Borders waste treatment fiasco: post mortem (part two)

by DOUG COLLIE

A large delegation of councillors and senior local government officials from the Scottish Borders spent almost £4,000 of public money on a fact finding jaunt to the wrong south of England waste treatment plant, according to new information released via a Freedom of Information request.

The party made the trip to the New Earth Solutions Group's (NES) "pioneering" Avonmouth facility, near Bristol in October 2014, and returned impressed and convinced the plant would act as a blueprint for a £21 million project at Easter Langlee, Galashiels.

But just four months after the tour, including an overnight stay at an upmarket city hotel, the deal between council and contractors NES collapsed in disarray after it was confirmed the Avonmouth technology was not fit for purpose while the company could not secure funding for the project. Subsequently the 'misfiring' Avonmouth facility was offloaded by NES for no monetary consideration...so much for due diligence by the Borders party during an inspection which failed to produce a single written report or minute.

Extracts from a confidential account of a "lessons learnt" workshop, held in the Edinburgh law firm Brodies' office in April 2015, reveal a range of negative issues linked to the contract over its four-year life span. Brodies had been commissioned by the council to provide "expert" legal advice, and had collected fees totalling £679,000 by the time the entire venture was abandoned at a cost of £2.4 million to Borders taxpayers.

But large tracts of the information held in the document remain covered up after SBC was allowed to redact entire sections deemed outwith the scope of the FOI request. It means all the negative bullet points which flowed from a year long contract moratorium which SBC granted NES are blacked out while a section headed RISKS THAT REMAIN OPEN AT END OF PROJECT has been 100% censored. So much for FREEDOM of information!

But we are told the much vaunted members' visit should have been to the NES centre at Canford, in Dorset, 110 miles from Avonmouth. The report states - perhaps incredibly - "The visit was to demonstrate how a site worked. However Avonmouth did not show this in balance; instead it was being over positive". So who arranged the trip in the first place?

The loss of more than £2 million of public money is dealt with like this: "SBC occurred £2 million loss up to termination. However SBC did not incur the cost of NES losses etc. which could have amounted to double. The fact this was written off in reserves does mean there will not be any effect on services to customers: it will be business as usual".

There appears to have been a complete lack of concern that such a significant sum was squandered thanks to decisions taken by bungling councillors on recommendations made by ineffective or ill informed officers and advisers.

And how the entire costly debacle, complete with the list of issues outlined in our coverage of the "lessons learnt" documents managed to acquire a clean bill of health from external auditors appointed by Audit Scotland is surely beyond belief.

The report says the deal offered by NES was a market leader at the time. But one attendee at the 2015 workshop - the identity of the participants has been protected - queried whether the project team had been "blinded" by the deal on the table.

According to the document: "The reply to this would be no this was not the case. In hindsight the team could have requested more detailed modelling. However, time was against us. In hindsight the more appropriate course would have been to go down the route of a different contract structure such as DBOM (Design Build Operate Maintain)".

The Borders project was to have been financed by the Isle of Man-based New Earth Recycling & Renewables [NERR] infrastructure fund, which is now in the hands of liquidators Deloitte with no prospect of recovery for shareholders and investors.

The workshop was told that in late 2013 it was made clear the funding from NERR was no longer available, so there was now no funder of last resort.

An evaluation of the 12-month moratorium, which only delayed the inevitable cancellation of the deal, concludes "It was difficult to admit the project was going to fail especially after all the hours spent, plus the project also had a high profile. It was a brave decision to terminate, but there was the risk that come 2020 the council could still have been left with nothing.

"The lesson learnt is around good project management, that careful thought had been given and analysed, and the timescale appreciated that if the contract was not terminated the risks of continuing delivery failure would be too high."

And the report adds: "Robustness of process during the termination reduced the risk of a claim from NES. Currently (April 2015) two months have passed without a claim: however they have up to five years".

Borders waste treatment fiasco: 'post mortem' (part one)

EWAN LAMB reports

Two heavily censored documents containing the findings of separate "lessons learnt" workshops during and after Scottish Borders Council's disastrous £80 million waste treatment contract with penniless New Earth Solutions Group have been released in response to a Freedom of Information request.

The local authority attempted to keep the damaging material under wraps. But following a ruling by the Scottish Information Commissioner six weeks ago, SBC has provided redacted copies of the requested reports.

Generous applications of black ink to obliterate entire passages and even parts of sentences make the reports from 2011 and 2015 difficult to comprehend. But there is enough evidence in the untouched sections to show a catalogue of issues during the six-year duration of the ill-fated and costly relationship between council and contractor.

In part one of our coverage of the reports we will deal with the September 27th 2011 workshop which tackled "lessons learnt" from the procurement of the never-to-be-built £21 million waste treatment project at Easter Langlee, Galashiels. The non-project was to cost Borders taxpayers £2.4 million, a sum written off in cavalier fashion as the second part of the story will show.

The identities of those officers who participated in the workshops have been kept secret so all contributions to the debate are from anonymous individuals.

For example, at the beginning of the 2011 document "(black square to hide name) highlighted that lessons learnt can be positive and the officers who were involved in other large projects brought good experience to the project". Another speaker agreed there had been a positive change when officers were brought into the project. Readers can only speculate as to the role of officials prior to their involvement.

In an apparently worrying revelation we are told: "The group agreed that one of the main problems at the start seemed to be that the project board consisted wholly of external agency staff and due to the level of seniority of the membership (Acting Director of Technical Services, Acting Head of Environment) it was difficult to challenge the decision making process".

Yet at the end of the day these 'outsiders' had picked up hundreds of thousands of pounds in fees - paid for by local council taxpayers - and even though the project was a complete failure they presumably knew what they were doing.

According to the 'post mortem' report this structure generated a number of issues:

*Lack of operational understanding of the council's needs.

*Conflict of interests.

*No project ownership.

*No responsibility for project consequences.

*Officers were kept at arms length and were not given...(rest of sentence redacted).

To the layman this probably sounds like a recipe for the disaster which developed over the lifetime of the contract as New Earth Solutions had neither the technology nor the funding to deliver the vital piece of Borders infrastructure.

A team member claimed there had been no consistence in the terms and conditions that the agency and consultants were commissioned under. The report adds: "As the frameworks are now in place, it will help overcome these issues, but importantly the appropriate informed officers need to write a robust brief to ensure the consultants deliver what you actually require

"-- indicated that it was important to get project support in place to free up the project manager to make better use of his time, unfortunately it took at least nine months for this to happen".

Then, another list of specific issues are laid out.

*No profiling of capital budget. Progress was not reported to the appropriate council committees.

*The PM (project manager) allowed consultants to write their own briefs.

*The consultant did not identify that a remediation strategy was required for the site. This was a risk that sat with the council.

*Bonus contract for consultants. There are other alternatives.

*No insurance expertise within the team, which was a crucial element when officers became involved.

*No realistic programme in place.

*No business case development.

Surely this damning evidence begs the question "Where were the Borders elected members who were supposed to be in charge of the project? Did any of them even bother to raise questions with consultants or officials? It seems they were content to take a back seat and abdicate responsibility.

COMING NEXT...

How a Scottish Borders Council delegation was taken on an expensive two-day site visit to the WRONG "over positive"New Earth Solutions facility 110 miles from the plant they should have toured!

Borders council's "bankers" under investigation

by DOUGLAS SHEPHERD

The offshore business chosen by Scottish Borders councillors to bankroll a £21 million waste management project is now the subject of an investigation by financial regulators after the collapse of a second investment fund controlled by the company.

News of the probe into the affairs of the Premier Group (Isle of Man) Eco Resources Fund is contained in a letter to shareholders which can be read on the Channel Islands Stock Exchange website. As we reported in recent days the Fund invited deposits of cash in a venture involving several bamboo plantations in Central America and South Africa.

The fate of the Eco Resources Fund - efforts to attract new investors appears to have failed - follows the demise of Premier's New Earth Recycling & Renewables [Infrastructure] Fund (NERR) which is now in the hands of liquidators Deloutte with reports being submitted to the Isle of Man courts.

Although Premier Group's directors received millions of pounds in management and promotion fees for running the two funds, hundreds of investors seem unlikely to get any of their money back.

Scottish Borders Council clearly believed NERR could finance a much needed waste processing plant at Easter Langlee, Galashiels. But in fact cash from NERR's coffers was being used to prop up council contractors New Earth Solutions [NES] which is now in administration with millions of pounds of debt.

While NES and NERR provided the council with a string of excuses for delays to the waste management project, the local authority was squandering at least £2.4 million of public money, mainly on expensive lawyers and consultants. Eventually the entire deal was abandoned when it became clear NES and NERR could neither fund the project nor provide the necessary technology.

The latest debacle involving the problems facing the "bamboo" fund have been emerging in recent weeks, a short time after the NERR fund's liquidation.

The latest missive from Premier Group director Jamie Sutton begins: "Over the last few weeks I have spoken to a number of you, discussing the lack of liquidity affecting the Fund and the urgent need for further investment in order to continue."

No doubt readers can guess what follows. Mr Sutton continues: "Although several of you gave serious consideration to committing additional money, regrettably no firm commitments were forthcoming. As a result, the Fund board has been left with no option other than to commence the process to put the Fund into liquidation.

"You will receive formal notices about the liquidation process next week and a date will be set, most likely in early December, for the meeting to put the Fund into liquidation".

More than 3,200 investors in NERR are caught up in the liquidation of that particularly entity, and no doubt hundreds if not thousands more will be hit by this latest Premier Group financial disaster.

Mr Sutton tells the bamboo punters: "Throughout the recent past, the Board has been in regular contact with the Isle of Man Financial Supervision Authority (FSA). Today we were informed by the FSA that they have made an application to the High Court in the Isle of Man for the appointment of an inspector to fully investigate the background and events leading to the current situation".

According to the letter, the Board welcomes the appointment of the inspector and will be co-operating fully with him with regard to the investigation.

Mr Sutton then invites potential investors to get involved in "confidential discussions" in a bid to keep the Fund's subsidiary ERF Ltd. outside the liquidation process. The future of ERF and its ability to progress the plantations is entirely reliant on new funding from new investment, he warns.

The circular concludes: "The Board very much regrets this outcome for the Fund's investors and other stakeholders. However, despite concerted efforts for a considerable period of time, it has not been possible to resolve the liquidity situation and secure a future for the Fund".

It is believed some $36 million was invested in the Eco Fund which paid $3 million in fees to Premier Group and its associates in recent times.

Meanwhile Deloitte's have promised further updates on the liquidation of the NERR fund which had around £59 million invested in NES, including ownership via a solitary £1 share of New Earth Solutions (Scottish Borders) Ltd, the business specially set up in 2011 to deliver the Easter Langlee project.

Risky technology means bankruptcies and broken promises

by DOUG COLLIE

The risky and untried gasification and pyrolysis technologies which Borders councillors sanctioned for a failed waste treatment project are synonymous with bankruptcies and broken promises, according to evidence assembled by a national network which campaigns against incineration of refuse.

A damning briefing note from the United Kingdom Without Incineration Network [UKWIN] includes a section dedicated to the now defunct New Earth Solutions Group whose management presided over several failed schemes linked to their useless so-called NEAT technology.

According to UKWIN, investigations and Freedom of Information revelations following the collapse of Scottish Borders Council's multi-million pound contract with New Earth make it clear the local authority should never have relied on the company's unproven gasification system to treat the region's waste.

The briefing note says: "The failed Easter Langlee gasification project cost Scottish Borders Council at least £2.4 million with nothing to show for it".

UKWIN's document entitled GASIFICATION FAILURES IN THE UK: BANKRUPTCIES AND ABANDONMENT catalogues a whole list of failed projects throughout the length and breadth of the country. The money wasted by public bodies and private companies must run into many billions of pounds.

In the case of New Earth Solutions, Easter Langlee was just one of four abandoned gasification projects, the others had been planned for Merseyside, Dorset and Kent. And yet elected members on Scottish Borders Council were convinced the misfiring, incompetent system would make them the leading waste management authority in Scotland, devoting millions of pounds of public money to a spectacular failure.

By June 2016 New Earth Group had entered administration with huge debts and no prospect of repayment. Within a matter of weeks the closely linked offshore investment fund - New Earth Recycling & Renewables [Infrastructure] PLC - which was supposed to finance the £21 million Borders venture, plunged into liquidation.

UKWIN is an organisation with around 100 campaign groups opposed to waste incineration. The network has built up a detailed overview of the gasification and pyrolysis sector with intimate and detailed knowledge of numerous incineration proposals and waste companies.

Shlomo Dowen, National Coordinator of UKWIN, commented: “Promoters of gasification and pyrolysis schemes often cite existing and past projects to bolster support for their new proposals, but don’t like to mention that those other projects were actually embarrassing failures.

"Gasification and pyrolysis is an expensive misstep when it comes to waste management, because even if someone ever manages to get the ill-fated technology to work it would still have all of the problems of more conventional waste incineration. As with all forms of incineration, these technologies would result in shocking levels of CO2 being released and would rely upon destroying valuable material that should be recycled, composted or re-used”.

UKWIN argues that because companies do not like to talk about their failures it is often hard to find out what went wrong. They cite the Air Products debacle on Tees-side which is said to have cost the company $1 billion before that brand of so-called Advanced Thermal Technology was abandoned.

The full briefing note can be read on UKWIN's website at:

http://www.ukwin.org.uk/fail

Will bamboo join NERR on financial scrapheap?

EWAN LAMB reports

A second 'eco-friendly' fund run by the Premier Group Isle of Man stable is facing oblivion only weeks after shareholders in their recycling and renewables investment facility learned there was no chance of recovering millions of pounds in the wake of liquidators being appointed.

Premier Group is the offshore outfit which was supposed to fund Scottish Borders Council's £21 million waste treatment facility on the outskirts of Galashiels until the local authority's deal with 'specialists' New Earth Solutions Group unravelled and was binned in February 2015.

Unfortunately Borders councillors seemed blissfully unaware for more than four years that the New Earth Recycling & Renewables Infrastructure PLC (NERR) was incapable of funding the project. The elected members presided over the loss of at least £2.4 million of taxpayers' money before abandoning the deal and the strategy on which it was based.

Much of the money raked in by NERR's directors from investors was being used to provide loans to the equally incompetent New Earth Solutions Group which could not deliver the technology needed to build the Easter Langlee plant. When the loans could not be repaid to NERR and other lenders NES Group was forced into receivership earlier this year.

Now it has emerged that Premier's Eco Resources Fund which allowed investors to risk large wads of money in bamboo plantations in Nicaragua and South Africa had until yesterday (Monday October 31st) to raise substantial amounts of extra finance otherwise it too could face the prospect of liquidation.

The Halloween deadline must have been particularly scary for investors worldwide who may lose their cash before the bamboo is harvested.

Last year Not Just Sheep & Rugby revealed the $36 million Eco Resources Fund handed over almost $3 million in fees to the fund's directors in their capacity as managers and promoters.

Those payments were made against a gloomy financial background outlined in the Fund's annual accounts. The report revealed there had been a "disappointingly high" level of redemption requests from investors, and the directors had closed the fund to redemptions until the liquidity position improved, possibly by 2017. In the meantime a further $15 million would be required to guarantee success.

There has been a series of circulars to investors in recent months, the most recent issued in October. According to Jamie Sutton, a director of Premier Group, attempts to secure a new lending facility was proving "very difficult" and was nowhere near conclusion.

He wrote: "The risk to the Fund is that this lending facility will not conclude or that it will not conclude in a timescale that is satisfactory for the Fund. The directors are now exploring options to raise new capital from shareholders."

Mr Sutton warned that as a minimum, $500,000 in cash had to be secured by the end of October. A previous missive, sent out on October 5th claimed the Fund was looking to raise up to $30 million in additional investment to repay the lenders who put up the money for the plantation costs and to fund future expenses before the bamboo crops produced a profit.

However, the latest letter from Mr Sutton concludes: "Should loan negotiations not be successful or should new investment not be committed then a board meeting has been set for 1st November 2016. If nothing changes from the current situation, it is therefore likely the directors will seek approval from the Management Shareholder to wind up the Fund and appoint a liquidator".

As previously disclosed in these columns the Management Shareholder in this case, and in the case of the now liquidated NERR Fund is Premier Distribution Inc., registered in the tax haven of British Virgin Islands, based in the offices of law firm Mossack Fonseca, and featured in the 'Panama Papers' files available on the internet.