Official confirmation of “tax sites” for the Forth Green Freeport in May confirmed one of Scotland’s worst-kept secrets.

As soon as areas around the firth of Forth offering tax incentives to investors had been approved by the UK and Scottish governments, Danish firm Vestas confirmed rumours it would establish a wind turbine blade manufacturing facility on a site owned by Forth Ports in Leith.

Forth Ports had long been preparing for the announcement. Its £50 million investment to develop an offshore wind marshalling site, where Vestas will be based at the Port of Leith, had been well underway. It is due to be completed in August, ahead of demand.

The confidence Forth Ports had to develop 175 acres on the outer birth of its Leith port was underpinned by ambitions to establish the green freeport sites in Scotland.

The UK and Scottish governments had announced the locations of two green freeports in January 2023. This came after hard-fought campaigns amongst five regions vying for the designation.

Inverness and Cromarty Firth Green Freeport (I&CFGF) in the Highlands and Forth Green Freeport stretching from Rosyth, Edinburgh, Burntisland and Grangemouth triumphed as the winners.

But this only signalled the beginning of much hard work.

Both of the winning bids set out big numbers for what they hoped would come. There has been talk of thousands of jobs and billion spent as a result of the green freeport status.

Forth Green Freeport counts on £7 billion of private and public investment over the next decade, generating close to 40,000 “green jobs”. Around half of these would be directly linked to the tax sites.

I&CFGF has estimated freeport status could attract up to 10,000 new jobs across the Highland region and generate £3bn for the local economy.

The shape of things to come

On the Forth, Leith joined Burntisland to form one of three special economic zones that make up the green freeport.

As Vestas has confirmed its place, this mid-Forth area forms part of an ambitious vision to develop a purpose-built deepwater floating wind turbine integration, marshalling and commissioning facility. It offers the “deepest floating wind port in Scotland with unlimited wet storage”.

It should also reverse the fortunes of the Port of Burntisland, which was previously tenanted by BiFab. This collapsed in administration in 2021 having failed to attract contracts from nearby offshore wind farms.

However, the establishment of the green freeports only took effect with the confirmation of the tax sites. Organisations leading the bids to become green freeports first had to submit business cases for approval by HMRC and other government departments

I&CFGF was the first to have its tax sites approved in April. Once the legislation had passed at Westminster and Holyrood, this gave operators and businesses choosing locations on five areas, covering around 1,300 acres, the ability to take advantage of tax benefits and other available incentives.

The sites include port operations in Ardersier, Inverness and three on the Cromarty Firth. Port operators include Port of Nigg, owned by Global Energy Group (GEG), and the trust port-owned Port of Cromarty Firth. They are among those involved in the sites at Invergordon and at the mouth of the firth at Nigg.

High voltage

The confirmation of the Highland tax sites was swiftly followed by a final investment decision (FID) from Sumitomo – with a tea ceremony – confirming plans to establish a £350mn high-voltage subsea cable factory at Nigg.

The Japanese firm had previously announced ambitions to work with GEG to establish its facility at Nigg. This had attracted the promise of a Scottish government grant worth £24.5mn. Along with the tea, the Japanese firm was also able to announce a deal struck with SSEN Transmission to produce HVDC cable for its Shetland 2 connector project as part of its FID.

Associated British Ports (ABP) has also signed an agreement concerning parcels of land in the Cromarty Firth area. It is investigating development options to support floating offshore wind and green energy development there.

Another investor attracted to the potential of the green freeports, which inspired a build-it-and-they-will-come approach, was Haventus.

Eagle-eyed

US investment firm Quantum led a £300mn investment in Haventus to acquire the 450-acre former McDermott shipyard at Ardersier in April 2023.

The US firm made its move for port capacity following the ScotWind offshore leasing round as well as taking a position on future North Sea decommissioning. These, it considered, were an unmissable opportunity.

The investors soon joined the steering group leading the campaign for green freeport status and its involvement was awarded with a near 2-mile, z-shaped tax site on the Moray Firth.

This undoubtedly galvanised the next investment, a £100mn joint credit facility from the Scottish National Investment Bank (SNIB) and the UK Infrastructure Bank in May this year.

However, these promising investments are just the start. Another major potential investor in the I&CFGFP area is Mingyang Smart Energy.

Mingyang, one of China’s largest wind turbine manufacturers, was identified as a front runner in a process designed to identify and support strategic investment in the offshore wind supply chain in Scotland.

The Chinese firm’s proposed OEM facility was one of seven projects selected by Scotland’s offshore wind energy council (SOWEC) for priority assessment in the Strategic Investment Model (SIM) funding round in April.

However, protests have surrounded Chinese involvement in the UK and European offshore wind supply chain and the decision is still shrouded in secrecy.

Moving ahead

One of the reasons I&CFGFP came out ahead in the tax site race was the appointment of CEO Calum MacPherson to spearhead the group’s development early in May last year.

Forth Green Freeport only confirmed the appointment of his counterpart, Sarah Murray, as CEO of the public/private consortium in July. She will take up her role at the end of August.

MacPherson noted that the tax incentives were essential to Sumitomo taking its FID.

“Bear in mind the way that these investments work. They have used the figure of £350mn. It is going to be many, many, many years until they actually receive any income off this investment. So for them being able to write down some of the costs of the capital allowances early is making a difference for them in terms of investing here.”

Watching the clock

With the green freeport status having a limited time to run, the UK and Scottish governments reached a further deal to extend tax breaks for projects linked to these for another five years, to 2034.

MacPherson said that the extension offered a more realistic time scale. Massive infrastructure projects “have a habit of taking longer than people would have liked them to”, he observed.

“Some of these projects are moving off to the right in terms of timeframe. It was realised across the UK that this is a vehicle that is attracting international investment. But if it’s going to be closed in just a few short years, you won’t even get a chance to build some of the things that we need to build to enable this industry.”

Alex Campbell, who took over as CEO of Port of Cromarty Firth (PoCF) in May, said the port had enjoyed an uptick in interest among foreign investors since the confirmation of the tax status. He also welcomed news that PoCF had won £55mn of support from the Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS).

“The port is busy dealing with enquiries across sectors, including some regarding direct foreign investment. The number of enquiries has certainly increased since the Port secured tax site status as part of Inverness and Cromarty Firth Green Freeport.”

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