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New Earth faces break-up after ERF hits problems

New Earth is likely to be broken up into waste and energy recovery arms after financial problems with its Avonmouth energy recovery facility.

A message to shareholders from Isle of Man fund manager Premier Group said it was in advanced talks with Macquarie Bank about the sale of the ERF (pictured) but “the terms of any sale are unfortunately likely to be unfavourable for shareholders”.

New Earth and Premier own Isle of Man and Channel Islands open-ended investment funds that invest exclusively in New Earth.

The message said the Avonmouth installation’s “performance has consistently fallen well short of targeted levels”, with higher than expected costs and a need for “further essential and significant capital expenditure”, which would “still carry substantial technical risk”.

Problems at the recovery plant had in turn affected the financial performance of New Earth’s adjacent waste facility, which feeds it with refuse-derived fuel (RDF).

The businesses had been intended as an integrated waste and energy operation.

Instead, the recovery plant’s problems coincided both with the waste business winning new contracts and benefiting from changes in the RDF export business as plants in northern Europe import increasing amounts of waste from the UK to maintain their operations.

“It is now cheaper to export RDF than it is to supply RDF to the [Avonmouth] plant,” the message told shareholders.

“In addition, exporting RDF requires less preparation by the waste business and has proved to be a considerably more reliable offtake route than the ERF [recovery] has been.”

The waste half of New Earth had “developed a direct and unique relationship with a major developer of large combined heat and power plants in Europe and is currently at an advanced stage of discussion”.

If successful, this would give the separate New Earth waste business the opportunity to supply this client with “significant volumes of RDF over the medium to long term”.

In February New Earth agreed with Scottish Borders Council not to pursue an intended 24-year contract for an integrated waste management facility near Galashiels.

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