EXCLUSIVE by EWAN LAMB
The partnership which operates Scottish Borders Council's controversial Public Finance Initiative secondary schools project needed to recoup £120,000 from its Luxembourg-based shareholders after a financial error "overstated the company's available distributable profits", it has been revealed.
Since the arrangement with the council was set up in 2009, Scottish Borders Education Partnership [SBEP] Ltd. has racked up millions of pounds in operating profits on the expensive PFI school buildings in Earlston, Eyemouth and Duns.
The newly published 2021 accounts for SBEP shows the partnership's finance debtor - the Borders local authority - is due to pay £58.129 millions over the remaining period of the agreement which runs until November 2038. The outstanding sum stood at £60.168 million at the end of 2020.
The PFI Borders project logged an operating profit of £1.121 million last year for the ultimate parent company BBGI Global Infrastructure with its headquarters in Luxembourg. Annual turnover of £4.485 million included interest totalling £3.528 million received from SBC.
According to the report dividends paid to the BBGI shareholders amounted to £460,000 in 2021, up from £197,000 the previous year.
A detailed account of the dividend overpayment explains: "The directors approved that the company paid dividends of £580,000 in total during the year. After the balance sheet date analysis showed that the financial model and related accounts which had supported an interim dividend payment of £217,000 in December 2021 had overstated the company's available distributable profits.
"Consequently, the payment of the interim dividend had resulted in the company having negative reserves of £89,000 at the balance sheet date. When this was brought to the attention of the Board it was agreed that shareholders would reimburse £120,000 to the company".
It was noted the Board 'acted in good faith' in relying on the original financial model, and that lenders and shareholders were kept fully informed and supported the corrective action taken.
"The directors (Albert Naafs and Frank Schramm) do not expect this to have any adverse financial consequences for the company. The Board have reviewed the processes which resulted in the overpayment of dividends in the year.
"They are satisfied that suitable steps have been taken to ensure that similar issues will not arise again".
The latest figures showing the £1.121 million operating profit for 2021 means profits accruing to SBEP since Borders councillors signed the original deal in 2007 now exceed £11.5 million.
It is noted in the latest accounts: "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".
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