Ministers have come under fire for a 'Saudi Arabia of renewables' target after they refused to carry on backing energy manufacturer BiFab which is now believed to be on the brink of financial collapse.
The Herald on Sunday revealed that ministers stand to lose up to £52.4m of taxpayers money after refusing to carry on backing state-owned renewables manufacturer Burntisland Fabrication (BiFab).
They signed off on what was a secret £30m guarantee to support Bifab last year before doing a U-turn after the failure of an important contract, leaving fears that the company faces liquidation.
Ministers decided to do the U-turn after new legal advice felt that providing key support for the ailing company at the centre of a wind farm jobs row would be seen as illegal state aid under European Union regulations.
Scottish Government sources revealed that a re-evaluation came after BiFab in September failed to win any work on Scotland’s largest offshore wind farm, the multi-billion pound Seagreen project, located just a few miles from its yards in Burntisland and Methil in Fife.
READ MORE: Revealed - Up to £52.4m taxpayers money set to be lost as BiFab faces collapse
A Chinese yard will fabricate 84 of the 114 turbine jackets for the project, which will then be shipped to the North Sea.
The ministers' intial support came by way of a commitment to effectively underwrite a contract to have a part in the the £2 billion Neart Na Gaoithe (NnG) offshore wind farm project in the Firth of Forth to the tune of £30m.
The contract proposed a minimum of eight of 54 steel foundation jackets which anchor the turbines to the seabed would be built by Bifab with the rest being constructed in south east Asia.
But on Wednesday, the Scottish Government which owns a third of Bifab, decided to decline the "assurances" to BiFab to support the contract signed off on last year.
In 2009, the potential wind and marine energy power in the Pentland Firth - where the north-east Atlantic meets the North Sea – led the then Scotland's First Minister Alex Salmond to dub it the "Saudi Arabia of Renewables" with BiFab at the time making turbines for offshore wind farms.
The narrow sea channel has some of the most powerful currents and tidal surges in the world, with speeds up to 16 knots or 19mph recorded. The area also experiences some of the biggest waves in the UK.
BiFab, now part state-owned after ministers carried out a £37.4m bailout in a bid to save it from closure in 2017, was seen as a key component in Scotland's renewable jobs ambitions.
A Scottish Government report in 2010 stated that the offshore wind sector alone offered the potential for 28,000 direct jobs and a further 20,000 jobs in related industries, as well as £7.1bn investment in Scotland by 2020.
Liberal Democrat leader Willie Rennie said: “This has been an expensive publicity stunt from an SNP Government that promised Scotland would be the Saudi Arabia of renewables but has just watched as contracts for wind farms off the Scottish coast have been won by countries on the other side of the globe.
“We need a plan to deliver jobs for Scotland especially if we are paying for the work through our electricity bills. An industrial plan to get our yards in a fit shape to win contracts should be the Scottish Government’s first priority.”
A Scottish Government spokesman said: “As has always been the case, the Scottish Government does not take management and operational decisions at BiFab, therefore matters of contract negotiation are for the BiFab board of directors to consider in the first instance.
"Once the board determine the terms of the contract, including whether or not they are prepared to provide an assurance package. If asked, it is at that point the Scottish Government would evaluate whether to financially support BiFab, but it would need to do so in the same way a commercial investor would in order for it to be state aid compliant.
“In considering the actual provision of a guarantee, it is appropriate and necessary to consider the prospects and performance of a company together with their subsequent performance, notably at the time when the relevant contract is to be signed, on the same basis as any commercial investor would. The pipeline of future trading and work has been adversely impacted by the decision of SSE not to award work to BiFab for the Seagreen offshore windfarm.
“Without majority shareholder investment in the company we have exhausted the options for what financial support we can provide legally. So this is a legal compliance issue and not an issue of financial commitment on the part of the Scottish Government.”
“We will continue to do everything possible to support the business while recognising the need for us to remain in line with State Aid regulations.”
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