Viridor set to grow EfW earnings as profits rise 7%

Viridor has said that its pipeline of energy-from waste projects could more than double its earnings in the next five years as its parent company Pennon published results for the first half of 2011/12 showing a 7% rise in pre-tax profits.

In the six months to September 30 2011,the Taunton-based waste management company’spre-tax profit rose to 30.6 million, up 7% compared to the same period in 2010. Meanwhile, its EBITDA (Earnings before interest, taxes, depreciation and amortisation) rose by 5% (2.8 million) to 58.4m.

While the growth is slightly less than what the company has achieved in previous years (with an average growth in profit of 20% per year since 2000), Viridor chief executive Colin Drummond told letsercycle.com that it was still a very strong result at a time when whole countries are going bust.

And, he said the company was well poised for the future growth. For the first time, recovering value from waste in the form of recycling and energy recovery accounts for over half (51%) of the companys profit. Viridor also has a number of major energy-from-waste projects in the pipeline which Mr Drummond said put it in a very strong position going forward.

This includes the Runcorn energy-from-waste plant in Cheshire, which Mr Drummond said would be Europes biggest and most efficient energy-from-waste CHP plant. Phase one of the plant is due to be complete by the end of 2012, with phase two due to come online a year later.

Viridor is also involved in developing EfW plants at Ardley in Oxfordshire, Trident Park in Cardiff and is bidding for contracts in South London and Glasgow among others which would extend its energy portfolio further. The company currently has 135MW of capacity and expects this to reach over 300MW by 2015/16.

When we put all those projects together we expect our EBITDA to more than double in a five year period thats very impressive, Mr Drummond said.

Results

The unaudited results show that Viridors revenue in the first half of 2011/12 was up 9.9% year compared to the first half of 2010/11 to 399.2 million. The acquisition of Storm Recycling in the first half of 2011/12 and five acquisitions in 2010/11, accounted for 19.6 million.

This financial year the company has also acquired Veolias trade waste collection interests in North Devon and North West logistics specialist JWS Churngold (see letsrecycle.com story).

The company, which now claims to have the largest materials recycling facility (MRF) capacity in the UK, reported that recycling volumes traded increased by 53,000 tonnes (6%) to 913,000 tonnes, with the overall recycling revenue per tonne up 16% to 125. But, the results note that revenue per tonne may ease back in the second half of the year reflecting world economic conditions.

On the energy side, average revenues per Megawatt hour (MWh) increased by 15% to 80 per MWh compared with the first half of 2010/11. The proportion of operational capacity eligible for ROCs increased from 69% to 71%. Viridor is currently calling on the government to set a target of 6% of electricity to come from energy-from-waste sources, because it says that it is base load power unlike wind energy and is also relatively economic.

Everyone is talking about going the green thing but we are delivering it, said Mr Drummond. We are recovering the embedded value in waste. I would like the government to be more bullish in supporting this.

Outlook

In the results, Pennon credits Viridor for transforming itself over the last ten years from a predominantly landfill operator to a leading recycling, renewable energy and waste management company.

Commenting on the outlook, the results report says: Recycling is now the companys largest profit generator and will be key in the next two years. Viridor is not immune to the difficult conditions in the world economy which may have an impact on results in the shorter-term. EfW/PPP projects already contribute to the bottom line, and a healthy pipeline is expected to underpin the profit momentum of the capacity of the company longer-term as the plants come on stream from 2013.14 onwards.