Renewi plc is to end its PFI operating contract with Dumfries and Galloway council 10 years early. The company said it will have made a loss of around £3m in the year to 31 March 2018 and is pulling out to avoid “future risk”.
And Renewi (formerly Shanks) has blamed Scotland’s demanding waste legislation as a reason for having to pull out of the work.
The company announced on Friday that it is now in discussions with the council and other stakeholders to start the termination process for the 25-year contract.
In a statement, Renewi said the D&G PFI project “is unable to address the needs of the Waste (Scotland) Regulations which set demanding new requirements regarding landfill diversion and recycling from 2021”.
And, the waste management firm explained that, despite discussions over a number of years, “a workable solution compliant with the regulations has not been found”.
Renewi said the termination of the contract “will enable D&G Council and other stakeholders to explore new ways to comply with the obligations of the Waste (Scotland) Regulations”.
The Waste (Scotland) Regulations, were passed by the Scottish Parliament in 2012 and include a ban on biodegradable municipal waste going to landfill from 1 January 2021.
Originally, Renewi cited its inability to meet requirements which had been set by Zero Waste Scotland, however, the company later issued a revised statement saying this was incorrect and it meant the regulations.
D&G signed a 25-year PFI-backed waste management contract with Shanks Group – which later rebranded as Renewi – in 2004. As part of the £270m contract Shanks was to process around 95,000 tonnes of municipal solid waste.
The contract included the construction of an Ecodeco mechanical biological treatment plant to treat 60,000 tonnes of waste a year through Italian composting and mechanical separation technology. The MBT process is used to treat food waste which is mixed in with ‘black bag’ waste when collected.
In a statement, the company said the remainder of its municipal division – which comprises contracts to deliver services on behalf of East London Waste Authority, Barnsley, Doncaster and Rotherham, Cumbria – is unaffected by this termination.
Renewi commented: “As previously announced, the Division is performing largely in line with revised expectations for the year, delivering operational progress against its recovery plans.”
In a trading update published last month, Renewi reported that it had made “good operational progress” during the second half of the financial year (see letsrecycle.com story). However, the company revealed it is facing continuing losses on municipal contracts with Wakefield council and for the Barnsley, Doncaster and Rotherham partnership.
Renewi – formerly Shanks – has also previously signalled that its £720 million PPP contract with Cumbria county council has been a burden on its municipal division (see letsrecycle.com story).
A spokesman for Dumfries and Galloway council told letsrecycle.com: “Renewi has advised that the operating contract is loss making and has made a loss of approximately £3m in the year ending 31 March 2018.
“Terminating the operating contract is not a decision we have taken lightly and we will work with Dumfries and Galloway council, our employees and our other stakeholders to ensure a seamless transition.”
“The council’s over-riding aim is to continue to ensure that its waste collection and disposal service, which is a priority for its residents and businesses in the region, is maintained and complies with all legal requirements.”
James Priestley, managing director of Renewi’s municipal division said: “Terminating the operating contract is not a decision we have taken lightly and we will work with Dumfries and Galloway council, our employees and our other stakeholders to ensure a seamless transition.
“Whilst our termination discussions are taking place, we will continue to ensure a high-quality and efficient service to the council and the residents of Dumfries and Galloway. This decisive action is in line with our strategy to actively manage our portfolio of UK assets to reduce future risk.”