Lochaber smelter hit by £4m loss prior to Greensill collapse

The Lochaber smelter owned by GFG Alliance and subject to a £586 million Scottish Government guarantee made a loss of more than £4m in the 2020/21 financial year, accounts show.

Release of the financial result comes just weeks after it was revealed significant question marks remain around GFG Alliance’s ability to meet conditions set out as part of its agreement with the Government.

For 2020/21, the smelter made an operating loss of £4,051,284, the accounts show, despite statements saying the smelter was “performing profitably”.

Hide Ad

The losses were primarily attributed to higher raw material cost and “lower demand” for the products at the smelter due to the impact of the Covid pandemic.

Hide Ad

The smelter’s accounts have also been published unaudited despite more than £60,000 being spent on auditing fees.

Read More
Tory tax plans will see £420m budget hole or end of lower tax for most Scots, an...
Hide Ad

GFG Alliance said their unaudited publication was an “interim step”.

This is the first time they have not been audited by the accountants King & King since 2018, and comes as the accountancy firm is under investigation by the Financial Reporting Council for their 2019 audits of several GFG Alliance companies, including Alvance British Aluminium at Lochaber.

Hide Ad
Employees working at the UK’s only remaining aluminium smelter in Lochaber, Scotland

The accounts provide an insight how the collapse of Greensill Capital, GFG Alliance’s main funder, last year plunged the company into crisis and led to increased focus on its dealings worldwide.

Hide Ad

Serious Fraud Office officials are investigating suspected fraud, fraudulent trading and money laundering at GFG Alliance and visited sites across the UK, including in Scotland.

The smelter at Fort William is a key asset for the company and was purchased from Rio Tinto in 2016, with money raised from a guarantee by the Scottish Government.

Hide Ad

Ministers agreed a £586m guarantee, which confirmed 25 years of power purchases by the smelter from the nearby hydroplant, a decision they claim saved hundreds of jobs.

The accounts for the hydroplant, which has a £10m profit sharing agreement with the smelter, are overdue and are yet to be published, making it difficult to judge the profitability of the entire Fort William site.

Hide Ad

The cost of the power purchased from the hydroplant for the smelter in 2021 was £22.7m, up from £14.8m in 2020.

However, the accounts state the smelter was previously dependent on funding from “fellow subsidiaries and related companies” and highlights the collapse of Greensill, referenced as the “major funder” of the wider group.

Hide Ad

They add: "The future availability of funding is based on several external factors which are beyond the management’s control, like achieving projected improvements in alumina prices and sufficient energy supply is dependent on hydropower plant.

"Also given the company’s past financial performance results, arranging an external funding is also expected to be difficult.

Hide Ad

"These conditions suggest that there are material uncertainties that cast significant doubt on the company’s ability to continue as a going concern.

"However, the director is optimistic that the company will be able to arrange the required funding through better performance results and borrowings.”

Hide Ad

A spokesperson for GFG Alliance repeated their claim the smelter was performing profitably and that plans for expansion remained “firmly on track”.

They added: “The submission of accounts for some GFG Alliance entities has been impacted by the disruption caused by the collapse of our main lender Greensill Capital.

Hide Ad

"The submission of unaudited accounts is an interim step and we remain in contact with Companies House over all filings.

"Alongside this, we continue to negotiate a consensual debt restructuring in the best interest of all stakeholders, not least the thousands of employees that rely on our businesses in the UK and around the world.

Hide Ad

"We are making good progress towards this goal as evidenced by our refinancings in Australia and the US and the standstill agreement with Greensill Bank, our largest creditor by far.”

A Scottish Government spokesperson said it had been told the smelter was now trading profitably” and its intervention had “preserved strategic industrial capacity” and saved 200 jobs.

Hide Ad

This is despite the number of employees at the smelter dropping from 101 to 92.

The spokesperson added guarantee fee payments due to the government are up to date.

Hide Ad

The second 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.

Comments

 0 comments

Want to join the conversation? Please or to comment on this article.