SCOTTISH ministers have defended risking £586m of public money by way of a power-purchase guarantee related to the takeover of a loss-making aluminium plant in the Scottish Highlands owned by commodities tycoon Sanjeev Gupta.
The guarantees were made when Sanjeev Gupta bought the Lochaber smelter in 2016 but the full extent of government support has only just been confirmed.
Built in the 1930s, the Lochaber smelter churns out 48,000 tonnes of aluminium a year and, according to its owners sustains between 100 and 200 jobs.
Scottish Labour branded it a "dodgy deal" while a Conservative MSP said "jaw dropping" sums were put at risk.
The agreement came when Mr Gupta’s GFG Alliance bought the smelter and two nearby hydropower plants from Rio Tinto in 2016.
It meant there was a 25-year guarantee to buy energy from the Lochaber hydro plants, should their be a shut which varies between £14 million and £32 million per annum over the 25 year life of the guarantee.
The Scottish government said it had acted to support high-skilled jobs.
A spokesman said: "We are committed to supporting jobs across Scotland and make no apology for doing so - including our backing for Scotland's strategically important aluminium sector and the highly-skilled jobs it provides.
"The Scottish government guarantee, which has not been called upon, was approved by the cross-party finance and constitution committee following appropriate due diligence.
"As part of that guarantee the Scottish government took on a comprehensive security package consisting of the smelter, the hydro power station, extensive land holdings, and a series of other protections."
Ministers initially rejected disclosing the sum of the guarantee in February 2020, citing commercial confidentiality.
They argued that the revealing the actual size of the guarantee could disadvantage Gupta’s company and help rivals calculate the size of the commercial sensitive information.
The Scottish Information Commissioner overruled the decision in September 2021.
The smelter, just outside Fort William, was at risk of closure five years ago when its owner Rio Tinto Alcan decided to sell it along with two hydro power plants and a huge portfolio of Highland estates.
Mr Gupta eventually bought it for £330m and promised major investment in the plant, securing 160 jobs and potentially creating hundreds more.
GFG is structured into three core industrial pillars: Liberty Steel Group, Alvance Aluminium Group and SIMEC Energy Group, employing around 35,000 people, across 10 countries, with revenues of circa $20bn.
Two weeks ago a report by MPs said that Mr Gupta should be investigated for potential breaches of his duty as a company director and said his leadership threatened the future viability of Liberty Steel.
Liberty Steel has, meanwhile, lurched through eight months of crisis after the March collapse of its key financial backer, Greensill Capital, triggered an ongoing attempt to find new lenders.
GFG, one of the UK's biggest industrial groups, was forced into an urgent financial restructuring while the UK government in March rejected its request for a £170m bailout because of its opaque corporate structure.
Liberty Steel was last month able to restart operations at its plants in Rotherham and Stocksbridge, both in south Yorkshire, after a partial £50m refinancing. However, the MPs on the business select committee said they still had concerns over the lack of transparency over the funding terms.
GFG said the company "takes note of the findings of the select committee. We will review and reflect upon its conclusions".
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