Waste PFI funds withdrawn in shock move by Defra

The three projects to have their funding withdrawn are being procured by: the Merseyside Recycling & Waste Authority; North Yorkshire county council and City of York council; and, Bradford and Calderdale councils.

The Department for Environment, Food and Rural Affairs (Defra) said withdrawing provisional financial support for the projects, which are the only ones still to reach financial close, would only reduce the likelihood of meeting the 2020 diversion targets by 2%.

However, the Department acknowledged that the move would impact on the affordability of the projects and would significantly reduce the likelihood of them going ahead.

Defra carried out a red-amber-green analysis of the likelihood of the three projects becoming operational by 2020, which concluded that two of the projects have an amber red rating, while the North Yorkshire and York project was assessed as red. In North Yorkshire it concluded that the project is unlikely to go live by 2020 because gaining planning permission is likely to be problematic owing to the controversial nature of the development.

Following the withdrawal of funding yesterday (February 21), a spokeswoman for Defra said: We are investing 3.6 billion in 29 waste infrastructure projects. This will reduce the amount of waste sent to landfill, promote recycling and stimulate economic growth. We now expect to have sufficient infrastructure in England to enable the UK to meet the EU target of reducing waste sent to landfill. Consequently the decision has been taken not to fund the remaining three projects.

This does not necessarily mean the three projects will stop. That will be a decision for the Local Authorities concerned. We will continue to provide commercial and technical advice to those projects that continue with their procurement process.

The full methodology which Defra used to come to its decision was published today (February 22) in a report entitled ‘Forecasting 2020 waste arisings and treatment capacity’.

The report refers to the withdrawal of PFI funding from seven projects in 2010 and notes that only three of them went forward.

Merseyside

The Merseyside Recycling & Waste Authority (MRWA) planned to use 90 million in PFI credits to support the development of energy-from-waste facilities under a 25-year waste treatment contract which would cover the treatment of 450,000 tonnes of waste every year (see letsrecycle.com story).

The contract was being procured on behalf of the Merseyside and Halton Waste Partnership.

Only last week, the MRWA announced that it had chosen a preferred bidder for the contract from its remaining candidates – EfW specialist Covanta and waste management firm SITA UK however it had kept the identity of the preferred bidder confidential pending final confirmation of the PFI funding.

Both firms were proposing to build energy-from-waste facilities. Covanta plans to build its facility at Ince Marshes in Cheshire the site of its joint venture eco-park with Peel Environmental, while SITA submitted a proposal for an EfW at the Wilton International site in Teesside.

Councillor Joe DeAsha, chairperson of the MRWA, said: “Members of Merseyside Recycling and Waste Authority, who are leading the procurement, are meeting next week to discuss a way forward to deal with Merseyside and Haltons residual waste (waste that cannot be recycled) while continuing to deliver value for money. This decision has been made because the Government considers that the amount of waste treatment infrastructure and facilities is no longer required nationally to meet the European Landfill Directive obligations.

“The Authority is considering the implications of this announcement and will make a further announcement in due course.”

Yorkshire

Defra has also withdrawn 65 million in funding from a partnership between North Yorkshire county council and City of York council. The partnership was planning to use the money to support a multi-million pound 25-year waste and recycling contract with Spanish-owned firm AmeyCespa which would see the firm develop and operate a 1.4 billion waste park and EfW incinerator at Allerton Waste Recovery Park (see letsrecycle.com story).

County Councillor John Weighell said the announcement was a complete surprise as the council had been repeatedly assured of Defras commitment to providing PFI credits to the project.

He said: To be informed now, after the granting of planning consent and the decision of the Government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing.

We have undergone a lengthy procurement process of more than five years, and Defra has been closely involved in that process – even to the extent of providing a permanent liaison officer at senior level. At no stage in that period, during which there have been continuing assessments to ensure that the scheme remains viable, value for money, and necessary, has any issue been raised by the Government. There have been repeated indications from Government throughout this period that the scheme will be funded through PFI.

However, Cllr Weighell emphasised that the decision does not necessarily signal the end of the project and the councils are now examining other options available to them.

Bradford

Bradford and Calderdale councils said the withdrawal of funding by Defra would have a big negative impact on their project.

The councils had planned to build a combined heat and power plant in Bowling Back Lane using 62.1 million in PFI credits.The facility was expected to process up to 193,000 tonnes of waste from the councils every year. Pennine Resource Recovery (PRR) a consortium involving FCC Environment and Skanska – was appointed as the councils preferred bidder for the project (see letsrecycle.com story).

Commenting on Defras decision, councillor Andrew Thornton, Bradford councils executive member for the environment, said: This is a massive blow that jeopardises the delivery of an important project which would have resulted in major long term cost savings for Council Tax payers in both local authorities. We are currently assessing the impact of losing 62.1 million of PFI credits on the affordability of the project.

The PFI credit contribution was intrinsic to the scheme and DEFRA has been involved every step of the way. The Government had not given us any indication that these PFI credits would not be available and we are just a few months away from starting construction on site.