OVER £50m of taxpayers money faces being lost after ministers decided not to pursue the nationalisation of the insolvent renewables manufacturer run from Canada seen as a key part of the future of Scotland's wind farm revolution.

The Scottish Government insist that EU state aid rules stop it from carrying out a full takeover of Burntisland Fabrications (BiFab) which is being put into adminstration by its Canadian owners.

The move came after the Scottish Government felt that providing key support for the ailing steel fabrications company at the centre of a wind farm jobs row would be seen as illegal state aid under European Union regulations.

Canadian firm JV Driver, through its subsidiary company DF Barnes, took total control of BiFab, which has yards in Methil and Burntisland in Fife and Lewis, for just £1 two years ago.

The ministers' 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.

Scottish Government sources revealed that a 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 yards had been operating on a skeleton 30 staff - with zero contracts but at its height employed hundreds.

With the collapse of the company, and without a takeover, the emerged the public purse could lose up to £52.4m which has been pumped into the company.

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. According to official 2018/19 accounts, that stake was worth just £2m because of expected losses.

It would be worthless if the company goes into liquidation. According to insolvency law, shareholders are the last class of creditor to receive a distribution from funds raised from an administration and they only receive money after everyone else has been paid in full.

READ MORE: Scots ministers say they remain "committed" to salvaging a future for BiFab - after it became insolvent

A loan facility of £15 million was also provided to support working capital.

The Scottish Conservatives are calling for an urgent parliamentary inquiry into the BiFab collapse, and say an audit should be carried out.

BiFab announced on Thursday that it was entering administration after Scottish ministers ruled out nationalising the company and claimed it would be unlawful under state The move to rule out nationisation contrasts with its moves to ensure that the shipyard company at the centre of Scotland's ferry building fiasco was brought into ministers' hands.

Ministers used £7.5m of the debt it was by Ferguson Marine Engineering Ltd (FMEL) to mount the takeover. According to the latest financial statements, it is still owed over £40m.

The Herald on Sunday has previously revealed the government has faced questions about failing to notify the EU about nationalising FMEL after being found to have given £50m of "illegal state aid" to two airports.


First Minister of Scotland Nicola Sturgeon and Chuck Saunders CFO of JV Driver (right), after it was announced the company had bought BiFab.

Illegal state aid was found to have been made to Sumburgh Airport on Shetland and Inverness Airport after both received taxpayer support that had not been approved by the European Commission.

A secret pathway to the FMEL state takeover was revealed as the Scottish Government reached a financial agreement with an American insurance firm to stop it having a hold on the the company assets.

The performance bonds acted as a £25m 'insurance' against the company going under and would allow for the completion of two lifeline ferries.

After falling into administration in August, last year, former FMEL managers accused the Scottish Government of having no serious intention of leaving it in private ownership while being warned nationalisation would be subject to EU state aid laws.

They accused ministers of forcing it into insolvency by rejecting a plan that would avoid any state aid claim, save the taxpayer at least £120m and prevent the costs of building two key lifeline ferries soaring to over £230m.

READ MORE: Anger as part Scottish Government-owned BiFab files for adminstration

After details of the secret deals emerged, islands minister Paul Wheelhouse told a parliamentary inquiry that the government would have far rather have seen it as a private business and that the state takeover was in the public interest.

A Scottish Government spokesman said: “Nationalisation was considered but this could not resolve the challenges presented by state aid rules, and would still not have allowed for the provision of working capital or guarantees to the business.

"The key question in determining whether or not financial support would be possible is whether a market economy investor would do the same. Nationalisation would not have changed the requirement for the Scottish Government to comply with state aid rules.

“We will now work with the administrator and trade unions to secure a new future for the BiFab yards in Fife and the Western Isles, helping ensure they are able to diversify and compete in this competitive market."

The EU previously confirmed it was not notified of the state takeover or the issuing of two commercial loans to FMEL in Port Glasgow totalling £45m before the yard fell into administration and then public ownership.

Under state-aid rules, a government can own a company - but it is not allowed to keep it going if it would otherwise fail.

In 2016 the commission ordered Belgium to recover 211m euros in illegal state aid it had given to its steel industry.

And in January, the European Commission ordered Estonia to recover 'illegal aid' given to an agricultural company AS Tartu Agro through the rent of agricultural land below market price.

Under EU rules, member-state governments are expected to notify the European Commission – which is in charge of treaty compliance – about proposed state aid moves.

The intent of state aid rules is to avoid financial assistance given by a government that favours a certain company or commercial group and has the potential to distort market competition.

The Competition and Markets Authority expressed its concern in the wake of the FMEL nationalisation about the "potential risks" of state control over the way ferries are operated, run and paid for.

A Scottish Government spokesman added: “The Scottish Government will do all that it can to recover investment. Once the administrator is appointed, we will liaise with them to ensure the best outcome for the workforce and the sites.”