Greater Manchester Waste Disposal Authority (GMWDA) has confirmed that it is ending its £3.8bn PFI contract with the Viridor Laing (VLGM) joint venture on 29 September by acquiring VLGM for £1.
The announcement comes four months after a meeting of England’s largest waste authority decided to terminate the 25-year deal because of “financial challenges due to prolonged austerity”.
Viridor said it was briefing employees and union representatives, and would consider bidding for new contracts under the reprocurement process. Kerbside collections and household waste recycling centre services will continue as normal.
The GMWDA had been under pressure from its constituent local authorities, which were struggling under “austerity budgets” to make larger contributions. The predicted levy rise for 2018-19 was 7.6%, which the nine waste collection authorities said they could not afford. Since 2014, the GMWDA has cushioned the impact by drawing on its cash reserves.
A statement said: ”The GMWDA is exiting the current contractual arrangements by acquiring VLGM via a negotiated settlement for £1. As part of the arrangements, GMWDA will be paying back outstanding bank loans at full value.”
The new financial structure after 29 September has enabled the disposal authority to secure lower borrowing rates, which will save £20m a year.
We understand the authority will commence a reprocurement process for the recycling and reprocessing operations later this year. Viridor will be eligible to bid for the new contract
Viridor’s commercial director Paul Ringham
A GMWDA statement on the termination said savings it had identified were not possible within the existing arrangements, and the authority was taking services in-house temporarily while it looked for new contractors.
“While a range of efficiency savings options have been explored in partnership with VLGM and their sub-contractor Viridor, constraints within the new EU Procurement Regulations (2014) have meant that the savings identified cannot be taken forward through the existing contractual arrangements,” it said.
The end-date of 29 September is conditional on completion of the transfer of Viridor Laing into GMWDA ownership, resolution of outstanding confidential commercial issues and approval by the lenders to the project.
”VLGM will continue to operate but will be renamed on 29 September 2017 and, as such, takes on all responsibilities and subcontracts, and will be owned by the GMWDA from this point. This is an interim position which allows the continuation of service while reprocurement happens. The continued agreement with Viridor Waste (Greater Manchester) Ltd are part of the exit arrangements for an interim period to ensure continuous service.” – GMWDA briefing
The authority’s statement added: “While this decision has not been taken lightly, the GMWDA will work closely with all stakeholders to provide updates as quickly as possible. With the support of Viridor, interim arrangements have been agreed to enable the GMWDA to continue to provide recycling and waste processing and treatment while [it] procures new recycling and waste services.”
Viridor’s commercial director Paul Ringham said: “We are pleased to now be able to provide further certainty for our employees and stakeholders on the outcome of the negotiations.
“We look forward to continuing to work with the authority during the next 18 months to deliver vital public services to Greater Manchester. We understand the authority will commence a reprocurement process for the recycling and reprocessing operations later this year. Viridor will be eligible to bid for the new contract.
“Residual waste will continue to be treated at Runcorn 1 Energy Recovery Facility, which Viridor will continue to operate for the remainder of the original 25-year contract with no significant operational changes.
“Our employees and union partners are being fully briefed, and we remain committed to keeping them informed every step of the way.”
The original contract was signed on 8 April 2009. A briefing document published by the GMWDA to coincide with the announcement reports that landfill diversion since then had increased from 20% to 89%, well ahead of its 2020 target of 75%. There was a 2015-16 target for recycling of 50% with the provisional 2016-2017 figure being only 44%.
- 20 household waste recycling centres – six have been closed in previous contract years
- 5 mechanical biological treatment facilities – four with anaerobic digestion
- 8 transfer loading stations
- 1 thermal recovery facility
- 1 MRF
- 4 in-vessel composting plants
- 2 green waste shredding facilities
- 1 energy recovery facility – refuse-derived fuel generates heat and power at the Runcorn 1 ERF through a joint venture between Viridor, John Laing Infrastructure and Inovyn since 2015