14 February 2013

Viridor hit by weak recyclate prices

Low recyclate prices and landfill volumes are continuing to hit waste management firm Viridor, according to its parent company the Pennon Group.

In an interim management statement issued today (February 14) the water and utilities giant said that challenging market conditions meant that, as previously flagged, trading at the waste management firm was significantly below last year.

Viridor recently signed a PPP contract with Peteborough city council, which will see the company build an energy-from-waste plant at Fengate

Viridor recently signed a PPP contract with Peteborough city council, which will see the company build an energy-from-waste plant at Fengate

However, the company said that Viridor was responding aggressively to the challenges and that it had achieved success on a number of energy-from-waste projects which would deliver significant growth from 2014/15 onwards.

This includes achieving financial close this month on a multi-million pound PPP contract with Peterborough city council and the announcement that the firm is the preferred bidder for a long-term contract with Prosiect Gwrydd in South East Wales.

In the update, Pennon Group said: As previously flagged, trading in Viridor has been significantly below the level of last year with recyclate prices falling back from their 2011 peak reflecting world economic and market conditions. Recyclate revenues per tonne have recovered a little from their lows of October and November 2012 but remain significantly below first half 2012/13 levels and we remain cautious about the prospects for further recovery.

Viridor is continuing to respond aggressively to the ongoing near-term challenges. With the weakness in recyclate prices and the continuing reduction in landfill volumes we expect PBIT plus joint ventures in 2013/14 to be broadly similar to the current year. As a result of these factors we are reviewing the carrying values of some of Viridors assets and environmental provisions (any impairment or additional charges would be non-cash items) and we will update the market in our preliminary results announcement.

Progress

Pennon added that Viridor had made further strong progress since the beginning of the year in developing its pipeline of energy-from waste project which it said are expected to deliver significant growth from 2014/15 onwards.

The company highlighted its recent successes as:

  • Financial close achieved for the Glasgow Design Build Finance Operate project (July 2012) and planning application for the Recycling and Renewable Energy Centre, which is part of the project, approved (January 2013)
  • Financial close achieved for the South London Waste Partnership PPP (November 2012)
  • Planning approval (January 2013) and financial close (February 2013) achieved for the Peterborough PPP
  • Provisional preferred bidder achieved for the South East Wales residual waste project (Prosiect Gwrydd) (February 2013)

Overall, Pennon said that the Groups trading performance remained on track to meet management expectations and is in line with market consensus.

Pennon intends to announce its preliminary results for 2012/13 on Thursday 23 May 2013.




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