Report recommends probe of £2.4m loss at Scottish Borders Council A BOMBSHELL report about the loss of more than £2.4 million of public money by Scottish Borders Council casts significant doubt on the official investigation into the loss and the local authority’s management of a now collapsed £80m waste project.
Distinguished journalist Bill Chisholm, who was awarded an MBE for services to journalism when he retired some years ago, spent 30 months investigating the scandal.
The Easter Langlee waste transfer system - located not far from the new Borders railway at Tweedbank - was never built but still cost the public purse more than £2.4m.
In February 2015 Scottish Borders Council (SBC) announced without warning that it was abandoning a £80 million, 24-year contract with waste management firm New Earth Solutions Group [NESG] including a planned £23 million treatment facility at Easter Langlee, Galashiels only four years into the deal.
The treatment plant was regarded as vital if the Borders was to fulfil its responsibilities in diverting waste from landfill under strict Scottish Government policies.
Apart from a brief statement citing “technological and financial issues” the council has offered its council taxpayers no explanation for the collapse of the contract despite the loss of many millions of pounds of public and private money. Now we face the prospect of 40,000 tonnes of Borders rubbish having to be transported out of the region by road for treatment elsewhere. Not a particularly environmentally friendly strategy.
The full report into the fiasco compiled by investigative journalist William Chisholm MBE, followed more than two years of investigative work which was blocked at almost every turn by SBC on grounds of “commercial confidentiality”.
Speaking to SLR, Bill Chisholm said “In my view the report clearly shows the council mishandled the contract on many fronts as I have tried to set out in the attachment, but no-one has been held to account. It also explains why it has taken so long to assemble a reasonably clear picture of why the deal went so badly wrong.”
“I am asking MSPs to raise the issue in Parliament and to press for full disclosure of information which has not been released by SBC.”
It can also be revealed the company at the heart of the £80m waste project was managed by a former director of a £400m collapsed hedge fund – Heather Capital.
John C Bourbon, a boss of Premier Group (Isle of Man) Ltd, (now in liquidation) which managed and promoted the New Earth Recycling & Renewables (NERR) fund (also bust) recently scored a spectacular success in the Manx High Court.
Bourbon is a former head of the financial regulatory authority on the island who later joined Premier and created funds like NERR (the one SBC planned to use to build Easter Langlee) and Eco Resources Fund (ERF) – also bankrupt - which persuaded investors to invest in bamboo plantations in Nicaragua and South Africa. According to accounts and documents, Bourbon and fellow directors have paid themselves millions in management fees.
A provisional liquidator appointed by the Manx Financial Services Authority wanted to wind up ERF as soon as possibly (£12,000 of assets but £2.7 million unpaid debts) and warned a proposed re-financing scheme was a non-starter.
However, Bourbon persuaded a High Court judge to remove the provisional liquidator from office and replace him with an insolvency practitioner nominated by Bourbon himself.
Questions are now being asked why SBC claim ignorance of any of the events surrounding NERR which also controlled New Earth Solutions Group.
The full Isle of Man court judgement is here: IOM FSA v THE ECO RESOURCES FUND / 14 July 2017 / CIVIL - CHANCERY PROCEDURE
A feature on the report is available here; Fresh calls for "waste fiasco" inquiry
Full updates on the Scottish Borders Council fiasco and other news from the Scottish Borders can be found http://notjustsheepandrugby.blogspot.com/
The full report on the £80m waste project collapse and £2.4m losses – by journalist William Chisholm MBE:
Researched and written by Bill Chisholm, Jedburgh.
How Scottish Borders Council (SBC) gambled with at least £2.4 million of taxpayers’ money, lost it, wrote it off, then mounted a concerted campaign to conceal hundreds of documents, emails and letters linked to the financially disastrous episode from public scrutiny.
NOTE: The vast majority of this information has been assembled in the course of a two and a half year investigation which SBC has consistently tried to frustrate and hamper.
From 2008 onwards Scottish Borders Council was faced with an urgent environmental/financial issue. Time was beginning to run out on their practice of land-filling the vast majority of some 40,000 tonnes of waste per annum generated by households across the local authority’s territory.
Previous attempts (well documented) to devise a credible waste management strategy for the Scottish Borders had failed, and in 2008/9 elected members of SBC were being told by senior officers that to ‘do nothing’ and continue to landfill rubbish at the Easter Langlee disposal site on the outskirts of Galashiels was no longer an option: rapid, and potentially expensive action was required.
It was decided to award a 24-year waste management contract, valued at between £65 million and £80 million to a firm of specialists which would include the development and construction of a “cutting edge” treatment facility at Easter Langlee at an estimated cost of up to £23 million, depending on the specifications.
The plant was to be built in two stages over seven years. A conventional Mechanical Biological Treatment [MBT] centre would divert up to 80% of Borders rubbish from landfill. Then, at a later date once technological processes had proven themselves to be commercially viable an Advanced Thermal Treatment [ATT] facility would be added. This would have the capability of converting waste into energy to power local homes, factories and public buildings with surplus electricity being sold off to the National Grid. SBC would receive some of the profits.
A team of environmental, financial and legal consultants was assembled to advise SBC. Following a lengthy procurement process it was announced in March/April 2011 that the contract had been awarded to Dorset-based New Earth Solutions Group (NESG), a company which had never worked on a project in Scotland before. The losing competitor was Shanks, a business with vast experience in the field of waste management throughout the UK.
But the release of highly confidential documents during the course of 2016/17 following SEVEN separate applications to the Scottish Information Commissioner to overturn refused Freedom of Information requests, shows the project had hit funding and technological problems by January 2012, only nine months after the contract was handed to NESG. These issues proved insurmountable, but the council granted NESG generous contract moratoriums which allowed the undeliverable project to squander hundreds of thousands of pounds of public money until it had to be abandoned in February 2015.
PAGE TWO -Letters from NESG to SBC in January 2012 claimed the stand alone MBT could no longer attract bank funding. Money for the Easter Langlee scheme was supposed to come from either the Co-op Bank or from NESG’s partner, the Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund [NERR].
But changes in the Scottish Government’s waste disposal policies were allegedly proving tricky and unattractive to financiers, according to NESG, and an alternative way of delivering the Borders project would have to be identified.
Following months of unsuccessful negotiations between NESG and the council’s Project Team it was finally decided to recommend a very major alteration to the contract to combine the MBT and ATT in a single phase development.
This has to be viewed as an extremely high risk strategy for one simple reason. NESG’s brand of ATT – named NEAT Technology – was completely untried and untested in 2012. For the record it remains problematical and unproven in 2017. And the release of sensitive documents dating from 2012 shows the NEAT system had not even completed its journey through research & development testing in October 2012 when members of SBC sanctioned the so called Deed of Variation [DoV] at a private meeting even though this could have been construed as commercially unfair to rival bidders Shanks.
The DoV was to make little difference. NESG was heavily in debt to banks and to NERR whose directors had a major stake in NESG and were basically keeping New Earth Solutions afloat by providing a total of £39 million to that company. This arrangement/mortgage was concluded in September 2011, and the paperwork is available for public scrutiny at Companies House.
At the same time NERR’s parent company Premier Group (Isle of Man) Ltd [PGIOM] was picking up millions of pounds each year in fees for managing and promoting NERR to 3,500 unwitting investors and shareholders. The managing shareholders of Premier Group were entities based in the offshore tax haven of British Virgin Islands.
SBC appears to have been completely unaware of the complex financial arrangements involving NESG, NERR and PGIOM. The council has also confirmed it was unaware of many alleged complaints made about the conduct of Premier’s array of investment funds, including NERR, to the Manx regulatory authorities, and to the UK Financial Services Ombudsman from 2004 onwards.
The problems and apparently insurmountable technological and financial issues facing NESG and SBC dragged on through 2013 and 2014 without a brick being laid at Easter Langlee. A selection of documents, many of them heavily censored by SBC before release, give a patchy view of what was happening on a month to month basis as the project staggered on.
PAGE THREE - Details of a high powered visit by a large delegation of Borders councillors and officers to NESG headquarters in Avonmouth, near Bristol in October 2014 are extremely sketchy as SBC claimed when asked for reports on the trip that nothing had been written down. But representatives of the Borders press were given the impression the visit had been extremely worthwhile from a “due diligence” point of view, and the elected members had been impressed by what they had been shown. SBC firmly believed it was on the right track to become Scotland’s leading waste management authority.
Unfortunately there was a different behind-the-scenes scenario which suggests Borders councillors were completely deluded. By now NESG was virtually insolvent; the NEAT technology continued to misfire, NERR had still not come up with the £23 million needed to build the Borders project, and Scotland’s environmental watchdog SEPA (Scottish Environment Protection Agency) was still refusing to sanction an operating permit for the combined MBT and ATT because of unresolved issues.
Four months after the expensive trip to south-west England a press release issued by SBC in February 2015 contained the shattering news of the contract’s complete collapse.
The statement declared: “Since the contract was signed in April 2011 there have been significant changes with regard to Scottish waste policy and regulation, and project-specific issues in terms of technology and funding.”
No further details were given despite the complete failure to deliver a crucial facility, and the squandering of millions of pounds of public and private money over four years. On top of that SBC’s waste management strategy was in tatters yet again with landfill deadline day looming.
From the publication of the press release on February 19th 2015 SBC was determined to pull down the shutters on Project Easter Langlee to cover their own backs and to prevent anyone from exposing their sheer incompetence and risky decision making. The Borders public deserved better.
FIGHTING THE COVER-UP
I was personally annoyed and dissatisfied that my local authority could treat its citizens in such a cavalier manner, and I was determined to investigate this disastrous chapter in the annals of Borders local government after being told SBC had decided to simply write off their losses and move on.
The only way to get at the facts would be via Freedom of Information (FOI) requests although I realised this avenue was bound to be littered with pitfalls and obstacles. Requests would have to be carefully worded to guarantee some chance of a worthwhile return. And questions to the council would have to be divided up into numerous sections to avoid refusal by breaching the £600 cost ceiling allowed for each request.
The first FOI was aimed at discovering the true scale of the financial loss to taxpayers as even this basic information remained a closely guarded secret. Surely details of what had been spent on the aborted contract should have been published as a matter of routine. Not in the secretive world of local government.
PAGE FOUR - My FOI 7651 received a response in April 2015. It claimed the costs involved during the lifetime of the contract totalled £1.968 million (exclusive of 20% VAT), most of the money having gone to highly paid consultants, most notably Edinburgh law firm Brodies who received £679,000 for specialist legal advice even though the project was a complete failure. In-house staffing costs were given as £356,400. There was to be additional costs associated with post-contract expenditure.
My own feeling is that the true losses linked to the NESG debacle were considerably higher than this but unfortunately I have to accept what SBC has told me.
The response from SBC contained the following sentences which indicated how they would resist further requests for information: “You suggest that ‘now that the contract and the project have been abandoned the issue of commercial confidentiality no longer applies.’ This is factually incorrect. The confidentiality clauses pertaining to the contract remain in place for six years after termination of the contract.” So I’d have to wait until 2021 for full disclosure.
However, the loss of a substantial sum approaching £2.5 million surely warranted further investigation. I half expected an announcement from Audit Scotland, the nation’s public spending watchdog, that it would be launching an enquiry into the affair. But announcement came there none, and my own repeated requests for their intervention have all been rebuffed.
I have copied Audit Scotland into correspondence throughout the investigation. Unfortunately their email to me dated May 26th 2017 illustrates their attitude towards SBC’s multi-million pound loss of public funds:
“Thank you for forwarding the decision by the Scottish Information Commissioner, regarding Scottish Borders Council and its waste management contract.
“This information has been shared with the external auditor of the council. After full consideration of the content of the decision, they are content that the audit work previously completed by the external auditor of the council showed that the council followed a reasonable process in the procurement of the waste management contract.
“We believe the key judgement for the council was whether continuing with the contract would have seen even more public money lost. It is our opinion that the council came to a reasonable judgement in terminating the contract when it did.
“We do not deny that a loss of £2.4m is a poor outcome for the council. Therefore as part on the 2016/17 annual audit of Scottish Borders Council we will be reviewing whether the council have identified any ‘lessons learned’ through their review of how the waste management contract was managed. Any significant findings will be reported to the council in our Annual Audit Report. This will be available on the Audit Scotland website by October 2017.
PAGE FIVE - “In your correspondence you state your view that the commissioner’s findings represents clear evidence of a deliberate cover up. Although we do not agree with this view, we continue to encourage councils to be as open and transparent as possible with the information they hold.“
During the early stages of my own investigation I also attempted to enlist interest from Scottish politicians and from Scottish parliamentary committees. No luck there either. A £2.4 million gamble with public money did not merit anyone’s attention. Shining a spotlight on bungling councillors of virtually every political hue and holding the incompetents to account might be disadvantageous for all of the parties involved, so avoid such scrutiny like the plague appeared to be the stance taken.
It seemed all that was left would be a one-man campaign to uncover as much information as possible and have it published in a bid to at least embarrass those responsible for the losses. That’s pretty much how it has panned out.
The council started to reject my FOI requests in late 2015. In each of seven successive cases information was withheld on “commercially confidential” grounds and after subsequent requests for reviews of decisions I had to take each case individually to the Scottish Information Commissioner.
In the majority of applications for decisions the SIC found in my favour, and in at least a couple of the Commissioner’s reports the SBC arguments in favour of either keeping documents secret or redacting those they offered to release were demolished and heavily criticised.
It is worth reproducing just some of the findings outlined by Acting Scottish Information Commissioner Margaret Keyse in Decision Notice 100/2017 issued in June 2017 as they demonstrate how flimsy the council’s arguments in favour of secrecy really were.
The Commissioner's conclusions
“The Commissioner recognises that the Council made a significant investment in the integrated waste management project in the belief that it would resolve some of the waste disposal issues in the Scottish Borders Council area. The Council and NESG expended considerable effort, time and money to ensure the project was a success. If the project had completed successfully, it would have increased the Council's household recycling performance by an estimated 2.6%. However, the contract was terminated on 19 February 2015, leading to the Council having to write off at least £2.4 million.
“The Commissioner accepts that there is significant public interest in understanding what steps the Council had taken to ensure that the project was robust. There is a strong public interest in understanding the measures that the Council had taken in order to limit its financial exposure in a project which had been on-going for four years and had involved substantial sums of public money.
“In the Commissioner's view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the Council, the basis for those actions and decisions, and the reasons why the project failed. As noted above, the project had involved many years of work, and substantial sums of public money. The integrated waste management project would have had a direct effect on the residents in the Council area.
PAGE SIX - “The Commissioner has given weight to the particular circumstances of this case, which incurred the Council investing substantial time, money and resources, in a project that ultimately did not come to fruition. In these circumstances, the Commissioner finds it is legitimate for the public to seek to understand what happened, and in the public interest for this understanding to be as complete as possible.
“The Commissioner accepts that there will be cases in which it is in the public interest for post-contract discussions and project discussions to be kept confidential. However, in the circumstances of this case, the Commissioner considers that the public interest in understanding the Council's role in the project is stronger, for the reasons outlined above.
“Having considered all of the representations made by Mr Chisholm and the Council, the Commissioner has concluded that, even if she had found that disclosure of the information would, or would be likely to, prejudice substantially the confidentiality of commercial or industrial information in line with the exception in regulation 10(5)(e) of the EIRs, she would have found, in all the circumstances, that the public interest in making the information available outweighed that in maintaining the exception.”
All seven decision notices can be found on the Scottish Information Commissioner’s website, reference numbers as follows: 185/2015; 069/2016; 078/2016; 097/2016; 220/2016; 061/2017 and finally 100/2017.
So the process of forcing SBC to release documentation has taken well over two years because of the need to divide up requests which are all linked to the same subject but would not pass the FOI test on cost grounds. This has involved many hours of additional work preparing applications for the Commissioner and dealing with necessary requests from SIC for more evidence or clarification.
Meanwhile SBC staff and their legal experts must have devoted countless hours in dealing with seven separate SIC investigations as they sought to defend their corner and keep those sensitive reports out of sight. Perhaps a FOI request asking for details of costs incurred by SBC over the course of the seven cases might be justified!
At the end of the day with NESG bankrupt, NERR in liquidation and PGIOM in the process of being dissolved there can be no commercial confidentiality argument for a continuing cover-up of this tawdry affair. Every document on the SBC Waste Management Project file must be published.
However, that is clearly not how SBC sees it. The last of my successful applications to the SIC was concluded on June 28th 2017 when Ms Keyse issued her decision completely in my favour. The council was given until August 14th 2017 to comply – some six weeks. But they delayed releasing the documents they had withheld until August 11th, waiting until virtually the last day allowed before obeying the orders of the Commissioner.
An earlier release of the information would not have proved difficult. I originally requested the material in early 2016, and following their refusal to make copies available on two separate occasions my SIC application was lodged on August 5th 2016.
PAGE SEVEN - During that same month SBC was asked to send the SIC the withheld information – 86 documents among 200 relating to the case. So it is clear the council had sorted through and assembled the requested reports at least a year before they complied with Decision 100/2017. They could have been sent to me within days of the June 28th decision, but SBC – as they did on previous occasions – decided I could wait for the maximum period allowed under SIC rules. Little respect there for Freedom of Information.
REVELATIONS AND ISSUES THROWN UP BY THE INVESTIGATION
SBC undoubtedly wished to draw a line in the sand under the New Earth affair as soon as the highly embarrassing decision to terminate the useless contract was taken in February 2015. Their attitude towards my series of FOI requests proves that beyond any reasonable doubt.
But information they have been forced to give me on the instructions of the SIC has penetrated the wall of silence and has shed some light on many worrying aspects of the council’s dealings with a group of financially unstable companies and funds. However, it is impossible to complete the picture without full disclosure. Here are some of the points requiring full investigation:
1. NESG TRACK RECORD AND CONDUCT - NESG was a relatively inexperienced player in the waste management industry, and had little if any knowledge of environmental rules and regulations governing waste disposal in Scotland, including SEPA’s rigorous process before issuing operating certificates.
Information I obtained showed how NESG became so frustrated over delays in the sanctioning of a permit for the ATT aspect of the Easter Langlee project that they suggested SBC and others should put pressure on the independent environmental watchdog to achieve the desired result. This surely amounted to totally unacceptable and unprofessional conduct.
2. SURETY FOR SEPA - In the very early stages of the contract SBC had to provide financial security in the sum of £315,000 to SEPA on behalf of New Earth Solutions (Scottish Borders) Ltd., the ‘ special vehicle’ set up to deliver the Borders project. The council refused to tell me why this was necessary on grounds of “commercial interests”.
The SIC disagreed and told SBC to give me the information I had asked for. It transpired that NES could not acquire £315,000 of insurance without incurring costs which would have had to be passed back to the council “nor can they afford to hold the capital aside to cover this requirement”. So a contractor involved in a multi-million pound scheme didn’t have £315,000 to spare. Surely alarm bells should have been ringing at SBC. Did anyone ask questions about such a worrying issue?
3. THE STATUS OF NERR & PGIOM - Information obtained during the course of my inquiries has confirmed that SBC were completely unaware of many complaints lodged by investors and shareholders in the NERR fund and against its parent company PGIOM. These businesses were crucial to the successful delivery of Easter Langlee, and SBC was told £6 million per month was pouring into NERR from eager ‘green’ investors.
PAGE EIGHT - The truth was that any money reaching NERR’s coffers was either being used to prop up NESG (£39 million in total) or being siphoned off by PGIOM managers and controllers in fees (£12.027 million in 2014 and £10.748 million in 2013 while the Borders contract was ‘live’). The impression is given that SBC accepted at face value what NESG and NERR were telling them. Even in the early years of the contract (2011) NESG was recording sizeable financial losses.
Liquidators Deloitte appointed to investigate NERR by the Isle of Man Financial Services Authority soon discovered almost 3,500 investors and shareholders in the fund would get none of their money back. Deloitte is currently considering the possibility of pursuing third parties in a bid to recoup cash and NERR has insufficient resources to even pay for its own liquidation. PGIOM is also in the process of being dissolved. How did SBC become involved with such unstable offshore entities?
4. DEED OF VARIATION – Perhaps the most important reason for the collapse of the project, and the most puzzling issue to emerge from SBC’s web of secrecy. Within a matter of months of the original contract being signed NESG was telling SBC the MBT plant was undeliverable because it could not attract bank funding as a stand-alone project. How much had changed in such a short period of time? Why were MBT facilities being developed elsewhere in the UK? Did anyone at SBC ask?
In October 2012 members of SBC decided (in private, naturally) to radically change the terms of their contract with NESG to include ATT using so-called NEAT Technology, NESG’s very own brand of gasification and pyrolysis to convert rubbish into electricity.
The councillors must have realised they were taking a huge gamble. Apparently they were labouring under the impression NEAT could install them as champions of the Scottish waste disposal league table. But in fact the technology had not even started its arduous journey through development trials at NESG’s R&D centre in Canford, Kent.
How was any financial institution likely to put up £23 million under those circumstances? What persuaded SBC’s elected members to sanction NEAT when the technology was not commercially proven and funding was not guaranteed? Each member who voted in favour of the DoV must be asked to explain their reasoning, and officers and members of the Project Team who recommended this risky course of action also need to provide a detailed public explanation.
In an interview published in the Journal of the Chartered Institute of Waste Management in October 2015 - AFTER the SBC/NESG contract was shredded, and THREE YEARS AFTER the DoV was rubber-stamped - Richard Brooke, the commercial director of NES, confirmed that the form of technology which had been planned for Easter Langlee was not commercially ready in late 2014. So why did SBC sign up for it in October 2012? Brooke’s reference to the Borders project reads as follows:
“The development in Scotland that would have been New Earth’s sixth facility did not come to fruition for a variety of reasons, most notably the drop-off in the quantity of residual waste requiring treatment; and the specific energy technology to be built and operated was not ready to bring on-line on a commercial scale.”
This amounts to a damning indictment of SBC’s decision making. In actual fact this form of ATT technology remains unproven in 2017 while a similar system installed at another NESG facility in Avonmouth, Bristol has proved so troublesome the entire plant has had to be closed down to allow radical remedial work to be undertaken. It is hoped to reopen the ATT there in 2018.
PAGE NINE - 5. MONITORING OF PROJECT BY ELECTED MEMBERS – There is virtually no mention of councillor involvement in the Easter Langlee project in any of the documents SBC has volunteered to give me or in the many more released on the orders of the Scottish Information Commissioner.
Minutes of meetings should provide a full picture of the role played by our elected members, but incredibly, during my inquiries I have been told on more than one occasion that events were not formally recorded. Therefore written documents containing information about the ill-fated scheme do not, in many cases, exist on the council’s ‘New Earth Solutions’ file. I would submit that such an admission of sloppy record keeping should be worthy of investigation on its own.
A classic example of this cavalier approach towards the (non) minuting of meetings came to light after I submitted a FOI request seeking information about the council’s large delegation of elected members and officers who made a “fact-finding” trip to NESG headquarters at Avonmouth in October 2014, just four months before the Easter Langlee shipwreck had to be abandoned.
No fewer than 18 of the most powerful members and officials of SBC made the trip (including an overnight stay) at a total cost to taxpayers of £3,939.35. In public statements following their return to the Borders they made it clear they were pleased with what they had seen and were convinced SBC was “on the right track”.
When I requested a list of the questions asked and answers given at a briefing session this is what I was told: “There was then a question and answer session with NES so that Councillors could get a detailed understanding of the delivery strategy, technology development, permit and funding. No information is held on record in respect of the questions or answers provided. Only the presentations are held – which are commercially confidential, a redacted copy is attached.”
I went on to ask for copies of reports generated before and after the visit. Here’s the reply from SBC: “Subsequent project reports, minutes and emails make reference to the visit but were not generated specifically as a consequence of the visit. Again the content of these documents contains commercially confidential information and cannot be released.”
This repeated failure to maintain written records which appears to have permeated much of the four-year liaison between SBC and NESG may be a convenient way of avoiding public scrutiny. But it also runs totally counter to the local authority’s own Information Governance Policy.
That document states unequivocally: “Scottish Borders Council is committed to creating, managing and keeping records that document its principal activities. Information must be processed and protected diligently, lawfully and ethically through good data security, accurate information and informed openness.”
One can only assume those high-minded principles ‘went out of the window’ in the case of the Easter Langlee shambles. Or perhaps the failed Easter Langlee project is not regarded as one of SBC’s “principal activities”.
In fact the visit to the Avonmouth facility may well have been a complete waste of time and money. The misfiring steam technology there was different from the system which was to have been deployed in Galashiels. The 18-strong team carrying out ‘due diligence’ should, according to some experts, have been 67 miles from Avonmouth - in Canford - where NEAT was on trial.
PAGE TEN - Councillor David Parker, the local authority’s leader, told the Border Telegraph in October 2014 (following the visit) the Avonmouth trip had been “valuable and illuminating”.
“The integrated WTF is a really big deal for our council as it will transform the way we deal with our waste and help us comply with our zero waste obligations,” he told the newspaper.
“It also involves a major investment, in partnership with NES, which requires councillors to carry out due diligence and, in that respect, the trip was necessary. I am satisfied after our visit that we are on the right track and confident that the WTF will be up and running before the 2019 contract deadline, hopefully by mid-2017.”
Contrast that upbeat declaration with DUFF & PHELPS ADMINISTRATORS’ REPORT on New Earth Solutions Group July 2016:
Paragraph 2.8 – “In October 2014 (the same month in which the Borders delegation was briefed by NESG) the Group carried approximately £159 million of debt, with £37 million due to the Banking Group (Co-op) and £102 million to New Earth Recycling & Renewables [Infrastructure] PLC (NERR) which was subordinated to the Banking Group’s debt. A further £20 million was also owed to Macquarie Bank with a request for further funding. Funding from NERR was suspended in 2014 and Co-op was requested to step in to provide financing.”
In other words the due diligence carried out by Councillor Parker and his colleagues managed to miss the fact that NESG was completely insolvent long before the contract was terminated. The cash-strapped company was, to all intents and purposes, incapable of delivering the Easter Langlee project a year if not more prior to February 2015. Did anyone examine the company’s books? What information were the expensive financial consultants [hired at a cost of £146,000] giving SBC about their contractor’s economic well-being (or lack of it)?
2013’s NOTIFICATION OF A TWO-YEAR DELAY
The project had been beset by problems and issues from the very outset thanks to a combination of undeveloped technology and the absence of the £23 million to pay for it.
Among a collection of 80 reports, emails and other correspondence which SBC released in August 2017 on the SIC’s orders were details of yet another delay of two years of which notice was given by NES in late 2013. The NEAT trials in Canford were going extremely badly, and after a catalogue of excuses the contractors finally admitted there was no prospect of commissioning the Borders plant until July 2017 although even that date could prove to be ‘ambitious’.
Here’s how the council’s own consultants reacted to the news – although the council seemed content to allow matters to drift on.
SLR Consulting (technical experts) wrote: “In summary it is difficult for SLR to understand whether there is a reticence to try to develop because; data attained does not show the process favourably; if operational issues at Avonmouth are taking priority or are showing some fundamental issues with the technology; if the technical team are capable of addressing and managing the problems to an expedient solution.”
PAGE ELEVEN - And financial advisers Nevin Associates were more forthright in their correspondence with SBC following the latest test failure at Canford: “This may have been the final incident that convinced NES to come clean and admit that there was no chance of implementing NEAT on a commercial scale in 2014.
“This could leave us hanging on the outcome of the Canford trials, over which we have no control, and if those were to fail or (more likely) take longer than anticipated to succeed, then we would still potentially be exposed to the risk of having no treatment solution in place for the Council’s residual waste.
“It is imperative that momentum is not lost and that NES show evidence of continued commitment to the project, otherwise we may have little option but to pursue a Plan B to avoid the risk that the Council fails to achieve ZWP regulatory requirements.”
NES had already been granted a so-called ‘contract moratorium’ giving them extra time to solve the various problems dogging Project Easter Langlee.
Surely council members should have stepped in and ordered an end to the fiasco in December 2013. That would have avoided a 15 month period up to February 2015 when tens if not hundreds of thousands of pounds of public money continued to be squandered without any progress being made. But yet again councillors appear to have been conspicuous by their absence.
CONCLUSION – Those who take the trouble to read this report are free to draw their own conclusions.
In my opinion Scottish Borders Council - at the very least - was grossly incompetent in its stewardship of substantial sums of public money. SBC was equally inept in the management and administration of a £23 million building contract, work on which had not even started after almost four years of dithering and interminable delays caused by a model of technology which had never been commercially proven, and by an inability to secure funding for construction.
The fact that no-one will be held to account for the entire debacle is regrettable and disgraceful.
The following pages forming an appendix to this report are items of correspondence included in a large collection of reports, emails and letters all of which Scottish Borders Council classed as “highly sensitive” or “commercially confidential”.
The four examples selected date from 2013 and 2014, and there are many more in similar vein. They illustrate some of the technological difficulties which hampered and delayed the failed project throughout its four-year lifetime. There is also the occasional update on funding options, none of which ever came to fruition.
Martin Hannan Journalist The National 24 October 2017
Scottish Borders Council refused to answer questions from retired journalist Bill Chisholm, but was rebuked by the Information Commissioner
A BOMBSHELL report about the loss of more than £2.4 million of public money by Scottish Borders Council casts doubt on the official investigation into that loss.
Distinguished journalist Bill Chisholm, who was awarded the OBE for services to journalism when he retired some years ago, spent 30 months investigating the scandal. The Easter Langlee waste transfer system was never built but still cost the public purse more than £2.4m.
Despite Scottish Borders Council (SBC) constantly refusing to answer his questions, Chisholm – now 72 and describing himself as a concerned council tax payer – persevered and the Scottish Information Commissioner ruled in his favour seven times so that he was able to access the information, which he claims shows mismanagement and a misuse of public funds.
But Audit Scotland’s investigation has cleared the council and it says its file on the matter is now closed.
The saga began in 2011 when the council awarded a 24-year waste management contract, valued at between £65m and £80m, to an English firm, New Earth Solutions Group (NESG), which would include the development and construction of a “cutting-edge” waste treatment facility at Easter Langlee near Galashiels at an estimated cost of up to £23m.
Chisholm’s 43-page report alleges the technology to be used at Easter Langlee by Dorset-based NESG, backed by Isle of Man-based New Earth Recycling & Renewables [Infrastructure] PLC (NERR), was not fully tried and tested.
He reports: “In an interview published in the Journal of the Chartered Institute of Waste Management in October 2015 … Richard Brooke, the commercial director of NESG, said ‘The development in Scotland that would have been New Earth’s sixth facility did not come to fruition for a variety of reasons … the specific energy technology to be built and operated was not ready to bring on-line on a commercial scale.’”
The contractors were given more time and 18 SBC councillors and officers visited NESG’s premises in October 2014 – a trip that cost council taxpayers almost £4,000.
NESG then failed to deliver on Easter Langlee. Less than four months later on 19 February, 2015, the contract was terminated.
Both NESG and NERR went bust and SBC had to write off more than £2.4m. The council has since tried to establish its own new £4.8m waste transfer system at Easter Langlee, but after planning problems work has still not begun and the council continues to face penalties for its failure to treat its waste.
Chisholm asked a series of questions about the technology and funding but received insufficient answers.
The Information Commissioner then overruled SBC in very strong terms, saying: “In the Commissioner’s view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the council, the basis for those actions and decisions, and the reasons why the project failed. The project had involved many years of work, and substantial sums of public money.”
Chisholm was finally told by SBC that the costs involved during the lifetime of the contract totalled £1.968 million – excluding 20 per cent VAT – with much of the money having gone to highly paid consultants.
After external auditors KPMG passed the council’s accounts, public spending watchdog Audit Scotland took over as auditors and concluded the council acted correctly. Both SBC and Audit Scotland have refused to re-open any inquiry into the failed project.
Chisholm told The National: “I would suggest Audit Scotland has made a misjudgment [in connection] with the Borders’ £65m waste management contract
“A significant number of people who have read the report, including an eminent procurement expert, have expressed the view that there are many issues I have uncovered which would justify an investigation.
“Examples include the question of whether the council might have breached EU procurement rules, not to mention the complete loss of at least £2.4m of taxpayers’ money.”
Chisholm added: “Audit Scotland may have closed the file on Project Easter Langlee: I have not.”
A Scottish Borders Council spokesperson said yesterday: “Mr Chisholm has not yet presented Scottish Borders Council formally with a copy of his report, however it is worth noting that both KPMG and Audit Scotland have examined the matter and are both satisfied with the steps taken by the council in relation to the contract with New Earth Solutions.”
An Audit Scotland spokesman said: “In our response to Mr Chisholm we explained that our opinion is that the council came to a reasonable judgment in terminating the contract when it did. We are also satisfied that audit work previously completed by the external auditor showed that the council followed a reasonable process in the procurement of the waste management contract.”