by EWAN LAMB
The world's largest manager of infrastructure investments considered ploughing up to £30 million into an ultra-modern waste treatment plant for the Scottish Borders only four months before the ill-fated project was abandoned, it has been revealed.
A 'strictly private and confidential' letter from the managing director of Australian-based Macquarie Bank to his or her opposite number at Scottish Borders Council's waste management contractors New Earth Solutions Group [NESG] is included among a large collection of paperwork released by the local authority in response to a Freedom of Information request. The names of the two high-powered individuals have been redacted.
The letter, dated October 2014, says: "Further to our recently completed £20 million re-financing of NESG Ltd.'s Avonmouth Energy Recovery Facility we are writing to confirm our interest in providing funding for New Earth's pipeline projects.
"We understand that New Earth is advancing a number of pipeline projects including a waste to energy project in Scottish Borders that is underpinned by a long term local authority contract and will use modular gas to engine based advanced conversion technology.
"The purpose of this letter is to confirm that Macquarie Bank Ltd has had preliminary discussions with New Earth in relation to the potential financing of the Scottish Borders project by Macquarie. Subject to due diligence, internal approvals and contract Macquarie would look to provide up to 100% of the project's funding requirement, which we understand to be in the region of £25 million to £30 million".
At the time the letter was written the planned waste treatment plant at Easter Langlee, Galashiels, was facing what proved to be insurmountable difficulties.
The contract between SBC and NESG had been originally signed in April 2011 with a so-called Mechanical Biological Treatment [MBT] facility due to come on stream by the end of 2012.
However, the project soon encountered financial issues centred on New Earth Recycling & Renewables (Infrastructure) Ltd. or NERR, the Isle of Man 'funders of last resort'. The scheme had been amended in 2012 to include an unproven thermal treatment technology revelling in the name of NEAT, which was still in the research and development phase.
The council then granted NESG a year long moratorium (contract standstill) to hopefully sort out the financial and technological bugbears which consistently dogged the Borders project.
The Macquarie letter made it clear their interest in investing at Easter Langlee was not an offer capable of acceptance and should not otherwise give rise to a binding contract. It added: "This letter is confidential and should not be disclosed without our prior written consent".
In February 2015 the partners in the Borders venture abandoned the scheme without a brick being laid and with at least £2.4 million of public money spent by SBC on consultants and lawyers.
It later transpired that in October 2014 NESG was already insolvent, carrying £159 million of debt with £37 million due to the Co-operative Bank, £102 million to the NERR fund and £20 million to Macquarie Bank. A team of insolvency experts sold off the entire group for less than £6 million after they were called in during 2016.
Macquarie Bank currently has 737 billion Australian dollars worth of assets under its management.
When the bank submitted its possible funding solution for the Borders treatment plant to NESG it pointed out: "Macquarie Group Ltd. is the largest manager of infrastructure investments globally and has over 700 infrastructure investment professionals actively managing assets and operating 48 funds across a diverse portfolio of regulated industries including water utilities, power generation, electricity and gas transmission and distribution networks, toll roads, airports and social infrastructure.
"In particular Macquarie Group and its managed funds are actively in energy across the globe, with 2,340 MW of renewable energy assets under management in addition to investments in more than 2,000 MW of CCGT generation assets in the UK alone".
But even the might of Macquarie could not save the day for Scottish Borders Council.
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