Bute Energy Development Holdings Ltd resolutions 20/01/25 and court order

On January 20th 2025 Bute Energy Development Holdings (BEDH) passed 2 resolutions. The first resolved that a single deferred share of £110 million be issued by capitalising a revaluation reserve of the same amount; the second, following the passing of the first, resolved that the deferred share be cancelled and the amount arising be attributed to distributable reserves. The reduction of capital resulting from the second resolution was approved by a court order on January 28th.

What does this all mean and why a court order? The effect of the 2 resolutions taken together is to change a non distributable reserve into a distributable reserve thereby circumventing Company Law which, for obvious reasons, treats revaluations as non distributable. Apart from window dressing the most likely purpose of this device is to enable distributions to shareholders notwithstanding brought forward losses on the profit and loss account. It seems likely that this was Bute’s objective.

The background to this is that In April 2023 the funding arrangements between Bute and Copenhagen Infrastructure were revised and as part of this in July 2023 CI acquired a call option from Bute Energy Development Holdings (BEDH) giving the former the option to purchase the 99.9% of the shares of the energy park companies not presently held by it at an an agreed but undisclosed strike price on the commencement of construction.  BEDH received £60 million for the sale of the option albeit the company is obligated to repay this if the option is exercised via a reduced strike price. Notwithstanding this it appears the directors were keen to distribute these funds through the group to their private companies. The difficulty with this was that BEDH had carried forward losses and no distributable reserves. To overcome this problem the company revalued its investment in its subsidiaries creating a revaluation reserve of £190 million. This was capitalised by the issue of a single deferred share of the same value. 3 days later the deferred share was cancelled and the proceeds attributed to distributable reserves thus enabling the payment of the dividend of £60 million to its parent Bute Energy (BE). BE in turn paid a dividend of the same amount to its parent Windward Energy (WE) and finally WE in turn paid a dividend of £58 million to its shareholders private companies - Windward Global for Oliver Millican (82%), Windward SG for Stuart George (8%) , Windward LS for Lawson Steele (8%) and Windward JR for John Reilly (1%).

Unfortunately, as Bute has since conceded, “it became apparent that the deferred share issue was ineffective”.  No details are given on this but the most plausible explanation is that concerns were raised that the signed directors declaration of solvency required by Company Law on the cancellation of shares was simply not accurate given the company’s circumstances. As a result of this the dividend was subsequently reversed and a receivable of £60 million from BE was recorded in the accounts of BEDH at 31/3/24. Curiously no similar receivable from WE is recorded in the accounts of BE and it seems likely that the funds remained in the promoter’s companies.

The resolutions in January 2025 appear to be an effort to rectify this shambles by again issuing and cancelling a deferred share albeit this time substituting a court order for the declaration of solvency on the cancellation.. A court order is normally only required for a public company on the cancellation of shares - its purpose being to protect creditors. Clearly in this case there was no risk to creditors as the share was only issued moments before it was cancelled and so the court order was given. The result again was an artificial increase in distributable reserves presumably allowing the dividend to be reinstated.

The final chapter in this saga was on February 19th 2025 when Bute returned to court with a section 1096 claim which had been adjourned from the previous hearing. The purpose of a section 1096 claim is to remove information from the Companies House register and in this case it was to delete all references to the 2023 deferred share transactions, including the declaration of solvency signed by the four directors, from the public record. This was surprisingly granted despite the fact that the transactions undoubtably took place and financial action was taken based on their outcome.

Does any of this matter? Firstly there is no suggestion of illegality - the issue is one of integrity and competence. Bute Energy is looking for approval from the Welsh government for plans that are of major public concern. In addition the Wales Pension Partnership has invested local authority pensions in the company. In the circumstances scurrying around with transactions with no purpose for the group's operations but rather the extraction of assets into the shareholders' own hands is not a good look.