The contract will see Shanks disposing of waste from the 850,000 households in four London boroughs – Havering, Newham, Redbridge and Barking & Dagenham. The company is to invest heavily in new facilities to boost recycling.
Shanks’ targets are to recycle 25% of the annual 535,000 tonnes of material produced by the boroughs by 2005. Additional targets have been set at 40% by 2007, 45% by 2010 and 67% by 2015.
Speaking to letsrecycle.com, Shanks chief executive Michael Averill said: “We will be investing more than £100 million in civic amenity sites and two mechanical/biological treatment facilities – one at our existing site at Jenkins Lane, Newham, and one new facility nearby, at Frog Island on the Thames.”
The belief at Shanks is that the contract will see a revenue of around £25 million generated in the first year, with profits reduced through years two to five as the investment is made in infrastructure before resuming a “normal pattern” once new facilities are build. Over its 25-year lifespan, Mr Averill said that the contract “will be worth in excess of £1 billion”.
Funding
The contract has been funded under the Private Finance Initiative (PFI), with investment coming from existing Shanks resources and as well as 80% of the money from “new limited resource” bank loans. These loans are secured against the project rather than Shanks assets, so if the company does not deliver, it will lose the contract rather than there being any threat to its assets.
New mechanical/biological treatment facilities will use Ecodeco technology from Italy, composting the waste using micro-organisms to break down the biodegradable material before it is dried and separated automatically to remove non-organic materials.
According to a Shanks presentation to investors, 10% of the waste from the new plants will be turned into compost, 15% recycled. With 25% being lost as water through the drying process, the company has said that 50% of the result will be residue, which is likely to be used as fuel.
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