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Local authorities may have to reassess waste infrastructure solutions, according to industry figures

Local authorities may have to assess how waste infrastructure can be developed, according to industry figures, after the Department for Environment, Food and Rural Affairs confirmed only one major waste PFI project reached financial close in 2009.

While another PFI project and two PPP projects were scheduled to close last year, the Greater Manchester Waste PFI was the only major waste project signed off in 2009.

Defra told MRW that the Wakefield waste PFI was scheduled to be signed in 2009 but will now happen in 2010. Derbyshire waste PPP and West Sussex waste PPP were both meant to close in 2009 too. However, a lot more projects are expected to close in 2010.

Waste consultancy AEA practice knowledge leader for waste management and resource efficiency Dr Adam Read said: Im not surprised only one project was signed off last year because these deals do take a lot of due diligence. There are another four projects currently drawing to a close and it doesnt surprise me that some are running behind schedule because local authorities are taking longer to make decisions and banks are being more prudent.

According to Catalyst Corporate Finance research director Mark Wilson it is the difficult nature of PFIs that has led more councils to look at alternative ways to build their much-needed facilities. He said: The reality is that PFI projects have proven to be extremely complex and reaching financial close within sensible timeframes has been difficult.

There are a growing number of privately funded waste infrastructure projects  - especially energy from waste - in the pipeline, which have been able to secure waste streams, electricity off-take agreements and funding which dont rely on the 25-year contracts, typically associated with PFI.
At the moment many of these projects are currently dealing with commercial waste rather than municipal, Wilson believes this will eventually reach local authorities as a solution.

With the financial situation England has been faced with, PFI projects have struggled to get off the ground with banks unwilling to underwrite the whole debt, which has led to a rise in club structures to spread the risk but increasing the complexity of the deals.

Furthermore, because PFI deals are designed as a solution for large infrastructure projects, the Government has used the system to encourage groups of local authorities to work together, in order to find a solution for them all in one go.

However, Read added: Some local authority partnerships which were encouraged by Defra under their joint working initiative looked good but we are now starting to see some cracks. This is in part a reflection of the complexity of the contracts involved and the need for joint working, joint contracts, joint risk management etc. and because the PFI deals are taking longer to sign off than expected created local political concerns about budgets and decision-making.

In some cases the PFI joint working approach has proved too expensive and they are now questioning whether they should be spending this amount of money.


 

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