Sturgeon’s Government provided a guarantee of £586 million to Sanjeev Gupta’s company GFG Alliance as part of the company’s purchase of the Lochaber smelter. The figure was made public for the first time after a two-year transparency battle.
The revelation surfaced after ministers were slapped on the wrist for withholding the information from the public, with opposition leaders labelling it a “dodgy deal” and claiming the SNP was “desperate to avoid scrutiny”.
The agreement saw the Scottish Government guarantee 25 years of power purchases by Gupta’s company from another business owned by his father, with the guarantee funding the purchase of the aluminium smelter.
The guarantee allowed Greensill Capital to transform the guarantee into nearly £300m of debt with a credit rating equivalent to UK sovereign bonds to be created, funding the purchase.
The deal with the Scottish Government was provided when the smelter in Lochaber was purchased by GFG Alliance alongside two hydropower plants from Rio Tinto in 2016.
GFG Alliance also promised the construction of an alloy wheels factory near the smelter, which was scrapped in favour of a £94m recycled aluminium factory, which could have created 2,000 jobs. The SNP government admitted just 50 additional jobs had been created by the deal.
Gupta’s company hit the skids due to the collapse of Greensill Capital, which was partially blamed as Gupta’s company began to default on more than $5bn (£3.7bn) of debt GFG Alliance had borrowed from Greensill.
The Sturgeon guarantee required the Scottish taxpayer to cover Gupta’s annual amounts reportedly between £14m and £32m. An excessive amount for a fee initially valued at £21.4m, but later written down to zero with a £33m provision due to the potential exposure of the deal.
GFG Alliance said: “The Lochaber aluminium smelter is a profitable operation, and GFG Alliance’s commitment to invest in a new recycling and aluminium billet plant there will secure the future of the operations, create new high-quality employment in the area and provide opportunities for the local supply chain.”
SNP Ministers were also criticised by Scotland’s information watchdog for failing to release the total value of the deal after they claimed their commercial interests would be harmed by its release.
In a decision notice, Scottish Information Commissioner Daren Fitzhenry criticised the use of commercial interest as a defence, saying it was highly unlikely the release of the information would prejudice the negotiation of future guarantees. He said:
“The SNP ministers do not, in general, operate in a commercial environment and the commissioner does not consider them to be doing so simply because they are providing funding to, or guaranteeing the liabilities of, business.
“They do not undertake such activities as participants in the market with the businesses concerned, in pursuit of profit, but rather to promote the economic and social well-being of the country, or parts of it, in furtherance of the wider public good.”
“Nothing in the submissions offered here persuades the commissioner that the ministers’ interests should be regarded as especially ‘commercial’ here.
“There might be prejudice to the public purse if the guarantee were to be called up, and disclosure might (although the commissioner considers this less likely) prejudice the negotiation of future guarantees, but neither of these considerations suggests an interest that should properly be considered commercial (as opposed to more widely economic, or social).”.
A summary of an August 2017 meeting led by First Minister, Nicola Sturgeon, warned the government had “reached the very limits of what was possible” and noted: “the potential to be overexposed to one company – a company that we know is on an aggressive expansion drive elsewhere”.
Sep 2024: But the £585 million government guarantee was called in as Guptas business collapsed. The Scottish taxpayer was forced to stump up the cash to cover Sturgeon’s incompetence bail out. And she has still not apologised.
caltonjock 