With £529.5m of funding eventually coming from public sources in the form of either direct finance or loans, the Greater Manchester Waste Disposal Authority PFI deal has proven extremely difficult to finance from commercial lenders.
The source said: The whole concept of how to fund these waste PFIs has been questioned now. You have to wonder whether the likes of Merseyside, North London, Cheshire and the rest will go through.
Greater Manchester was a very complex structure with two tiers, one of which was the Ineos Chlor combined heat and power plant and the other being the rest of the facilities for Greater Manchester and that made it more difficult to finance than others. But in the end, it was very difficult to get the financial close on this and local authorities are going to find it very tricky and expensive to get these deals through in the current climate.
The source commented does this mean the P in PFI now stands for public rather than private?.
Greater Manchester has revealed that £640 million will be used for capital expenditure, but the actual deal costs will be much higher.
However, MRW can exclusively reveal that GMWDA received £124.5m in PFI credits from the Department for Environment, Food and Rural Affairs and £120m from the HM Treasury Infrastructure Finance Unit the first PFI deal to receive loans from this newly created body. These loans work in a similar fashion to commercial loans.
GMWDA is itself putting in a capital contribution of £68m as well as an additional loan amount of £35m.
The European Investment Bank has also revealed that it lent £182m to the deal with Viridor Laing receiving £100m to treat Manchesters waste and Ineos Runcorn TPS getting a loan of £82m to incinerate solid municipal waste from Greater Manchester for combined heat and power.
Commercial lending from the banks was £245m with Bank of Ireland providing £95m, BBVA £55m, Lloyds Banking Group £55m and SMBC £40m.
MRW also understands that Pennon Group made an equity contribution to the total project fund. Pennon Group is the owner of Viridor Waste Management which joined with John Laing to form the Viridor Laing (Greater Manchester) consortium which won the contract from GMWDA.
GMWDA has revealed that the 25-year life of the PFI deal will be worth £3.8bn to Viridor Laing which makes it Europes largest waste PFI contract.