Shanks has disposed of 100% of its subordinated debt in the new Wakefield waste facility and sold nearly 50% of its equity in the PFI contract.
The company says the move will cost it £10m, although £88m of debt will be removed from the group balance sheet.
Assets in the Wakefield financing and infrastructure vehicle (SPV) have been sold to fund manager Equitix, which in November invested in a £107m energy-from-waste plant in Belfast.
Peter Dilnot, Shanks Group chief executive, said sale of the assets was consistent with his company’s strategy.
“The proceeds will be used to reduce borrowings and support our ongoing investment in infrastructure projects. It will also enhance the ability of the group to redeploy capital for accretive acquisitions or investments where accelerated growth and returns can be delivered.
“Shanks remains wholly committed to the success of our flagship Wakefield contract as both an operator and an ongoing investor.”
The Wakefield municipal scheme is a 25-year contract until 2038 and Wakefield Council is expected to give formal approval in March.
A Shanks Group statement said: “The gross assets of the SPV amounted to £113m at 31 December 2015, and profit before tax associated with the assets being disposed of was projected to be £1.5m in the financial year ending March 2017. The transaction will result in a profit on disposal of approximately £11m.
“However, after writing off other associated assets in Shanks Waste Management Ltd on the basis that the group will no longer be fully consolidating the SPV which holds the PFI contract with the local authority, the transaction will result in a loss of approximately £10m as a non-trading item.”
The news came at the same at the latest trading update from Shanks, which indicates that trading in the current year to March will be “slightly below” previous expectations.
It says weaker commodity markets have hit its municipal division, but the long-term model ”remains robust and it is expected to deliver significant profit and cash generation”.