No Brexit worries for Borders PFI managers

EXCLUSIVE by DOUG COLLIE

The partnership which manages a Private Finance Initiative (PFI) for Scottish Borders Council has reported an operating profit of £945,000 for 2018 and passed on a dividend of £259,000 to its Luxembourg shareholders under an arrangement which is costing local taxpayers tens of millions of pounds.

SBC will have to find £10.9 million from its increasingly stretched resources in 2019/20 to meet its PFI payments to Scottish Borders Education Partnership Ltd. (SBEP), based in Maidenhead, Berkshire. According to its latest set of accounts the council will fork out £273 million over the next 25 years thanks to the PFI project, sanctioned by councillors in 2006/07.

In its 2018 directors' report filed with Companies House SBEP says: "The principal activity of the company is the provision of operational and maintenance services, including related financial arrangements for three schools in the Scottish Borders (Eyemouth, Earlston and Berwickshire High in Duns) in accordance with a project agreement entered into with SBC.

"The company is currently operating the facilities for the period to November 30th 2038, providing a full range of facilities management services under a contractual agreement that provides a regular income stream subject to deductions for service shortfalls and the unavailability of the facilities".

The SBEP directors Albert Naafs and Frank Schramm go on to say: "The UK is due to leave the European Union by October 31st 2019. The terms on which the UK may withdraw from the EU are not clear and it is difficult to evaluate all of the potential implications on the company's trade, customers and suppliers and the wider economy.

"However, the company is not affected by the continued uncertainty surrounding the UK's membership of the EU, as the cash flows generated from the PFI concession asset are secured under contract with SBC, a government body".

It has been calculated that SBEP has racked up over £8 million in operating profits during the lifetime of the arrangement so far. And it seems the company will continue to benefit from this extremely costly method of financing public sector infrastructure.

The report adds: "The project continues to perform generally in line with the modelled expectations, and management of the scheme both logistically and financially remains under control. The directors remain confident that the company will maintain the current level of performance and keep meeting the obligations under the contract".

SBEP's turnover in 2018 totalled £3.484 million (£3.429 million in 2017) while the operating profit of £945,000 was slightly down on the previous year's £1.054 million.

The partnership has loans, overdrafts and debts totalling £74.445 million. Borrowing of £68.33 million is made up of £15 million held by Prudential Annuities Ltd and £53.33 million held by Prudential Retirement Income Ltd with a 2.604% index linked coupon.

All of the share capital in the parent company - Scottish Borders Education Partnership (Holdings) Ltd. - is held by BBGI Investments SCA which is in turn an indirect and wholly owned subsidiary of BBGI SICAV SA, both registered in Senningerberg, Luxembourg.