The deputy chair of the Nottingham Conservatives has said Robin Hood Energy is ‘bound to fail’ and faces potential bankruptcy during an interview with CBJ Star.
Robin Hood Energy is a non-profit gas and electric company founded by Nottingham City Council in 2015.
£25.5million has been invested in the company by Nottingham City Council over the last four years to keep the gas and electric supplier afloat.
Last year the company announced that it had made a profit of £202,000 but that was only after they swapped a £7.5m loan from Nottingham City council for shares in the company.
William Scott, the Deputy Chair of the Nottingham Conservatives and a retired accountant, said:
“I think secrecy has become ingrained in City Council. They use cloak of Commercial sensitivity. RHE [Robin Hood Energy] was political project and they were naive to risks and costs.
“It’s been set up for political reasons and it’s an extremely competitive market. In my mind it is bound to fail because it’s such a competitive market.
“Their claiming at the moment that they have 130,000 customers, although you can never tell as they are very secretive. Of that 130,000, I believe that about 100,000 are not in Nottingham.
“It means that if Robin Hood Energy goes bust it’s not Liverpool that will have to pay for it, it’s Nottingham.”
Nottingham currently has the second highest council tax in the country paying £5 less per year than the highest council tax authority of Rutland.
Dorset Council share the second highest council tax with Nottingham City with an average band D council tax of £2,038 a year.
The council has recently announced cuts as well as a rise in council tax due to being in debt.
These cuts have reduced some bus routes, affected funding for the NGY youth centre, increased parking charges on a Sunday in Nottingham City Centre and will cause the loss of around 27 council jobs.
Some people took to Twitter to complain about the rise in council tax, blaming the Nottingham City Council-funded energy company.
An article by The Times revealed that Jeremy Corbyn is one of Robin Hood Energy’s customers, which only caused more anger online: ” Jeremy Corbyn enjoys a cut-price energy deal in his north London home from a company funded by millions of pounds of taxpayer cash.”
— Cllr Francesco Lari (@FrancescoLari) January 15, 2018
Jeremy Corbyn citing Nottingham's Robin Hood Energy as great example of public-owned energy firm. It put up dual fuel bills by 17% in March.
— Peter Saull (@petesaull) May 16, 2017
Nottingham City council released a statement:
“It comes from the overall working cash balances held by the council and is paid back into those funds, with added interest…The City Council has provided financial support to Robin Hood Energy at a commercial rate of interest, which is compliant with state aid legislation and therefore means that the Council earns interest on the financial support it provides.”
Robin Hood Energy also responded to the allegations on Twitter:
“The money loaned to Robin Hood Energy by Nottingham City Council has had no effect on Council Tax. The City Council has provided financial support to Robin Hood Energy at a commercial rate of interest.
“The council would have to make more cuts to local services if it hadn’t loaned money to Robin Hood Energy and received £2m in interest payments.”
But Mr Scott believes that Robin Hood Energy reducing cuts to local services is ‘nonsense’.
He said: “Maybe they have been paying back the initial 11 million loan but the total they now owe to Nottingham City Council is £25 million. To say they are paying off the loan while meantime they are borrowing more.
“In my view, Robin Hood is totally worthless and faces potential insolvency. At that stage, if not before, the City Council will have to write off it’s £25m plus loans and share capital investment, which will have an immediate impact on it’s budget for matters like social care.
“In their books the council are showing these as loans and they haven’t written off the loans yet but if Robin Hood goes bust they will have at least 25 million pounds to write off, then it will affect council tax,” explained Scott.
“Energy companies need to buy forward their energy, but energy prices are going up and down all the time so what they tent to do is to buy their energy forward to match their commitments but having to go into this forward market and competing against the big six.
“Robin Hood Energy have 180 local Nottingham employees. Do they think they stand any chance? Their going to get slaughtered in the forward market.”
In a Nottingham City Council meeting in September 2018 Councillor Graham Chapman responded that the initial loan is scheduled for repayment on March 31 2027 with the subsequent loans due by December 31 2024 with interest of 7.56% up to 11%.
He stated that the interest on the most recent loan is less because of the “reducing risk which means that the company is stabilising.”