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.
COMING NEXT - MONITORING OF PROJECT BY ELECTED MEMBERS
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