MINISTERS stand to lose the vast majority of the £52.4m it pumped into the collapse of part state-owned renewables manufacturer Burntisland Fabrication (BiFab) despite putting up £300,000 in taxpayers money to support legal action to regain some back.

The Scottish Government has agreed to the litigation funding facility in a £17.8m claim in a contractual dispute over Bifab’s involvement with the construction of wind-turbine pin piles for use in the Moray Firth offshore wind project.

It is the latest twist in the row over the firm which was once seen as key part of the future of Scotland’s wind farm revolution and fell into administration in December, 2020.

The claim would be pursued by the administrators of Bifab, which is running what is left of the business, with an aim to ensure that creditors are paid back as much of what they are owed as possible. This is done by selling off assets such as factories and equipment and taking up potential legal claims that might generate money for creditors.

Some £52.4m was injected by ministers into the company after its first financial collapse in December, 2020.

The Scottish Government, in a bid to save it from closure in 2017, provided a £37.4m bailout and converted it to its 32.4% equity stake in the company. The shareholding became worthless in the wake of its administration.

A loan facility of over £15 million was also provided to support working capital - which has become a debt of the collapsed Bifab.

But it can be revealed that while the Scottish Government are secured creditors, the Royal Bank of Scotland, which is potentially owed £14m, ranks ahead of them in the queue to get their money from the proceeds of the insolvency - and that could swallow up nearly all of any proceeds from the taxpayer-funded claim. The RBS debt is dependent on a separate claim.

Two of the three BiFab fabrication yards – Methil in Fife and Arnish on Lewis – were subsequently bought out of administration by London-based firm InfraStrata for £850,000. But the former BiFab fabrication yard at Burntisland in Fife was not part of the deal and re-emerged under Forth Ports ownership, with Aberdeen-based dive systems specialist Orca Oceanic Systems setting up an operations facility.

Now it has emerged that ministers are behind a bid to try and get some money back - although the administrators of Bifab have indicated ministers will only get a fraction of the loan facility by way of return if successful.

At the centre of the row are pin piles taken out to the Moray East Offshore Wind Farm from the firm’s Arnish yard on the Isle of Lewis, with others coming from its Methil yard in Fife.

Video of the offshore wind farm construction of Moray East

BiFab won a £26.5m deal for the manufacture of 100 pin piles in March, 2019.

The contract initially got off to a slow start before being delayed when work stopped at the site the following September.

It is understood a shipping problem occurred between BiFab and Belgian project contractor, Deme Offshore.

According to Teneo, the joint administrators of Bifab, during the project the customer “instructed a number of variations to the agreed contractual scope of works in respect of which BiFab has advanced various claims for additional costs”.

They said in a financial statement: “These claims are contested by the customer.”

The administrators have confirmed that £300,000 in funding provided to meet costs of the sale of Bifab during a sale period has been repurposed to be used to pursue the court case.

The estimated recovery value of £17.8m from the wind farm claim is by far the greatest chance of those owed money getting anything back with the amount currently available for distribution standing at £852,479. There are 34 claims worth £8.5m from unsecured creditors, who rank behind RBS and Scottish ministers in their rights of recovery - but are only expected to share £600,000 set aside under a ringfenced amount called the Prescribed Part.

The administrators say that the outcome for RBS and Scottish Ministers depends on legal claims, including the taxpayer-funded court action by ministers.

Scotland's biggest operating offshore wind farm, Moray East, which came online last year is controlled by a combination of private companies based in Spain, Holland and Japan.

BiFab, which once employed around 1,400 workers was rescued from the brink of administration by the Scottish Government with the £37.4m loan, and then was purchased by Canadian firm DF Barnes for 1p, although hundreds of jobs were shed.

The Herald:

Ministers signed off on what was a secret £30m guarantee to support Bifab in 2019 before doing a U-turn after the failure of an important contract, leaving fears that the company would collapse financially Ministers decided to do a U-turn after new legal advice felt that providing key support for the ailing company at the centre of a wind farm jobs row would be seen as illegal state aid under European Union regulations.

The re-evaluation came after BiFab in September failed to win any work on Scotland’s largest offshore wind farm, the multi-billion pound Seagreen project, located just a few miles from its yards in Burntisland and Methil in Fife.

The ministers' intial support came by way of a commitment to effectively underwrite a contract to have a part in the the £2 billion Neart Na Gaoithe (NnG) offshore wind farm project in the Firth of Forth to the tune of £30m.

The contract proposed a minimum of eight of 54 steel foundation jackets which anchor the turbines to the seabed would be built by Bifab with the rest being constructed in south east Asia.

But the Scottish Government which owned a third of Bifab before its collapse, decided to decline the "assurances" to the firm to support the contract signed off on last year.

BiFab then said that made the award of what was a loss-making contract "very challenging".

The decision to underwrite the potential NNG contract last year was aimed at protecting its investment in BiFab as a major shareholder.

But it was felt the financial support would be seen as state aid now, after the failure to get the Seagreen contract because the company would not have been seen as an investable proposition.

InfraStrata, when it bought two of the three Bifab fabrication yards in February, 2021, had already owned Harland and Wolff shipyard in Belfast and said its ideas for the Arnish yard include ferry maintenance, with the possibility of installing a floating dock.

A Scottish Government spokesperson said: "The Scottish Government will continue to work with the administrators to obtain the maximum possible recovery of public funds. It would not be appropriate to comment further while the administration continues.”