MINISTERS have come under fire after it emerged it is risking £586m by way of a power-purchase guarantee related to a loss-making aluminium plant in the Scottish Highlands owned by commodities tycoon Sanjeev Gupta.

While the Scottish Government disclosed the existence of the guarantee in 2016, neither the government nor Mr Gupta’s GFG Alliance has made public its full value.

Now the Scottish Government after a lengthy Freedom of Information has confirmed the guarantee amount provided to safeguard jobs at Britain’s last-remaining aluminium smelter.

Built in the 1930s, the Lochaber smelter churns out 48,000 tonnes of aluminium a year and, according to its owners sustains between 100 and 200 jobs.

The agreement came when Mr Gupta’s GFG Alliance bought the smelter and two nearby hydropower plants from Rio Tinto in 2016.

It meant there was a 25-year guarantee to buy energy from the Lochaber hydro plants, should there be a shut down,  which varies between £14 million and £32 million per annum over the 25 year life of the guarantee. The Scottish Government say that so far there has been no call on the guarantee.

It also says it has taken a series of securities over assets of the GFG Alliance at Lochaber "plus other protections in support of the guarantee".

Ministers initially rejected disclosing the sum of the guarantee in February 2020, citing commercial confidentiality

They argued that the revealing the actual size of the guarantee could disadvantage Gupta’s company and help rivals calculate the size of the commercial sensitive information.

The Scottish Information Commissioner overruled the decision in September 2021.

Among those attacking the lack of transparency and the deal was Scottish Liberal Democrat economy spokesperson Willie Rennie MSP who said: “It looks like the Scottish Government have been taken for mugs by the GFG Alliance with financial backing worth £586 million in return for a handful of extra jobs.

“Lochaber was promised 2000 jobs as a centre of alloy wheel production but very little has happened since apart from the delight in the boardroom of GFG Alliance that they were able to drive a financial return from that multi-million-pound financial backing from the SNP Government.

“The lack of transparency and attempts to withhold information on this deal will also be a concern to the people of Scotland. How can they hold their government to account when that government is working in the shadows?”

The Herald:

Scottish Labour’s finance spokesman Daniel Johnson added:  “The SNP can pretend to be above the sleaze engulfing the Tories, but these astonishing revelations tell another story.  "

"Questions are piling up for SNP ministers about this dodgy deal, which they have desperately tried to bury.

“The SNP  urgently need to admit who signed off on this extraordinary arrangement – and why they spent two years trying to hide it from the public."

The Scottish government has previously stated it carried out appropriate due diligence with the help of accounting firm Ernst & Young LLP.

GFG is structured into three core industrial pillars: Liberty Steel Group, Alvance Aluminium Group and SIMEC Energy Group, employing around 35,000 people, across 10 countries, with revenues of circa $20bn.

Two weeks ago a report by MPs said that Mr Gupta should be investigated for potential breaches of his duty as a company director and said his leadership threatened the future viability of Liberty Steel.

Liberty Steel has, meanwhile, lurched through eight months of crisis after the March collapse of its key financial backer, Greensill Capital, triggered an ongoing attempt to find new lenders.

GFG, one of the UK's biggest industrial groups, was forced into an urgent financial restructuring while the UK government in March rejected its request for a £170m bailout because of its opaque corporate structure.

Liberty Steel was last month able to restart operations at its plants in Rotherham and Stocksbridge, both in south Yorkshire, after a partial £50m refinancing. However, the MPs on the business select committee said they still had concerns over the lack of transparency over the funding terms.

GFG said the company "takes note of the findings of the select committee. We will review and reflect upon its conclusions".

The guarantee relates to payments from the aluminium smelter- to an adjacent hydro power plant that supplies its electricity, both purchased by GFG in 2016.

The government guaranteed 80% of the value of a 25-year power supply contract between the power plant and the smelter.

A Scottish Government spokesman said:  “The Scottish Government’s priority is to support Scotland’s strategically important steel and aluminium sectors and the highly-skilled jobs they provide, while ensuring value for money to the public purse.

“In 2016 Scottish Ministers received the approval of the cross-party Finance and Constitution Committee to provide a guarantee of the Lochaber smelter’s power purchases. The guarantee does not require the Scottish Government to buy electricity.

“The amounts guaranteed by the Scottish Government vary between £14 million and £32 million per annum over the 25 year life of the guarantee. The Scottish Government has taken a series of securities over assets of the GFG Alliance at Lochaber plus other protections in support of the guarantee.”