The Merseyside Waste Disposal Authority (MWDA) met last week and approved plans for the purchase of 170,376 tonnes of landfill allowances (LATS) from 2009 to 2014 at £20 a tonne to help cater for its waste disposal needs while infrastructure is being built as part of its £3 billion PFI project.
With the current economic climate, as well as increases in recycling collections it is likely that we will see a further reduction in waste arisings and a reduction in the deficit amount
Carl Beer, director, MWDA
And, the Authority has now refused to comment on the extent to which the purchase of the LATS credits – for £3.4 million – will influence the future of the proposed interim contract. The contract is intended to make use of existing facilities as a ‘stop-gap' to divert waste from landfill during the construction period for the PFI work.
While the concept of an interim contract still exists, there appear to have been few developments since the idea was unveiled alongside contracts to manage household waste and recovery centres and develop an energy recovery facility in October 2007.
However, a spokeswoman for the MWDA told letsrecycle.com that the interim contract was “still in place” and expected to announce an update on its current status “at some point this week”.
Interim
When an interim contract was put out to first tender stage two years ago, the shortlisted companies were named as Cory Environmental, Shanks Group, SITA UK, Veolia Environmental Services, Waste Recycling Group, the Resource from Waste Alliance Consortium and VT Group (see letsrecycle.com story).
A spokesman for one of the bidders, civil engineering firm VT Group, which intended to operate the interim contract through the Biossence autoclave firm at Hooton Park, Merseyside, said it was no longer competing for the award and was unsure of its current status.
Report
An external Audit Commission report covering MWDA member Sefton council, published in 2008, noted that the MWDA had investigated the possibility of using both landfill allowances and interim measures to counter any deficit in landfill diversion that occurred during the construction of other facilities.
The report from August 2008 said that the MWDA “conducted a detailed evaluation of the comparative cost of an interim contract to treat BMW between 2009/10 and 2013/14, including the potential for higher recycling rates, against the purchase of LATS allowances” and had found a difference between the LATS trading option and the best interim contract option was about £17 million.
The report noted that “this information has enabled MWDA to consider how best it can manage its risk exposure to comply with its BMW obligations through a possible combination of LATS permits purchases and interim contract commitments”.
Allowances
It is believed that the MWDA could be looking to capitalise on the low cost of landfill allowances – which are allocated in decreasing numbers to councils each year to help meet Landfill Directive targets – and could possibly use these in conjunction with some interim measures.
Under the proposed agreement to purchase landfill allowances from a consortium of North East councils, the MWDA is set to buy the credits at a secured price of £20 per tonne, complete with the first refusal to purchase further allowances at the set price if the MWDA requires.
Projections presented at the meeting highlighted that there would be a further deficit of 133,660 tonnes over the four years if no infrastructure developments were made.
However, planned facilities under a long-term PFI (see letsrecycle.com story) are expected to become operational during this period and are set to provide sufficient diversion for biodegradable waste from landfill from 2013/14 onwards.
The MWDA said that the price secured for the LATs was compared to other trades taking place for allowances in the 2009/10 target year, which currently ranged between £18 and £35.
Deal
In a report presented to the MWDA meeting, Carl Beer, director of the MWDA, said the Authority had planned the four-year deal as the Landfill Allowances Trading (LATs) market “proved difficult to predict” and its arrangements with the North-East consortium ensured financial certainty.
Speaking after the agreement was made, he said: “Based on this information, the Authority will closely monitor waste arisings in the coming year and in particular will monitor the deficit level.
“With the current economic climate, as well as increases in recycling collections it is likely that we will see a further reduction in waste arisings and a reduction in the deficit amount. In a worst-case scenario the Authority has first refusal on the purchase of more allowances later in the year at the same price,” he added.
As part of the meeting, the MWDA's Waste Flow Model was updated to include latest performance indicators. Historically, waste growth had been set at 3%, however, the authority claimed growth had “slowed significantly” in recent years and therefore the Model had been based on a revised target of less than 1%.
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