Veolia has said it is looking to compromise with Sheffield City Council over the threat to terminate its contract and re-procure the city’s waste management arrangements.
The council cabinet had agreed in January to ditch the 35-year contract as it approached the midpoint because it was concerned at the cost.
Bryan Lodge, cabinet member for the environment, said at the time: “It is no secret that we are operating in very tough financial times and we have to do things differently. Our contract with Veolia, which was signed 16 years ago, is no longer meeting our needs and is no longer compatible with the tough financial landscape in which the Government is forcing us to operate.”
Now optimistic comments from Veolia’s chief executive Antoine Frerot have been reported by Reuters: “Negotiations are continuing with Sheffield. I am rather confident we can find an agreement in the next months.”
Frerot was quoted as saying that a compromise could take the form of a lower price, possibly by extending the contract duration so that investments depreciated over a longer period. Treatment of waste from other areas in the Sheffield facilities could also reduce costs, he added.
Council reports in January indicated that an option to put out to tender another fully integrated contract had been discarded because it was less flexible and likely to attract less market interest.
“The preferred option is to make separate arrangements for each service, reflecting their specific nature, the council’s requirements for each service and enabling it to deliver a lower-cost, more flexible service overall,” officers said.
They recommended separately tendering for:
- a seven-year collection contract, to reflect the life-cycle of the vehicles used
- a five-year energy-from-waste plant operation contract, including the sale of electricity and supply of heat to the district energy network
- a two-year district energy network contract, which the council plans to develop
Frerot also told Reuters that waste handling costs in Sheffield were among the lowest in Britain. He said Veolia had told the city that cancelling the contract would lead to a claim for compensation for the depreciation costs of the investment as well as for earnings on which it missed out.
Sector sources have indicated to MRW that costs incurred by councils in penalties for breaking long-term contracts could be offset by savings through cheaper borrowing on local authority markets.
Veolia and Sheffield City Council issued a joint statement: ”Veolia and Sheffield City Council remain committed to continuing to provide waste services in the city.
”At present no decision has been taken to end the contract. We are in discussions about the long-term future of our partnership. To date nothing has been finalised and a further update will be provided in due course.”