Government

Defra withdraws funding for three PFI projects

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The three incinerators that have seen there funding withdrawn are: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of the government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing.”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, Bradford. 

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 project. 

"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." 

Overcapacity 

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’.