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THE VALUATION TRIBUNAL FOR ENGLAND Summary of Decision: non-domestic rates, merger of assessments, Woolway (VO) v Mazars, geographical or functional test, chemical works, pipeline connecting, appeal dismissed. Re: TATA CHEMICALS EUROPE LTD LOSTOCK WORKS, MANCHESTER ROAD, NORTHWICH, CHESHIRE CW9 7NY & TATA CHEMICALS EUROPE LTD WINNINGTON, WALLERSCOTE WORKS, WINNINGTON LANE, NORTHWICH, CHESHIRE CW8 4DL APPEAL NO: 066525358322/539N10 BETWEEN: TATA CHEMICALS EUROPE LIMITED Appellants and MR ROBIN HUGHES Respondent (VALUATION OFFICER) BEFORE: Mr G Garland (President) SITTING AT: The Tribunal Offices, 2nd Floor, 120 Leman Street, London, E1 8EU ON: 6 March 2018 APPEARANCES: The Appellants were represented by Cain Ormondroyd of Francis Taylor Building as advocate. The Respondent Valuation Officer was represented by Guy Williams of Landmark Chambers as advocate. Witness Statements were provided by: Mr Peter Houghton, a Director of Tata Chemicals Europe Ltd; Mr Ian Charman, an equity partner of Turner Morum LLP; and Mr Robin Hughes, specialist case worker with the Valuation Office Agency. Summary of Decision 1. The appeal is dismissed as the hereditaments do not meet the geographical or functional test. Introduction 2. The proposal made on 25 March 2015 and appeal, sought a merger of the two separate assessments into a single entity on the grounds of geographical layout/contiguity as well as on the grounds of technical, financial and practical mutual interdependence. The parties made application for the appeal to be treated as complex in accordance with the Tribunal’s Consolidated Practice Statements (CPS3). I agreed to the request and issued Directions. By the time of the hearing the parties had agreed a single preliminary point which they advised me underlined the appeal. If I found for the Appellants the parties hoped to agree a valuation for the revised assessment and, if I found for the Respondent the appeal was lost. A bundle and aerial film of the pipeline (expertly taken from a drone) were provided to me in advance of the hearing for which I was grateful. 3. In simple terms this preliminary point considered the question of whether the two individual chemical works occupied by Tata Chemicals Europe Ltd (TCEL) at Winnington and Lostock which are joined together by a steam pipeline and a high tension electrical supply connection, should properly be regarded as forming one single hereditament for rating purposes with effect from at least 3 February 2014 (which was the material day) onwards. 4. Both sites are chemical plants operated by TCEL. They are located at different sides of the Cheshire town of Northwich and are around 3 miles or 5Km apart from each other. However, the two sites are physically connected by a direct high tension electrical supply and three pipelines: two steam pipelines each of 18” diameter and one condensate pipeline is of 6” diameter. 5. At the date of the proposal (and indeed at the present time), the two sites are shown on the local list as two separate hereditaments for the purposes of national non-domestic rates under the Local Government Finance Act 1988 (“LGFA 1988”). 6. Lostock is a purpose-built chemical plant designed and built for the production of soda ash and sodium bicarbonate as a by-product/further process product of the soda ash manufacturing process. The equipment on site is specialist and on a large scale, a large number of the elements of the plant are rateable including conveyors, conveyor towers, kilns, bunkers and storage silos. I understood that there is no alternative use of these facilities due to the specialist nature of the buildings and the large amount of rateable plant which is accepted to form part of the hereditament. 7. The manufacture of soda ash requires a large supply of process steam and electrical power. I was advised that energy represents some 50% of the cost base of the operation at Lostock, which I am also informed is a relatively high proportion. Electrical power is in theory available from the national grid, although this would be so expensive that it would put the economic sustainability of the operations at risk. 8. The only source of process steam to Lostock, however, is via the system of direct pipelines from Winnington (“the Pipeline”). The Pipeline currently forms part of the Winnington hereditament for rating purposes. Even if steam is available from elsewhere, Lostock is also economically dependent on receiving low cost steam from Winnington. 9. Some (but not all) of the end product from the Lostock site is transported to Winnington where it is processed into food-grade or healthcare grade sodium bicarbonate. The buildings at Winnington which are used for this process are also large, purpose-built and unsuitable for any other use. 10. I was told that until 2000 there was a power station (dual fuel oil and coal) on site at Lostock and two similar power stations on site at Winnington. The main purpose of all of the power stations was to provide process steam but they also generated the electrical demand on site. The stations became obsolete and a purpose built gas fired Combined Heat and Power plant (“the CHP plant”) was then constructed on part of the Winnington operational site, with cross country steam pipelines to Lostock and a direct power connection. The CHP plant came on line in 2000 and the two power stations at Winnington were subsequently demolished. The power station at Lostock has not yet been demolished but, I believed, was incapable of use. 11. The CHP is in fact split across the two ends of the Pipeline. The main generator is at Winnington but a further generator and steam conditioning station at Lostock but controlled from Winnington. 12. At the time the CHP plant came on line and immediately thereafter, the CHP plant and Pipeline were owned and operated by a third party. It operated at a substantial loss. In 2013, the CHP plant and Pipeline came within the ownership of TCEL. 13. In 2014, TCEL closed down the soda ash production facility at Winnington. This was subsequently decommissioned and partly demolished and it was agreed that the soda ash facilities at Winnington were no longer physically capable of use and all parts were removed from the assessment with effect from 3 February 2014. This left just the CHP plant, the sodium bicarbonate production facility and the main administrative offices, some laboratory and research facilities on site at Winnington. 14. The practical effect of closing down the soda ash production facility at Winnington was twofold. First, Winnington became dependent on Lostock for its supply of soda ash. Second, Lostock became the main source of demand for process steam from the CHP plant. 15. The sodium bicarbonate production facilities at Winnington could, in theory, function without the soda ash production facility at Lostock due to the potential for importing soda ash. However, there is no other soda ash producer in the UK and therefore the ash would need to be acquired from abroad. 16. The Appellants state this would not be at all economically viable due to the very high costs of transporting the soda ash to Winnington, they rely on the economics as being a factor in their argument , in short saying one was not viable without the other. 17. The soda ash production facility at Lostock could not be used for any other purpose and can only be used for soda ash production which in turn requires a large supply of process steam. The only such supply available is from the CHP at Winnington via the Pipeline. Lostock could not be used for its intended purpose without the supply of steam via the Pipeline. There is no alternative source of steam for Lostock. 18. The Appellants state that the CHP plant at Winnington also requires a large demand for process steam in order to operate efficiently (which also brings with it other advantages, notably in terms of tax liability). Furthermore, they state that there is currently no available demand for the amount of process steam that the CHP plant (operating efficiently) generates aside from the demand for process steam from Lostock. About 96% of the output of steam feeds the Lostock site. The remaining 4%feeds Winnington. The CHP could not economically supply the 4% alone. The demand from Lostock is apparently exceedingly high in UK terms, such that there is no other foreseeable need for so much process steam in this location other than to supply Lostock. 19. The Appellants stated that the operations at Lostock and Winnington were only viable when operated in tandem. Put another way, if TCEL did not own and operate the site at Winnington and supply steam to Lostock at cost price, the operations at Lostock would not be economically viable to run and without owning the supply of soda ash at Lostock and being able to supply it to Winnington at cost price, the operations at Winnington would not be viable. This interdependence reflects the nature of the sites and the facts of the market; it would remain the case whether TCEL or some other party was operating the sites. 20. The appeal for the two properties to be treated as a single hereditament from the effective date onwards has been made on the grounds that since that date, they have been in a single and exclusive occupation by the same ratepayer for the same purpose, and that the two parts currently assessed separately form a geographically distinct whole as well as being functionally essential one to the other. 21. Up until 3 February 2014 each of the two chemical plants had manufactured Soda Ash (both light ash and heavy ash) in parallel with each other.

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