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Councils borrowed £500m to end Manchester waste PFI deal

new viridor logo 2016

Greater Manchester Combined Authority (GMCA) borrowed £500m to pay its way out of its doomed PFI contract with Viridor Laing, it has emerged.

The authority revealed the figure as it published its statement of accounts for 2017/18.

Greater Manchester Waste Disposal Authority (GMWDA) – which this spring transferred all its duties and powers to the combined authority – said last summer that it was ending the £3.8bn PFI deal by acquiring Viridor Laing for £1.

But a report in the Manchester Evening News this month said the GMCA spent £500m buying out the deal. A spokeswoman for the authority told MRW: “The figure of £500m is correct, that’s how much was borrowed.”

When the termination announcement was made in August last year, the GMWDA said it would be paying back outstanding bank loans at full value as part of the agreement.

The PFI contract – covering waste collection, treatment and disposal along with construction of various related facilities – was signed in 2009. Landfill diversion increased from 20% to 89% during the following eight years.

But austerity era cuts to council budgets and problems encountered with the deal to design, construct and commission 46 waste facilities across Greater Manchester piled pressure on the combined authority.

The GMCA’s statement of accounts revealed that the mechanical biological treatment process was ”capturing significantly less organic material than originally envisaged” during in 2017/18, while there had been “unexpected corrosion in the anaerobic digestion facilities resulting in the reduced generation of green energy”.

It added in a statement: “On 29 September 2017, the recycling and waste management PFI contract with Viridor-Laing (Greater Manchester) (VLGM) ended. The GMWDA was exploring a range of efficiency savings options in partnership with VLGM and their sub-contractor Viridor. But constraints within the new EU Procurement Regulations 2014 meant that the savings identified could not be taken forward through the existing contractual arrangements.

“Coupled with some technical and operational challenges, the GMWDA and VLGM mutually agreed to terminate the contract.”

Viridor’s parent company Pennon said: “Viridor and Greater Manchester agreed to end the PFI contract last year and, by working with all partners, this has now been successfully reset.

“Viridor will continue to operate the recycling and reprocessing assets, constructed by Viridor Laing, until at least 31 March 2019. These activities are subject to a reprocurement process which commenced in late 2017, in which Viridor is participating.

“Residual waste will continue to be treated at the Runcorn Energy Recovery Facility, which Viridor will continue to operate for the remainder of the original 25-year contract with no significant operational changes.”

In February the GMWDA said that six companies had progressed to the next stage of procurement to provide waste and resource management services in the area. These were Suez, Veolia, Viridor, FCC Environment, Biffa and Biowise.

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