AQUIND ready to set sail (at last?)
PART 3 of an in-depth investigation into AQUIND's ownership origins
This is the final part in the series
Tracing AQUIND’s ownership origins:
Part 1: Temerko and Ms Love—an odd pair
Part 2: Three oilmen and an accountant
Offshore Group Newcastle is born
While the SLP business group was in its downward spiral, a plan was hatched by the owners and management to launch a new group of companies from the ruins of the old.
In March 2009, Shepherd Offshore agreed to lease the Hadrian Road Complex—a shipyard on the banks of the River Tyne—to the SLP Group.1
Engineering giants SLP plan to turn the old Hadrian Yard, in Howdon, Wallsend, into their UK manufacturing base over the next three years.
It will create up to 2,000 jobs, with an initial 450 generated through contracts to manufacture two oil and gas platforms.2
Then in July 2009, the Jersey-registered company Hadrian Industrial Holdings bought the site for an unknown fee. Hadrian Industrial Holdings had been incorporated in May and was (and still is) owned by OGN Investment Partners, which was also the majority shareholder of SLP Production.
[Note: Viktor Fedotov resigned from the board of SLP Production in September 2009, leaving Temerko as the only remaining Soviet-born board member in the SLP Group.]
The relaunch was marked with a change of name and from the end of September 2010—almost two years after SLPE entered administration—SLP Production became Offshore Group Newcastle (OGN).
The following month four subsidiary companies, which had been incorporated between April and October 2008 (and had not yet began trading), were similarly renamed. All the other subsidiaries from the old group—besides those placed into administration or sold—were dissolved.
All that remained in the new OGN Group were five UK-registered companies:
OGN, the parent holding company, which was still owned by OGN Investment Partners (87.5%), David Edwards (7.5%) and Keppel FELS (5%).
And its four subsidiaries:
OGN North Sea, which was similar in nature to SLP Engineering, in that it would carry out: “Design, engineering, fabrication and installation of platforms, modules and structures for the oil and gas industry.”
OGN Property, which would: “Hold leases and operate office and production facilities.“
OGN Energy Resource Services, which would manage: “Provision of services of staff.“
Aquind, which would focus on the company’s renewable energy endeavours.
In November 2010, it was announced that Apache—the American hydrocarbons exploration company—had selected OGN “to build a new satellite oil production platform for the UK Forties field”.3
The contract is worth in excess of $240 million (£150 million) and is expected to generate more than 1,000 jobs over 20 months at OGN Group's Hadrian Yard site in Newcastle and with other local contractors.
OGN was born, looked set to thrive, and had moved its operations north: from its old home in Lowestoft to its new one in Wallsend—just east of Newcastle along the River Tyne.
For the next five years, the OGN Group ran a successful business operation that averaged turnover just above £110 million and gross profit just under £10 million annually.
Déjà vu: oil price crash
A familiar story unfolded in 2014, when the price of oil plummeted from a peak of cents under $108 (£63) a barrel in June, to under $45 (£30) a barrel in January 2015.4 This would ultimately spell disaster for OGN.5
New capital expenditure in the UK and Norwegian North Sea oil and gas exploration and production sector - the main market for the Company's services - significantly reduced following the sharp decrease in world oil prices in 2014 and which remained ongoing. The number of new enquiries reduced and competition heightened leading to a significant contraction in market opportunities for the group.
The main operational subsidiary OGN North Sea suffered a blow in December 2015, when one of its debtors, Kvaerner, declared it would be unable to pay £2 million it owed. Both parties agreed to a settlement of just over £1 million.
In 2016, David Edwards—the group’s CEO and partial owner (7.5%)—used his contacts to negotiate a contract worth £5 million with Smulders.6
Mr Edwards had a long-standing relationship with one of the key individuals of Smulders and negotiations were, in the main, via Mr Edwards. In late December 2016 Mr Edwards suffered a stroke, but gradually returned to work in January 2017. However, in early March 2017 Mr Edwards suffered a second stroke and was unable to continue working. Mr Temerko took his place in the negotiations with Smulders.
Later in March 2017 it became clear Smulders was “unlikely to pay sufficient sums” for the business to remain operational. Soon afterwards the company received a letter from its majority shareholder, OGN Investment Partners, demanding repayment of more than £1.3 million in secured debt.
Administrators were appointed on 27 March, beginning the process of winding up the company. The following month David Edwards died, aged 67.7
Aquind: saved by a “related party”
At the end of October 2015, Aquind was sold to OGN Enterprises, a “related party” of OGN Investment Partners registered to the same address in the British Virgin Islands (BVI). Aquind’s shares had a nominal value of £330,001 but it’s unclear how much was paid for the transfer of ownership.
Following the launch of the OGN Group in 2010, Aquind was the only company in the group to remain dormant. It first became active in October 2012, when it won a £4.5m grant from the government’s Regional Growth Fund.
The grant money was meant to help fund the £50 million construction of a new yard for the mass manufacture of offshore wind jacket structures, which it was claimed would help to create more than 800 jobs in the North East.8
Ultimately the project didn’t materialise and Aquind never used any of the grant funding, instead pivoting to their Interconnector project in the English Channel. As of the company’s latest accounts—up to the year ending 30 June 2019—Aquind has never generated a turnover and the most people it has employed at any time is seven.
In March 2019, Aquind was sold to a company registered in Luxembourg, AQUIND Energy, which was 100% owned by Viktor Fedotov. In the UK, Aquind attempted to hide Fedotov’s ownership using a rare legal loophole, which is intended for use only by persons whose lives would be endangered if their identity were made public.
Earlier this year Alexander Temerko acquired half of AQUIND Energy through another Luxembourg shell company, Energy Stream Investments, making him and Fedotov both People with Significant Control (PSC) over the UK-based Aquind.
Since then Fedotov has waived his right to anonymity, meaning that he and Temerko are now both listed at Companies House as PSCs of Aquind. This is the first time either man has ever been officially named as an owner of any of the companies from the SLP/OGN Group.
Earlier this month the company issued and allotted £17 million pounds worth of preference (redeemable) shares. Preference shares carry no voting rights, but are first in line for dividend payments or—in the case of bankruptcy—repayment from the sale of company assets.
We may have to wait until the company’s accounts for 2020 are published, to find out who owns these preference shares. Aquind’s £25 million outstanding loan debt to its previous owner—the BVI-registered shell company, OGN Enterprises—hints at them.
The men’s PSC status is unaffected by this development, however, since that is determined solely on the basis of voting rights.
Who owns OGN?
The big question that remains is: who owns the two BVI-registered companies—OGN Investment Partners (OGNIP) and OGN Enterprises (OGNE)? It would be a mistake to characterise this as a question that pertains only to the past.
As mentioned above, up to 30 June 2019, OGNE is owed more than £25 million pounds by Aquind. At the same date, Aquind was said to own £23 million worth of assets (almost all intangible). To that extent, OGNE effectively owns Aquind.
Meanwhile, up until recently, OGNIP owned the Hadrian Yard industrial site that was home to the OGN Group (and with it Aquind). In December 2020, the site was sold to Smulders Projects UK—which had been leasing the site from Hadrian Industrial Holdings (owned by OGNIP) since 2016—for £12.8 million.9
Because OGNIP is an offshore entity with hidden ownership, we cannot be certain who received those funds. Similarly, we cannot know the source of the funds that bought Hadrian Yard in 2009. To suggest nothing about the legal status of their original funding, whoever is behind OGNIP now has almost £13 million in ‘clean’ money.
Looking back over the timeline we’ve established here, however, there are several clues as to who owns OGNIP.
Firstly, OGNIP bought Rockpoint in March 2007. At that time Rockpoint owned a 46.5% stake in SLP Engineering, of which Alexander Temerko had been made a director the month before. The transaction coinciding with Temerko’s first arrival at the SLP Group gave a strong hint to his involvement in OGNIP.
That much was confirmed many years later, in December 2014, when Temerko and several senior managers at OGN were interviewed by the FT’s Chris Tighe. She learned that Temerko had invested £10 million for a 35% stake in the company.10
At that time, the company’s ownership was officially listed as follows:
87.5%—OGN Investment Partners
7.5%—David Edwards
5%—Keppel FELS
OGN Investment Partners was said to be ultimately controlled by Equity Trust (BVI), a firm that provides trust and fiduciary services (e.g. acting as nominee shareholder to hide ownership). For the sake of simplicity, let’s do away with that intermediary step.
If Temerko owned 35% of the company, which must necessarily have been held by OGNIP, that leaves 52.5% of OGN’s ownership unaccounted for.
Another way of looking at it is this: Temerko owned 40% of OGNIP, leaving 60% of the BVI company’s ownership unaccounted for, as of December 2014.11
It’s impossible to know who owned the other 60% of OGNIP, or if its division of ownership has changed over the years. Given Fedotov and Temerko’s (now public) joint ownership of AQUIND Energy, it’s likely Fedotov was a partial owner of OGNIP.
However it’s also worth bearing in mind that OGNIP increased (and more than doubled) its stake in SLP Engineering to 95% on 30 May 2008—three days after Semyon Vainshtok joined the board; whereas Fedotov didn’t arrive on the scene until late July.
Conservative party donations
Through the UK-registered Offshore Group Newcastle, of which it owned 87.5% (and entirely funded), OGN Investment Partners donated £475,000 to the Conservative party between August 2012 and December 2015. That’s almost half a million pounds, of unknown origin.
It’s hard to believe that, six years later, the best indication we have of its ownership comes from a lone newspaper article.
While Aquind was 100% owned by OGN Enterprises, it donated a further £53,000 to the political party that has governed the UK since 2010.
Then, while it was 100% owned by Victor Fedotov (through Luxembourg’s AQUIND Energy), Aquind donated a further £300,000 to the Tories. Throughout that time, Fedotov’s identity as owner was ostensibly hidden.
Aquind donated another £15,000 to Jeremy Hunt’s office in February this year, before Temerko’s recent acquisition of 50% of AQUIND Energy (and with it Aquind) had been revealed (see: AQUIND owner is no longer 'anonymous').
Aquind has donated over £365,000 since May 2018, despite never having generated a penny in turnover.
Together with OGN, that’s more than £840,000 donated in under nine years, all from companies with hidden overseas ownership and unknown sources of funding.
Temerko, who is now the vice-chairman of the Cities of London & Westminster Conservative Association, has donated a further £720,000 by himself. Taken together, the Tory party has accepted more than £1.5 million donations from this group.
AQUIND ready to set sail (at last?)
For the first time since its incorporation in August 2008, the ownership of Aquind is officially public knowledge. At least, it was for all of a month, until £17 million worth of preference shares were allotted at the end of May. [Note, 18 June: see UPDATE at the end for latest developments on this]
Aquind’s £25 million debt to OGN Enterprises, which has financed the company since acquiring it in 2015, illustrates the ongoing importance of establishing who owns that BVI company.12
OGN Enterprises Limited has provided a number of shareholder loans to the company over the years. OGN Enterprises Limited has confirmed its commitment to provide funding to cover the initial project development costs irrespectively of the sale of 100% of shares of the company to Aquind Energy S.a.r.l.. OGN Enterprises Limited has agreed to roll-over each loan and to extend them until 1 June 2021. OGN Enterprises Limited has provided a letter of comfort to the company that the budget will be funded by additional loans and that all individual loans made to date to the company is extended to 1 June 2021. OGN Enterprises Limited is therefore committed to provide continued funding to the company for the current project development phase. The directors are also investigating alternative sources of finance, including commercial banks, other financial institutions and strategic partners to fund subsequent project stages.
Likewise: OGN Investment Partners, the “related party” from which OGN Enterprises acquired Aquind in 2015. The recent sale of the OGN Group’s former HQ in Wallsend, for which Investment Partners earned over £12.8 million, demonstrates the need to identify that BVI company’s ownership too.
On 8 June, the Planning Inspectorate issued a Recommendation Report to the Secretary of State, pertaining to the proposed AQUIND Interconnector project. Kwasi Kwarteng and the Department for Business, Energy and Industrial Strategy (BEIS) now have until 8 September to make a final decision on whether or not to approve the project. 13
That decision is made in the shadows of a seemingly relentless campaign by Aquind and its owners to curry favour with decision makers: from Alok Sharma, who had to recuse himself from the process; to Lord Callanan, who was on the company’s board for over a year; to Kwasi Kwarteng himself, who the Times recently revealed had written to Temerko in March 2020, saying:14
“I do not think there is much doubt that the UK government and Ofgem support the project.”
If approved, the AQUIND Interconnector will require “in the region of” £1.2 billion in funding.15 Given the company has already borrowed £25 million from an opaque offshore shell entity, an official investigation into the ownership and original source of funding—for both OGN Enterprises and OGN Investment Partners—is long overdue.
UPDATE
Since this was first published, we have learned that the £17 million worth of preference shares belong to another Luxembourg company: Project Finance Group, which is 100% owned by Viktor Fedotov.
Laing, I., 2009. Engineers considering second Tyneside contract. [online] NE Business. Available at: <https://web.archive.org/web/20120214163445/http://www.nebusiness.co.uk/business-news/latest-business-news/2009/03/21/engineers-considering-second-tyneside-contract-51140-23197356/> [Accessed 15 June 2021].
ChronicleLive. 2009. Wallsend shipyard could create 2,000 jobs. [online] Available at: <https://www.chroniclelive.co.uk/news/north-east-news/wallsend-shipyard-could-create-2000-1454529> [Accessed 15 June 2021].
MarketScreener. 2010. Apache Selects OGN Group for North Sea Platform Construction. [online] Available at: <https://www.marketscreener.com/quote/stock/APA-CORPORATION-11664/news/APACHE-CP-nbsp-Apache-Selects-OGN-Group-for-North-Sea-Platform-Construction-13508431/> [Accessed 4 June 2021].
U.S. Energy Information Administration. n.d. Cushing, OK WTI Spot Price FOB (Dollars per Barrel). [online] Available at: <https://www.eia.gov/dnav/pet/hist/RWTCD.htm> [Accessed 14 June 2021].
Offshore Group Newcastle Limited, 2017. Statement of administrator's proposal. Available at: <https://find-and-update.company-information.service.gov.uk/company/06390883> [Accessed 14 June 2021].
Ibid.
Smith, A., 2017. Tributes paid to industry stalwart David Edwards. [online] Eastern Daily Press. Available at: <https://www.edp24.co.uk/news/tributes-paid-to-industry-stalwart-david-edwards-1013774> [Accessed 14 June 2021].
Ford, C., 2013. Profits boosted by 70% at Offshore Group Newcastle. [online] The Journal. Available at: <https://web.archive.org/web/20200803145359/http://www.thejournal.co.uk/business/business-news/profits-boosted-70-offshore-group-6298961> [Accessed 14 June 2021].
HM Government. n.d. Transaction ID: BEF7EBBF-B493-7A76-E053-6B04A8C092F7. [online] Available at: <https://landregistry.data.gov.uk/data/ppi/transaction/BEF7EBBF-B493-7A76-E053-6B04A8C092F7.html> [Accessed 15 June 2021].
Tighe, C., 2015. Ukraine donor mixes business with politics in northeast England. [online] FT. Available at: <https://www.ft.com/content/167ee8e2-9024-11e4-a0e5-00144feabdc0> [Accessed 15 June 2021].
35 ÷ 87.5 = 0.4 = 40%
Aquind Limited, 2020. Full accounts made up to 30 June 2019. Available at: <https://find-and-update.company-information.service.gov.uk/company/06681477> [Accessed 15 June 2021].
National Infrastructure Planning. n.d. AQUIND Interconnector. [online] Available at: <https://infrastructure.planninginspectorate.gov.uk/projects/south-east/aquind-interconnector> [Accessed 15 June 2021].
Greenwood, G. and Midolo, E., 2021. Kwasi Kwarteng voiced support for Channel power link after Tory donor’s lobbying. [online] Times. Available at: <https://www.thetimes.co.uk/article/kwasi-kwarteng-voiced-support-for-channel-power-link-after-tory-donors-lobbying-rfn5hldqm> [Accessed 15 June 2021].
AQUIND. n.d. Procurement. [online] Available at: <http://aquind.co.uk/procurement/> [Accessed 15 June 2021].