to be covered off by further investigations XX. The
project is recommended for approval subject to satisfying these requirements, the particular conditions
recommended by the Independent Appraiser and completion of the standard funding agreement.
If any of the conditions are not satisfied in the necessary time period, this project will be referred
back to the Investment Panel to review their decision.
Recommended
Recommended
(with conditions)
Defer/Reject
CONDITIONS
Essential Pre-Conditions - to be met prior to entering a funding agreement:
1. Agree payment monthly in arrears or monthly in advance as set out in the financial case point 11
in the above summary. Applicant to confirm they can meet the revised spend profile on whichever
basis is agreed
2. Provide the following documents to Adrian Stanley at DWF (TVU’s legal representative):
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XX
3. Title Report must be issued contemporaneously with completion of the funding agreement.
4. Clarifications as outlined in the full appraisal state aid review to support opinion is required.
5. State Aid position to be issued as an opinion to Stockton Council at date of completion.
Essential Conditions - to be included in the funding agreement:
6. Appointment of the main building contractor and any equipment outside of the main building to be
procured through competitive tender with a minimum number (4) of suitable contractors to comply
with accountable body’s minimum requirements.
7. Detailed planning consent for the scheme is evidenced prior to draw down of funding.
8. To meet State Aid Requirements:
8.1 Charges for completed scheme will be market prices for access to the infrastructure.
8.2 Access will be made available to end users on an open and non-discriminatory basis.
8.3 Economic and non-economic activities of the facility will be separated out.
9. MPI is to retain or appoint the services of a professional construction project manager should the
application be approved.
Standard Conditions - to be referenced in the TVU issued LGF Project Handbook
10. Mitigating action for red risks in register must be implemented.
Specifically for this project, confirming the main contractor procedure regarding discovery of
asbestos materials to be commissioned for inspections and testing.
11. At project closure a QS is appointed to check the original plans against the delivered project.
TVU LEAD APPRAISER:
PRINT NAME
Heather Heward (Strategic Investment Planning Manager)
SIGNATURE
DATE
23.01.15
TO BE COMPLETED AFTER INVESTMENT PANEL: RECORD OF DECISION
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CHAIR:
Stephen Catchpole (on behalf of Neil Schneider)
CONFLICTS OF INTEREST:
Not direct but Stephen Catchpole is an observer on the MPI Council
DATE OF MEETING:
27th January 2015
DECISION:
Recommended for Investment with Conditions
NOTE: When a decision is made at Investment Panel this document will become
unclassified and will be available on the TVU Website to meet LGF audit requirements.
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