The investments in a flagship thermal technology waste treatment facility near Bristol, which was meant to allow Scottish Borders Council to become Scotland's leading local authority in the field of refuse disposal, were sold by its debt-ridden owners for just £2 (two pounds), it has been revealed.
And now the threat of administration hangs over the New Earth Solutions Group [NES], the specialist company recruited by Borders councillors to handle their waste treatment requirements for 24 years in a deal with a gross payment value of £180 million.
The future of the NES business empire hinges on crucial negotiations with a developer who must agree to take on millions of pounds of debts owed to two banks and to refinance New Earth by next Tuesday.
The Group has posted a set of long awaited and twice delayed accounts on the Channel Islands Stock Exchange only days after investors in the Isle of Man-based fund which has a controlling interest in NES [New Earth Recycling & Renewables or NERR] were warned of an uncertain future for the businesses.
New Earth recorded a consolidated loss for the year of £29.67 million in the year ended January 2015 compared to a deficit of £11.99 million the previous year. The various companies in the Group owe NERR shareholders loans totaling more than £59 million.
The report on the financial plight of NES states: "The directors recognized that continuing support from these parties - NERR, Co-op Bank and Nord Bank - was unlikely to continue indefinitely. With the future cash flows of the Group showing that additional support was likely to be required, the directors have been exploring different financial options for the Group".
An unnamed developer of large combined heat and power plants in Europe is said to be interested in assisting NES with its future progress, 'recognizing the value in waste contracts controlled by the Group'.
According to the accounts the developer is negotiating with Co-op and Nord for the exit from their outstanding loan facilities. The aim is to have a deal in place for the acquisition of the entire debt by May 31. But settlement is conditional on the developer's lender successfully syndicating facilities required in connection with the deal.
"The directors [of NES] understand that the acquisition of the senior debt by the developer means the developer will assume full control and ownership of NES Group", adds the report
But the document goes on to warn that if the deal over the debt does not go through the company may not be able to realise its assets and discharge its liabilities in the normal course of business.
"The conditions at the date of signing these financial statements (May 19) indicate the existence of a material uncertainty which may cast significant doubt about NES Group's ability to continue as a going concern.
"SHOULD THE TRANSACTION NOT COMPLETE THE DIRECTORS MAY HAVE NO OPTION OTHER THAN TO APPOINT ADMINISTRATORS TO THE GROUP".
In July 2015 NES terminated its contract to operate the energy from waste facility at Avonmouth, Bristol, which had Borders councillors and senior officers drooling following a site visit in October 2014. This followed the malfunctioning plant's acquisition by a newly formed company called Avonmouth Bio Power Ltd.
The accounts show that NES sold its investments in New Earth Energy (West) Ltd and New Earth Energy (West) Operations Ltd - the owners and operators of the facility - for the princely sum of £2.
Yet only six months before the peppercorn deal was signed Scottish Borders Council remained convinced a scaled down version of the Avonmouth plant or another experimental and untried NES facility at Canford, Dorset was the answer to their environmental prayers.
By the time they finally decided to cut their losses more than £2.4 million had disappeared down the plughole, public money they wrote off without as much as an explanation..