Information regarding GFG Alliance: FOI release

Information requested

1. What assurances, including financial underwriting, were given by the Scottish Government to GFG Alliance in relation to the financial future of its hydro plant and aluminium smelter in Lochaber?

2. What is the value of the goods or services that have been underwritten by the Scottish Government and what indexing has been set against these in increasing or decreasing value depending on future market value?

3. What due diligence was carried out by the Scottish Government on the hydro plant and aluminium smelter prior to and after its agreement to financially support GFG Alliance?

4. What surveys and reviews of infrastructure – including water tunnels, dams, plant machinery, fixtures and fittings – were carried out by the Scottish Government prior to and after its agreement to financially support the hydro plant and aluminium smelter?

5. What was the total value of the liabilities of the hydro plant and aluminium smelter identified by the Scottish Government?

6. What assurances have the Scottish Government sought or received in relation to the Jahama Highland Estate from GFG Alliance?

7. Has the Scottish Government carried out any investigations on whether it is possible to isolate/separate the Lochaber smelter and hydro plant from other GFG Alliance assets?

8. Has the Scottish Government identified whether income and resources relating to the Lochaber hydro and smelter plant have been used to finance other GFG assets?

9. What assurances have the Scot Government received from GFG Alliance relating to the potential housing project in Fort William and have they secured undertakings to ensure that the land will be made available?

Response

1. The Scottish Government intervened in 2016 to support continuing aluminium production in Lochaber. Scottish Ministers sought Parliament’s permission through the Finance and Constitution Committee to provide a guarantee of the smelter’s power purchases. The Committee reviewed and approved the contingent liability.

The Scottish Government receives a fee for providing the guarantee.

The Guarantee and Reimbursement Agreement and related documents are available online: Guarantee and Reimbursement Agreement (GRA) with GFG Alliance companies: FOI release - gov.scot (www.gov.scot).

2. The Scottish Government’s guarantee does not relate to the provision of goods and services, rather the guarantee provides for timely payment of income due under a power purchase agreement.

The amounts guaranteed by the Scottish Government are published in the Scottish Government’s Consolidated Accounts and vary between £14 million and £32 million per annum over the 25 year life of the guarantee.

3. The Scottish Government supported by its legal and commercial advisors carried out appropriate due diligence of the guarantee prior to its approval, including the value of its security with respect to the extent of the guarantee.

Examples of this due diligence are available online: Ernst & Young LLP reports and guidance to Scottish Government: FOI release - gov.scot (www.gov.scot).

4. The Scottish Government carried out appropriate due diligence of the guarantee prior to its approval by Ministers and the Finance and Constitution Committee, and has obtained appropriate protections in support of the guarantee.

Examples of this due diligence are available online: Ernst & Young LLP reports and guidance to Scottish Government: FOI release - gov.scot (www.gov.scot).

5. The public reporting of the financial information of the businesses connected to the Lochaber guarantee including balance sheet information (the value of assets and liabilities) is a matter for the businesses themselves. Online records are available at Companies House.

6. The Scottish Government understands that the GFG Alliance remains wholly committed to the development of the Lochaber complex including the Jahama Highland Estate.

7. The Scottish Government monitors its financial risks on an ongoing basis and carries out appropriate contingency planning with input from specialist advisers where that is required. The corporate structure of the Lochaber businesses is the responsibility of the shareholder.

8. The public reporting of the financial information of the businesses connected to the Lochaber guarantee including inter-group funding arrangements is a matter for the businesses themselves. Online records are available at Companies House.

9. The Highland Council are working with Scottish Government and partners to support the delivery of affordable housing across the Highlands. Fort William currently has two major schemes: Blar Mhor Phase 1 (117) and Upper Achintore Phase 1 (82) as well as several town centre regeneration schemes. The outlying areas have projects in Mallaig, Arisaig, Strontian and Spean Bridge. In total these developments will provide over 325 new homes to the Lochaber area and include a range of tenures – affordable rent, mid-market rent and low cost home ownership options. The GFG Alliance are committed to supporting the local community of Lochaber and the success of the Fort William 2040 project.

About FOI
The Scottish Government is committed to publishing all information released in response to Freedom of Information requests. View all FOI responses at http://www.gov.scot/foi-responses.