Continuing emergency action needed to save former Skykon plant in Kintyre

(Revised) Skykon, the wind turbine tower manufacturer at the Machrihanish plant in Kintyre, was, of course, forced into administration , the victim of cash flow problems directly linked to the recession following the collapse of the banks.

That is now  history.

The pressure is to find a new operator to take over the plant in time to capitalise on the completion of an order it has on its books – the Siemens Clyde order.

We had understood from industry insiders that there was a window of 5-7 days within which action had to be taken – the trouble being that action, as opposed to discussion and the preparation of plans, is not a major feature of government at any level.

We missed a Press Release issued on Wednesday and understand that an agreement has now been made with Siemens that will see production resume at Skykon Campbeltown Ltd, starting yesterday with all 130 employees back at work, wage arrears met, and the Siemens contract to be completed.

While it is being said that this agreement ‘sees Siemens provide short-term funding for an outstanding order of 30 wind turbine towers’ – that are already in situ at Skykon Campbeltown and are destined for the Clyde wind farm near Abington in South Lanarkshire, there is much it does not say.

What is not known

There is no timeline given for the completion of the Siemens contract and the wording of the Press Release, referring to the 30 towers remaining in the order as being ‘already in situ at Skykon Campbeltown. Does this mean that the towers are already fabricated?

We understand that Scottish Enterprise. Highlands and Islands Enterprise, Scottish Development International and Argyll and Bute Council have all been involved with the administrator in securing this temporary put-by arrangement – and it is unlikely that they will have kept their hands in their pockets.

What is also not known is whether the continuation of the contract is being used to see Siemens – and end customer SSE, experience no further difficulty in delivering the giant Clyde wind farm (a serious consideration) – or whether it is also being used to secure a buyer for the plant. One thing is certain – the closer to the end of delivery on the Siemens order this matter runs, the smaller the chance of securing a new operator.

Siemens needed the turbines. Skykon were the most likely to be able to deliver them in time, given the latitude to complete. SSE needed Siemens to deliver the installed turbines. The Skykon employees needed their wage arrears and as much continuing work as possible – and the Scottish Government needed them to get that easement, with an election coming up.

We warmly congratulate all concerned for their efforts in getting this temporary stay – but this is itself a spur to redouble those efforts and get a buyer in place as soon as possible.

The administrator at Skykon is competent, engaged and respected – but is being paid massive daily fees.

Prompt action is therefore not in the administrators’ financial interests. The longer the matter takes the more fees are earned. Kintyre cannot afford to be prey to such interest.

Time is not on the side of the plant unless the securing of this order is a live commercial asset to attract investors. There will not be more orders on the books without a new company in place to pitch for and deliver on them.

Without orders in the books, what attraction is there in an empty plant and a track record of failure?

We understand that there is a serious trade investor interested in taking over the plant but who does not want to pay as much for it as the administrator will be compelled to ask, charged with getting best value for the government.

This is a situation where private sector values need to be prioritised in the longer interests of the local economy of Kintyre.

The administrators at Skykon, Ernst and Young, are a wealthy major company. They may want but do not need to prolong matters at Machrihanish for their own financial gain.

The government will be afraid not to get best value for the plant. In this situation, that really dose not matter.

What matters is the future of Kintyre – and in the renewables industry, in which the area is so well placed to play a major part – if it can get across the threshold of entry period survival.

This is the only wind turbine tower manufacturing plant in Scotland. It is a national asset and it has serious room to grow, if its operations can only be sustained.

SSE took a 15% share in BIFAB at Burntisland in order to ensure that aspect of its supply chain in the windfarm sector. It is not inconceivable that it might take a share in the Machrihanish plant for the same reasons.

The operation at Machrihanish will need knowledgeable leadership from the industry.

We understand that Skykon, which has been doing all it can to assist and has been bringing the plant to the attention of a range of investors – has offered short term input into stabilising the operation and progressing the Siemens order.

That also looks like an offer not to cavill at.

This matter will be a sharp test of just how business savvy the Scottish Government and the enterprise agencies actually are. There is a time for action and this is it. Can they deliver?