by DOUG COLLIE
Private and confidential papers linked to the £23 million failed Scottish Borders waste treatment project show the local council was to be charged up to 12 per cent interest by the Isle of Man investment fund chosen to bankroll the scheme.
And a three per cent fee for setting up the 15 year loan would have netted the directors of New Earth Recycling & Renewables [Infrastructure] Ltd. or NERR in excess of £600,000.
These are among the figures contained in "secret" documents which were protected by a six-year confidentiality agreement signed in 2015 by Scottish Borders Council and their incompetent contractors New Earth Solutions (NES) a company which had Isle of Man-based NERR as funding partners. It was a partnership which soon became insolvent.
A so-called funding solution for the Borders venture assembled by NES and NERR in January 2011 - three months before councillors signed up to the disastrous £80 million waste treatment deal - makes interesting reading.
The proposals outlined would disintegrate within a year when the plans for the facility at Easter Langlee, Galashiels had to be radically altered. Even that did not prevent the project from total collapse in 2015 costing SBC and its local taxpayers at least £2.4 million.
New Earth's funding solution together with NERR's loan conditions are among dozens of reports released by the council in response to a Freedom of Information request.
The NES letter to SBC says: "Our current funding solution remains to source 97.5% of the project capital expenditure requirement from our funding partner NERR and for NES to provide the remaining 2.5% via pinpoint equity".
But by 2016 NERR together with a number of other investment vehicles promoted by Premier Group (IOM) Ltd. had called in liquidators with allegations that the environmentally friendly fund had been "a scam". Premier too became financially insolvent.
NERR remains under investigation on the Isle of Man while hundreds of investors worldwide have been warned they may never get back any of the £200 million handed to NERR management.
That funding solution, presented to SBC after NES was chosen as the council's preferred bidder, states: "The funding requirement for the Scottish Borders project will be in the region of £21.5 million. Project construction is programmed to commence in autumn 2011.
"NES is hoping to close projects with a total capital expenditure in the region of £95 million during 2011 with Scottish Borders representing both the first and highest priority".
The upbeat message was supported by letters from the directors of NERR: it was later revealed that at least £24 million from the Manx fund had been used in a vain bid to prop up the failing NES Group by covering its debts.
The identity of the NERR executives is not revealed in the copies of correspondence supplied by SBC as their names have been redacted.
According to the document: "The NERR investment fund is experiencing growing interest from UK and overseas investors who recognise that it offers growth potential and diversity if held within their investment portfolio or pension fund as well as being an environmentally friendly investment.
"NERR's feeder funds, the Premier Investment Opportunities Fund Protected Cell Company plc and the Eclipse Investment Fund Protected Cell Company plc are targeted at experienced investors and institutional investors respectively".
But in fact it turned out that many financial advisers were persuading individuals with no experience of investing to plough large sums from their life savings or pension pots into NERR with promises of huge returns which never materialised..
A significant number of people have won compensation from agents after taking cases to the financial regulators. Other claims aimed at recovering cash remain outstanding while NERR's liquidators continue their investigation into the fund's activities.
SBC was told in 2011: "The funds have raised in excess of £58 million of cumulative subscriptions since summer 2008 of which £46.5 million has been invested into NES and its projects to date. These funds are currently raising £35 million-£40 million on an annualised basis to invest into NES projects via NERR".
The fund planned to charge 12% interest on £16.13 million of mezzanine funding for the Borders plant and 8.75% on a further £4.3 million, both loans to run for 15 years.
The newly released paperwork also includes a series of 'proof of funds letters' provided by NERR fund managers Moore (also based in Douglas, Isle of Man) during 2013 showing sums held on account at BNP Paribas Securities Services.
However, it appears SBC members were unaware that Premier Group - NERR's promoters - had taken £6.9 million in fees from the fund's proceeds between 2009 and 2014 with a further £16.46 million for "sales and marketing" alongside £750,000 in management fees. These fees were apparently based on the net asset value of the fund.
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