10 August 2016 by Robin Nierynck

Interserve to exit EfW market

Construction firm Interserve has announced that it is to pull out of the energy from Waste (EfW) market, due to “unique challenges” in the field.

Interserve has announced its exit from the EfW sector

An artist’s impression of Viridor’s Glasgow Recycling and Renewable Energy Centre (GRREC) – of which Interserve has reported delays to construction work

In its half-year financial results, published today (10 August), the company reported overall growth, but chief executive Adrian Ringrose said Interserve is “taking action to exit the Energy from Waste sector.”

In May, Interserve claimed that technical issues had slowed down construction work on its contract to build Viridor’s Glasgow gasification plant, leading the company to set aside £70 million to address the ‘deterioration’ of the contract (see letsrecycle.com story).

And, the company has now announced it will “no longer undertake contracts for the construction of Energy from Waste facilities.”

Commenting on the company’s growth, chairman Glyn Barker said the results had “been overshadowed by the deterioration in the outlook of our Energy from Waste contracts.”

Challenges

Mr Barker said: “As a result of the unique challenges in the Energy from Waste market, including continuing supply chain challenges, we have taken the decision to exit this area of our business. These six contracts are therefore now reported as ‘Exited Business’.

“Managing the challenges of exiting from these complex projects is a significant priority, as is ensuring our processes continue to improve given the lessons we have learned.”

The six contracts, entered into between mid-2012 and early 2015, have aggregate whole-life revenues of £430m, the company has said.

Interserve has stated it expects works to complete during 2017 and for the impact of these contracts to be contained within the £70 million exceptional loss provision in its May trading update.

According to Mr Barker, the “significant milestones” that effect the exit from these contracts will take place through 2016 and 2017, and the company expects the cash outflow associated with these losses to be substantially borne this year.

Construction of the Glasgow Recycling and Renewable Energy Centre (GRREC) — Viridor’s Glasgow gasification plant— began in 2013 with the site originally due to start operations early this year.

As well as building the Glasgow waste facility, Interserve has also been contracted to build Viridor’s Dunbar energy from waste plant at East Lothian, on which constrution began in July 2015.

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