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GIB ready to step in on large waste PFI projects

The Green Investment Bank’s (GIB) start-up team is poised to help out a number of waste private finance initiative (PFI) projects as major schemes struggle to secure traditional lending, MRW has learned.

Exclusive MRW strap

Wakefield Metropolitan District Council confirmed to MRW discussions were on-going between the funding club behind its £700m project and the GIB’s precursor organisation, UK Green Investments (UKGI).

Market sources also said the Urbaser Balfour Beatty (UBB) consortium behind the Gloucestershire waste PFI were also holding similar discussions but both UKGI and the consortium refused to comment directly on the matter.

The size and nature of any potential loans remains unclear at present but UKGI head of waste Edward Northam asserted at a conference last week that the bank’s position was that these will not be “soft loans”.

UKGI first revealed it could support struggling PFI/PPP deals in April when a senior bank official admitted it was “disappointing” that the bank would be used in a way which could freeze out smaller, more innovative schemes.

Until now it has been unclear which projects have sought help.

One market source told MRW he thought projects would be in line for “just enough to push the project over the line”.

“There has been a lot of talk about a number of projects, including Gloucestershire and Wakefield,” he added.     

A spokeswoman from the Department for Business Innovation and Skills, which oversees UKGI, told MRW the department would not comment on specifics but confirmed talks were on-going.

She said: “A pipeline of projects – including some local authority PFI/PPPs – is under development.  Further details will be announced in due course.”

Wakefield corporate director for communities Andrew Balchin said: “Wakefield Council are pleased that UKGI have been asked to join the funding club supporting its waste PFI project. 

“The council now look forward to completing the final stages of the project negotiations with the funding club, which also comprise of Barclays and Bayen LB, by the late summer.”

UKGI first revealed it was gearing up to support struggling PFI/PPP deals in April (19 April, But until now it has been unclear which projects had sought help.

Market experts said that with a number of substantial council waste PFIs, including Bradford Metropolitan Borough Council, Merseyside and West London, still to reach financial close, other projects could pursue GIB loans.

While some in the sector have expressed disappointment that the GIB is looking to assist PFIs rather than kick-start more innovative projects, others welcomed the potential market stability on offer.

Nadeem Arshad, a major projects partner with law firm Bevan Brittan, said:“UKGI’s involvement is a welcome addition and should provide more stability and certainty for the market. There are still quite a few deals out there which need to be bought to financial close.”

Speaking at the Waste to Energy City Summit last Thursday, Northam told delegates he saw the bank’s role as “filling the funding gap which currently exists” as financial market go through a transition phase.

He added: “We believe pensions funds and others have the appetite [to fund long term projects] at the moment but are not yet ready to launch into that market. They need a bit more time to get their head around the issues and the challenges.”

He also emphasised the challenge ahead for the GIB, which has earmarked waste as one of five priority sectors.

“We have £3bn to solve a problem that we think is probably more like £200bn - £300bn so we need to be smart with where we put our capital and mobilise additional capital,” he said.

A UBB spokeswoman said: “As the Gloucestershire residual waste procurement project is a ‘live’ procurement we are unable to comment regarding the commercials of this project.”

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