ECA queried Kelvin asset deal

The ECA raised the issue after a Belfast-based company Bytel Networks Ltd. transferred telecoms infrastructure to Hibernia Atlantic - the deliverer of Project Kelvin - in 2009.

Bytel had originally developed telecom connectivity in Londonderry, Letterkenny, Bridgend, Omagh, Strabane, Belfast, Craigavon, Armagh, Dundalk and Dublin from the mid-noughties having drawn down funding from the European Union (EU) Interreg III programme, which ran from 2000 to 2006.

But the ECA became concerned about the potential for double-funding when Bytel agreed the transfer in September 2009.

According to a new report by the Northern Ireland Audit Office (NIAO), the company completed the “Asset Transfer agreement with Hibernia Atlantic UK Limited” almost four years after Bytel’s final grant claim had been paid.

“The agreement governed the sale of infrastructure assets, which included ducts, sub-ducts and tubes and fibres in Belfast, Portadown, Armagh, Monaghan, Omagh, Strabane and Londonderry,” the NIAO report states.

This helped facilitate the completion of Project Kelvin, which cost 29.6million euros, 22.2million euros of which was provided by the European Regional Development Fund (ERDF).

The NIAO report points out that the European auditors became concerned following the sale.

“In January 2010, an inspection by the ECA raised a number of queries relating to the procurement of Project Kelvin,” the report states.

“Whilst discussions with Special EU Programmes Body (SEUPB), DETI and the [Dublin] Department of Communications, Environment and Natural Resources (DCENR) helped resolve almost all of the substantive issues raised by the ECA, an issue relating to a potential overlap between Bytel and Project Kelvin remained unresolved.

“Essentially, the ECA were concerned that some of the assets used by Hibernia to complete Project Kelvin had previously received Interreg funding during the Bytel project.

“This apparent use of EU funding twice for the same assets would have represented a breach of European legislation,” it continues.

According to the NIAO one consultancy firm forensically examined the Bytel project but found it was unclear whether there was any overlap of assets between the two projects.

However, another consultancy firm concluded: “It is our opinion that all of the assets that were built under the Bytel Extreme Broadband Project were later transferred to Hibernia Atlantic under the Asset Transfer agreement.”

The NIAO report judges: “Ultimately, the withdrawal of the Bytel project from the Interreg III A programme in February 2012 helped ensure that there was no duplication of EU funding in respect of Bytel and Project Kelvin.”

The report also finds that Hibernia Atlantic ultimately got a good deal on the Bytel assets.

The second consultancy firm estimated that whilst the total costs of all assets transferred was 5.27 million euros the “consideration” paid by Hibernia to Bytel for these had only amounted to 1 million euros, together with any eligible VAT.

“On the basis of Consultants B analysis, Hibernia had therefore acquired the Bytel assets for around 20 per cent,” the NIAO finds.