Amount paid to Scottish Government for £586m Lochaber guarantee linked to Sanjeev Gupta to stay secret

GFG Alliance purchased the plant in 2016 after securing the guarantee from the Scottish Government.

The exact amount the taxpayer is receiving as part of the Lochaber smelter guarantee will stay secret following a ruling by the Scottish Information Commissioner.

In 2016, ministers agreed to guarantee 25 years of power purchases by GFG Alliance from a nearby hydropower plant at a total risk to the taxpayer of £586 million, allowing Sanjeev Gupta’s conglomerate to raise hundreds of millions in bonds to finance the purchase from previous owners Rio Tinto.

However, the potential for the guarantee to be called was thrown into uncertainty when GFG Alliance’s major funder Greensill Capital entered administration in 2021, sparking a political scandal.

The Lochaber smelter in Fort William was sold to GFG Alliance.

As part of the deal with Mr Gupta, the Scottish Government receives a commercial fee for agreeing to the guarantee, but the value of each payment and the date has never been made public.

A report undertaken by Ernst and Young prior to the deal being signed states the fee payable to the Government for the guarantee would cost Gupta’s businesses an annualised figure of £1.1m, equivalent to £26.8m overall.

This would start, for the first five years, at £2.5m, before dropping to £1.7m from year six, and below £1m a year from year 12 of the 25-year-long guarantee.

However, the Scottish Information Commissioner (SIC) said the exact amounts and dates of the fee payments should stay confidential and secret due to the risk of the business collapsing if they were to be released.

In a decision notice, outgoing commissioner Daren Fitzhenry agreed with arguments from the Government that publication of the information would significantly hinder potential future industrial interventions by ministers.

He also said the publication of the fee payments could “adversely impact GFG’s current … financial situation and lead to the guarantee being called in”.

Mr Fitzhenry wrote: “Taking into account the significant size of the Lochaber smelter guarantee and those potentially affected by the circumstances surrounding it, particularly were it to be called in, the commissioner accepts that there is clear and substantial public interest in understanding the finer details of the guarantee and any underpinning or associated information

“In the commissioner’s view, there is also a substantial public interest in maintaining the exemption in relation to sensitive information, which could adversely impact GFG’s current (and changing) financial situation and lead to the guarantee being called in.

"He recognises that such a situation could lead to a number of unwanted circumstances presenting themselves, for example job losses, the requirement for a new agreement to be drawn up or entered into by the authority, and a reduction in crucial commercial information being provided by businesses to the authority, which would inhibit the authority’s ability to take fully informed decisions and secure best value for public money.

"Such circumstances would clearly impact on the authority’s position with regard to its ability to effectively conduct its public affairs, and that would not be in the public interest.”

The Scotsman has previously reported how ministers were advised their deal with GFG Alliance may have been in breach of state aid rules.