Thursday, 19 October 2017

The file ignored by Audit Scotland, parliament and politicians [3]


SBC undoubtedly wished to draw a line in the sand under the New Earth affair as soon as the highly embarrassing decision to terminate the useless contract was taken in February 2015. Their attitude towards my series of FOI requests proves that beyond any reasonable doubt.

But information they have been forced to give me on the instructions of the SIC has penetrated the wall of silence and has shed some light on many worrying aspects of the council’s dealings with a group of financially unstable companies and funds. However, it is impossible to complete the picture without full disclosure. Here are some of the points requiring full investigation:

1. NESG TRACK RECORD AND CONDUCT - NESG was a relatively inexperienced player in the waste management industry, and had little if any knowledge of environmental rules and regulations governing waste disposal in Scotland, including SEPA’s rigorous process before issuing operating certificates.
 Information I obtained showed how NESG became so frustrated over delays in the sanctioning of a permit for the ATT aspect of the Easter Langlee project that they suggested SBC and others should put pressure on the independent environmental watchdog to achieve the desired result. This surely amounted to totally unacceptable and unprofessional conduct.

2. SURETY FOR SEPA - In the very early stages of the contract SBC had to provide financial security in the sum of £315,000 to SEPA on behalf of New Earth Solutions (Scottish Borders) Ltd., the ‘ special vehicle’ set up to deliver the Borders project. The council refused to tell me why this was necessary on grounds of “commercial interests”.
The SIC disagreed and told SBC to give me the information I had asked for. It transpired that NES could not acquire £315,000 of insurance without incurring costs which would have had to be passed back to the council “nor can they afford to hold the capital aside to cover this requirement”. So a contractor involved in a multi-million pound scheme didn’t have £315,000 to spare. Surely alarm bells should have been ringing at SBC. Did anyone ask questions about such a worrying issue?

3. THE STATUS OF NERR & PGIOM - Information obtained during the course of my inquiries has confirmed that SBC were completely unaware of many complaints lodged by investors and shareholders in the NERR fund and against its parent company PGIOM. These businesses were crucial to the successful delivery of Easter Langlee, and SBC was told £6 million per month was pouring into NERR from eager ‘green’ investors.

The truth was that any money reaching NERR’s coffers was either being used to prop up NESG (£39 million in total) or being siphoned off by PGIOM managers and controllers in fees (£12.027 million in 2014 and £10.748 million in 2013 while the Borders contract was ‘live’). The impression is given that SBC accepted at face value what NESG and NERR were telling them. Even in the early years of the contract (2011) NESG was recording sizeable financial losses.

Liquidators Deloitte appointed to investigate NERR by the Isle of Man Financial Services Authority soon discovered almost 3,500 investors and shareholders in the fund would get none of their money back. Deloitte is currently considering the possibility of pursuing third parties in a bid to recoup cash and NERR has insufficient resources to even pay for its own liquidation. PGIOM is also in the process of being dissolved. How did SBC become involved with such unstable offshore entities?

4. DEED OF VARIATION – Perhaps the most important reason for the collapse of the project, and the most puzzling issue to emerge from SBC’s web of secrecy. Within a matter of months of the original contract being signed NESG was telling SBC the MBT plant was undeliverable because it could not attract bank funding as a stand-alone project. How much had changed in such a short period of time? Why were MBT facilities being developed elsewhere in the UK? Did anyone at SBC ask?
In October 2012 members of SBC decided (in private, naturally) to radically change the terms of their contract with NESG to include ATT using so-called NEAT Technology, NESG’s very own brand of gasification and pyrolysis to convert rubbish into electricity.

The councillors must have realised they were taking a huge gamble. Apparently they were labouring under the impression NEAT could install them as champions of the Scottish waste disposal league table. But in fact the technology had not even started its arduous journey through development trials at NESG’s R&D centre in Canford, Kent.

How was any financial institution likely to put up £23 million under those circumstances? What persuaded SBC’s elected members to sanction NEAT when the technology was not commercially proven and funding was not guaranteed? Each member who voted in favour of the DoV must be asked to explain their reasoning, and officers and members of the Project Team who recommended this risky course of action also need to provide a detailed public explanation.

In an interview published in the Journal of the Chartered Institute of Waste Management in October 2015 - AFTER the SBC/NESG contract was shredded, and THREE YEARS AFTER the DoV was rubber-stamped - Richard Brooke, the commercial director of NES, confirmed that the form of technology which had been planned for Easter Langlee was not commercially ready in late 2014. So why did SBC sign up for it in October 2012? Brooke’s reference to the Borders project reads as follows:

“The development in Scotland that would have been New Earth’s sixth facility did not come to fruition for a variety of reasons, most notably the drop-off in the quantity of residual waste requiring treatment; and the specific energy technology to be built and operated was not ready to bring on-line on a commercial scale.”

This amounts to a damning indictment of SBC’s decision making. In actual fact this form of ATT technology remains unproven in 2017 while a similar system installed at another NESG facility in Avonmouth, Bristol has proved so troublesome the entire plant has had to be closed down to allow radical remedial work to be undertaken. It is hoped to reopen the ATT there in 2018.


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