A metals company has handed over a £586million support package to the Scottish government in the face of court bankruptcy battle
A metals company that received a £586million Scottish government support package to buy a Highland smelter is facing a legal battle against bankruptcy.
Taxpayers could suffer crippling losses if businessman Sanjeev Gupta’s GFG alliance goes bankrupt following the controversial deal signed by SNP ministers.
The company, which received massive state backing to buy metal and power stations in Lanarkshire and Fort William, is now at the center of a fraud investigation and could be liquidated if it loses a court battle with its creditors.
The Sunday Mail revealed last year that then rural economy secretary Fergus Ewing may have breached rules of conduct by attending a dinner with Gupta at a top restaurant in Glasgow.
He dined with no officials present and took no notes – a strict rule included in the ministerial code when he was in government business.
It came after Ewing struck a complex financial deal to allow GFG to buy a smelter in Lochaber, near Fort William, and a Highlands hydroelectric power station from Rio Tinto in 2016.
The amount of financial guarantee given by the Scottish Government to facilitate the purchase was originally around £360million in public money, but later rose to £586million.
Opposition politicians reacted with fury to the announcement of bankruptcy proceedings and demanded that Prime Minister Nicola Sturgeon “come clear” on the decision to risk taxpayers’ money on GFG.
Labor Funding spokesman Daniel Johnson MSP said: ‘It is the incomes of hard-working taxpayers that are at risk because of the SNP’s deal with GFG.
“We’ve seen Fraud Office raids, investigations and now liquidation proceedings, but we still don’t know what assessment the SNP government made before pumping billions of Scottish cash into the business. The SNP must be clear.
Conservative finance spokesman Jamie Halcro Johnston, MSP, said: ‘The SNP’s Lochaber smelter dealings have been murky from the start.
“The SNP have done all they can to hide the extent of the safeguards they have put in place against the smelter and, although this has now been revealed to be a colossal £586million, there is still huge questions to be answered about the government’s financial involvement with the GGF Alliance.
“With GFG facing liquidation proceedings, it’s time for the SNP to come clean about these deals, which have seen over half a billion pounds of taxpayers’ money used for collateral.
“The Scottish Government must urgently set out in full the concerns raised with Scottish Ministers about the deal and the safeguards put in place by Ministers to ensure that public money is protected.”
GFG was plunged into crisis last year due to the collapse of Greensill Capital, a financial firm for which former Prime Minister David Cameron acted as a lobbyist in a bid to gain access to a bailout of the British government Covid. Greensill’s owner, Lex Greensill, was also at the Glasgow dinner Ewing was attending.
The company is now battling the insolvency of some of its major companies after Credit Suisse pulled out of debt talks.
Under UK law, creditors can ask the courts to shut down businesses that owe them money if they can prove those businesses cannot pay.
Credit Suisse has pulled out of negotiations with GFG over nearly £1bn of debt after the UK’s Serious Fraud Office (SFO) served a Section 2 notice to produce documents. The offices were also raided by the French police.
GFG has repeatedly stated that it is close to securing new funding, but its prospects have been affected by several criminal investigations.
A spokesperson said: “Since 2016, GFG has invested £275 million in Scotland and remains fully committed to operating and developing its Scottish aluminium, steel and hydropower assets in a way that will ensure sustainable industrial growth and will generate long-term employment.
“Following the collapse of our lender Greensill Capital, GFG continues to work constructively with creditors and stakeholders on the refinancing, which will allow us to meet our obligations.
“The Lochaber smelter is profitable despite the impact of high energy prices. Plans to nearly double capacity at the site with a new billet casting and recycling plant remain on track.
“As expansion plans progress…this will drive additional spending into the local and national economy and allow us to target growing demand for Lochaber’s low-carbon aluminium.
“We will continue to invest to improve productivity, modernize existing facilities and preserve long-term jobs. Our core international businesses continue to generate strong returns and reach record production levels.
“We remain committed to repaying all creditors and continue to make…progress towards…debt restructuring.”
After initially promising to create 2,000 new jobs, it emerged last year that only 50 positions had been created by GFG in Scotland.
The criticism of Lochaber’s guarantee follows fresh attacks on Sturgeon following the Ferguson Marine fiasco.
Over £200million has been invested in the business, but two CalMac ferries are unfinished five years after entering service.
The contract was approved by ministers without normal financial guarantees and Audit Scotland was unable to establish why the original £97million order was given to Ferguson shipyard without such guarantees.
At the time, the yard was owned by billionaire businessman Jim McColl.
A Scottish Government spokesperson said: ‘There has been no call on the Scottish Government Guarantee, no debt is owed to the Scottish Government under the Lochaber Guarantee, all guarantee charges are up to date and we hold a full suite of titles when it comes to the Lochaber Guarantee.
“If the guarantee were to be called, the assets guaranteed to the Scottish Government would cover more than the cost of the guarantee.
“The net present value of the remaining revenue stream from the power purchase agreement over the remaining 20 years is £284m, while company accounts valued Fort William assets at £438m. pound sterling.”
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