The detailed proposals on how a £21 million Scottish Borders Council waste treatment facility was to be funded by contractors New Earth Solutions [NES] have been revealed in another leaked document which has been handed to Not Just Sheep & Rugby.
It appears the availability of cash for the originally agreed disastrous project hinged on the successful refinancing of the NES plant at Avonmouth near Bristol with the anticipated proceeds of £15 million from that exercise being returned to the council's approved funders, New Earth Recycling & Renewables (Infrastructure) Plc [NERR].
As we revealed only last week, NERR is the offshore fund 50% owned by a business registered at the Mossack Fonseca branch office in British Virgin Islands, the law firm directly linked to the "Panama Papers" tax dodging controversy.
The latest 'strictly private & confidential' report on a saga which has cost SBC taxpayers at least £2.5 million, is important as it dates from around the time when the original £65 million contract between SBC and NES was signed.. The document, drawn up by NES is headed Scottish Borders project - Update on New Earth's funding solution.
Unfortunately the money to pay for the combined conventional and thermal waste treatment centre planned for Easter Langlee, Galashiels, was still not in place four years after the report was drafted. The entire deal between council and contractor was abandoned in February 2015 because of insurmountable funding and technological problems.
According to the document: "Our funding solution remains to source 97.5% of the project capital expenditure requirement from our funding partner, NERR, and for New Earth to provide the remaining 2.5%. NERR remains committed to investing into the project, having executed various legal documents with New Earth coterminous with the contract award that demonstrates its commitment including the shareholders agreement."
The council is assured NERR's assets are healthy with a graph showing how the fund had grown from humble beginnings to a total of £71 million by June 2011.
"The funding requirement for the Scottish Borders project will be in the region of £21.5 million, with the first phase MBT [Mechanical Biological Treatment] facility costing in the region of £14 million", the document reveals.
NES's Avonmouth plant which impressed a SBC delegation during a site visit in October 2014 had also been 97.5% funded by the tax haven-based NERR fund, says the report.
New Earth had subsequently received six separate offers in respect of the Avonmouth refinancing, and terms had been agreed with the company's existing senior debt provider. The letter adds: "The proceeds of this £15 million refinancing, net of transaction costs, will be returned to NERR for subsequent re-investment into the Scottish Borders project.
"We believe that the positive response by banks to the Avonmouth refinancing opportunity vindicates our approach to using the NERR funding to 97.5% finance the construction and commission period and enables us to achieve better value senior debt terms post-commissioning. We fully expect to be able to successfully replicate this funding approach on the Scottish Borders project".
This revelation raises important questions. Why did this funding arrangement fail, and what action did the council and the contractor take to identify an alternative source to finance the vital environmental project? When did NES first indicate that NERR was incapable of delivering the £21.5 million? How many briefings were given to councilors as the project continued to descend into meltdown, and why did they allow the money-sapping delays to continue for almost four years?
But there is even more in the leaked document to give rise for concern.
It states: "Furthermore as part of the Avonmouth refinancing process we have received very strong interest from banks to provide long-term senior debt funding towards the construction, commissioning and operational periods of the Scottish Borders project.
"Through the £15 million Avonmouth refinancing and NERR subscriptions between June and September (£2.9 million per month) it is therefore envisaged that during quarter three of 2011 New Earth will complete its £21.5 million fundraising for the Scottish Borders project".
It is essential in light of this latest disturbing disclosure that SBC publishes the full secret account of the project's downfall. Taxpayers deserve nothing less. Were any of the banks asked to intervene and replace NERR as the funder?
There is even a fallback position outlined in the document. It explains: "Should closing the Avonmouth refinancing take longer than anticipated then the £14 million MBT element of the Scottish Borders project could still be funded from a combination of NERR subscriptions over the next few months and senior debt. Project construction is programmed to commence in autumn 2011.
"New Earth is hoping to close projects with a total capital expenditure in the region of £95 million during 2011 and into 2012 with Scottish Borders representing both the first and highest priority."
In those circumstances how could anything go wrong?