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Greater Manchester Waste Project

Greater Manchester Waste Project. Ed Farquharson PPP Days 2010 Manila 22-23 March 2010. Landfill Tax. Landfill Allowance Trading Scheme. Recycling Targets. Public Demand. Renewable Obligation Certificate. Waste Treatment Policy and Drivers.

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Greater Manchester Waste Project

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  1. Greater Manchester Waste Project Ed Farquharson PPP Days 2010 Manila 22-23 March 2010

  2. Landfill Tax Landfill Allowance Trading Scheme Recycling Targets Public Demand Renewable Obligation Certificate Waste Treatment Policy and Drivers • Landfill Directive: reduce volume of BMW sent to landfill to 75% of 1995 levels by 2010, 50% by 2013 and 35% by 2020. • Waste and Emissions Trading Bill limits waste to landfill - £150/tonne.

  3. Waste Project Pipeline: 55 projects

  4. Greater Manchester Waste Disposal Authority Providing a solution for Greater Manchester’s municipal waste. 9 Collection Authorities 2.2m population 973k households 1.2m tonnes p.a. of municipal waste

  5. Key Project Outcomes • At least 50% recycling and composting of all waste by 2015 • Diversion of more than 75% of Greater Manchester’s waste from landfill • Help to ensure that the UK complies with its requirements under the European Union Landfill Directive • Carbon benefits

  6. Project Facilities • Total capital cost: £631 million, 44 different facilities • Combined Heat and Power Plant for 375ktpa 25 Household Waste Recycling Centres 5 Mechanical Biological Treatment Plants (4 with AD) 4 In-Vessel Composting Plants 1 + 2 Material Recovery Facility / Green Waste Facilities 7 Transfer Loading Facilities

  7. Key Commercial Features • Payment by Authority on a per tonne basis • Exclusivity • Third party income from power sales shared • Key risks transferred to private partner: • technology • construction – time and budget • operation • waste composition risk • residue market sales

  8. Contract Structure

  9. Project Milestones October 2004 – Outline Business Case submission. February 2005 tender issued; 10 proposals submitted June 2005 5 consortia shortlisted May 2006 2 names - SITA and Viridor/John Laing January 2007 – Viridor Laing consortium appointed preferred bidder. From July 2007 – redevelopment/acquisition of 23 sites. April 2008 – contract ready to close 8 April 2009 – contract signed.

  10. How the Funding Unfolded • BAFO: two banks underwrote finance / joint MLAs • EIB €150 million available • Credit Crunch intervened • Elected Members fully advised to maintain confidence. • Unchanged technical solution and long term funding with balanced risk profile. • Close liaison with Government and PUK. • Joint work yielded new banks • All new Banks wanted variations on a theme for due diligence. • Authority and TIFU funding introduced.

  11. Source of Funding £m % Commercial Banks (BoI, BBVA, SMBC, Lloyds TSB) 245 31 European Investment Bank 182 23 Equity Investment - Sponsors 148 19 TIFU 120 15 Capital Contribution 68 8 WDA Senior Debt 35 4 Total 798 100 Final Sources of Funding

  12. Key Finance Details • Debt: 23.5 years, 79/21 gearing, 325bps during construction, 5 year margin ratchets during operation, starting at 335bps and rising to 450bps after year 16 to maturity. • Primary SPV: • Viridor Waste Management Limited (50%) • John Laing Investments Limited (50%) • Secondary SPV: • Viridor Waste Management Limited (40%) • John Laing Investments Limited (40%) • Ineos Chlor Limited (20%)

  13. Success Drivers • Strong stakeholder management led to clarity of purpose and commitment • Dedicated central support • Dedicated team supported by stable team of advisors • Sponsor engagement • Continual checking back to objectives and the contract rules • Well planned site acquisition – schemes hit the ground running • TIFU and EIB funding support Longley Lane, Manchester: MRF, MBT, HWRC and Green Waste May 2009 September 2009 October 2009 December 2009

  14. Information and Resources • WIDP Guidance, incl: • Residual Waste Treatment Contract (consultation) • Options appraisal • Project governance • Payment mechanisms • Output specifications www.defra.gov.uk/environment/waste/localauth/funding/pfi/consultation.htm • Waste Strategy for England www.defra.gov.uk/environment/waste/strategy/strategy07/documents/waste07-strategy.pdf

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