Lochaber Smelter and GFG Alliance: 'We'd do the same £586m deal again today', says SNP minister
Sanjeev Gupta would today receive the same £586 million backing from SNP ministers to save Scottish jobs, despite the collapse of his main lender and an ongoing Serious Fraud Office investigation, the Scottish Government’s business minister has said.
Ivan McKee, speaking at an event on Wednesday at the Tartan Blanket Company in Leith, said he would commit to the same deal today and rejected suggestions the Government and taxpayer is being taken for a ride by the businessman.
It comes as the Scottish Liberal Democrats called for an urgent parliamentary statement on the issues around GFG Alliance and the Government after a Freedom of Information request showed ministers were warned of “very significant political, financial, state aid and legal issues” around intervening at Dalzell.
The business minister also dismissed the suggestion ministers should be concerned about the recent resignation of the auditors of several GFG Alliance companies, including the steelworks at Dalzell, claiming the Government had “seen what we need to see”.
King & King Chartered Accountants resigned from four GFG Alliance companies after Mr Gupta blocked them from stating there was not enough evidence for them to complete their audit work.
Accounts for the Lochaber smelter near Fort William, also owned by Mr Gupta, were also published unaudited despite more than £60,000 being spent on audit fees.
This has raised questions about the quality of the information in the accounts and the assurances provided to the Government, which has spent millions on consultancy fees to help tackle financial commitments to GFG Alliance businesses.
However, Mr McKee rubbished these concerns when asked whether he was worried about the auditor’s resignations.
“It’s a private business, the auditors have made their decision based on the approach to doing business,” he said. But when pressed, he said: “We've seen what we need to see to understand, and we work closely with our financial advisors on this, to understand what the situation is with regards to it.”
Mr McKee added: “That’s commercially sensitive information, of course it is. You understand that, of course you do.
"We’ve saved the jobs, we're getting paid everything that we are due to be paid and the liabilities that are in play are more than covered by the assets of the business the Scottish Government has a call on.”
The Government agreed to guarantee 25 years of the Lochaber smelter’s power purchases from the associated hydropower plant, initially worth £586m, in 2016, in return for a fee and security over the smelter, hypro-plant and land.
This agreement allowed Mr Gupta to raise around £300m to purchase the plant, with the outstanding value and potential taxpayer exposure of the guarantee sitting at around £280m.
However, the collapse of GFG Alliance’s main funder, Greensill Capital, last year has led to ongoing concerns about the future of the conglomerate’s businesses and the total liability on the shoulders of the Scottish taxpayer.
In May last year the Serious Fraud Alliance confirmed it was investigating GFG Alliance for suspected fraud, fraudulent trading and money laundering, with several sites, including those in Scotland, visited by agents in April.
Despite this, Mr McKee said he would give Mr Gupta the same deal today as was provided by the Scottish Government in 2016.
“Yes we would,” he said, “because the liability that’s there is more than covered by the assets, in the value of the business.
"All the payments are up to date. We’ve protected those jobs, which is really important.”
The Government has refused to publish information, including an independent report, on the valuation of the assets at Lochaber. Ministers have repeatedly shut down questions asked by reporters and politicians on the topic both in the Holyrood chamber and through Freedom of Information requests.
Asked why valuation information has not been made public, Mr McKee pointed towards possible “commercially sensitive information”.
He said: “The business obviously operates in a commercial environment and from our perspective, it's important to protect that commercial confidentiality, of course it is, because that's what allows them to trade successfully and support those jobs and make money and that's what's important.”
Mr McKee also defended consultancy spend on the issue, arguing rather than suggest there is a problem, “it suggests that we’re on top of it, that we know what we’re doing”.
He said: “We've got the right data. We're talking to the right people to make sure that that's verified and we understand the current situation and we understand future scenarios.
"What it suggests is that we're on top of this, which is the case.”
Alongside the agreement at Lochaber is a £7m loan to Liberty Steel Dalzell from Scottish Enterprise.
The steelworks was briefly purchased for a nominal sum of £1 by the Government from Tata Steel to facilitate its sale to Mr Gupta’s steel empire.
Last year, Mr McKee told MSPs the deal may have breached state aid rules and could leave the taxpayers responsible for millions of pounds of environmental clean-up.
It has also emerged ministers were warned of “very significant political, financial, state aid and legal issues” around intervening at Dalzell.
A briefing document, sent to the First Minister, deputy first minister and the-then business minister Fergus Ewing in 2016 warns of the issues and the “less and poorer quality information than we would have wished to see” from Liberty Steel during the due diligence process.
It also labels the deal as “untested” and states the “novel” deal “carries significant state aid and financial risk”.
Willie Rennie, the Scottish Liberal Democrat’s economy spokesperson, said the Government had been “reckless”.
He said: “We now know that the Government was warned about the major ramifications of the deal, from environmental clean-up costs to the uncertainty around state aid compliance.
"We now know that the Government was warned that they did not have a clear rationale for intervening. Despite all of this, the First Minister decided to go ahead.
“It smacks of a Government which is willing to throw taxpayers and workers under the bus in negotiations with big business.”
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