Wednesday, 29 July 2015

FOR SALE! Avonmouth plant which so impressed Borders councillors

EWAN LAMB watches chickens coming home to roost

The waste treatment incinerator near Bristol on which an identical facility planned for the Borders was based is set to be sold off at a knockdown price after the operators failed to resolve a range of technical problems which will cost millions of pounds to fix.

New Earth Solutions' Energy Recovery Facility (ERF) at Avonmouth left a delegation of elected members and chief officers from Scottish Borders Council impressed and satisfied following a visit to the troublesome plant in October 2014. The council was convinced a scaled down version using the same technology, to be developed at Easter Langlee, Galashiels, would be the answer to local waste treatment issues.

The latest dramatic development in the saga - the under-performing Avonmouth facility is causing a "substantial drain" on New Earth's funds - seems certain to increase the pressure for an investigation into why SBC signed up for the deficient and untried ERF technology in October 2012, long before the prototype plant had even generated its first watt of electricity.

The council has so far resisted requests for full disclosure of reports and other information relating to their disastrous and expensive involvement with New Earth by claiming a strict confidentiality clause in their £65 million contract with NES will remain firmly in place until 2021. It is difficult to see how that position can be justified with the contract torn up and the technology on which it was based patently not fit for purpose.

Shareholders in the New Earth funds have been told by Premier Group Isle of Man, controllers of the business, that the level of performance at the Bristol facility has consistently fallen well short of target. Now, a programme of work undertaken earlier this year "has proven to be unsuccessful. Operational, manpower, maintenance and repair costs have consistently proved to be much higher than originally planned."

There is also a strong hint in the document circulated to NES investors that the ERF was in fact under performing when the large Borders delegation toured the plant last year. So what were the questions asked by Borders representatives on that visit?

In April, NES commissioned an external engineering consultancy to carry out a further technical and financial review on the future potential of the plant.

According to Premier: "The consequence of this review is that further essential and significant capital expenditure has been identified in order to potentially improve the ERF plant's performance. Based on history, this programme will still carry substantial technical risk.

"In addition, the continued under performance of ERF still requires further working capital to support operational losses until capital modifications are made over the next 18 months. As with all technology there is often a steep learning curve and sometimes a high degree of uncertainty as to the outcome and these have unfortunately been amploy demonstrated in the performance of the ERF to date."

The risks and 'high degree of uncertainty' appear to have been totally ignored by Borders councillors, the paid officials who advised them and the so-called experts from private consultancies who made up the Easter Langlee project team. The result is a spectacularly failed venture which has already cost taxpayers several millions of pounds and will cost millions more in future not to mention the knock-on impacts for the local environment.

In what appears to be a desperate bid to save New Earth's skin, the directors of the fund have embarked on a so-called demerger of the energy and waste businesses within the group. The energy business, including the £60 million Avonmouth ERF will, hopefully, be sold and refinanced.

The report to shareholders says: "Conversations are at a very advanced stage with Macquarie Bank and an (un-named) institution for the sale of the energy business combined with refinancing.

"Given the continuing poor performance of Avonmouth ERF and the need for further significant capital expenditure, which still carries significant risk as to its ultimate success, the terms of any sale are unfortunately likely to be unfavourable for shareholders."

The latest revelations certainly provide strong evidence that Scottish Borders Council bought a proverbial pig-in-a-poke when councillors sanctioned radical changes in their multi-million pound contract with NES on October 25th 2012. The resultant mess will not be cleared up until ALL of the facts and figures are made public.

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