Pennon Group, parent company of waste management firm Viridor, today reported that its financial performance since October 1 2009 has been in line with expectations and that the waste business is "performing well".

The success at Viridor comes despite falling volumes in the commercial and industrial sector and being against a generally weak economic background.

In its half-yearly results, published in November 2009, Pennon had pointed to growth of about 14% at Viridor and today said that it remained confident of delivering continued full year growth in profits.

Colin Drummond (above) said profits at Pennon had risen 22% since 2001

Pennon also revealed today that because it has a high number of small shareholders it will be bringing forward its share dividend because of taxation changes in the next year.

Explaining how Viridor was managing to keep growing at a positive rate, Viridor chief executive Colin Drummond said that a large element of this was because of the recovery of value from waste.

He explained that from 2001 to 2009 the company had seen its profits rise by about 22% per annum on average. "Over the same period our landfill business performed well while recycling and power generation increased their share."

Today, said Mr Drummond, about 41% of the profit comes from recovering values from waste, either by recycling or through energy recovery.

He explained that Viridor had managed to forward-sell its power production. "In the current year to the end of March we have very good power prices after we sold our power forward at peak prices in 2008. And, in recycling, prices have got back up to the levels they were in 2008 - we have recovered well from the nervousness in world markets in November 2008 to February 2009."

The chief executive noted that Chinese markets had opened up again and that Viridor had a strong access to world markets through Viridor Resource Management.

Greater Manchester

Another aspect of the company's strength, he said, was that profits from the Greater Manchester contract were starting to feed through in line with the contract provisions.

Looking ahead, Mr Drummond said that the provision of energy from waste would become very significant for the waste sector. "Fundamentally, there will be so much growth in renewable energy. 28% of renewable energy currently comes from waste representing 1.5% of total electricity supply. This figure could reach 6% of total electricity, in my view, by 2015. In contrast to tidal barrages and wind, energy from waste is a cheap form of energy and a by product of waste and energy from waste can be readily distributed around the grid."

Mr Drummond said that the company's message to politicians is for them to set an energy from waste target of 6% out of the target of 15% renewable energy of total energy production by 2015 (i.e. the other 9% comingfrom other renewable sources such as wind and marine). "Of that 15%, 6% should be waste. If they can give that commitment it would give planners a big signal and would help in permissions for plants," he added.

Viridor currently provides about 110MW to the grid with 102MW of power coming from landfill. This will change rapidly in future years with the Manchester contract providing 130MW and the company's share of the Colnbrook plant providing 37MW.