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PRESENT: Lorne Crerar (Chairman)

Alex Paterson (Chief Executive) Paddy Crerar Alistair Dodds Giles Hamilton Donald MacDonald Donald MacRae Iseabail MacTaggart Craig Spence William Swann Steve Thomson IN ATTENDANCE:

Carroll Buxton Director of Regional Development

Forbes Duthie Director of Finance and Corporate Services Charlotte Wright Director of Business and Sector Development Rachael McCormack Director of Strengthening Communities

Sandra Dunbar Head of Business Improvement and Internal Audit Karen Moncrieff Head of Human Resources

Chris Roberts Head of Communications

Alastair Nicolson Head of Planning and Partnerships (items 3.1 and 4.1) Keith Bryers Head of Property and Infrastructure (items 3.4. 3.7 and 3.8) Martin Johnson Inner Moray Firth Area Manager (items 4.1 and 4.3)

Rhona Fraser Inner Moray Firth Area Team (item 4.1) Calum Davidson Director Energy and Low Carbon (item 4.2)

Roy Kirk Caithness and Sutherland Area Manager (item 4.2) Gillian Galloway Inner Moray Firth Area Team (item 4.3)

Donna Chisholm Head of Business Innovation and Growth Sectors (item 5.1) Iain Hamilton Head of Creative Industries (item 5.1)

Andrew Senior Andrew Senior Associates (item 5.1)


1.1 Apologies

No apologies were received. 1.2 Declaration of interest

Professor Lorne Crerar advised of a potential conflict of interest relating to item 4.1 on the agenda – [Part of item removed as disclosure at this time could have a detrimental effect on commercial interests and could prejudice the effective conduct of public affairs.]


1.3 Minutes of the meeting held on 12 February 2014

The minutes of the Board meeting held on 12 February 2014 were approved. 1.3 Minutes of the meeting held on 5 March 2014

The minutes of the Board meeting held on 5 March 2014 were approved. 1.4 Matters arising

a) Cairngorm Mountain Procurement update HMS 9346524

Following HIE Board approval to award preferred bidder status to Natural Retreats UK Ltd on 12 February 2014, the Director of Business and Sector Development provided an update on the key work areas during the transition to a new operator at Cairngorm Mountain. Having provided assurance on a number of issues which the Board had highlighted, Natural Retreats had been notified of contract award on 21 March 2014. In accordance with OJEU procedures, a 10-day standstill period was then entered, to enable challenge from the unsuccessful bidder. Standstill closed at midnight on 31 March 2014 with no challenge having been presented.

HIE and Natural Retreats held a media briefing at Cairngorm Mountain on 7 April to introduce the new operator, and this generated largely positive coverage in press, TV, radio and social media. HIE's project team is progressing towards contract close, which involves finalising a suite of documentation including a share purchase agreement, operating agreement, lease agreement, loan agreement and a parent company guarantee. A transition plan is now in operation, with the current operator, CairnGorm Mountain Ltd, offering open access to Natural Retreats to familiarise themselves with the business in preparation for formal handover, which is scheduled for June 2014.

The Board thanked the Director for this update and commended the project team for their extremely thorough work in securing a positive result which would produce long-term benefits for the local economy and the regional tourism sector.


2.1 Chairman’s and Chief Executive’s update HIE 2004/02226 The Chairman and the Chief Executive extended the Board's welcome to newly appointed members Paddy Crerar, Alistair Dodds, Giles Hamilton and Donald MacRae, who were attending their first HIE Board meeting. They also noted that Belinda Oldfield, General Manager of Revenue and Risk at Scottish Water, had been appointed as a shadow Board member and was expected to attend her first meeting in July. The April meeting would be the last to take place in Cowan House, which was being handed over to enable Capgemini to double its Inverness workforce to around 1,000 posts.

The Chief Executive reported that HIE's new three-year Operating Plan, entitled 'Building our Future', had been signed off by the Scottish Government and would be published the next day, in parallel with the equivalent plans from Scottish Enterprise and VisitScotland.

The Chief Executive and the Director of Corporate Services would be giving evidence in May to the Economy, Energy and Tourism Committee of the Scottish Parliament. HIE would


present evidence alongside Scottish Enterprise as part of the Committee's scrutiny of the Scottish Government's draft budget plans for 2015-16.

Mr Paterson reported that HIE had reached agreement with SSE Ltd concerning support for Wind Towers (Scotland) Ltd, Machrihanish, as agreed by Board members in a special meeting conducted by telephone on Wednesday 5 March. HIE investment of £2.8m from the Scottish Government would sustain jobs and secure assets in public ownership at Scotland's only wind tower manufacturer, which is an important local employer in Argyll and a player in the national renewable energy sector.

There was good news to report on air connectivity from the Highlands. A new, twice-daily air service operated by Flybe between Inverness and London City Airport had been announced by HIAL and was due to begin operations in October 2014. The number of passengers using Flybe's service between Inverness and Amserdam had increased by 22 per cent when compared with the previous year.

Recent investments by HIE continued to demonstrate commitment to improving the resilience of remote and fragile areas. These included £1m towards a £4m renovation of the Field Studies Centre in Millport on the island of Cumbrae, and £900,000 support for the £10m development of North Harris Distillery, the first whisky distillery on the island, which is expected to create 20 new jobs.

The Director of Business and Sector Development reported that HIE continued to have regular contact with business outsourcing firm Serco, which had been unsuccessful in re-tendering for contracts served by over 200 staff in Dingwall. HIE was also in contact with the new operator of these contracts, and making efforts to secure continuity of employment for affected Highland staff. The Director also reported that HIE's area team in Orkney was continuing to work with the administrator of Ortak, with a view to sustaining a jewellery design and manufacturing business in the islands.

The Director of Finance and Corporate Services reported that good progress had been made in agreeing changes to the HIE Superannuation Scheme and that approval from the Cabinet Secretary for Finance, Employment and Sustainable Growth was expected shortly.

The Chairman reported that he and the Chief Executive had met senior representatives of Comhairle nan Eilean Siar at a recent 'Our Islands Our Future' meeting attended by the Enterprise Minister in Stornoway, followed by similar visits to council leaders in Orkney and Shetland. All meetings had been very positive. Professor Crerar had also attended an energy summit in Stornoway, hosted by Energy Minister Fergus Ewing.


3.1 Year End Review Report 2013-14 HIEA 2012/00553

Alastair Nicolson joined the meeting.

The Head of Planning and Partnerships presented HIE's year-end review covering the twelve months from 1 April 2013 to 31 March 2014. The review described out-turns achieved by HIE at the end of financial year 2013/14 against Key Measures and Regionally Significant Investments set out in HIE’s Operating Plan 2012/15, along with an overview of wider operational activity.

Business confidence appeared to have risen, with 93% of businesses which participated in HIE’s most recent panel survey expressing optimism about their future prospects, a


proportion which was in line with trends across Scotland. Unemployment had declined over the year and remained below the Scottish average across most of the Highlands and Islands, while the regional employment rate was higher than Scottish and UK levels. However, although the region had generally suffered less from the recession than Scotland as a whole, businesses continued to experience mixed fortunes, with the impact of the downturn presenting an ongoing struggle for some.

A single investment of £6.5m for the development of quayside at Global Energy Group's Nigg yard was expected to generate an increase in turnover of £190m and support 1,246 jobs. Even with this project factored out, HIE had still succeeded in meeting or exceeding all of its key measures for the year. The forecast increase in turnover by supported businesses (excluding Nigg) was £89m, against a measure range of £70-90m. The forecast increase in international sales by supported businesses was £28.7m (£20-30m). The number of full time equivalent jobs supported was 882 (700-900), again excluding Nigg, and 163 of these (100-150) were in fragile areas. Forecast increase in turnover in the social economy was £3.67m (£1.5-2.5m), of which £2.65m ((£0.5-1m) was generated by community owned assets. The number of account managed communities delivering increased community benefit was 43 (25-30).

A new Assisted Areas map was due to come into effect on 1 July for seven years, and HIE and its partners had succeeded in securing a positive outcome for the region which would enable the development agency to target resources effectively and utilise the highest possible levels of intervention. Discussion focused on issues including Assisted Areas, the region's strong performance in nationally significant growth sectors, and the importance of regionally significant investments, including the £146m rollout of next generation broadband, to underpin future economic and community development.

Mr Nicolson was thanked for his presentation and it was agreed that the Chairman would write to HIE staff, expressing the Board's appreciation of their contribution in achieving an excellent set of annual results.

Alastair Nicolson left the meeting.

3.2 Financial Statement to 31 March 2014 HIE 2009/00611

The Director of Finance and Corporate Services presented a report summarising HIE's financial position for the twelve months to 31 March 2014, subject to final audit confirmation by Audit Scotland, which would take place later in the year. The report showed that the organisation had delivered all financial targets, achieving a balanced resource position for the year, with a total resource spend of £93.1m. Grant-in-aid (GIA) of £57.9m had been drawn down in full, and HIE had secured additional GIA allocations amounting to £9.5m during the year.

The Board welcomed the Director's report and congratulated staff for a positive outcome.

3.3 Budgets 2014-15 HIE 2004/02226

The Director of Finance and Corporate Services presented a report setting out HIE's proposed budget allocation for 2014/15, along with indicative budgets for 2015/16 and 2016/17. This showed that HIE expects to achieve income of £96.9m in 2014/15, comprising £58.6m grant-in-aid and £23.2m non-cash funding, both from the Scottish Government; European funds of £5m; capital receipts of £4.5m, and revenue receipts of £5.6m. Additional Scottish Government funding would also be received for two national initiatives which are managed by HIE, namely Community Broadband Scotland and the Scottish Land Fund, and for broadband rollout. Energy projects were under discussion with the Scottish Government.


The Director added that HIE would also continue to pursue opportunities to attract further income from a range of sources, and the Board noted that HIE would be able to achieve national Strategic Forum savings of £3.2m without affecting the organisation's investment budget or staff resource. The budget proposals for 2014-15 were approved.

3.4 Property Factoring and Consultancy HMS 9347449

Keith Bryers joined the meeting.

The Head of Property and Infrastructure presented a paper recommending HIE cash funding totalling £2,289,000 gross (£1,686,000 net of recoveries) to enable HIE's Property and Infrastructure team to fund property factoring and consultancy services to assist with the management of HIE's property portfolio. HIE's commercial property portfolio had an asset value at 31 January 2014 of £44.32m, and currently comprises 94 industrial and 43 office premises, 90 development plots, 12 plots let to businesses on long-term leases and 14 miscellaneous properties (including The Centre for Health Science, Cairngorm Mountain, Orbost Estate and Inverness Campus). The organisation itself also occupies two HIE-owned offices, in Dingwall and Invergordon, and leases 14 offices from the private sector. A property managing agent, appointed following competitive tender provides a comprehensive service from handling enquires through to rent reviews, lease renewals, sales and purchases.

The Board approved the recommendation. Keith Bryers left the meeting.


Presentation and discussion, Anne MacColl, Chief Executive, SDI

The Chairman welcomed Anne MacColl, Chief Executive, Scottish Development International, to the meeting.

Anne MacColl delivered a presentation on recent work undertaken by Scottish Development International (SDI), the international trade and investment arm of HIE, Scottish Enterprise and the Scottish Government. This focused in particular on SDI's role in supporting Highlands and Islands businesses to export successfully, and in helping attract foreign direct investment to the region. During 2013/14, SDI had, in partnership with HIE, worked through its 30 offices around the world to assist over 150 Highlands and Islands businesses to enter new global markets or grow their international trade, including eight which were supported through deep engagement to increase turnover over three years, and 16 companies new to exporting which had taken part in the Export Explorer programme.

Questions from Board members focused on: real and perceived barriers to exporting for Scottish firms, particularly those based in the Highlands and Islands; SDI's role in supporting new and existing exporters, and how the region's performance in international trade and investment compared with the rest of Scotland. The SDI Chief Executive agreed to provide more detailed information showing the numbers of companies supported to make an inward investment into Scotland in the past year, broken down by sector.

Anne MacColl left the meeting temporarily to enable the Board to discuss matters arising from her presentation and to consider follow-up actions. On her return, it was agreed that the HIE Chairman and SDI Chief Executive would meet again to consider and agree means by which the two organisations will work together to ensure that: 1) they are fully engaged to maximise the potential of Highlands and Islands businesses to trade successfully in international markets, and 2) the opportunities which the Highlands and Islands presents as


a location to attract foreign direct investment are effectively promoted to target audiences, including the investors themselves and SDI personnel around the world.

It was further agreed that the agenda for the HIE Board meeting in August 2014 would include an update on maximising the regional outputs, both in terms of international trade and inward investment, arising from HIE's relationship with SDI.

3.5 Risk Register HIEA 2012/00218

The Head of Business Improvement and Internal Audit presented the latest Corporate Risk Register, summarising the 23 highest risks (18 strategic and five tactical) currently faced by HIE. It was noted that HIE's Risk and Assurance Committee had, at its meeting in March 2014 considered the approach to an annual wholesale refresh of the risk register, and that each business unit would undertake a refresh of its register in the first quarter of 2014/15. In addition the HIE Leadership Team will consider risk from a top down perspective and the HIE board would have a significant opportunity to comment and input into the corporate risks at its meeting in July.

The Board discussed matters arising and welcomed the latest risk register.

3.6 Draft Risk and Assurance Committee Minute, 11 March 2014 HIE 2004/02226

The Board welcomed the draft minutes of the HIE Risk and Assurance Committee which was held on 11 March 2014. These minutes are routinely presented to the Board in draft form for information, and will be submitted to the Risk and Assurance Committee for approval at its next meeting, on 9 July.

3.7 Inverness Campus: Proposed sale of Plot 7 South HIE 2009/00250

Keith Bryers rejoined the meeting.

[Paragraph removed as disclosure at this time could have a detrimental effect on commercial interests.]

The Board approved the sale of Plot 7 South, subject to the conditions detailed in the paper. 3.8 Inverness Campus: HIE-UHI Joint Building HIE 2004/02226

The Director of Regional Development updated the Board on the current position regarding the proposal for the construction of a new building, to be shared by HIE and the University of the Highlands and Islands (UHI) at Plot 10 on Inverness Campus. The paper set out the strategic business case and opportunities arising from HIE's decision to enable Gapgemini to double its Inverness workforce to almost 1,000 by taking over the development agency's offices at Inverness Retail and Business Park.

Subsequent discussions between HIE and UHI had identified significant opportunities to develop further facilities within the new building, including UHI Life Science Education and Research Facility; UHI Oil and Gas team; UHI Low Carbon Institute; UHI Learning and Teaching Academy, Science Academy; Scotland's Rural College, and a Digital Excellence Centre. All of these would complement HIE's strategic ambitions and provide opportunities to share common facilities and front of house services to achieve best value and effective use of resources. [Sentence removed as disclosure at this time could have a detrimental effect on commercial interests and could prejudice the effective conduct of public affairs.] A further report will be brought to the HIE Board in July, when it is expected that procurement will have achieved an acceptable tender for construction services.


Discussion focused on the need to ensure a strong strategic rationale for all elements of the project, including designing the science academy with a view to benefiting the whole region, and on the importance of aligning teaching in schools, colleges and universities with career and economic opportunities which will strengthen the regional economy.

The Board noted the progress being made in delivering this project. Keith Bryers left the meeting.

Anne MacColl left the meeting. 4. INVESTMENT PROPOSALS

4.1 [Item removed as disclosure at this time could have a detrimental effect on commercial interests and could prejudice the effective conduct of public affairs.]

4.2 MeyGen Onshore Facilities for Tidal project HMS 9346948

Calum Davidson and Roy Kirk joined the meeting.

The Director of Energy and Low Carbon and the Caithness and Sutherland Area Manager presented a paper recommending that HIE approve grant funding totalling £3.31m towards a £50.45m project to enable MeyGen Ltd to develop Phase 1A of a tidal energy project in the Pentland Firth and Orkney Waters. The result would be the world's largest tidal stream project in development, the leading tidal wave array in the United Kingdom, and one of the most advanced projects of its kind in Europe. HIE's contribution would be paid against onshore works totalling £8.86m and be made up of £2.482 research, development and innovation grant, and £0.828m Regional Aid.

It was noted that the project would further strengthen and diversify the area economy: building on the success of 11 years' testing at the European Marine Energy Centre (EMEC) in Orkney, bringing direct economic benefit to Caithness, and providing the opportunity for a major tidal turbine assembly and manufacturing facility in Easter Ross. Phase 1A would be the first phase of commercialisation of tidal technology and would involve four turbines being installed. It would mark the culmination of tidal development activities over the past two decades, with EMEC providing the location for technology development and proving, acting as a catalyst for a Highlands and Orkney supply chain, and giving industry and government confidence to commit significant resource to the marine energy sector. Meygen's long term plan is to achieve a phased scale-up to 167 turbines by 2021.

In discussion, the Board agreed there was a strong rationale for supporting this project, which was expected to support 184 FTEs in the HIE area (303 across Scotland), yield GVA of £10.4m in the region (£17.1m across Scotland), build on past investment at EMEC, Nigg and Scrabster, and stimulate the regional supply chain in the energy sector.

The project was approved.

Calum Davidson and Roy Kirk left the meeting.

4.3 Inverness Campus: Life Sciences Building HMS 9346832


The Inner Moray Firth Area Manager presented an appraisal paper recommending HIE cash funding totalling £3,100,000 for the construction of an advance life sciences building of 1,000m2 on Plot 8, within the Life Sciences Enterprise Area, of Inverness Campus. ERDF of £835,760 had been allocated to the project from HIE's current SBD package at an intervention rate of 40%, based on construction costs of £2,089,432. The total project budget also had an allocation of £797,500 fit-out costs, including additional project management and design. In line with HIE's Sustainable Construction Policy, the design team was aiming to achieve an 'excellent' BREEAM rating for the development.

Following approval by HIE's Leadership Team, detailed design for the building had been carried out, and statutory consents for planning and building warrant obtained in December 2013. The unit would contribute towards HIE’s ambitions for the growth of the life sciences sector and provide a stimulus to the Enterprise Area. It would provide accommodation that was not otherwise available or planned in the local area, and improve the supply of suitable accommodation for life sciences businesses. The building design had been made flexible to appeal to a wide range of potential tenants, and was capable of being sub-divided.

The Board approved the project, and noted that the contract will be awarded to Morrison Construction, which had tendered as part of HIE's Prime Contractor Framework. The works will be project and cost managed by Torrance Partnership as part of the HIE Prime Consultant Framework. The Board also agreed that approval to award a contract for fit-out works should be delegated to HIE's Leadership Team, subject to the costs being within the overall project approval of £3.1m.

Martin Johnson and Gillian Galloway left the meeting. 5. DISCUSSION PAPERS

5.1 Creative Industries Strategy HIEA 2011/00686

Donna Chisholm, Iain Hamilton and Andrew Senior joined the meeting.

The Head of Business Innovation and Growth Sectors introduced Andrew Senior, of Andrew Senior Associates, who delivered a presentation giving an overview of a new draft strategy for the Creative Industries sector in the Highlands and Islands. The strategy would build on existing, successful initiatives which HIE has led in the sector, including trade networks and the annual GoNorth event, Scotland's largest creative industries showcase. The strategy had been designed to have a strong business focus and highlight opportunities in a number of specific themes, including developing metrics, young people, digital connectivity, attracting private investment, and leading global debate. Further consultation is to take place with partners including local authorities, to develop a route map and publish the strategy in the summer.

The Board welcomed the presentation and discussed several issues arising, including the risks associated with parts of the region being perceived as remote, the role of Creative Scotland in the regional sector, the level of resource which would be required to deliver the strategy's ambitions, and the need for consultation to be carried out as a listening exercise. Donna Chisholm, Iain Hamilton and Andrew Senior left the meeting.



The Board welcomed the latest update from the Energy and Low Carbon team.

6.2 HIElights HIE 2004/02226

The latest issue of the e-newsletter HIElights was noted.

6.3 Property Activity Report: 01 October to 31 December 2013 HIE 2008/00768 HIE's property activity report for the third quarter of 2013-14 was noted.

6.4 SDI Operating Plan

The new Operating Plan from Scottish Development International was welcomed. 6.5 Business Panel Pulse Survey and Social Enterprise

Panel Pulse Survey HIE 2007/02738

The Board welcomed the most recent pulse surveys carried out with HIE's panels of businesses and social enterprises, and were encouraged by the high, and rising, levels of optimism which each reported.

6.6 AOB HIE 2004/02226

There was no other business. 6.4 Forthcoming Board dates:

Risk and Assurance Committee, Inverness, Wednesday 9 July, 2014 HIE Board, Inverness, Thursday 10 July, 2014

Chris Roberts 29 April 2014 HIE 2004/02226





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