Pennon Group, which also owns South West Water, has also hinted at future growth within the UK once its energy recovery programme is complete – but has for the moment ruled out international expansion.
This was the broad message delivered at Pennon Group’s Capital Markets event in London yesterday (23 February), where chairman Sir John Parker and chief executive Christopher Loughlin shared their plans for the future of the Group’s waste and water divisions.
Susan Davy, Group director of finance, also fielded questions from shareholders and investors on the company’s half-year results for 2015/16 and where its revenue would be generated in the years to come.
Earlier this month, Pennon reported that strong investment in energy from waste at Viridor was well positioned to drive its dividend growth into 2016/17 – and is on track to deliver a targeted £100 million in EBITDA (see letsrecycle.com story).
However, the Group remains wary of falling recyclate prices. Mr Loughlin said: “If you wind back the clock Viridor was very good at moving away from landfill and good at predicting the policy change. But as prices have come down the market is very, very much less attractive than it was.”
In response to the unease, Ms Davy announced that the Group was “looking at its assets” and “consolidating some of those recycling sites” to make the more effective. She forecast that the move could save an estimated £9 million.
While Pennon would not be drawn on what shape the consolidation would take, letsrecycle.com understands that Viridor will look to reduce overheads including restructuring of departments and the rationalisation of office premises. The company at present has three core offices with its headquarters in Taunton, as well as West Malling in Kent and Greater Manchester.
MRFs
Viridor could also look to divert more recyclables from its local authority contracts to flagship materials recycling facilities (MRFs) such as Crayford. The firm is looking to share the ‘pain and gain’ of recycling price exposure with its customers.
Asked what incentive councils would have to renegotiate their contracts, Mr Loughlin said: “If we walk away they have to do something else, and there’s not a lot of competing assets out there. They have to come to the table because they have these recycling targets to meet and diversion from landfill.”
He added there was “no pressure at all” to renegotiate on energy recovery contracts and argued any future incinerator tax from government would fall on local authorities and in turn drive more recycling.
The event culminated in a market stall exhibition in which Viridor shared some of its plans for energy decentralisation and technology.
It is estimated that once all 11 plants delivered under the energy recovery programme are operational, the subsidiary will produce 242MW of electricity per year – some of which will be rerouted to industrial partners. It is currently working on a 3km connection pipeline from its Exeter ERF to power South West Water’s Countess Wear sewage treatment works.
Technology
Other areas of technical innovation include an £8 million cryogenic energy storage programme in Greater Manchester funded fully by DECC, which will allow Viridor to choose when to power its turbines and generate better economies around power sales. It is also seeking a funding package which will allow it extract ammonia from landfill leachate – a valuable waste chemical used in ERF.
And elsewhere, Pennon is looking to capitalise on Viridor’s pre-existing local authority customer base to grow out its merged South West Water and Bournemouth Water non-household retail business.
Register for free to comment