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Evolution Magazine

Finance

GPG’s Investment into the Scottish Aluminium Smelter, Lochaber

Chairman Sanjeev Gupta’s Third Investment into Scotland’s Metal Industry

Mr. Sanjeev Gupta is the CEO of GFG Alliance who has been known to invest in steelworks, power stations, smelters, and mines, mostly when they’re on the brink of uncertainties and imminent closure.  He has invested in companies few and far between, with a range of Australia to the Czech Republic. He has previously made purchases of Scottish steel plants Dalzell and Clyderbridge, so his approach towards Lochaber in 2016 was not entirely unexpected.

Gupta is known to be a ‘saviour’ of steel factories, reinvesting in them so they’re environmentally friendly and still capable of ample production.

Lochaber is the last aluminium smelter of its kind in the UK. This smelter is powered through hydroelectrically charged turbines. The water source used is from an underground tunnel that bends in a 12-mile around the Ben Navis. Lochaber was constructed in the 1930s, an engineering masterpiece and revolutionary smelter of its time. Now, it’s a considerably outdated factory that produces 48 000 to 50 000 tonnes of aluminium in a year, in comparison to international competitors who create hundreds and thousands of tonnes of aluminium every year. It’s also one of the smallest smelter’s in the world, with the only known smaller one being an operational smelter in Cameroon.

The Fort William Lochaber was created in 1029, and has had an assortment of come-and-go owners, up until it was bought by Rio Tinto, a mining giant within the industry, in 2007. After almost a decade of working there, he put the 114 000 acre factory up for sale, which is when GPG came to make their sweep.

Sanjeev Gupta bought the Lochaber from previous owner Rio Tinto for £330 million. Not soon after he dove into his financial reconstruction of the plant. His first source of income came from Greensill Capital. It was a drafted loan to City investor which would be paid through the profits of the hydropower plant Kinlochleven. The bond was officially issued through Wickham, a legal entity dealing in financial transactions of larger scale. Out of this load can around £229 million, which were used to pay off Rio Tinto.

The second source of income used was once again conducted through Greensill Capital along with the Wall Street bank Morgan Stanley. This bond required the consent and support of the Scottish Government in order to take place. Gupta agreed to an irrevocable commitment to investors that they would be paid quarterly returns. This payment would have to made even in the case of power station breakdowns and inability to afford the payment. So, supposedly if Gupta were to fall back on his development of the factory, the Scottish government would have to take over the debts.

Gupta is facing a current financial issue and Greensill Capital closed in March. Their transactions are being investigated by an SFO (Serious Fraud Office) to determine whether or not all transactions and loans were law-abiding deals. GFG Alliance promised their full cooperation during this investigation.

Though not all plans have been disclosed, Sanjeev Gupta has created a profit of £600 million from a facility which was thought quite some ago to be under the brink of closing. His future plans will to grow the manufacturing line of the factory will require £90 million and will provide around 60 new jobs.

Written By: Leah Latif

Reported By: Zarrish

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