The Shetland social enterprise charity COPE is to take over the unused water-bottling factory which was built in Weisdale for its aborted Shetland Spring Water venture.
Putting the custom-built premises to use for some of COPE’s existing activities and for expansion into new areas will help the charity avoid being badly hit through having to pay back much of the £400,000 start-up funding for the water company, which went into voluntary liquidation last year before production could begin.
It was the first major failure for COPE which has won awards and been highly successful in establishing a string of innovative businesses employing people with learning difficulties in Shetland over the past 12 years, including the Karibuni cafeteria, the Scrap Store, the Shetland Soap Company, a pet shop, the Shetland Coffee company and a catering company which makes sandwiches. However, its experimental production of bio-diesel from old vegetable fat was also discontinued last year following a review of its viability.
The Shetland Spring Water company’s financial affairs still remain to be resolved. Most of the funding went into building and equipping the factory at Voehead in Weisdale but the liquidator cannot sell the premises because they are on land owned by COPE.
The plan to make use of the factory for “core COPE activities and new opportunities” was confirmed this week by COPE’s new general manager Peter McCann who took up post in November. He said: “My objective is to ensure that we utilise that factory and we fill it with meaningful work opportunities for our participants and that it operates as a genuine business.”
Shetland Spring Water was set up in 2004 as the Shetland Soda Company but during the first few years there was no activity other than research and planning. It was eventually decided to concentrate just on water to begin with rather than a range of high-quality flavoured soft drinks. The small factory was built next to the proposed water source at Heglibister springs, near the former Norseman’s Inn – which was also meant to be tapped for the defunct Blackwood Distillers’ range of spirits.
The plan was to target Shetland’s annual consumption of an estimated 800,000 litres of bottled water which was being brought into the islands at the time that COPE did its market research. Shetland water could also have been exported, including to Orkney.
It had been hoped that the first bottles would go on sale in early 2007 but long delays meant that by 2008 the factory was still not ready, the market for bottled water had fallen away and an Orcadian rival had got started first, making the project appear too risky.
A further major blow was a national move by public bodies away from buying in giant bottles of spring water for office coolers and canteens – which were all the rage for a while – switching instead to the more eco-friendly and cheaper option of filtering local tap water. The SIC decided to stop providing 18.5 litre water coolers in its offices, which it was hoped would have been filled with Shetland Spring Water’s product.
Despite having built and equipped a new factory for bottling water it was discovered that it required further investment to meet the required standards. Faced with having to invest more money the directors decided in February last year, following an in-depth review by consultants, to pull the plug and wind up the company before incurring any more debt.
COPE chairman George McGhee, whose day job is running the Janet Courtney Hostel, said the organisation had been very disappointed to lose Shetland Spring Water, which he had been a director of. “We were obviously devastated that we had to take that action at that time. It is the first time in all the ventures that COPE have had that it hasn’t been a success. It was not an easy decision for the board to come to and we looked at various different scenarios but we were left with the unfortunate decision that we had to take.
“A lesson we learned from this was that maybe not everything we are going to try to put forward will be successful. It would have been ideal if we had been sitting here having a conversation about the launch of Shetland spring water and how successful it had been and everybody throughout Shetland was buying it and NorthLink were having it on their boats and we were selling it here, there and everywhere.”
Ewen Alexander of Aberdeen accountants Ritson Smith was appointed administrator at the end of March last year and decided to put Shetland Spring Water into liquidation. He told The Shetland Times the water company’s directors had probably made the right decision in calling it a day.
“They basically decided they wanted to draw a line under it before it even got started. If the board knew it was likely not going to make a profit for the foreseeable future then their obligation as directors is not to allow the situation to continue.”
The liquidator is only able to deal with Shetland Spring Water and its assets, not those held by COPE which relate to the water company. Some of the grants and loans for the water enterprise were awarded to COPE, placing them outside his remit, along with the factory. The only asset he has at his disposal is a bottling line, which he is hoping to sell soon.
The big fear among public funding bodies has been that resolving the water company’s affairs and recovering funds would have a serious knock-on effect on COPE and its successful businesses, which only seek to break even while providing jobs for over 50 people, some with disabilities who might otherwise not get into the labour force. They also provide work experience and training for over 50 adults with disabilities.
COPE receives £350,000 a year from the council and £145,000 from Shetland Charitable Trust towards running costs. During the financial year 2008/09 it earned £564,000 from its businesses and £623,000 in funding assistance but recorded a small deficit for the year.
The main creditors of Shetland Spring Water are COPE itself, Social Investment Scotland’s Futurebuilders scheme (which involves several Scottish banks and the government and was owed around £80,000), the council and the Royal Bank of Scotland’s community fund.
The council was owed £86,520 from a loan to Shetland Spring Water and £33,750 from a grant to COPE for the water project. Discussing the matter in private at the development committee in April last year after the company had decided to wind up, councillors were warned that if all the £161,681 in grants owed to various bodies had to be repaid by COPE “then a number of the activities would need to be reduced or even shut down”.
The confidential report concluded: “Seeking a repayment of grant in these unusual circumstances is counterproductive to both the aims of COPE and the council.” The committee agreed that all or part of the £33,750 grant should only be paid back by COPE if money was raised from Shetland Spring Water’s few assets.
SIC business development manager Douglas Irvine confirmed last week that no council funds had been recovered so far. He said: “If they can still fulfil their obligations then there will not be any need to ask them to repay the grants, which obviously was going to be a problem for them because they are not a rich organisation.
“This project went awry because of the change in the market for spring water. They went for what they thought was an opportunity but the market changed and then the recession came in and they could see it wasn’t going to work.”
Highlands and Islands Enterprise area manager in Shetland, Stuart Robertson, confirmed that £43,596 had been given by his organisation. He said: “Following COPE’s decision to withdraw from the project, we continue to work with this successful social enterprise to identify an alternative plan that will enable the agency’s investment to deliver economic and social benefits for Shetland.”
Grants and loans were also paid by other sources, including the EU and the Big Lottery, although the liquidator said neither was a creditor of Shetland Spring Water.
Mr McGhee said: “We’re certainly looking at how we can resolve the situation, causing as little discomfort to anybody as humanly possible. We have been in negotiations with the ones that provided help in this and they are fully supportive of us. Nobody is banging on the door demanding money.”
He accepted that questions about the fate of public money should be answered but was concerned about the damage that might be done by a negative story about COPE. He said: “It would be a shame if COPE were to be pilloried in the press for one failed enterprise when we have had so much success.”