Sunday, 10 September 2017

Mystery solved by liquidator's report


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."

No comments:

Post a Comment