Scottish Borders Council agreed in March, 2012 to act as surety on behalf of a private company which was seeking a licence to operate a huge waste treatment plant at Easter Langlee in Galashiels.
The decision to act as guarantors for Dorset-based New Earth Solutions (NES) was made, it has just been revealed, because the firm could not afford the necessary insurance cover of £315,000.
Yet just six months later, the council agreed to sign an amended contract with NES – worth £80m over 24 years - for the delivery of an advance thermal treatment (ATT) facility to process most of the 40,000 tonnes of waste which currently goes to landfill in the region.
In February this year, the deal was scrapped when it emerged the company could neither fund the project nor overcome technical issues associated with its operation.
As a result, the council was forced to write off the £2m it had spent on the failed procurement.
In one of several Freedom of Information requests since then, retired Jedburgh journalist Bill Chisholm wanted to know why the council and not NES had put up the £315,000 bond.
Such guarantees are required of private sector companies by the licence-granting Scottish Environment Protection Agency (SEPA) to ensure funds are available if there is an “environmental event” on a waste treatment site or when a clean up is required if an operator ceases trading.
After Mr Chisholm was told the relevant report to councillors on March 29, 2012, would not be released due to “commercial sensitivity”, he took his case to the Scottish Information Commissioner (SIC) which last month ordered the council to make disclosure.
During the SIC probe, the council released part of that report by SBC’s then director of environment and infrastructure Rob Dickson which stated: “NES cannot obtain £315,000 of insurance without incurring costs that would have to be passed back to the council…”
The rest of that sentence was redacted (blacked out), but following the SIC edict, it has been revealed this week as “…nor can they [NES] afford to hold the capital aside to cover this requirement”.
Despite this insight into the company’s finances, the council agreed in private on October 25, 2012 to legally vary a 2010 contract with NES, thus entrusting the firm to deliver the ATT plant.
Mr Chisholm said this week: “If NES could not afford the insurance premium for a £315,000 guarantee in March, 2012, how did SBC just six months later expect the company to finance even a fraction of a massive waste management project?
“I am amazed alarm bells were not ringing and that not a single councillor appears to have asked questions or demanded assurances that the firm could deliver.”
An SBC spokesperson said: “As this scheme was cancelled in early 2015, this bond no longer applies and none of this money was spent.”