A SCOTTISH Government agency faces the loss of up to £4.3m of taxpayers’ money from the collapse of a wind tower firm seen as a key part of Scotland’s green jobs revolution, the Herald on Scotland can reveal.
It comes as it has been confirmed that South Korean-owned CS Wind (UK), which ran Britain’s only UK facility for manufacturing onshore and offshore wind towers in Machrihanish, Argyllshire, is not actively being sold as a going concern meaning there is little chance of it continuing to operate as an existing business.
The demise of the UK operation has come just a month after the South Koreans struck a deal to take over the world’s largest wind tower manufacturing facility having purchased the Pueblo plant in Portugal from Denmark-based Vestas.
It has emerged that the factory had benefitted from at least £14m of public funds since it opened 19 years ago with a green jobs fanfare.
Highlands and Islands Enterprise, the Scottish Government’s economic development agency had pumped as much as £4.3m into the business in the six years it has been run by CS Wind.
It has emerged that HIE has been trying to reclaim £2.8m of its financial assistance through the courts – before the directors of company placed the firm into administration. The taxpayer-funded agency gave the money to create the UK’s first offshore wind tower factory.
The agency says conditions attached to the funding required the company to maintain business operations at the plant linked to the purposes for which the funding was awarded.
HIE has since last year also been fighting to prevent the sale of the assets including property, plant and machinery which formed part of a legal agreement over the cash injection.
But now administrators are doing just that, selling off the assets of a factory which, when opened in 2002, led then First Minister Jack McConnell to declare his ambition to make Scotland a world leader in renewable energy.
While the Scottish Government was predicting 11 years ago that there would be 28,000 Scottish jobs in the offshore wind industry alone by 2020 as the nation takes advantage of its benefits – the latest workforce data for 2019 shows it stands at just 1400.
Unions have described the situation over CS Wind and the loss of green jobs as a “national scandal”.
The enterprise agency, even if it continues the court case, will line up with other creditors who are expected to get back only a tiny fraction of what they are owed.
Directors of CS Wind placed the company into voluntary administration and appointed Michelle Elliot and Tom MacLennan, partners with FRP Advisory as joint administrators who have stated that they will now market the assets for sale, including various plant and machinery and a residential property in the heart of Campbeltown that had been used by management for accommodation.
HIE began court action against CS Wind last year following concerns that the factory had been mothballed.
An interim interdict was agreed in early February by Court of Session judge Lord Ericht that prevented CS Wind’s officers, employees and agents from removing plant or equipment from the factory out of the Highlands and Islands. It was amended to allow the company to deliver items manufactured to satisfy customer orders.
It has emerged that a further £1.5m of financial assistance was offered by way of a training grant in August, 2016.
Papers seen by the Herald on Sunday show that an undertaking for the public funds stated that CS Wind should not without prior written consent “discontinue or dispose of the business or any substantial part of it or make any alteration that is in the reasonable opinion of [HIE] a material alteration to the character of the business”.
It also states: “[CS Wind] shall not without the prior written consent of [HIE] sell, lease, grant security over or otherwise dispose of [its] property or buildings or sell, lease, grant security over or otherwise dispose of or remove any of the plant, equipment or other assets used in connection with the Business and which have been acquired or improved with the benefit of the financial assistance.”
HIE had claimed that CS Wind had removed plant, equipment and other assets from the site without written consent of the pursuer.
“If the defender is allowed to remove some or all of the plant and equipment which is located at the site, it is very unlikely that the manufacturing capability of the site could be saved,” HIE warned in legal papers lodged in court.
“It is an important part of the local economy. The employment provided by the defender at the site, and the economic benefits to the local economy which those jobs produce, will be lost.
“[CS Wind’s] operation of the business at the site has benefitted from the substantial public funds made available by [HIE]. The public funds which [HIE] advanced to [CS Wind] by means of the additional financial assistance (and the benefits to the economy which that funding was intended to secure) are at risk.”
A £27m investment from Siemens deal paved the way for major expansion at the factory and Mr Wheelhouse (left) and CS Wind Corporation chairman Seong-Gon Gim (right) attended a ground-breaking ceremony in July, 2016, three months after the takeover.
CS Wind UK executive director Yun-Cheol Kim told the Herald on Sunday in August, last year, that it had no intention of moving out of Scotland and had called for talks with politicians to discuss the factory’s future.
“CS Wind hopes to keep business in Scotland, unfortunately we didn’t get the projects yet. CS Wind is working on getting projects actively,” he said.
But the administrators has told the Herald on Sunday that the business “ceased trading” in early 2020 and that a going concern sale of the business was unlikely.
In December, 2019, the First Minister was urged to intervene amid concerns Scotland was missing out on a wind farm jobs boom, as CS Wind lost out on a key contract.
CS Wind were involved in the Beinn an Tuirc wind farm project on the Kintyre peninsula believed to consist of 18 turbines.
In November, ScottishPower Renewables, announced that it had begun work on the Amazon backed project which was to see 50MW of green energy, enough each year to power the equivalent of 46,000 homes.
ScottishPower had then stated the project would be powered by turbines supplied by Danish-owned Vestas, with the towers for the wind turbines being supplied by CS Wind.
Up to a hundred new jobs were expected to be created at the site over the lifetime of the project and it was announced CS Wind were on board.
Unite believe CS Wind lost the Beinn an Tuirc contract due to uncertainty surrounding the factory. It was believed the contract would have provided the factory with a two months of work until other contracts could be secured.
Concerns about CS Wind’s operation of echoed worries raised in Canada about the mothballing of a factory after the wind turbine manufacturer opened in Windsor in 2011 as part of a multi-million dollar deal with Ontario’s Feed-In Tariff program for renewable energy sources.
CS Wind was expected to hire around 400 people when it first opened. As of 2015, it employed 482 people and as of 2019, there was no activity on site.
It started winding down production six years after promising jobs and economic investment with $10-million publicly funded incentives.
The factory was developed in the Kintyre peninsula which was a focus for the government and economic development agencies after Campbeltown’s shipyard closed in the 1980s and the military pulled out of RAF Macrihanish in 1996.
In the early 2000s Danish company Vestas established the £12m factory primarily to supply Scottish and UK onshore wind farms. The 100,000 sq ft purpose-built factory was secured with the help of £9.4 million of public funds, including £3.6m from Europe. Vestas also invested a further £3 million in equipping the the purpose-built wind tower facility, placed on a section of the former airfield.
When it formally opened in the summer of 2002, then First Minister Jack McConnell declared his ambition to make Scotland a global centre for new energy technology development. The factory would help revitalise Campbeltown – then an unemployment blackspot.
“This is an ideal site, an excellent location for building turbines for Scotland, the UK and further afield-right in the centre of an extremely high wind resource,” he said.
The factory, plant and equipment were purchased by Wind Towers Scotland (WTS), which was majority-owned by SSE.
But in April, 2016, HIE offloaded a 19% stake in the Argyll-based firm as CS Wind – with factories in China, Vietnam and Canada – took over operations in April, 2016.
HIE and Scottish energy firm SSE, which sold its entire 81% stake in WTS said at the time that CS Wind planned to invest up to £14m in Scotland which would safeguard 130 skilled jobs and create up to 70 new jobs in rural Argyll.
Under CS Wind, it used to have 134 staff at the Scottish base but that dropped to a skeleton staff early last year.
A CS Wind UK production video from 2016
Pat Rafferty, Unite Scottish Secretary, said: “The depressing story of CS Wind is the personification of everything that’s gone wrong with the green energy sector over the last ten years in Scotland. It’s arguably the most blatant example of the strategic failures by both the Scottish and UK Governments after what should have been, and still could be, a very promising future for the factory. The skills are still there to be utilised and a manufacturing capacity for the development of onshore and offshore wind turbines could be retained. To suggest there is no market demand for these turbines is a lie, but what is lacking is government support, effort and commitment to turn promises into a reality.”
“We repeatedly warned of the disgraceful situation developing at the hands of the South Korean owners who have a track record for taking millions in public funds only to run a factory into the ground. The reality is that Scottish Government sat back and watched from the sideline.
“Let us consider the facts. There have been minimal green manufacturing jobs directly created in Scotland. There is no green jobs revolution – it’s a myth. The word scandal is often over used, but if this isn’t a national scandal what is?”
GMB general secretary Gary Smith added: “While the First Minister outlined her programme for government, announcing a raft of ‘green jobs’ measures, the administrators were called to Machrihanish.
“It’s yet another example of the Scottish Government’s miserable record on renewables manufacturing. Scotland isn’t creating the tens of thousands of green jobs once promised by the First Minister’s predecessor, we are haemorrhaging them to the rest of the world and specifically yards in China, Indonesia, and the UAE.
“And scraps off the table from our own billion-pound renewables projects in the form of scores of assembly and maintenance jobs simply won’t cut it, not while tens of thousands of workers in Asia are building our future.
“Where is our ‘Aberdeen of renewables’ and when are we going to stop the mass export of the green jobs we need to deliver a transition to net zero?”
CS Wind UK’s most recent accounts for 2019 showed a £2.6 million post-tax profit on revenue of £41.9 million.
HIE put out this video of the ground-breaking ceremony for a 2016 major expansion attended by Mr Wheelhouse and CS Wind Corporation chairman Seong-Gon Gim. It came as Siemens awarded CS Wind UK preferred supplier status for multiple offshore wind tower projects.
In an analysis signed off in December, 2020, directors admitted that a “lack of viable contracts cast a material uncertainty on the company’s ability to continue as a going concern”.
But they also said they were “hopeful” they could secure the necessary contracts to ensure the UK site “remains commercially viable”.
An HIE spokesman said: “The manufacturing facility at Machrihanish is a major asset to the Kintyre area and one that should be fully active and providing valuable local employment. Sadly it has been idle for some considerable time now, in spite of commitments made by CS Wind when they took over the lease and received public sector funding.
“With the company now in administration, we should be able to start making progress in resolving some of the outstanding issues. This includes securing alternative economic activity that will bring employment back to the site, and we look forward to opening discussions with other parties who may be interested in using the facility.
“Meanwhile HIE is a listed creditor of CS Wind in the administration process. We will also therefore be working closely with the administrators with a view to recovering this. Finally, there is the matter of the ongoing legal proceedings between ourselves and CS Wind, which will need to be resolved.”