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INSIGHT: Industry in two minds about future of packaging recovery notes

Packaging compliance scheme Valpak announced last week that the proposed management buy-out of the company had been postponed, following expressions of third-party interest in the business.

In the letter to members notifying them of the proposed buy-out, Valpak chairman Lord Deben expressed concern at the effect of the Government’s review of waste policy on the business.

He said: “We are now faced with the challenge of the coalition Government’s recently released review of waste policies. This sets out a strategy where the emphasis is placed on ‘voluntary agreements’ and ‘responsibility deals’ as opposed to further regulatory legislation.

“This will mean that Valpak, as a business, cannot continue to rely on legislated producer responsibility regimes alone.”

Despite Valpak’s concerns, other packaging compliance schemes remain more upbeat about the future of the packaging recovery note (PRN) system.

Complypak managing director Andrew Francis said: “The flat targets have not impacted upon Complypak’s business, but they have caused the PRN market to stagnate which has been detrimental to the system as a whole. We very much support the PRN system, which has delivered low cost compliance with the regulations for 13 years. Defra have been reported as saying that they have no plans to abolish the PRN system, so we hope that it is here to stay.”

Wastepack marketing director Paul Van Danzig believes that despite the concerns of other compliance scheme members, the PRN system is unlikely to undergo any significant change.

He said: “Defra has made a statement saying they’ve got no plans to change the PRN system. What Defra did say, is that they’re going to review a number of policies, including the PRN system, as part of the review. It might be that it’s likely that any review would conclude that the PRN system is the cheapest way of discharging obligations in Europe. Therefore, given the current economic climate, are you going to change a system that’s delivering low cost to obligated producers in the UK? I think that it’s highly unlikely that any review would recommend anything other than to leave the PRN system as it is.”

However, waste electrical and electronic equipment compliance scheme B2B Compliance project director David Burton believes that the PRN system is ‘fundamentally flawed’. He said: “To invest in recycling with PRN revenues creates more end product. It creates an oversupply situation of end-product packaging so prices will fall. Investment in recycling with PRN money also creates more PRNs which floods the market and PRN revenue prices will fall.”

Other sources in the PRN market have told MRW that there are multiple bidders for Valpak and queried the “relatively low valuation” of the company in the documents, which proposed a net assets position of £697,000.

One reason for that could be concern about the PRN system.

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