Norfolk County Council must find millions of pounds within three days to compensate a contractor for its currency hedging.
The council last month ended its contract with Cory Wheelabrator to build a controversial waste incinerator near Kings Lynn. The termination of the contract landed the council with a £30m compensation bill to the firm.
Norfolk must now find an extra £3.5m due to Cory Wheelabrator’s hedging cost for equipment that would have been bought in foreign currencies.
The strengthening pound and reduced long-term interest rates since the contract was ended have resulted in a bill of £11.86m rather than the £8.36m expected. Under the contract, this must be paid within three working days.
Norfolk said it would “now begin to scrutinise Cory Wheelabrator’s claimed costs”.
Leader George Nobbs (Lab) said: “This final figure for the ‘hedging’ element of the contract is more than we would have hoped it would be, but it has to be found, and will be found.
“None of this has been easy but the county council will cope and come through this.”
The incinerator project stalled because communities secretary Eric Pickles had by April still failed to decide on planning permission, despite having promised a decision by mid-January.
The delay, costing £140,000 a day, threatened to wipe out projected savings.
Norfolk has lobbied prime minister David Cameron for help with the compensation bill, arguing that it arose because of Pickles’ indecisiveness.
A former Liberal Democrat councillor is leading an inquiry for the council into how the contract arose.
This article first appeared on MRW’s sister title Local Government Chronicle on 19 May