Council unaware of complaints against funders

EXCLUSIVE by EWAN LAMB

Scottish Borders Council was unaware of numerous complaints lodged by investors against the controllers of a group of offshore funds, one of which was supposed to finance a £21 million waste treatment facility to process the region's domestic rubbish.

The admission is included in a response to a Freedom of Information request in which SBC was asked if it had known at any time that Premier Group (Isle of Man), the managers of the New Earth Recycling & Renewables [Infrastructure] Fund (NERR) had been the subject of allegations from disgruntled shareholders since 2004 - more than seven years before a contract was signed between SBC and New Earth Solutions Group (NESG).

According to SBC: "The Council was unaware of any alleged complaints".

But the complaints against Premier Group - now in liquidation along with NERR - were well documented and available on web sites. The allegations were of serial failings by the directors of Premier Group, and claims they had designed and promoted a succession of "dubious" funds over 15 years.

The local authority has released several documents relating to NERR after being asked for information regarding the financial checks made by council officials or elected members as to the competence of NERR to deliver the treatment plant at Easter Langlee, Galashiels before a contract variation was approved in October 2012 to include unproven gasification technology.

Newly released reports and letters show two alternative methods of funding the project were under consideration in early 2013 involving financial input of £20 million  from the Co-op Bank with the rest of the capital to come from NERR. Alternatively, if bank funding could not be secured then NERR was prepared to bankroll the whole deal.

But neither cash source materialised: the collapse of NESG meant the company owed Co-op Bank over £50 million while NERR investors and shareholders are virtually certain to lose everything following the fund's liquidation. At the same time parent company Premier Group is also being dissolved.

However, a 2013 financial review prepared by consultants for SBC was largely upbeat. The report concluded: "Overall, the financial standing of the New Earth Group appears to have strengthened modestly since the signature of the original Project Agreement.

"While still loss-making, this reflects the fact that the Group is in start-up phase and investing heavily in new facilities and contracts. According to the Directors’ Report, its performance is in line with expectations, and the Group is continuing to be strongly supported by NERR, its principal funders."

In fact NESG had recorded an operating loss of £6.5 million in 2012, up from £5.9 million the previous year. It has since transpired that the millions of pounds provided to NESG from NERR was to keep the waste treatment company going.

Elsewhere in the consultant's report it is stated: "The [NESG] directors' report includes confident statements regarding the Group’s market position, stating that 'policy and fiscal support for the two sectors that the Group is active in – waste management and renewable energy – remain strong and attractive.... In contrast to many operators in the waste sector, the Group has a proven track record of funding its growth and new projects during a time of financial austerity and a sharp contraction in the availability of project finance,' drawing particularly on NERR.

The report goes on to state that "during the last 12 months, the Group has developed and demonstrated its own suitable treatment technology, which is patent protected and has been branded as New Earth Advance Thermal (NEAT).

This was the technology brand which Borders councillors appear to have been so impressed with that they sanctioned its inclusion in the contract variation even before NEAT had started development trials. The failure of the gasification and pyrolysis system was one of the two main reasons the Borders project failed, losing taxpayers at least £2.4 million in the process. The other was the inability of NERR to come up with the money.

The highly ambitious and eventually undeliverable Energy Recovery Facility (ERF) planned for Easter Langlee was meant to provide power for over 400 homes, industrial premises and council buildings in and around Easter Langlee with surpluses being sold to the National Grid.

According to the report just published New Earth Solutions were telling SBC in 2013 that the plant would be generating energy sales worth £2.31 million by 2016/17. Under a profit sharing agreement the council could expect to receive £61,880 in that year. There would then be similar payments throughout the 24 years of the contract.

The report says: "The prospect of additional income from this source provides a financial incentive to the Council to work with Project Company to ensure that it enters into a Power Purchase Agreement (PPA) on the best possible terms available in the market, and develops a robust, financially viable and economically beneficial heat off-take plan."

As it turned out the entire project, including the planned district heating plan, proved to be an expensive white elephant with negative consequences for the Borders environment.

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Second crushing defeat for secrecy

by DOUGLAS SHEPHERD

Another concerted attempt by Scottish Borders Council to cover up information linked to their costly and disastrous waste management project has been foiled yet again by the Scottish Information Commissioner [SIC].

The latest setback for the local authority - it appears more than 80 documents were withheld from Freedom of Information requester Bill Chisholm - follows a similar defeat in April when the then SIC Rosemary Agnew ordered SBC to release six reports which had been heavily censored to hide vital facts and figures.

When those documents were finally made public earlier this month they showed that elected members at SBC sanctioned a Deed of Variation with contractors New Earth Solutions Group (NESG) before a series of technological trials had even been initiated at a research and development centre.

The brand of technology was to have been used in the construction of a £21 million "cutting edge" waste treatment centre at Easter Langlee, Galashiels, to deal with Borders household rubbish.

But as has been well documented in these columns the entire project collapsed in disarray in February 2015 when it was realised the technology did not work and the scheme could not attract funding. As a consequence SBC had to write off at least £2.4 million of taxpayers' money while the now bankrupt NESG are believed to have lost several millions too.

Since the Easter Langlee plans were abandoned, leaving SBC's waste treatment strategy in tatters, the council has repeatedly refused to disclose information under freedom of information.

They have claimed on every occasion that to divulge reports and documents would harm NESG and its partners even though all of them are either in administration or being dissolved by insolvency experts. Despite previous SIC decisions dismissing this stance SBC has continued to cling to the 'commercial confidentiality' clause in the doomed contract.

But in a damning decision notice issued to Mr Chisholm this week, the current information commissioner Margaret Keyse has instructed the local authority to release the information it withheld. They have been given until a date in August to comply with her orders.

The original FOI request in this case was lodged with SBC in May 2016, and it has taken over a year to resolve the issue of the council's refusal to supply the documentation they were asked for.

Ms Keyse' 18-page 'judgement' describes how the council was late in responding to the request, then provided reports some of which the requester considered to be irrelevant. There was no index supplied with the CD containing limited information, and the reports were not in chronological order.

The Commissioner explains: "Having considered the documents that fell within scope of Mr Chisholm’s request (calculated by the Commissioner to be 201 in total), it was not clear what information had been withheld or disclosed from some of the documents. In a series of discussions with the investigating officer, the Council clarified what information had been withheld."

She added: "The investigating officer found that some of the withheld information had been published on the internet by another Scottish public authority. The Council was asked to comment on this. It did not respond directly to this request".

In rejecting SBC's arguments yet again the SIC points out: "Having considered the information which the Council has withheld in this case, the Commissioner is not persuaded that it is all covered by the confidentiality agreement in the contract.

"The Council has not explained clearly why the parts of the documents containing withheld information are covered by the confidentiality clause. It has not explained why the information is commercially sensitive, and has provided only general arguments in relation to the harm that would, or would be likely to be caused by disclosure."

The Council stated that disclosing the withheld information would place it in the public domain. The information was considered to be of market value. It could be used not only for the advancement and exploitation of the innovative technology, but for future contract bids within the waste industry.

The Council submitted that it was impossible to determine a timescale as to when specific harm would occur, if the information was disclosed. However, as soon as it was placed in the public domain, it would strip the owner of the benefit to which they were entitled, as owner. Therefore, to that extent, the harm would be immediate.

Ms Keyse observes: "There also appears to be little consistency about what has or has not been withheld. For example, information about the time taken to test the waste processing system has been withheld throughout, except in one document where it was disclosed.

"Not all the withheld information relates directly to NESG, and the Council has not explained why information relating to its own matters is still sensitive, or why this information is excepted from disclosure".

In investigating this case, the Commissioner’s staff spent several weeks reviewing the information withheld from Mr Chisholm and trying to establish why, in the Council’s view, it was considered to be sensitive, especially where similar information had been disclosed.

The Commissioner concluded there was comparatively little information in the withheld documents about the financial status of NESG or details of the technology it was developing which had not already been published.

Mr Chisholm argued there was an overwhelming case for release of all information relating to the Council’s dealings with NESG, given the loss of at least £2.4 million resulting from the collapse of the project. Mr Chisholm argued that the Council should have been aware that NESG was on the brink of insolvency when a Council delegation carried out a “due diligence” visit to NESG’s headquarters in October 2014.

He commented that when the Council entered into the contract with NESG, taxpayers were told it was a £65 million contract over 24 years which would divert 80 per cent of waste from landfill, provide heat and power for hundreds of homes in Galashiels, and make the Council the leading waste management authority in Scotland.

Instead, the Council had written off £2.4 million of public money on a project which could not be funded and did not have the necessary technology to guarantee success. Mr Chisholm told the Commissioner that the Council is now at, or near, the bottom of the Scottish recycling league.

"The Commissioner accepts that there is significant public interest in understanding what steps the Council had taken to ensure that the project was robust. There is a strong public interest in understanding the measures that the Council had taken in order to limit its financial exposure in a project which had been on-going for four years and had involved substantial sums of public money", concludes Ms Keyse.

She continued: "In the Commissioner's view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the Council, the basis for those actions and decisions, and the reasons why the project failed. As noted above, the project had involved many years of work, and substantial sums of public money. The integrated waste management project would have had a direct effect on the residents in the Council area.

"The Commissioner has given weight to the particular circumstances of this case, which incurred the Council investing substantial time, money and resources, in a project that ultimately did not come to fruition. In these circumstances, the Commissioner finds it is legitimate for the public to seek to understand what happened, and in the public interest for this understanding to be as complete as possible".


 

Hike in homeless across southern Scotland

EXCLUSIVE by DOUG COLLIE

The number of applications to services for the homeless across Scottish Borders, East Lothian and Dumfries & Galloway rose sharply in 2016/17 at a time when appeals for help nationally fell by two per cent.

The statistics, published by the Scottish Government this week, reveal a 23% spike in applications to Dumfries & Galloway Council (up from 668 to 820), a 12% rise in East Lothian (681 to 766) and a 10% increase in Scottish Borders (623 to 686). The Borders figure was the highest recorded since 2011/12.

Meanwhile the number of households living in temporary accommodation in the Borders rose from 82 to 87, far above the 2002 figure of 35 households. At the same time the number of children living in temporary accommodation went up from 38 to 41.

The temporary accommodation statistics for Dumfries & Galloway showed a significant improvement, down from 240 households to 199 with 73 children included in the latest figures compared to 76 in 2015/16.

However, in East Lothian households in temporary accommodation increased from 410 to 440, with the number of children involved up from 184 to 251.

In February, in answer to a Freedom of Information request, Scottish Borders Council confirmed it was renting 85 properties from Registered Social Landlords (RSL) and 49 from Private Sector Landlords (PSL) in meeting its statutory homeless duty.

Total rents paid to RSLs in 2015/16 was £310,000, and to PSLs £253,170. The equivalent figures for 2016/17 are  £316,934 and £233,264.

A research report by Shelter Scotland into evictions by social landlords in Scotland between 2012-2016 revealed a 13% increase in evictions by Scottish Borders Housing Association, the main landlord in the region following a whole stock transfer of council housing in 2003.

In 2015/16 SBHA instituted 535 proceedings against tenants, 68 were taken to court, decree was granted in 44 cases and 17 evictions occurred.

East Lothian's eviction rate increased by 162.5% between 2013/14 and 2015/16 from eight to 21. At the same time RSL Dumfries & Galloway Housing Partnership completed 33 evictions, a 2.9% reduction from 2013/14. There were 925 notices of proceedings, 297 tenants were taken to court and decree was granted in 58 instances.

The Shelter Scotland report concludes: "From the evidence and analysis, it is apparent that landlords, especially local authority landlords, are increasingly making use of eviction actions in response to rent arrears. In the years leading up to 2013/14, there was a decrease in the use of eviction action. However, since then the number of evictions has risen.

"Between 2007/08 and 2013/14, evictions fell by 52 per cent, while over the course of 2013/14 to 2015/16 evictions have increased by almost 25 per cent. Shelter Scotland is concerned that this upward trend will continue unless clear changes to policy and practice are made.

"With the significant changes to the backdating of housing benefit and the introduction of the benefit cap in 2016, it has become even more important for the rest of the social rented sector to learn from their examples. Social sector landlords should seek to actively engage with their tenants and try to prevent rent arrears as much as possible by providing help and advice when needed.

"The increasing uncertainty regarding the UK economy following Brexit is likely to further impact social sector tenants. It is therefore vital that the policies and practices of social sector landlords reflect the challenges that their tenants face and adequately address them in a way that reduces rent arrears and, ultimately, helps tenants to stay in their homes."

Common Good revisited: still under-performing?

EXCLUSIVE by EWAN LAMB

The nine Common Good funds in the Scottish Borders received only £69,000 from a combined investment portfolio of £2.7 million in 2016/17 while the common land and property in a former Scottish burgh just a few miles away  recorded a £600,000 return for its trustees.

The £69,000 figure represents a 2.5% investment 'dividend for Scottish Borders Council, administrators of the funds in a year when the council's own pension fund achieved a 21.5% return

Serious concerns were voiced four years ago over the alleged poor management of the Borders funds with a dismal financial performance and a failure to fully exploit the valuable assets granted to local burgesses and freemen by various charters of the Scottish kings over 500 years ago.

While the Common Good lands and properties in Duns, Galashiels, Hawick, Jedburgh, Kelso, Lauder, Peebles and Selkirk appeared to be in the doldrums in 2013, the single fund managed by the Berwick-on-Tweed Freemen Trustees was chalking up impressive financial achievements.

At that time SBC announced that the £2 million cash balance in their funds was to be transferred to a “private firm of global fund managers.”

Berwick, one of the four original Scottish burghs founded in 1125, received its common from the monarch in 1491, around the same time as several of the other towns in the Scottish Borders.

The trustees at Berwick have 2,550 acres of land under their control with a value of £6.508 million, according to the charity's latest available accounts (2015/16). The fund generated more than £600,000 from investments and was able to devote more than £500,000 to "charitable activities".

A new set of accounts covering 2016/17 for the now nine Borders Common Good funds - Innerleithen has been added to the list since 2013 - allows a modern day comparison to be made with Berwick-on-Tweed.

Between them the funds, amalgamated into a single charitable trust several years ago by SBC, have land holdings in excess of 5,000 acres including three Selkirk farms extending to 1,300 acres, 800 acres of farmland at Hawick and a 1,700 acre common at Lauder.

Total income from investments in the last financial year added up to £69,000 made up of £66,000 from the £2.7 million investment portfolio in the Newton Real Return Fund plus £3,000 in bank interest from the "Scottish Borders Council loans fund".

The council charged  £48,000 for 'governance costs' incurred in administering the trust - the same figure was levied in the previous fiscal year - and Common Good donations to worthy causes totalled £171,00 (£89,000 in 2015/16).

When the various deductions were made from the funds net income last year was a decidedly unimpressive MINUS £139,000 compared to PLUS £433,000 the year before. The bottom line was a reduction of £149,000 in the net movement in funds against an additional £503,000 for 2015/16.

Total funds carried forward fell from £13.895 million to £13.746 million.

Meanwhile over in Berwick-on-Tweed a seemingly highly efficient regime saw total funds carried forward increase from £21.687 million to £22.024 million. In March 2011 the Berwick fund stood at £17.9 million, so there has been considerable value added since then.

In a section headed Plans for the Future, the report carrying the Borders accounts declares:" The Common Good Funds will continue to maintain their heritable assets and will look to maximise their income from any of these assets which are let commercially. Where assets are used by third parties towards the Common Good of the Burgh then rental levels may reflect this aspect of the tenants’ activity."

The Common Good agenda item for this week's committee meeting appeared alongside SBC's draft accounts for 2016/17 which we have already reported on, and the local authority pension fund.

There was much better news for members of the pension fund than the slim pickings for the Common Good trustees who happen to be all 34 members of the council.

The SBC Pension Fund accounts reveal: "Strong three-year annualised investment performance of 10.9% - 0.9% above benchmark; 2016/17 Strong one year performance to March 2017 with investment returns of 21.5% in the year to a benchmark of 19.5%."

It means the pension fund now has £654m in net assets, an increase of £112m on 2015/16.

Another ‘under-spend’ at council HQ yet debts climb by12%

EXCLUSIVE by DOUG COLLIE

Scottish Borders Council has declared a wafer thin under-spend on its £261 million revenue budget for the fifth year in succession while at the same time running up more than £21 million of extra external debt during the 2016/17 financial year.

The situation is outlined in draft annual accounts which will be presented to councillors later this week.

Research by Not Just Sheep & Rugby staff has confirmed that in every fiscal year since 2012/13 the council has recorded an under-spend of less than one per cent, demonstrating an apparently remarkable control on expenditure over scores of different budget headings.

This time round the books were closed with a miniscule 0.05% (£128,000) ‘in the black’ figure. The corresponding returns in previous years were 2012/13 0.30%; 2013/14 0.18%; 2014/15 0.16%; and 2015/16 0.49%.

The report containing the latest set of unaudited accounts claims under the heading Highlights of the Year: “Against a very difficult financial background, the Council has achieved a great deal during 2016/17 as follows: signed a 13-year contract with CGI to establish a digital services partnership;

“Achieved £8.9 million of planned Financial Plan savings on a permanent recurring basis; Delivered £261.6 million of revenue spending within budget; Delivered Capital Investment of £51.5 million on schools, flood protection, roads, lighting and other assets; Supported a successful first year operation of the new integrated Sport & Culture Trust (Live Borders)”.

However, for some reason, the accelerated rate of borrowing does not feature among the highlights. A few pages further on Borders residents are told: “External Debt: The Council’s external debt as at 31 March 2017 was £197 million. Additional long term borrowing was undertaken during the year amounting to £12 million.

“Short term borrowing for cash flow purposes was also undertaken with £9 million outstanding at the end of the year. The average rate of interest paid on outstanding external debt was 6.2%”.

One wonders if the many extra millions borrowed are taken into account when calculating that 0.05% "under-spend".

In fact the total debt figure had soared by 12.1% from its level of £175.25 million in March 2016. And no less than £11.879 million of taxpayers’ cash was required in 2016/17 just to service SBC’s portfolio of loans.

There was a hefty bill too for the long-term PFI scheme which delivered new secondary schools a decade ago in Eyemouth, Duns and Earlston. The accounts show there will be a service charge of £6.024 million in 2017/18 plus an additional £2.66 million to cover interest. The total cost of the Initiative will be more than £238 million, including an eye-watering £34.7 million in interest charges.

The ‘Remuneration’ section of the accounts will no doubt be of special interest to many of those who take the trouble to scrutinise the authority’s financial house-keeping.

For example: the number of employees at SBC who earn £50,000 or more increased from 115 to 125 last year. And the top 13 senior employees received total remunerations of £1,002,622 (up from £989,519 in 2015/16).

But the exit door at Newtown St Boswells appears to have been less busy; 2016/17 saw 23 exit packages for departing staff at a total cost of £430,745. In the previous financial year SBC offloaded 71 staff members who took £2.233 million with them.

The report concludes: “The operating environment for the Council continues to be very challenging with financial and economic influences such as increasing demands on services, reducing Scottish Government funding, low interest rates and cost pressures from pay and price inflation all affecting the Council’s finances. The Council, despite these challenges, remains financially sound and well placed to serve the people of the Scottish Borders in the future”.

No doubt the people of the Borders can also anticipate another wafer thin under-spend when March 2018 comes round. The level of external debt may be more difficult to predict.

According to monthly lists of loans displayed on the Public Works Loan Board website SBC borrowed £8 million over 10 years on February 24th 2017, the money to be applied to expenditure 'within one month'.

And on April 26th 2017 the local authority borrowed another £10 million over 10 years. This time the cash was to be applied to expenditure 'immediately'.

Will May keep this gravy train running?

by ROLY MEADOWS, OUR RURAL AFFAIRS EDITOR 

Farmers in the Scottish Borders and elsewhere must be hoping at least one Tory manifesto policy survives the political carnage which has seen many of the party's flagship pledges ditched and shredded.

Gone even before a deal with the DUP could be stitched up were promises to introduce more grammar schools, to legalise foxhunting in England and Wales, to levy a 'dementia tax' on folk requiring care, to deny many pensioners their winter fuel payments along with the removal of the triple lock on the state pension. All conveniently abandoned to keep a lame duck prime minister in power for a while longer.

However, the well worn Hammond/May mantra "we must live within our means" continues to get regular air time, and there was nothing in the Queen's Speech this week to suggest there would be extra billions for education, the NHS and for other suffering public services.

So if there is no spare cash floating around The Treasury, where will the estimated extra £9 billion come from to deliver the Tories' commitment to guarantee the current level of financial support for British farmers post-Brexit? In other words, to extend the Brussels Common Agricultural Policy's (CAP) 'dripping roast' from 2019 to 2022. Or will this solemn promise be quietly buried too?

Last year more than 154,000 UK businesses collected in excess of £2.86 billion in subsidies, slightly less than the £3.185 billion which supported 183,000 separate recipients the previous year.

In 2016, more than 26,000 different Scottish rural businesses received a CAP payment from EC funds. The hand-outs were worth over £647 million, and a significant proportion of the money was used to promote environmental projects and schemes aimed at resisting climate change.

Research carried out by colleagues at Not Just Sheep & Rugby would suggest the Government will have to come up with more than £150 million over three years if farm related businesses in the Scottish Borders and North Northumberland are not to suffer financial losses once the CAP gravy train hits the buffers.

In the twelve months to October 2016 1,191 agri-linked entities across the region received £47.2 million following the 2015 statistics which showed some 1,300 businesses pulled in around £63 million from EU funds.

The loss of such a significant level of subsidy would blow a large hole in the Borders economy. According to tourism experts the money spent in the region by visitors on food, drink and accommodation is worth £65 million a year to hotels, restaurants and pubs. So the complete removal of CAP benefits from the Borders would be on a similar scale.

An economic profile for the Scottish Borders, produced by Scottish Borders Council in 2013, stressed: "It is critical for the local economy that CAP reform continues to deliver support for an innovative and competitive agricultural sector. Total income from farming in Scotland is less than subsidies received (£589 million income against subsidy of £633 million, so industry dependency on direct support is high".

Here is a postcode breakdown of the farm payments which found their way into the Scottish Borders in 2016, including some of the main beneficiaries:

TD1 - GALASHIELS - 49 businesses received a total of £2.304 million (2015 £3.620 million): including L G Litchfield, Bowland Farms £295,441; T & J Elliot £136,594; Torwoodlee & Buckholm Estates £127,536; Mrs C M Reid £126,541.

TD2 - LAUDER - 46 businesses received £1.664 million (£2.260 million); including W H Sharp & Son £108,415; W M Barr & Co £106,633; Firm of Sutherland £100,105.

TD3 - GORDON - 21 businesses received £1.671 million (£2.141 million): including G McDougal (Bassendean) Ltd £256,585; J & T F Macfarlane £484,213; Haddington Farms £152,502; R W Morris & Co £127,816.

TD4 - EARLSTON - 21 businesses received £1.067 million (£1.157 million): including Fans Farming £172,367; J W Fullerton & Sons £192,533; Hamish Morison Farming Ltd £120,450; Messrs R & J Scott Aiton £110,078.

TD5 - KELSO - 163 businesses received £7.249 million (£9.450 million): including C G Greig Farms Ltd £258,886; Balgonie Estates Ltd £197,634; Floors Farming £231,378; James Mitchell & Partners £187,847; Lochtower Ltd £128,629; D & D W D Thomson £151,835; Messrs J Jeffrey £168,460; Playfair Farms £129,882; T W & T B Edgar Ltd £203,876.

TD6 - MELROSE/ST. BOSWELLS - 64 businesses received £2.016 million (£2.922 million): including Mertoun Estate Farms £173,218; Messrs Maxwell (Faughhill) £112,067; Scottish Borders Council (Woodlands) £97,252.

TD7 - SELKIRK - 83 businesses received £2.858 million (£4.909 million): including BQ Farming Partnership Ltd £212,248; Langholm Farms Ltd £182,256; Sir F M Strang Steel £146,152; W N Douglas £113,440.

TD8 - JEDBURGH - 86 businesses received £3.153 million (£4.270 million): including Firm of Nisbet Mill Farm £190,896; R G Barbour & Sons £177,815; Robert Neill & Partners £135,589; Messrs A A Scott £121,019; J W Ogilvie & Partners £107,560.

TD9 - HAWICK/NEWCASTLETON - 171 businesses received £5.204 million (£8.389 million): including G W & M Richardson £106,813; H & M Farms £180,262; R H Brunton & Co £101,738; R J & T J & M T Feakins £183,718; S H & P M Shirley-Beavan £115,093; W S Davies & Son £108,370.

TD10 - DUNS/GREENLAW - 24 businesses received £907,000 (£1.871 million): including J C & K C Constable Ltd £104,239; John Mitchell & Co £106,899; The Firm of James Orr £129,683.

TD11 - DUNS/ABBEY ST. BATHANS - 126 businesses received £5.987 million (£8.017 million): including A M & A Calder Farms Ltd £168,885; C A Ramsay Partnership £119,164; Catchelraw Trust £150,923; Charterhall Farm £101,631; Ellemford Farming Ltd £120,556; Harehead Farms £170,380; Macfarlane Farms Ltd £220,361; R & J McDonald £212,752; R P Cowe & Co £107,057; W Arnott & Co £131,160.

TD12 - COLDSTREAM - 19 businesses received £759,000 (£1.162 million): including Ladykirk Estate Farms £152,584.

TD13 - COCKBURNSPATH - 16 businesses received £403,000 (£1.355 million): including J P H Wight & Co £78,596.

TD14 - EYEMOUTH - 55 businesses received £1.725 million (£1.583 million): including Eyemouth Freezers Ltd £319,313.

TD15 - BERWICK-ON-TWEED - 162 businesses received £6.902 million (£7.527 million): including A T Barr & Co £143,870; G H Millar (West Foulden) Ltd £106,810; Conundrum Farm Partnership £102,787; J A Frater £103,867; J E Armstrong & Son £166,147; Joicey Partnership £291,497; R T de Plumpton Hunter £184,552; Penmar Farming £443,295; R C Reed £136,936; Sunwick Farm Ltd £106,427; The President Estate Farming Partnership £240,133; Todd Farms £129,154; W L Douglas & Son £281,638.

EH45 - PEEBLES - 48 businesses received £1.515 million (£2.278 million): including Glenrath Farms £111,828; J P Campbell & Sons £212,171.

Creditors of SBC contractor will get 1.5p in the £

EXCLUSIVE by EWAN LAMB

The mountain of debt which finally engulfed Scottish Borders Council's waste management contractors New Earth Solutions last year may have been as high as £116 million, it has been revealed.

And non-preferential creditors who previously thought they might recoup between four and eight pence in the pound will get just 1.5 pence in the pound while claims from unsecured parties have rocketed fourfold from £9.1 million to a staggering £36.289 million.

The latest financial statistics in the New Earth Solutions Group disaster are disclosed in a progress report to creditors by joint administrators Sarah Bell and Philip Duffy, of insolvency specialists Duff & Phelps.

Yet again it must be emphasised that members of Scottish Borders Council either failed to check on or were completely unaware of the company's fragile monetary state throughout the lifetime of a four year contract.

The fact that the local authority even considered doing business with such a debt-ridden Group simply beggars belief. The council decision to hook up with NESG cost local taxpayers at least £2.4 million, and the urgently needed waste treatment facility at the heart of the deal was never even started.

Documents seen by Not Just Sheep & Rugby show that NESG was heavily in debt to banks in 2011 when SBC sanctioned its original multi-million pound deal, but was also in hock to its associated off-shore fund New Earth Recycling & Renewables [Infrastructure] plc or NERR prior to a contract deed of variation being signed by councillors in October 2012.

The Duff & Phelps report shows there is insufficient funds from sales of assets to pay off the secured creditor (Co-op Bank) in full. The Co-op was owed £41.8 million.

Next in the pecking order of so-called secured creditors came NERR, the now bankrupt Isle of Man investment fund chosen by SBC to bankroll the £21 million waste plant at Easter Langlee, Galashiels.

According to the report: "NESG was historically funded via quasi-equity from NERR. [The fund] provided the Group with funding for ongoing trade as well as capital improvements. The funds were provided under a debenture created on September 19th 2011.

"As at the appointment (of administrators) the indebtedness to NERR totalled in excess of £39 million. As NERR's security is subordinated to the Co-op's debt there is no prospect of any distribution being made to NERR under its security".

Hundreds of investors and shareholders in NERR who lost everything now know their money went to prop up the struggling NES Group even though they had been told the fund invested in new waste recycling facilities in the UK.

So did the millions of pounds which NERR handed over to NESG in September 2011 mean the "green" fund could no longer finance the Scottish Borders project?

Within three months of the debenture being finalised New Earth informed SBC that a conventional facility to treat the region's rubbish could no longer secure bank funding. Surely the paying public have a right to know the full facts relating to the disastrous contract failure.

Duff & Phelps had expected to conclude the administration of NESG this month with a move to dissolve the business and remove its name from the Register of Companies.

But the report explains that a request has been made to extend the administration by twelve months to June 2018.

"The extension is necessary following the requirement of the joint administrators to include a provision for a significant non-preferential claim", says the report. "The claim is currently the largest submitted within the administration.

"However, it has not yet been possible to conclude the position in respect of this claim and therefore the extension will be required to conclude the adjudication of this claim".

There is no indication in the report as to the identity of the claimant or the amount being sought. A further progress report is likely to be issued in the near future.

Workers seek £109,000 from failed building firm

EXCLUSIVE by DOUGLAS SHEPHERD

A group of 15 former employees of a Borders building company which crashed into administration late last year are taking the firm to an employment tribunal in a bid to claim over £100,000 in so-called protective awards.

The trade union representing workers who lost their jobs at long-established Galashiels builders Murray & Burrell is basing the case on the alleged failure of the company's management to consult prior to the appointment of an administrator.

Meanwhile it has been revealed that claims from ordinary creditors, estimated at £800,000 in November 2016 has now climbed to almost £2 million which means previous indications that all creditors would be paid in full may have to be scaled back once a final reckoning is reached. It now also seems unlikely that any funds will be returned to shareholders.

The information is contained in a progress report to creditors from administrator Richard Gardiner which sets out a series of developments since his appointment last November.

Mr Gardiner reports: "The sale of the company's plant, equipment, motor vehicles and stock realised more than my agent had anticipated and debtor collection to date has far exceeded my own expectations with further amounts still to be collected."

The sale of the yard from which the company traded has been completed for £167,000. Mr Gardiner anticipates the sale of the firm's development site at Craigpark Court, Galashiels will change hands for £540,000. Proceeds from the sale will go towards paying secured creditor Assetz Capital Ltd, the business which holds a bond and floating charge over all Murray & Burrell's assets, and which was owed £727,000 at the end of May 2017.

Mr Gardiner's report also shows employee claims will be in the region of £34,000 for arrears and holiday pay and £187,000 for notice/redundancy pay.

He adds: "However, in February 2017 I received notification that 15 of the employees, acting through their union, are seeking protection awards against the company for what they claim was a failure to consult. Having discussed the matter with the directors and legal agents, the decision was taken to vigorously defend the claims and a hearing date is awaited from the Employment Tribunal. It is estimated that if the Tribunal were to make the awards in full these would amount to some £109,000."

The report shows the sale of the company yard for £167,000 was to the Trustees of the Alexander Kemp Pension Scheme. Mr Gardiner explains that Mr Kemp is a former director of Murray & Burrell and the husband of Sally Kemp who is a director of the firm.

A number of asseys remain to be released, including a development site at Buckholm Corner, Galashiels which has been valued at £750,000 to £1 million. That valuation has been challenged by the firm's directors who also have an interest as representatives of the two major ordinary creditors, ASM Developments (owed £564,000) and Waukrigg Developments (£231,000).

"This land had been on the market with another agent prior to administration, but there had been little interest", writes Mr Gardiner. "From discussions with various agents it would seem that there is currently little interest for plots of this size in the Borders area".

D M Hall, the agents who valued the Buckholm Corner site have agreed to 'revisit' their assessment prior to fully placing the property on the market. The directors have also suggested the possible appointment of a joint marketing agent to reach out to potential purchasers from overseas.

Mr Gardiner also explains that following a review of old planning applications in the Borders area on which no development has commenced, Scottish Borders Council had indicated an intention to remove this land from their Development Plan.

"As the intention is to sell the land for development I instructed my property agents to lodge a defence and this has been submitted to the council in order to preserve the value in the land", he states.

There has also been little interest in a site at Lilliesleaf valued at between £200,000 and £275,000.

The development of nine houses on Craigpark Court land had commenced prior to administration. Two properties had been completed, one of them having already been sold and the second being used as a furnished show house.

This site was subject to "an onerous Section 75 planning obligation" (developer contributions) which could potentially put off prospective buyers or lead to reduced offers.

"The purchaser (of Craigpark Court) ius a provider of social housing and is thus usually exempt from Section 75 obligations".

In a section of the report entitled Prospects for Creditors, Mr Gardiner says: "My staff continue to receive and log claims from (ordinary) creditors. Ordinary claims are currently projected to be in the region of £1,996,000 but I would stress that, to date, no formal adjudication has been carried out on any claims and this is merely an indicator based on the creditor list provided by the company and claims received to date".

The estimated financial position of the firm included within the administrator's proposals published in January suggested that, based on the asset values provided by the directors at the time, a dividend of 100p in the pound would be available to creditors.

But according to the new report: "The level of dividend will depend on the final sales values that can be achieved for the various land and properties and, whilst I still anticipate that a substantial dividend could be available to ordinary creditors, I am unable to provide an estimate of the timing or quantum of such dividend until such time as the outcome of asset realisations is known. However, creditors should be aware that the assets remaining to be sold are likely to take some considerable time to sell".

In a message to shareholders, Mr Gardiner says the anticipated surplus in the estimated financial position of the company included with the January proposals indicated that there might be funds to be returned to shareholders.

He warns: "However, this now seems unlikely given the potential lower returns from the sale of assets, the costs of the administration and interest accruing on creditors' claims".

A note headed Directors' Conduct, the administrator says in terms of the Company Directors Disqualification Act 1986 and the insolvent companies (Report on Conduct of Directors) (Scotland) Rules 1996 he is required to prepare a report regarding the conduct of the directors who held office in the three years prior to his appointment.

"This report has been submitted but I am unable to divulge the contents of such reports", concluded Mr Gardiner.

Ticking all the wrong boxes!

EWAN LAMB reports on the Borders' latest waste management performance

Hidden away in a 44-page annex of a report to be considered by Borders councillors this week are four ticks in separate boxes, indicating that the local authority is on target and in line with national trends when it comes to waste recycling and landfilling.

Hardly surprising that Scottish Borders Council has awarded itself four out of four passes when it is allowed to mark its own homework book.

The annual and quarterly performance reviews show that in 2016 SBC managed to recycle 39.07% of the rubbish it collected, up from 36.89% the previous year. At the same time the tonnage of garbage being buried actually increased although the overall percentage dropped from 62.2% to 60.7%.

However - perhaps conveniently - there is no mention of how SBC is doing compared to national averages or when their data is set alongside other Scottish local authorities who form a 'Family Group' for bench-marking purposes.

The Scottish Government's recycling targets continue to be missed by a country mile in the case of Borders. The aim was to achieve 50% re-use of waste by 2013, 60% by 2020 and 70% by 2025.

There seems little chance those ambitious heights will be reached by SBC following the complete collapse of its waste management strategy, the abandonment of a project which was designed to divert 80% of rubbish from landfill, and the recent decision by its own members to turn down a planning application for a waste transfer station.

According to this week's report to the influential SBC Executive: "Over the last four quarters there has been a small but consistent increase in recycling rate observed. This is thought to be related to the introduction of food waste kerbside collections, and in an increase in garden waste collected at the recycling centres.

"The tonnes of waste going to landfill have increased slightly over the period of the past four quarters. This could be related to economic activity. However, over this same period there has been a small but consistent decrease in the percentage of waste going to landfill.

Statistics for 2016 for all 32 Scottish local authorities will not be published by the Scottish Environment Protection Authority (SEPA) until September. But the 2015 data gives a snapshot of SBC's record compared to its brothers and sisters in that Family Group.

The Borders landfill figure of 62.2% for 2015 was only exceeded by Eilean Sar (Western Isles) Council on 64.8%. The other figures for the Group were Aberdeenshire 56.1%; Highland 54.6%; Argyll & Bute 48.7%; Shetland 22.0%; Dumfries & Galloway 29.3%; Orkney 23.9%.

The 2015 proportions of so-called other diversions from landfill (not including recycling) show SBC close to the bottom of the league. This section of the waste management figures comprises waste disposed of by incineration, recovered by incineration or managed by other methods.

The percentages for the Family Group were Dumfries & Galloway 43.5; SBC 1.79; Aberdeenshire 0.13; Argyll & Bute 17.4; Orkney 51.2;Eilean Sar 13.9;Shetland 68.8; Highland 0.9.

A fleeting reference to the "new" Easter Langlee waste transfer station merely tells us: "As planning consent was refused the project is now delayed and likely to incur significant additional cost".

Based on all available data the box ticking exercise which allows SBC to claim it is on target or in line with national trend or showing a long-term positive trend seems virtually meaningless.

Uncovered: consultant's report on failed waste project

DOUGLAS SHEPHERD on first 'expert' paper to emerge from council's secret files

The role played by a team of at least twelve 'specialist' consultancy firms in the disastrous Scottish Borders Council/New Earth Solutions waste treatment project has never been publicly explained since the venture collapsed over two years ago with the loss of millions of pounds of taxpayers' and investors' money.

Experts in the fields of technology, finance and the legal sector were commissioned by the local authority to guide councillors and officials through the minefield of public procurement. Between them these firms collected around £1.6 million in fees, but at the end of four years SBC had nothing to show for that generous expenditure.

Now, for the first time, a consultant's report linked to the Easter Langlee waste treatment project has found its way into the public domain as an appendix to a larger confidential report submitted to a private council session at the dawn of the contract in 2011.

The report from financial consultants Nevin Associates - they were paid a total of £143,000 by SBC over the lifetime of the contract - examines the financial implications which might flow from the non-development of an energy from waste facility (Advanced Thermal Treatment or ATT) alongside a proposed conventional treatment plant.

In particular Nevin looked at various scenarios and how they might affect the solvency or insolvency of New Earth Solutions (Scottish Borders) Ltd. (NESSB), - known as the project company - which was specially set up to carry out the Easter Langlee project.

According to the report: "The construction of the ATT plant is not absolutely essential for service delivery. NES have confirmed that they can still deliver the service as specified in the contract by treating residual waste through a Mechanical Biological Treatment (MBT) plant and then securing an off-take contract for the solid refuse fuel (SRF) produced by the MBT process with a merchant plant outside the Scottish Borders".

Nevin Associates added that while NES intended developing an ATT facility at Easter Langlee, the process that New Earth envisaged using was still being trialled on demonstration plants, and although results appeared to be positive "it cannot yet be confirmed that the technology will prove to be feasible".

That clear marker appears to have been repeatedly ignored by councillors and officers alike for the inappropriately named NEAT technology never proved itself.

The investigation concluded that even if the generating capacity of the ATT plant turned out to be lower than forecast, the solvency of the project company would not be jeopardised, and would be in a position to continue delivering the contracted services.

Nevin went on to examine the likely outcomes for the NESSB if the ATT did not proceed at all, and off-take contracts for the SRF had to be secured. NES had indicated the off-take cost of SRF would equate to £65 per tonne.

Financial modelling showed that if the project company paid an off-take price of £54.01 a profit of £3.25 million would be generated over the project period, and NESSB would "remain solvent (just)".

Under an off-take price of £46.88 the profit over the 24-year contract period would fall to £2.378 million and NESSB would only be marginally solvent. Nevin commented: "Shareholders might not walk away, but to maintain solvency might have to accept suspension of sub-debt interest payments for a period".

NES had named a number of potential facilities that could accept SRF from Easter Langlee including one in Dumfries and another in THe Netherlands. According to Nevin: "It will be noted that some of these potential off-take facilities could have fairly significant transport costs associated with them".

The question therefore arose, wrote Nevin, of what the financial position of the project company would be if it had to meet a SRF off-take cost of £65 per tonne.

When two scenarios were analysed one concluded it was likely interest payments on subordinated debt would need to be suspended for a period while the other warned NESSB would run out of cash and become insolvent.

"In terms of the overall probability of project company insolvency if the ATT plant does not go ahead: The project team assessed that there is a 10% chance of the ATT plant not proceeding as a result of either technical or commercial failure with a somewhat higher risk that the implementation of the ATT plant could be delayed for these reasons.

"In the event of contract termination because project company becomes insolvent, the provisions of the project agreement are that the council will re-tender the contract and pay project company an amount equal to the adjusted highest compliant tender price in full and final settlement of all project company's claims against the council".

Should SBC be unable to re-tender the contract because of a lack of bidders then the council would be required to compensate NESSB for an amount equal to an independent expert's determination of the estimated fair value of the contract.

Controller of bankrupt recycling fund breaks silence

SCOTTISH EXCLUSIVE by DOUG COLLIE

One of the businessmen who presided over a fund which was supposed to bankroll Scottish Borders Council's £21 million waste treatment plant has spoken for the first time since the debt-ridden investment firm went belly up almost twelve months ago.

But far from offering more than 3,200 investors in his worthless New Earth Recycling & Renewables [Infrastructure] plc or NERR an explanation or an apology - they face losses totalling in excess of £290 million - John Bourbon has branded an investigation into the fund's activities as "something of a witch hunt".

The NERR fund was part of Isle of Man based Premier Group which managed and controlled a range of investment vehicles all of which are either about to be dissolved or are teetering on the verge of insolvency. It is now the subject of a probe by the Isle of Man Financial Services Authority (IOMFSA).

Mr Bourbon, a former chief of the Manx financial regulator before joining the board of Premier Group, and his colleagues, collected tens of millions of pounds in fees from NERR and its associates before the Group also crashed late last year.

Between 2011 and 2015 NERR had the role of funder for the Scottish Borders project at Easter Langlee, Galashiels. But financial backing for the waste management plant never materialised, and since the collapse of the project in 2015 it has become clear that NERR strung SBC along with a variety of excuses.

As we reported recently, Premier Shareholders' Group (PSG), which represents some of the hundreds of investors who lost their savings in Premier's funds, has established that the NERR fund was the most lucrative in terms of fees earned for the parent company which was, in turn, controlled from the tax haven of British Virgin Islands.

In an interview with Manx-based journalist Adrian Darbyshire, of Isle of Man Today, Mr Bourbon addressed allegations of mis-selling and other dubious practices which have been levelled at his Group by PSG and others. A dossier of evidence running into many pages is due to be presented to members of Tynwald (the Manx Parliament) within a matter of weeks.

The dossier accuses Premier of paying large commissions to unqualified and unlicensed agents who then targeted pensioners by claiming the funds were 'low risk'. PSG goes on to allege that shareholders were trapped by punitive exit fees, often up to 30%, and they could not access their money after the funds suspended withdrawals.

But Mr Bourbon dismissed PSG's claims and told his interviewer it was unlikely that anyone with significant investments in his funds were unaware of the risk. All fees and charges were clearly set out in the documentation used to promote the funds, he explained.

He made the extraordinary claim that a greater number of people had made a profit from the New Earth fund which loaned cash for the development of waste plants in the UK before it was wound up by the Isle of Man regulators in July 2016. Those loans were made to New Earth Solutions, the contractors handed a multi-million pound contract by SBC. NES is also insolvent and in the process of being wound up.

A further 189 investors are believed to have lost £61 million in NERR's sister entity Eco Resources Fund which ploughed cash into bamboo plantations in Central America and South Africa.

Mr Bourbon is personally fighting moves by the Eco Resources Fund liquidator to have the fund wound up with an adjourned court hearing due to take place next month.

He told Isle of Man Today the fund retained the potential to produce returns for investors for years to come if it is refinanced.

"With the right liquidator, it would be possible to refinance the fund, pay off creditors and financial indebtedness by 2023 and be left with an asset which produces $25 million per annum for investors for the following 60 years", said Mr Bourbon.

Mr Darbyshire's article, which was published online today has already attracted many angry comments.

One writer declared: " Perhaps Mr Bourbon can explain why the Premier group appointed unqualified, unregulated and unlicensed 'agents' (calling them professional financial advisers) to sell experienced investor funds to inexperienced pensioners - some living alone aged over 80. These 'agents' vanished at the first sign of trouble, but Premier kept the money that they received and refused to hand it back. The PSG has absolutely NO record of Premier returning any money."

Council assured waste project was "viable and fundable"

EWAN LAMB dissects the contents of SBC contractor's 'commercially sensitive' letter

A top secret letter sent to Scottish Borders Council by waste management contractors New Earth Solutions confirmed a planned treatment facility to serve the region remained viable and fundable without an accompanying thermal treatment system being available from the outset of the project..

But despite this seemingly cast iron assurance in February 2011 that a so-called Mechanical Biological Treatment (MBT) plant could be constructed and delivered on its own, the pledge was rendered worthless less than a year later when New Earth claimed a stand alone MBT without a thermal conversion capability could not secure bank funding.

A copy of the five page letter from NES outlining contingency plans should the Advanced Thermal Treatment (ATT) facility fail to materialise has been made public via Freedom of Information requests which were refused by the local authority, but upheld by the Scottish Information Commissioner.

Each page of the document is marked Confidential and Commercially Sensitive. It explains what would happen to the Solid Recovered Fuel (SRF) produced during the treatment processes at the Easter Langlee MBT centre, and discusses the various impacts which could affect New Earth Solutions (Scottish Borders) Ltd., the special vehicle set up to progress the Borders project.

Plans were in place for NES and SBC to share on a 50-50 basis any additional costs or benefits if the SRF had to be transported and treated by a third party outwith the Scottish Borders.

This so-called risk-share mechanism was to come into play if planning permission and/or a permit for the ATT were unsatisfactory or these consents were refused or if it proved technically or commercially not viable to deliver the ATT at Easter Langlee.

SBC had asked the contractor what the implications would be if the ATT was not technically or commercially viable. Ironically, the NES brand of technology remained incomplete and not fit for purpose four years after the letter was written. The ATT failure resulted in the contract being ditched with SBC forced to write off at least £2.4 million of taxpayers' money.

But back in 2011 NES wrote: "The proposed ATT facility supports the landfill diversion capability of the MBT, produces electricity to power the facility and generates revenues from the production and sale of renewable energy. The revenues generated are used to fund the capital and operational costs of the ATT. Without these revenues the ATT facility would not be viable".

However, if the ATT facility was not developed then the MBT would be re-configured to ensure the landfill diversion targets could still be met.

The letter continues: "NES would wish to point out that its future growth within the UK waste management market is based on incorporating on-site energy recovery within its MBT technology in new and existing waste treatment facilities.

"This means that over the course of the project, NES intends to develop an on-site energy recovery facility and thus, any use of a third party SRF off-take is likely to be on a short term basis or if, for unforeseen circumstances, the energy recovery facility is unavailable for short periods of time".

Then the council is told: "The project remains viable and fundable without the on-site ATT being available from the outset. At the point when an on-site energy recovery facility is ready to be developed, funding will be secured from the project funders i.e. New Earth Recycling & Renewables Infrastructure Plc (NERR).

Under the terms of the original contract the ATT could be delivered up to seven years after the MBT to allow the technology to be fully tried and tested. Both NES and NERR are now insolvent with mountainous unpaid debts.

The letter  explains that under the contingency plans for the Easter Langlee SRF, the fuel could be moved out of the Borders to one of many outlets. New Earth had recently agreed a deal with a major SRF user in Holland - The Van Gansewinkel Group - and material from the Borders could be hauled by road to Grangemouth before being shipped to The Netherlands.

A perfect score for a useless contractor

DOUG COLLIE wonders how bidder received 40 out of 40, then finance package 'disappeared'...

The waste management "specialists" handed a multi-million pound contract by Scottish Borders Council were awarded vastly superior scores compared to their rivals on both technical and financial merit even though their technology was subsequently unable to attract bank loans and funding was not in place when the deal was signed.

Details of the so-called tender evaluation summary for a proposed Mechanical Biological Treatment [MBT] waste treatment facility at Easter Langlee have been revealed for the first time in a confidential document released by the local authority under the Freedom of Information system.

New Earth Solutions, the successful bidder, outscored their only competitor Shanks Group on all three evaluation headings. The assessment is likely to have been carried out by 'expert' consultants commissioned by SBC at considerable cost. NES was awarded a total of 84 out of a possible 100 while Shanks managed only 70.3.

The maximum mark for technical aspects of the contract was 55, and NES clocked up 41.5  compared to Shanks on 38.4. When it came to finance New Earth received a perfect 40 out of a possible 40 with Shanks lagging behind on 30.9. And in the contractual section which carried a top mark of 5, NES were rated 2.5 while Shanks received a seemingly poor score of 1.

As the new information shows, New Earth Solutions indicated only a few months after winning the contract that the MBT on its own could no longer get bank funding. It meant councillors had to nod through a major change so that completely untried Advanced Thermal Treatment [ATT] technology could be included from day one.

According to a contracts specialist: "This radical Deed of Variation surely rendered the original tender evaluation completely irrelevant and worthless. Given it was less than a year after entering the contract with NES when they started to indicate they could not secure funding or deliver the project there must have been provision to reopen negotiations with Shanks as a reserve bid position".

The experienced consultant added that the council should have been undertaking contingency plans in parallel to NES discussions after New Earth confirmed they were struggling to deliver the project in 2012.

"I would suggest SBC's advisers may have been negligent in the advice they gave the Council, especially in light of how much it cost the Council and the fact the local authority has nothing to show for an outlay of at least £2.4 million".

But despite New Earth's considerable difficulties with funding, and notwithstanding the fact that the company's brand of ATT had not even achieved commercial status, SBC's elected members were advised - and agreed - to vary the contract. It was a decision which would ultimately result in the complete collapse of the authority's waste management strategy in 2015.

The crucial report, considered in private session in October 2012, says: "The key to this Deed of Variation is to allow New Earth Solutions to develop the project to a position where the banks or New Earth's sister investment company New Earth Recycling & Renewables [Infrastructure] plc (NERR) are confident enough to fund the construction phase.

"If NES are successful in obtaining all of the permissions required for the integrated facility, the funding is invested in the project and the construction contracts are signed, the council is then protected under the existing provision in the contract to allow the facility to be delivered even if the ATT technology fails".

Unfortunately for Borders council taxpayers the necessary operating certificate for the integrated plant was never secured, funding was never in place, and construction contracts remained unsigned. Apart from that the venture was no doubt considered to be a roaring success in-house after vast sums of public money were simply written off by SBC.

NES is in the hands of administrators with massive unpaid debts while NERR is the subject of an investigation by liquidators on the Isle of Man after investors in the fund lost everything. Some of those angry investors are calling for a criminal inquiry.

As one cynic told us: "It seems from the emerging evidence contained in the documents they wanted to hide that SBC was involved with some very strange bedfellows".

Site for waste plant was on contaminated land

EWAN LAMB examines another of the secret New Earth papers...

A "state-of-the-art" waste treatment centre capable of dealing with all of the rubbish generated in the Scottish Borders would have been constructed on contaminated land at Easter Langlee on the fringe of Galashiels.

And rival bidders for the lucrative £21 million contract on offer from Scottish Borders Council did not tell the local authority in advance that they planned to redistribute 26,000 tonnes of landfilled material to level the sloping site.

The contamination issue is dealt with in one of the six reports newly released by the council after their plea for continued secrecy in what has been dubbed the New Earth Solutions (NES) disaster was dismissed by Scotland's Information Commissioner.

At the end of the day the plan for the 'cutting edge' plant was abandoned without a single brick being laid, and £2.4 million of public money spent for absolutely no return.

According to one of the documents, it is believed NES, the successful tenderers, and the other bidder Shanks Group did not approach the relevant controlling authorities prior to tender submission to discuss the re-use of waste material on the Easter Langlee site.

The report explains that developing the new plant on top of a former landfill site would require remediation of the land to create a fit for purpose site for the proposed facility.

SLR Consulting, the environmental technical consultants commissioned by SBC - the firm would collect fees totalling £186,000 by the time the SBC/NES venture collapsed in 2015 - indicated the preferred solution for remediating the site would be to cap the existing waste material.

The development plot would then be levelled with material excavated from the road and building footprint, then pile through the former landfill site into stable ground to support the proposed building.

"SLR's estimated pass through cost to the council for capping the site and dealing with excavated waste material generated from piling, including any associated landfill tax, was in the region of £500,000", the report says.

It goes on to reveal that during the fourteen month competitive dialogue process neither bidder identified an alternative approach for creating a suitable site.

"It was only after the tenders were submitted on 17 September 2010 that the project team discovered both bidders had proposed an alternative solution for the site preparation and remediation.

"Due to sloping nature of the eastern end of the site and the restrictions caused by the 132kv set of overhead cables, the bidders are proposing to lower the level of the site by up to three metres at the western end, and use the excavated material to fill up the eastern end of the site to create a level platform.

"This approach would also allow the building sufficient vertical space to create the required roof height to accommodate the internal machinery, without encroaching within the safety exclusion zone of the 132kv overhead cables. The proposal will generate 26,000 tonnes of excavated material from the site, which NES have indicated that they will be allowed to redistribute within the site".

But the council's representatives on the project do not appear to have been entirely convinced this was the best strategy for securing a fit site.

The report states: "The project team are not fully satisfied with the information that has been supplied by the bidders to support a cut and fill option, with the material being used on site. The original ground investigation report by SLR did not fully characterise the waste present within the site, and as a result the bidders do not know what type of contamination is present across the whole site and whether it can be classified for reuse".

The seven authors of the report, which was submitted to the council's Capital Management Group, went on to say it was not believed NES or Shanks had approached the relevant "controlling bodies" prior to tender submission to specifically discuss the reuse of waste material on the site.

As a result another consultancy, Envirocentre was commissioned to carry out further ground investigation work. Over 300 samples were taken, and this exercise "showed there was a risk to the ground water, even when Envirocentre factored in the reduced filtration from capping the site.

"The contaminated land officer [a SBC official] has assessed the final supplementary ground investigation report and concluded that reusing the material will not cause a risk to human health if the appropriate measures are put in place.

"However, the analysis regarding the risk to the water environment will have to be reviewed by the Scottish Environment Protection Agency (SEPA) as they have a much wider and more detailed hydro-geological experience and skill".

The report warns that SEPA's involvement in the process could have financial or time related consequences for the council. The ground investigations had only covered some 10 square metres of a two acre site.

Not enough rubbish to go round

DOUGLAS SHEPHERD with yet more revelations from those secret papers

Thousands of tons of refuse from outwith the region would have had to be 'imported' into the Scottish Borders by road each year to guarantee the financial viability of a multi-million pound waste treatment facility at Easter Langlee on the outskirts of Galashiels.

Scottish Borders Council and their contractors New Earth Solutions (NES) were facing a potential shortfall in the volume of rubbish to fuel the £21 million plant soon after concluding a disastrous deal in 2011 which was to collapse four years later with an accumulated loss running into many millions of pounds.

Details of the 'garbage shortage' are contained in the series of top secret council documents now made public for the first time on the orders of the Scottish Information Commissioner.

To provide financial viability for the waste treatment project SBC had to agree to pay for a minimum of 40,000 tonnes per annum even if the amount collected by the environmental health service fell below that figure. Special provisions were written into the contract document to allow SBC to source "substitute" waste to make up the tonnage figure to 40,000.

Soon after the deal was struck the managing director at NES informed SBC his firm could no longer obtain funding for the construction of a stand alone conventional Mechanical Biological Treatment plant.

One of the main factors was a reduction in SBC's waste tonnage from 45,000 tonnes during the tender period to 38,500 tonnes in 2011/12 due to the introduction of recycling schemes, but mainly attributed to the "current recession". The downward trend in the amount of rubbish generated was limiting the funding available to NES for their Borders project.

And according to one of the confidential reports: "An additional pressure to the council's guaranteed minimum tonnage is the requirement to introduce food waste collections in the Waste (Scotland) Regulations 2012. This is due to the fact that the food waste forms part of the residual waste stream under the project agreement".

A separate document gives details of a possible money-making scheme in which SBC and NES would submit a joint bid to land a five year contract with neighbouring Midlothian Council to handle that local authority's 25,000 tonnes of residual waste generated annually.

Borders councillors considered the business case with recommendations in private session in May 2011.

The report from chief executive (David Hume at that time) envisaged a contract start date of July 2011, and until the proposed treatment plant was up and running in October 2012 all of the Midlothian waste over this 15 month period would be transported to the Easter Langlee landfill site for burial.

Under the terms of the contract SBC would receive £25 for every tonne of rubbish going to landfill while NES would be responsible for all costs and risks associated with landfill tax and transport.

This report adds: "From the opening of the new waste treatment facility SBC will receive a £4 per tonne royalty for every tonne of Midlothian waste processed".The commercial venture by the local authority and its partner was estimated to bring in £395,000 to council coffers over the five year contract period. The cost of preparing the bid is given as £40,000.

Councillors are warned: "If SBC does not participate in the tendering exercise NES will be submitting a bid. If NES are subsequently successful in securing this contract the waste will be transported to Easter Langlee and SBC will not obtain any financial benefit".

It was also estimated that bringing 25,000 tonnes of Midlothian waste to Galashiels would equate to four or five additional vehicles per day. There were currently 50 vehicles a day accessing the site.

Contract change 'potentially unfair to competitors'

DOUG COLLIE with more revelations from council's top secret files...

The decision by councillors in the Scottish Borders to sanction radical changes in a multi-million pound waste management contract only months after the deal was signed weakened the local authority's position and the move could have been challenged by a rival bidder, it has been claimed.

As we reported recently, a collection of highly confidential reports covering the disastrous £180 million 24-year contract between Scottish Borders Council and New Earth Solutions (NES) have just been released after a lengthy journey through the Freedom of Information system.

Not Just Sheep & Rugby will bring to public attention aspects of the failed venture involving attempts by council and contractor over a four year period to deliver a £21 million waste treatment facility to handle 40,000 tonnes of household refuse a year at Easter Langlee, Galashiels.

The project ended in complete chaos in February 2015 when both sides walked away and the contract was shredded in the face of insurmountable technological and financial issues. But not before £2.4 million of public money disappeared into thin air with millions more belonging to shareholders in NES and its offshore "funder" suffering a similar fate.

SBC's elected members were somehow persuaded in October 2012 to sign up for a variety of Advanced Thermal Treatment (ATT) technology which had not even completed research and development trials, and remains commercially untried to this day.

A 34-page report presented to councillors in a private meeting, and which has never been seen publicly till now, argues the so-called Deed of Variation to the contract to include ATT alongside the conventional Mechanical Biological Treatment plant which formed the original deal with NES still represents 'best value' for the council.

New Earth told SBC the MBT on its own could not attract bank funding, and the ATT conversion of waste to electricity would be a much more attractive proposition for funders.

"The new integrated facility will actually deliver added benefits and reduced risk to the Council", according to the document. "The delay to the delivery [from October 2012 to March 2015] actually benefits the Council as there is no increase to operational costs and the delivery coincides closer to the point at which it becomes cheaper to treat waste than land filling it (2017/18).

"Once funding is in place and the construction contracts have been signed the main contract does provide the Council with better protection from future changes in the financial viability of the project for New Earth Solutions".

We showed the report to an independent expert in procurement who literally "rubbished" those statements.

We were told: "It seems clear the Deed of Variation severely weakened the position of the council in respect of providing a situation whereby if NES did not deliver they would not be held financially accountable for SBC's losses, a safeguard which would have been built in to the original agreement. NES could have just delivered the MBT and would have been forced to deliver according to the contract".

Our expert explained that bringing the MBT and the energy facility together into a single phase had "completely changed the dynamics of the deal". It constituted a material change to the bid which could have been challenged by Shanks Group, the company which lost out to NES in the bidding process, added the consultant.

The procurement specialist went on: "The revised contract provided funders including New Earth Recycling & Renewables [Infrastructure] or NERR to redraft terms according to risk. The energy aspect of the project always carried the higher risk, and this was a fundamental.reason why they could not secure funding at a reasonable rate. An experienced commercial negotiator would have recognised this".

COMING NEXT - THE PLAN HATCHED TO MAKE THE ATT VIABLE

Deal signed before trials even started

EXCLUSIVE by EWAN LAMB

A set of 'strictly confidential' documents released on the orders of the Scottish Information Commissioner show councillors in the Scottish Borders agreed to alter a multi-million pound waste management contract BEFORE a programme of technological trials had even begun at a research and development centre.

The high-risk strategy is revealed in a 34-page report which was submitted to a private meeting of Scottish Borders Council (SBC) in October 2012. Each page of the document, written by the Director of Environment & Infrastructure and the Project Manager for the planned £21 million waste treatment plant at Easter Langlee, Galashiels is stamped CONFIDENTIAL - NOT FOR PUBLICATION.

Critics and contract procurement experts claim that by sanctioning a so-called Deed of Variation in their original deal with contractors New Earth Solutions, elected members on the local authority exposed council taxpayers to increased financial risks and created a situation which led to the entire venture collapsing with the loss of £2.4 million of public money.

Not Just Sheep and Rugby plans to run a series of articles based on the newly released material in a bid to bring as much of it as possible into the public domain. It follows lengthy and concerted efforts by SBC to keep the documentation "under wraps" on grounds of alleged commercial confidentiality.

That argument in favour of secrecy was completely blown away by former Scottish Information Commissioner Rosemary Agnew in a damning report she published in April.

She pointed out that much of the requested material alluded to SBC's deliberations and decision making rather than the technology being touted by the now insolvent New Earth Solutions Group (NESG) and their bankrupt 'funder' New Earth Recycling & Renewables [Infrastructure] or NERR, based on the Isle of Man.

Even the status of the 2012 Deed of Variation document was kept a closely guarded secret by SBC.

We can now reveal a passage on the report's front page states: "As the Contract with Scottish Borders Council represents New Earth Solutions’ first project in Scotland, it will strengthen market confidence in New Earth Solutions’ ability to deliver projects throughout the United Kingdom. Commercial and reputational damage would be caused to New Earth Solutions if the technical or financial details of this report were made public.

"Due to the confidentiality clauses that are in place within the contract currently in place, Scottish Borders Council could be liable for any commercial or reputational damage caused to New Earth Solutions."

The original contract between the parties was signed in April 2011 and required NESG to deliver a conventional Mechanical Biological Treatment [MBT] plant at Easter Langlee capable of dealing with 40,000 tonnes of household rubbish each year.

A second phase of the scheme, up to seven years later, would see the addition of Advanced Thermal Treatment (ATT) technology to convert the garbage into electricity.

However according to the newly published document,by January 2012 - just nine months after the contract was sealed - New Earth indicated to the council that a MBT facility without the ATT element meant the project could no longer get bank funding. The terms of the deal would have to be radically altered.

The council's project team and NESG were then involved in ten months of discussions in an attempt to overcome "irreconcilable differences". In what amounted to an ultimatum, New Earth's directors told SBC the proposal to build a stand alone MBT would be dropped and a fully integrated MBT and ATT solution would be "delivered from day one".

In a section headed Advanced Thermal Technology Development, the 2012 report to councillors states: "The viability of the project for New Earth Solutions now hinges on the successful delivery of an Advanced Thermal Treatment Technology that can create electricity from gas. New Earth Solutions have developed the Advanced Thermal Treatment Technology to create a consistent gas from the waste derived fuel at their research and development site in Canford, Dorset."

The report goes on to claim that this major step in the technology development had allowed the company to invest tens of millions of pounds in their first commercial energy from waste site in Avonmouth, Bristol.

"This facility is different from the one proposed at Easter Langlee as it utilises the heat from the gas generation to create steam, which in turn is used to create electricity.

"The development of the gas generated electricity has one final process to resolve by creating an effective gas clean-up solution to generate a consistent gas feed to the off the shelf engines. This process has been designed and is under fabrication at the moment, with operational trials programmed for late November 2012, to deliver a technology that has funder confidence by August 2013.

"Officers have visited the sites and been shown the investment in Avonmouth and the research and development in Canford and there has been significant progress in the technology development over the last twelve months".

This would appear to prove beyond reasonable doubt that members of SBC gave their blessing to a form of ATT which had not even completed its journey through the research and development process.

In actual fact the brand of technology recommended by officials and approved by councillors was still not 'fit for purpose' by February 2015 when the Easter Langlee project was abandoned on "technological and financial grounds". 

The business operating the Canford site has changed its name from NEAT Technology to Syngas Products. According to the company's website Canford is still a 'demonstration facility', a pre-production unit with new and modified elements.

And the Avonmouth plant had so many operational issues it was 'sold' for nothing to new owners, has been completely shut down since June 2016 and is set to remain closed until at least 2018 while engineers attempt to get it to function properly.

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