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Contract bonaza lures outsiders into sector

Companies from outside the waste sector are taking an increasing interest in industry opportunities. Large cash contracts in a market place which attracts investors, despite a gloomy economy, is not something to be ignored.

Relative newcomer to the industry, North Midland Construction (NMC) recognised this and recently secured a multi-million pound deal to design and build an integrated waste management facility in Wrexham, North Wales.

This build is part of a wider infrastructure plan worth about £17 million. Another company which has identified opportunities in the sector is United Utilities, which is through to the last four bidders for Cheshires £1billion private finance Initiative (PFI) contract. Both companies have experience in the waste water utilities infrastructure sector.

Companies from other sectors have taken an interest too. These include Ineos Chlor, a large chlor-alkali producer and PVC manufacturer and Australian owned Global Renewables, an engineering and development company.

Ineos Chlor has teamed up with Shanks Waste Management to bid for Cheshires £1 billion deal and is through to the last four, like NMC. It is also involved in facilities for the Greater Manchester Waste Disposal Authority PFI contract. While Global Renewables won the £2billion 25-year Lancashire County Council PFI waste contract in 2007.

So what initially attracted these companies?

NMC strategy and business development director Stuart Campbell explains: We had identified waste industry as an area that we needed to focus on because the civil engineering side is something we have a lot of experience of, working in the waste water industry.
When we first got involved we were looking for sectors to grow the business. I had looked at our staff skills and experience to see where we could fit that into other markets and we identified the waste industry. From our point of view the industries are very similar, its about working with large concrete structures.

However, skills synergies were not the sole reason for focussing on the industry says Campbell: We were also encouraged by the investment in waste by the Government as well as its forecast that the UK would need 13,000 new facilities by 2014.

To ensure their bids had a good chance Campbell researched the bidding process, he says: We looked at the procurement process to try and understand it because its quite long. It can take between six to nine months from initially seeing an opportunity until we put in a bid.

He says NMC will continue to bid for similar contracts in the future and at the moment he is looking at four other projects. I hope to start the bidding process this year, he adds.
United Utilities (UU) has also shown a strong interest in the waste sector. Its core business is management and operation of electricity distribution, clean water and waste water networks in north west England. As well as bidding for the Cheshire PFI contract a UU spokeswoman says: The company is examining other opportunities in the sector and will continue to do so in the future.

She explains why the company is in a position to take advantage of opportunities in the waste sector: Over the last 15 to 20 years there has been huge infrastructure investment in water and waste water, which companies like ours have been building. The sort of infrastructure we build runs quite close to that required for waste, so its not wholly alien to us.

She also explains that company investments in the last decade put them in a strong position to enter new markets.

Both UU and NMC have synergies with the waste infrastructure sector which has been, in part, a driver for their entry into the market. However, the longer term security of the industrys growth is another factor that will draw others to the sector.

Utility companies are also aware of opportunities because they will have observed investors interest shift towards waste infrastructure (March 20 2008,mrw.co.uk). A further draw lies in research findings that the industry is awash with cash and that large profits are there to be made (March 27 2008, mrwc.co.uk).

But should companies already in the industry been concerned about this new wave of interest? WRG spokesman Mike Snell thinks not. He says: The advantage of waste management, which is driven by Government and EU legislative demands, is the urgent development programme. More than £10 billion will have to be spent over the next 10 years to provide the infrastructure necessary to meet EU targets. This is why companies which are not traditionally involved with the industry will be interested. This situation is good for the larger players in the sector, like WRG, because it widens the playing field for contractors. It provides more options for us to choose from and increases competitiveness for tenders.

So, as the sector continues to grow, expect to see more companies enter into the bidding arena.

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