Scotland's Economy

BiFab update

December 16, 2020 by Fiona Hyslop MSP No Comments | Category Economy, Uncategorized

Economy Secretary Fiona Hyslop said:

In 2016 the owners of BiFab sought to sell the business. At that point DF Barnes became involved in the process and achieved preferred bidder status.

The negotiations were paused when the managing director of BiFab sadly passed away. It subsequently became clear that BiFab would require external funding to be able to complete the works on the Beatrice offshore windfarm contract.

In 2017 Scottish government stepped in and provided a loan facility of £15 million.

In April 2018 the company was purchased by DF Barnes. As part of that deal Scottish Government agreed to increase its existing commercial loan facility to £41 million, to be used specifically for the completion of the Beatrice contract, and to provide a second loan facility of up to £10 million for restructuring and working capital requirements.

Ultimately £37.4 million of the original loan facility was used and, as agreed in the sale process in April 2018, this was converted to an equity stake of 32.4%. Subsequent loan monies provided by Scottish Government sit as a liability on BiFab’s balance sheet.

The financial support provided by the Scottish Government ensured that:

• the Beatrice Contract secured work at the 3 yards providing employment for around 250 permanent staff, with a further 1100 employed via agencies to support specific contracts at peak construction
• the Moray East Pin Piles contract securing 90 jobs in Arnish for around 8 months
• a Nigerian oil and gas contract from First E&P for work at Burntisland and Methil for 250 contractors

It was clear in 2018 that, to be successful, to secure and deliver new contracts, BiFab required working capital. It required appropriate assurance packages by the shareholders, and it needed investment at the sites.

However the majority shareholder made a commercial decision not to provide the support to the business in a way we would expect of a majority shareholder and as a result was unable to secure future work.

If the majority shareholder won’t invest then almost by definition investment by central government can only be seen as a subsidy.

Investment by government must be on the same basis as a commercial investor. When the pipeline of future work was adversely affected by SSE Renewables’ decision not to award the Seagreen work to BiFab, the commercial position changed.

I have been asked why we couldn’t invest at that time. This is simply because there was no prospect of a commercial return. A commercial investor would not have invested, so we were unable to do so.  By investing we would only have been providing subsidy with no prospect of a return. This fact is key to the state aid position.

As a minority shareholder, we have been exhaustive in our consideration of the options available to us to financially support BiFab. We have worked collaboratively with the United Kingdom Government to explore all options and we have not identified a legally compliant way to support the business.

Deloittes were appointed as administrators on Monday 14^th December.  We will  work with them  and trade unions to secure a new future for the yards in Fife and the Western Isles, helping ensure they are able to diversify and compete in this competitive market.

Scottish Government has engaged directly with the appointed Administrators to understand from them their current strategy and plans for the workforce in the immediate term, and to shape that to reflect our priorities for the workforce and the yards.

I have also agreed that Scottish Government will fund the Administrators’ initial work. This includes paying the workforce whilst a sale of business process is pursued should there be insufficient funds in the business to do so.  This will avoid any immediate redundancies and I’m sure this will be welcome news for the workforce.

We remain hopeful that a buyer willing to invest in the business will be found and we will work closely with administrators and trade unions to secure the best possible outcome for the workforce, the yards and local communities.

The Administrator is now responsible for all management and operational decisions at BiFab.

The Administrator will form their own independent assessment of the position of the company and will implement a strategy to maximise the return to all of BiFab’s creditors.

As a secured creditor with a considerable outstanding debt, the Scottish Government has a significant interest in the Administration process and will work closely with the appointed Administrator throughout the coming days and weeks.

The Administration process is governed by legislation and the Administrator is bound to act in the interests of all creditors.

The Scottish Government seeks a  positive future for the workforce and the sites  and stands ready to work with credible parties who share our objectives. The process of securing a buyer for the business is a process for the Administrator to manage.  We will of course work closely with the Administrator to support the marketing process in any way we can.

While the chances are receding, I would reiterate my desire to see the NnG contract fulfilled from these yards. I have written to Siapem on two occasions in recent weeks expressing my hope that the NnG contract for 8 jackets can still be completed in Scotland but I am aware that they have gone to the market to seek alternatives.

We are setting up a joint working group with the United Kingdom Government, to rally the collective efforts of Government around securing a strong future for BiFab’s sites. While that group must respect the live administration process, it will position both governments to stand ready to work with potential new investors.

Officials met with United Kingdom Government counterparts last Thursday to discuss the group’s terms of reference and membership, including how we involve key Scottish stakeholders. I remain keen that the voice of our trade unions is heard as part of this process, and will continue to press for that.

Our immediate focus is on delivering a sustainable future for the yards and the workforce.

We remain committed to supporting Scottish supply chain growth and to bringing inward investment opportunities to Scotland. This will  create employment and help build our economy by capitalising on our natural resources.

We have demonstrated that commitment with a series of initiatives.

The Renewable Energy Investment Fund, investing £70.3m in 39 companies, leveraging additional investment of £168.5m.

We have created a £62 million Energy Transition Fund.

The Green New Deal and green recovery is our coherent and strategic approach to Scotland’s transition to net zero emissions by 2045.

Nonetheless, we must do more.

The Crown Estate Scotland Scotwind leasing round must deliver benefit for the Scottish supply chain. This is an opportunity for Scotland that we should not miss.

Both Scottish Enterprise and Highlands & Islands Enterprise, will work in partnership with stakeholders and communities to ensure that resources are properly targeted to achieve a maximum impact for Fife, the Isle of Lewis and Scotland as a whole.

With a collective effort we can and must deliver for Scotland.

Beyond a purely Scottish focus we have been calling on United Kingdom Government to reform the Contract for Difference process and make greater use of Supply Chain Plans within that process. The United Kingdom Government should not award contracts solely on price, but should weigh the contribution of the bid to domestic supply chains to ensure a better outcome for us all.

Despite our efforts BiFab is now in administration.

My view is the best outcome is if the business can be sold as a going concern. For that reason, and to support the workforce, I have agreed to fund the administrators work in the short term, in the event that there are insufficient funds available in the business to do that.

Over the longer term we must pick up the opportunities and challenges offered by our Green New Deal to provide the best possible outcome for the yards and for Scotland.

Tags: BiFab

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