Scottish Government stand to lose cash handed over in loans to Prestwick Airport, Ferguson Marine and BiFab

The Scottish Government is unable to declare any returns from investment by way of interest payments or dividends from the multiple loans given to all three.

Meanwhile it has emerged the value of what it has forked out  to bail out Bifab and Prestwick Airport has plummeted to a tiny fraction of its original value.

According to official 2018/19 accounts, the equity value of a £37.4m loan to Bifab reduced to just £2m because of expected losses.

Debts totalling £39.9m as a result of a Prestwick Airport bailout remain outstanding. In its 2018/19 annual accounts, Transport Scotland said the value of the loan had reduced by £33m to just £6.9m to reflect expected losses.

Some £5m in interest was owed after ministers ploughed £45m into Ferguson Marine over two years but it has been confirmed that not a penny was paid, after the shipbuilder fell into administration in August last year before being taken over by the Scottish Government.

The interest payment brings to £45m, the amount owed over the collapse of FMEL having used £7.5m of their debt to mount a state takeover of the company.  According to financial papers ministers will expect to get some money back from the FMEL's collapse, but administrators have been holding just £8.4m for potential distribution to creditors.

Canadian-owned Bifab, with yards in Arnish and Fife, received a total of £37.4m in no-interest loans between 2017 and March, 2019.  That has been converted to shares in a process which started in April, 2018 and eventually gave ministers a 32.4% stake in the company.

But it has been confirmed that the Scottish Government has so far yet to receive any dividends.

It has been confirmed a further £9m was advanced to Bifab in 2019/20, which is struggling to win contracts in a separate loan which is due to attract 18% annual interest.

But ministers have so far been unable to account for how much if anything they have received.

And it has been confirmed there there has been zero return on the £39.9m ministers of past loans put into Prestwick Airport to keep it afloat.

John O'Connell, chief executive of the TaxPayers' Alliance said: "It's incredibly worrying that millions of pounds of taxpayers' cash could go down the drain - money that could be used to support vital frontline services.

"We all want to see local industries prosper but the Scottish government shouldn't be trying to pick winners and losers. Putting public funds at commercial risk is far from guaranteed to be a winning formula.

"The best way to help businesses flourish is by reducing the burdens placed on them. Cutting taxes and slashing red tape would be a boon to many entrepreneurs."

The Scottish Government says it needed to intervene with Ferguson Marine and Bifab as both were strategically important businesses and that their actions saved hundreds of jobs.

The 'battle for Bifab' protests

The Scottish Government has been criticised on its handling of the state takeover of Ferguson Marine, after a secretly negotiated deal emerged which formed the pathway to a state takeover involving waiving £25m in performance bonds that acted as an 'insurance' against the company going under and not being able to complete two lifeline ferries.

State-owned Ferguson Marine's delivery of two lifeline island ferries MV Glen Sannox and Hull 902 have been delayed by a further six months as a result of the coronavirus pandemic - while the cost of project has doubled from the original £97m fixed price contract.

The further delays means that the delivery of both ferries, which were due online in the first half of 2018, will be between four and five years late.

The Herald on Sunday previously revealed that ministers had ensured there was a "right to buy" of the owners of the last civilian shipyard on the Clyde year in 2018 when giving FMEL a £30m loan, knowing it was creating a path to state ownership.

Bifab employed about 2,000 people across its two yards in Fife and one on Lewis during peak production on its contract for the Beatrice offshore wind farm  and builds equipment for the offshore oil and gas industry as well as platforms for offshore wind turbines and tidal generators

The Scottish Government's first loan of £19m to BiFab to allow its completion came in 2017 but has struggled to win big contracts since the firm's 2018 acquisition by Newfoundland-based firm DF Barnes.

The loan value was turned into equity in the company the day after DF Barnes took it over on April 17, 2018 - but its value has since slumped.

The company was rescued from the brink of administration by the £37.4m but after it was purchased by Canadian firm DF Barnes, hundreds of jobs were shed.

It has been at the centre of a row over Scots jobs losing out on wind farm revolution jobs after sixteen more staff were laid off in January amidst continuing questions over a major multi-million offshore wind farm contract.

It took the workforce at Bifab to below 100 as work on oil and gas fabrication parts for the Niger Delta winds down.

The Herald understands that there are still no final decisions made over whether Bifab, would get a cut of the action in the creation of one of the country’s biggest offshore wind farms, the £2 billion Neart Na Gaoithe (NnG).

It had been hoped it would get a key contract to build the 54 steel foundation jackets which anchor the turbines to the seabed. It had been proposed that eight might be built in Scotland with the rest being constructed in south east Asia.

The SNP administration has come in for a series of criticism for its interventions in taking over some private sector enterprises.

It paid £1 to buy Prestwick airport in 2013 and has ploughed tens of millions of pounds into the Ayrshire hub since then.

In November 2013, the Scottish Government purchased Prestwick Airport with the stated aim of protecting jobs and safeguarding what it considered to be a strategic infrastructure asset.

As at 31 March 2019, the Scottish Government's level of loan support to the Airport totalled £39.9m.  The debt remains outstanding.

In June 2019, the Scottish Government announced that the sale of Prestwick Airport was being progressed, in keeping with its long-term objective that the airport should be returned to the private sector.

Transport Scotland anticipated that a sale may be achievable by the end of 2019/20.

No date has yet been set to complete the sale, with delays being put down the coronavirus pandemic.

It has emerged there is an interested party and that a timeframe for discussions has been extended.

Two years ago Audit Scotland told ministers that it had to stop handing secret loans to private companies with little accountability.

It said that a rule book should be drawn up outlining when the government should offer financial backing to companies, rather than leaving it to politicians' impulses.

In an analysis last year of the Scottish Government's accounts for 2018/19, the Auditor General for Scotland higlighted that ministers had not yet developed a "clear framework" to outline its approach to financial interventions in private companies.

A Scottish Government spokesman said: “We are committed to openness and transparency for the public resources we use to support the Scottish economy and the framework for Scottish Ministers lending to businesses is set out clearly in the Scottish Public Finance Manual.

“As Audit Scotland recognised, the Scottish Government undertakes appropriate due diligence prior to any commitment of funds to support Scottish businesses and this continues throughout the lifetime of the support.

“We informed the Scottish Parliament’s Finance Committee of the loans to both BiFab and FMEL.

“In addition, we published new guidance last year that specifically relates to investment in businesses by Scottish Ministers. This guidance reinforces the existing extensive framework of legislation, economic policy, procedures, practice and expertise that guides and supports sound decision-making on financial interventions involving private companies.

In terms of value for money at Ferguson Marine and Bifab, the spokesman went on: “We have saved Ferguson Marine from closure, rescued more than 300 jobs, ensured that the two vessels under construction will be completed and secured a future for the yard.

“The delivery of the vessels is critical to supporting the lifeline ferry network by adding two new badly needed vessels to the Calmac fleet – and there is no guarantee whatsoever that this could have been done any cheaper elsewhere.

“We are clear that this Government will back the shipbuilding industry in Scotland – and that’s exactly what we have done.

“BiFab is a strategically important business and it was essential that we helped it avoid the threat of administration. The Scottish Government is in regular contact with the company, investors and relevant parties in our work to ensure a strong, sustainable future for BiFab and creating jobs in the longer term.”