Monday, 25 September 2017

Will council sanction copycat application?

DOUGLAS SHEPHERD contemplates a planning dilemma

Councillors in the Scottish Borders who rejected proposals for a £4 million waste transfer station in April on the back of six written objections will soon consider a "revised" planning application which opponents claim is virtually identical and which has attracted 19 objections.

The WTS at Easter Langlee at the site of the region's only public landfill facility is urgently needed following Scottish Borders Council's failure to commission and deliver a suitable waste treatment plant. And attempts to assemble a credible waste management strategy have repeatedly ended unsuccessfully over the last 15 years.

It may seem strange to the layman, but SBC has had to submit two separate requests for planning consent to themselves as planning authority for the area. The WTS would be home to thousands of tonnes of household refuse until it was shipped out by road for treatment at an established facility some distance from Galashiels.

According to waste management experts the cost of this distinctly environmentally unfriendly solution to the council's waste management woes was estimated at more than £1 million a year back in 2009. So the likely price for road haulage thanks to the inability to fund and build a conventional MBT [Mechanical Biological Treatment] plant seems certain to be considerably more in 2017/18.

Opponents of the WTS argue the C class road leading to the Easter Langlee site is totally inadequate for the volume of heavy traffic the development would generate. It is difficult to see what has changed since April when elected members threw out a recommendation from their own staff to give the WTS the go-ahead.

Cynics have commented that the councillors were 'grandstanding' just a few short weeks before the local government elections. But others were convinced planning committee members had listened to the serious concerns of local residents.

So it will be interesting to see whether the second attempt to secure the WTS also ends in failure. It is a potential setback the local authority can ill afford with landfill deadline day looming large in its wing mirrors. Had the MBT been delivered on time in 2013 some 80% of Borders rubbish would have been diverted from landfill and there would have been no requirement for a giant garbage store.

This time round Galashiels Community Council has added its voice to the dissenters. Like other opponents it sees merit in finding a "more suitable" location close to a main route and away from the
hazardous network of country lanes close to Easter Langlee.

In their written submission, the community council state: "The Community Council after hearing all points made wishes to object to this planning application as we do not feel that the conclusions made in the Transport Report are valid.

"Photographs were produced by residents of accidents on the C77 which refute the points made in the report that it can be made safer with lighting; widening at specific areas; implementing a speed limit and erecting various signage.
The size and regularity of large vehicles on this road are a danger to people and children; cyclists and horses. The number of houses adjacent to the C77 has increased over the years, especially the Melrose Gait development (not yet complete, with another phase still to be built."
Comments were raised about the unsuitability of the Lowood Bridge for heavy vehicles but the SBC representatives advised that the bridge repairs and upgrading would accommodate this.

In conclusion the community council claims: "In essence, the view is that the waste transfer station application is flawed, particularly the Transport Report and we object to this and also suggest that the Council should be looking for another location."


Thursday, 21 September 2017

Incredible accolade from Audit Scotland

by EWAN LAMB

The Scottish local authority which repeatedly refused to release information about its failed waste management contract and had to be ordered to make top secret documents public on several occasions by the information commissioner has just been described as "open and transparent" by spending watchdog Audit Scotland.

This unlikely and frankly incredible conclusion is reached in Audit Scotland's annual audit report on Scottish Borders Council's accounts for 2016/17 which will be presented to a council committee next week. The finding is about as plausible as the outcome of the audit into the waste contract itself which provided SBC with a clean bill of health despite losing millions of pounds of taxpayers' money.

According to the audit report, beneath a heading Governance and transparency it states:"The Council has appropriate governance arrangements in place that support the scrutiny of decisions made by the Council. The Council is open and transparent in the way it conducts it business and the public can attend meetings of the Council and its standing committees."

But the fact is SBC's own Scrutiny Committee was not allowed to examine the four year fiasco which resulted from the decision to hook up with insolvent contractors New Earth Solutions. And members of the public have been able to attend ALL council committee meetings in Scotland since the 1975 reform of local government. At the same time councillors can decide to hold sections of meetings in private whenever they wish.

Later on, five whole paragraphs are devoted to the council's superb transparency arrangements. In the interests of accuracy and fairness we have decided to quote paragraphs 78-82 of the report verbatim:

78. Transparency means that the public, in particular local residents, have access to understandable, relevant and timely information about how the Council is taking decisions and how it is using resources such as money, people and assets.
 
79. There is evidence from a number of sources which demonstrate the Council's commitment to transparency. Members of the public can attend meetings of the full Council, executive and other committees. Minutes of these committee meetings and supporting papers are readily available on the Council’s website.
 
80. The Council’s website allows the public to access a wide range of information including the register of members’ interests, current consultations and surveys and how to make a complaint.
 
81. The Council makes its annual accounts available on its website. These include a management commentary which provides details of performance against budget, information on the use of reserves and risks and uncertainties facing the Council.
 

82. Overall, we concluded that the Council conducts its business in an open and transparent manner.

On reading this glowing testament to openness, a former councillor told us: "What a lot of claptrap, This stuff is just padding and alluding to what every council is obliged to do.   What's great about public attending meetings or having access to accounts? Who are Audit Scotland trying to fool?"

The very next section of the document deals with SBC's Freedom of Information handling. And here again, despite recent events which saw the council lambasted (twice) for wrongly withholding information it did not want the public to see, Audit Scotland claims everything in SBC's information garden is rosy!

This is what the report says:

83. During 2017 the Scottish Information Commissioner has issued two rulings against the Council regarding its handling of a Freedom of Information (FoI) request from a member of the public. These decisions found that the Council had not complied with the requirements of the FoI legislation and had incorrectly withheld information.
 

84. As part of our audit work we held meetings with Council officers to discuss how the Council had responded to the FoI requests, and to determine whether the Council had identified any lessons to be learned from the handling of the request or any improvements to its process for dealing with requests. Based on the work carried out, we are satisfied that the Council has an appropriate system in place for responding to FoI requests and that improvements have been adopted.

So that's all right then!

Audit Scotland came up with a similar 'lessons learned' conclusion following the failed £23 million project to provide the Borders with a suitable waste treatment facility. It described the massive loss of public funds as "a poor outcome" but maintained SBC followed correct procedures in ditching their useless contractors in 2015.

Unfortunately that audit did not come up with an explanation for the huge gamble taken by elected members in sanctioning a form of rubbish incineration which had never been tested and could not be made to function. An investigation into that aspect of the debacle, and perhaps the role of Audit Scotland in the affair, is still required.

Wednesday, 13 September 2017

Chuffin' heck: where's the boom?

by DOUGLAS SHEPHERD

A decision by Scottish Borders Council to borrow £7.7 million and settle their share of the Waverley Railway (north section) reinstatement, then use house builders' development contributions to pay off the loan over ten years may turn out to have been a bit risky.

Despite upbeat predictions a decade ago by politicians and estate agents that the second coming of trains in 2015 would spark a house construction boom in Midlothian and the Central Borders, thereby generating large sums of dosh for the two local authorities, there is no sign of a building bonanza in and around Galashiels.

On the other hand new figures published this week by the Scottish Government show house start-ups and completions by the private sector in Midlothian are at record levels. At the same time building industry activity in the Borders has slumped to an all time low.

The housing demand near the northern stretches of the railway line may or may not be directly attributable to the return of the Iron Horse after a gap of 46 years. But the sharp contrast in house building rates in neighbouring council areas is distinctly puzzling.

Here are the statistics which should give local economists, councillors and other stakeholders considerable food for thought. In the Borders case the completions and starts are for the whole region rather than for the narrow corridor where developer contributions are levied. The Scottish Government tables show:

Private Sector housing starts for Midlothian & Scottish Borders:
BORDERS – 2016: 211; 2015: 272; 2010: 215; 2006: 692; 1996: 254. Note: The 2016 figure of 211 is the lowest since 1998 (197).
MIDLOTHIAN – 2016: 847; 2015: 593; 2010: 205; 2006: 309; 1996: 306. Note: 2016 figure of 847 is highest since records began (1996)
Private Sector housing completions for Midlothian & Scottish Borders:
BORDERS – 2016: 235; 2015: 347; 2010: 429; 2006: 618; 1996: 523.

MIDLOTHIAN – 2016: 642; 2015: 583; 2010: 266; 2006: 169; 1996: 209. Note: 2016 figure of 642 highest since records began (1996).

Figures for house completions in the Waverley Developer Contribution area (includes Lauder, Galashiels, Melrose and Selkirk) in the five financial years to 2015/16 can be found in the Scottish Borders Council Housing Land Audit 2016.
The numbers are - 2011/12 89; 2012/13 101; 2013/14 110; 2014/15 91; 2015/16 118.
According to the audit, approximately 32% of all Borders completions fell within the Waverley Developer Contribution area. The report does not specify whether these statistics are for all completions or just the private sector.

But what is clear from both sets of data is that so far the Borders Railway has not kick-started a housing boom in communities bordering the southern sections of track.

It is to be hoped the council attracts enough contributions from house builders to meet the cost of the £8 million loan they took from the Public Works Loan Board [PWLB] in February with an interest rate of 2.05%. This advance is repayable over 10 years.

In April, SBC borrowed a further £10 million from PWLB in April at 1.90%, also over 10 years. Information posted on the PWLB website does not specify what each loan would be used for.

Borders councillors were told at the beginning of this year that by repaying their 'bill' for the railway upfront after borrowing the cash rather than meeting their commitments in instalments through to 2038 by handing over developer contributions they could expect to save around £4 million of public money.

A Freedom of Information request submitted to SBC in June 2014 asked for the total number of development contributions obtained for the railway project so far (2004 to 2014). The council reply showed there had been 241 developer contributions valued in total at £743,127 - far less than the number required to keep up the council's payments. 


Sunday, 10 September 2017

Mystery solved by liquidator's report

EXCLUSIVE by EWAN LAMB

The latest revelations from liquidators who are investigating an insolvent offshore investment company have helped to explain why there was no mention of the fund in a series of monthly reports to Scottish Borders Council by contractors commissioned to build a waste treatment facility for the region.

As we reported over the course of the weekend, Deloitte's, the liquidators for New Earth Renewables & Recycling [Infrastructure] PLC (NERR) has told creditors, investors and shareholders in the fund that while £40 million was being paid out to "service providers", there were no subscriptions from investors from January 2014 onwards.

NERR was supposed to bankroll the £23 million waste treatment plant planned at Easter Langlee, Galashiels by contractors New Earth Solutions (NES). But the local authority was fobbed off with one excuse after another between 2012 and early 2015 as the waste management firm and its "funders" failed to put up the cash for the 'cutting edge' project.

Not Just Sheep & Rugby has now taken a fresh look at the monthly "progress" reports which NES sent to SBC throughout 2013 and 2014. These highly sensitive documents were finally released by the council last month on the orders of the Scottish Information Commissioner.

Each report up to February 2014 carries so-called updates on further funding arrangements with regular mentions for the future role of NERR in delivering the much needed Borders facility.

But following the block on new subscriptions into NERR there is a complete absence of funding updates for seven months. And during that time the crucially important development of the closure of subscriptions is not mentioned.

It is only after an inquiry is made about funding by SBC that NES offers this response: "Action is being taken to raise funds to invest in new projects. A senior debt provider is expected to complete arrangements by the end of August with funds being available in September. This will provide a significant sum of money of which the majority will be returned to NERR".

The following month's update includes yet another carrot: "The visit from the New York based fund that may sit alongside NERR went well. They have said that they now wish to explore with NERR how they can provide money both at a NERR shareholder level and directly into projects.

"Scottish Borders was prominent in the discussion. There will however now be a lengthy due diligence programme to establish the means and timing of any investments".

In a telling comment written in the margin of this report a project team member asks 'Is this a six-month process or a six-year process'.

The truth is that by this time NERR had no income but was ploughing millions of pounds of investors' cash - £24 million in total - into the floundering New Earth Solutions companies. The fund was incapable of financing Project Easter Langlee but SBC was still being told NERR had a role to play.

So did an apparent lack of scrutiny and involvement by elected councillors fail to detect the contract was in critical difficulties long before its abandonment in February 2015?

Perhaps an Audit Scotland report on capital projects by local authorities which was published in 2016 contains some telling passages.

It concluded: "Elected members are not able to scrutinise the performance of capital programmes effectively because they are not receiving adequate information on capital investment. The majority of councils' progress reports to elected members on major capital projects focus on reporting capital spending in the current financial year. Some councils do not report cumulative capital spending, covering several years, against the total capital budget for individual projects.

In a specific reference to the failed Borders project the report says:
"Waste Treatment facility
The Scottish Borders Council cancelled the project due to project-specific issues. In particular, the council failed to demonstrate the project's technical viability and was therefore unable to secure funding for the project. External auditors are satisfied that it followed appropriate procedures in relation to this decision."

Friday, 8 September 2017

Fees of £40 million taken from bankrupt fund

EXCLUSIVE by DOUG COLLIE

An investigation by insolvency experts has discovered that a staggering £40 million worth of fees were dispensed by the directors of the 'green' investment fund which was meant to pay for a planned waste treatment plant to serve the Scottish Borders.

The money removed from the Manx-based New Earth Renewables & Recycling [Infrastructure] fund (NERR) to pay controllers, managers, custodians and promoters far exceeded the £23 million required to cover the cost of Scottish Borders Council's proposed treatment facility at Easter Langlee, Galashiels.

Yet NERR could never come up with the resources for the Borders plant in the four years before the local authority's deal with contractors New Earth Solutions (NES) was abandoned in February 2015. By that time SBC had spent £2.4 million preparing a project which never got off the ground.

A newly published report to creditors and shareholders by NERR liquidators Deloitte has also revealed that the fund never received any subscriptions from investors after January 2014, long before Project Easter Langlee had to be scrapped. But it continued ploughing money into the loss making NES companies, providing loans in excess of £24 million.

The report explains: "The Company (NERR) had provided significant finance to support and back the start-up and expansion of the UK Trading Companies (NES) over a number of years. These investments were made into loss making activities and the development of operations which ultimately proved to be unsuccessful."

New Earth Solutions also suffered a financial collapse last year when accountancy firm Duff & Phelps were appointed joint administrators.

Deloitte's state: "The Joint Liquidators (of NERR) have not entered into any form of settlement with the Administrators and retain an open mind in relation to what steps should now be taken. One option available to the Company (as an unsecured creditor) and one which we are presently considering, would be to seek the appointment of a liquidator over NESGL and/or NESFM to investigate the affairs of those companies (including during the period of Administration)."

Shareholders of NERR are told that given the insolvent position of the Company’s investments, the joint liquidators are continuing to investigate the potential for recovery from other sources.

"We have actively been progressing our enquiries into the failure of the Company and, with the assistance of legal counsel in the Isle of Man and the United Kingdom, have focused on specific issues that, based on our and their experience, we consider have the best chance of securing a valuable return to the shareholders and creditors of the Company."

In what is probably the most disturbing section of the report Deloitte's write: "Given that the UK trading companies performed poorly and ultimately failed, our investigations have focused on the actual causes of loss to the Company. 

"As well as the money that was lost in the investments in the UK Trading Companies, large sums of money (in excess of £40 million) were paid out to service providers. Many of these fees were based on the NAV (Net Asset Value) of the fund, which showed significant increases despite the underlying businesses’ failure. Amongst other things, we are focusing on the basis for the valuation of the Company’s assets and the continued investment of investors’ money into failing businesses."

More than 3,000 investors in NERR had been told there was little or no chance of recovering any of their lost cash. But the new report appears to offer a small glimmer of hope.

It says: "As previously stated in our reports, we are limited in what information we can share with you so that we do not prejudice any potential claims. Further, due to the complex nature of the investigations and voluminous documentation, it may be some time before we can provide you with the final results of our enquiries.

"However, based on the enquiries made and legal advice received so far, we are reasonably confident that our investigation will support the making of potential claims for the benefit of creditors and/or shareholders in due course."

But no story about NERR and NES would be complete without a bizarre twist, and this particular tale of woe is no exception.

The assets of NES may have been sold off by Duff & Phelps for a little over £5 million, and the ownership of those subsidiary companies now rests with Irish-based PandaGreen.

But it seems a consortium headed by waste management company Global Gateways together with a group of financial advisors are attempting to put together a bid to take over the assets.

Deloitte's report sets the scene. "Investors may be aware that we have received an informal approach from Ms Jane Sanders, acting on behalf of Global Gateways and a group of Independent Financial Advisors, mooting a scheme whereby Global Gateways would bring some kind of legal claim in an attempt (as previously attempted without success) to gain control of some of the former assets of the UK Trading Companies on terms and for consideration to the Company and its creditors and shareholders which have not been specified. 

"We have sought to obtain further information and supporting evidence from Ms Sanders to enable us to assess whether such a scheme and the legal claim (apparently directed against the Administrators) has any merit or is likely to benefit creditors and shareholders.

"At the date of this report, we have not received any answers or supporting evidence in response to our requests, either from Ms Sanders or Global Gateways. In the absence of such supporting evidence and having obtained specialist legal advice in the Isle of Man and United Kingdom, we are not presently convinced that there is any basis to undo the transactions with third parties who now own former assets of the UK Trading Companies or that there would be a benefit to the creditors and/or shareholders in doing so."

One financial expert commented after reading Deloitte's report: "The scale of fees being creamed off by those in charge of NERR is quite unbelievable. It is becoming abundantly clear that the contract NES had with Scottish Borders Council gave the NERR fund kudos and credibility with potential investors over a four year period. 

"Unfortunately NERR was never in a position to deliver the Borders waste treatment plant, and SBC were kept onside by a string of plausible but worthless excuses. I'd say they were taken for a ride".




Tuesday, 5 September 2017

Fresh calls for "waste fiasco" inquiry

by EWAN LAMB

There have been renewed calls for some kind of official inquiry into the loss of £2.4 million of public money by Scottish Borders Council following publication of a damning 42-page report into the Easter Langlee waste treatment "affair".

An investigation which took more than two years to complete thanks to the council's refusal to release hundreds of documents linked to the abandoned contract has produced damning evidence and allegations that SBC mismanaged funds by failing to deliver a £23 million facility to deal with the region's 40,000 tonnes of household rubbish.

The catalogue of factual evidence which had to be dragged from the council with the assistance of the Scottish Information Commissioner has been handed to local politicians and media representatives in a bid to have the issue taken further.

Unfortunately Audit Scotland, the organisation normally tasked with such an investigation has shown no appetite to get involved.

And the Scottish Public Services Ombudsman [SPSO] - when supplied with a copy of the report together with a request for advice - recommended passing the document to....Audit Scotland. It would appear that Scotland's regulatory system for public authorities resembles a version of the Magic Roundabout.

But if the regulators see nothing amiss with the loss of £2.4 million together with many millions more which had been invested in New Earth Solutions and its offshore partner New Earth Recycling & Renewables (NERR) fund there has been some strong reaction from experts and others who have read the report.

One of the key findings from the investigation was that councillors in the Borders should have pulled the plug on NES and NERR long before February 2015 when the waste treatment project was finally abandoned for "technical and financial reasons".

An experienced and respected member of the waste management industry told us: "When you look at this in summary it is shocking. How they allowed so much to go on without hitting the stop button beggars belief. What is shocking to me is they had Shanks as a reserve bidder that they could have called when things started to go wrong so quickly". 

He claimed those in charge should have considered "a couple of options", namely:

  1. force NES to build the conventional Mechanical Biological Treatment (MBT) plant as per the contract and set aside the Advanced Thermal Treatment (ATT) facility to be built as phase 2 (as per the original contract.
  2. terminate the contract and award to Shanks. At least Borders would have had a treatment facility
The industry expert commented: "It is to be hoped there is a public enquiry of sorts and a number of people are brought to account. The handling of this was nothing short of shocking. I would also question some of the advisers as to why they did not impress on SBC the need to consider termination much earlier."

There seems little doubt that electyed members at SBC took a huge gamble in 2012 when they sanctioned the inclusion of Advanced Thermal Treatment (ATT) in the Easter Langlee project. This decision was taken even though councillors were aware the ATT technology had not even been through research and development trials.

An anti-ATT campaigner said: "There are important lessons to be learned [from the Borders investigation], not least for those councils where history is repeating itself and for other authorities who should be publicly ruling out gasification..

"This document has provided an invaluable service to the whole movement by giving us a rare glimpse behind the curtain of secrecy that usually hides what really goes on between waste companies and waste authorities. Councillors clearly need educating."

And a former councillor who was once in charge of important local government portfolios told us: 
"There is absolutely no doubt that this is an Audit Scotland matter right enough but it appears that they are happy to go along  with the work they commission from private accounting firms acting as external auditors.

"After all it is Audit Scotland that has set out the guidelines for elected member responsibilities for ensuring best value when it comes to spending the 'Public Pound'  due diligence etc."

One local taxpayer merely said he was 'sad and depressed at the sheer incompetence of councillors and officials at SBC' while a number of others claimed it was "criminal" that no-one had shouldered the blame or been held to account for the loss of such a vast sum of public cash.

Sunday, 27 August 2017

A strong case for the prosecution

DOUGLAS SHEPHERD examines the evidence in the Easter Langlee debacle

The completion of a two-and-a-half year investigation into the failed Scottish Borders waste treatment project has uncovered sufficient evidence to make a charge of gross maladministration stick against those in charge of the contract.

That is Not Just Sheep & Rugby's conclusion based on the contents of dozens of documents which had to be prised out of secret files at Scottish Borders Council via Freedom of Information requests and on the instructions of the Scottish Information Commissioner.

The refusal to accede to requests for information was maintained steadfastly on grounds of "commercial confidentiality" even after debt-ridden contractors New Earth Solutions [NES] collapsed into administration and its offshore funding partner New Earth Recycling & Renewables (NERR) fund was discovered to be insolvent. We maintain SBC indulged in a cover-up in a bid to protect themselves from scrutiny and embarrassment, not to mention responsibility.

It is impossible to mount a defence for SBC as the local authority has maintained a stony silence ever since they were forced to abandon their deeply flawed deal with NES in February 2015 at a cost of at least £2.4 million to council taxpayers.

Not a single elected member has offered a plausible explanation or offered an apology for the collapse of a £23 million construction project which left the Borders waste management strategy in complete disarray.

Now a second planning application has been lodged for the development of a £4 million waste transfer station [WST] on the former New Earth site where refuse collections can be centralised before being carted by road to a destination outwith the area for treatment. The first attempt by Borders council officials to secure permission was thwarted by er Borders councillors!

There is so much damning evidence now in the public domain that it is difficult to outline its impact within the confines of a single article. But here are the main revelations and questions which now hang over the SBC/NES contract:

*Apart from rubber stamping the original contract with NES in 2011 and nodding through a disastrous amendment to the deal in October 2012 there is no evidence of control or even involvement by elected councillors who were responsible for planned expenditure of £23 million at Easter Langlee. What was their actual role? The absence of written records suggests they left matters entirely in the hands of paid officials and extremely costly consultants.

* Had the contract not been varied the Borders should have had a conventional treatment plant capable of diverting 80% of waste from landfill up and running by 2013. Our region ended up with nothing with an end to landfill looming large.

*Councillors agreed in private in 2012 to include Advanced Thermal Treatment – a form of gas-engine incineration – in the project to convert refuse into electricity. Unfortunately the so-called NEAT technology had never been proven commercially at any location, and it never worked.

*NES told SBC at different stages of their relationship that funding for Easter Langlee would come from the firm’s offshore partners, then from one of eight named banks, and latterly from New York. Despite the string of promises and excuses, money for the plant was never in place.


*In late 2013 the NEAT research and development trials were going so badly that New Earth warned of a further two-year delay, taking completion to (hopefully) July 2017. Why did councillors not step in at that stage and order the contract to be abandoned forthwith instead of allowing the farce to continue for another 15 months at great public cost?

*At this point New Earth directors suggested abandoning the gas option and replacing it with a brand of steam technology. But to be viable the re-designed plant would require a 70,000 tonne capacity rather than the 40,000 tonne plant needed to deal with Borders waste. The answer would be to import garbage from other parts of the country.

*In a desperate bid to keep the project alive, NES proposed in 2014 that until the Galashiels centre was completed all of the rubbish from the Scottish Borders should be transported out of the region in fleets of lorries for treatment somewhere in North-east England. Ironically, that is the only environmentally unfriendly solution left to the council in 2017 as a direct result of catastrophic mismanagement of the contract.

*A large delegation of councillors and officials returned from a 'fact finding mission’ to south-west England in October 2014 and confirmed their waste treatment solution was on track and would be an asset to the Scottish Borders. But behind the scenes the project was on the verge of collapse, and four months later it had to be abandoned.

Despite all of these hard facts Scotland's public spending 'watchdog' Audit Scotland has stated repeatedly there was/is no need for an investigation into this mess of SBC's making. Apparently the council pulled the plug at the right time otherwise even more of our cash would have disappeared down a proverbial black hole.

Audit Scotland did concede the loss of £2.4 million was a "poor outcome" for the council. No it wasn't. It was a very poor outcome for taxpayers, but SBC simply wrote off the money and carried on as though nothing had happened.

We rest our case....


Friday, 25 August 2017

Running out of options and still no cash!

EWAN LAMB closes the lid on our damning expose of Borders waste contract

Waste management "specialists" New Earth Solutions did everything they could to keep their multi-million pound contract with Scottish Borders Council alive and kicking throughout 2014 even though the project had been suffering from dead duck syndrome long before that.

As we reported previously, the latest wheeze was a suggested switch from gas engine to steam technology which would fire the incinerators at Easter Langlee and deal with the region's 40,000 tonnes of municipal rubbish.

But unfortunately, to render the steam option viable the plant would require up to 70,000 tonnes of garbage, generating a need to import vast quantities of waste from outwith SBC's territory.

Meanwhile the ingenious head honchos at NESG were offering to export all of the Borders rubbish by road for treatment elsewhere until Easter Langlee was commissioned - hopefully although not definitely in 2017.

The evidence contained in recently released "secret" files from the vaults at SBC suggests an air of growing desperation and a clutching at straws mentality as the gas-based NEAT technology continued to misbehave and the only way of securing £23 million to build the Borders plant appeared to be via the National Lottery or the Euro Millions!

Here's what one member of the project team had to say about the steam solution and the prospect of taking local rubbish in fleets of lorries for treatment in North-east England:

I note the potential steam solution. A key issue looks as if it may be third party volumes - is it realistic that 70/80k tonnes RDF per annum could be sourced for a plant at Easter Langlee - there surely must be some doubt here.

"The interim residual waste treatment solution is potentially interesting. It is another matter, of course, whether whatever might be offered would save cost to the Council in the interim compared to continuing disposal to landfill. 

"Also, we should be mindful that the purpose of the moratorium (and its hoped-for outcome) is to see if a clear way forward can be found for the final residual waste treatment solution and within what timescale, so we might not wish to pursue any interim solution unless and until satisfied following the moratorium that the final residual waste treatment solution is judged to be technically viable, fundable and likely to be implemented within a satisfactory timescale."

But steam treatment for Borders waste was firmly knocked back by SBC's technical consultant who wrote: "In summary, we feel that the adoption of a steam-based solution would be a retrograde step. The steam solution could be costlier, require additional merchant capacity to be affordable, necessitate changes to planning and permitting and would not be capable of retro-fit to gas engines should this be shown to be technically feasible in the future."

There were warnings too that continuing delays could completely derail the council's waste treatment strategy.

A senior officer expressed concern in an email dated August 2014: "Overall, to me, there are positives but we need to be careful that the re-financing news and the possible steam option is not masking the poor performance of Canford (R&D centre for NEAT technology) and NES’ appetite to continuing to pursue gas to engine technology.

"Ultimately we need to bear in mind that we are on a relatively short timeline for delivering a project to meet the first Zero Waste target in 2021, if NES fail to deliver. The latest SBC would need  to start is April 2017. Therefore we need to make sure that between now and October (2014) NES are focusing on a viable option to deliver the project and not stalling for additional time."

The method of paying for the major scheme at Galashiels had also shifted yet again. None of the range of banks and finance houses named in previous correspondence had been persuaded to sign up, and now eyes were turning to bigger fish and across the pond to New York.

An August 2014 email showed just how wide NES were casting their net. In it the managing director himself told SBC: "Pairing up with a larger fund – We are currently speaking to both EY (Ernst & Young) and PWC (Price Waterhouse Cooper) about identifying larger funds who would co-invest alongside NERR to provide finance directly to future NESG projects. This review has identified a number of funding partners and a first line of due diligence is being undertaken to identify the most suitable.

"Funding directly into the project – During the Avonmouth refinancing process the senior debt provider has been asking us if they can now invest directly at the start of our next projects. Scottish Borders has featured prominently in this conversation however, the existing funder would probably expect that the solution is a steam based energy project because they have now got themselves comfortable with the proven nature of this technology. 

"We have also now received approaches from a number of other funders who have been watching the operability test and have indicated that they would now be comfortable lending directly into this technology.
Sale of non-core business – In September we are on target to complete the sale of one of our non-core green / food waste processing businesses. This is highly confidential at the moment and we would appreciate you not forwarding this information onto any of your advisers. 

"We will be making a press announcement at the appropriate stage. Some of the proceeds of this will repay the senior debt attached to the contracts, however, the majority will be returned to NERR (the Isle of Man fund which repeatedly failed to come up with cash for Easter Langlee)."

Despite the reticence of their own experts on the issue of a steam system for Easter Langlee, and the complete lack of funding as of August 2014, a delegation of councillors and lead officers from the council returned from a "fact finding mission" to the NES Avonmouth plant two months later declaring their ideal solution for dealing with Borders rubbish was on track.

How wrong could they be?

NEXT: DRAWING OUR OWN CONCLUSIONS

Thursday, 24 August 2017

The Age of Steam?

DOUG COLLIE reports on a radical move to solve the deepening Borders waste crisis

The repeated failure of the so-called NEAT system of incineration at the research and development stage meant that by early 2014 the planned £23 million waste treatment facility for Scottish Borders to deal with up to 40,000 tonnes of municipal rubbish was already years behind schedule.

A newly released file of around 80 documents linked to the disastrous contract between Scottish Borders Council and waste management company New Earth Solutions Group has provided detailed information concerning the test failures which frustrated the Borders project throughout its existence.

Our recent series of articles has attempted to give readers an idea of how far NESG engineers were from perfecting the Advanced Thermal Treatment (ATT) system which was to be installed in the plant at Easter Langlee, Galashiels.

Yet another failed test is chronicled in a report from July 2014. Those involved in the project had already been given the devastating news of a further two year delay thanks to the technological hitches coupled with a lack of financial backing for the gas-based pyrolysis method of converting refuse into electricity.

The technical report on the July event says: "An extended trial began in the evening of 6th July. Unfortunately the trial had to be stopped in the afternoon of 7th July due to a significant pressure drop across the pyrolyser. Initial investigations suggest that a problem has occurred with the char (ash) extraction.

"The fuel used in the trial was a 60/40 blend of oversize and biofines and the feed rate was 1 tonne/hour. This is a different mix to that previously used but very comparable to the fuel specification for Easter Langlee. It is considered that a greater quantity of char is produced from this fuel specification and coupled with a high feed rate this has led to a build-up of char in the pyrolyser and consequently the pressure drop experienced. Further investigations are being carried out to confirm if this is the case."

A leading member of the project team commented in an email:“This again is worrying.  It has taken 1 year and 8 months since the DoV (the fateful Deed of Variation signed by councillors in October 2012 and implemented in December 2012) to run fuel representative of Easter Langlee and it caused problems!”

However, help was at hand. Within a month NESG, which had provided a long string of reasons and excuses for delays with technology and funding, suddenly came up with another massive contract revision to solve Easter Langlee's woes.

An email from top brass at New Earth HQ to SBC set out the solution in detail. The message explained: "As you are aware the Easter Langlee project has always been based on small scale energy generation using gas to engine technology. 

"With the experience we have gained at Avonmouth (the NESG plant near Bristol) we now consider a steam based project to be potentially viable. In part this has been aided because the original regulatory permit requirements of SEPA preferred a gas to engine solution to a steam solution. During the intervening period SEPA has relaxed these regulations to the point that a steam solution like that in use at Avonmouth appears more possible. To this end, the NESG team are doing a review of the viability of delivering a steam solution to Scottish Borders."

Such a major switch in technology would require a wide-reaching project review, and some of the points for discussion are set out in the document. We reproduce the text in full:

 Scale – Because of the inclusion of the boiler and other ancillary equipment the steam system takes up more space so we need to identify if we can accommodate it / what additional space would be needed and the implications on planning and permitting.

 Affordability – Again because of the boiler the capital cost of this solution is higher. We are looking to see if the solution can be tailored to meet the requirements of the Scottish Borders volumes.


 Third party volumes – It may be that a steam solution is only viable at a minimum of 9-10 units which equates to 70-80 thousand tonnes of RDF per annum (double the volume of rubbish generated in Scottish Borders). 

For this reason we will need to discuss with you any issues arising from bringing other parties material into the site. We also need to understand if this material is available. Clearly if we can provide a steam solution it would enable us to speed up the project because we would no longer be waiting on the Canford R&D development timetable and the funding for this solution would be more readily available.

And with the Borders scheme so far behind schedule, NESG even had a short-term sweetener on offer to deal with household rubbish until the steam engine arrived in the Easter Langlee "siding".

The email continued: " Interim residual waste treatment solution – In recognition that the project has been delayed, NESG is currently reviewing the availability of emerging treatment capacity in the North East of England. 

"This could result in New Earth offering the Council an interim treatment solution for all or part of its residual waste, which could be transferred from the Council’s transfer stations to a third party treatment facility, pending the development of the Easter Langlee treatment facility. Clearly we would appreciate your early feedback to this concept as we understand that you will have engineered void at Easter Langlee landfill and also landfill gas generation income. However, this potential opportunity may offer the Council an interim recycling and landfill diversion benefit."

How ironic: a proposal hatched in 2014 to transport local refuse in fleets of lorries for treatment elsewhere turns out to be the preferred option in 2017...if planning permission can be secured for a waste transfer station on the same site where a conventional treatment facility should have been functioning FOUR years ago. A glittering example of bungling incompetence?

NEXT: THE REACTION TO THE STEAM OPTION

Wednesday, 23 August 2017

Spluttering into 2014...

DOUG COLLIE on yet more setbacks for Easter Langlee

The damning evidence which Scottish Borders Council wanted to keep from public scrutiny shows 2013 had been a veritable annus horribilis for the project team aiming to provide the region with a fit for purpose waste management facility costing £23 million.

Council contractors New Earth Solutions were warning of another two-year delay to the project at Easter Langlee, Galashiels as engineers struggled unsuccessfully to get the chosen gas incineration technology - inappropriately dubbed NEAT - to work. Only Borders councillors had been impressed...they approved the untested system in October 2012.

And newly released files from a debacle which cost taxpayers, shareholders and investors many millions of pounds have revealed that the money needed to build the plant simply had not been sourced.

Not Just Sheep & Rugby has brought much of the evidence from 2013 into the public domain after SBC was ordered to end its concerted attempts to surround their disastrous liaison with NESG with secrecy. But the collection of some 80 reports, emails and other correspondence show progress on Project Easter Langlee would also be non-existent throughout 2014.

One of the litmus tests for the NEAT Advanced Thermal Treatment (ATT) appears to have been to get it to function non-stop for 120 hours at New Earth's R&D centre in Canford, Kent. This would be a watershed if banks and other investors were going to commit.

We have already reported on several failed tests during the course of 2013, and 2014 would prove to be little different. The documentation may be technical but the outcome is there for all to see.

This report followed an attempted 120-hour test in January 2014:

"A 120hr trial began at 9pm Sunday 12th January 2014. The whole system was run – pyrolyser, gas clean-up, engine – and the trial progressed well for 64 hours. Whilst operating, the engine produced c.310KWe. At two points within this 64hr run, operations had to cease (for 14 hours in total) due to failures of ancillary equipment: Diesel burner problems (used to heat the pyrolysis tube). The fuel feed pipeline to the diesel burner was restricting the flow. The pipeline was replaced.


"Unfortunately the trial was stopped after 64 hours due to a pressure drop across the ceramic filter indicating a broken filter element. Investigations confirmed that an element had broken. The cause of the breakage is thought to be differential thermal expansion of the cleaning mechanism (as per previous breakages). This will be remedied through increasing the tolerances further."

The following month's test produced this documentation:

"It was proposed to carry-out a 120hr trial in w/c 17th February. The trial commenced on 18th February and initial progress was good with a consistent fuel gas being produced.
However, the trial had to be halted after seven hours of operation as the gas booster fan tripped.  The plant was shut down in a controlled manner as required to prevent escape of gas and uncontrolled combustion.

"On investigation it was found that the electrical motor for the fan had collected water within the casing.  The site had been experiencing inclement weather for some time and despite the weatherproofing of the fan, rainwater had penetrated the casing. Unfortunately the rain had also penetrated the building containing the combustion chamber and soaked the ceramic fibre insulation which subsequently collapsed into the chamber."

Third time lucky? Not exactly: there were a number of issues to be addressed following a further test in early April 2014:

"On Sunday 6th April a 120hr trial commenced on the plant at Canford. RDF (Refuse Derived Fuel) had been dried prior to this to ensure sufficient fuel was available. The trial was stopped after approximately 36hrs as the pressure drop across the ceramic had increased indicating a breakage of one (or more) of the filter elements. 

"This is being investigated. From an initial review of the data, the syngas quality was as expected and the fuel feed system worked well at a feed rate of c.500kg per hour. Despite the assumed breakage of filter elements, the quench system did not show signs of particulate indicating that there has been no carry-over from the filters. During the trial the char extract system jammed a couple of times due to large foreign objects – temporary fencing clamps, metal wall ties, metal sweet tins, etc. but these were dealt with without interrupting the process. Further upstream removal of metals may be required to alleviate this."

Ceramic filter breakages continued during further trials over the summer.

COMING NEXT: FULL STEAM AHEAD!


Tuesday, 22 August 2017

A disturbing new discovery....

by EWAN LAMB

An investigation by Not Just Sheep & Rugby has uncovered another mysterious chapter in the story of the Scottish Borders' failed £23 million waste treatment project following the release of 'commercially confidential' files on the orders of the Scottish Information Commissioner.

As we have reported over the last few days, the recently published paperwork showed Scottish Borders Council's deal with waste management contractors New Earth Solutions Group (NESG) was in deep trouble during the second half of 2013.

Project reports and emails from senior officers confirmed troubling issues had been encountered on two fronts - technology and finance.

There was even mention of the scheme to construct an Advanced Thermal Treatment (ATT) facility at Easter Langlee, Galashiels incorporating New Earth's self-styled NEAT technology having to be cancelled altogether.

The development of the NEAT system was proving troublesome while potential funders New Earth Recycling & Renewables Ltd (NERR) - managed by Premier Group (Isle of Man) - could not bridge the cash gap.

As an email written by a project team member warned: "NERR's cash balances stood at £5.484 million on August 20 (2013), down from £7.968 million on July 19 ---- the gap between the cash funds at NERR's disposal and the amount actually required to deliver the (Borders) project (£23 million) has widened over the past month".

By November 2013 NESG had advised there would be another two-year delay at Easter Langlee with construction of the ATT facility unable to start until June 2016.

A 120-hour technology trial of the NEAT system which started on November 17 had to be stopped after just five hours, and the plant had to be shut down to prevent significant damage. This event prompted a council appointed consultant to comment: "This may have been the final incident that convinced NES to come clean and admit that there was no chance of implementing NEAT on a commercial scale in 2014".

However, those engaged in the procurement of Project Easter Langlee appear to have been living in a parallel universe to that inhabited by directors and managers of the NERR fund, and by the top brass at NESG, our investigations have found.

A lengthy press statement issued on the Isle of Man by Premier, and dated November 28 2013, boasted that net assets of NERR "are now around £200 million". But that was not the only claim being made by those at the helm.

According to the news release NEAT was "patented and fully operational", and the company's 'stat-of-the-art' energy recovery facility in Avonmouth, Bristol could process 120,000 tonnes of waste derived fuel each year and exported enough electricity for around 25,000 homes.

The highly positive spin on the performance of NERR and of NEAT was part of a strategy leading to a "possible Initial Public Offering [IPO] on the London stock exchange to support ambitious UK and overseas growth plans".

These must have been staggering claims in light of what was happening with the Scottish Borders venture. But there is no indication that these fanciful plans were challenged or questioned by those in charge at SBC.

 Premier's statement declared: "Launched just over 5 years ago amidst the worst global financial crisis this century, the New Earth fund range have seen strong demand both in the UK and internationally such that net assets of New Earth Renewables & Recycling (Infrastructure) plc, the master holding fund, are now around £200 million.

"The fund’s investors have seen the value of their shares increase by nearly 84% in the original Sterling Sub-Fund of the Premier Investment Opportunities Fund Protected Cell Company plc, with very little volatility along the way, whilst even the more recent investors are looking at good returns over 6 months of nearly +6% in the same share class."

NERR investors were barred from making withdrawals from the fund from 2013 onward and the investment entity became totally insolvent in 2016 with more than 3,200 individuals warned they could expect to lose everything. And in 2013 NESG was already heavily in debt to banks and to NERR itself.

None of that prevented NERR director David Whitaker telling potential investors: "The successful conclusion of this project (IPO) will help New Earth make the step change required to take it on to the next level and, very importantly for the shareholders, should lead to a successful outcome for them too."

And Head of Premier, Mike Richardson provided this quotation:“We are really pleased that New Earth feel that the time is now right to make their move. Given the recent performance of the UK economy and stock markets, including a very successful high profile IPO, we are fully behind the decision and hope it will be as beneficial for investors in the funds as it will be for the New Earth themselves.”

A number of publications appear to have taken company statements at face value, and a clutch of positive articles were published, including a feature in the Financial Times.

Commenting on the future of New Earth to online trade magazine Let's Recycle, company chairman Bill Riddle said: New Earth started life as a composting business but is now firmly focused on residual waste treatment, thermal technology development and renewable energy generation. The NEAT technology offers scope for us to become not just a national company, but an international one."

Unfortunately the Stock Market flotation never happened, the finance to develop Easter Langlee was never in place and the NEAT technology continues to cause problems at Avonmouth to this day.



Monday, 21 August 2017

Not so NEAT: Borders project in intensive care!

DOUGLAS SHEPHERD shows why Scottish Borders Council were so keen to hide evidence...

If the lack of progress on the Scottish Borders' £23 million waste management facility at Galashiels was concerning the group of council staff and their advisers attempting to procure and deliver the scheme then their frustrations must have been magnified many times when the contractors warned of a further two year delay because of serious technical issues.

Newly released top secret documents from the Scottish Borders Council/New Earth Solutions files include stark warnings from consultants in December 2013 that:

*Development of the Easter Langlee Advanced Thermal Treatment [ATT] plant could be cancelled altogether.
* There was a risk that SBC would have no solution for dealing with the region's residual waste.
*New Earth Solutions could have decided to put the Scottish Borders project "on hold".

Our previous revelations have provided strong evidence of the repeated technical issues which were preventing any meaningful progress on the development of the so-called NEAT pyrolysis and gasification system needed to incinerate rubbish in the Borders.

And funding for the multi-million pound Easter Langlee job was dependent on the refinancing of New Earth's recently completed Avonmouth Energy from Waste project near Bristol. That particular plant would develop major problems in the months and years ahead, and it is currently closed down completely to facilitate radical modifications involving major additional investment by new owners.

The 'investment house' regarded as the most likely to bankroll the Borders venture was New Earth's partners New Earth Recycling & Renewables [Infrastructure] Ltd (NERR).

Reports and emails from two firms of consultants working for SBC - Nevin Associates and SLR Consulting - reveal the extent of the growing crisis which was threatening to envelop the project well over a year before SBC decided enough was enough and abandoned the scheme at a cost to local taxpayers of at least £2.4 million.

The SLR report, written after visits to Canford, the New Earth R&D centre in Kent, and to the Scottish Borders, coincided with NES's bombshell letter indicating a potential two years delay to the project whilst a demonstrator facility was built at Canford and was proven, leading to a re-jigged construction programme at Easter Langlee with commissioning now pushed back to July 2017.

The somewhat technical explanation states: "The justification given for the delay is the financing requirement to demonstrate a significant operation through from front-end to final engine exhaust as an integrated facility demonstrating utilisation of heat recovery and efficiencies of operation throughout".

This followed on from an unsuccessful attempt to reinstate a 120-hour testing programme when a new issue was determined and explained as being in connection with over-drying of feedstock and loss of sealing plug in the feed system which in turn led to a safety issue for the process.

According to SLR's expert: "As a part of the justification the implication is that NERR financing is more risk averse due to issues emanating from the Avonmouth facility's failure to meet targets and some scepticism perhaps with regards to anticipated outputs.

"Indirectly it was reported that the facility at Avonmouth operates at up to 75% of targeted performance and perhaps reading between the lines this may also be at the sacrifice of availability although this was not officially confirmed by NES."

SLR's report also reveals that between Oct 2015  and Feb 2016 the revised target was now for 2000 to 4000 operational hours leading to an ability to commit to financial close for the Scottish project in early 2016.  

"It was pointed out that plant operation indicated as July 2017 could jeopardise Renewables Obligation certification and NES indicated that they would look to bring this to March 2017 for operations to commence. Overall the programme seems to be very loose and SLR should question its accuracy and the ability for NES to be able to firmly guarantee anything with respect to meeting the proposed targets – especially in light of an inability to demonstrate 120-hours operation on the simplistic test facility within the past 6 months plus."

NES were unable to provide any confirmation with regards to conditions imposed by their own test facility finance which might be required before their project commencement date of April 2014 although this might link to demonstration of 120 hour test with the current test rig. 

SLR's report concludes: "In summary it is difficult for SLR to understand whether there is a reticence to try to develop because; data attained does not show the process favourably; if operational issues at Avonmouth are taking priority or are showing some fundamental issues with the technology; if the technical team are capable of addressing and managing the problems to an expedient solution."

The bottom line was that NES would not be in a position to commence work on the ATT facility at Easter Langlee until June 2016 although even that date - more than two years behind schedule - appeared optimistic.

In a separate contribution to the debate Nevin Associates wrote: "The 120 hour technology trial for NEAT starting on November 17 stopped after five hours when 'the fuel that forms the plug preventing air ingress into the pyrolysis tube failed, and in order to prevent significant damage to the plant, the plant was shut down.' This may have been the final incident that convinced NES to come clean and admit that there was no chance of implementing NEAT on a commercial scale in 2014 ."

Yet again Not Just Sheep & Rugby believes it must point out that Borders councillors had sanctioned the use of NEAT technology in OCTOBER 2012. It is therefore extremely surprising, and perhaps concerning, that the new files contain not a single contribution from elected members of the local authority.

There is no mention of councillors who should have been supervising planned expenditure of £23 million asking questions about potentially fatal blows for a vitally important environmental facility. If meetings were held and minutes were taken then they certainly have not been produced so we can only conclude they do not exist. 

The public's elected representatives must therefore shoulder responsibility for the decision to allow work on the project to continue unhindered beyond 2013 despite the evidence from documents now publicly available for the first time.

Nevin's report pointed out the revised programme meant that the detailed design of the Canford project would be completed by April 2014, and construction of the Canford demonstration facility would commence in July 2014.

"The facility itself will, on this programme, only become operational in July 2015, and revised schedule for the Easter Langlee facility – i.e. start on site in June 2016 – implicitly assumes that there will be no significant problems at Canford. If there are, then one could anticipate further delays, or even cancellation, of the Easter Langlee ATT facility.

"This could leave us hanging on the outcome of the Canford trials, over which we have no control, and if those were to fail or (more likely) take longer than anticipated to succeed, then we would still potentially be exposed to the risk of having no treatment solution in place for the Council’s residual waste."

In a separate comment, the consultant declared: "The paucity of information on the progress of the project suggests that NES have in effect put the Scottish Borders project on hold,".

NEXT: CRISIS, WHAT CRISIS?  NEW EARTH CLAIMS N.E.A.T WILL MAKE THEM WORLD FAMOUS


Sunday, 20 August 2017

Council "in the dark" over waste project start date

by EWAN LAMB 

A start date for construction of the £23 million waste treatment facility to deal with household rubbish in the Scottish Borders had still not been fixed some two and a half years after local councillors awarded a potentially lucrative contract to debt-ridden 'specialists' New Earth Solutions.

The uncertainty which prevailed in late 2013 as to when building work would get underway at Easter Langlee, Galashiels is outlined in some detail in reports and emails made public for the first time via Freedom of Information requests.

And while apparently insurmountable issues continued to bedevil technology trials for the so-called NEAT Advanced Thermal Treatment system planned for the Borders site, New Earth bosses were becoming more and more frustrated over the "attitude" of the Scottish Environment Protection Agency [SEPA] towards the granting of an operating certificate for the incinerator.

Not Just Sheep & Rugby has reported in the past on attempts by the contractors to pressurise SEPA into sanctioning the paperwork for Easter Langlee. Now correspondence between NES and Scottish Borders Council confirms SBC was deeply unhappy with the attempts to steamroller the independent Scottish watchdog.

A report from September 2013 which was written by NES sets out their position. It states: "As SBC is aware, we disagree with SEPA in a number of areas relating to their need for certain data in order to process the certificate.  Now we are through the “difficult” part of the project (i.e. the planning application), as discussed at the previous meeting, we may need SBC’s assistance with lobbying through Scottish Government to bring pressure to bear on SEPA. .

"We  met with Zero Waste Scotland (at an event) and expressed frustration with SEPA’s approach and we will be following up on this initial contact."

The council was less than pleased with NES's attempt to hector SEPA. A response made public with the rest of the 2013 file reads: "In relation to your soundings to ZWS  regarding SEPA's performance, can you please refrain from further discussions until the situation has been discussed with the Council. 

"We do not believe that representations to another government body (Quango) on the performance of a regulatory body reflects well on us (NES are effectively representing the Council to deliver the project) and could cause the Council future (wider) issue with SEPA, if they take exception to the complaint route that has been taken.

"As discussed at the last contracts meeting, if NES feel that SEPA's performance needs to be challenged then a meeting is to be convened with the Council to discuss the issue, the risks, the approach and who is best place to take it forward."

The floundering contract was hit by another wave of misfortune the following month, according to a document attributed to a consultant who also had membership of the Easter Langlee project team.

The report makes it clear it appears likely that the start on site for the advanced thermal treatment facility will be later than anticipated, because of delays in technology testing, and the knock-on effect this will have in securing the permit.from SEPA.

"The All Reasonable Endeavours (ARE) report indicates further slippage in technology trials, with the second 120 hour trial delayed until the week commencing October 28th 2013.", added the report.
"From a non-technical viewpoint, one's impression reading the report is that there are still some significant technical issues to be overcome before NES could be confident enough to finalise design of the ATT facility, let alone start building it."
 
And the consultant added to the growing negativity surrounding the project by writing: "Rather ominously, but not surprisingly in the light of the technology trial delay, page eight of the October ARE states that NES are currently carrying out an internal review of the delivery timetable, and 'then wishes to discuss the timetable with SBC. It is anticipated that additional time will be required to deliver the integrated facility.' .


"So we're still in the dark as to the likely start date on site, or commissioning date for the integrated for treatment facility, although in the October ARE NES state that they are targeting financial close for March 2014, commencing construction in April 2014 and service commencement in July 2015. It is in NES's financial interest to get the facilities up and running as early as possible so that they start becoming cash generative, but on the facts as presented this timetable looks optimistic."

As things turned out the new "timetable" outlined by NES proved to be remarkably optimistic. As we will report next SBC would soon receive a letter from New Earth warning of a potential two year delay to the entire scheme.

However, even faced with that devastating setback there is no evidence in the newly released files that SBC even contemplated pulling the plug on the contract in November 2013.

Saturday, 19 August 2017

Tensions grows as waste project stalls

DOUG COLLIE dissects another batch of damning evidence from council files

The growing sense of frustration among members of Scottish Borders Council's £23 million waste treatment project team following the technological and funding problems encountered during 2013 can be revealed in detail for the first time thanks to the release of highly sensitive documents.

More than two years after the original 2011 deal with waste management contractors New Earth Solutions [NES] the money needed to build the "state of the art" gasification and pyrolysis facility at Easter Langlee, Galashiels had still not been sourced.

And as our series of articles on new material obtained under Freedom of Information shows the so-called NEAT Advanced Thermal Treatment (ATT) incineration system remained a long way from proving itself to be commercially viable despite receiving a green light from Borders councillors.

So far as funding was concerned everything seems to have depended on the successful re-financing of the NES treatment plant at Avonmouth, Bristol so that cash could be returned to NES's offshore investment partner, Isle of Man based New Earth Recycling & Renewables [NERR]. But as we have already reported the re-financing had hit snags and was threatening to derail Easter Langlee completely.

This link between Avonmouth re-financing and Galashiels was highlighted in an email from a senior official at SBC to NES in September 2013.

He wrote: "The (project) Risk Register gives a “1” (very low) risk rating to the possibility of NERR not having sufficient funds to meet the development costs of the project.  Such a low risk rating does not seem to be supported by the evidence provided.

"NERR’s cash balances stood at £5.484 million on August 20th down from £7.968 million on July 19th – i.e. the gap between the cash funds at NERR’s disposal and the amount actually required to deliver the project (£23 million) has widened over the past month.  NES refer to "gross subscriptions of £56.9 million in the last 10 months at a rate of £5.7 million per month", but make no reference to withdrawals from the fund, and hence the rate of net subscriptions, which is the relevant consideration with regard to funding availability for Easter Langlee. 

"The conclusion would seem to be that the Avonmouth refinancing may be crucial to securing the finance for the Scottish Borders project."

Project Easter Langlee was faring no better on the technological front as yet another report demonstrates. Although aspects of the document are technically specific we have deliberately not edited the following passages so that a complete picture can be conveyed to readers.

"The trial was started with a feed rate of 30Hz, but the gas pressure within the drum became unstable and the feed rate was reduced to 15Hz.

"Ceramic filter panel lost power due to heating element shorting causing a protective trip to isolate the panel.  At this point the plant was shut down normally and safely without the cleaning elements operating for 2 minutes whilst the trip was reset.

"The plant was re-started at 15Hz, this was stable and the feed rate was increased to 17.5Hz. Despite the temperatures rising they were still within acceptable limits. The feed rate was increased to 22.5Hz and allowed to stabilize.  At this feed rate the gas pressure fluctuations in the pyrolysis drum were significant.  The flare temperature was also noted to be falling."

Not Just Sheep & Rugby has also decided to publish a commentary on the August/September 2013 technical hitches in full. It was prepared for SBC by a consultant.

It reads as follows: 

"The crux of the matter is that the engines have so far not operated at full capacity, and only time will tell if the engines can indeed operate at 100%.  The engine management system is currently limiting output to 25%, achieving 100% output is a large step up given the issues NES have previously faced. 

"For example, the ARE (All Reasonable Endeavours) report states the purpose of the 120hr run is to confirm the operation of the complete system over a prolonged period of time. The system can currently be run and has successfully been run on 3rd and 4th September 2013.

"However, NES acknowledge that upon examining the data and physical results of the trials to date, areas have been identified that require modification to enable successful long runs to be completed. It should be noted that a specialist engineer from the engine is not available until 1 October 2013 to make the required modifications.  However, there does not appear to be any mention of what this modification is or what it entails.  Are NES in a position to confirm the modifications will allow the engines to operate at 100% for 120 hours?"

So what were the potential implications of these latest setbacks at the company's research and development establishment in faraway Kent?

Another member of the project team pulled no punches when providing his assessment. He wrote:
"Potentially it leaves us in a limbo not knowing exactly what the extent of any delay might be, and  what the operational implications are for the Easter Langlee landfill site or on what basis budgets from 2014/15 onwards should be prepared – i.e. will the Council need to continue to landfill through to mid-2016?

"On the facts as now known, it seems to me quite possible that the technology development may delay commissioning and the start of operations from June 2015 to June 2016; - this may not be a deal breaker, but to keep our own principal properly informed we need to know.

"NES must come clean with us regarding the exact nature of the technological issues that they are seeking to overcome, and a realistic methodology and timetable to address them. I just feel at the moment that we are suffering a little from the "mushroom syndrome", with NES being somewhat disingenuous in seeking to apportion blame for the delay to SEPA [Scottish Environment Protection Agency]. 

"This may be a defensive mechanism on their part, to avoid the risk that we can refer to the legal provisions of the contract to claim damages from them in the event of a significant delay. In which case, a pragmatic way forward might be to assure them that this is not our intention, provided that we are kept fully informed of what progress is being made, and given a realistic date for the commencement and commissioning of the ATT facility."

On this evidence the entire venture was in serious difficulty in September 2013. But the non-productive saga would be allowed to continue consuming public funds for another 17 months before contract termination.

NEXT: THE BLAME GAME AND SOME DEVASTATING NEWS



Friday, 18 August 2017

£6 million profit for Borders PPP operators

EXCLUSIVE - by OUR FINANCE UNIT

The Luxembourg controlled partnership which provides services under a Private Public Partnership (PPP) agreement for three Borders secondary schools has achieved operating profits of more than £6 million since the properties in Eyemouth, Duns and Earlston became fully operational in 2009.

Meanwhile Scottish Borders Council, the so-called finance debtors in the controversial 30-year project, currently pays more than £6 million per year in liability and service charges plus £2.6 million in interest in an annual bill for the schools of more than £8.6 million.

According to the local authority's latest set of accounts total payments to be made for the PPP on the three educational establishments will be £238.5 million by 2038. This includes a bill for interest of £34.7 million.

Newly published financial statements covering 2016 for the so-called Scottish Borders Education Partnership [SBEP] - part of the giant Bilfinger Berger organisation - reveal an operating profit of £769,000. SBEP is registered at an address in Maidenhead, Berkshire.

It follows healthy six figure profits for the previous seven years ranging from £619,000 in 2009 to £911,000 in 2014. The yearly surplus averages out at £755,000, and following the 2016 result the overall operating profit breaks the £6 million barrier at £6.041 million.

As the statement explains the principal activity of the company is the provision of operational and maintenance services including "related financial arrangements" for the Borders schools. SBEP will continue to operate the properties for the 30 years covered by the agreement they have with SBC.

The firm is provided with a regular income stream which is subject to deductions for service shortfalls and the unavailability of facilities. Interest on the finance debtor is charged at 5.47%.

According to the report: "Financial penalties are levied by the authority in the event of performance standards not being achieved. In 2016 deductions of £115,000 have been levied (2015 £25,000) representing 3.24% of turnover.

"The project continues to perform generally in line with expectations and management of the scheme both logistically and financially remains under control".

The corporate structure of the partnership is set out in the accounts statement. It explains that SBEP is a wholly owned subsidiary of Scottish Borders Education Partnership [Holdings] Ltd. One hundred per cent of the share capital of this organisation is held by BBGI Investments SCA which in turn is an indirect and wholly owned subsidiary of BBGI CAV SA, a Luxembourg investment company.

Details are also provided of a so-called Bond Loan relating to senior secured funding totalling £68,33 million of which £15 million is held by Prudential Annuities Ltd and £53.33 million by Prudential Retirement Income Ltd with a 2.604% index linked coupon.

NAMED: EIGHT potential funders for New Earth

DOUGLAS SHEPHERD continues our story of the troubled Borders waste project

Waste management contractors New Earth Solutions identified eight separate banks and financial institutions "in strictest confidence" as likely backers for re-financing to release money for a £21 million incineration plant to serve the Scottish Borders after members of the project team expressed doubts about the company's ability to secure funding.

A series of top secret reports and email exchanges from mid 2013, released by Scottish Borders Council (SBC) on the instructions of the Scottish Information Commissioner, give an indication that representatives of the local authority were losing patience with New Earth over the crucial issue of funding.

The money for the Advanced Thermal Treatment [ATT] plant at Easter Langlee was supposed to be channelled through the Isle of Man-based New Earth Recycling & Renewables Fund (NERR}. But a lack of progress prompted SBC to ask for a schedule showing NERR's monthly subscriptions and disbursements as the re-financing of another plant at Avonmouth, Bristol stalled.

According to a contribution from a financial consultant commissioned by SBC in June 2013: "NES’s statement that they cannot supply us with a schedule showing NERR’s predicted monthly subscriptions and disbursement as it is "potentially price sensitive information" is disingenuous. They have provided such forecasts in the past, and we have always treated them as commercially confidential, not in the public domain, and released to us purely to provide assurance regarding the availability of funding for the Easter Langlee project, in which we have a legitimate interest.

"No member of the Council's in-house or advisory team would release this information to any third party, and we would only use it generically in reports to Council, to confirm that NES have provided reasonable assurances that funding for the project will be in place when the necessary permits and consents have been secured. Without this, we cannot provide such assurances to our principals.

"One possible inference from NES’s response is that NERR’s subscriptions have fallen behind earlier forecasts  (which is suggested by their cash balance of £7.7 million) and therefore there is a risk that NES may not have sufficient funds to meet the capital costs of Easter Langlee by early 2014.

The question is then what we do about it. I believe that the only thing we can do is flag it up to our principals (Elected Members) that funding availability remains a risk factor, notwithstanding NES's discussions with potential alternative fund providers (including the Green Investment Bank), although obviously we hope that they will ultimately bear fruit."

The following month NES sent the council a report in an apparent attempt to allay fears over the financing of the multi-million pound project.

Their document states: "We are currently in a refinancing process, the participants of which are commercially sensitive.  In May 2013, we presented to 11 parties. We then decided to proceed to an Avonmouth ERF site visit with eight of these 11 parties. On the understanding that the Council treats this information in the strictest confidence, we can disclose that the eight parties as being UK Green Investment Bank, Siemens, Macquarie, Santander, Investec, Star Capital, Amber and Ecofin. "

And for good measure the report added: " Based on discussions held to-date, we are confident of receiving three or more term sheets and achieving refinancing proceeds to NERR of circa £25m (as opposed to the £20m previously indicated)."

If the funding of Easter Langlee was "up in the air", the same was certainly true on the technology front with more negative reports emanating from the NEAT technology R&D chambers in Canford, Kent.

Here is an extract from a "progress report" assembled in July 2013.

"The 120 hour trial commenced at 23:15 on 15 July 2013. The system was run for a continuous period of 54 hours. At this point, a failure of a roller bearing supporting the pyrolysis drum occurred. The bearing was replaced and the trial continued. For the majority of the trial (to date), the gas has been flared, although the gas engine has been run for short periods. This is due to analysis of the gas leaving the engine showing that the temperature is too high, such that it may cause damage to the engine. The high temperature is due to the compression ratio of the engine."

At this stage it should be borne in mind that members of SBC had sanctioned the inclusion of the completely unproven NEAT system in the Easter Langlee facility nine months before that gloomy report was written.

NEXT: YET MORE DELAYS ON THE FUNDING FRONT AND NEAT MISFIRES AGAIN!