INVEST NI has admitted to failures in its handling of a high risk and “irregular” loan provided to a biogas plant in Co Donegal that resulted in the loss of millions of pounds of public money.
The detail around Invest NI’s management of the £9.3 million loan to Glenmore Generation Limited in 2015 is contained in a new report published by the Northern Ireland's Audit Office.
Former Economy Minister Diane Dodds admitted last year that the loan provided to help set up the anaerobic digestion plant in Ballybofey had been written off after the company got into difficulty.
In his audit of Invest NI’s 2020/21 accounts, Auditor General Kieran Donnelly noted another £4.9m of accumulated interest had been lost, meaning £14.2m in total had been written off.
Mr Donnelly’s audit of the economic development agency produced a qualified opinion, largely linked to the way Invest NI and DfE reported the expenditure of Covid-19 grant support schemes.
A qualified opinion is typically made when an auditor finds the financials of an organisation are fairly presented, with the exception of a specified area.
The Auditor General said that even without the Covid grant schemes, he would still have qualified his opinion due to the concerns around Invest NI’s handling of the Glenmore loan.
The £9.3m loan was the product of Invest NI’s Sustainable Utilisation of Poultry Litter (SUPL) scheme, where it agreed to provide 40 per cent toward Donegal businessman Karol McElhinney’s development of a £24.3m anaerobic digestion plant.
The facility was supposed to turn 25,000 tonnes of poultry litter from Northern Ireland into energy each year, supplying power to Bombardier (now Spirit Aerosystems) and Montupet.
Private equity group SQN also injected significant funds into the project.
But it suffered “significant commissioning issues” and struggled to ramp up production, resulting in a pre-tax loss of £23m in 2019.
Glenmore Generation initially failed in a bid to sell the business, and instead moved to restructure and refinance the company with the help of well-known Fermanagh business figure Ernie Fisher.
The Auditor General found that while Invest NI and SQN had originally entered financial arrangements on an equal footing, SQN subsequently injected another £10.5m between 2017 and 2019 and in effect, outranked the arms-length body when it came to the recovery of the initial loans.
On April 2 2021 Invest NI approached DoF through the Department for the Economy, seeking the urgent approval to write off a loss totalling £14.2m in order to allow the refinancing to proceed.
When DoF officials later reviewed an internal audit commissioned by Invest NI’s own board, they listed a number of procedural failures.
DoF said while it had initially approved the loan, it was not informed of the change in risk and circumstances of the loan. Ultimately DoF concluded the loan was “irregular”.
Responding to Mr Donnelly’s request for an explanation, Invest NI admitted “it did not consider the circumstances in their totality and that DoF should have been consulted”.
It also acknowledged that too much reliance was placed on the due diligence undertaken by the private sector partner.
Invest NI also accepted that the absence of specific risk register meant the risk monitoring and escalation of the situation “was not sufficiently robust to respond to the changing risk profile of the project”.
In a statement, Invest NI’s interim chief executive Mel Chittock, who served as Invest NI’s most senior finance director for a decade, said: “It was always understood that the development of anaerobic digestion plants using innovative technologies was high risk.
“This risk was balanced against the environmental and economic benefits to the NI economy.”
He said the plant continues to supply energy to the two manufacturers.
However the interim boss said Invest NI accepted the qualification of its accounts.
“I have given assurances to our board, our sponsor department and the Department of Finance that lessons have been learnt,” he said.