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Manchester pulls the plug on PFI waste deal

manchester deal

Greater Manchester Waste Disposal Authority (GMWDA) has told Viridor and its joint venture partner John Laing that it is terminating the region’s long-term waste contract.

An announcement on the website of Viridor’s parent group Pennon said the decision to scrap the £3.8bn deal followed “financial challenges due to prolonged austerity”. In February, a Pennon trading update had said it was working with partners to tackle the issues. 

A spokeswoman for England’s largest waste authority said: “The GMWDA can confirm that, at a meeting held on Wednesday 26 April 2017, it agreed to terminate its waste and recycling contract with Viridor Laing.”

Pennon said: “Discussions and negotiations are now expected to progress over the coming weeks as we work with the GMWDA to ascertain the implications. There are provisions in the contract for compensation to be paid to Viridor and John Laing on termination.”

The company said the book value of Viridor’s investment in the Greater Manchester project at 31 March 2016 was £72.3m, with Viridor Laing’s share at £36.8m and Ineos Runcorn with £35.5m.

The statement added: “Diversion of waste from landfill remains ahead of contractual commitments, and Viridor and its partners are keen to ensure this progress is able to continue.

“Viridor and its joint venture partner John Laing have been actively engaging with the GMWDA as they have worked to consider their options.”

Viridor’s commercial director Paul Ringham said: “We are obviously disappointed by the decision by the GMWDA. We’ve been working with the authority since 2009, helping to transform waste across the north-west of England, which has included investing £631m in the region.

“Despite the success of the model and the substantial progress we’ve made together, we recognise the significant impact of enhanced and prolonged austerity on this particularly ambitious and complex contract, and the financial challenges faced by the nine partner councils.

“The timing and nature of a termination has yet to be defined. This is a complex process and, to clarify, everyone involved continues to work together towards getting the best possible outcome for all parties including and, most importantly, our people and the communities they serve.

“Essential public waste and recycling services remain unaffected. Our employees and union partners have been fully briefed and we remain committed to keeping them informed of developments as the situation clarifies.”

After a series of private sessions of the GMWDA, the decison had been expected but it had been thought it might be held up by the election of a metro mayor for Manchester this week and the integration of the waste authority into that body in 2018.

As well as the austerity budgets hitting local authorities, problems arose with builder Costain’s £397m contract to design, construct and commission 46 waste facilities across Greater Manchester. The contract was won in 2007.

Rectification work has been carried out on a number of facilities across the contract. Discussions are taking place between Costain and Viridor Laing in relation to Costain’s future work. 

A Costain trading update stated: “Costain has not been party to any discussions between the authority and Viridor Laing, but can confirm that discussions are taking place with Viridor Laing to consider the options in relation to Costain’s subcontract. A further announcement will be made when appropriate.”

 

 

 

Readers' comments (2)

  • This looks like the beginning of the end for long term all encompassing local authority contracts that presumably lack flexibility to cope with the world as it changes fast. VL has taken on financial "swaps" that currently appear to have a negative value of £43m. If everything stopped tomorrow this would still have to be paid by the JV partners. Will this be covered by GMWDA? IMHO "Swaps" have become a dangerous gamble that too many accountants have taken on. Swaps have sent many firms bust and more will follow. The Government, the Treasury and the FCA all appear to be complicit in allowing this to happen.

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  • The comments are interesting. We all knew that the saga of the GMWDA proposition when it was first advertised as a potential project and various companies were invited to get vetted by the company (GMWDA) that the project matrix using incineration was far too expensive and unwieldy. The consultants and their paymasters were vehemently for a proposition that was already priced too high, and from all accounts when they were confronted with the ideas that there were less expensive options they frowned and said "new technology does not work!"

    However listening to some of the companies that attended these preliminary interviews the discussions were not about new technology at all and were all about the status quo of using existing (some say "dated" and "out-of-date") technologies the so-called ATT (Advanced Thermal Treatment) systems. So when the possibility of using newer technologies, such as waste to biofuels and waste to bio-methane, for which the treatment costs were shown to be barely a third of that for the ATTs proposed and these produced a profit which paid for the treatment plant within 5 years this was discounted as being pie-in-the-sky ideas. Not so now then? Such plants have already been approved and built and are operating and show that this is valid.

    Now after over a decade of wasting time the industry - the Waste Authorities - have found out that the truth was already out there and its knowledge was already in the hands of the Waste Authorities but held in abeyance by the Advisors and Consulting Engineers. Why has this happened?

    After the debacle in Kings Lynn is it any surprise that real questions are still being asked?

    When will the remaining Waste Authorities - some of whom have already sought preliminary advices on treatment systems recently - take heed and go forward for more modern treatment systems that do not waste money by being a service and move forward with the 21st century's needs for real money-generating treatment systems that solve waste treatment issues as well. Is there any reason why we should be surprised that overseas they are reviewing the issues and going for such processes.

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