Allegations that unauthorised loans worth tens of millions of pounds were taken by the Manx Electricity Authority first surfaced at the end of 2004.

Concerns quickly mounted over the state of the MEA’s accounts amid allegations that the government-owned authority had borrowed cash without first obtaining Treasury permission.

Expenditure on the Pulrose power station project had risen significantly over the original estimates of £185m, which had been funded by a government bond in 2001.

The collapse of contractor Enron had a devastating impact on the construction programme.

The then chief executive Mike Proffitt resigned but always denied there was anything unlawful about the two loans of £50m and £70m taken out with Barclays by an MEA subsidiary, the Manx Cable Company Ltd.

He told the Isle of Man Examiner at the time: ’We have worked within the provisions of the Electricity Act. We have done nothing of an ultra vires nature.

’That is not my opinion, it is the opinion of two law firms here in the Isle of Man.

’All our borrowings, all our receipts and all our expenditures have the utmost of integrity.’

Tynwald went on to retrospectively sanction the loans, which were refinanced by government when they became due for repayment - Treasury advancing funds to the MEA which then repaid Barclays.

It is that refinancing which forms a major part of the outstanding consolidated loans fund.

A select committee inquiry into the affair identified a serious lapse by Treasury, inappropriate operating procedures and overly-optimistic profit predictions.

Its damning report concluded that Mr Proffitt should never have been authorised as the signatory for loans from a bank for which he had been appointed as chairman.

Examining how costs of the power station project spiralled, it found no provision was made for the cost of demolishing the old power station and dealing with contaminated ground, and no contingency fund was included.