The troubled Avonmouth energy recovery facility (ERF) was sold to financial institutions for a nominal sum, with the previous owner citing “aggressive” Government policy as a contributing factor to its problems.
New Earth Recycling & Renewables’ backer Premier Fund said in a letter to shareholders this month that it sold the ERF in late July for “a nominal sum” to Macquarie Bank and an unnamed institutional investor, which were willing to refinance it.
The deal allowed New Earth to offload the £60m project and clear its debts to the bank.
In the letter, director Michael Richardson said New Earth’s waste business would continue after selling the energy arm.
He explained: “In addition to the documented poor technical and financial performance of Avonmouth Energy Recovery Facility, one of the key factors in the directors’ decision to pursue a waste-only business was the steady erosion of the renewable energy subsidy support in the UK.”
Since coming to power in May, the Conservative Government had “been aggressive in halting subsidies and ending support for environmental projects of all kinds”, the company said, as a result of which, “it was becoming obvious to the board that the risks of continuing to pursue the vertical integration policy of adding more ERF plants alongside existing New Earth waste plants were substantially increasing”.
Capital was harder to attract because of doubts about the Government’s attitude, “even if the technical and financial performance issues at the Avonmouth ERF could be overcome”, Richardson wrote.
The sale to the bank took place after no buyer could be found, and some 70 staff have transferred with the plant.
“Ultimately, the development of the energy business at a cost of nearly £60m, with its ambition to provide an integrated waste and energy to solution for the UK market, has not worked and has been a very costly and disappointing exercise for the fund, its shareholders and New Earth,” Richardson said.
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.