£9 million Investment in Solar Park for Milford Haven Port Authority Pension Scheme
The Trustees of Milford Haven Port Authority Retirement Benefit Scheme have invested £9 million in a five megawatt solar park in Milford Haven.
Advised by law firm Morgan Cole, the trustee agreed to choose this innovative asset financing to reduce the pension scheme’s deficit. Their £9m investment has been contributed to a Scottish Limited Partnership (SLP) which, together with the £4m investment from Milford Haven Port Authority (MHPA), has been invested in a Special Purpose Vehicle (SPV) which is a subsidiary of Milford Haven Port Authority. This company will run the solar park and the proceeds from the company will be used to fund the pension scheme for a period of 20 years.
Milford Haven Port Authority was advised by corporate specialists firm Burges Salmon and by tax and finance specialists from Deloitte. Burges Salmon pensions partner Clive Pugh, advised MHPA on pension and corporate law matters in setting up the SLP and associated documentation.
Alec Don, chief executive of MHPA said “We believe that this development is in line with our strategy of maintaining a strong balance sheet to enable us to diversify and take advantage of other energy related opportunities. The fact that it also provides a funding stream to assist in addressing our significant pension deficit in relation to historic service is very welcome.”
Clive Pugh, a partner with Burges Salmon commented: "In line with the majority of UK defined benefit pension schemes, low gilt yields and poor market conditions have led to a material deficit in the pension scheme. Asset backed funding arrangements are a recognised solution in the right circumstances and one that we are well placed to assist with given our previous experience and knowledge of the issues. It was interesting that MHPA's innovative response in this particular case was to use funds to build an asset to be owned by the SLP. This is a novel response which we hope to see replicated by others."
Ian Barnes, Deloitte tax partner, commented “We worked closely with MHPA to implement a solution which immediately removes the pension scheme deficit, whilst also reducing the risk that the sponsor will over-fund the scheme in future years. Whilst we originally implemented asset-backed funding structures for FTSE100 companies with very large pension schemes, this transaction continues the recent trend of also using asset-backed funding solutions for smaller pension schemes.”
Michael Prior, a pensions specialist and partner with Morgan Cole added: “Our in-depth knowledge of both Milford Haven Port Authority and the Retirement Benefit Scheme enabled us to assist the Trustee on this novel asset backed contribution to the pension scheme in accordance with the guidelines from The Pensions Regulator. Through this investment, the Trustee has achieved a reliable and inflation-proof source of income for the pension scheme and Milford Haven Port Authority has gained a tax-efficient means of investing in renewable energy.”