Pembrokeshire council is facing questions over a £1.9m investment it made into the successful Bluestone holiday village. The investment, which had been made over a decade ago, has since lost nearly all of its value and was made public for the first time at a meeting of the full council.
It emerged that the council gave the popular £110m holiday park near Narberth some £1.9m in secured loans soon after it opened in August 2008. The loans helped fund the site's extensive swimming complex, then called Waterworld and now known as the Blue Lagoon.
Part of the justification for the loan was that Bluestone would give the public year-round access to the swimming complex at a fair price. However the following year, 2009, the council exchanged its loans for an equity share in the company. Pembrokeshire's council meeting was told that the shares were now worth just £70,000.
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The revelation was made by the council's cabinet member for finance Alex Cormack at the meeting on May 11. He was replying to a question that said: "Given the council’s previous investment in Bluestone of a £1.9 million secured loan, now converted into shares, can the Cabinet member advise what return on investment per annum has been received over the last five years in share dividends or any other form of income?”
Cllr Cormack, speaking via remote link as he had tested positive for Covid, said: "The council originally invested in Bluestone two loans; the key justification was Waterworld, now called Blue Lagoon – was to be an indoor venue accessible year-round for the general public of Pembrokeshire, and for a fair price.”
He said that investment was secured with a legal charge on land at the land registry but the following year Bluestone asked the council to exchange the loans for shares, which would have involved removing that legal charge over the land. The council declined that offer, but agreed it be considered at the next Cabinet meeting, Cllr Cormack told members. By the time the Cabinet met, Bluestone had successfully refinanced, with about £10m of extra investment. It was then that the behind-closed-doors decisions were made, removing the loans and the guarantees, members heard.
Cllr Cormack said the 2009 Cabinet report was confidential, so he couldn’t say what was in it, but said he could tell members “what was not in it,” saying there was no clear justification for taking up the shares or for giving up the legal charge guaranteeing the loans and no evaluation of the pros and cons, or evaluation of a fair share price.
Members heard the value of the shares amounted to - at best - under £70,000, and had paid out £19,000 in dividends over the last five years, with the highest dividend in a single year amounting to £5,250, in 2019-20.
“The council’s lost £1.8m of the £1.9m – roughly 95 per cent – of the IPPG investment and the public’s lost the guaranteed right to use the Bluestone pool,” said Councillor Cormack. “At this rate, if we took that maximum dividend amount of £5,250, the council would get its money back in roughly 340 years.”
He said previous conversations had taken place between the council’s director of resources and Bluestone’s finance director, with not much interest raised in purchasing them.
“Being a minority shareholder in a private company is a very weak position to be in, any attempt to sell shares would lead to a ‘minority share discount’,” he said. “It’s not clear to me that, A, we would be able to [sell], and, B, we would be able to raise a decent amount of money.”
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