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Holyrood’s Gupta guarantee has some ragged paperwork attached

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Who needs an auditor anyway?

Seemingly not embattled metals magnate Sanjeev Gupta, whose aluminium smelter in Lochaber has recently filed a puzzling set of accounts.

Alvance British Aluminium, based near Fort William and bought from Rio Tinto by Gupta’s GFG Alliance in 2016, is the company at the centre of a high-profile and controversial £586mn guarantee from the Scottish government.

The guarantee underpinned a piece of financial engineering masterminded by Greensill Capital that enabled Gupta to acquire the last remaining aluminium smelter in Britain in 2016. The Sunday Times recently reported that the Indian-born industrialist contributed just £5 of equity to complete the £330mn deal.


Unusually, Alvance’s accounts for the year to March 2021 are unaudited. Even more unusually, the accounts show the firm paid £66,520 for an audit, despite the absence of any audit opinion.

Alvance has previously used King & King, an obscure two-office firm that has worked for numerous GFG companies, to go over its figures. But in May the Financial Reporting Council said it was investigating King & King in relation to audits of four companies, including Alvance’s accounts for the year to March 2019.

The numbers in the latest accounts are not pretty. Pre-tax losses swelled to £4.05mn, compared with a loss of £122,601 in “restated” figures for 2020. Losses were due to high raw material prices and lower demand for its products, although demand has increased “significantly” since the coronavirus pandemic, wrote Alvance.

Following the collapse of Greensill Capital, which was the main provider of funding to GFG, Gupta admits “significant doubt” about Alvance’s ability to continue as a going concern, although he adds he is “optimistic” it can find funding as its performance improves.

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There are plenty of other puzzling features of the filing. Gupta’s signatures on the accounts, for instance, are undated. Also, while results list “restated” figures for the prior year to March 2020, Alvance has never filed separate accounts for this year with Companies House. This may have something to do with the fact that Alvance lengthened its accounting period in March 2020, before switching back to the original reporting period days later:

The accounts also lay bare Alvance’s reliance on sales to related parties.

They reveal that in the year to March 2020, a whopping £19.5mn of its sales — nearly one-third of that year’s total revenue — were to Liberty Commodities Limited, Gupta’s metals trading outfit. The FT revealed last year that Liberty Commodities raised financing through Greensill using suspect invoices that raised suspicions of fraud, while also booking large trades with a loose network of related companies insiders dubbed the “Friends of Sanjeev”.

While it booked no further sales to Liberty Commodities in 2021, Gupta’s trading firm still owes Alvance £6.4mn.

The restated 2020 figures (the ones for which no separate accounts appear to exist) also contain a mysterious “waiver of related party loan” worth nearly £6.7mn for Alvance.

The filing is likely to make for uncomfortable reading for a Scottish government that has already come under considerable pressure over the guarantee.

“This is another worrying sign about the underlying health of the smelter plant at Lochaber,” said Willie Rennie, MSP and former leader of the Scottish Liberal Democrats. “The SNP government must now be open about the financial agreements with GFG Alliance and report to parliament with urgency.”

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“The public has a right to understand how and why this deal was ever signed off”, said Daniel, a Labour MSP and spokesman on the economy and finance.

Under the 2016 deal, Holyrood guaranteed 25 years of the smelter’s power purchases from a hydropower firm owned by Gupta’s father. In return, the Scottish government receives an annual fee, while it has also taken security over the smelter, the hydropower plant and some land.

However, in December the Scottish government revealed a £161mn provision against the guarantee. And in its audit of the Scottish government’s accounts, the auditor general said the Lochaber deal was one of a number of instances of financial support that “has not delivered expected outcomes and is unlikely to achieve value for money”.

The smelter was “impacted by the Covid-19 pandemic in 2020” but “is now trading profitably”, said a spokesperson for the Scottish government. The government’s “intervention to support the Lochaber aluminium smelter has preserved strategic industrial capacity and supported the livelihoods of hundreds of people”, they said, adding that GFG’s fee payments are up to date.

A spokesman for GFG said the submission of the accounts “has been impacted by the disruption caused by the collapse of our main lender Greensill Capital”, adding that “we continue to negotiate a consensual debt restructuring” and that submitting unaudited accounts was “an interim step”.

“The Lochaber smelter is performing profitably despite the impact of high energy prices and our plans to nearly double capacity on site with a new recycling and billet casting plant remain firmly on track,” said the spokesman.

The UK government recently withdrew guarantees from £400mn of loans Greensill Capital made to companies linked to Sanjeev Gupta, after an investigation found breaches of the terms of an emergency coronavirus lending programme. This included a £50mn loan to the Alvance’s parent company, Liberty Industries UK, whose registered office is also at the Lochaber smelter. This company has not filed any accounts since December 2019.

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Readers may remember that the size of the Scottish guarantee was only revealed following a near two-year Freedom of Information battle by the Financial Times, when the Scottish Information Commissioner ruled in the paper’s favour last year. (Alphaville has previously documented how the Scottish government turned down the FT’s FOI, despite knowing that if the case went to the commissioner then it was likely to lose).

For Gupta, meanwhile, the results are merely the latest instalment in a lengthy series of bad news, after his business empire was plunged into crisis following the collapse last year of Greensill Capital, the main provider of funding to GFG.

The group, which is the subject of criminal investigations into alleged fraud and money laundering in the UK and France, has made little headway in refinancing the $5bn it borrowed from Greensill. Over the past year it has lost control of two continental European aluminium facilities to a US buyout group. And a judge ruled that creditors could go-ahead with a court bid to shut down three of his UK companies, a move that would hit large swaths of the metals magnate’s British operations and put hundreds of jobs at risk.

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