Government

Lancashire County Council terminates PFI contract

Lancashire County Council and Blackpool Borough Council have taken over ownership of their 25-year private finance initiative (PFI) waste contract with waste management company Global Renewables Lancashire Limited (GRLL) and construction firm Lend Lease.

First signed in 2007, the £2-billion contract – of which £90 million was PFI credits (said to be the UK’s largest PFI contract at that time) – saw Lend Lease/GRLL design, construct, commission and operate two mechanical biological treatment (MBT) plants at Thornton, near Blackpool and Farington, near Preston to process around 600,000 tonnes of the county’s household waste.

Both of the facilities have a dedicated in-vessel composting area for garden waste, designed to process 80,000 tonnes per annum, while Farington also has a 55,000 tonne materials recovery facility (MRF) for source-separated dry recyclables.

Unknown cost of breaking contract

However, in a new move, Lancashire County Council and Blackpool Council have announced that they will take over ownership and responsibility for running the two sites. By taking ownership of the operating company Global Renewables Lancashire Operations Ltd (GRLOL), the staff who operate the facilities will remain working for GRLOL and continue to operate the sites.

The cost of terminating the 25-year contract has not been made public (however, when Norfolk County Council broke its waste contract with Cory Wheelabrator earlier this year, it had to pay out £ £33.7 million in costs), but the council has said that by ‘restructuring’ the financing for the sites, the councils will jointly save more than £12 million pounds per year over what would have been the remaining 22 years of the contract. 

County Councillor David Borrow, Deputy Leader of Lancashire County Council, said: "This agreement means both sites will continue to deliver a hugely important service for people across Lancashire, while the new funding arrangements contribute significantly to the £300 million of savings the county council needs to make by 2017/18. It is a very good deal for the people of Lancashire." 

Councillor Amy Cross, Blackpool Council’s cabinet member for streetscene and the environment, added: “In Blackpool, like in Lancashire, we are a proactive authority when it comes to recycling and disposing of our waste correctly. 

“We’re pleased that this deal will allow us to maintain our current arrangements and continue to work towards improving recycling rates in the town." 

Neither Lend Lease nor GRLL were available for comment when contacted.

PFI contract controversy

PFI contracts were promoted by government as a means of funding large infrastructure projects in a way that transfers risk to the private sector in return for a guaranteed long-term contract.

However, the track record of UK PFIs has been shaky – with central government announcing last year that it was withdrawing £217.1 million of funding for three waste PFI projects, after finding that the 29 projects that already had funding were ‘sufficient’ to meet the EU’s 2020 landfill diversion targets.

The three incinerators affected were:

  • 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.

Find out more about the Lancashire waste PFI contract.