- Friday, April 26, 2024
By: Chandrashekar Bhat
GFG ALLIANCE’S acquisition of the Lochaber aluminium smelter was facilitated by a £586-million guarantee provided by the Scottish government, the Financial Times said.
GFG, led by commodities tycoon Sanjeev Gupta, took over the smelter along with two nearby hydropower plants from Rio Tinto in 2016.
According to the agreement, the Scottish government guaranteed 25 years of power purchases by Gupta’s company from a business owned by his father, the newspaper said after nearly two years of freedom of information battle over the size of the taxpayer’s gross liability.
It was speculated earlier that the guarantee was around £575m and the government had refused to divulge the information citing commercial confidentiality.
The deal had support from political leaders in Edinburgh as it raised the hopes of a revival of the metals industry in the UK and the creation of 2,000 jobs.
According to the report, GFG attempted to secure another guarantee from the Scottish government but the proposal was turned down by Holyrood.
Greensill Capital funded the takeover of the smelter and the deal also marked the beginning of the supply chain finance company’s backing of big-ticket acquisitions by GFG over the next few years. However, the collapse of Greensill, in part due to default by GFG on debt repayment, meant Gupta’s business empire faced severe financial difficulties.
While a British parliamentary committee recently raised governance issues in Gupta’s business, French authorities reportedly launched a probe over allegations of “misuse of corporate assets” and “money laundering”.
Lochaber aluminium smelter was set up in 1929 by the British Aluminium Company. However, the firm was merged with the British division of the Canadian company Alcan in 1982 to form Alcan UK. The business was further merged with Rio Tinto before GFG took over the smelter, which is now Britain’s last such facility.
Although the prices of metals surged before recent corrections, manufacturers are not helped by the high energy costs which are eating into their profits.
