I welcome everyone back to this meeting of the Scottish Parliament’s Public Audit Committee. The next item on our agenda is consideration of the Scottish Government’s approach to financial interventions, with particular reference to the GFG Alliance arrangement at the Lochaber aluminium smelter.
I am pleased to welcome our two witnesses: Jeffrey Kabel, chief transformation officer at the Liberty Steel Group; and Helen Lambert, senior legal counsel at the GFG Alliance. You are both very welcome. Thank you for joining us—we appreciate it.
We have some questions that we would like to put to you, but, before we get to our questions, I invite Mr Kabel to make a short opening statement.
Good morning, committee members. Thank you for inviting me to discuss GFG Alliance’s businesses in Scotland.
I am the chief transformation officer of GFG Alliance and a member of the board of directors of the Liberty Steel Group, which is the ultimate holding company of all the global businesses. I have oversight of all the United Kingdom businesses and have direct management over the Lochaber businesses and lands in Fort William.
I am supported today by Tom Uppington, who is the managing director at Alvance British Aluminium and SIMEC Power. Unfortunately, Ruaridh Macdonald, who is the head of estates strategy and development at Jahama Highland Estates and manages 140,000 acres of Highland estates surrounding the smelting businesses, could not make it today. I also work closely with Gordon MacRae, the operations manager at Liberty Steel Dalzell, who is here today, and with Helen Lambert, who was introduced earlier.
I highlight GFG Alliance’s contribution to Scotland over the past 10 years. The business context in the UK and for GFG has been challenging for a number of reasons. I do not need to emphasise the impacts of Brexit and Covid nationally and globally. However, for GFG, there was also the well-known and well-covered collapse of our main finance provider, Greensill Capital, in early 2021. I was brought on to the board in May 2021, just after the Greensill collapse.
Despite those challenges, since 2016, GFG has provided tens of millions of pounds of funding in the Scottish businesses, through capital investment and operational and salary support. We remain fully committed to operating and developing our Scottish aluminium, steel and hydropower assets.
When I joined the business, one of my key priorities was to ensure that the smelter, hydro and our estates fulfilled their potential as unique integrated assets for sustainable manufacturing. On a recent visit, Sky News reported that it thought that the combined operations amounted to the largest factory in the world.
Our goal has been to optimise the water catchment collection areas of the estates, annualised reservoir hydrology levels and aluminium and electricity production levels. The split is determined by prevailing global, London Metal Exchange, aluminium and UK power prices, coupled with national grid balancing mechanism requests.
We were connected to the grid about three years ago. We provide a balancing mechanism for the grid when there are issues with wind and so on. We have made significant progress in developing the assets and, more importantly, the joint teams to collaborate. This remains our core global competitive match. I pulled the whole group together—the estates were run separately, and I pulled everything into one operation.
11:30
To that end, we will shortly provide to the Scottish Government for discussion a proposal for a substantial investment in an expansion project to complement and further enhance the national strategic value of the smelter. The estates of Jahama Highland Estates, which surround the smelter, are a huge part of our business in the Highlands and the local community, and we are making significant headway in supporting the growth of the estates. That work encompasses community and conservation support via commercial, recreation and tourism investments. The value that we are bringing has been recognised by the £2.3 million grant that was recently awarded to us by Scottish Forestry to carry out one of the largest woodland recovery projects ever to have been undertaken in the UK.
We have a very constructive relationship with the Scottish Government, to which we provide regular reporting and updates to ensure full transparency, and our vision for sustainable manufacturing complements Scotland’s wider industrial agenda. That working relationship is very strong, and I, personally, am heavily involved in it. About 40 per cent of my time globally is spent on the Scottish businesses. We are committed to partnering with Scotland to promote the Lochaber community and Scottish industry.
I want to reinforce the point that no public funds have been spent under the Lochaber guarantee. The Scottish Government continues to earn the expected income in the form of guaranteed fee payments from GFG Alliance.
Our Dalzell plant in Motherwell paused production in August 2024 due to poor market conditions, with the staff being placed on a furlough arrangement that was agreed with the unions. That important step by GFG Alliance allowed staff to be retained and put the business in a strong position to recommence operations. The company has plans to recommence operations at Dalzell to supply plate for naval warship building. GFG has been awarded a large contract by Navantia, and it has the opportunity to bid for more work in the near future. It is worth noting that in excess of £20 million of funding has been provided to Dalzell to ensure that employees can be retained and paid throughout the period.
Finally, even though I have been a citizen for 17 years and have lived in the UK for 23 years, I still cannot pronounce “aluminium” the way you do.
Thank you very much, Mr Kabel. To open, I would like to try to establish what the ownership structure of the site in Lochaber is. As I understand it, the SIMEC Group, which owns the hydropower stations at Kinlochleven and Fort William, is owned by PK Gupta, which is headquartered in Hong Kong, while Liberty Aluminium Lochaber Ltd, which owns the smelter, is owned by Sanjeev Gupta, whose company is headquartered in Singapore. Also in the mix is Alvance British Aluminium. Could you illuminate the relationship that exists between those different subsidiaries?
I might defer to Helen Lambert on that. Ultimately, they are all owned by the same owner, but the structure of the businesses when the company was acquired was such that they were put into those different buckets. However, I assure you that they are all run as one business.
So, there is one owner. Is there one director, or is there a board of directors?
There is one overall director of all the businesses. Underneath that, there is a sub-governing board.
I presume that the overall director is Sanjeev Gupta.
Yes.
Thank you. Given that you mentioned that full transparency is important to you, I am bound to ask—you will have seen that the committee has raised this on a number of occasions—why you do not have any auditors and have not lodged audited accounts. As you will understand, we are the Public Audit Committee.
Again, that is an issue that I took on when I came in. I was made a director of several of the companies, but not all the companies, which means that I am party to the discussions on Companies House, along with the other directors.
We have engaged with Companies House from the get-go on all our businesses. That process is progressing, and we hope to come to some arrangement. However, in the meantime, we have obtained auditors for the Lochaber smelter, for Lochaber Hydropower and for Dalzell, and we are completing the audits for those. Dalzell is a bit further behind Lochaber—I am sorry; I mean behind Alvance and SIMEC—but there are auditors in place right now.
When was the last time that you lodged audited accounts with Companies House?
I believe that it was in 2020.
It was in 2019-20.
It was a while ago.
That is a long time.
Yes.
Am I correct in thinking that you are the subject of prosecution by Companies House?
Yes, we are.
Is that for failing to lodge audited accounts?
Yes. The management accounts have always been completed for all of the accounts. The reason is that we had auditors in the UK that walked away, as you probably read about.
It was King & King.
Yes—the auditors walked away. That was very difficult, so, over the past couple of years, I have been involved in canvassing regularly to get auditors in. As I said, of the operating companies that we have now, half are already being audited. However, as Helen Lambert said, we have to go back to 2020. Why the audits were not done in between, I cannot say, as that was before my time. However, my goal is to get all the audits done as quickly as possible and to get them submitted when we can.
We actually tried to submit the accounts, but Companies House rejected them. It is well aware of my efforts to get auditors. However, I would say that we are on a good path right now.
When did you try to submit accounts that were rejected?
I believe that it was—
Which year’s accounts were those?
They were for 2020, and I believe that it was in August or September 2021. In fact, after that, Companies House actually posted Alvance’s accounts online, but it realised that there was a mistake and pulled them off—you probably read about that. We have offered to provide those all along.
As I understand it, the reason why King & King resigned as auditors was that it wanted to put a qualification on the accounts. However, Mr Gupta refused to accept a qualification on the accounts, so King & King walked.
I was not here when that happened, but, yes, I believe that there was a disagreement on that qualification.
Why has it been five years and you still do not have auditors in place?
Number 1, because of that issue. Number 2, because of Greensill Capital. Number 3, because of the Serious Fraud Office investigation.
Frankly, there is very little audit capacity out there. There are only four big audit firms, and they have all been fined immensely over the past however many years. That means that taking on a new large conglomerate is very difficult. I therefore went to each operating company. We got close on a few, but, because of those three issues, it was almost impossible to put that in place. That is all documented—me emailing and speaking with people to try to get them in.
Those were the three principal issues as to why. As I said, the accounts are done, but getting them audited is taking a bit longer, because we have to go back—in some cases four years—to get that done.
You have an internal audit function, though.
Yes, we do. As I said, the accounts are done internally, but getting them out and audited has been a challenge.
You mentioned the Serious Fraud Office investigation, which I think goes back to 14 May 2021, so it is a long-standing investigation. My reading is that the SFO usually investigates only what it describes on its website as the most
“serious and complex fraud, bribery and corruption cases.”
Is that what it is investigating here?
I cannot comment on the investigation. I can say that I am the correspondent, because I was not here when what the SFO is looking at happened, although I cannot say what it is looking at. I would say that the investigation has ebbed and flowed. It goes dramatically fast and then it slows down, and then it goes dramatically fast. There is quite a bit of engagement, and it is positive, and I think that both sides want a resolution one way or another. However, unfortunately, it has taken a long time. We have fully complied with everything that the SFO has asked for and we continue to do so.
However, it is a matter of public record that the headings of investigation that the SFO has are serious fraud, fraudulent trading and money laundering.
Yes.
Is the investigation only in relation to Greensill Capital, or is it about the relationship with the GFG Alliance?
I cannot comment on that. We do not exactly know. We are just at the end of section 2 letters requesting information.
So, you do not know what the charges or the suspicions are, because the SFO is at the stage of suspicion and investigation.
Yes. We could postulate, but we do not know. Sometimes, when we think that we know, the SFO goes in another direction. All that I know is that we are fully engaged. You are sitting with the person who receives the letters and works with all my internal teams and lawyers to make sure that the SFO receives the information.
Okay—you are the correspondent.
I am the correspondent.
Where does Mr Sanjeev Gupta sit in this?
He is the party, but the SFO needed someone to correspond with who is outside the system, which was me at the time. As I am on the board now and have coverage of the UK, which is where the issue that the SFO was looking at is situated, it was decided that I would be the correspondent.
I have one final question before I bring in the deputy convener. It concerns a historical issue that will have occurred before your time, Mr Kabel—perhaps Ms Lambert can help. A document that was produced in 2016 by EY—formerly Ernst & Young—on the business case for the arrangement between the Scottish Government and the GFG Alliance discussed the borrowings that the SIMEC Group had at that time, which were $21.3 million due to B&N Bank Russia; $25 million due to International Bank of St Petersburg, secured against receivables; and $34 million due to Greensill Capital Ltd, which was an unsecured loan. I take it that you no longer have financial relationships with Russian financial institutions. Is that correct?
I cannot comment on the past, because I do not recognise the position that you set out—maybe I should. However, I can say that we do not have financial relationships with Russian financial institutions.
You appreciate that we are in a situation where there are financial sanctions, prohibitions, asset freezes and so on in relation to Russian institutions.
Absolutely. When the Russians invaded Ukraine, because of the businesses that we were involved with, the Department for Business and Trade made quite an exhaustive effort in relation to the smelter and the steel plants, asking questions such as where we get our iron ore from—we do not buy iron ore—where we get our scrap from and where the raw materials come from for the smelter.
I am clear that, from that time, as you know, everything has had to be above board and kosher. Since my time, and particularly with regard to the Ukraine war, we have looked at everything in relation to the issue that you raise.
Okay. So, as far as that issue is concerned, you think that you are above board and kosher.
Yes—absolutely.
Jamie Greene, the deputy convener, has some questions.
:Good morning. Let us just put all this into context. The Auditor General does not produce these reports just for the fun of it; he usually does so when there are valid concerns or a rationale for investigating such things.
We have always had an interest in the Scottish Government’s interactions with your business, and we are aware of issues including the Serious Fraud Office investigation, which has remained live over a number of years; the issues that you are facing in your other site in Scotland; some of the other insolvency and liquidation proceedings that other parts of the business are going through at the moment, including quite a substantial administration in Australia that requires huge Government support; various international legal and regulatory investigations, such as the one in Romania into embezzlement and fraud; and your failure to file accounts or appoint auditors in the UK. It is just a big, long catalogue of misgovernance and poor practices. Please tell me in which way GFG Alliance is a fit and proper organisation to do business with in Scotland.
At the time of the original deal, in 2016, and subsequently, anyone who looked to acquire the Lochaber business would have shut down the smelter. Quite frankly, it is uneconomic. Even though it has low energy prices due to hydropower, it is small and it is far away. However, we came in and said that we would keep the smelter going, which we have. We have increased headcount by 40—we are now at 207. I know that we have had a couple of goes at different projects. I am the one who killed the previous two, because I thought that they were too expensive and did not create enough jobs, and the markets were very commoditised. Over the past couple of months, we have spoken with the Scottish Government in broad brushstrokes about the one that we are talking about shifting to. The investments have been there.
On top of that, we are still here, after all those things have happened. A lot of that is because I continually speak with the Scottish Government, our local MPs, the UK Government and the unions, and I tell them the good, the bad and the ugly, hopefully before it happens—I do not see everything that comes.
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At the end of the day, the two principal disabling issues since I have been here have been the Greensill issue and the SFO investigation, which, as you said, started a couple of months after I came in. Those are being addressed.
On the issue of other assets around the world, I think that there was the desire to save assets that, quite frankly, probably should not have been saved. Everything was done to get those assets going. We are making a success of some of them and we have failed with others. Do I regret having a go at doing that? In some cases, yes. However, the intention was to come in and save some of those assets.
On the assets in the UK, especially steel, we have injected £200 million in loss funding over the last four or five years. We had finally fixed that asset and we were ready to refinance it with BlackRock, but, at the end of the day, our creditors voted against it, and now it is sitting with the official receiver, which the UK Government is not happy about, because it is a good plant.
I am not obfuscating, but, yes, a lot of issues have been popping up. I cannot comment on them because they are on-going investigations. I know the Australia situation well, because I am on the board of InfraBuild—that is the meeting that I have to go to a bit later—and was just down there. I would say we poured a lot of money into that business and had a plan to convert to clean electric arc furnaces, but the gas that was promised by the state never arrived and there were no trade remedy authorities such as the ones that exist in the UK that would have kept out Chinese and Vietnam competition with regard to our production of billet. The situation was hampering our other businesses, because InfraBuild is probably the second largest producer of steel in Australia—it is a big construction business. Quite frankly, I am not happy about the situation.
In the US, we furloughed that facility for about six months, but it is now running fully. It has had some operational issues and has also been a big cash drain, but it has very good margins. A lot of people told us to give it up, but we did not.
Perhaps we should have given up on some of those assets earlier. However, I have always focused my time on the two assets in Scotland, and I will continue to do so. This summer, for the first time ever, we tested selling products from the Lochaber smelter to the US, and we are now selling half of our output to the US. That is not only because the margins are good because of the Trump tariffs, but because it makes good business sense to diversify our market beyond what we sell to the UK and Europe. I think that those sales to the US will continue, because, regardless of whether the US fixes its relations with Canada, the Americans are looking for a diverse supply. Further, that metal is the greenest in the world.
We run the Lochaber business very differently to the way in which others have previously. I am a trader, so I optimise the income and the flows of power to the grid as well as the amount of metal that we make. I will not put more pots on to make more metal unless I have seen a quarter forward of pricing that supports that. I am the one who killed the deals on the two projects that I mentioned earlier, and I did that because I did not think that they were going to work, as there was too much risk.
Dalzell is probably one of the best mills in the country right now. It produces plate, and, as I said, we have run a huge defence contract. It has been painful to keep the plant on furlough. I had to delay commencement again because we had to do some refinancing, which we are completing this week.
Given all of that, were we the best owner? I do not know, but I look at what is happening with British Steel, with Tata and with Celsa, which is changing hands, and I note that we are still here, for the most part.
Have we made mistakes? Yes. Are issues being investigated? Yes. Do I still think we are the right owner or partner for Scotland on the assets that we have? I would say yes.
:I appreciate your frankness on that, but you can see that the optics around this are absolutely dreadful.
Absolutely.
:Particularly when the Scottish Government is exposing the taxpayer to risk on the guarantees. I appreciate the value of that risk has come down over the years—we have seen some statistics around that and have had Government officials in to update us on that. That is a welcome and positive direction of travel, although there is still a huge amount of uncertainty about how much revenue the Scottish Government and, therefore, the taxpayer is earning from the deal—that is entirely opaque, I have to say.
Given what you have said, it seems to be a group of companies that just makes really bad investment decisions. Why would you invest in a business that is uneconomic? You are not a charity, that is for sure.
I will be honest with you. When I came to Lochaber—I am not criticising the management: you never do; they make decisions as they do—a lot of things were not managed properly. The estates were awful, but that is a small peanut in comparison. There was no grid connection and no desire to get one, but getting that grid connection changed the way in which we were able to manage that business. We export power when we do not need it to make metal. At the end of the day, the power is there to make the metal. When the smelter is running, it needs, I think, 56MW and we make 85MW. We take it down in the summer because of the heat, so as to keep the reservoirs at a certain level. We are looking at putting in battery storage alongside that. Unfortunately, because of our financial position, we could not rush as far ahead as I wanted to on those things.
My team, which was running the steel business in Sheffield, had fixed that business. It had been mismanaged for years, it did not make any money and the customers were not paying what they should have been paying for aerospace, defence and so on. BlackRock—the Scottish Government has met them—was our funder. It was the biggest funder in the world—it had funded our Australian businesses and our US business—and it was going to fund the new steps in speciality steel.
Over the past four and a half years, I have tried to make sure that I advise the Scottish Government and its advisers about the good, the bad and the ugly. There are some things that I do not see, but I think that these are good businesses.
:We have only heard from the Government about the good bits. Just out of interest, what are the bad and the ugly?
The bad and the ugly come from our end. Companies House is going to issue an administration—I warned the Scottish Government about it. When that happened in Australia, I did not know that it was going to happen; we were completely blindsided by it. We have had to do some other things in Europe and I always warn the Scottish Government about those. Over the past few years, I have kept it updated on an almost monthly basis about where the discussions with Greensill are and about settling the debt issue.
So, the Scottish Government has everything and it is very rare for it to say, “Oh, we’ve read this, and this is not good.” Sometimes that happens, although I do not actually know when it has happened. I have always tried to make sure that the Scottish Government is informed, because, at the end of the day, it is taxpayers’ money that is backing this. Not a dime has been drawn down—I do not expect that to happen, frankly—but I am a taxpayer and I understand that. I have a big issue with the south bailing out British Steel. It has had £350 million right now and there is still no strategy. There is still no strategy on what we left behind, even though we bid on it. I take that backing seriously. Even in relation to the woodland grant and the good things, we try to put it out there as a good investment, because I know that there have been some difficult investments up here.
:I appreciate that my line of questioning has come across as difficult, but, as you say, it is taxpayers’ money and we have a duty as a committee, as does Audit Scotland as an organisation, to unearth what that risk looks and feels like.
Is there a concern that, if you are unable to appease your creditors or recapitalise properly as a wider group of businesses, there is still a substantial level of risk to the Scottish Government and the taxpayer? Have you identified roughly what that risk might look like?
I do not think so. Frankly, the security that the Government has is more than covered by the assets. If we tipped over—but that will not happen. I cannot say that it will never happen, but I do not see it happening. The Government has constantly wanted to know where Greensill is at and who the funding is going to come from going forward. Because of the early issues with Greensill and the SFO, it has been a challenge to get funding, and it is really expensive to do that. However, at the end of the day, I think that your investment is secure.
With the changes since the invasion of Ukraine, we need to buy things closer to home and strategically—including steel, metals, plastics and other things—and there has been an increase in defence spending. It is also one of the greenest—if not the greenest—facilities in the world. Maybe four, five or six years ago, there was a big risk in relation to the smelter keeping going, because of its cost structure. However, right now, I am confident that it is secure.
In the last year, the number of joint ventures that have approached us to partner has been dramatic. That is what got us to look at sending the metal to America and other parts of the world. It is not just about the Trump tariffs; the world has shifted in relation to commodities.
:Have you ever lost out on new business opportunities simply because you did not have the capital funding for the raw materials?
No.
:On a more parochial point, without going into the commercial details of the deal that you made with the Scottish Government, I note that a public commitment was made to invest in the Lochaber site. I have seen various figures, including £70 million and £80 million. How much have you invested?
An account is set up to do that, and it has to be £70 million. The project that we are looking at is substantial—I cannot go into the details, because I have not shared the paper with the Government, but I assume that you will be able to access it at some point—and I see no problem whatsoever in funding it. The project that we are looking at is very similar to a previous one. It will create the same number of jobs, but it is more relevant to world demand for the product. It has a similar footprint, so it is not a case of going back to the drawing board or ground zero. If we reach agreement on the project, development will start quite quickly.
:There are a lot of ifs. Five years ago, you promised that there would be 2,000 jobs—
Quite frankly, I do not know where that figure came from. That was before my time—
:Someone must have made that claim.
They did. It must have been a guess. We cannot get housing for 40 new people—imagine trying to get it for 2,000 people, let alone for the constructors. I agree with you. I apologise, but I do not know where that figure came from.
:How many jobs do you think could be created in the local area? We all want economic growth in the area—I am with you on that—but I want to be realistic.
Not a heck of a lot. We are looking at another 10 jobs following the expansion, which will shore up the existing business. If we could put more pots on, we would, but we run things quite efficiently. We are not deploying any artificial intelligence—we cannot do that for our business. The work is labour intensive, but there will not be a huge increase in the number of jobs.
The bigger expansion in the number of jobs will come about from some of the things that I want to do on the estates. We are finalising our strategic plan in that regard.
However, I cannot see us squeezing a heck of a lot more jobs out of the smelting and hydro businesses. The investment that we will make will shore up and diversify the smelter’s product range and make it even more sustainable.
:Can you reassure me that you will not just walk away from all this?
I assure you that I will not walk away from this.
:Thank you.
I want to take you back to the downstream activities and ask about two things. At one point, it was anticipated that Jaguar Land Rover and Nissan would manufacture a million vehicles, or a million cars, which would equal 4 million wheels. As you said, you killed that proposal, and then there was the billet plant proposal. Can you explain your rationale for stopping 4 million wheels being manufactured?
The first one?
Yes—we will go for that one.
China. End of.
The transfer of manufacturing of cars to China?
No—the wheels are made in China.
Okay.
We had plans for a wind factory plant at one of our sites. We were going to build wind towers because we had a 140MW wind project in the works for Glen Shira. However, when I looked at the numbers, I found that it would not work, because wind towers come from Vietnam or heavily subsidized Denmark. Again, it comes down to energy issues and others.
On the billet plant, we did all the market studies and got letters of intent from offtakers, but the pricing was very volatile. The product is very commoditised. Other plants were coming online around the same time, so my fear was that once we got it going, it would be difficult to keep that market share, and the capital investment turned out to be much bigger than it was when we started looking at it. I was quite a proponent of that plant for a long time, but then we really got into the numbers in the markets. Until I came in, neither a proper market study nor an updated market study on the wheel plant had been done, so I took the decision that it was not a good use of funds.
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Related to that, one of the heads of terms of the agreement between the company and the Scottish Government, in part 6, is:
“No distributions would be made by the HydroCo or SmelterCo until”
a redacted sum of money
“is invested in an approved downstream activity.”
Has that term been met—that there has been no distribution?
No.
Okay. Thank you. I am now going to invite Colin Beattie to put some questions to you.
:I would like to explore more recent developments in relation to finance and so on. Excuse me if I jump around a wee bit on this.
Back in March 2021, when Greensill Capital went into administration, GFG Alliance needed to refinance debt of approximately £5 billion across its companies. That was refinancing the debt, not restructuring it. Does it still hold that it is refinanced rather than restructured? The debt in 2021 was £5 billion. What is it now?
That is still with the Greensill creditors. To use your term, restructuring was step 1, and step 2 was refinancing the business. The debt load, of which 99 per cent sits with the Greensill group of lenders, is still there. That is still being adjudicated. We were very close to settling at the beginning of last year, but that fell apart, pretty much because of issues that happened in Australia, so we are still in the process of negotiating how that will come out.
We have funding vehicles, as I think I mentioned, in the background—BlackRock being the first one. It is not cheap money, quite frankly. I think that we are paying interest of 15 or 16 per cent; we should be paying 9 or 10 per cent, but that is what we have been borrowing to keep the businesses going. A bunch of other smaller financiers are lending to us, but those two issues—Greensill and the investigation—have hindered our ability to deal with the situation. However, that is a lot less the case than it was two or three years ago. The board has recognised that, frankly, the lending was too concentrated into one group. It was moving away from that, but what happened, happened.
We have tried to keep many of the businesses going, but some could not meet the high cost of debt that we brought in later on. That situation is on-going, but with regard to bringing on new money—although it is not a huge amount, and it is very caveated—we are in a much better place than we were even a year ago. That is why I say that we do not have that issue with the Scottish businesses—Dalzell and Lochaber—because of where they are and because of the actual product that they make.
:The original amount that needed refinancing was £5 billion. Has that increased?
No.
:It is still—
It will be reconstructed, as you say.
All the funding, other than what I have mentioned, has come out of equity. As I said, the money that we put into the UK to keep Speciality Steel UK going and the funds going into Lochaber and Dalzell have been equity capital.
:You mentioned the optimism back in February 2025 that an agreement had been reached with the creditors of Greensill, which was subject to final binding legal agreement. However, from what you say, the settlement did not happen.
Perhaps that explains the issues around Liberty Steel, because that was going to be restructured and fresh capital was going to be put in. I am going on the basis of newspaper reports. I seem to recall that there was an issue with Liberty Steel in relation to providing steel under a contract—I think that it was a naval contract—because it did not have the capital or the cash flow to pay for the raw materials to produce the steel. Am I remembering that correctly?
That was Dalzell. The Navantia contract—for a long time, we could not say who the contract was with, because it was a Ministry of Defence contract—took 10 months longer to award than it was supposed to. The markets were terrible for plate. Finally, the UK Government put some trade remedies in place to keep out Korean plate. We did not want to restart the plant until that contract was awarded. We were not sure that the contract was going to come, but we were pretty sure, because it had to be plate and it had to be UK sourced, so we thought, “Hello? That’s really only Dalzell.” That happened much later. We were awarded the contract, and we purchased the first shipment. I had a financing vehicle lined up, but it got the jitters towards the end of the year—first, because what was happening with British Steel was being not sorted out, and, secondly, because of what happened with our business, Speciality Steels, in Sheffield.
We do not have that issue in the aluminium business because it is a different animal; it can be hedged on the London Metal Exchange. Right now, there is an issue, although that is actually not so much about us any more as it is about UK plc and British policy on metals. However, we have secured funding for Dalzell. We are papering it right now, so I expect the plant to be up and running in the next three or four weeks, once we procure the metal—the slab feedstock—from British Steel into Dalzell. It has been a challenge. However, once it gets going—we have a couple of other interested parties who want to take metal from the plant—it will go, so I am confident. A lot of this is a bit on a knife edge. It was supposed to be nailed down at the end of last year and it has fortunately bled into February, but I am confident that we will get it going.
: I want to get this clear in my mind. Going back to the investigation that is under way, which must cast a shadow over things, how many companies are involved in the issue?
I cannot disclose that. I am sealed on anything with regard to the investigation. All that I can tell you is that it is on-going and we are fully engaged. We respond very quickly to anything that is asked, and I am the corresponding party, so I am not telling you that second-hand. I am telling you as the one who is zipped as far as saying anything. I am not trying to obscure anything, but we cannot talk about it.
:I understand that it is a live investigation. How many companies are involved in the refinancing process?
Greensill has interests in many of the businesses, just because of the structure of multiple countries and multiple jurisdictions, and energy businesses, steel businesses and metal businesses. However, at the end of the day, it all rolls up to the fact that there must be a global settlement, so it will not be done piecemeal. That is what we have been working on since day 1, frankly. We were close to having the process done in February, but, unfortunately, what happened in Australia set off a chain reaction with regard to how that was going to be structured and funded. I hope that, in the next few months, we will be able to come back to settling with the Greensill people.
:My next question was going to be whether it would be individual or across-the-board refinancing.
I think that it would have to be done across the group.
:Do you have any idea when that might be concluded? It is obviously a major issue.
I cannot tell you how many letters I have sent out—agreements in principle, which you have seen. I think that it will either be in the next few months or towards the autumn.
:Do any of the global entities involved provide any security or guarantees in relation to the Scottish firm or the guarantee entered into with the Scottish Government?
That is all in the detail of the commercial arrangements, and I must admit that I am not entirely sure whether I am able to disclose those in a public forum.
:Linked to that, are any of these entities still subject to refinancing?
I cannot comment on that.
:That would obviously impact on the Scottish Government.
I look at the businesses as one, regardless of the structure. At the end of the day, there is one shareholder. Obviously, we look at the businesses regionally and fund them regionally through the arrangements that I have described, but the overall operation is managed at a global level. The goal is to make sure that all of that is sorted as part of the restructuring and the refinancing.
Graham Simpson has some questions to put to you.
:Do you think that the alloy wheel plant will ever happen?
Here?
:Yes.
No way.
:There is no chance of that happening.
No chance.
:Right. What about the aluminium billet factory?
As I mentioned earlier, we are looking to pivot to another project, which I have not fully formally briefed the Scottish Government on.
In my view, given the capital cost of putting in what I would call a commodity business, which would have a lot of competition and would involve lot of price fluctuation, billet production would not be a good business for a smelter in northern Scotland to get into. Although we cannot say that the project that we are looking at now will be fully immune to that, it will be pretty immune to it, because a lot of the product will go to the UK.
:Do you mean the product from the new project?
Yes.
:So whatever will be made there will be sold largely in the UK.
Yes, that is what we are planning on.
:But you are not going to tell us what the proposed project is.
Let us just say that it is infrastructure driven.
:Infrastructure driven? How curious.
I gotta give you something, right?
:So whatever you make there will be used to build things.
I do not know whether you have been up there, but that facility, which was built in 1929, is a feat of engineering. The answer to your question is yes.
:Okay. What about the port facility at Corpach?
It is still operating—it supports the businesses.
:What about the canned mountain water business? Did that ever happen?
I killed that.
:You killed that. Why?
I did not see the point of it. Again, we are talking about a very small commodity business. We are not in the retail business.
:Okay.
How many people are employed at Lochaber?
Two hundred and seven.
:Right—207. You said earlier that you do not see that figure rising by very much.
No. We have added 40 employees since we took over the business. The second two projects will add about 10, but they will shore up the diversity of the smelter’s products.
:To go back to the mystery big project that you alluded to, when do you think that we will get an announcement on that?
We have to go through the proper channels with your colleagues in the Scottish Government. We have briefed them on what we are looking at and the reasoning for the pivot. We have set out why we should go that way, but I am not going to say that it is done. We need to properly stop the first project before we can begin the second one. Because it involves such a similar footprint as far as the machinery and the various requirements are concerned, it will not involve a big change.
How long that process takes is up to the Scottish Government, but I hope that it will be completed sooner rather than later. We have done most of the engineering, as well as the market studies, so there are not many boxes that I have to go back and tick. The planning permission might need to be tweaked, but it is already there. The new project will not go on peatland. The other one did, which caused its own issues and costs. Therefore, I am hopeful. In fact, the document is sitting on my desk. I need to get it across to the Government, but I hope that we will be able to move on that in the next couple of months.
:Do you need the Scottish Government’s go-ahead for the project?
Yes.
:Right at the start, you mentioned a woodland project. Can you tell us a bit about that?
We already do quite a bit of reforestation and peatland restoration, and we have a full staff for deer management. However, the issue is that, in the past several years, not necessarily our estate but some of the adjoining estates have not properly accomplished deer management, and that is causing a big problem with some of the forests up in that part of the world. We are replanting and restoring peatlands and, frankly, we will need to reduce the deer population in the next several years. The issue is the same as we are seeing other parts of the country and in other parts of the world. It is unfortunate, but to be blunt, if you go up there right now you will see that the impact is visible.
12:15
:You said that you got a grant to do that work.
It was awarded just last week.
:How much was the grant?
It was £2.3 million over five years, I believe.
:That is to plant trees and—
It is for everything that I have mentioned. It is also heavily monitored by the forestry conservation commission, or whatever it is called.
:Forestry and Land Scotland.
Yes.
:I also want to ask about Dalzell, which is in the region that I represent. If I was to go into Dalzell tomorrow—I have been in the plant but it was a few years ago—what would I see? I presume that nothing is happening at the moment.
It got going again in December and did a couple of runs but, with regard to the funding to procure the next trains, we had to pivot to someone else. The opening ceremony will probably be at the beginning of May. I want to make sure that the plant is running so that, when we bring people up, they can see it running. The start is imminent. As soon as I finish up with this funding, which will happen at the end of this week and the beginning of next week, we will procure the metal from British Steel and it will take about four or five weeks to get the plant running again.
We have a contract—
:That is what I was going to ask you. You have definitely got the contract to make plates for warships.
Yes.
:And that is from—
It is from Navantia.
:Is it for British warships?
Yes. It is a Ministry of Defence contract with Navantia, which bought Harland & Wolff, and that was part of the reason for the delay. We expect to be able to bid on more, because that is just one part of the contract, and others are queuing up to have us bid as supplier. I am confident that, once we get going, we will be able to service those contracts and then look at the general domestic market and the American market, because the margins are quite good for plate.
:What staffing do you have at Dalzell and do you foresee it growing? [Interruption.]
Mr Kabel is required to answer the questions.
It is 107 and we will probably add another 10 or 15. The thing is, as with any of these things, it is a ramp up. If we get to full output, which is the goal at the end of the day, that will mean more people. I do not know what that number is, but Gordon has run those. Apologies for referring to my colleague who is not at the table.
:Is Clydebridge one of your facilities?
Yes.
:What is happening at Clydebridge at the moment?
Originally, it was going to house our factory to make wind towers, but, as I said, when I dusted the plans off and looked at them again a couple of years ago, I saw that the project would not work from a competition standpoint.
Right now, we are close to a significant development project for that site. We are working closely with Scottish Enterprise on that. There has been a bit of back and forth with those who we are working with on it, but I hope that, in the next couple of months, we will be able to announce what is going to happen with that site.
:Will that be something that involves Liberty Steel Group rather than you selling the site?
I expect that we will probably sell the site, but we might keep an interest in it, because what goes there might be something that we look at doing at other sites around the world.
:That is all very interesting. If you plan to have an opening ceremony at Dalzell at the start of May, you might want to wait until after the Scottish Parliament elections on 7 May, so that you can invite local MSPs.
We will.
:I might be one of them—you never know.
We have pretty much come to the end of our time. My final question takes us back to the start. The Auditor General described the arrangement at Lochaber as a “complex transaction”. We are interested to understand whether it is a unique arrangement or whether you have seen such a power purchase model—the guarantee and reimbursement agreement—anywhere else.
I have seen such arrangements in multiple other places—not in the UK, but in the developing world, America and other parts of Europe. They are usually used for industrial assets, because it is in the interests of taxpayers and constituents’ interests, as well as in our strategic interests, to ensure that such assets are kept in use. Such approaches do not always work, but that was the intention that they had at Lochaber at the time, which I think was correct. The intention at the time was—and still is—to invest and ensure that operations continue.
Okay. The deputy convener has one very last, short question to put to you.
:The first one is to ask for clarification on the alloy business that went to China. Was that a business that you owned or did it go to a competitor?
No. We were not involved in it in any way. To use the wind tower project as an example, we bought the plant—the gold‑plated one that was built in Wales—and dismantled it. The components were sitting in shipping containers in Clydebridge, and then the market fell out.
I think that there is only one tower plant left in the UK. There were going to be several because of all the wind power demand—there still is that demand. The UK should have such plants, because we have the plate mill down the road and we have the estates to build them. That was the thinking, because we have the pieces, but that particular piece just did not work. I was not at the company at the time, but the wheel plant was not feasible.
:We build ships and wind turbines, yet we import 70 per cent of our steel from overseas, so we have an indigenous market that is not being used to its full extent. What is your advice to the Government?
I hope that a steel strategy will be set out soon. I sit on the UK Government’s steel council, and I ran the International Steel Trade Association for a while outside of my main job. At the end of the day, we still have the right people in place. We also still have the demand, although it is not huge and what we make is mostly high end.
The business that we unfortunately lost in Sheffield is an aerospace defence business—it is still not running. Some other businesses are viable, such as the Tata ones that supply Jaguar Land Rover, but there are a couple of big issues. First, there is no strategy—that was also the case with the previous Government. A strategy is supposedly now promised, so I will not blame the Labour Government for that, but energy costs are the highest in the world, and steel is a very intense business.
Despite those energy prices, we were going to make Speciality Steels UK and Dalzell work, because they make specialised products. In some cases, it is not a huge investment and the money is there for us to do that work, but there has to be a road in place in order for us to go forward. As I said, our assets are the right ones, which is why we will continue to invest in them.
:Thank you.
Thank you for your frankness and for your time this morning, Mr Kabel. Let me put on record my apologies that the committee kept you waiting. I hope that you do not miss your flight to Australia.
I will get on the phone with them now.
Thank you for your very useful evidence. I also thank Helen Lambert for being here. We will now move into private session.
12:24
Meeting continued in private until 12:58.