Renewi Plc has provided for the “complete termination” of its Derby PPP contract following a delay to the opening of the Sinfin gasification plant by its partner Interserve.
The revelation came yesterday (June 10) as the European waste management company—formed when Shanks merged with Van Gansewinkel in 2017—published its 2019 annual report, pointing to a number of challenges in the market including Brexit and the Chinese National Sword campaign.
Overall, group chairman Colin Matthews reported “good progress” in the company’s core Benelux commercial waste business for the year, but explained that this was offset by challenges in other divisions, including municipal waste, which operates mainly in the UK. As a result, the company reported a statutory loss of €97.7 million (£87.3m) for 2018/19.
“In the Municipal Division, our main challenge is the new Derby facility”, explained Otto de Bont, who has been Renewi chief executive since April 2019. “Following the failure of our partner Interserve to commission the facility, we have now provided for the complete termination of the PPP contract.”
Renewi signed a contract in 2014 in a joint venture named Resource Recovery Solutions (Derbyshire) with construction firm Interserve along with Derby city and Derbyshire county councils.
However, the facility is two years late in commissioning and in April, the councils warned that they would bring the contract to an end unless the project’s financial backers intervened to help (see letsrecycle.com story).
Writing in the annual report, Renewi said: “We have supported our customer and insisted on not accepting the facility until it has properly passed acceptance tests such that it can be safely and profitably operated.
“Recognising the significant risks that the facility cannot be commissioned in a timely way, we have written off our historic €40m (£36m) investment in the Derby project, taken a €7.6m provision for ongoing losses and assumed termination costs in the event that the contract comes to an end”.
The company added that it had “provided €11.6m against delay damages which we believe are owed to us by Interserve but which remain outstanding.”
Renewi runs six municipal contracts in the UK – with Argyll and Bute, Barnsley, Doncaster and Rotherham (BDR), Derby, Elstow and East London (ELWA) councils.
“Recognising the significant risks that the facility cannot be commissioned in a timely way, we have written off our historic €40m (£36m) investment in the Derby project, taken a €7.6m provision for ongoing losses and assumed termination costs in the event that the contract comes to an end”Renewi
Annual Report 2019
In general, the UK business saw revenues fall 3% to €195m (£174m) and made an underlying EBIT (earnings before interest and taxes) of €0.8m (£0.7m), up from a loss of €6.6m (£5.9m) in 2018. Improvements in operational performance and efficiency and the ending of loss-making contracts helped drive this.
However, Renewi said that falling recyclate prices driven by China’s National Sword policy cost the company €1.4m (£1.25m) and that Brexit has created difficulties for its ELWA contract which exports 200,000 tonnes of refuse-derived fuel (RDF) to the Netherlands each year.
As a result, the municipal division is now focused on running and optimising its existing contracts, rather than bidding for new ones, and will be looking for material markets within the UK, Renewi said.
Elsewhere in the report, Renewi has revealed an improvement in its accident rate and highlighted employee safety as one of its core values.
Commenting on this, Mr Matthews said: “Safety matters because our people matter, and improved safety means improved operational performance. Renewi launched a new safety culture initiative and has set new ambitious targets.”
Looking forward, Renewi—which is listed on the London Stock Exchange—said it was planning a second listing in Amsterdam, reflecting its increasing focus on the Benelux region.
Mr de Bont said: “We are focused on resolving our short-term challenges and building a solid base for future growth. Renewi remains well positioned for profitable growth in increasingly favourable markets.”