Demand for status of Scottish Government securities at Lochaber to be outlined to MSPs

Deputy First Minister John Swinney has been urged to make a statement to Holyrood to set out how the Scottish Government would be impacted by the potential collapse of Lochaber smelter owner GFG Alliance.

Accounts published last month detailed a £4 million loss at the aluminium plant prior to the collapse of the conglomerate’s main funder, Greensill Alliance, early last year.

The accounts also detail “material uncertainties” which “cast doubt on the company’s ability to continue as a going concern”.

GFG Alliance is under significant financial strain as it continues to refinance following Greensill’s collapse.

It is also subject to fraud enquiries, including by the Serious Fraud Office.

To ensure the survival of the plant in 2016, ministers agreed a £586m guarantee that confirmed 25 years of power purchases by the smelter from the nearby hydroplant.

Sanjeev Gupta, the chief executive of GFG Alliance, partially funded the purchase of the smelter from Rio Tinto by converting this guarantee into around £295m.

First Minister Nicola Sturgeon with Sanjeev Gupta, the head of the Liberty Group

This included the value of the hydroplant and the land surrounding it, but the smelter was considered as having a nil value by then-advisers EY.

The Scottish Liberal Democrats have written to Mr Swinney demanding a ministerial statement on the issue when Holyrood returns after recess.

Willie Rennie, the party’s economy spokesperson, said there were growing concerns the Government was “duped” when it supported GFG Alliance in its purchase of the smelter.

He said: “These late and unaudited accounts are another worrying sign about the underlying health of the Lochaber smelter.

“Despite flashy promises of 2,000 jobs and a new billet plant, nothing has materialised, even though the SNP Government has provided hundreds of millions of pounds of financial guarantees.

“There is now a significant risk that the firm is either sold or collapses as a result of the losses at Lochaber and the wider group’s financial difficulties.

"The Scottish Government will need to set out what will happen to the financial guarantees that it has provided and whether it will be taking an active role in securing new ownership and the future of the site.”

The demand comes after officials said the Government held no information about a meeting held between Scottish Enterprise, the Government’s commercial advisers Teneo, and the Dalzell Steelworks.

Dalzell was purchased by GFG Alliance following a back-to-back sale involving the Government, something ministers now admit breached state aid rules.

Details of the meeting were released to The Scotsman in an earlier Freedom of Information request response, but officials later claimed it did not take place.

When challenged, officials admitted the meeting had taken place, that Government civil servants were present in a “listening capacity", but refused to release any minutes.

The steelworks was loaned £7m by Scottish Enterprise in 2017 to help fund the purchase of the plant by Mr Gupta.

However, the latest available accounts state the sum is yet to be repaid.

A Scottish Government spokesperson said: “Like many businesses, the Fort William smelter was impacted by the Covid-19 pandemic in 2020, but with world markets in recovery, the business is now trading profitably.

“The Scottish Government’s intervention to support the Lochaber aluminium smelter has preserved strategic industrial capacity and supported the livelihoods of hundreds of people. Since 2016, GFG has created 40 new jobs in Lochaber, increasing direct employment to 200 jobs and supporting a valuable supply chain.

“The Scottish Government receives a commercial fee in respect of the Lochaber guarantee and guarantee fee payments are up-to-date. There has been no call on the guarantee and the Scottish Government holds a comprehensive suite of securities over the assets at Lochaber that have been valued at more than the outstanding amount guaranteed.”

The fourth episode of the brand new limited series podcast, How to be an independent country: Scotland’s Choices, is out now.

It is available wherever you get your podcasts, including Apple Podcasts and Spotify.

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