The north-east’s biggest concert and conference venue is facing receivership unless local councillors agree a rescue package this week, the Press and Journal can reveal.
Aberdeen Exhibition and Conference Centre (AECC) has asked the city council to step in and save it from closure as it struggles to cope with multimillion-pound debts.
Aberdeen City Council officials fear its demise would be seen as the first stage in the decline of one of the world’s most important energy cities.
To save the venue from “almost certain receivership” and the loss of 55 jobs, councillors will be asked this week to effectively underwrite the construction of a new four-star hotel next to the centre at Bridge of Don.
A leaked report has also revealed they will be asked to extend by six years the deadline for repayment of a £7.5million loan, and convert another £2million debt due to the council into shares in the centre.
Councillors will consider the move in private on Wednesday, one day before they meet to approve £26million of cuts to spending on services for the coming year.
The AECC is estimated to bring about £80million into the local economy every year and council officials consider it too important to let fall into a “spiral of decline”.
The local authority wants the Scottish Government to recognise it as the country’s National Energy Exhibition and Conference Centre, potentially opening up new funding streams.
Until then, the council has been left to foot the bill, having already provided loans worth more than £28million to the AECC in the last five years, as well as £8.85million in subsidies since 1998.
In a confidential report to Wednesday’s full council meeting, officials warn it is “highly unlikely” that the AECC would be able to earn sufficient profits to repay those loans in its current trading position.
Without refinancing or other guarantees from the council, the centre would “soon find itself in a situation whereby it is trading illegally”, wrote economic development project director Gerry Brough.
Local authority officials have raised the possibility of the council taking over control of the AECC but hope this can be avoided if councillors back the rescue plan.
Opposition Labour group spokesman Willie Young said: “I can’t believe the administration want to hide the problems of the AECC from the public, who are all 100% shareholders in the centre.
“Any proposed hotel development, as detailed in the AECC accounts, should be done by a private developer and not this council.”
Councillor Neil Fletcher, chairman of the AECC board, said he could not comment on a confidential report.
AECC bosses have long believed the centre cannot compete for important international conferences without such a hotel, and want one built in time for its flagship conference, Offshore Europe, next year.
The hotel could then be sold for a net profit of between £14million and £20million, which would place the centre on a firmer financial footing and help clear its debts.
Investment in a new arena is also envisaged in the report as a long-term goal at the centre, if external funding can be found.
Mr Brough said it was generally recognised that similar centres throughout Europe and the US were not standalone profit-making entities.
He urged councillors to back the recommendations this week.
“Without the AECC, Aberdeen would lose a major piece of business infrastructure and many businesses in Aberdeen, especially those in the oil and gas industry, might assume that this represents the first stage in the decline of Aberdeen as one of the world’s most important energy cities,” he said.
“It is clear, from past independent economic impact assessments, that the AECC contributes significant added economic benefit to the city.
“Therefore, supporting the proposed financial restructuring and the planned construction of a four-star hotel is critical to the AECC’s future.”
The Press and Journal revealed last week that the AECC had axed six jobs and frozen staff pay for a year.
The AECC was opened in 1984 as a joint venture between Grampian Regional Council and Spearhead Exhibitions Ltd, then event manager for Offshore Europe.
Aberdeen City Council became its sole owner after the demise of the regional council, and now holds all its shares.
A spokeswoman for the council said she could not comment on a confidential report.