Scottish Government's investment in BiFab

The request was partially successful.

Dear Audit Scotland,

In April 2018 DF Barnes Services Limited a subsidiary of JV Driver Corporation Inc acquired 100% of the share capital of Burtnisland Fabrications Limited (BiFab) paying £1 to the former shareholders. DF Barnes Services Limited subsequently injected a total of £4 (that is four pounds) into BiFab.

During the FY 2018/19 Scottish Ministers acquired a 32.4% stake in BiFab injecting £37.4 million into the company. At the end of the FY 2018/19 Scottish Ministers wrote down the value of their 32.4% investment from £37.4 million to £2 million.

By reasonable deduction, JV Driver Corp Inc stake of 67.6% must now be worth at least £4 million.

The result of this series of transactions is that Scottish Ministers have incurred a net loss of £35.4 million on their investment and JV Driver Corp have made a net gain on their investment of £4 million, largely down to the use of public funds.

BiFab have not published an annual report for their year ended 31 December 2018 which is preventing scrutiny of Scottish Ministers’ investment. The deadline for filing was 30 September 2019.

In the public interest of transparency and accountability with public funds, please provide all information held by Audit Scotland on the revaluation of Scottish Ministers’ shareholding in BiFab from £35.4 million to £2 million.

Yours faithfully,

Mr Paterson

Dear Audit Scotland,

REMINDER

This is a reminder that a response to my FOI request "Scottish Government's investment in BiFab" is due.

Yours faithfully,

Mr Paterson

Dear Audit Scotland,

OVERDUE RESPONSE

The response to my FOI request "Scottish Government's investment in BiFab" is overdue.

Please respond without any further delay.

Yours faithfully,

Mr Paterson

Ian Metcalfe, Audit Scotland

1 Attachment

  • Attachment

    Grant Thornton DRAFT Valuation Report Scottish Government BiFab 20 June 2019 redacted.pdf

    1.2M Download View as HTML

Dear Mr Paterson

Firstly I apologise for the late response to your Freedom of Information request dated 15 November 2019. In your request you asked for provide "all information held by Audit Scotland on the revaluation of Scottish Ministers’ shareholding in BiFab from £35.4 million to £2 million".

I attach a copy of a report produced by Grant Thornton. Some information has been redacted under exemption 33 1 B Commercial interests and the economy

Section 33 1 B of FOISA provides that information is exempt if its disclosure under this act would, or would likely to, prejudice substantially the commercial interests of any person (including, without prejudice to that generality, a Scottish public authority).

The information is redacted because we believe that the release will substantially prejudice the commercial interests of the Scottish government. We do not believe that there is any public interest argument which would override the likely damage to the commercial interests.

Yours
Ian Metcalfe
Corporate Performance Officer
Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN
T: 0131 625 1861 E: [email address]
www.audit-scotland.gov.uk

Right of review and appeal
If you are dissatisfied with how we have handled your information request or would like us to reconsider the decision we made, please write to: Diane McGiffen, Chief Operating Officer, at 102 West Port, Edinburgh, EH3 9DN. You should do this as soon as possible and within 40 working days of the date of issue of our response to your request.

If, after that, you are still not satisfied you can ask the Scottish Information Commissioner to review how we dealt with your request. This should be done within 6 months after the date of receipt of our response to your review. The Commissioner is independent of Audit Scotland and can decide whether we acted properly and according to the Freedom of Information (Scotland) Act 2002.

The Information Commissioner can be contacted at: The Scottish Information Commissioner, Kinburn Castle, Doubledykes Road, St Andrews, Fife, KY16 9DS, Tel 01334 464 610, email [email address]

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Dear Diane McGiffen, Chief Operating Officer, Audit Scotland

FOI Request: “Scottish Government's investment in BiFab”

REQUEST FOR INTERNAL REVIEW

The response to my FOI request in unsatisfactory and I am requesting an internal review. The original response fails to comply with the Freedom of Information (Scotland) Act 2002. I request that you reassess the original response in full.

Some information has been withheld under section 33(1)(b) “Commercial Prejudice”. Guidance available from the Scottish Information Commissioner (SIC) states that “in seeking to withhold information under section 33(1)(b), the authority must ensure that it sets out whose commercial interests are likely to be prejudiced, as well as the particular nature of those interests.” The response limits commercial prejudice to the Scottish Government but does not set out the nature of those interests.

Further, SIC guidance states “the exemption in section 33(1)(b) can only be applied where disclosure would, or would be likely to, cause substantial prejudice. There must be at least a significant probability that substantial prejudice would occur in order for the exemption to be properly applied. There must also be a genuine link between disclosure and the harm: it cannot simply be a remote or hypothetical possibility.” The original response fails to set out the significant probability of substantial prejudice - and the link between disclosure and harm.

The public interest test set out in the original response also fails to comply with guidance from the SIC. I draw your attention to specific comments made by the Scottish Information Commissioner: “I am not comfortable with the view that the public interest test is purely subjective. It is not simply a “finger in the air” exercise. When carrying out the test, an authority must identify and set out the competing arguments as to how the public interest would be served by disclosure of the information and how it would be served by withholding the information. Having identified the public interest arguments on each side, the authority must then carry out a balancing exercise to determine where the public interest lies. Where the balance is even, the information should be disclosed." The original response fails to consider the substantial public interest arguments for full disclosure.

I would also like the make the following points:

Information relating to the FY ended 2018 has been redacted in the original response. Information relating to FY ended 2018 is now historical. The company has published Annual Financial Statements for 2018 in accordance with its statutory duty. Therefore, withholding FY 2018 can not prejudice the company. There is also a public interest in comparing the information for FY 2018 that was used as a basis for the valuation with the actual outturn available from the published financial statements.

There is a substantial public interest argument for full disclosure. Scottish Ministers presented their investment to the public and to the parliament as a commercial transaction (i.e. not state intervention where different rules apply). There is a clear public interest in understanding the full circumstances of how an initial investment of £37.4 million of public money made during 2018 was valued at just £2 million within 12 months. This does not appear, at face value, to be a commercial investment.

Further, a subsidiary of the private sector company, JV Driver of Canada, made the initial purchase of the company for £1 and a subsequent investment of £4. Their shareholding is 67.6%. Scottish Ministers shareholding for an investment of £37.4 million is just 32.4%. The public and private investments do not rank pari passu. There is a clear public interest in understanding the value of the public sector investment and how it ranks alongside the private sector investment.

Please acknowledge receipt of my request for internal review.

Yours faithfully,

Mr Paterson

Diane McGiffen, Chief Operating Officer,

REQUEST FOR ACKNOWLEGEMENT
I note that I have not had an acknowledgement to my request for internal review and would be grateful of receiving such.

FURTHER INFORMATION
I wish to add the following to my request for internal review:

Please see extract below of Gordon Wales, Chief Financial Officer of the Scottish Government, informing the Scottish Parliament’s Public Audit Committee of the commercial nature of the investment in Burntisland Fabrications Limited on 29 November 2019:

https://www.scottishparliament.tv/meetin...

As I have already stated, the public sector (Scottish Government) investment does not rank pari passu with the private sector investment. Therefore, the public sector investment is not of a commercial nature as claimed by Scottish Government. There is a clear public interest for full public disclosure in this instance.

Yours sincerely,

Mr Paterson

Mr Paterson left an annotation ()

Typo: should read 29 November 2018 NOT 2019.

Mr Paterson left an annotation ()

From Grant Thornton report:

BiFab valuation = £8.6 million

JV Driver (67.6%) = £6.6 million
Scottish Ministers (32.4%) = £2 million

JV Driver gain on investment: £6.6m - £5 = £6.6 million
Scottish Ministers loss on investment: £37.4m - £2m = £35.4 million

Dear Diane McGiffen, Chief Operating Officer, Audit Scotland

FOI Request: “Scottish Government's investment in BiFab”

I refer to my request for internal review dated 5 January 2020 of the above FOI request. Whilst despite nt receiving an acknowledgement of receipt, a response to my request is due. I look forward to receiving a response very shortly.

Yours faithfully,

Mr Paterson

Ian Metcalfe, Audit Scotland

Dear Mr Paterson

Your email dated 5 January 2019 asked for a review of our response (dated 19 December 2019).

I am aware that I should have responded to your request for a review by 31 January. However due to an oversight on my part your review is not complete and is still being undertaken. Please accept my apologies for the unaceptable delay in responding to you and I will get a response to you by the end of February or sooner if I can.

Yours sincerely

Ian
Ian Metcalfe
Corporate Performance Officer
Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN
T: 0131 625 1861 E: [email address]
www.audit-scotland.gov.uk

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Ian Metcalfe, Audit Scotland

Dear Mr Paterson

Your request for a review has been completed.

The response to your freedom of information request included information redacted under FOISA 33 1 B Commercial interest and the economy. The information we redacted in the report includes the information of Grant Thornton and Bifab. The information redacted that applies to Grant Thornton is information to arrive at their analysis and information and the information that relates to BiFab included management information. As well, we believe the release of the information will be detrimental to the interests of the Scottish Government which would be exempt under section 33 2 b.

Specifically the release of the information may substantially prejudice the commercial interests for example including seeking new contracts or investments.

In addition your request for a review stated that the information relates to 2018 and is therefore historical and should be released. We have considered this and whilst the information does relate to 2018 the investments made are ongoing and for the reasons stated above the release of the information is still exempt.

We considered the public interest test in the application of this exemption and whilst we acknowledge there is a public interest in disclosing information we believe that this is met by the publication of the Audit Scotland annual report, assessment of the valuation of the Scottish Government's equity stake by external professional advisors and the responses to your previous FOI request.

The redacted information has been reviewed and the exemptions applied have been upheld. We maintain that the public interest in maintaining the exemption outweighs the public interest in disclosure.

We are being as transparent as possible and we previously provide information to your FOI request on the Scottish Governments investment in BiFab including:

The following outlines details of our assessment of Scottish Government loans to Burntisland Fabrications Limited as part of our audit of the 2018/19 Scottish Government consolidated accounts.

In preparing the accounts, the Scottish Government is required to comply with the 2018/19 Government Financial Reporting Manual (FReM). Our annual audit opinion on the consolidated accounts concludes that the accounts have been properly prepared in accordance with International Financial Reporting Standards as interpreted and adapted by the 2018/19 FReM. Our audit work is carried out in accordance with applicable law and International Standards on Auditing (UK).

Auditing and accounting standards require us to evaluate the appropriateness of balances and disclosures in the Scottish Government’s consolidated accounts 2018/19, with a financial year end of 31 March 2019. The consolidated accounts were authorised for issue on 23 September 2019 and the independent auditor’s report was certified on 25 September 2019. All material events between the 31 March and 23 September are required to be considered and appropriately disclosed in the consolidated accounts to ensure that they provide a true and fair view and are free from material misstatements.

Included in the loan agreement with BiFab is a provision for the loan to be converted to an equity stake, not exceeding a 38 per cent shareholding in BiFab. The Scottish Government
impaired the value of its equity stake from £37.4 million to £2 million to reflect expected losses in line with new accounting requirements (IFRS 9). This followed an assessment of the valuation of the
Scottish Government's equity stake by external professional advisors. We reviewed this assessment and agreed with the carrying value (recoverable amount) of the investment.

Your sincerely

Ian Metcalfe
Corporate Performance Officer
Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN
T: 0131 625 1861 E: [email address]
www.audit-scotland.gov.uk

Right of review and appeal
If you are dissatisfied with how we have handled your information request or would like us to reconsider the decision we made, please write to: Diane McGiffen, Chief Operating Officer, at 102 West Port, Edinburgh, EH3 9DN. You should do this as soon as possible and within 40 working days of the date of issue of our response to your request.

If, after that, you are still not satisfied you can ask the Scottish Information Commissioner to review how we dealt with your request. This should be done within 6 months after the date of receipt of our response to your review. The Commissioner is independent of Audit Scotland and can decide whether we acted properly and according to the Freedom of Information (Scotland) Act 2002.

The Information Commissioner can be contacted at: The Scottish Information Commissioner, Kinburn Castle, Doubledykes Road, St Andrews, Fife, KY16 9DS, Tel 01334 464 610, email [email address]

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