Waste management firm Renewi has said its contract with the East London Waste Authority (ELWA) has become “onerous” due to the Dutch incineration tax and Brexit complications.
In a trading update yesterday (20 January), Renewi – which warned of complications with the contract in November (see letsrecycle.com story) – said the “crystallisation” of events would increase the off-take costs of the ELWA contract by over €5m per annum until new outlets are found.
Released as the business applies for a secondary listing on Euronext Amsterdam, the update explained pressure had arisen from the introduction of the Dutch tax on the import of burnable waste and Brexit.
It touched on the market for recyclable materials, saying it has “continued to increase prices to waste producers to address low recyclate prices.”
The update also explained that the AEB incinerator in Amsterdam had returned to full operation with all outstanding claims settled, resulting in a reversal of the €3m provision taken at the half year.
The update reads: “We have previously disclosed the risk to our ELWA contract in Municipal arising from a new Dutch tax on the import of burnable waste and from Brexit.
“We have previously disclosed the risk to our ELWA contract arising from a Dutch tax on the import of burnable waste”
“As a result, ELWA has become an onerous contract and an exceptional charge of €25.5 million will be taken in the full year results: €10 million to impair assets and €15.5 million as an onerous contract provision that will be incurred over the next four years.”
The trading update covered the period from 1 October 2019 to date. It states that performance remains in line with Renewi’s expectations.
After reporting a drop in UK revenue in November 2019, Renewi warned of the financial impact Brexit and a potential Dutch incinerator tax could have upon its operations (see letsrecycle.com story).
At the time it said a hard Brexit could “disrupt the export of waste and recyclates internationally, creating offtake costs in the UK and over-capacity of incineration in the Benelux”.
It also noted the risks of the looming Dutch refuse derived fuel (RDF) tax, with the ELWA contract seeing 200,000 tonnes per year exported to the Netherlands.
The annual impact was estimated at around €4 million (£3.45m).
Effective as of 1 January, a €32.63 tax is now in place for exports of RDF to the Netherlands (see letsrecycle.com story).
At a meeting back in October, ELWA’s managing director Andrew Lappage said, when talking about market uncertainty brought on by problems at the AEB incinerator and the Dutch tax, that if export of waste not possible waste may end up going to landfill.
Minutes from the meeting read: “The head of waste and support services confirmed that if export was not possible, then waste may go to landfill, and that the operator had contingency arrangements for this.
“He noted that when the Amsterdam facility went out of action the Operator demonstrably coped with this, and that similar procedures would be actioned in response to Brexit issues”.
However, Mr Lappage said no RDF would go directly to landfill.
“Clarification was sought about the destination of refuse derived fuel (RDF) in respect of the main Amsterdam energy recovery facility used by the operator reducing its available lines.
“The managing director responded that the operator was taking the majority of RDF to other destinations, e.g. UK, Germany and Scandinavia.
“He added that some destinations wanted the RDF loose (UK-based destinations) and others baled and confirmed that none was going directly to landfill.”
ELWA is the waste disposal authority responsible for the East London boroughs of Newham, Barking and Dagenham, Havering and Redbridge.
Established on 1 April 1986, the authority has seven years to run on its contract with Renewi.