IMAGINE a tiny country that discovers great natural energy resources on its doorstep. Imagine there is a huge, pent-up global demand for these resources. Fortunately, it is a country of brilliant engineering ingenuity as well as being rich in capital. This most fortunate of nations has everything it needs to exploit the resources nature has bequeathed it. Surely there are happy times ahead for this hypothetical country.
Unless you are Scotland. Last week it became known that a Scottish firm called BiFab, which has engineering yards in Fife and Stornoway, had failed to win any contracts for building a massive new offshore wind farm called Seagreen.
Developed by SSE, the Perth-based electricity giant, Seagreen is set to become Scotland’s largest offshore wind farm. BiFab’s future, on the other hand, looks bleak. Yet Seagreen is only 27km away from BiFab’s construction facilities at Burntisland and Methil. So why is SSE buying the platforms to hold the 114 wind turbines at Seagreen from China, and from that great global manufacturing hub (not) the United Arab Emirates?
Events at Seagreen are symptomatic. Scotland was promised a renewables jobs and income bonanza just as it was promised an oil jobs and income bonanza. Instead, we have suffered a double whammy unprecedented in the history of small nations cursed with natural wealth – we have been robbed twice over.
First the oil profits and tax revenues disappeared across the Border to London and to Wall Street. Then in 2010, the Scottish Government’s much-lauded low carbon energy strategy promised 28,000 new green jobs, mostly in offshore construction and production. A decade later, only 1700 full-time local jobs had been created, a pathetic 6% of the promised total. What went wrong?
At this stage, the employment potential lies in construction and manufacturing jobs. But these have largely gone abroad. Why so? According to companies such as SSE, the answer is that Scottish manufacturing costs are too high. The company said: “We wanted nothing more than to award work to a Scottish firm … Unfortunately, on this occasion, the gap between BiFab’s offering and that of competing fabricators was too significant to close.”
I should point out that SSE’s pre-tax profits last year rose by a staggering 49%. I should also point out that SSE is being massively subsidised to produce electricity from Seagreen, through the Westminster Government’s infamous “Contract for Difference” (CfD) scheme. This puts a levy on all electricity consumers which goes to guaranteeing SSE’s future prices.
We are all being screwed so companies can hike their profits and buy cheap foreign engineering kit. This begs an obvious question: how can you build big bits of generating kit on the other side of the globe, then transport it to Fife, and still undercut Scottish suppliers?
One explanation is that the Chinese build in bulk, so reducing unit costs. You can’t gainsay this point. However, had the Scottish Government a decade ago used its political and financial muscle to create a scaled-up engineering facility to meet offshore wind farm needs, we might still be in the game. As it is, companies such as BiFab are too wee to compete globally.
That’s not the end of the story as far as the Seagreen project is concerned. Why not make power companies subsidised by the public through the CfD put something back in by hiring Scottish engineering companies? Other countries do this. Besides, the Chinese are subsidising their offshore platform constructors, so BiFab is facing a rigged market.
Of the 114 platforms needed at Seagreen, 84 are being built by a partnership between Fluor, an American group, and the China Offshore Oil Engineering Company (COOEC). COOEC is headquartered in the new Tianjin Free Trade Zone, which has been specially designated in order to cream business away from Hong Kong, in a bid to undermine democracy in the former colony.
READ MORE: It's Scotland's Oil: How profits that should belong to the nation are in danger
COMPANIES inside the free trade zone get all sorts of tax concessions. Fluor, by the way, runs the US bases in Afghanistan, and is a major Pentagon contractor. Last year, it was accused of overcharging the US Army by hundreds of millions of dollars on its Afghan contracts.
The rest of the Seagreen platforms are being manufactured by a firm based in the United Arab Emirates (UAE) called Lamprell, which is actually registered on the London Stock Exchange.
The Lamprell deal seems very questionable. The company’s share price has halved in the past year and is worth a fifth of what it was five years ago. In May, Lamprell warned the stock exchange there were “material doubts” about its position as a going concern, after annual losses more than doubled. This despite the UAE being a low-tax jurisdiction.
Far be it for me to suggest Lamprell has been trying to buy business by cutting contract prices to below cost. But the firm (by its own admission) is haemorrhaging cash, which suggests it is not making a profit on current work. This makes it impossible for BiFab or anyone else to compete. Let’s hope SSE gets its platforms from the Emirates delivered. Otherwise members of the SSE board should be offering their resignations.
For instance, Dame Sue Bruce who, before joining SSE as a non-executive director was the chief executive of Edinburgh Council. I mention Dame Sue because she is a member of the Scottish Government’s advisory group on economic recovery after the pandemic.
The advisory group has published a report which argues strongly in favour of “green investments” to create jobs and kickstart the economy. Such a pity that Dame Sue does not put her money where her mouth is and buy from BiFab.
But then, this is the same Dame Sue who also voted for SSE’s decision to move its group ownership into a new Swiss holding company. SSE explained it had done so (pre the 2019 General Election) because of the Labour Party’s threat to take the big firms into state ownership. In other words, profits ahead of democracy.
I predict that SSE’s PR folk will be in touch to say they had “nothing” to do with letting construction contracts for Seagreen, as this has been delegated to a project manager with the exotic name of Subsea 7. Believe that if you like. Subsea 7 is registered in Luxembourg, with subsidiaries in the Cayman Islands, though its headquarters are in London. One smells a tax angle.
Two years ago, the government of Equatorial Guinea ordered local companies to stop doing business with Subsea 7. The reason? Because Subsea 7 had failed to comply with Guinean laws aimed at creating more local jobs and sourcing local content. Why can’t the Scottish Government do the same?
Finally, note that in June SSE sold a 51% stake in Seagreen to Total, the French oil and gas giant. This allows Total to pretend it is interested in renewables while providing SSE with cash to survive the Covid-19 crisis. Meanwhile, SSE (not Subsea 7) has announced it will buy the turbine blades for Seagreen from a Japanese-Danish firm based on … the Isle of Wight.
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