Exclusive: Amey sells its PFI stakes in Sheffield

Much criticised for its role in the felling of some 5,000 street trees in Sheffield, Amey has lost over £350 million in the last year and has now sold its stakes in the ‘ruinous’ Sheffield private finance initiative (PFI) deal – costing residents £1.75 million per week – to an unnamed buyer. The sale appears to be rearranging the deck chairs on a corporate ‘Titanic’, reports Alan Story

Alan Story

Amey PLC, which has felled more than 5,000 mostly healthy street trees in Sheffield since 2012, has sold its stakes in the ruinous 25-year Sheffield private finance initiative (PFI) deal, Green World has exclusively learned.

In a single sentence on page 52 of the annual report from Spanish multinational Ferrovial – Amey’s parent company – released on 28 February, the sale of Amey’s stakes in the Sheffield PFI, as well as the one in North Yorkshire, were announced.

The sale of Oxfordshire-based Amey’s stakes in Amey Ventures Assets Holdings Ltd. (Amey VAHL), which manages Amey’s involvement in the Sheffield PFI deal, was uncovered by accident last week during an investigation of the Sheffield PFI’s financial affairs by the campaigning group AMEY OUT. Neither Amey PLC nor SCC had previously announced the sale.  

However, the Amey press office has refused our request to reveal to whom it sold its stake in the deal, so the identity of the new owner remains unknown. Two separate owners of the PFI deal, one based in the tax haven of Guernsey, remain in place.

Goldman Sachs, the international banker and deal-maker that Ferrovial has engaged to sell its assets, declined to comment on Monday, while the two private equity firms, one British and one French, which both The Financial Times and The Times have recently reported as the likely buyers of Amey PLC, told Green World in interviews last week that they had not purchased Amey VAHL.   

But PFI and investment experts we interviewed suggested that other private equity firms across the world were probable purchasers. Operating on a ‘buy, strip and flip’ model, such private equity firms take over existing – and often failing – businesses such as Amey PLC, strip away their assets and then sell the company within three to six years to a new owner. The main asset of a PFI-based firm is that its revenues are guaranteed by Westminster for the life of the contract, which is often 25 years.

Other possible purchasers of Amey VAHL include Amey PLC’s two former financial partners. One is based in the tax haven of Guernsey and did not return our phone calls. The Cheltenham office of the other, PIP Infrastructure Investments Ltd. #5, has no publicly available phone number.   

Amey sale entirely predictable after £358 million losses

Sheffield protester
Sheffield protester protecting a tree marked for felling.

The sale of its stakes in Amey VAHL, for an undisclosed amount, significantly weakens the corporate power of floundering Amey PLC. Amey, which holds numerous PFI deals from Scotland to the Isle of Wight, is itself on the auction block.     

Thus Ferrovial’s decision to sell off its ownership interest in the Sheffield ‘Streets Ahead’ PFI deal is entirely predictable – in its latest annual report released on 28 February 2019, Ferrovial stated that Amey PLC had lost a stunning £358 million in the last financial year alone.

But this sale and Amey’s recent poor performance raise the possibility that the entire £1.9-billion Sheffield scheme will collapse. Such a scenario would cause infrastructure havoc and great expense in one of England’s largest and greenest cities.

It wouldn’t be the first PFI scheme to be wound up. Last year, Manchester bought out a failing waste management PFI in its region. Elsewhere, the financial press is currently reporting that “troubled outsourcer Amey is preparing to pay more than £200m to free itself from a botched 25-year PFI contract to repair Birmingham’s roads”; that deal is very similar to the one in Sheffield. In Birmingham, the parent company is in administration.

On a short-term basis, another branch of Amey PLC will carry out some specified work under the Sheffield ‘Streets Ahead’ scheme for Labour-controlled Sheffield City Council (SCC). But that activity is expected to be of a very temporary nature because Ferrovial declared in its recent annual report that Amey is a ‘discontinued activity’ with ‘its assets held for sale.’

Rather curiously, the Amey press office also refused to even release the name of the branch of its own company that is temporarily doing the road work and other construction, road gritting, street cleaning and rehab work for SCC. The PFI project is at least a year behind schedule.

The sale of its stakes in Amey VAHL dramatically reduces the power of Amey PLC in Sheffield. Amey PLC no longer has an ownership interest (that is, a shareholder vote) in the PFI deal; it is now a merely a contractor working for the two other longer-term owners, as well as the new, still undisclosed, owner of Amey VAHL. These three owners, in addition to SCC, have the power to dispense with Amey’s services if they wish.   

But as said above, Ferrovial has already decided to put Amey PLC, which has more than 19,000 employees in the UK, up for sale. About 500 people, many of whom are former SCC employees, now work for Amey in Sheffield.

Sheffield’s ‘Streets Ahead’ scheme, which is set to last from 2012 to 2037 unless it is wound up beforehand, is the largest contract ever signed by SCC. As things stand now, Sheffield residents will be paying for the PFI scheme until the year 2057.

‘Worst mortgages in the world’

PFI contracts allow private, profit-making companies to take over, control and manage buildings and services usually operated by local councils, the NHS or Westminster. PFI schemes are now so discredited, indeed downright toxic, that not even the Tories will establish another one, Chancellor Philip Hammond announced in November 2018.

Frances O’Grady, General Secretary of the Trades Union Congress, says that “PFIs are quite simply the worst mortgages in the world."

Alison Teal
Alison Teal

SCC Green Party Councillor Alison Teal commented on the latest developments in Sheffield: “I think we need to bring in some knowledgeable experts to advise us on what is the best outcome for Sheffield; one outcome might be working to wind up this PFI scheme.”

Whether Labour-controlled SCC has the competency to manage this complex and mostly secret PFI contract is an issue that may arise in the campaign for the 2 May local elections. The ‘Streets Ahead’ scheme has essentially meant ‘Streets Privatised’.

Other short- and long-term implications of the recent sale remain uncertain. Sheffield tree campaigners will no doubt be far from happy when they learn that Ferrovial has escaped scot-free back to Spain after committing the shameful environmental vandalism involved in the well-publicised Sheffield chainsaw massacres – a recent Green World article called for a ‘peoples’ inquiry’ into the Sheffield tree felling debacle.

It is not yet clear what impact the sale of Amey’s stake in Amey VAHL to a new owner will have on the December 2018 agreement reached between SCC, Amey and the Sheffield Tree Action Groups (STAG) concerning the future management of street trees. The new owner of Amey VAHL was not a party to those talks.

As a result of a very effective non-violent direct action campaign – chiefly, standing under threatened street trees – the wrongful arrest of many tree campaigners and widespread political campaigning, Amey and SCC were forced to halt the felling of street trees in Sheffield in the middle of March 2018. New fellings of healthy street trees would likely be a catalyst for fresh street protests.

Amey in deep trouble

There is certainty about one thing: Amey (and the overall PFI model) is in deep trouble. As one accounting professional who has seen the Amey accounts commented last week to Green World: “All in all it presents the picture of a firm which doesn’t have a lot of prospects operationally.”  

Amey PLC’s net loss of £358 million in the last financial year was the result of a gargantuan ‘write down’ or devaluation of the worth of Amey. That value was slashed in the Ferrovial annual report by £660 million and ‘fair value’ for an expected sale was reduced to £88 million.

This is the equivalent to a house in the more upmarket parts of Sheffield being listed on the property market in mid-February for £660,000 and now being available at a ‘reduced-for-quick-sale’ price of £88,000.

With this ruinous PFI deal costing Sheffield residents £1.75 million per week and with a significant percentage of that money ending up in offshore tax havens, it is obvious there is still lots more to unravel in the months ahead about Amey and its disgraceful role, both environmental and financial, in South Yorkshire. Stay tuned!