Viridor Laing will negotiate for compensation from the Greater Manchester Waste Disposal Authority (GMWDA), after the authority voted to end its waste management PFI contract with the consortium.
The decision to end the contract comes eight years after it was agreed. GMWDA – which describes itself as England’s largest waste disposal authority – signed the long-term waste contract with Viridor Laing in 2009 at a value of £3.2 billion over the course of its 25-year lifespan.
Under the terms of the deal, Viridor Laing – a consortium of the waste and resources firm Viridor and the construction group John Laing Infrastructure – handles an estimated 1.1 million tonnes per year of waste, produced by a population of around 2.3 million.
The contract involves the development and operation of a total of 42 facilities – totalling more than £600 million – for the management of waste from Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside and Trafford councils across the Greater Manchester area.
The Authority approved the termination of the contract at a meeting last week (26 April). This comes several months after the waste authority revealed that it was ‘not satisfied’ with the status of the contract, and had been seeking ‘significant savings’ through the deal (see letsrecycle.com story).
Pennon Group – the parent company of Viridor – has noted that there are provisions in the PFI contract for compensation to be paid to Viridor and John Laing on termination. And, in a statement issued yesterday (2 May), Pennon claimed that the Authority’s exit from the contract is due to ‘financial challenges’ caused by prolonged austerity.
The company stated: “Discussions and negotiations are now expected to progress over the coming weeks as we work with GMWDA to ascertain the implications. There are provisions in the PFI Contract for compensation to be paid to Viridor and John Laing on termination.”
According to Pennon, the book value of Viridor’s investment in the Greater Manchester project as at March 2016 is £72.3 million, of which Viridor Laing (Greater Manchester) Limited represents £36.8 million.
In a statement GMWDA said: “The Greater Manchester Waste Disposal Authority can confirm that at the Authority meeting held on Wednesday 26th April 2017 it agreed to terminate its Waste and Recycling (PFI) contract with Viridor Laing (Greater Manchester) Ltd. The decision allows for delegation for officers to progress termination. At this time we are unable to comment further.”
In a report to the Authority meeting last week GMWDA solicitors said that details of the termination of the contract were of “the utmost commercial sensitivity”.
However, public reports presented at the meeting noted a good performance to the end of December 2016 on Contract landfill diversion, but that recycling levels remain well below target due to lower than expected performance. In 2015/16 the overall recycling rate was 44.2%, but according to documents presented at the meeting, up to 70% of the kerbside waste presented by householders ‘is theoretically recyclable’.
Documents concluded that the GMWDA will now seek “to receive the final update on savings proposals and agree the appropriate way to action those savings.”