UK Government Guarantees Ineos Grangemouth Bonds
The Government has given a £230 million loan guarantee to secure the future of Grangemouth in a move that is being seen as highly political, as well as economic, just two months before the Scottish independence referendum.
The Treasury announced that Ineos, the Swiss owners of the Falkirk-based petrochemicals plant, had won one of the few loans under the UK Guarantee Scheme, designed by the Coalition to back its plans to unleash £375 billion of infrastructure projects.
The deal, which will secure thousands of Scottish jobs, will allow Ineos to raise Government-backed debt financing that will be used to fund the construction of the biggest ethane tank in Europe.
Jim Ratcliffe, the chairman of Ineos who threatened to close the plant last year amid an industrial dispute, said the tank was vital to allow the company to import cheap American shale gas which will make the plant economically viable.
"Our ability to import shale gas underpins the future of manufacturing at Grangemouth and across many businesses in Scotland," he said. "It is a vital step towards preserving the long term future of the Grangemouth site and those businesses that depend upon its continued presence in Scotland."
George Osborne said the guarantee was part of the Government's plan to "equip the whole country with the infrastructure it needs to compete." In a more obvious attack on the SNP, he added that the deal was "only possible because of the credibility of the UK Government's balance sheet." He said the loan would allow Grangemouth to "provide essential raw materials to industries across the UK" and would "secure thousands of skilled, well-paid, long-term jobs for the future."
Ineos has already launched a £300 million investment program designed to keep Grangemouth open beyond 2017 after winning a bitter industrial dispute last October which nearly closed the plant.
The plan to return the loss-making site to profit relies on the shipment and storage of ethane from America, which is 75% cheaper because of the shale gas revolution. Ineos has agreed a long-term to run its KG chemical cracker at full capacity of 700,000 t/y - twice the rate currently possible due to the decline in gas feedstocks coming out of the North Sea.
Grangemouth was one of more than 40 projects to have already gained "prequalified" status, or eligibility for the UK Guarantee scheme. However, although many have spent two years on the waiting list, so far Drax Power Station and the Mersey Gateway Bridge have been among the very few projects to be actually processed.