How Scottish Borders Council (SBC) gambled with at least £2.4 million of taxpayers’ money, lost it, wrote it off, then mounted a concerted campaign to conceal hundreds of documents, emails and letters linked to the financially disastrous episode from public scrutiny.

A Disturbing Story of CoverUp and Incompetence at Scottish Borders Council Researched and written by Bill Chisholm, Jedburgh.

PAGE ONE - A DISTURBING STORY OF COVER-UP AND INCOMPETENCE Researched and written by Bill Chisholm, Jedburgh. How Scottish Borders Council (SBC) gambled with at least £2.4 million of taxpayers’ money, lost it, wrote it off, then mounted a concerted campaign to conceal hundreds of documents, emails and letters linked to the financially disastrous episode from public scrutiny. EXECUTIVE SUMMARY NOTE: The vast majority of this information has been assembled in the course of a two and a half year investigation which SBC has consistently tried to frustrate and hamper. From 2008 onwards Scottish Borders Council was faced with an urgent environmental/financial issue. Time was beginning to run out on their practice of land-filling the vast majority of some 40,000 tonnes of waste per annum generated by households across the local authority’s territory. Previous attempts (well documented) to devise a credible waste management strategy for the Scottish Borders had failed, and in 2008/9 elected members of SBC were being told by senior officers that to ‘do nothing’ and continue to landfill rubbish at the Easter Langlee disposal site on the outskirts of Galashiels was no longer an option: rapid, and potentially expensive action was required. It was decided to award a 24-year waste management contract, valued at between £65 million and £80 million to a firm of specialists which would include the development and construction of a “cutting edge” treatment facility at Easter Langlee at an estimated cost of up to £23 million, depending on the specifications. The plant was to be built in two stages over seven years. A conventional Mechanical Biological Treatment [MBT] centre would divert up to 80% of Borders rubbish from landfill. Then, at a later date once technological processes had proven themselves to be commercially viable an Advanced Thermal Treatment [ATT] facility would be added. This would have the capability of converting waste into energy to power local homes, factories and public buildings with surplus electricity being sold off to the National Grid. SBC would receive some of the profits. A team of environmental, financial and legal consultants was assembled to advise SBC. Following a lengthy procurement process it was announced in March/April 2011 that the contract had been awarded to Dorset-based New Earth Solutions Group (NESG), a company which had never worked on a project in Scotland before. The losing competitor was Shanks, a business with vast experience in the field of waste management throughout the UK. But the release of highly confidential documents during the course of 2016/17 following SEVEN separate applications to the Scottish Information Commissioner to overturn refused Freedom of Information requests, shows the project had hit funding and technological problems by January 2012, only nine months after the contract was handed to NESG. These issues proved insurmountable, but the council granted NESG generous contract moratoriums which allowed the undeliverable project to squander hundreds of thousands of pounds of public money until it had to be abandoned in February 2015.

PAGE TWO -Letters from NESG to SBC in January 2012 claimed the stand alone MBT could no longer attract bank funding. Money for the Easter Langlee scheme was supposed to come from either the Co-op Bank or from NESG’s partner, the Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund [NERR]. But changes in the Scottish Government’s waste disposal policies were allegedly proving tricky and unattractive to financiers, according to NESG, and an alternative way of delivering the Borders project would have to be identified. Following months of unsuccessful negotiations between NESG and the council’s Project Team it was finally decided to recommend a very major alteration to the contract to combine the MBT and ATT in a single phase development. This has to be viewed as an extremely high risk strategy for one simple reason. NESG’s brand of ATT – named NEAT Technology – was completely untried and untested in 2012. For the record it remains problematical and unproven in 2017. And the release of sensitive documents dating from 2012 shows the NEAT system had not even completed its journey through research & development testing in October 2012 when members of SBC sanctioned the so called Deed of Variation [DoV] at a private meeting even though this could have been construed as commercially unfair to rival bidders Shanks. The DoV was to make little difference. NESG was heavily in debt to banks and to NERR whose directors had a major stake in NESG and were basically keeping New Earth Solutions afloat by providing a total of £39 million to that company. This arrangement/mortgage was concluded in September 2011, and the paperwork is available for public scrutiny at Companies House. At the same time NERR’s parent company Premier Group (Isle of Man) Ltd [PGIOM] was picking up millions of pounds each year in fees for managing and promoting NERR to 3,500 unwitting investors and shareholders. The managing shareholders of Premier Group were entities based in the offshore tax haven of British Virgin Islands. SBC appears to have been completely unaware of the complex financial arrangements involving NESG, NERR and PGIOM. The council has also confirmed it was unaware of many alleged complaints made about the conduct of Premier’s array of investment funds, including NERR, to the Manx regulatory authorities, and to the UK Financial Services Ombudsman from 2004 onwards. The problems and apparently insurmountable technological and financial issues facing NESG and SBC dragged on through 2013 and 2014 without a brick being laid at Easter Langlee. A selection of documents, many of them heavily censored by SBC before release, give a patchy view of what was happening on a month to month basis as the project staggered on.

PAGE THREE - Details of a high powered visit by a large delegation of Borders councillors and officers to NESG headquarters in Avonmouth, near Bristol in October 2014 are extremely sketchy as SBC claimed when asked for reports on the trip that nothing had been written down. But representatives of the Borders press were given the impression the visit had been extremely worthwhile from a “due diligence” point of view, and the elected members had been impressed by what they had been shown. SBC firmly believed it was on the right track to become Scotland’s leading waste management authority. Unfortunately there was a different behind-the-scenes scenario which suggests Borders councillors were completely deluded. By now NESG was virtually insolvent; the NEAT technology continued to misfire, NERR had still not come up with the £23 million needed to build the Borders project, and Scotland’s environmental watchdog SEPA (Scottish Environment Protection Agency) was still refusing to sanction an operating permit for the combined MBT and ATT because of unresolved issues. Four months after the expensive trip to south-west England a press release issued by SBC in February 2015 contained the shattering news of the contract’s complete collapse. The statement declared: “Since the contract was signed in April 2011 there have been significant changes with regard to Scottish waste policy and regulation, and project-specific issues in terms of technology and funding.” No further details were given despite the complete failure to deliver a crucial facility, and the squandering of millions of pounds of public and private money over four years. On top of that SBC’s waste management strategy was in tatters yet again with landfill deadline day looming. From the publication of the press release on February 19th 2015 SBC was determined to pull down the shutters on Project Easter Langlee to cover their own backs and to prevent anyone from exposing their sheer incompetence and risky decision making. The Borders public deserved better. FIGHTING THE COVER-UP I was personally annoyed and dissatisfied that my local authority could treat its citizens in such a cavalier manner, and I was determined to investigate this disastrous chapter in the annals of Borders local government after being told SBC had decided to simply write off their losses and move on. The only way to get at the facts would be via Freedom of Information (FOI) requests although I realised this avenue was bound to be littered with pitfalls and obstacles. Requests would have to be carefully worded to guarantee some chance of a worthwhile return. And questions to the council would have to be divided up into numerous sections to avoid refusal by breaching the £600 cost ceiling allowed for each request. The first FOI was aimed at discovering the true scale of the financial loss to taxpayers as even this basic information remained a closely guarded secret. Surely details of what had been spent on the aborted contract should have been published as a matter of routine. Not in the secretive world of local government.

PAGE FOUR - My FOI 7651 received a response in April 2015. It claimed the costs involved during the lifetime of the contract totalled £1.968 million (exclusive of 20% VAT), most of the money having gone to highly paid consultants, most notably Edinburgh law firm Brodies who received £679,000 for specialist legal advice even though the project was a complete failure. In-house staffing costs were given as £356,400. There was to be additional costs associated with post-contract expenditure. My own feeling is that the true losses linked to the NESG debacle were considerably higher than this but unfortunately I have to accept what SBC has told me. The response from SBC contained the following sentences which indicated how they would resist further requests for information: “You suggest that ‘now that the contract and the project have been abandoned the issue of commercial confidentiality no longer applies.’ This is factually incorrect. The confidentiality clauses pertaining to the contract remain in place for six years after termination of the contract.” So I’d have to wait until 2021 for full disclosure. However, the loss of a substantial sum approaching £2.5 million surely warranted further investigation. I half expected an announcement from Audit Scotland, the nation’s public spending watchdog, that it would be launching an enquiry into the affair. But announcement came there none, and my own repeated requests for their intervention have all been rebuffed. I have copied Audit Scotland into correspondence throughout the investigation. Unfortunately their email to me dated May 26th 2017 illustrates their attitude towards SBC’s multi-million pound loss of public funds: “Thank you for forwarding the decision by the Scottish Information Commissioner, regarding Scottish Borders Council and its waste management contract. “This information has been shared with the external auditor of the council. After full consideration of the content of the decision, they are content that the audit work previously completed by the external auditor of the council showed that the council followed a reasonable process in the procurement of the waste management contract. “We believe the key judgement for the council was whether continuing with the contract would have seen even more public money lost. It is our opinion that the council came to a reasonable judgement in terminating the contract when it did. “We do not deny that a loss of £2.4m is a poor outcome for the council. Therefore as part on the 2016/17 annual audit of Scottish Borders Council we will be reviewing whether the council have identified any ‘lessons learned’ through their review of how the waste management contract was managed. Any significant findings will be reported to the council in our Annual Audit Report. This will be available on the Audit Scotland website by October 2017.

PAGE FIVE - “In your correspondence you state your view that the commissioner’s findings represents clear evidence of a deliberate cover up. Although we do not agree with this view, we continue to encourage councils to be as open and transparent as possible with the information they hold.“ During the early stages of my own investigation I also attempted to enlist interest from Scottish politicians and from Scottish parliamentary committees. No luck there either. A £2.4 million gamble with public money did not merit anyone’s attention. Shining a spotlight on bungling councillors of virtually every political hue and holding the incompetents to account might be disadvantageous for all of the parties involved, so avoid such scrutiny like the plague appeared to be the stance taken. It seemed all that was left would be a one-man campaign to uncover as much information as possible and have it published in a bid to at least embarrass those responsible for the losses. That’s pretty much how it has panned out. The council started to reject my FOI requests in late 2015. In each of seven successive cases information was withheld on “commercially confidential” grounds and after subsequent requests for reviews of decisions I had to take each case individually to the Scottish Information Commissioner. In the majority of applications for decisions the SIC found in my favour, and in at least a couple of the Commissioner’s reports the SBC arguments in favour of either keeping documents secret or redacting those they offered to release were demolished and heavily criticised. It is worth reproducing just some of the findings outlined by Acting Scottish Information Commissioner Margaret Keyse in Decision Notice 100/2017 issued in June 2017 as they demonstrate how flimsy the council’s arguments in favour of secrecy really were. The Commissioner's conclusions “The Commissioner recognises that the Council made a significant investment in the integrated waste management project in the belief that it would resolve some of the waste disposal issues in the Scottish Borders Council area. The Council and NESG expended considerable effort, time and money to ensure the project was a success. If the project had completed successfully, it would have increased the Council's household recycling performance by an estimated 2.6%[15]. However, the contract was terminated on 19 February 2015, leading to the Council having to write off at least £2.4 million. “The Commissioner accepts that there is significant public interest in understanding what steps the Council had taken to ensure that the project was robust. There is a strong public interest in understanding the measures that the Council had taken in order to limit its financial exposure in a project which had been on-going for four years and had involved substantial sums of public money. “In the Commissioner's view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the Council, the basis for those actions and decisions, and the reasons why the project failed. As noted above, the project had involved many years of work, and substantial sums of public money. The integrated waste management project would have had a direct effect on the residents in the Council area.

PAGE SIX - “The Commissioner has given weight to the particular circumstances of this case, which incurred the Council investing substantial time, money and resources, in a project that ultimately did not come to fruition. In these circumstances, the Commissioner finds it is legitimate for the public to seek to understand what happened, and in the public interest for this understanding to be as complete as possible. “The Commissioner accepts that there will be cases in which it is in the public interest for postcontract discussions and project discussions to be kept confidential. However, in the circumstances of this case, the Commissioner considers that the public interest in understanding the Council's role in the project is stronger, for the reasons outlined above. “Having considered all of the representations made by Mr Chisholm and the Council, the Commissioner has concluded that, even if she had found that disclosure of the information would, or would be likely to, prejudice substantially the confidentiality of commercial or industrial information in line with the exception in regulation 10(5)(e) of the EIRs, she would have found, in all the circumstances, that the public interest in making the information available outweighed that in maintaining the exception.” All seven decision notices can be found on the Scottish Information Commissioner’s website, reference numbers as follows: 185/2015; 069/2016; 078/2016; 097/2016; 220/2016; 061/2017 and finally 100/2017. So the process of forcing SBC to release documentation has taken well over two years because of the need to divide up requests which are all linked to the same subject but would not pass the FOI test on cost grounds. This has involved many hours of additional work preparing applications for the Commissioner and dealing with necessary requests from SIC for more evidence or clarification. Meanwhile SBC staff and their legal experts must have devoted countless hours in dealing with seven separate SIC investigations as they sought to defend their corner and keep those sensitive reports out of sight. Perhaps a FOI request asking for details of costs incurred by SBC over the course of the seven cases might be justified! At the end of the day with NESG bankrupt, NERR in liquidation and PGIOM in the process of being dissolved there can be no commercial confidentiality argument for a continuing cover-up of this tawdry affair. Every document on the SBC Waste Management Project file must be published. However, that is clearly not how SBC sees it. The last of my successful applications to the SIC was concluded on June 28th 2017 when Ms Keyse issued her decision completely in my favour. The council was given until August 14th 2017 to comply – some six weeks. But they delayed releasing the documents they had withheld until August 11th, waiting until virtually the last day allowed before obeying the orders of the Commissioner. An earlier release of the information would not have proved difficult. I originally requested the material in early 2016, and following their refusal to make copies available on two separate occasions my SIC application was lodged on August 5th 2016.

PAGE SEVEN - During that same month SBC was asked to send the SIC the withheld information – 86 documents among 200 relating to the case. So it is clear the council had sorted through and assembled the requested reports at least a year before they complied with Decision 100/2017. They could have been sent to me within days of the June 28th decision, but SBC – as they did on previous occasions – decided I could wait for the maximum period allowed under SIC rules. Little respect there for Freedom of Information. REVELATIONS AND ISSUES THROWN UP BY THE INVESTIGATION SBC undoubtedly wished to draw a line in the sand under the New Earth affair as soon as the highly embarrassing decision to terminate the useless contract was taken in February 2015. Their attitude towards my series of FOI requests proves that beyond any reasonable doubt. But information they have been forced to give me on the instructions of the SIC has penetrated the wall of silence and has shed some light on many worrying aspects of the council’s dealings with a group of financially unstable companies and funds. However, it is impossible to complete the picture without full disclosure. Here are some of the points requiring full investigation: 1. NESG TRACK RECORD AND CONDUCT - NESG was a relatively inexperienced player in the waste management industry, and had little if any knowledge of environmental rules and regulations governing waste disposal in Scotland, including SEPA’s rigorous process before issuing operating certificates. Information I obtained showed how NESG became so frustrated over delays in the sanctioning of a permit for the ATT aspect of the Easter Langlee project that they suggested SBC and others should put pressure on the independent environmental watchdog to achieve the desired result. This surely amounted to totally unacceptable and unprofessional conduct. 2. SURETY FOR SEPA - In the very early stages of the contract SBC had to provide financial security in the sum of £315,000 to SEPA on behalf of New Earth Solutions (Scottish Borders) Ltd., the ‘ special vehicle’ set up to deliver the Borders project. The council refused to tell me why this was necessary on grounds of “commercial interests”. The SIC disagreed and told SBC to give me the information I had asked for. It transpired that NES could not acquire £315,000 of insurance without incurring costs which would have had to be passed back to the council “nor can they afford to hold the capital aside to cover this requirement”. So a contractor involved in a multi-million pound scheme didn’t have £315,000 to spare. Surely alarm bells should have been ringing at SBC. Did anyone ask questions about such a worrying issue? 3. THE STATUS OF NERR & PGIOM - Information obtained during the course of my inquiries has confirmed that SBC were completely unaware of many complaints lodged by investors and shareholders in the NERR fund and against its parent company PGIOM. These businesses were crucial to the successful delivery of Easter Langlee, and SBC was told £6 million per month was pouring into NERR from eager ‘green’ investors.

PAGE EIGHT - The truth was that any money reaching NERR’s coffers was either being used to prop up NESG (£39 million in total) or being siphoned off by PGIOM managers and controllers in fees (£12.027 million in 2014 and £10.748 million in 2013 while the Borders contract was ‘live’). The impression is given that SBC accepted at face value what NESG and NERR were telling them. Even in the early years of the contract (2011) NESG was recording sizeable financial losses. Liquidators Deloitte appointed to investigate NERR by the Isle of Man Financial Services Authority soon discovered almost 3,500 investors and shareholders in the fund would get none of their money back. Deloitte is currently considering the possibility of pursuing third parties in a bid to recoup cash and NERR has insufficient resources to even pay for its own liquidation. PGIOM is also in the process of being dissolved. How did SBC become involved with such unstable offshore entities? 4. DEED OF VARIATION – Perhaps the most important reason for the collapse of the project, and the most puzzling issue to emerge from SBC’s web of secrecy. Within a matter of months of the original contract being signed NESG was telling SBC the MBT plant was undeliverable because it could not attract bank funding as a stand-alone project. How much had changed in such a short period of time? Why were MBT facilities being developed elsewhere in the UK? Did anyone at SBC ask? In October 2012 members of SBC decided (in private, naturally) to radically change the terms of their contract with NESG to include ATT using so-called NEAT Technology, NESG’s very own brand of gasification and pyrolysis to convert rubbish into electricity. The councillors must have realised they were taking a huge gamble. Apparently they were labouring under the impression NEAT could install them as champions of the Scottish waste disposal league table. But in fact the technology had not even started its arduous journey through development trials at NESG’s R&D centre in Canford, Kent. How was any financial institution likely to put up £23 million under those circumstances? What persuaded SBC’s elected members to sanction NEAT when the technology was not commercially proven and funding was not guaranteed? Each member who voted in favour of the DoV must be asked to explain their reasoning, and officers and members of the Project Team who recommended this risky course of action also need to provide a detailed public explanation. In an interview published in the Journal of the Chartered Institute of Waste Management in October 2015 - AFTER the SBC/NESG contract was shredded, and THREE YEARS AFTER the DoV was rubberstamped - Richard Brooke, the commercial director of NES, confirmed that the form of technology which had been planned for Easter Langlee was not commercially ready in late 2014. So why did SBC sign up for it in October 2012? Brooke’s reference to the Borders project reads as follows: “The development in Scotland that would have been New Earth’s sixth facility did not come to fruition for a variety of reasons, most notably the drop-off in the quantity of residual waste requiring treatment; and the specific energy technology to be built and operated was not ready to bring online on a commercial scale.” This amounts to a damning indictment of SBC’s decision making. In actual fact this form of ATT technology remains unproven in 2017 while a similar system installed at another NESG facility in Avonmouth, Bristol has proved so troublesome the entire plant has had to be closed down to allow radical remedial work to be undertaken. It is hoped to reopen the ATT there in 2018.

PAGE NINE - 5. MONITORING OF PROJECT BY ELECTED MEMBERS – There is virtually no mention of councillor involvement in the Easter Langlee project in any of the documents SBC has volunteered to give me or in the many more released on the orders of the Scottish Information Commissioner. Minutes of meetings should provide a full picture of the role played by our elected members, but incredibly, during my inquiries I have been told on more than one occasion that events were not formally recorded. Therefore written documents containing information about the ill-fated scheme do not, in many cases, exist on the council’s ‘New Earth Solutions’ file. I would submit that such an admission of sloppy record keeping should be worthy of investigation on its own. A classic example of this cavalier approach towards the (non) minuting of meetings came to light after I submitted a FOI request seeking information about the council’s large delegation of elected members and officers who made a “fact-finding” trip to NESG headquarters at Avonmouth in October 2014, just four months before the Easter Langlee shipwreck had to be abandoned. No fewer than 18 of the most powerful members and officials of SBC made the trip (including an overnight stay) at a total cost to taxpayers of £3,939.35. In public statements following their return to the Borders they made it clear they were pleased with what they had seen and were convinced SBC was “on the right track”. When I requested a list of the questions asked and answers given at a briefing session this is what I was told: “There was then a question and answer session with NES so that Councillors could get a detailed understanding of the delivery strategy, technology development, permit and funding. No information is held on record in respect of the questions or answers provided. Only the presentations are held – which are commercially confidential, a redacted copy is attached.” I went on to ask for copies of reports generated before and after the visit. Here’s the reply from SBC: “Subsequent project reports, minutes and emails make reference to the visit but were not generated specifically as a consequence of the visit. Again the content of these documents contains commercially confidential information and cannot be released.” This repeated failure to maintain written records which appears to have permeated much of the four-year liaison between SBC and NESG may be a convenient way of avoiding public scrutiny. But it also runs totally counter to the local authority’s own Information Governance Policy. That document states unequivocally: “Scottish Borders Council is committed to creating, managing and keeping records that document its principal activities. Information must be processed and protected diligently, lawfully and ethically through good data security, accurate information and informed openness.” One can only assume those high-minded principles ‘went out of the window’ in the case of the Easter Langlee shambles. Or perhaps the failed Easter Langlee project is not regarded as one of SBC’s “principal activities”. In fact the visit to the Avonmouth facility may well have been a complete waste of time and money. The misfiring steam technology there was different from the system which was to have been deployed in Galashiels. The 18-strong team carrying out ‘due diligence’ should, according to some experts, have been 67 miles from Avonmouth - in Canford - where NEAT was on trial.

PAGE TEN - Councillor David Parker, the local authority’s leader, told the Border Telegraph in October 2014 (following the visit) the Avonmouth trip had been “valuable and illuminating”. “The integrated WTF is a really big deal for our council as it will transform the way we deal with our waste and help us comply with our zero waste obligations,” he told the newspaper. “It also involves a major investment, in partnership with NES, which requires councillors to carry out due diligence and, in that respect, the trip was necessary. I am satisfied after our visit that we are on the right track and confident that the WTF will be up and running before the 2019 contract deadline, hopefully by mid-2017.” Contrast that upbeat declaration with DUFF & PHELPS ADMINISTRATORS’ REPORT on New Earth Solutions Group July 2016: Paragraph 2.8 – “In October 2014 (the same month in which the Borders delegation was briefed by NESG) the Group carried approximately £159 million of debt, with £37 million due to the Banking Group (Co-op) and £102 million to New Earth Recycling & Renewables [Infrastructure] PLC (NERR) which was subordinated to the Banking Group’s debt. A further £20 million was also owed to Macquarie Bank with a request for further funding. Funding from NERR was suspended in 2014 and Co-op was requested to step in to provide financing.” In other words the due diligence carried out by Councillor Parker and his colleagues managed to miss the fact that NESG was completely insolvent long before the contract was terminated. The cashstrapped company was, to all intents and purposes, incapable of delivering the Easter Langlee project a year if not more prior to February 2015. Did anyone examine the company’s books? What information were the expensive financial consultants [hired at a cost of £146,000] giving SBC about their contractor’s economic well-being (or lack of it)? 2013’s NOTIFICATION OF A TWO-YEAR DELAY The project had been beset by problems and issues from the very outset thanks to a combination of undeveloped technology and the absence of the £23 million to pay for it. Among a collection of 80 reports, emails and other correspondence which SBC released in August 2017 on the SIC’s orders were details of yet another delay of two years of which notice was given by NES in late 2013. The NEAT trials in Canford were going extremely badly, and after a catalogue of excuses the contractors finally admitted there was no prospect of commissioning the Borders plant until July 2017 although even that date could prove to be ‘ambitious’. Here’s how the council’s own consultants reacted to the news – although the council seemed content to allow matters to drift on. SLR Consulting (technical experts) wrote: “In summary it is difficult for SLR to understand whether there is a reticence to try to develop because; data attained does not show the process favourably; if operational issues at Avonmouth are taking priority or are showing some fundamental issues with the technology; if the technical team are capable of addressing and managing the problems to an expedient solution.”

PAGE ELEVEN - And financial advisers Nevin Associates were more forthright in their correspondence with SBC following the latest test failure at Canford: “This may have been the final incident that convinced NES to come clean and admit that there was no chance of implementing NEAT on a commercial scale in 2014. “This could leave us hanging on the outcome of the Canford trials, over which we have no control, and if those were to fail or (more likely) take longer than anticipated to succeed, then we would still potentially be exposed to the risk of having no treatment solution in place for the Council’s residual waste. “It is imperative that momentum is not lost and that NES show evidence of continued commitment to the project, otherwise we may have little option but to pursue a Plan B to avoid the risk that the Council fails to achieve ZWP regulatory requirements.” NES had already been granted a so-called ‘contract moratorium’ giving them extra time to solve the various problems dogging Project Easter Langlee. Surely council members should have stepped in and ordered an end to the fiasco in December 2013. That would have avoided a 15 month period up to February 2015 when tens if not hundreds of thousands of pounds of public money continued to be squandered without any progress being made. But yet again councillors appear to have been conspicuous by their absence. CONCLUSION – Those who take the trouble to read this report are free to draw their own conclusions. In my opinion Scottish Borders Council - at the very least - was grossly incompetent in its stewardship of substantial sums of public money. SBC was equally inept in the management and administration of a £23 million building contract, work on which had not even started after almost four years of dithering and interminable delays caused by a model of technology which had never been commercially proven, and by an inability to secure funding for construction. The fact that no-one will be held to account for the entire debacle is regrettable and disgraceful. FOOTNOTE: The following pages forming an appendix to this report are items of correspondence included in a large collection of reports, emails and letters all of which Scottish Borders Council classed as “highly sensitive” or “commercially confidential”. The four examples selected date from 2013 and 2014, and there are many more in similar vein. They illustrate some of the technological difficulties which hampered and delayed the failed project throughout its four-year lifetime. There is also the occasional update on funding options, none of which ever came to fruition.

From: Matthew Webb [mailto:[email protected]] Sent: 27 November 2013 16:03 To: Doyle, Ewan

Cc: Chris Cox; Robert Asquith Subject: November ARE report

Ewan,

Please find attached the ARE report for November. It covers the permit, ATT development and grid connection. I will be in touch regarding dates for meetings in the New Year.

Regards

Matt

For more information on our services please visit: www.newearthgroup.co.uk This email and any attachments are confidential and may be privileged or otherwise protected from disclosure. If you are not the intended recipient you must not copy this message or any attachment or disclose the contents to any other person. If you have received this message in error please contact us at the address below or by email at [email protected] Any files attached to this email will have been checked by us with virus detection software before transmission. You should carry out your own virus checks before opening any attachment. New Earth Solutions Group Ltd accepts no liability for any loss or damage which may be caused by software viruses. New Earth Solutions Group Ltd is registered in England and Wales: No. 4368018. Registered office: Key House, 35 Black Moor Road, Ebblake Industrial Estate, Verwood, Dorset, BH31 6AT

This email has been scanned for email related threats and delivered safely by Mimecast. For more information please visit http://www.mimecast.com

From: Tom Callaghan [mailto:[email protected]] Sent: 22 November 2013 13:35 To: Doyle, Ewan; Tony Yates Cc: Diarmid Jamieson Subject: Canford Visit and NEs update

Ewan/Tony,

As discussed during our recent visit to Canford the following is intended as a report and update for internal SLR parties whilst providing a summary of findings during the visit to Scottish Borders.

The visit was a progress update and coincided with the receipt by Scottish Borders of a letter from New Earth indicating a potential 2 years delay to the project whilst a demonstrator facility was built at the Canford site and was proven leading to a construction programme at the operations site with commercial start date given as July 2017.

The justification given for the delay is the financing requirement to demonstrate a significant operation through from front-end to final engine exhaust as an integrated facility demonstrating utilisation of heat recovery and efficiencies of operation throughout.

This follows on from an unsuccessful attempt to reinstate the 120-hour testing programme last week wherein a new issue was determined and explained as being in connection with over-drying of feedstock and loss of sealing plug in the feed system which in turn leads to a safety issue for the process.

The proposed new demonstrator facility will potentially be capable of handling 8-10ktpa through a single pyrolysis/gasification system with gas conditioning and clean-up and ultimate gas engine to electricity conversion. Feedstock will be derived from existing sources on site and other sources with materials potentially being shredded and dried only prior to processing.

As a part of the justification the implication is that NERR financing is more risk averse due to issues emanating from the Avonmouth facility failure to meet targets and some scepticism perhaps with regards to anticipated outputs. Indirectly it was reported that the facility at Avonmouth operates at up to 75% of targeted performance and perhaps reading between the lines this may also be at the sacrifice of availability although this was not officially confirmed by NES.

One major aspect of the New Earth development is the fact that the trials appears to be pushing throughput to 1.7tph but not achieving more than 5-6hours of operation at a time. Whereas it might be seen as more prudent to achieve steady state operations for a 120hr period on a known feedstock and to then trial and test what limits and or boundaries are available from subsequent trials.

The latest attempt failing due to the loss of the sealing plug which has ‘never before’ been an issue for the plant. The feedstock was over dried (although this fact was not known until after operation of the process had begun (and presumably failed) based on reported timescales for sampling and analysis in parallel with operational trials.

In a large part the team seem to assume that operations are achievable and are content to test and trial variables assuming that they must achieve maximum flexibility of the process – this may be a plausible and worthy approach the original 120-hour test due in April has not been achieved in more than 6 months. SLR has indicated that perhaps any test showing that the plant can run and operate for 120-hours would be favourable whereas current distraction to alternative issues of fine tuning and maximum flexibility is irrelevant if the basic operation cannot be attained. This in turn raises a question as to whether the operations team are technically the optimum mix to develop and to resolve issues or whether they will continue to be slowed by seemingly minor issues when they have not demonstrated the basics as yet.

NES were requested to complete the risk matrix data which they have been reticent to do as they feel this may be read in a less than favourable light – it was pointed out that the complete absence of any data shows no progress at all whereas some data will show a modicum of progress at least.

NES indicated that there was a target of April 2014 at which point they would be committing a design concept to purchase and initiate purchase contracts and construction would commence in July 2014. The overall programme of 12 months to commence commissioning is an arbitrary one for the plant – and was suggested there would be float within this. Between Oct 2015 and Feb 2016 the target was for 2000 to 4000 operational hours leading to an ability to commit to financial close for the Scottish project in Early 2016. It was pointed out that pant operation indicated as July 2017 could jeopardise RO certification and NES indicated that they would look to bring this to March 2017 for operations to commence. Overall the programme seems to be very loose and SLR should question its accuracy and the ability for NES to be able to firmly guarantee anything with respect to meeting the proposed targets – especially in light of an inability to demonstrate 120-hours operation on the simplistic test facility within the past 6 months plus.

NES were unable to provide any confirmation with regards to any conditions imposed by their own test facility finance which might be required before their project commencement date of April 2014 although this might link to demonstration of 120 hour test with the current test rig. In a brief meeting with Scottish Borders after the visit SLR suggested that it might actually be appropriate to set a series of targets to NES which may then show commitment and progress for all parties if met i.e. 120-hours test facility running with gas engine operation prior to Christmas 2013 and a subsequent test to demonstrate operation with 120-hours of gas engine running time perhaps by mid or late January 2014. Repeated tests with other key parameters might be considered i.e. 200hours operation or specifying the feedstock type/blend etc… This along with completed Mass and energy balance data will provide a much clearer picture and understanding of operations and the prospect for operations going forwards.

Whilst there are a range of detailed comments which could be made with regards to the focus on minutiae of details; i.e. whether the process can run with materials ranging in dryness from 10% to 30+% and, achieve the desired plugging characteristics; whether the plant will process 1.7tph or 1tph (design basis originally quoted); whether the process blending of fines and regular feedstock undertaken to meet near the projects ultimate feedstock range is appropriate; all of which are irrelevant and cannot be assessed without some quantitative data to demonstrate that the current test scheme may have potential and/or shows progression in its development.

In summary it is difficult for SLR to understand whether there is a reticence to try to develop because; data attained does not show the process favourably; if operational issues at Avonmouth are taking priority or are showing some fundamental issues with the technology; if the technical team are capable of addressing and managing the problems to an expedient solution. The request for data which NES has indicated that will provide will help to interpret some operational capabilities and set a benchmark for further testing, additional time constraints for NES to achieve key targets such as 120-hr run of the test unit (using any desirable feedstock to simply show that the plant can run) followed by 120-hr run with significant engine running time (based on RDF feedstock with say 30% moisture content) will both provide further mass and energy balance progression but also confirm the ability for the NES team to actively and expediently manage technical problems set.

My apologies for the delay to providing this summary update, but I hope this meets the current requirements for Scottish Borders and an update for Tony/Diarmid with regards to project progression.

Best wishes

Tom

Tom Callaghan Principal SLR Consulting Ltd Email: [email protected] Mob: +44 7789 996059 Tel:

+44 29 20491010

Fax:

+ 44 2920 487903

Fulmar House, Beignon Close, Ocean Way, Cardiff, CF24 5PB, United Kingdom www.slrconsulting.com

Confidentiality Notice and Disclaimer This communication and any attachment(s) contains information which is confidential and may also be legally privileged. It is intended for the exclusive use of the recipient(s) to whom it is addressed. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. If you have received this communication in error please email us by return mail and then delete the email from your system together with any copies of it. Please note that you are not permitted to print, copy, disclose or use part or all of the content in any way. Emails and any information transmitted thereunder may be intercepted, corrupted or delayed. As a result, SLR does not accept any responsibility for any errors or omissions howsoever caused and SLR accepts no responsibility for changes made to this email or any attachment after transmission from SLR. Whilst all reasonable endeavours are taken by SLR to screen all emails for known viruses, SLR cannot guarantee that any transmission will be virus free. Any views or opinions are solely those of the author and do not necessarily represent those of SLR Management Ltd, or any of its subsidiaries, unless specifically stated. SLR Consulting Limited, Registered Office: 7 Wornal Park, Worminghall, Aylesbury, Bucks, HP18 9PH Registered in England and Wales No: 3880506 As a recipient of this e mail from SLR, we may wish to e mail you from time to time updates on SLRs services and activities. Should you not wish to receive e mail updates please press ‘Unsubscribe’ Many thanks

From: Jackie Byrne (Brodies Solicitors) [mailto:[email protected]] On Behalf Of Charles Smith (Brodies Solicitors) Sent: 02 December 2013 16:35 To: Doyle, Ewan Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Drummond-Hunt, Andrew; Sharp-Dent,

Ross; Robb, Kirsty; 'Michael Nevin' Subject: NES - November ARE Report [BRO-D.FID1767624]

CONFIDENTIAL MESSAGE - INTENDED RECIPIENT ONLY

Ewan

I have now reviewed the NES November 2013 ARE Report.

I don’t have any particular legal points to raise on it.

I note that progress continues to be made with SEPA in relation to the permit. For the moment, this seems to be progressing well, but of course the time may come when SEPA ask for specific and actual emissions data, which will be problematic. I did just note in connection with the answer to question 4 set out in Attachment 1 (on exhaust gas temperature) that there are references to maximising the heat recovery for the “available customer” (see paragraph 3) and the “principal heat customer” (see the last paragraph). I was not quite sure what/who is meant by this – perhaps it may not matter as the real point being made is that heat recovery will be maximised having regard to the anticipated customer base.

On the grid connection, quite a lot of information is provided, but there are no particular legal points which come out of it. (However, as part of consideration of the new delay to the process, we will need to think about the likely fate of the grid offer and acceptance – that is separate from this ARE Report however.)

Regards.

Charles Smith Partner Brodies LLP Edinburgh, UK mailto:[email protected] http://www.brodies.com Direct Line: + 44 (0) 131 656 0236

************************************************************************************************************ IMPORTANT NOTICE: This notice applies to this email and to any other email subsequently sent by anyone at Brodies LLP and appearing in the same chain of email correspondence. References below to "this email" should be read accordingly. This e-mail and its attachments (if any) are confidential, protected by copyright and may be privileged. If you receive this e-mail in error, notify us immediately by reply e-mail, delete it and do not use, disclose or copy it. Unless we expressly say otherwise in this e-mail, this e-mail does not create, form part of, or vary, any contractual or unilateral obligation. No liability is accepted for viruses and it is your responsibility to scan attachments (if any). Where this e-mail is unrelated to the business of Brodies LLP, the opinions expressed within this e-mail are the opinions of the sender and do not necessarily constitute those of Brodies LLP. Brodies LLP is a limited liability partnership and responsibility for e-mails related to its business lies with Brodies LLP and not the individual sender. The e-mail system of Brodies LLP is subject to random monitoring. A list of all the members is maintained and may be inspected during office hours at Brodies LLP's registered office. Brodies LLP (registered no SO300334), Registered Office: 15 Atholl Crescent, Edinburgh, EH3 8HA, Scotland UK. T 0131 228 3777, F 0131 228 3878, DX Ed10 Edinburgh-1 Also at: 2 Blythswood Square, Glasgow G2 4AD, Scotland UK T 0141 248 4672, F 0141 221 9270, DX GW11 Glasgow-1; And: 23 Carden Place, Aberdeen AB10 1UQ, Scotland UK T 01224 392 242, F 01224 392 244, DX AB10 Aberdeen; And: 8th Floor, 41 Avenue des Arts, 1040 Brussels, Belgium T +322 808 7990, F +322 588 1776 ************************************************************************************************************

From: Michael Nevin [mailto:[email protected]] Sent: 03 December 2013 10:55 To: Charles Smith (Brodies Solicitors); Doyle, Ewan Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Drummond-Hunt, Andrew; Sharp-Dent, Ross; Robb, Kirsty Subject: Re: NES - November ARE Report [BRO-D.FID1767624]

Dear Ewan To some extent, the information in the November ARE report has been overtaken by events, and in particular a NES's advice that they will not now be in a position to commence the construction of the advanced thermal treatment facility until June 2016, i.e. more than two years later than the originally scheduled date. Section 3 of the ARE Report states that the 120 hour technology trial for NEAT starting on November 17 stopped after five hours when "the fuel that forms the plug preventing air ingress into the pyrolysis tube failed, and in order to prevent significant damage to the plant, the plant was shut

down." This may have been the final incident that convinced NES to come clean and admit that there was no chance of implementing NEAT on a commercial scale in 2014 . The revised programme indicates that the detailed design of the Canford project will be completed by April 2014, and construction of the Canford demonstration facility will commence in July 2014. The facility itself will, on this programme, only become operational in July 2015, and revised schedule for the Easter Langlee facility – i.e. start on site in June 2016 – implicitly assumes that there will be no significant problems at Canford. If there are, then one could anticipate further delays, or even cancellation, of the Easter Langlee ATT facility. This tends to confirm my reservations regarding an unconditional acceptance of NES's proposal simply to leave the PPP contract intact, and put back all the start dates to June 2016. This could leave us hanging on the outcome of the Canford trials, over which we have no control, and if those were to fail or (more likely) take longer than anticipated to succeed, then we would still potentially be exposed to the risk of having no treatment solution in place for the Council’s residual waste. However, this is not the only uncertainty. It is still not clear what the final requirements of the Scottish Thermal Treatment Guidelines will be. There is speculation that the revised thermal treatment guidelines may relax the regulatory requirements for thermal treatment. Under the draft guidelines, if a local authority achieves 65% recycling and composting, then it is deemed to have pretreated all municipal waste, so the remaining 35% could be sent directly to thermal treatment, without requiring any further pre-treatment. The speculation is that the revised guidelines may drop this threshold to 50%, and possibly that the thermal efficiency standards in the draft guidelines could be relaxed. If this is does prove to be the case, then it may make it easier to implement a thermal treatment solution based on a technology closer to that at Avonmouth, rather than on gasification. Equally, if the Council could achieve 50% recycling and composting, then under this scenario the possibility opens up of sending the residual fraction directly to EFW, with capacity being developed in the North-East (Sita, Air Products, etc), as well as potentially in Scotland, opening up the possibility of letting medium-term treatment contracts in a competitive open market, in much the same way as for the recyclate and organic fractions. Hopefully the final guidelines will be confirmed ahead of any final decision on which option to take vis-a-vis NES, not least because it would be useful to have certainty on the targets that the Council (and its contractors) are required to hit before arriving at a final decision, and the likely costs associated with different options. Kind regards Mike

Nevin Associates Ltd Kilgour Spencer Place Trinity Edinburgh EH5 3HF

Tel: 0131 552 6089 Mobile: 0782 4829 445

From: Doyle, Ewan Sent: 06 December 2013 12:19 To: 'Matthew Webb' Cc: Chris Cox; Robert Asquith; Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty; 'Charles Smith (Brodies Solicitors)'; 'Michael Nevin' Subject: RE: November ARE report Importance: High

hello Matt,

Thanks for the November ARE report.

I can confirm that for the Month of November 2013 we confirm ARE has been used in relation to the Permit. I must stress again that if a further Schedule 7 is submitted that relies on NEAT development, then the development of NEAT will be part of the measurement whether ARE has been used. In simple terms, we have an understanding that gasifier info will be required, so the development of the gasifier needs to be progressed ASAP.

Regards Ewan

From: Michael Nevin [mailto:[email protected]] Sent: 18 December 2013 09:56 To: Charles Smith (Brodies Solicitors); Doyle, Ewan Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty; Drummond-Hunt, Andrew; Charles Smith (Brodies Solicitors); 'Diarmid Jamieson'; Tom Callaghan; Tony Yates Subject: Re: NES December ARE Report

Dear Ewan

my comments on the December ARE report are as follows:

The report does not contain particularly encouraging news with respect to the technology trials, stating that a trial of the pyrolysis unit on December 13th had to be abandoned after approximately 4.5 hours following breakage of a ceramic filter element, the cause of which has now been identified. The report states that it will not be possible to run the 120 hour trial before the end of 2013. The phasing of future technology trials is to be raised with NES at tomorrow's meeting.

The report does not include a funding update, beyond a general statement of intent by New Earth to investigate funding options including a possible IPO or further collaboration with the infrastructure funding market. Within the risk register, the reference to funding availability (Risk 5.1) is dated 21/08/13, and states that NERR “is likely to provide initial finance". Is this still the case, and if so do NES have a drawdown schedule for the £1.5 million of NERR initial funding committed in principle? Or is it the case that funding drawdown is now on hold pending further clarification of the development programme?

We will raise the question of the group's funding strategy tomorrow. It would also be helpful to know if NES still hope to refinance Avonmouth, and if so what the process and timetable would be.

The paucity of information on the progress of the project suggests that NES have in effect put the Scottish Borders project on hold, possibly pending tomorrow's meeting. However, from our point of view, it is imperative that momentum is not lost and that NES show evidence of continued commitment to the project, otherwise we may have little option but to pursue a Plan B to avoid the risk that the Council fails to achieve ZWP regulatory requirements.

Kind regards Mike

Nevin Associates Ltd Kilgour Spencer Place Trinity Edinburgh EH5 3HF

Tel: 0131 552 6089 Mobile: 0782 4829 445

From: Charles Smith (Brodies Solicitors) Sent: Monday, December 16, 2013 12:58 PM To: [email protected] Cc: Dickson, Rob ; Beard, Ray ; Young, Robert (Tech Serv ; Sharp-Dent, Ross ; Robb, Kirsty ; Drummond-Hunt, Andrew ; Charles Smith (Brodies Solicitors) ; 'Michael Nevin' ; 'Diarmid Jamieson' ; Tom Callaghan ; Tony Yates Subject: NES December ARE Report [BRO-D.FID1767624]

CONFIDENTIAL MESSAGE - INTENDED RECIPIENT ONLY

Ewan

I have now reviewed the NES December ARE Report. I have no major comments but a few observations.

1.

I note the terms of the “end of waste” letter of 10 December 2013 from the Environment Agency. While this is helpful, it is not necessarily the case that SEPA will follow it and it is not binding on SEPA in any way. The process of consideration and decision which the EA have gone through is sanctioned by Article 6(4) of the EU Waste Framework Directive 2008/98/EC, in that it is permitted for decisions as to whether or not end of waste has been achieved to be taken at an EU Member State level where at Community level criteria have not yet been set for any particular case. There is certainly some material on the definition of waste on SEPA’s website which suggests that they will provide guidance on end of waste questions provided that sufficient information is provided to justify the claim – whether they will be content with what has been supplied to the EA will very much remain to be seen.

2.

I note the continued issues in relation to technology development. We will, I hope, hear on Thursday whether NES are prepared to address these as we have requested.

3.

In the risk register, bank due diligence is noted, as is the key fact that “NERR is tightening its DD requirements”. Again we have asked for further particulars around this and will hopefully hear more at Thursday’s meeting.

4.

I see also that the risk register notes that CfD may be required as opposed to ROCs. NES state that they will be assessing the implication of CfDs compared to ROCs, and also note that “where possible” they will accelerate the timetable so that commissioning occurs before April 2017.

5.

The risk register also notes the issue of delay to grid connection works and in particular that the delay to the project risks increased costs being incurred for the grid connection. It is just worth noting in terms of the SPEN offer letter as accepted by NES, that if the Works to be carried out by SPEN are not completed within 12 months from the date of the NES acceptance, then SPEN may amend and/or vary any terms and conditions of the offer including the charges and other payments, though this is qualified “to the extent that it is reasonable to do so”.

Regards,

Charles Smith Partner Brodies LLP Edinburgh, UK mailto:[email protected] http://www.brodies.com Direct Line: + 44 (0) 131 656 0236

************************************************************************************************************ IMPORTANT NOTICE: This notice applies to this email and to any other email subsequently sent by anyone at Brodies LLP and appearing in the same chain of email correspondence. References below to "this email" should be read accordingly. This e-mail and its attachments (if any) are confidential, protected by copyright and may be privileged. If you receive this e-mail in error, notify us immediately by reply e-mail, delete it and do not use, disclose or copy it. Unless we expressly say otherwise in this e-mail, this e-mail does not create, form part of, or vary, any contractual or unilateral obligation. No liability is accepted for viruses and it is your responsibility to scan attachments (if any). Where this e-mail is unrelated to the business of Brodies LLP, the opinions expressed within this e-mail are the opinions of the sender and do not necessarily constitute those of Brodies LLP. Brodies LLP is a limited liability partnership and responsibility for e-mails related to its business lies with Brodies LLP and not the individual sender. The e-mail system of Brodies LLP is subject to random monitoring. A list of all the members is maintained and may be inspected during office hours at Brodies LLP's registered office. Brodies LLP (registered no SO300334), Registered Office: 15 Atholl Crescent, Edinburgh, EH3 8HA, Scotland UK. T 0131 228 3777, F 0131 228 3878, DX Ed10 Edinburgh-1 Also at: 2 Blythswood Square, Glasgow G2 4AD, Scotland UK T 0141 248 4672, F 0141 221 9270, DX GW11 Glasgow-1; And: 23 Carden Place, Aberdeen AB10 1UQ, Scotland UK T 01224 392 242, F 01224 392 244, DX AB10 Aberdeen; And: 8th Floor,

41 Avenue des Arts, 1040 Brussels, Belgium T +322 808 7990, F +322 588 1776 ************************************************************************************************************

From: Matthew Webb [mailto:[email protected]] Sent: 16 October 2013 09:30 To: Doyle, Ewan Cc: Robert Asquith; Chris Cox; Sara Whittle; Shaun Gomm Subject: October ARE report

Ewan,

Please see attached the ARE report for October. Please note that information on the ATT technology development and funding will follow by 18th October 2013. Apologies with the delay in providing this information.

Regards

Matt

For more information on our services please visit: www.newearthgroup.co.uk

This email and any attachments are confidential and may be privileged or otherwise protected from disclosure. If you are not the intended recipient you must not copy this message or any attachment or disclose the contents to any other person. If you have received this message in error please contact us at the address below or by email at [email protected] Any files attached to this email will have been checked by us with virus detection software before transmission. You should carry out your own virus checks before opening any attachment. New Earth Solutions Group Ltd accepts no liability for any loss or damage which may be caused by software viruses. New Earth Solutions Group Ltd is registered in England and Wales: No. 4368018. Registered office: Key House, 35 Black Moor Road, Ebblake Industrial Estate, Verwood, Dorset, BH31 6AT

This email has been scanned for email related threats and delivered safely by Mimecast. For more information please visit http://www.mimecast.com

From: Matthew Webb [mailto:[email protected]] Sent: 18 October 2013 16:46 To: Doyle, Ewan Cc: Robert Asquith; Chris Cox; Sara Whittle; Shaun Gomm Subject: RE: October ARE report

Ewan,

Please see attached the updated ARE report including information on the technology development and funding.

Regards

Matt

From: Rhonda Elliot (Brodies Solicitors) [mailto:[email protected]] On Behalf Of Charles Smith (Brodies Solicitors) Sent: 21 October 2013 17:47 To: Doyle, Ewan; Dickson, Rob; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty; 'Michael Nevin' Subject: NES October ARE Report [BRO-D.FID1767624]

CONFIDENTIAL MESSAGE - INTENDED RECIPIENT ONLY

Ewan,

I have now reviewed the NES October ARE Report, incorporating the technical and funding updates.

The only point I want to raise is in section 12 on timetable where NES point out that they anticipate additional time will be required to deliver the integrated facility and that they will seek to amend the timetable once their internal review is complete.

As part of that, and as I have mentioned before, they will need to consider the question of amending the Schedule Part 21 date for obtaining the Environmental Permit, which is set at 25 October 2013 and which clearly will not be met.

Once that date has passed, I do not think it is in the Council’s interest to leave it unamended because although a right to terminate is conferred if the Permit has not been granted by that date, there will only be no compensation termination if ARE have not been used up to and including 25 October in connection with obtaining the Permit. I think that will be difficult to substantiate as even if it could be demonstrated that there is a link between the use of ARE to obtain the Permit and the progress of the technology trials, I very much doubt if it could be successfully argued that had the trials all gone according to plan NES would then have been able to provide all of the information required by SEPA so as to obtain the permit by 25 October. That seems to me extremely unlikely. It would therefore follow that any termination would require to be accompanied by payment of Force Majeure compensation which would of course include the repayment of monies already drawn down from NERR.

If, on the other hand, a revised date for obtaining the Permit is not set, then the All Reasonable Endeavours obligation remains, but it will have no teeth as there is no date by which it requires to be implemented (except for the 25 October 2014 longstop date), which is not in the Council’s interest.

I don’t have any other comments on the Report – I know that Mike will address funding as always, and as far as obtaining the Permit is concerned, it seems that NES are seeking to respond to the SEPA Schedule 7 Notice reasonably promptly. There may be the question to be considered of what kind of operational data SEPA may wish (ie actual vs projected), but I commented on that and the issue of SEPA guidance in my separate email of 7 October.

Regards

Charles Smith Partner On behalf of Brodies LLP Edinburgh, UK

mailto:[email protected] http://www.brodies.com

Direct Line: ++ 44 (0) 131 656 0236

************************************************************************************************************ IMPORTANT NOTICE: This notice applies to this email and to any other email subsequently sent by anyone at Brodies LLP and appearing in the same chain of email correspondence. References below to "this email" should be read accordingly. This e-mail and its attachments (if any) are confidential, protected by copyright and may be privileged. If you receive this e-mail in error, notify us immediately by reply e-mail, delete it and do not use, disclose or copy it. Unless we expressly say otherwise in this e-mail, this e-mail does not create, form part of, or vary, any contractual or unilateral obligation. No liability is accepted for viruses and it is your responsibility to scan attachments (if any). Where this e-mail is unrelated to the business of Brodies LLP, the opinions expressed within this e-mail are the opinions of the sender and do not necessarily constitute those of Brodies LLP. Brodies LLP is a limited liability partnership and responsibility for e-mails related to its business lies with Brodies LLP and not the individual sender. The e-mail system of Brodies LLP is subject to random monitoring. A list of all the members is maintained and may be inspected during office hours at Brodies LLP's registered office. Brodies LLP (registered no SO300334), Registered Office: 15 Atholl Crescent, Edinburgh, EH3 8HA, Scotland UK. T 0131 228 3777, F 0131 228 3878, DX Ed10 Edinburgh-1 Also at: 2 Blythswood Square, Glasgow G2 4AD, Scotland UK T 0141 248 4672, F 0141 221 9270, DX GW11 Glasgow-1; And: 23 Carden Place, Aberdeen AB10 1UQ, Scotland UK T 01224 392 242, F 01224 392 244, DX AB10 Aberdeen; And: 8th Floor, 41 Avenue des Arts, 1040 Brussels, Belgium T +322 808 7990, F +322 588 1776 ************************************************************************************************************

From: Michael Nevin [mailto:[email protected]] Sent: 22 October 2013 17:26 To: Charles Smith (Brodies Solicitors); Doyle, Ewan; Dickson, Rob; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty Subject: Re: NES October ARE Report [BRO-D.FID1767624]

Dear Ewan

Adding to Charles’ comments on the October ARE:

Technology Trials

It would appear likely that the start on site for the advanced thermal treatment facility will be later than anticipated, because of delays in technology testing, and the knock-on effect this will have in securing the PPC permit.

The ARE indicates further slippage in technology trials, with the second 120 hour trial delayed until the week commencing October 28th 2013, with a comment made on page 10 that one of the engineers required to complete Trial 25 "is unavailable until 4th November 2013." Given that the technology trials are on the critical path of project implementation, should NES not be programming their internal resources to avoid delays of this type caused by absence of key staff members?

From a non-technical viewpoint, one's impression reading the report is that there are still some significant technical issues to be overcome before NES could be confident enough finalise design of the ATT facility, let alone start building it. Section 3 of the updated ARE dated October 18th 2013 provides information on the technology trials that were carried out on September 3rd. One interesting point is that the moisture content of the RDF appears relatively high, with all three samples having a moisture content of >40% and an overall average of 43.62%. With such a high moisture content, the CV would be relatively low, and this seems to be borne out by the graph on p.9 which shows a wet CV fluctuating from below 10 CV to 15-20 CV during the course of the trial from 10:00 to 17:00 (visual inspection suggests an average wet CV of around 13-15 CV over the period). Presumably this high moisture content is deliberate and was not a cause of the engine tripping due to water jacket temperature alarm?

Rather ominously, but not surprisingly in the light of the technology trial delay, page 8 of the October 15th ARE states that NES are currently carrying out an internal review of the delivery timetable, and "then wishes to discuss the timetable with SBC. It is anticipated that additional time will be required to deliver the integrated facility.”

So we're still in the dark as to the likely start date on site, or commissioning date for the integrated for treatment facility, although in the October 18th ARE NES state that they are targeting financial close for March 2014, commencing construction in April 2014 and service commencement in July 2015. It is in NES's financial interest to get the facilities up and running as early as possible so that they start becoming cash generative, but on the facts as presented this timetable looks optimistic.

Could NES specify when they expect their internal review to be completed, as the timetable is relevant to the Council’s own operational plans and budgets? It is also relevant to ancillary developments such as the District Heating Scheme, where SEPA’s response on exhaust gas temperature suggests that they are seeking to test whether there is potential for additional heat recovery for district heating.

Funding

The funding update indicates that NERR have cash balances available of £5.2 million, down from £6.3 million in mid-September and £7.968 million on July 19th, suggesting that NERR’s cash position is tight and getting tighter, and net inflows are lower than previously forecast.

NES state that the Avonmouth ERF is the only prior claim on these funds ahead of Easter Langlee. However, there must be a question over whether NERR will achieve their target of £14 million cash by financial close in March 2014, unless the anticipated senior debt of the Avonmouth ERF goes ahead. The funding update states that NERR have "decided to proceed with GIB (the Green Investment Bank) as the sole senior debt provider to the project and to target more conservative (refinancing) proceeds of £25 million, " with financial close on the refinancing anticipated in January 2014. If this is achieved, it will be a significant boost to NERR’s cash facilities, which would help the financing of Easter Langlee.

At the moment, I’m less concerned / anxious about the funding position than the technology trials, albeit it looks tight, because experience suggests that, if the technology is proven and viable, the funding will follow.

Kind regards Mike

Nevin Associates Ltd Kilgour Spencer Place Trinity Edinburgh EH5 3HF

Tel: 0131 552 6089 Mobile: 0782 4829 445

From: Tony Yates [mailto:[email protected]] Sent: 24 October 2013 17:19 To: Doyle, Ewan Subject: 131024_Scottish Borders Commentary on October ARE Report

Hi Ewan

Attached are my comments on the ARE report. The information on the trials is a little more informative than previous but it still appears to me that NE are some way off from providing their final technical solution. It is encouraging to see that design work has been carried out. I note that NE have also recognised that there needs to be an extension to the design timescale – it will be interesting to see what impact this has on overall delivery timescales

Give me a call if you wish to discuss

Thanks

Tony

Tony Yates Principal SLR Consulting Ltd Email: [email protected] Mob: +44 7748 113832 Tel:

+44 1225 309400

Fax:

+44 1225 309401

Treenwood House, Rowden Lane, Bradford on Avon, BA15 2AU, United Kingdom www.slrconsulting.com

Confidentiality Notice and Disclaimer This communication and any attachment(s) contains information which is confidential and may also be legally privileged. It is intended for the exclusive use of the recipient(s) to whom it is addressed. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. If you have received this communication in error please email us by return mail and then delete the email from your system

together with any copies of it. Please note that you are not permitted to print, copy, disclose or use part or all of the content in any way. Emails and any information transmitted thereunder may be intercepted, corrupted or delayed. As a result, SLR does not accept any responsibility for any errors or omissions howsoever caused and SLR accepts no responsibility for changes made to this email or any attachment after transmission from SLR. Whilst all reasonable endeavours are taken by SLR to screen all emails for known viruses, SLR cannot guarantee that any transmission will be virus free. Any views or opinions are solely those of the author and do not necessarily represent those of SLR Management Ltd, or any of its subsidiaries, unless specifically stated. SLR Consulting Limited, Registered Office: 7 Wornal Park, Worminghall, Aylesbury, Bucks, HP18 9PH Registered in England and Wales No: 3880506 As a recipient of this e mail from SLR, we may wish to e mail you from time to time updates on SLRs services and activities. Should you not wish to receive e mail updates please press ‘Unsubscribe’ Many thanks

From: Doyle, Ewan Sent: 24 October 2013 21:45 To: 'Matthew Webb'; 'Robert Asquith'; Chris Cox Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty Subject: October 2013 ARE - SBC comments

Hello Matt,

Hello Matt,

Please find enclosed the Council's comments on ARE for October 2013:

PLANNING •

Thank for the inclusion of the conditions. Can you please provide status updates in future reports please

PERMITTING • •

Methodology 1(e) - Can you please explain further the statement '…., because the maximum are all around the landfill area.' Should this be an area for concern for the Council? If you do not get a response from SEPA this week (W/C 21 Oct 2013) do you need to apply for an extension of time? if so please justify.

ADVANCED THERMAL TREATMENT TECHNOLOGY DEVELOPMENT

• •

Paragraph 1 - is the quote of a 1.8m long filter correct? Trial 25 - the time taken to get engineers to work on the engines a concern. Please provide a mitigation plan to minimise future call out times for the remainder of the R&D process and when the facility is operational at Langlee. • Scottish Borders Council must stress that the development of the NEAT is inexplicably linked to the progress of the permit. For instance; the current Schedule 7 does not mention the Gasifier information (previously requested in draft Schedule 7's) but that does not mean that a future request should be reasonably expected. The measurement of ARE will therefore take account of the actual data requested by SEPA and the development of NEAT to supply that information. • Please supply a programme for the delivery of the Gasifier.

Attachment 4 NEAT East Langlee Layout VOA 1.

The layout does not show gasifier(s)

2.

The layout appears to show drum pyrolysers rather than the screw pyrolysers currently employed at Avonmouth/Canford. Is this a departure from original design?

3.

The Char will be hot and high in carbon and could potentially combust when introduced to air eg in transfer conveyors. Is char cooling to be included in the design?

Trial 21 3 September 2013 4.

The text talks about fines and RDF although the fuel feed rate and moisture amount are clearly based on RDF only. Can NE confirm what fuel was actually used?

5.

The feedstock to the trials is stated as having a moisture content of 43.62%. Is there any reason why a drier fuel was not used which would have been more representative of the proposed fuel in the Langlee project?

6.

Syngas volume was recorded as 176 m3/hr based on feed rate of 587 kg/r producing 0.3m3 per kg of waste indicating 30% of feedstock converted to syngas. How does this figure reconcile with the 43.62% moisture content?

Trial 22 4 September 2013 - The CV plot shows a very inconsistent CV ranging from between 10 and 20 MJ/Nm3 on a wet basis with a similar profile on a dry basis. Will the CV be modulated sufficiently to provide consistent CV to the gas engines? The table is difficult to understand and appears to show that the engine ran for 2 minutes at 11:49 and 14:06

Trial 23 03 October 2013 - No comment Trial 24 07 October 2013 - No comment as no data available yet

Trial 25 09 October 2013 - It would be helpful to see test data should be provided showing mass of waste processed, volume of gas and power output

WC 14th Oct 2013 - No comments - Future Plans - SLR notes that the 120hr trial will now commence w/c 11 November 2013. NE recognises that the timetable will require modification GRID CONNECTION • •

Thanks for the update. We would be grateful for future updates from your monthly discussions with SPEN. Can you please provide a section in the programme for the delivery of the power supply. This can be developed as the detail comes to light.

FUNDING • • • • • •

Thank you for this detailed update Bullet point 1 - Cash balance has reduced by £1.1m from last month. Over and above Avonmouth, what is the other commitment (high level explanation is fine) and how long will it continue? When will DD start? What level of consistent NEAT running is required for NERR to fund the project? What is the mitigation plan if NERR are unable to fund the project due to lack of funds, if no banking discussions are being undertaken? If Avonmouth is refinanced, will £20.5m be ring fenced for the Langlee project?

CONSTRUCTION/TECH CONTRACTS • •

Can you please provide clarity on dates for draft contract being submitted for review in the next report. Two weeks in the programme for Council sign off is insufficient based on actual experience from 2012. please put a realistic timeframe in the programme.

HEALTH & SAFETY •

Please add requirements in the construction contract for H&S awareness for Council operatives and the public during the works. This will avoid contractual problems during the works. Also add to risk register please.

COMMUNICATIONS • •

Please provide draft newsletter to SBC by 28 November 2013 (or earlier) for review. As the newsletter is going to Persimmons for the first time, can you please make sure that the project objectives are stated so it help their understanding of the communications.

TIMETABLE • •

The date for obtaining satisfactory Permit was the 25 October 2013. This milestone has past but the programme/plan does not set out a clear mitigation plan and timetable for obtaining the permit. The final paragraph in the section is unacceptable. Before the next meeting SBC expect a revised programme to be submitted five days before so that we can review beforehand. It will not be accepted not to have clarity beyond 20 November 2013

RISK REGISTER •

Comments in construction section.

Finally, we are aware that for the last two ARE reports there has been a stagger in the submission of the components of the reports. Due to the way that the ARE assessment period is structured we need to avoid this in future. For the purposes of this month, the NEAt and Financial sections review date (10 day period) is 1 October, all other elements need to be finalised by 29 October 2013.

We look forward to hearing from you.

Ewan Doyle Project Management Team Leader Environment & Infrastructure 01835 824000 Ext.5482

From: Dickson, Rob Sent: 25 October 2013 16:39 To: Chris Cox Cc: Doyle, Ewan Subject: RE: October 2013 ARE - SBC comments

Chris,

I hope you are well.

You will see from Ewan's detailed reply below that we have undertaken a thorough review of the ARE Report and other supporting material.

Can I emphasise the point re timetable please. We have agreed (or to be precise I think we are still agreeing!) that we should come down and meet you on 20 November. I am particularly keen that we have information from you in advance of that meeting regarding the timetable. We currently find ourselves in a position where there are no dates in play given the date for obtaining satisfactory Permit was 25 October 2013. But this milestone has passed. There is now no programme/plan setting out a clear mitigation plan and timetable for obtaining the permit. That is not an acceptable position that can be sustained for longer than the period to our meeting on 20 November.

I'd be grateful for confirmation that you will work towards providing a new revised timetable for 15 November as requested and that we can discuss when we meet on the 20th

Thanks Rob

From: Matthew Webb [mailto:[email protected]] Sent: 06 November 2013 09:57 To: Doyle, Ewan; Robert Asquith; Chris Cox Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty Subject: RE: October 2013 ARE - SBC comments

Ewan,

Please see responses to the questions below in the attached document.

Regards

Matt

From: Doyle, Ewan [mailto:[email protected]] Sent: 24 October 2013 21:45 To: Matthew Webb; Robert Asquith; Chris Cox Cc: Dickson, Rob; Beard, Ray; Young, Robert (Tech Serv); Sharp-Dent, Ross; Robb, Kirsty Subject: October 2013 ARE - SBC comments

Hello Matt,

Hello Matt,

Please find enclosed the Council's comments on ARE for October 2013:

PLANNING •

Thank for the inclusion of the conditions. Can you please provide status updates in future reports please

PERMITTING • •

Methodology 1(e) - Can you please explain further the statement '…., because the maximum are all around the landfill area.' Should this be an area for concern for the Council? If you do not get a response from SEPA this week (W/C 21 Oct 2013) do you need to apply for an extension of time? if so please justify.

ADVANCED THERMAL TREATMENT TECHNOLOGY DEVELOPMENT • •

Paragraph 1 - is the quote of a 1.8m long filter correct? Trial 25 - the time taken to get engineers to work on the engines a concern. Please provide a mitigation plan to minimise future call out times for the remainder of the R&D process and when the facility is operational at Langlee. • Scottish Borders Council must stress that the development of the NEAT is inexplicably linked to the progress of the permit. For instance; the current Schedule 7 does not mention the Gasifier information (previously requested in draft Schedule 7's) but that does not mean that a future request should be reasonably expected. The measurement of ARE will therefore take account of the actual data requested by SEPA and the development of NEAT to supply that information. • Please supply a programme for the delivery of the Gasifier.

Attachment 4 NEAT East Langlee Layout VOA 1.

The layout does not show gasifier(s)

2.

The layout appears to show drum pyrolysers rather than the screw pyrolysers currently employed at Avonmouth/Canford. Is this a departure from original design?

3.

The Char will be hot and high in carbon and could potentially combust when introduced to air eg in transfer conveyors. Is char cooling to be included in the design?

Trial 21 3 September 2013 4.

The text talks about fines and RDF although the fuel feed rate and moisture amount are clearly based on RDF only. Can NE confirm what fuel was actually used?

5.

The feedstock to the trials is stated as having a moisture content of 43.62%. Is there any reason why a drier fuel was not used which would have been more representative of the proposed fuel in the Langlee project?

6.

Syngas volume was recorded as 176 m3/hr based on feed rate of 587 kg/r producing 0.3m3 per kg of waste indicating 30% of feedstock converted to syngas. How does this figure reconcile with the 43.62% moisture content?

Trial 22 4 September 2013 - The CV plot shows a very inconsistent CV ranging from between 10 and 20 MJ/Nm3 on a wet basis with a similar profile on a dry basis. Will the CV be modulated sufficiently to provide consistent CV to the gas engines? The table is difficult to understand and appears to show that the engine ran for 2 minutes at 11:49 and 14:06

Trial 23 03 October 2013 - No comment Trial 24 07 October 2013 - No comment as no data available yet

Trial 25 09 October 2013 - It would be helpful to see test data should be provided showing mass of waste processed, volume of gas and power output

WC 14th Oct 2013 - No comments - Future Plans - SLR notes that the 120hr trial will now commence w/c 11 November 2013. NE recognises that the timetable will require modification GRID CONNECTION • •

Thanks for the update. We would be grateful for future updates from your monthly discussions with SPEN. Can you please provide a section in the programme for the delivery of the power supply. This can be developed as the detail comes to light.

FUNDING • • • • • •

Thank you for this detailed update Bullet point 1 - Cash balance has reduced by £1.1m from last month. Over and above Avonmouth, what is the other commitment (high level explanation is fine) and how long will it continue? When will DD start? What level of consistent NEAT running is required for NERR to fund the project? What is the mitigation plan if NERR are unable to fund the project due to lack of funds, if no banking discussions are being undertaken? If Avonmouth is refinanced, will £20.5m be ring fenced for the Langlee project?

CONSTRUCTION/TECH CONTRACTS • •

Can you please provide clarity on dates for draft contract being submitted for review in the next report. Two weeks in the programme for Council sign off is insufficient based on actual experience from 2012. please put a realistic timeframe in the programme.

HEALTH & SAFETY •

Please add requirements in the construction contract for H&S awareness for Council operatives and the public during the works. This will avoid contractual problems during the works. Also add to risk register please.

COMMUNICATIONS • •

Please provide draft newsletter to SBC by 28 November 2013 (or earlier) for review. As the newsletter is going to Persimmons for the first time, can you please make sure that the project objectives are stated so it help their understanding of the communications.

TIMETABLE • •

The date for obtaining satisfactory Permit was the 25 October 2013. This milestone has past but the programme/plan does not set out a clear mitigation plan and timetable for obtaining the permit. The final paragraph in the section is unacceptable. Before the next meeting SBC expect a revised programme to be submitted five days before so that we can review beforehand. It will not be accepted not to have clarity beyond 20 November 2013

RISK REGISTER •

Comments in construction section.

Finally, we are aware that for the last two ARE reports there has been a stagger in the submission of the components of the reports. Due to the way that the ARE assessment period is structured we need to avoid this in future. For the purposes of this month, the NEAt and Financial sections review date (10 day period) is 1 October, all other elements need to be finalised by 29 October 2013.

We look forward to hearing from you.

Ewan Doyle Project Management Team Leader Environment & Infrastructure 01835 824000 Ext.5482

"********************************************************************** This email and any files transmitted with it are privileged, confidential and subject to copyright. Any unauthorised use or disclosure of any part of this email is prohibited. If you are not the intended recipient please inform the sender immediately; you should then delete the email and remove any copies from your system. The views or opinions expressed in this communication may not necessarily be those of Scottish Borders Council. Please be advised that Scottish Borders Council's incoming and outgoing email is subject to regular monitoring and any email may require to be disclosed by the Council under the provisions of the Freedom of Information (Scotland) Act 2002 . **********************************************************************"

For more information on our services please visit: www.newearthgroup.co.uk

This email and any attachments are confidential and may be privileged or otherwise protected from disclosure. If you are not the intended recipient you must not copy this message or any attachment or disclose the contents to any other person. If you have received this message in error please contact us at the address below or by email at [email protected] Any files attached to this email will have been checked by us with virus detection software before transmission. You should carry out your own virus checks before opening any attachment. New Earth Solutions Group Ltd accepts no liability for any loss or damage which may be caused by software viruses. New Earth Solutions Group Ltd is registered in England and Wales: No. 4368018. Registered office: Key House, 35 Black Moor Road, Ebblake Industrial Estate, Verwood, Dorset, BH31 6AT

This email has been scanned for email related threats and delivered safely by Mimecast. For more information please visit http://www.mimecast.com

Update for Scottish Borders Council – 12th September 2014 Information on the following areas is provided below: • • • • •

Easter Langlee permit application Technology development at Canford Avonmouth energy recovery facility Position with SPEN Future funding arrangements

Easter Langlee permit application • Question 8 (further detail on the syngas purification process) was provided in August as required by the Schedule 7 notice. • Responses to Questions 1, (part of) 9, 15, 16 and 20 are being progressed for submission this month. • Sol Environmental is currently reviewing the gasifier data from Avonmouth with the intention of submitting this at the end of the month. • In the week commencing 29th September, we will contact SEPA and ask for clarification on the next steps for the permit application. We will explain the position with the gasifier at Canford and seek clarification on whether they consider the gasifier data from Avonmouth to be suitable. Technology development at Canford Work on the Canford R&D facility since the last report has focussed on installing and testing the gasifier base, the char feed and ash extraction mechanism and preparing for the next long period trial of the pyrolyser. In summary: • • •

Gasifier cold feed and extraction trials have been successfully completed. Dismantling of the gasifier inside the shed has commenced to move it outside to accommodate a ceramic filter between the gasifier and combustor. The remainder of the gasifier is currently being fabricated off-site.

•

The angle of the pyrolyser has been reduced to increase the residence time of material as it passes through the drum.

The intention is to incorporate all components of the gasifier in October in order to commence hot trials by the middle of the month. The next trial of the pyrolyser, ceramic filter and gas engine is programmed to start on 28th September for 100 hours. Avonmouth energy recovery facility • The bank operability tests have all been completed for the refinancing (see below). • The line 2 boiler was shutdown in August to carry-out preventative maintenance. Operations have now returned to normal. • The improved gasifier bases that have been successfully trialled on NEAT unit 4 will now be rolled out from 22nd Sept with one unit being installed per week. This is anticipated to lead to enhanced efficiency. SPEN We met with SPEN (Tony Sneddon and Paul Dytor from SPEN) on 3rd September. We discussed the grid connection offer, the timetable for when the grid connection is required and the ROC grace period. The representatives from SPEN were supportive of the project and want to see it succeed. The outcomes of the meeting were: •

•

We have requested that SPEN drafts a new Cessation letter that will stand next to the offer setting out a long-stop date in 2016 to achieve financial close on the project. After this date, if we have not made the first instalment for the grid connection, SPEN can terminate the offer. We provided the briefing note on the ROC grace period and have requested a letter to estimate that the connection can be made by 31st March 2017.

We have asked SPEN to get back to us this month with both documents to ensure we meet the OFGEM ROC grace period deadline. This deadline has been confirmed as 9th November 2014. Future funding arrangements and NERR • We are hoping to close the refinancing of Avonmouth with the senior debt provider early next week (w/c 15th September). There are no issues to resolve, it is a matter of dealing with the legal paperwork. • The visit from the New York-based fund that may sit alongside NERR went well. They have said that they now wish to explore with NERR how they can provide money both at a NERR shareholder level and directly into projects. Scottish Borders was prominent in the discussion. There will however now be a lengthy due diligence programme to establish the means and timing of any investments. • Two further funds of this nature have also been identified and are visiting Avonmouth in the coming weeks.