Norfolk and Cory reach termination agreement
Norfolk County Council has agreed a full and final settlement to terminate its incinerator contract with Willows Power and Recycling Limited, owned by Cory Wheelabrator.
On Friday (28 November), the council paid the final payment of £5.9 million to the company, thus finalising the multi-million pound settlement in what the leader of the council termed “a significant act of closure in a sad and sorry saga”.
Contract background
Norfolk County Council’s cabinet unanimously voted to abandon its King’s Lynn incinerator contract in April 2014 following a protracted wait for Secretary of State for Communities and Local Government Eric Pickles to issue a decision on planning permission. Pickles had indicated he would make a ruling by January 2014, but had made no decision by April, and the council estimated that for every day the decision was delayed, it cost the authority £140,000. Consequently, the council decided to break its contract to protect itself from incurring more costs.
It was originally thought that the cost of breaking the contract would come in at around £30 million (£20.3 million of capped compensation to Cory Wheelabrator, as well as public inquiry costs of £1.6 million, and costs relating to the ending of the ‘hedging arrangement’ of £8.36 million). However, when the contract was formally terminated in May, the strength of the pound and reducing long-term interest rates meant the cost of ending the hedging arrangement had gone up to £11.84 million, taking the total costs to around £33.7 million – an increase of £3.4 million on previous projections.
Norfolk County Council is now sending 20 per cent (40,000 tonnes) of its residual household waste sent to SITA UK’s new 269,000 tonne per annum incineration plant in Great Blakenham, as part of an agreement with Suffolk County Council.
The two councils have said that they could save around £1 million each through the deal, with Suffolk County Council benefitting from ‘economies of scale’ – as it will be sending more waste to the Great Blakenham plant, thus reducing the treatment cost per tonne – and Norfolk avoiding hefty landfilling charges.
A spokesperson for the council told Resource that the council is "in the process of establishing policies that relate to waste services that reflect the needs and wishes of the county and residents", which would then be applied to "assessing different approaches in the future".
He added that as well as the Suffolk contract, there is also "the potential for agreements with other authorities and for the procurement of new waste disposal services to help meet our future requirements".
Pickles has yet to reach a decision on the planning application for the Willows Power and Recycling plant.
‘A sad and sorry saga’
A spokesperson for Willows Power and Recycling Limited commented: “As a result of the termination, Willows was contractually entitled to payment by Norfolk of compensation for sums it had incurred in developing the project referred to in the contract as the Force Majeure Termination Sum.
“Norfolk and Willows have been in discussion about the calculation of that compensation and have reached agreement in relation to the calculation and payment of the compensation in accordance with the terms of the contract.”
Speaking on Friday, Tom McCabe, Interim Executive Director of Community and Environmental Services at Norfolk County Council, said: “We built up a reserve in order to pay the substantial costs of terminating the contract and we have now made a final settlement in line with that.
“The costs associated with ending the contract are significant, and we have had to satisfy ourselves that they are justifiable, which is why this process has taken some time.”
George Nobbs, Leader of Norfolk County Council, welcomed the “certainty” that the agreement brings, adding: “This is a significant act of closure in a sad and sorry saga which was not of my administration’s making or choice. I very much welcome the fact that this now finally removes any risk of further costs being incurred in the future. However, it has been a salutary lesson of how not to do things.
“It is a matter of deep regret to me that this matter has caused so much damage to relations within our county and I hope that today we can all turn to a new page.”
Find out more about the Willows Power and Recycling plant, or Norfolk County Council’s new deal with Suffolk County Council.
