The following blog provides commentary on some of the failures and successes of active municipal waste Private Finance Initiative (PFI) projects, and a summary of their current status. The Government funded municipal waste PFI regime from 1997 to 2018 and was intended to support local authorities in funding waste infrastructure and services, and develop the market for this. The Chancellor Philip Hammond announced in October 2018 that PFI projects had run their course and would no longer be used.
There have been 28 municipal waste PFI contracts, 24 of which are on-going, as set out in a Summary table. As these were typically around 25 years in duration, one has already expired and several others are due to end over the next few years. Around 50% of the waste PFI projects have included conventional Energy from Waste (EfW) as a key element, and these have been largely successful with the exception of those which failed to gain planning permission.
The Hereford & Worcester contractor tried but failed to gain planning permission for an EfW facility for many years. The FCC HZI Hartlebury EfW facility developed to service these Councils was ultimately was a non-PFI funded solution. The Surrey PFI contract was initially for two EfW facilities but these failed to get planning permission and the authority then had a lengthy legal dispute culminating with arbitration in 2021 with the contractor SUEZ regarding fluidised bed gasification Eco park performance. The judge found in favour of SUEZ. Surrey County Council have learned from this experience and are currently proposing to “disaggregate” their waste services from 2024 into a number of contract lots i.e. kerbside dry recycling, food waste, garden waste, residual waste, waste transfer, HWRCs, bulky waste, fly-tipped, and hazardous waste. Likewise, the Hertfordshire waste PFI contract was terminated as planning permission for the proposed EfW facility was not gained.
Some 25% of the waste PFI contracts focused on Materials Recycling Facilities (MRF) with other services attached, and the MRF infrastructure elements have been largely satisfactory. However, there have been issues with many of the remaining c.25% of waste PFI contracts which are mainly based upon Mechanical Biological Treatment (MBT) with a small proportion based on gasification. Many of the PFI contracts which have included larger elements of MBT have been distressed and those which have included gasification have also had difficulties.
The first waste management PFI contract was signed in 1997 between the Isle of Wight Council and Biffa for 18 years and the integrated waste services included for the provision of gasification. The gasification facility had challenges and did not perform well. Lancashire and Blackpool Councils terminated the (2007) 25 year MBT led PFI contract with Global Renewables in 2014.
The 2012 Essex waste PFI contract failed in 2020 when the Urbaser/Balfour Beatty based Tovi Eco Park MBT facility in Basildon went into receivership having failed to meet performance and acceptance tests. There have been failures of waste PFI contracts due to other reasons. The high profile Greater Manchester 5 MBT and EfW contract which was signed with Viridor Laing in 2009 was terminated through mutual agreement in 2017 due to “financial challenges due to prolonged austerity”. This was the largest and most costly waste PFI contract and it was terminated as it was too expensive to deliver.
The current issue for Authorities with waste PFI contracts are how to accommodate contractual variations due to EPR, Consistent Collections and DRS i.e. change in dry recyclable waste at MRFs and also organics at MBTs. The additional need for food waste anaerobic digestion (approximately 50% of the English WDA and Unitary Authorities), and deliver base load tonnage (and calorific value) of residual waste for EfW are also considerations in the impending policy landscape. The PFI Authorities as listed in the summary table will also need to decide how to provide waste services from contract expiry i.e. whether and how to utilise their existing infrastructure for which the Authority take ownership; whether services can be provided through in - house arrangements; or whether the aggregation of new contracts for outsourced works and services is needed. A later blog will address these issues.
Frith Resource Management provides procurement support and project planning for Councils seeking to consider future options and actions around service and infrastructure procurement. See www.frithrm.com for more details, call 01746 552423 or email email@example.com