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Defra withdraws funding for three PFI projects | Government withdraws £217.1 million of PFI credits | Resource magazine

Defra withdraws funding for three PFI projects

22 February 2013 by Annie Reece

The Department for Environment, Food and Rural Affairs (Defra)
yesterday (21 February) withdrew £217.1 million of funding for three
waste PFI (private finance initiative) projects, after finding that
the 29 projects that already have funding are ‘sufficient’ to meet the
EU’s 2020 landfill diversion targets.

The three incinerators that have seen their funding withdrawn are:
•Merseyside Waste and Recycling Authority’s Covanta/SITA UK CHP
project (£90 million in PFI credits);
•North Yorkshire County Council and the City of York Council’s
Allerton Waste Recovery Park project (£65 million in PFI credits); and
•Bradford and Calderdale councils’ Bowling Back Lane CHP plant (£62.1
million in PFI credits).

According to Defra, these three projects were the only remaining waste
PFI contracts that had yet to reach financial close and would
reportedly reduce the likelihood of meeting the 2020 diversion targets
by two per cent.

In a statement, Defra said: “We are investing £3.6 billion in 29 waste
infrastructure projects. This will reduce the amount of waste sent to
landfill, promote recycling and stimulate economic growth. We now
expect to have sufficient infrastructure in England to enable the UK
to meet the EU target of reducing waste sent to landfill. Consequently
the decision has been taken not to fund the remaining three projects.”

Defra added that the withdrawal of the funding “does not necessarily
mean the three projects will stop”, and that the local authorities
concerned must now make the decision

“We will continue to provide commercial and technical advice to those
projects that continue with their procurement process.”

Defra has made available its full methodology for choosing these
contracts for withdrawal.

‘Dismay and surprise’

North Yorkshire County Council has reacted with ‘dismay and surprise’
to what it describes as a ‘government U-turn’ over the funding for
Allerton Waste Recovery Park.

Leader of North Yorkshire County Council John Weighell, said: “This
announcement has come as a complete surprise to us. We have been
repeatedly assured throughout the procurement process of Defra’s
commitment to PFI credits. To be informed now, after the granting of
planning consent and the decision of the government not to call in the
planning application for a public inquiry, that the funding commitment
is being withdrawn is frankly baffling and disappointing.”

Adding that the procurement process for Allerton Waste Recovery Park
had been going on for more than five years, Weighell voiced surprise
at the fact that “at no stage in that period…has any issue been raised
by the government”.

“To make this unexpected announcement, without consulting us and
without warning, is extremely disappointing”, he added.

However, the council emphasised that the decision does not
‘necessarily’ signal the end of the scheme and that they will ‘examine
all the options available to [them]’.

Bradford and Calderdale Councils also voiced surprise at the decision,
saying that the withdrawal of the funds will have a ‘big negative
impact’ on the planned waste treatment plant in Bowling Back Lane,

The 193,000 tonne facility was expected to be built by preferred
bidder Pennine Resource Recovery (PRR) in the hopes of delivering ‘at
least 50 per cent recycling by 2020 and divert at least 90 per cent of
our waste away from landfill’.

‘Massive blow’

Bradford Council’s Executive Member for Environment, Sport and
Sustainability, Andrew Thornton, said: “This is a massive blow that
jeopardises the delivery of an important project which would have
resulted in major long-term cost savings for council tax payers in
both local authorities. We are currently assessing the impact of
losing £62.1 million of PFI credits on the affordability of the

“The PFI credit contribution was intrinsic to the scheme and Defra has
been involved every step of the way. The government had not given us
any indication that these PFI credits would not be available and we
are just a few months away from starting construction on site.”

Leader of Calderdale Council, Tim Swift added: “We are shocked to hear
of this decision. It threatens the entire project, and the jobs and
benefits it would bring to the people of Bradford and Calderdale. We
are urgently trying to establish what this means for our local area.”

Members of Merseyside Recycling and Waste Authority have said that
they will meet next week to ‘discuss a way forward to deal with
Merseyside and Halton’s residual waste (waste that cannot be recycled)
while continuing to deliver value for money’ and ‘considering the
implications of this announcement’.

A further announcement from MRWA is expected in ‘due course’. The
councils are now seeking to meet with ministers to “ask them to
explain their position”.

ESA’s Director of Policy, Matthew Farrow, likewise criticised the
decision, saying: “Removing credits at such a late stage in the
procurement process has potentially wasted millions of pounds’ worth
of time and money, both for the local authorities involved, and also
for the bidders participating in complex PFI processes… this
decision will have the knock-on effect of undermining private sector
confidence in public procurements and will raise the political risk
associated with these types of project.”


The news has been welcomed by some sectors of the industry, however,
with former WRAP Director Phillip Ward, telling Resource: “Evidence of
falling waste arisings, rising RDF exports and improved recycling
capacity has been growing for some time. So a reappraisal of the need
for public subsidy for EfW was overdue.

“With a current recycling target of only 50 per cent in England, we
are still planning to burn too much recyclable material.”

Indeed, a 2012 report from waste management consultancy Eunomia, found
that planning consent for incinerators in the UK is being granted
‘faster than applications are being made’, and that without any change
in residual waste quantities, by 2015/16, there would be ‘overcapacity
of 6.9 million tonnes per annum’.

Further to this, GAIA (the Global Alliance for Incinerator
Alternatives), has warned that the EU’s increasing incineration
capacity could damage recycling rates as for incinerators to run
efficiently, waste would soon have to be ‘ sent to incineration,
rather than prevented or recycled’.

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