Liquidated fund a gravy train for some

EXCLUSIVE by EWAN LAMB

Investors and shareholders in the offshore infrastructure fund which was to have financed a £21 million waste treatment facility for the Scottish Borders seem certain to lose everything following the spectacular collapse of the troubled operation.

But detailed research by Not Just Sheep & Rugby has uncovered financial information which shows how the directors of the Isle of Man-based company who launched and ran the New Earth Recycling & Renewables [NERR] fund in 2007 scooped up more than £24 million in fees over a six year period.

It was confirmed last week that joint provisional liquidators had been appointed to NERR which is extremely likely to be wound up after investing large sums of investors' cash in the debt-ridden New Earth Solutions Group of companies [NES].

NES was awarded a potentially lucrative waste management contract by Borders councillors in 2010, but the technology selected for a treatment plant at Easter Langlee, Galashiels, was incapable of allowing the project to proceed while NERR could not provide the money for the scheme despite being the preferred funder while well established banks who had expressed an interest were rejected.

The failure of the contract, which was abandoned in 2015, has cost Borders council taxpayers £2.4 million while NES lost at least £1.3 million in the venture. The Group crashed into administration earlier this month only to emerge under new ownership 48 hours later.

That sequence of events was quickly followed by the announcement from Michael Richardson, one of the directors of the Premier Group (IOM) Ltd that NERR was facing liquidation. A court hearing on the island next month will determine whether the Fund, whose suspension in 2013/14 meant investors could not redeem their stakes, will cease to exist.

A warning has already been issued that banks who are owed many millions of pounds by NES will take priority when NERR's assets are being divvied up and scores of investors are unlikely to be reimbursed. And the Manx financial services authority points to statements from NES posted on the Channel Islands Stock Exchange in May "show large debt positions and operating losses".

But in sharp contrast it appears that bosses at Premier Group (IOM) have prospered as a result of NERR's transactions and deals between 2009 and 2014. During that time Premier acted as promoters and managers of the Fund as well as being responsible for sales and marketing. This entitled Mr Richardson and his colleagues to charge generous fees for fulfilling their various roles.

A detailed examination of NERR's annual accounts which can also be accessed on the Channel Islands Stock Exchange website shows the scale of those fees paid to Premier Group.

Over the six years under review promoters' fees added up to £6.9 million, including a payment of over £2.4 million in 2014 alone.

The levies for sales and marketing were even more spectacular, totalling £16.46 million between 2009 and 2014. A note accompanying this set of figures explains: "maximum of eight per cent of subscriptions for shares is payable to the promoter to meet introductory and advertising costs and are therefore classified as sales and marketing expenses".

One financial expert told us: "A sales and advertising budget of three to four million pounds a year is equivalent on the money spent on marketing by a very large business with hundreds on the payroll. I have seen no evidence that NERR fell into this category. In fact the entire operation appears to have been run from a relatively modest office in Douglas, Isle of Man".

In 2013 alone the sum of £4.441 million was spent on "sales and marketing expenses" for the Fund. Finally, management fees added up to more than £750,000 over the six years with a £264,000 payment recorded in the final year before NERR was suspended and de-listed.

The six-year bonanza for NERR's controllers coincided with the disastrous liaison between Scottish Borders Council, NES and NERR. So what kind of checks did SBC elected members and officers make on NERR's accounts after being informed the Fund was struggling to back the Borders project? Were they aware - or even attempt to make themselves aware - of the arrangements which proved so obviously lucrative for the Board of Premier Group?

We have already revealed how in 2014 the council granted NES and NERR a nine-month contract moratorium to enable contractor and funder to address serious technological and financial issues.

While the contract was temporarily mothballed the following fees were being collected from NERR by Premier Group: promoter's fee £2,472,452; sales and marketing £3,937,196 and management £264,641. Presumably the sum of £693,711, described as exit penalties charged to 'redeemers' was also retained. Yet the Fund was incapable of financing the long delayed Borders waste treatment facility. It recorded a loss of £30 million in 2014.

The grand total in fees over the six financial years amounted to £24,125,935, sufficient to pay for the Easter Langlee plant with just enough left over to cover the £2.4 million squandered by the council on expensive consultants, specialists and lawyers.

COMING NEXT: NERR should never have been marketed to ordinary punters.

Offshore fund follows council contractors down the pan

by DOUG COLLIE

Investors who were promised rich pickings by investing their cash in the New Earth Recycling & Renewables Infrastructure Fund [NERR] - the offshore entity chosen to finance a £21 million waste treatment facility for the Scottish Borders - are unlikely to get any of their money back after the Fund filed for liquidation in the Isle of Man courts.

The collapse of NERR, whose directors and promoters have creamed off millions of pounds in fees in recent years, comes hard on the heels of the administration and subsequent quick fire sale of New Earth Solutions Group, the company selected by Borders councillors to solve waste management issues.

It became apparent last year that NERR could not fund the Easter Langlee project, forcing the Council to abandon a 24-year contract with NES Group after just four years.

As this publication has asked before: how and why did elected members sanction involvement with two incompetent and debt-ridden businesses in a deal which has cost council taxpayers and shareholders millions of pounds for no return? The judgement of the councillors and officers involved in this Borders fiasco must be called into question, scrutinised and challenged.

The entire New Earth "empire" appeared to be heading for financial oblivion only last week when administrators were appointed after a proposed deal to sell the businesses collapsed in disarray. But only 48 hours after the financial 'fixers' Duff & Phelps were called in by NES management it was announced the troubled outfit had been sold to DM Opco Ltd., a £1 company set up in April by James McKelvey, a Yorkshire-based 'accountant'.

This somewhat mysterious transaction seems to have triggered the demise of NERR with Fund director Michael Richardson, of Premier Group Isle of Man, breaking the bad news to investors and shareholders via yet another letter posted on the company's website.

He explained: "The administrator has moved quickly and has sold the New Earth Group of companies to DM Opco, the full details of which are unknown.

"Taking into consideration that the assets of NERR are largely subordinated to the senior lenders' (Nord Bank and Co-op Bank), the directors consider it unlikely that the sale of these assets to DM Opco will achieve over and above the amount of senior lending. It therefore remains unlikely that the sale of these assets will generate a return for the Fund.

"This will come as extremely disappointing news to everybody connected with the Fund, including the directors, who believe they have made every effort to negotiate the best solution for shareholders of the Fund."

Those efforts included the abortive talks with the developer of heat and power plants in Europe which, according to Mr Richardson, had the potential to repair shareholder value in full over the course of time. It was, he claimed, regrettable that the proposed deal did not successfully conclude.

Instead the Isle of Man Financial Services Authority, with the consent of Mr. Richardson and his fellow directors, has filed a claim with the island's High Court of Justice seeking a winding-up order in respect of the fund.

The authority also asked the court to appoint provisional joint liquidators of the Fund, with a view to them taking control of assets "for the purpose of preserving them". A court hearing scheduled for next month will decide whether or not NERR should be placed into liquidation.

A 26-page document directly linked to the case which is accessible via the Isle of Man Financial Services Authority website includes the two following questions and answers:

What has happened to the money I invested?

The money invested by you was invested by the governing bodies of PIOF and Eclipse into NERR, and then onwards by NERR into NESFM and NESG (the New Earth companies) either by purchasing shares in or lending money to those companies. The recovery of value in those investments by NERR depends on profits and in particular cash flows being generated by the assets and operations of NESFM and NESG.

NESFM and NESG also owe money to other lenders who have a higher priority in being repaid.  As a result, the repayment of the loans made and payments on the shares held by NERR would only occur after those, more senior, lenders were repaid.

Will I get any of my money back?

At this stage it is not possible to estimate the amount of any recovery on the investments made by NERR, and hence PIOF and Eclipse.  The financial distress of NESFM and NESG and the presence of more senior lenders, does however mean that substantial recovery of value from those investments may be unlikely.

That information is less than encouraging for hundreds of investors around the world who were persuaded to participate in the Fund by a range of financial advisers.

It is understood NERR has loan notes totalling some £36 million with NESG and NESFM while the two banks involved are also due many millions of pounds.

COMING NEXT: How those who managed and promoted NERR syphoned off millions for themselves, and how the Fund was promoted to ‘unsuitable’ investors.

Galashiels misses out on greenhouse gas celebrations

EWAN LAMB on another Scottish Borders landfill legacy

While the Scottish Government, environmentalists and climate change watchers have been hailing a dramatic drop in greenhouse gas emissions across the nation, there was at least one fly in the ointment which threatened to spoil the party.

We were told this week that the SNP administration at Holyrood had exceeded its target to reduce the release of harmful gases by 42% SIX years ahead of schedule. Backslapping and congratulations all round!

But down here in the Borders at the municipal Easter Langlee waste disposal site the trend so far as these damaging substances are concerned appears to have gone sharply in the opposite direction in the five years leading up to 2014, the year on which Scotland's latest data is based. And the upwards spiral (literally) of skyward emissions has been nothing short of dramatic and potentially catastrophic.

The statistics for a range of pollutants produced in each of Scotland's 32 local government areas are readily available on the Scottish Environment Protection Agency [SEPA] website. And the numbers linked to Scottish Borders Council's landfill site do not make pleasant reading.

Volumes of methane seeping from the tip ballooned from 274,000 kilograms in 2010 to 361,000 kg in 2014, representing an increase of 87,000 kg or 31.7%. The annual reporting threshold for methane is 10,000 kg which means the Borders emissions are exceeding that threshold 36-fold.

The data for so-called chlorofluorocarbons (cfcs) and hydrochlorofluorocarbons (hcfcs) - gases which are many times more lethal than methane - make equally depressing reading.

Any release of more than 1 kg per annum of these substances must be reported to SEPA. So far as CFCs are concerned the Galashiels facility produced 16.9 kg in 2010 and 31.1 kg in 2014, a five-year increase of 84%.

Over the same period HCFC releases shot up from 17.3 kg to 23.9 kg or 38.1%. It is hardly an environmental record to be proud of in anyone's book.

Magazine highlights legacy of decade of dithering

by OSSIE SHEARER

Scottish Borders Council's poor record when it comes to waste management services has been laid bare in a respected online magazine which warns time is running out for the local authority to come up with a plausible plan for the future.

An article compiled by Let's Recycle senior writer Tom Goulding catalogues the council's disastrous 24-year deal with New Earth Solutions Group which collapsed in disarray last year with millions of pounds lost by both of the contract partners.

But in fact councillors and senior officials at SBC have been dithering over a so-called waste management strategy since at least 2006 with nothing to show for their efforts. The latest version of that strategy (it could probably be numbered 'draft 20') is expected to be unveiled later this year.

Meanwhile vast quantities of the region's municipal rubbish continues to be landfilled at Easter Langlee, near Galashiels, resulting in an annual landfill tax bill of £2.5 million. And a replacement system to replace the abandoned gasification option proposed by the council and New Earth will cost local taxpayers millions more.

Mr. Goulding writes: "Time is running out for Scottish Borders Council to develop a new waste management plan, with its landfill sites expected to reach full capacity by the end of 2017. The council has yet to confirm its future residual waste disposal arrangements".

There should have been no need for this scandalous state of affairs nor a last ditch rush to solve the had the council and its chosen firm of "specialists" delivered a conventional treatment plant by 2012. If that had been achieved the tonnage of garbage being buried underground would have fallen by now from 30,000 tonnes per annum to a highly respectable 6,000 tonnes.

That 30,000-tonne statistic - equivalent to 3,000 loaded refuse collection vehicles, according to the article - compares extremely unfavourably to the indicative tonnages which would have applied under a landfill allowance scheme. If Scottish local authorities had been made to meet their landfill targets, SBC should only have been burying 18,400 tonnes by 2012/13 and 16,000 tonnes in 2015/16.

Mr Goulding says the council is currently assessing feedback from a waste management consultation exercise which resulted in 1,400 people submitting ideas for the future of the service.

People were asked to respond to a range of questions, including their reaction to a potential reduction in the frequency of waste collections from fortnightly to every three or four weeks. Such a proposal is unlikely to have gone down well with 'customers' who remain outraged at the loss of garden waste uplifts, a move which has hit SBC's recycling rates hard.

A council spokesman told Let's Recycle: "All responses and comments will be considered as part of a review which is being driven by a number of factors, including the need to reduce the amount of waste being sent to landfill".

That statement might sound sensible, but unfortunately council representatives were saying the same thing in 2009 before they signed up to that useless contract with new Earth. It seems nothing has changed.

At present the favoured option is to close Easter Langlee's landfill site, construct a waste transfer station on the disused New Earthj Solutions site and transport Borders waste to treatment facilities in other parts of Scotland.

Mr Goulding points out that this strategy will cost SBC an estimated £6.8 million between now and 2025, an increase of more than £4.5 million when set alongside the authority's current waste disposal budget for the same period.

Does Borders lose £63 million if we 'Brexit'?

 by OUR AGRI STAFF

One Borders farmer received more than a million pounds in Common Agricultural Policy [CAP] payments last year while Scottish Borders Council was also a major beneficiary from European funds, collecting £529,000 to spend on renewal in rural areas.

As Britain heads for a possible exit from the European Union courtesy of the UK Government's controversial referendum, many of those who earn their living in the farming community may be pondering an uncertain future should the largesse of the CAP be suddenly withdrawn.

It is therefore worth reflecting that last year alone farm subsidies from Brussels funds were worth more than £63 million to almost 1,300 farms and related businesses across the Scottish Borders and North Northumberland. At this stage there is no firm guarantee that the Treasury would make good the lost subsidies should we leave the EU behind.

In many cases the pay-outs exceeded six figures as can be seen from the results of our research below.

The million pound mark was breached by Robin Feakins and family members, with farms near Bonchester Bridge. CAP funding for the business totalled £1,270,281, easily the largest single payment for any agricultural operation in the region.

The Berwickshire business of J & T F Macfarlane received £582,476, well down on the 2014 sum of £736,918. And Peeblesshire firm of J P Campbell & Sons had £348,194 in CAP payments with their associated Glenrath Farms receiving £176,959.

There has been little or no mention from 'Vote Leave' about the level of support CAP provides to UK agriculture. For the record the 2015 figures show 178,224 recipients netted more than three billion pounds (£3,160,852,121.61). Would Westminster be able or willing to find £3 billion for hard pressed farmers if the EU gravy train stops running?

PAYMENTS OF OVER £100,000 were made to the following Scottish Borders and North Northumberland farms and businesses by postcode area:

TD1 (Galashiels) - L G Litchfield, Bowland £404,513; William Montgomery £182,013; T & J Elliot £164,441; T Elliot (Bedshiel) £166,590; J Runciman & Sons £108,030; J G Runciman £100,102; J & E Logan £118,786;Mrs C M Reid £171,477; R A Miller & Son £100,248; R C Woodburn £134,538; T D Renwick £102,693; Talla Partnership £315,732; Torwoodlee & Buckholm Estates £104,267. Total paid to all businesses in TD1 in 2015 £3.628 million (2014 £3.51 million).

TD2 (Lauder) - William Barr & Co £128,481; Firm of Sutherland £215,304; W H Sharp & Son £146,312; Huntington Partnership £113,079; F Damerell & Son £116,799; Stephen Anderson & Co £116,772. Total paid in TD2 £2.20 million (2014 £2.26 million).

TD3 (Gordon) - J & T F Macfarlane £582,476; G Mcdougal (Bassendean) £323,977; J & J Campbell £111,111; R H Tait & Co £105,981; R W Morris & Co £154,046. Total paid in TD3 £1.988 million (2014 £2.141 million).

TD4 (Earlston) - Fans Farming £214,476; Hamish Morison Farming £148,823; J W Fullerton £235,294; R & J Scott Aiton £143,297. Total paid in TD4 £1.157 million (2014 £1.288 million).

TD5 (Kelso) - G & M Symons Ltd £106,443; C M Goodson & Son £142,184; Firm of R P Shanks £104,734; Floors Farming £296,482; J & T Clark £105,780; J Brunton & Son £101,375; KSH Farmers Ltd £103,336; Kames Partnership £107,804; Lochtower Ltd £197,436; D & D W D Thomson £170,612; Messrs J Jeffrey £193,604; Messrs J Neil & Son £141,463; Messrs Robsons £109,473; Messrs T D C Thomson £143,016; Messrs T H Brewis £126,575; Messrs Thomas M Stewart £103,594; Messrs W M Fleming £202,599; Ninewells Farms £126,865; Oxnam Estates £115,101; T D Clark £102,629; Playfair Farms £167,801; R H & C L Dixon £102,768; R H Bell & Co £107,398; T W & T B Edgar Ltd £290,977; The Oliver Family £165,397. Total paid in TD5 £9.450 million (2014 £10.305 million).

TD6 (Melrose/St Boswells) - Mertoun Estates £176,053; Maxwell (Faughill) £145,436; Riddell Farms £204,257; Malcolm Stewart £109,318; George Marshall £108,451; Scottish Borders Council £529,658. Total paid in TD6 £2.922 million (2014 £2.61 million).

TD7 (Selkirk) - B Q Farming Partnership £325,210; Langholm Farms Ltd £380,679; W N Douglas £206,903; Eckford Farming Ltd £247,520; Sir F M Strang Steel £136,760; T Renwick & Son £132,071; Macdonald Partners £103,078; Swinside Farming £117,212; Mitinley Farms £108,844; Buccleuch Woodlands £153,560; G & L White £130,409; John Hume & Son £180,297; W J Coltherd £107,008; S McClymont & Son £113,883; T C Aynsley & Son £100,527; W & M Rutter £1165,090. Total paid in TD7 £4.909 million (2014 £4.66 million).

TD8 (Jedburgh) - G Barbour & Son £223,380; Nisbet Mill Farm £194,119; Robert Neill & Partners £172,864; A & A Scott £173,035; Fenwick Jackson £113,419; R Tile £158,818; D & I Richardson £110,607; J G Scott £114,408; Mrs J C Hands £146,915. Total paid in TD8 £4.27 million (2014 £4.62 million).

TD9 (Hawick) - A & B Scott £104,310; David Reddihough £104,602; G W & M Richardson & Son £189,631; H & M Farms £217,928; J E M Vestey £102,841; J Hepburn & Co £105,104; W W Dunlop & Son £112,781; Mrs W V Feakins £106,137; R H Brunton & Co £157,323; R J & T J & M T Feakins £1,270,281; Rock UK Adventure Centres Ltd Newcastleton £221266; Ruletownhead Farms £116,087; S H & P M Shirley-Bevan £150,958; T W & E Tennant £137,894; W C Anderson & Son £133,577; W R Girvan & Son £186,667; W S Davies & Son £135,482. Total paid in TD9 £8.389 million (2014 £7.937 million).

TD10 (Duns) - Charterhall Farm £115,694; J C & K C Constable £186,670; John Mitchell & Co £145,551; Marchmont Farms 187,564; R M & J F Seed £140,587; The Firm of James Orr £190,480. Total paid in TD10 £1.871 million (2014 £1.887 million).

TD11 (Duns) - A & G Rodger £140,438; A M & A Calder Farms £177,620; Ellemford Farms 2000 £144,838; G W B Fullerton & Son £152,833; G W Thomson & Sons £123,549; Greenshields Agri Ltd £269,463; Harehead Farms £197,028; J J & H D J Dobie £129,311; L L McVie & Co £101,738; Macfarlane Farms £294,049; Nether Mains Farm £102,072; R & J McDonald £276,383; R P Cowe & Co £154,081; Robert Forrest Ltd £126,429; Robert Lamont £141,397; S White & Co £137,602; W B Prentice & Sons £113,030. Total paid in TD10 £8.017 million (2014 £8.29 million).

TD12 (Coldstream area) - Greenknowe EStates £213,283; Ladykirk Estates £193,683; J A Laing £126,584; W Potts £111,114; R Neill & Sons £126,032; S & D Blaylock £115,949. Total paid in TD12 £5.152 million (2014 £5.676 million).

TD13 (Cockburnspath) - J P H Wight £106,943. Total paid in TD13 £1.355 million (2014 £1.599 million).

TD14 (Eyemouth) - J Fullarton & Son £120,691. Total paid in TD14 £1.583 million (2014 £1.832 million).

TD15 (Berwick-on-Tweed) - A & J & C Colgan £130,512; B L Farms Ltd £100,355; Cayley Walton Partnership £147,109; Conundrum Partnership £110,115; G H Millar (West Foulden) Ltd £114,296; Home Robertson Partnership £135,524; J M Jackson & Sons £188,988; William Jackson £155,517; J E Armstrong & Sons £154,579; J E Smith £118,562; Joicey Partnership £274,131; Maclean & Co £136,900; Penmar Farming £410,918; R Cadzow £143,099; R C & I W Whitten & Sons £100,879; R C Reed £131,597; Sunwick Farm Ltd £177,509; President Estate Partnership £278,148; Todd Farms £175,579; W L Douglas & Son £247,667. Total paid in TD15 £7,527,884 (2014 £8.361 million).

EH45 (Peebles) - J P Campbell & Sons £348,194; Glenrath Farms £176,959; Haystoun £135,196; J B Currie £112,429. Total paid in EH45 £2.278 million (2014 £2.34 million).

End of the road for council's dud contractors

EXCLUSIVE by DOUG COLLIE & EWAN LAMB

A desperate last-ditch bid to save the debt-ridden New Earth Solutions Group, selected by Borders councillors for a multi-million pound waste treatment project at Galashiels, has collapsed, requiring the appointment of an administrator as creditors demand immediate settlement of outstanding payments.

News of the latest catastrophe to overtake the so-called waste treatment specialists was broken today in a letter to shareholders from NES's offshore owners on the Isle of Man. It had been hoped a "white knight" from Europe would take on the Group's £60 million pile of debt, but negotiations have fallen through.

For council taxpayers in the Borders who lost £2.4 million thanks to decisions taken by elected members and senior officers at Scottish Borders Council, it begs the question why an investigation has not been held into the involvement of the local authority with a company which had neither the money nor the technology to deliver a fit for purpose treatment centre for the region's rubbish.

Was the council aware of the firm's high level of indebtedness? Why did checks into the Group's finances not uncover links to offshore entities in the British Virgin Islands and other tax havens?

On top of the expenditure on consultants and lawyers, it has emerged that councillors even agreed to give NES a nine month breathing space during 2014 when serious issues surrounding funding and technology for the project were identified.

The decision to include an untried energy recovery facility at Langlee led to the downfall of the venture with the contract being finally abandoned in early 2015.

But the failure to press ahead with a conventional processing plant - due to be operational by 2012 - means SBC has not even reached the Scottish Government's 2010 target of 40% for the recycling of household waste.

Statistics published today show the Borders recycled 37.5% in 2015/16 compared to the Scottish local authority average of 42.8%. Meanwhile 62.2% of local refuse was landfilled, no less than 13% above the Scottish figure of 49.3%. The originally planned waste plant would have diverted 80% of refuse from landfill. The decision taken in October 2012 to vary the NES contract to include a form of incineration proved to be disastrous, both financially and environmentally.

Today's letter to investors from Michael Richardson, a director of the New Earth Recycling & Renewables [Infrastructure] PLC (NERR) which owns at least 80% of NES, outlines the sequence of events leading up to the need for administration.

NES holds a substantial number of contracts for the disposal and treatment of waste on behalf of local authorities in England, and at this stage the future of those contracts must be in doubt.

Mr. Richardson explained - as we revealed recently - that the future of the Group hinged on talks with a developer of large heat and power plants in Europe.

The negotiations were on the assumption of control of the NERR Fund and the New Earth companies by the developer and the exit of senior lenders Norddeutsche Bank and Co-op Bank.

"There were extensive discussions on how best to restructure the business operations; unfortunately, these negotiations have not been successful", reported Mr Richardson.

A series of alternative proposals had been put forward by the European developer, but all were rejected by the two banks.

The letter states: "Protracted negotiations over a six week period led to an agreement for the developer to purchase the senior debt from the senior lenders, subject to conditions and the source of financing by the  developer being completed by the end of May 2016."

But after a set of accounts for the NES Group was published last month management of the company were approached by parties who had bought portions of NES's future production requesting immediate settlement of outstanding payments or bank guarantees.

"Without this arrangement in place the New Earth companies cannot process waste which in turn puts the waste contracts with the local authorities in jeopardy", warned Mr. Richardson. "The senior lenders indicated that they were not prepared to provide bank guarantees nor to finance the New Earth companies to fund accelerated payment requests."

This resulted in the directors of the Group being forced to come to a decision that in such circumstances the New Earth companies were no longer a going concern without financial support from senior lenders.

"As a consequence, the directors, in consultation with their advisors, decided that the New Earth companies were required to seek statutory protection by filing a notice for the appointment of an administrator."

Mr. Richardson adds that based on this sequence of events, the European developer was unable to proceed with either the assumption of the control of the NERR fund or the purchase of the senior debt.

In a parting message to shareholders in NES and investors in the suspended NERR fund, Mr. Richardson says: "It is understandable that you will have concerns and the directors will be in touch as soon as they have any further information."

Moratorium failed to save disastrous Borders venture

EXCLUSIVE by DOUG COLLIE

Councillors in the Scottish Borders appear to have 'bent over backwards' as their chosen contractor in a multi-million pound deal struggled to find the money and perfect the technology for a disastrous waste treatment venture.

Papers obtained under Freedom of Information reveal how elected members at Newtown St Boswells granted waste management company New Earth Solutions [NES] a nine-month contract moratorium in 2014 even though the delivery of a £21 million treatment facility at Easter Langlee, Galashiels, was already years behind schedule.

In recent weeks we have disclosed how the company's investments in a pilot energy from waste plant near Bristol were sold for just £2, how NES now faces the prospect of administration unless another business takes on its £60 million debts, and how the firm lost £1.3 million on the abandoned Borders contract while local taxpayers were stung for double that amount, thanks to the actions of their council.

The proposals to "freeze" progress on the contract between February and October 2014 - the expensive deal was scrapped without a brick being laid in February 2015 - were submitted to a private meeting of the council on May 29 2014. It followed letters from NES to the local authority outlining the issues facing the project.

Although the original contract documents had been signed in April 2011, NES was now requesting a pause to allow it to put in place new funding provisions for their future infrastructure projects. The Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund (NERR) had been named by NES as the financial backers of the Borders development.

A report from Rob Dickson, SBC's Corporate Transformation & Services Director, recommended the moratorium should be approved.

He wrote: "This proposed pause to the delivery of the Easter Langlee facility does not cause any significant issues to the financial or legislative drivers of the project. The project still represents the best solution for the Council with a market leading gate fee, significant risk transfer and a robust on-site solution that requires minimal waste to leave the site."

Councillors were told the report was private because SBC had a duty to protect the reputation of NES, as a perceived failure of the project could affect the future funding opportunities of the company and as such the funding of the Easter Langlee project.

There was no detailed explanation from NES regarding the closure of the investment fund financed through NERR subscriptions. But in fact dealings in the NERR fund had been suspended on the Channel Islands Stock Exchange in November 2013, and investors have been prevented from recovering their deposits from NERR ever since. The status and future of the fund remains a closely guarded secret by its Isle of Man and British Virgin Islands controllers.

The brand of technology to be installed at Easter Langlee remained unproven in 2014 even though councillors had rubber-stamped its use in 2012. At the end of the day the technological and funding barriers for the Borders project proved insurmountable with at least £2.4 million of public money completely wasted on highly paid consultants and lawyers.

According to the confidential report of May 2014 NES would use the moratorium to determine its new funding arrangements following a review of its options for funding the group, its projects, and its research and development.

The report goes on to claim (perhaps unwisely): "The project is still a very good deal for the council financially and operationally and still has a high percentage of success despite the proposed delay. So it is the opinion of the Project Board, led by the Corporate Transformation & Services Director, that the moratorium period should be accommodated.

"A decision at this point to terminate the contract leaves the Council exposed with no long term solution identified ('Plan B'), that will take in the region of three months to review and identify anyway".

Two years later SBC still has no strategy in place for dealing with waste management going forward.

The moratorium was sanctioned by councilors even though they heard the delay would impact on five other planned schemes including the so-called Business Transformation Project.

A section of Mr. Dickson's report entitled Risks & mitigations stated there was a risk NES could not raise the funding for the project or could not develop their technology sufficiently within an acceptable timescale to obtain project funding.

He added: "The end of the moratorium period will determine the final fate of the project but the Council will be in a position to make an informed decision based on the review of the Business Case".

There appears to have been no dissent from any of the elected members when they were asked to permit the contract delay.

The confidential minute of council proceedings explains that NES had experienced funding and technology issues with their "commercially operational" facility at Avonmouth - the plant which so impressed a SBC delegation on a visit in October 2014 - that was having a knock-on effect to the funding of their future projects, including Easter Langlee.

Furthermore, a separate gas-to-engine research and development plant (the technology now proposed for Galashiels) was not progressing as originally programmed.

In all of the circumstances outlined above why was there not a proposal from any Borders councillor to pull the plug on NES in May 2014 thereby saving more than nine months additional expenditure and delay?

A contracts expert who examined the recently released confidential documents commented: "It is hard to fathom why the members of Borders council bent over backwards to accommodate NES unless it was in a bid to save their own skins after realising their earlier decision to engage this company represented a huge mistake which would come home to roost.

"It is clear neither the funding nor the technical system needed to deliver the Easter Langlee project were in place long after the contract was signed. In my view SBC should have withdrawn at a much earlier stage in the proceedings. A moratorium was simply delaying the inevitable".