The Scottish Government cannot legally provide any more financial support to the struggling BiFab yards, Economy Secretary Fiona Hyslop has said.
She told MSPs state aid rules mean ministers are unable to bail out Burntisland Fabrications (BiFab).
It comes after the company missed out on work as part of the manufacturing process for new offshore wind farms.
Ms Hylsop said: “It is not that the Scottish Government does not want to continue to support BiFab – it currently cannot.”
BiFab, which has yards in Burntisland and Methil in Fife, as well as one on Lewis, had to be rescued by the Scottish Government in 2017, with the company then acquired by Canadian-based JV Driver in April 2018.
The Scottish Government is still a minority shareholder but has no role in the day-to-day decisions of the firm, Ms Hyslop said.
She added there was a “strong pipeline of work opportunities” at the start of this year, with the potential to win contracts for both EDF’s Neart Na Gaoithe (NnG) project and the Seagreen wind farm being developed by SSE Renewables.
Ms Hyslop said the Covid-19 pandemic delayed both these developments, “impacting BiFab’s cash flow problems”.
She added she is “extremely disappointed that SSE did not award the Seagreen contract to BiFab”, claiming this decision was “pivotal in the situation which BiFab now faces”.
BiFab had been due to build eight wind turbine jackets for the NnG wind farm but reports have claimed this work cannot go ahead after the Scottish Government withdrew its offer of a £30 million financial guarantee backing the contract bid.
Ms Hyslop told Holyrood delays to the NnG contract and SSE’s decision to award work on the Seagreen wind farm to companies in China and the Middle East have “compounded by JV Driver’s continued lack of investment in the business”.
These factors have together “greatly weakened BiFab’s cashflow and balance sheet”, she added.
The Economy Secretary said: “These factors bring about a position whereby the Scottish Government cannot currently legally continue to financially provide more support to BiFab.”
Tory MSP Maurice Golden said: “The Nationalist handling of the BiFab fiasco is another sad example of the mishandling of Scotland’s green economy by the SNP.
“The SNP keep making and breaking promises on green jobs, with Alex Salmond once saying Scotland would become the Saudi Arabia of renewable energy.
“In 2010, the SNP Government promised 28,000 green jobs by 2020 – it is 2020 and they haven’t been delivered.”
Labour’s Claire Baker said the Scottish Government withdrawing its guarantee from BiFab “triggered this whole situation”.
She demanded ministers make public the legal advice they received on the issue.
Scottish Greens energy spokesman Mark Ruskell said: “There are plenty of examples across Europe of countries protecting their own supply chain through smart investments, so ministers cannot continue to hide behind state aid rules.”
In a joint statement, trade union secretaries Gary Smith and Pat Rafferty said: “Today’s statement amounts to little more than an attempt to deflect from the Scottish Government’s role in BiFab’s predicament, rather than providing accountability and a way forward for the workers’ and communities dependent on these yards.
“The legal advice given to the Minister concerning the withdrawal of guarantees for the NnG contract can and should be released, it is a matter of public interest because any credible hopes of kick-starting the much touted “green jobs recovery” depend on it.”