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.