Wednesday, 13 April 2016

Second leak adds more confusion to Borders fiasco


At least six banks expressed "strong interest" in providing between £14 and £21.5 million for the development of a state of the art waste treatment facility in the Scottish Borders, according to confidential documentation seen by Not Just Sheep & Rugby.

A second leaked report linked to the catastrophic Scottish Borders Council-New Earth Solutions Group contract, which has so far cost taxpayers £2.4 million, appears to contradict our recent revelations which were gleaned from a private council minute dated October 2012.

That minute shows councillors were warned bank funding to cover the cost of the original scheme - a conventional Mechanical Biological [MBT] plant producing compost-like material from domestic refuse - could no longer be secured. The only way to overcome the funding issue was to add an untested and unproven Advanced Thermal Technology [ATT] facility to be constructed in tandem with the MBT.

Elected members voted in favour of the radical contract change, but neither the funding problems nor technological difficulties associated with the ATT could be overcome and the entire project had to be abandoned in February 2015.

The latest "leak" concerns a six-page report sent to SBC in September 2010 by financial experts acting for New Earth Solutions [NES] before the original contract for the MBT was signed. The document is marked Private and confidential. It confirms that all banks were ruled out as potential funders ahead of the deal being clinched.

It describes how 25 financial institutions representing the majority of the UK project finance market had been supplied with information about two proposed NES schemes, a £26 million integrated waste treatment and energy recovery facility at Avonmouth (near Bristol) and a potential £14 million waste treatment facility at Galashiels, subject to NES being named as preferred bidder.

The document adds: "In the period following November 2009, New Earth has since incorporated energy recovery into its proposed solution with the capex [capital expenditure] increasing to £21.5 million accordingly".

However, under the terms of the original contract, signed in March 2011, the ATT which would generate heat and power from waste, was to be started within eight years of the MBT's completion.

The financial report reveals that after 15 institutions expressed an interest in receiving additional information, a short list of six potential funders who had shown strong interest was compiled.

Indicative offers were received from three banks, Investec, Royal Bank of Scotland and Bank of Ireland.

But the report from the specialists commissioned by NES concludes: "We believe that the financing terms that are currently available in the banking market represent poor value for money to both New Earth and Scottish Borders Council in respect of the current procurement process.

"We therefore concur with New Earth's proposal to initially source 100% of the funding from the highly successful infrastructure investment funds ahead of targeting subsequent re-financings."

Therefore by September 2010, six months before the deal was signed, it appears all of the banks which had shown enthusiasm for the project had been ruled out of the equation and the entire multi-million pound Easter Langlee venture rested on the ability of the offshore fund New Earth Recycling & Renewables (Infrastructure) PLC [NERR] to come up with the money.

As everyone now knows, despite the radical alteration to the contract - approved by SBC's elected members - to include ATT, the Isle of Man-controlled fund could not deliver while the ATT system itself was not fit for purpose.

In 2012 NERR boasted of having assets in excess of £100 million. But by November 2013 the fund was suspended leaving investors unable to access their money. That remains the position to this day.

We showed this latest "leak" to a consultant who told us: "Perhaps NERR did not want to fund the Borders project. But banks will generally fund this type of facility. Maybe NES did not like the terms as they may not have made sufficient profit".

COMING NEXT: Did Borders councillors know about NERR's tax haven links?

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