£100m gain for steel firm as ministers’ rescue deal scrutinised

A steel giant has made £100 million on its Scots plant after being underpinned by taxpayers while failing to deliver 2,000 promised jobs.

Metals magnate Sanjeev Gupta’s GFG Alliance bought the UK’s last aluminium smelter at Lochaber, Inverness-shire, and adjacent hydro-electric plant in 2016 in a deal underwritten by a £586m Scottish Government guarantee to buy energy from the hydro plants for the next 25 years.

At the time, Gupta claimed the investment could create 2,000 new jobs – only 50 additional workers have been hired.

The smelter and two hydro-electric plants were bought for £330m but newly-available documents reveal the assets are now worth £438m and, yesterday, Willie Rennie, the Scottish Lib Dems energy spokesman, said: “That’s quite a return on their investment which was backed by a £586 million SNP government guarantee. GFG Alliance are laughing all the way to the bank with the Lochaber smelter deal with the SNP government.

“The workers have been let down as have the taxpayers who have repeatedly funded the government’s failed industrial intervention policy. From BiFab to Ferguson’s to the Chinese deal and Lochaber, its record is a shocking one.”

He said ministers should now explain their plans to get GFG to stick to its promises on extra jobs.

The Scottish Government provided the £586m guarantee in December 2016 to allow Gupta’s family business to buy the smelter and two nearby hydropower plants from Rio Tinto. The magnate, dubbed “the saviour of steel,” hosted a lavish banquet at Edinburgh Castle to celebrate the deal while Nicola Sturgeon presented him with a special medal to mark the second anniversary of GFG’s involvement in Scotland.

However, the extent of the government’s support was only revealed in November after the Financial Times won a two-year freedom of information campaign as opposition leaders branded it a “dodgy deal” and Scotland’s Auditor General noted the deal and others, where the government had taken a “direct role in providing financial support to private companies”, had “not delivered expected outcomes and are unlikely to achieve value for money”.

Gupta’s GFG Alliance group, which says it remains committed to investing in the Lochaber smelter which remains profitable, is now under investigation by the Serious Fraud Office for suspected fraud and money laundering.

A Scottish Government spokesperson said: “The Scottish Government’s guarantee helped secure the future of the businesses at Lochaber. They are now operating profitably and have created 40 new jobs since 2016, increasing direct employment in the complex to 200 jobs while supporting a valuable supply chain with hundreds of associated jobs. The business remains committed to investment in the long term future of the site.

“There has been no call on the guarantee and the value of the security package held by the Scottish Government in relation to the Lochaber guarantee exceeds its financial exposure according to Treasury Green Book analysis prepared by independent advisers.

“The net present value of the remaining power purchase agreement revenue stream over the remaining 20 years is £286 million, while the companies’ valued the assets at Fort William at £438 million in their 2019 accounts.”