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Recycling firm favours merchant route over PFI

Waste management company Graphite Resources has reached financial closure on its £50 million autoclave plant in Tyne and Wear.

The Derwenthaugh Ecoparc site will be situated south of the River Tyne. The steam autoclave recycling plant will take in municipal waste and have the capacity to process more than 400,000 tonnes per annum.

Unlike many waste firms which have taken the private finance initiative (PFI) route the owners of the site, directors William and Michael Thompson and Richard Mair, have taken no advanced contracts for municipal waste with local authorities.

Local authorities are increasingly entering into PFI projects where long term fixed price contracts are negotiated with waste firms to deliver services to meet specified performance standards before they have built their waste facilities. This is normally the subject of a bidding process. In contrast, a waste company that opts for the merchant alternative will obtain local authority contracts after they have built the facility and avoid the need to bid.

Mair said: We have done this on a merchant basis and havent contracted our tonnage. This is when you build something first and then get customers to sign up afterwards. We havent had to fight with councils to get contracts for PFIs.

He also said that a change is taking place in the industry where waste companies may build merchant plants without relying on a PFI being in place. Mair said that public money should not be used to finance the waste industry but should be used for public institutions, such as schools and hospitals.

Financial backing has been granted by private equity firm Lehman Brothers and two major banks, Allied Irish Bank and Alliance & Leicester Commercial Bank, to raise the £50m needed for the project.

Steam autoclaving uses steam to clean metal, glass and plastics for recycling. All remaining material is converted into a sterilised biomass fibre known as CellMatt which can be used to make biogas for road vehicles.

The whole deal is pretty innovative and we have put it to bed because we have the finance in place and the construction contracts in place. There will be a lot of further developments to maximise the value of recycling streams, added Mair.

The plant is due to open by the end of next year.

Image: Aerial perspecitve of Derwenthaugh Ecoparc

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