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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

Greater Manchester Waste Project

Ed Farquharson

PPP Days 2010 Manila

22-23 March 2010


Waste treatment policy and drivers

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.


Waste project pipeline 55 projects

Waste Project Pipeline: 55 projects


Greater manchester waste disposal authority

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


Key project outcomes

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


Project facilities

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


Key commercial features

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


Contract structure

Contract Structure


Project milestones

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.


How the funding unfolded

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.


Final sources of funding

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


Key finance details

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%)


Success drivers

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


Information and resources

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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