EU rules blamed for failure to carry out national takeover of doomed BiFab
TAXPAYERS face a loss of more than £50 million after ministers decided not to pursue nationalising the insolvent renewables manufacturer BiFab, it can be revealed.
The Scottish Government insists that EU state-aid rules stop it from carrying out a full takeover of Burntisland Fabrications (BiFab) which has been put into administration by its Canadian owners.
The move came after ministers felt that providing key support for the ailing steel fabrications company at the centre of a windfarm jobs row would be seen as illegal state aid under EU regulations.
Canadian firm JV Driver, through its subsidiary company DF Barnes, took total control of BiFab, which has yards in Methil and Burntisland in Fife and Lewis, for just £1 two years ago.
The ministers’ support came by way of a commitment to effectively underwrite a contract to have a part in the £2 billion Neart Na Gaoithe (NnG) offshore windfarm project in the Firth of Forth to the tune of £30m.
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.
The yards had been operating on a skeleton staff of 30 with zero contracts but at its height employed hundreds.
With the collapse of the company, and without a takeover, it emerged the public purse could lose up to £52.4m which has been pumped into the company.
The Scottish Government, in a bid to save it from closure in 2017, provided a £37.4m bailout and converted it to its 32.4 per cent equity stake in the company.
According to official 2018/19 accounts, that stake was worth just £2m because of expected losses.
It would be worthless if the company goes into liquidation.
According to insolvency law, shareholders are the last class of creditor to receive a distribution from funds raised from an administration and they only receive money after everyone else has been paid in full.
A loan facility of £15m was also provided to support working capital. The Scottish Conservatives are calling for an urgent parliamentary inquiry into the BiFab collapse, and say an audit should be carried out.
BiFab announced on Thursday that it was entering administration after Scottish ministers ruled out nationalising the company and claimed it would be unlawful under state aid rule.
The move to rule out nationalisation contrasts with its moves to ensure that the shipyard company at the centre of Scotland’s ferry building fiasco was brought into ministers’ hands.
The Herald on Sunday has previously revealed the Government has faced questions about failing to notify the EU about nationalising FMEL after being found to have given £50m of “illegal state aid” to two airports.
Illegal state aid was found to have been made to Sumburgh Airport on Shetland and Inverness Airport after both airports received taxpayer support that had not been approved by the European Commission.
After details of the secret deals emerged, Islands Minister Paul Wheelhouse told a parliamentary inquiry that the Government would have far rather seen it as a private business and that the state takeover was in the public interest.
A Scottish Government spokesman said: “Nationalisation was considered but this could not resolve the challenges presented by state aid rules, and would still not have allowed for the provision of working capital or guarantees to the business.
“The key question in determining whether or not financial support would be possible is whether a market economy investor would do the same.
“Nationalisation would not have changed the requirement for the Scottish Government to comply with state aid rules.
“We will now work with the administrator and unions to secure a new future for the BiFab yards in Fife and the Western Isles, helping ensure they are able to diversify and compete in this market.”
Ministers felt that providing key support for the ailing steel fabrications company would be seen as illegal