25 May 2018 by Elizabeth Slow

Viridor sees ‘strong performance’ in ERFs

Viridor made a profit of £70.8m last year before tax, thanks in part, to growth in earnings from its energy recovery facilities (ERFs).

The profit level compares to £60.4m the previous year. And, while profits were up overall, recycling incomes dropped.

The figures come in Pennon Group’s full year results for the financial year 2017/18. Pennon is the environmental infrastructure group which owns waste management firm Viridor, along with water services businesses.

ERFs

Viridor’s ERFs “performed strongly” last year (Picture: Viridor’s Cardiff ERF)

In the results, the Group says Viridor’s ERFs have “performed strongly” during the year, with EBITDA increasing to £123.7m.

The operational ERFs have a nameplate capacity of 2.1 million tonnes of waste and 178 megawatts (MW) of power generation per annum, including joint ventures. This will extend to 2.9 million tonnes and 242 MW in 2018/19 and 3.2 million tonnes and 276 MW by 2021, the Group said.

The majority of Viridor’s capital investment continues to relate to the delivery of the ERF portfolio, with £167.6 million of the total spend relating to the four remaining ERFs. Beddington, Dunbar and Avonmouth are all expected to be completed on budget and, Pennon says that “solid progress” has been made with Doosan Babcock at Glasgow.

Recycling

Despite this growth in earnings on the energy from waste side, the business saw a reduction in income from recycling.

EBITDA for recycling has reduced by £7.7 million from £22.7 million to £15.0 million. Around £3 million of the reduction related to the pricing and quality implications of China’s policy announcement.

Pennon Group has released its annual results for 2017/18, which show Viridor made a profit of £70.8m last year before tax

“The remaining reduction of £4.7 million reflects an overall reduction in recycling volumes and increase in processing and reject costs as a result of local authority cost savings impacting input quality, and higher output quality demands,” Pennon said.

Recycling volumes traded in 2017/18 were lower than the previous year at 1.4 million tonnes.

This was in part, reflecting a decision not to re-tender certain contracts where we considered the level of contamination from inputs “unacceptable”, it said.

Despite noting that recycling markets have been “challenging” during the period, partly because of the restrictions imposed by China, Viridor said it “anticipated” this change and has secured new markets for plastic waste in the UK, Asia, and elsewhere in Europe.

‘Strong performance’

Commenting on the results, Chris Loughlin, Pennon chief executive, said: “Pennon has delivered a strong performance this year across water and waste. As a British business providing vital services to our communities, we are committed to delivering for customers and shareholders.”“

At Viridor the operating fleet of Energy Recovery Facilities is performing well, transforming household waste into electricity and heat. Good progress is being made to bring Viridor’s remaining four Energy Recovery Facilities in the portfolio on stream, with three in commissioning and the final facility under construction. The expansion of Viridor’s portfolio will support Pennon’s earnings growth to 2020 and beyond. Viridor has looked to navigate a challenging recycling market in 2017/18 through self-help measures and a programme of innovation.

“The UK recycling system needs fixing.”


Chris Loughlin
Pennon Group

However, he expressed strong views about the UK recycling system. “The UK recycling system needs fixing. We are encouraged that the ‘Blue Planet’ effect is spurring action and we are optimistic that positive changes will be announced in the Resources & Waste Strategy later this year creating a UK recycling system fit for the future.”

Framework

Viridor said it has called for a new framework for UK recycling to address input quality to UK Materials Recycling Facilities (MRFs), “stagnant” recycling rates and producer responsibility. And, the company remains “optimistic” that incentives for producer responsibility, consistency for household bins collections and PRN reform will be included in the Resources & Waste Strategy.

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