Battersea Power Station faces UK accounting scrutiny over valuation claims

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Battersea Power Station valuation scrutiny

Highlights

The UK's Financial Reporting Council has started initial inquiries into Battersea Power Station Development Company over allegations of inflated undeveloped land valuations and misreporting.
Former chief executive Donagh O'Sullivan claims undeveloped plots were valued at hundreds of millions of pounds above independent estimates by Jones Lang LaSalle and Knight Frank in 2023 and 2024.
Malaysia's Ministry of Finance states an independent forensic auditor found the allegations unfounded, with accounting practices in line with international standards and no change to Battersea's valuation.

Watchdog inquiries focus on land valuations

As reported by Financial Times, the Financial Reporting Council is making early-stage inquiries into allegations of financial misreporting linked to Battersea Power Station Development Company and claims about the valuation of undeveloped land at the wider site. People familiar with the matter say the scrutiny does not yet amount to a formal investigation, but it is examining whether the case warrants action under the accountancy scheme.

Former chief executive Donagh O'Sullivan alleges in an employment tribunal claim that he was dismissed after raising concerns over internal accounts at sister company BPS Holding. He says plots of undeveloped land were valued at hundreds of millions of pounds above independent estimates and that expenses were capitalised on the balance sheet rather than taken as an immediate hit to profits.

According to the claim, that accounting treatment left unbuilt parts of the project overvalued on BPS Holding's balance sheet. External assessments in 2023 and 2024 by Jones Lang LaSalle and Knight Frank indicated lower values for those plots, the claim says.

Jurisdiction and ownership implications

BPS and BPS Holding deny the allegations and have previously said the accounting treatment used for the undeveloped plots was appropriate because third-party valuations were prepared on a different basis from the group's internal accounts. In its response to O'Sullivan's claim, the company says his mandate was to secure a good financial return for BPS's owners, which include two publicly listed Malaysian companies and a Malaysian state pension fund.

PwC, which audited BPS Holding's accounts and has not been accused of wrongdoing, declines to comment. The FRC also declines to comment, while the Jersey Financial Services Commission does not comment on the matter.

The case also raises questions over the FRC's jurisdiction because the entity containing BPS Holding's accounts is incorporated in Jersey rather than in the UK. The regulator oversees auditors operating in the Crown Dependencies and can inspect audit work or seek sanctions, but those powers may not apply where the entity is not listed.

Malaysia's Ministry of Finance said in parliament last month that an independent forensic auditor appointed by BPS Holding reviewed the allegations and found them unfounded, with no need for further investigation. The ministry also says the review found the accounting practices were in line with international accounting standards and that, based on the forensic findings and PwC's work, no adjustment was made to the valuation of the Battersea investment.

Our earlier report on the Financial Conduct Authority’s latest enforcement data highlighted a rise in potentially suspicious trading ahead of UK takeover announcements and other price-sensitive disclosures. We also noted the regulator’s stepped-up action on insider trading and the broader surge in fraud losses, underscoring intensifying pressure on watchdogs to police market abuse.

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