Investors now favour “high risk, high reward” waste PFI

The survey was carried out by law firm Norton Rose and included the views of 59 experts from banks, waste management companies, technical advisers, consultants and the public sector.

” The industry, and potential investors, are becoming increasingly comfortable with the technologies involved and the risks that affect projects. “
– Martin McGann, Norton Rose
Although a almost 73% of those surveyed said the UK would fail to meet its European landfill diversion targets in 2010, there was a positive view on the availability of private finance for major waste projects.

In its report, entitled The Future of Waste PFI, the law firm said the risks of the waste industry are seen to be high compared to other sectors, while investment had been deterred in the past by the history of waste management.

But, with returns from the more established PFI arenas like health and education now dwindling, the report said banks are now looking at waste management with a newfound appetite.

Interest
Norton Rose head of PFI/PPP, Martin McGann, said: “In the last couple of years, as government attention has focused more on waste-related issues, and as more waste management deals have come to the market, interest in the sector has grown exponentially. The industry, and potential investors, are becoming increasingly comfortable with the technologies involved and the risks that affect projects are becoming better understood.”

The survey found that planning was now the issue cited as the biggest barrier to waste PFI and PPP projects, but that only 14% of those surveyed were most concerned about the viability of new waste treatment technologies.

However, the Norton Rose report adds a note of caution over “ill-defined and frequently over-ambitious projects” that it said could lead to a “vicious circle of high bid costs, affordability gaps and delays in decision making”. The law firm also warned that such an approach to projects would narrow the market for waste contractors with a subsequent impact on competition and value for money.

The report called for clearer guidance from Defra and said the standardisation of contracts would help cut the amount of time taken to close a deal.