Defra in European bank talks over Manchester PFI

A spokesman for the Department for Environment, Food and Rural Affairs told letsrecycle.com that it was playing a role in discussions between the Greater Manchester Waste Disposal Authority and the European Union's lending arm, the European Investment Bank (EIB).

“Defra has been supporting Greater Manchester in discussions to secure funding from the European Investment Bank,” he said.

The EIB is reported to be supplying in the region of £200 million towards the funds needed to get the GMWDA contract with Viridor-Laing off the ground.

EIB joins the Bank of Ireland, which has confirmed it is the lead bank on the project (see letsrecycle.com story), on the list of financial institutions with potential involvement in the deal.

The Bank, which is based in Luxembourg, has only had one previous well-publicised part to play in waste PFI market, providing some funding for the contract signed by SITA UK and Cornwall county council in November 2006 (see letsrecycle.com story).

Financial close

While Viridor-Laing was appointed as preferred bidder for the 25-year Greater Manchester deal in January 2007 (see letsrecycle.com story), two years down the line the contract is yet to achieve financial close.

Last year, the Authority admitted that the economic downturn had affected the finalising of the contract (see letsrecycle.com story) but, last month it raised hopes of a pre-Christmas signing for the deal, with the only barrier to the deal being the banks' need to secure credit approval for their funds (see letsrecycle.com story).

Speaking to letsrecycle.com earlier today (January 16), the chair of the GMWDA, councillor Neil Swannick, was hopeful that the contract would be signed “fairly soon.”

I'm very optimistic that we are close to a situation where we can sign the contract

 
Cllr Neil Swannick, chair, GMWDA

He said: “I'm much more relaxed than I was. I'm very optimistic that we are close to a situation where we can sign the contract.”

In GMWDA documentation, it has been indicated that any announcement would have to be timed to fit in with the London Stock Exchange, as there was share-price sensitivity which is thought to be for both Viridor's parent company Pennon and equity investor John Laing.

In a joint statement, the GMWDA and Viridor-Laing, said: “GMWDA is continuing to work collaboratively with Viridor-Laing and the funders towards achieving financial close at the earliest opportunity.

“We are in discussions with a number of funders and there is no definitive list available,” they added.

Failure

The GMWDA is set to meet next Friday (January 23) in Oldham, where an update on the PFI procurement is one of the items on the agenda.

But, minutes from a meeting of the Authority that was held on December 5, 2008, reveal that members have also considered what action may be taken if the contract negotiations with Viridor-Laing were a failure.

Members were given a presentation detailing the “options, at a high level, which may need to be further developed about a way forward, if the Authority was unable to conclude the current PFI contract negotiations with the Preferred Bidder.”

And, a question and answer session provided clarity on issues including refinancing and prudential borrowing for the project.