Unsecured creditors of New Earth Solutions Group, the waste management company chosen by Borders councillors for a £65 million development at Galashiels, have been told they could end up with as little as 4p in the £ following the dramatic collapse of the business.
And a new report from joint administrators reveals that NES did not have sufficient cash to maintain and upgrade its existing equipment, so had the Easter Langlee treatment plant been delivered, the Group may have been unable to afford to operate it.
Scottish Borders Council has claimed on more than one occasion that it carried out proper checks on NES before and after awarding the contract which cost local taxpayers at least £2.5 million prior to the entire house of cards crashing down in disarray. No-one within the local authority has been held to account, and the losses were blithely written off without explanation or apology.
The gradual disclosure of the flawed decisions taken by elected members suggests their attempts at so-called due diligence fell way short of the required standard. Had losses of this magnitude been chalked up in the private sector then undoubtedly heads would have rolled.
The 32-page progress report on the administration of NES Group from insolvency specialists Duff & Phelps heralds extremely bad news for the scores of unsecured creditors who were owed an estimated £9.169 million. A maximum of only £600,000 is available to meet their claims.
In a section explaining why it was decided not to trade the business, the document states: "The Group generated insufficient cash to service its secured debt and was in default in respect of its lending facilities.
"The Group generated insufficient cash to invest in the desired level of Capital Expenditure required to maintain and upgrade the equipment held by the company and therefore the quality of its assets were deteriorating. No new borrowing was available due to the insolvent position of the Group balance sheet and the current lender's inability to invest due to its precarious financial position".
That 'current lender' just happened to be Manx-based New Earth Recycling & Renewables [Infrastructure] PLC - known as NERR - which had been nominated as funders for the Galashiels project after more due diligence by the local authority. NERR managed to string SBC along for three costly years without ever coming up with any cash.
NERR is now in the process of being liquidated on the Isle of Man with a forecast that investors and shareholders will get nothing back.
The report says NES Group also owed the Co-op Bank £41.8 million and NERR in excess of £39 million when administrators Duff & Phelps were appointed last June. Again, SBC appears to have been unaware that NES was teetering on the edge of insolvency while their vital waste management contract was still 'live', but going nowhere.
Administrators estimate outstanding creditors are likely to receive a dividend of "approximately 4p to 8p in the £".
The report adds: "The Joint Administrators have filed a report with DBEIS (Department for Business Energy and Industrial Strategy) concerning the conduct of all directors of the Group that served in the three year period prior to the administrator's appointment. The content of this report is confidential".
NES Group is expected to be dissolved once the administration is completed within the next six months.
FOOTNOTE - New Earth Solutions (Scottish Borders) Ltd., the NES subsidiary specially set up to deliver the Easter Langlee treatment facility is also expected to be consigned to the dustbin of industrial history within a matter of weeks.
Papers filed at the Register of Companies show all directors of the company have resigned, accounts which should have been lodged with the authorities by October 29th last year have never been submitted.
The Registrar has issued a warning notice indicating the company will be compulsorily struck off the Register. Perhaps a fitting end for such a disastrous liaison between council and contractor which has cost the Borders dear, both financially and environmentally, and has heaped opprobrium on the region's elected representatives.