The Scottish Government Consolidated Accounts for the year ended 31 March 2018

9. Financial Assets

9a. Non-Current Financial Assets

To improve transparency the categories of financial assets have been changed this year to ensure further disclosure of Other Funds. This revised split, including new categories of Energy Related Loans and the EU CAP Loans, have been applied retrospectively, with the prior year table having also been restated.

	Interests in Nationalised Industries and Limited Companies	Voted Loans	NLF Loans	Student Loans	Housing Loans	Energy Related Loans	EU CAP Loans	Other Funds	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2017	25	2,766	622	3,122	904	92	-	137	7,668
Add element reported within current assets	-	81	30	135	1	-	185	1	433
Advances and acquisitions:	-	-	-	-	-	-	-	-
Acquisitions	-	-	-	-	-	-	-	-	-
Cash advances	-	303	-	602	183	32	369	61	1,550
Fair value adjustment	-	-	-	(181)	1	-	-	-	(180)
Capitalised interest	-	-	-	53	-	-	-	-	53
Adjustment	-	-	-	-	-	4	-	-	4
Repayments and disposals	-	(81)	(30)	(147)	(38)	-	(231)	(17)	(544)
Unwinding of discounted cash flow	-	-	-	107	-	-	-	-	107
Balance at 31 March 2018	25	3,069	622	3,691	1,051	128	323	182	9,091
Loans repayable within 12 months transferred to current assets	-	(84)	(31)	(145)	(9)	(1)	(322)	(3)	(595)
Balance at 31 March 2018	25	2,985	591	3,546	1,042	127	1	179	8,496

Investments have been measured and presented in accordance with IAS 32, IAS 39, IFRS 13 and IFRS 7 as modified by the Government Financial Reporting Manual (FReM). See also note 1.7

Scottish Water National Loans Fund repayments of £30m have not been included in the Environment, Climate Change and Land Reform portfolio capital outturn.

Prior Year	Interests in Nationalised Industries and Limited Companies	Voted Loans	NLF Loans	Student Loans	Housing Loans	Energy Related Loans	EU CAP Loans	Other Funds	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2016	25	2,476	652	2,778	751	66	-	86	6,834
Add element reported within current assets	-	308	24	130	-	-	54	-	516
Advances and acquisitions:
Acquisitions	-	-	-	-	-	-	-	21	21
Cash advances	1	372	-	577	190	25	370	42	1,577
Fair value adjustment	-	-	-	(171)	(7)	-	-	-	(178)
Capitalised interest	-	-	-	43	-	2	-	-	45
Repayments and disposals	(1)	(309)	(24)	(143)	(31)	(1)	(239)	(11)	(759)
Unwinding of discounted cash flow	-	-	-	43	2	-	-	-	45
Balance at 31 March 2017	25	2,847	652	3,257	905	92	185	138	8,101
Loans repayable within 12 months transferred to current assets	-	(81)	(30)	(135)	(1)	-	(185)	(1)	(433)
Balance at 31 March 2017	25	2,766	622	3,122	904	92	-	137	7,668

Investments have been measured and presented in accordance with IAS 32, IAS 39, IFRS 13 and IFRS 7 as modified by the Government Financial Reporting Manual (FReM). See also note 1.7

Scottish Water National Loans Fund repayments of £24m have not been included in the Environment, Climate Change and Land Reform portfolio capital outturn.

9b. Nationalised Industries

As at 31 March 2018, the Scottish Ministers are the sole shareholder in Caledonian Maritime Assets Limited, David MacBrayne Limited, Highlands and Islands Airports Limited and TS Prestwick Holdco Limited. The Scottish Ministers hold the following investments:

Caledonian Maritime Assets Limited	1,500,000 ordinary shares of £10 each
David MacBrayne Limited	5,500,002 ordinary shares of £1 each
Highlands and Islands Airport Limited	50,000 ordinary shares of £1 each
TS Prestwick Holdco Limited	1 ordinary share of £1

These organisations are operated and managed independently of the Scottish Government, and, therefore, do not fall within the consolidated portfolio accounting boundary. The companies each publish an individual annual report and accounts. The net assets and results of the aforementioned companies are summarised in the table below.

	Caledonian Maritime Assets Ltd	David MacBrayne Ltd	Highlands and Islands Airports Ltd	TS Prestwick Holdco Ltd
	£m	£m	£m	£m
Net Assets/(Liabilities) as at 31 March 2018	90	26	(25)	(34)
Turnover	43	209	25	18
Profit/(Loss) for the financial year	9	4	(2)	(8)

These results are in draft as their accounts are yet to be published.

Caledonian Maritime Assets Ltd

Following a restructure of the Caledonian MacBrayne group in 2006, Caledonian MacBrayne Limited became known as Caledonian Maritime Assets Limited (CMAL) and CalMac Ferries Limited (CFL) was incorporated. CFL took over operation of the Clyde & Hebrides Ferry Services as successor to Caledonian MacBrayne Limited. CMAL retained ownership of all vessels and ports, which it leases to the operator of the Clyde & Hebrides Ferry services (currently CFL). CMAL remains wholly owned by Scottish Ministers.

David MacBrayne Ltd

Scottish Ministers previously owned 2 shares of £1 in a dormant company, David MacBrayne Limited. In the course of the restructuring of the Caledonian MacBrayne group in 2006, Scottish Ministers' shareholding in David MacBrayne Limited was increased by 5,500,000 shares to 5,500,002 ordinary shares of £1. David MacBrayne Limited is now the holding company for the ferry operating companies CalMac Ferries Limited and Argyll Ferries Limited.

Highlands and Islands Airports Ltd (HIAL)

The Scottish Ministers are the sole shareholders in HIAL. The company's purpose is to maintain the safe operation of its airports to support economic and social development in the Highland and Islands. HIAL currently operates 11 airports; 10 in the Highlands and Islands and also Dundee, which it assumed responsibility for in December 2007 and now operates via a wholly owned subsidiary company, Dundee Airport Limited.

TS Prestwick Holdco Limited

In 2013 Transport Scotland purchased the entire share capital of Prestwick Aviation Holdings Limited, the holding company of subsidiaries who own and operate Glasgow Prestwick Airport, through a company set up for this specific purpose – TS Prestwick Holdco Limited. Subsequently Transport Scotland advanced loan funding to the group to cover the cash deficit arising from its operating deficit and capital expenditure.

9c. Other Interests

The loans issued and reported as Financial Assets within these accounts have been valued reflecting current market expectations regarding discounted future cash flows. Under IFRS 13, these valuations have been classed as level 3 unobservable inputs, as there is no active market for the investments.

Student Loan Company (SLC)

The Student Loan Company is a non-departmental public body which administers the payment and collection of loans to UK students. When it was set up in 1990, it was wholly owned by the Secretary of State for Education and Skills (now the Department for Education) and the Secretary of State for Scotland. From 1 July 1999, the student support function was transferred to the Scottish Ministers with respect to students ordinarily resident in Scotland. Following a restructuring the Scottish Ministers hold 1 share with a nominal value of £0.50 (5% of the equity) in the SLC.

Scottish Futures Trust Ltd (SFT)

The Scottish Futures Trust was set up in September 2008 to work collaboratively across the public sector to secure improved value for money in infrastructure procurement, and is working jointly with local authorities, NHS Boards and other public bodies to deliver benefits in cost effective asset procurement and management. The SFT is a limited company owned by the Scottish Ministers with share capital of £100, £2 of which has been issued and is held by the Scottish Ministers.

Scottish Health Innovations Ltd

Scottish Health Innovations Ltd is a company that works in partnership with NHS Scotland to protect and develop healthcare innovations. The company is limited by guarantee with three members, the Scottish Ministers, the National Waiting Times Centre, and NHS Tayside.

Voted Loans

The Scottish Ministers have provided loans from voted provision to Caledonian Maritime Assets Limited of £188m to be used for the construction of new shipping; £5m to crofters for building purposes; and £2,875m to Scottish Water for their capital investment programmes.

National Loans Fund

Prior to 1 July 1999, the Secretary of State lent money to Scottish Enterprise, Scottish Homes and the three Water Authorities (now Scottish Water), out of the National Loans Fund. At 1 July 1999, the right to the sums outstanding was transferred to the Scottish Ministers who must pay the repayments and interest to the Secretary of State for Scotland via the Scottish Consolidated Fund. The loans to Scottish Enterprise and Scottish Homes have since been repaid. The NLF loans remaining are with Scottish Water.

Scottish Water's 2017-18 annual report and accounts can be found at http://www.scottishwater.co.uk/about-us/publications/annual-reports/annual-report-1718

Student Loans

Loans made under the terms of the student loans scheme are administered by the Student Loans Company Limited, a company owned jointly by the Scottish Ministers and the Department for Education. These loans are accounted for on the basis of the loan balances of students domiciled in Scotland and adjusted for fair value and impairment.

Housing Loans

Housing Association loans are made up of repayment loans and deferred loans. The repayment loans are secured loans to registered Housing Associations and are repayable on an annuity basis, the deferred loans relate to the transfer of housing stock.

Other Housing Loans include the Shared Equity Housing and Deferred Financial Commitment Loans. The fair value estimation technique for the loans relates to the underlying property valuations using the Nationwide Pricing Index method.

The Scottish Government has invested £24.7m in Charitable Bonds to be repaid in 2026-27. £18.6m was advanced to housing associations for the development of new affordable homes. The remaining £6.1m will be donated to one or more charitable Housing Associations by the bond issuer for the provision of new social housing.

Energy Funds

The Scottish Government provides funding to Salix Finance Limited and the Energy Saving Trust (EST) to deliver programmes relating to energy efficiency which include the issue of loans. Salix provides loans to the public sector to improve their energy efficiency and reduce their carbon emissions. In 2017-18 £4.7m (2016-17: £8m, including £4m accounted for as an adjustment in 2017-18) of advances were made. EST administer and manage funds on behalf of the Scottish Government which provide loans to save energy and reduce carbon dioxide emissions. In 2017-18 £8.9m (2016-17 £5.3m) of advances were made.

Through the Home Energy Efficiency Programme (HEEPs) loans are available to help homeowners make energy and money saving improvements to their homes. In 2017-18, advances of £7.7m (2016-17 £10.6m) were made.

The Renewable Energy Investment Fund (REIF) is delivered through Scottish Enterprise and Highlands and Islands Enterprise. REIF provides funding to commercial and community renewable energy projects across Scotland. In 2017-18 £3.8m (2016-17 £5.2m) of advances were made.

EU CAP Loans

From 2015-16, a Scottish Government national loans scheme was put in place to provide support to the farming economy. In 2017-18, advances of £371m (2016-17: £370m) were made with repayments of £231m (2016-17: £239m); £5m of loans advanced prior to 2017-18 are outstanding and are expected to be fully recovered in 2018-19.

Other Funds

The Scottish Government, and the European Regional Development Funds, have established the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) Fund. This fund is a JESSICA (Joint Venture Support for Sustainable Investment in City Areas) Urban Development Fund (£43m; 2016-17: £41m) that helps fund regeneration and energy efficient projects within targeted areas of Scotland.

Over the past 4 years, the Scottish Government has provided £9.6m to the Scottish Futures Trust for use in their oversight of the Non Profit Distributing (NPD) programme. SFT's pipeline of NPD projects is delivered through two channels – very large projects such as major roads or large hospitals, procured directly by the public sector organisations through the NPD programme, with smaller Design, Build, Finance and Maintain (DBFM) projects delivered via the Scotland-wide hub initiative in partnership with local authorities, health boards and other public bodies. The funds are used to support subordinated debt investment in individual hub DBFM projects at a commercial rate of return. Interest on this investment contributes to the funding of on-going SFT activity.

In 2016-17, the Scottish Government entered into a guarantee contract in respect of a power purchase agreement between the hydro plant and aluminium smelter at Lochaber (owned by SIMEC and Liberty House respectively). The total discounted value of premiums due to the Scottish Government in respect of this guarantee is £18.7m (2016-17 discounted value: £21.4m), and is included within the Other Funds balance.

The Scottish Government has provided financial transactions totalling £10m (£6m provided in 2015-16 and £4m provided in 2016-17), over a 20 to 25 year period, to three of the National Performing Companies (Scottish Ballet, Scottish Opera and the National Theatre of Scotland). These related to capital projects and business support, including the new Rockvilla creation centre and an extension to the Theatre Royal, both in Glasgow.

In 2017-18, the Scottish Government provided commercial loans of £34m to private companies.