Wednesday, 18 March 2015

Flagship waste plant 'underperforming', shareholders warned

EXCLUSIVE: by Doug Collie

The "state of the art" Advanced Thermal Treatment plant which left a delegation of Borders councillors impressed and illuminated when they visited the site a few months ago is under-performing, thanks to operational issues which may not be resolved before the end of this year.

New Energy Solutions Group's Energy Recovery Facility (ERF) at Avonmouth, Bristol, was to have provided the blueprint for the controversial Scottish Borders Council integrated waste plant at Easter Langlee on the outskirts of Galashiels.

But only a matter of weeks after returning from Avonmouth and claiming they were on the right track with the £27 million ATT facility, Borders councillors last month abandoned their 24-year contract with New Earth Solutions (NES) and agreed to write off the £2 million they had squandered on the ill-conceived venture.

In a letter published in this week's Border Telegraph, Councillor John Mitchell, the council's depute leader, claims they were right to withdraw from the contract after "the fullest consideration of the likely success of this project and full understanding of the costs and risks involved".

It is believed Audit Scotland will be urged to initiate a full investigation into the reasons why SBC chose to spend £2 million of public money before suddenly deciding to sever their partnership with NES which they signed in 2011after realising the plan had no chance of delivery.

But apparently Mr Mitchell sees no need for an inquiry into possible financial mismanagement. Instead, he says the decision will be subject to full audit scrutiny by the council's appointed external auditors. It is doubtful whether that will satisfy many of the council's local taxpayers, some of whom have been highly critical of the way the entire Easter Langlee fiasco has been handled.

Councillors who were convinced New Earth had the technology, and presumably the funding, to develop the combined heat and power plant for the Borders may be interested in two recent messages to shareholders of Premier Investment, the offshore fund which is supposed to pay for NES projects.

The first message, issued in October 2014 - the same month the 16-strong delegation from SBC travelled to Avonmouth - revealed that dealings in the Fund's shares had been officially suspended in January 2014. They remain suspended to this day.

 Premier directors recognised at the time that the funding requirements for New Earth's "ambitious" expansion plans for new waste and energy plants - including the Borders project - were of such a size that they had realistically exceeded the capacity of the Fund to continue to finance NES on its own. The decision was taken to seek alternative sources of funding to finance these capital requirements.

It appears therefore that the proposed multi-million pound Galashiels facility had encountered potentially insurmountable funding issues as far back as late 2013, and there is no indication that those difficulties had been overcome by the time the council's partnership with NES was severed. Perhaps Mr Mitchell and his colleagues could shed light on this worrying aspect of the unfortunate saga.

A second downbeat message to Premier shareholders sent to them earlier this month, and after the Borders project was scrapped, reveals ongoing problems at Avonmouth.

"The key focus remains on creating and maintaining a strong track record of performance from Avonmouth ERF", the bulletin declares. "Unfortunately, operational issues continue to impact on the level of energy generation. These issues are being addressed with a planned programme of improvements to increase energy generation to an acceptable level of performance by the end of the year".

The plant produced its first electricity in June 2013 so the current difficulties surely cannot be attributed to "teething problems". It must therefore be a concern that the Galashiels facility, designed to provide power and heat for homes and other buildings in the area, could have encountered similar generating problems had it been built.

But the implications for NES do not end there. The shareholder message adds: "The current underperformance of the ERF is having a knock-on effect on the financial performance of the adjacent Avonmouth waste plant.

"With the combined turnover of both the ERF and Avonmouth waste plant representing some 70% of New Earth's £50 million total annual revenue it is essential that the performance of both plants is maintained and improves throughout 2015".

In a reference to the failed Borders venture the message claims that since the Easter Langlee contract was signed there had been significant changes with regard to Scottish waste policy and regulation. However, it does not explain how these policies an regulations contributed to the downfall of the scheme.

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