Councils seek urgent meeting over PFI funding cuts

Local authorities involved in the three waste management procurement projects for which Defra cut PFI funding last week are to seek an urgent meeting withLord de Mauley, minister for resource management.

Conversations have taken place between the councils involved the Merseyside Recycling & Waste Authority (MRWA); North Yorkshire/City of York; and Bradford and Calderdale councils and a letter is set to be sent to Lord de Mauley. The authorities are expected to ask theminister to review his decision although they are also starting to consider alternative financing routes in the face of the loss of a total of more than 210 million in support last Friday (see letsrecycle.com story).

The deputation to see the minister is likely to include mayors, council officers and officials.

Defra has today confirmed that it will provide advice to the authorities if they continue the projects.

A spokesperson said: “We are investing 3.6 billion in 29 waste infrastructure projects. This will reduce the amount of waste sent to landfill, promote recycling and stimulate economic growth. We now expect to have sufficient infrastructure in England to enable the UK to meet the EU target of reducing waste sent to landfill. Consequently the decision has been taken not to fund the remaining three projects.

“This does not necessarily mean the three projects will stop. That will be a decision for the Local Authorities concerned. We will continue to provide commercial and technical advice to those projects that continue with their procurement process.

Research

Among the authorities involved, there is a level of anger over the decision, how it was communicated and the fact that no consultation took place. Defra said that its decision was based on research into the level of capacity needed, available online at Defra research. However one source suggested that even though Defra had carried out research ahead of making its decision, the grounds were purely financial in a Department which was struggling to make savings.

Another source said that Defra representatives themselves were even unaware of the decision: at least one individual from the departments own Waste and Infrastructure Development Programme seconded to a project was kept in the dark over the funding withdrawal.

And, the decision to cut the funding which was made on the grounds that England would meet landfill diversion targets without the projects continues to draw strong criticism from outside the authorities.

CIWM

The Chartered Institution of Wastes Management attacked Defras move as poor government on a number of levels. The CIWM referred to the decision as also weakening investor confidence in an industry that struggled to attract funding.

Steve Lee, CIWM chief executive, said: The move also serves to highlight the Governments lack of vision and ambition. It would appear that the aim is for England to meet the bare minimum landfill diversion required by the Landfill Directive, and no more.

This is short term thinking and fails to take into account the fact that landfill diversion and other EU waste targets are likely to be raised in the next couple of years. And when industry experts cant agree whether we have too much or too little waste infrastructure, how much waste will be produced in the future, or how much of the infrastructure currently in the pipeline will actually be delivered, Defras confidence in its projections, and the lack of any margin for error, could be seen as cavalier.

Merseyside

Of the three schemes, the one proposed by Merseyside is the largest project involved which was to receive 90 million worth of credits.

Now the authority is calling together the councillors who represent its member authorities for a special presentation by MRWA chief executive Carl Beer tomorrow evening (February 27). Mr Beer is expected to outline potential alternative options for the financing of the project and to update councillors on the bidding process. A contract had been due to be awarded shortly to either Covanta or SITA UK and a non-PFI funded approach is said to be likely to cost the authority more.

One complication might be that should a contract be awarded to either of the bidders under changed financial circumstances, then the other bidder might have cause to seek a legal review because the bidding terms have changed.

Merseyside is thought to be conscious of the situation in Greater Manchester where its waste disposal authority was challenged, unsuccessfully, by SITA UK over its award of the contract to Viridor.

Covanta told letsrecycle.com that its proposals were still in place and SITA UK expressed regret at the loss of the funding.

SITA UK chief executive David Palmer-Jones said: It is regrettable that PFI funding has been withdrawn from the Merseyside and Halton Waste Partnership Waste Resource and Recovery Contract project at this late stage.

This said, SITA UKs solution delivers a robust, value for money and sustainable solution for Merseyside and its residents and so our commitment to the project remains just as strong.”

Yorkshire

Richard Flinton, chief executive of North Yorkshire county council, told letsrecycle.com that his authority and City of York were hoping to have discussions with Defra to understand their rationale for the decision.

The two authorities together lost 65 million in PFI funding which was to support a 25-year waste and recycling contract with Spanish-owned AmeyCespa.

The chief executive added that the authority will look to evaluate whether it is still viable and this would be another financial burden to a long-running project which was nearing an end.

And, Mr Flinton said that while the contract may still continue, it could involve more cost adding that there is an issue for the contractor in any event.

Bradford and Calderdale

Andrew Thornton, Bradford council’s executive member for environment, told letsrecycle.com today: “The full implications of the Government’s decision have not yet been worked out and we will be discussing these with our preferred bidder.

Obviously, Bradford needs a sustainable long-term solution for dealing with the district’s waste.We remain committed to increasing levels of recycling and diverting as much waste away from landfill as possible not only to save Council Tax payers money but also to help improve the environment.

Eunomia study

Almost a year ago, waste sector consultants Eunomia published a report that spoke of potentially too much infrastructure being built for waste treatment and which is thought to have influenced Defra thinking.

Eunomia principal consultant Adam Baddeley this week said: “Our report showed that there was a planned capacity of more than five million tonnes more than needed.”

And, he suggested that the withdrawal of the funding might make some other projects more viable and that shorter term agreements may be the way ahead, such as in Cheshire West and Cheshire which last year went out for procurement of a 10-year treatment contract after Defra withdrew PFI support for a 25-year project in 2010.