Greater Manchester s World-Class Recycling and Waste PFI Contract

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1 Greater Manchester s World-Class Recycling and Waste PFI Contract Paul Dunn, Executive Director Greater Manchester Waste Disposal Authority Stephen Jenkinson, CEO Viridor Laing (Greater Manchester) Ltd CONTACT Paul Dunn, Stephen Jenkinson Greater Manchester Waste Disposal Authority, Viridor Laing (Greater Manchester) Ltd Medtia Chambers, P O Box 217, 5 Barn Street, Higher Swan Lane, Oldham, Bolton, Lancashire, Lancashire, OL1 1LP, BL3 3BF, UK. UK. Tel: Tel: Fax: Fax: paul.dunn@gmwda.gov.uk stephen.jenkinson@viridor-laing.co.uk EXECUTIVE SUMMARY Greater Manchester Waste Disposal Authority (GMWDA) has signed a 25 year PFI Contract with Viridor Laing (Greater Manchester) Limited (VLGM), triggering a 631 million construction programme, creating a network of state-of-the-art recycling and waste management facilities across Greater Manchester. This initiative is the first of its kind in the UK on this scale; whilst the technologies have been proven in Europe they have not been integrated on a sub-regional scale before. The Contract was signed in April 2009 with financial close achieved during a period of unprecedented financial turbulence, involving more than two years of intensive working between GMWDA, VLGM, the funders and other parties. Through this solution Greater Manchester will be able to recycle and compost at least 50% of all waste by 2015, and divert more than 75% of its waste from landfill; a powerful contributor to complying with the European Union Landfill Directive. GMWDA continues to meet Landfill Allowance Trading Scheme (LATS) targets as well as exceed its obligations. A commitment to environmental improvement is at the heart of the Contract through the minimisation and diversion of waste and the generation of green energy. The Contract also delivers socio-economic benefits, through the creation and safeguarding of approximately 5,000 jobs. Customer feedback has revealed an overwhelming positive feedback from the residents of Greater Manchester. The Contract marks the beginning of an important chapter in the way Greater Manchester deals with its resources and waste. Moving forward the solution will help meet the targets of Greater Manchester s Municipal Waste Management Strategy (MWMS).

2 GMWDA and the Contract partners are developing environmentally world class infrastructure with unprecedented public and planning support. Leading the development of such initiatives in the UK GMWDA has assisted 15 other waste disposal organisations and received consistent feedback of hoping to emulate GMWDA s success. INTRODUCTION The Greater Manchester Waste Disposal Authority (GMWDA) is the largest of the six statutory waste disposal authorities created under the Local Government Act (1985). GMWDA deals with the equivalent of 5% of the UK s waste, covering the nine Greater Manchester Waste Collection Authorities (WCAs), serving 973,000 households and a population of over 2.27 million. The nine WCAs served are Bolton Council; Bury Council; Manchester City Council; Oldham Council; Rochdale Council; Salford City Council; Stockport Council; Tameside Council; and Trafford Council. GMWDA s vision is: to provide a world-class solution for the sub-region s municipal waste. To this end GMWDA is developing a revolutionary integrated recycling and waste management solution across Greater Manchester. GMWDA has signed a 25 year PFI Contract with Viridor Laing (Greater Manchester) Limited (VLGM), triggering a 631 million construction programme, creating a network of state-of-the-art recycling and waste management facilities, providing a long-term solution to Greater Manchester s waste. The facilities provide the most cost effective integrated cradle-to-grave collection and disposal solution. VLGM is a joint venture company owned by Viridor, a subsidiary of Pennon Group PLC, and John Laing PLC, combining waste management service delivery with experience of delivering major capital infrastructure. The technologies being developed provide an innovative solution, capable of handling 1.35 million tonnes of municipal waste, and is the first of its kind in the UK on this scale. The introduction of waste technologies to treat the whole of the sub-regions municipal waste (which is greater than the quantity of municipal waste produced in the whole of Northern Ireland) is a significant accomplishment. Whilst these technologies have been proven in Europe they have not before been integrated to provide a total municipal waste management solution on a sub-regional scale. GMWDA and the nine WCAs are set to build on their recycling success (from 7% of Greater Manchester s municipal waste being recycled in 2002/03 to over 30% today). Within the Contract Greater Manchester will be able to recycle and compost an impressive amount; at least 50% of all waste by GMWDA will divert more than 75% of Greater Manchester s waste away from landfill. Being responsible for 5% of the UK s municipal waste, GMWDA will be making a powerful contribution to ensuring that the UK complies with its requirements under the European Union Landfill Directive, in turn producing important carbon benefits. Throughout the development of the recycling and waste management solution, GMWDA engaged with the community to discover their expectations for recycling and waste management in Greater Manchester. All 973,000 households within the reach of GMWDA were canvassed to ensure that the public s views are appropriately reflected. Through

3 ongoing engagement campaigns the public fully support GMWDA s approach of maximising recycling and composting and materials to be sent for energy recovery. GMWDA has succeeded in achieving full public support, unprecedented for these often contentious technologies, particularly on this scale. THE MUNICIPAL WASTE MANAGEMENT STRATEGY (MWMS) The Greater Manchester MWMS was developed with intensive stakeholder engagement flexibility was the key to its development as one size does not fit all. Start with the end in mind which is Maximising recycling and composting. The MWMS has been agreed by GMWDA and all nine WCAs and is the output specification for the Private Finance Initiative (PFI). The recycling and waste management solutions being delivered through the Contract will allow the objectives and targets of the MWMS to be met: to arrest the increase in municipal waste arisings to: - no more than 1% per annum by 2010; - zero by 2020; and - no growth through to to achieve levels of recycling and composting of household waste of: - 33% by 2010; and - a minimum of 50% by 2020 and through to 2030 (the Contract should however achieve this five years early by 2015). To reduce household waste by 50% in proportion to current municipal waste arisings, which will reduce total tonnage by 10%. to accord the highest priority to: - waste reduction and minimisation; and - recycling and composting to meet Landfill Allowance Trading Scheme (LATS) allowances for Biodegradable Municipal Waste (BMW); and to continue to develop partnership working between GMWDA and the WCAs. PARTNERSHIP The Recycling and Waste Management Contract is a working partnership between the following organisations.

4 In order to facilitate partnership working and ensure the success of the Contract, GMWDA initiated the signing of the Inter Authority Agreement (IAA). The IAA is an agreement between GMWDA and the nine WCAs whereby the WCAs have committed their waste to the new technologies and collection systems. The IAA has been signed by all nine WCAs and provides long-term stability, future-proofing the success of the project. PREPARING FOR THE RECYCLING AND WASTE MANAGEMENT CONTRACT In order to attract major players from the waste industry GMWDA carried out market stimulation activity in the waste and energy industries to develop and expand markets for new technologies and for Solid Recovered Fuel (SRF) users. In October 2004 the Outline Business Case (OBC) submission took place, taking into account: Increasing environmental awareness; Over reliance on landfill; Changing legislation; LATS; Ageing facilities cannot deliver high recycling and composting rates; and No facilities in Greater Manchester for food waste treatment. In January 2005 the UK Government approved the PFI credits. In October 2005 Invitation to Tender took place. GMWDA formally invited four bidders to submit tenders for return: Shanks/Babcock and Brown; Sita/Royal Bank of Scotland/Peel Holdings; Viridor/Laing; and Waste Recycling Group. In January 2006 GMWDA received proposals from all four bidders and evaluated these tenders for the major project. PREFERRED BIDDER ANNOUNCEMENT In January 2007 GMWDA agreed to the appointment of VLGM, made up of Viridor Waste Management Limited and John Laing PLC, as the Preferred Bidder for GMWDA s waste services Contract. VLGM combines waste management service delivery with experience of delivering major capital infrastructure.

5 KEY ADVISORS GMWDA employed key professional advisors in the essential areas of finance, legal, technical and planning, as well as reputational management. The key advisors GMWDA employed are: Ernst and Young LLP, Financial Advisors Rob Winchester, Partner. Eversheds LLP, Legal Advisors Mike Mousdale, Partner. Willis Limited, Insurance Advisors Chris Lloyd, Executive Director. Entec UK Ltd, Technical Advisors Ken Rigby, Technical Director. ALIGNING THE COLLECTION SYSTEM Prior to the development of the recycling and waste solution the nine WCAs devised and implemented their own recycling and waste strategies; these were disjointed, not aligned to a joint approach for the collection and disposal of recyclate. The collection of waste in Greater Manchester has therefore been standardised through partnership working and developed into a four waste streams system, with the intention of delivering long-term financial environmental benefits in Greater Manchester. The technical solution is integrated across all nine WCAs, with a focus on using technology to sort waste, rather than manual sorting. Through the development of the solution GMWDA investigated technologies in Europe, whilst wishing to minimise/eliminate manual sorting and the inherent poor working conditions, and promote mechanical sorting. The four waste categories are: Green waste (garden and food waste), which goes into the In-Vessel Composting (IVC) facilities and is turned into compost; Paper, cardboard and Tetra Pak, which is bulked and sent for processing; Co-mingled dry recyclables (glass containers, plastic bottles and cans), which go through the Materials Recovery Facility (MRF) to be separated, the materials are then sent for recycling into new products; and Mixed residual waste, which is processed in Mechanical Biological Treatment (MBT) facilities. The Solid Recovered Fuel (SRF) and biodegradable material is separated. The biodegradable material is used in Anaerobic Digestion (AD) facilities to produce methane which provides a source of power for the whole of the facility and excess power which is placed into the grid. The residue from the AD process is used either as low grade SRF or as landfill aftercare, as a top dressing. PLANNING PERMISSION AND SITE ACQUISITION From July 2007 GMWDA had to ensure that the sites required were available prior to Contract signing; this involved buying additional land and three new sites. GMWDA then had to ensure that building and redeveloping the essential infrastructure was possible on all of the sites owned. GMWDA achieved 100% success with securing planning applications for construction and redevelopment of 23 sites for 36 facilities across Greater Manchester.

6 The Chichester Street site in Rochdale was the first major facility that was given planning permission. The site was a closed landfill site owned by GMWDA. The first facilities built were one new Transfer Loading Station (TLS) and one new IVC facility, which processes kitchen and garden waste into compost for use in landscaping, farming and horticulture. This is one of four IVCs within the Contract. In September 2008 the Thermal Power Station (TPS) and Combined Heat and Power (CHP) industrial facility, owned by Ineos Chlor and located at Runcorn, received planning permission. Ineos Chlor entered into a Contract with Viridor and Laing, the joint venture company. DETAILS OF THE TECHNOLOGY AND INFRASTRUCTURE BEING DEVELOPED The Contract utilises a range of new proven technologies not previously seen in the UK on this scale before. A new clean MRF, with a capacity of 90,000 tpa, sorts kerbside collected recyclable materials (cans, glass containers and plastic bottles) and is located in Manchester at Longley Lane. Five new MBT plants (four with AD), with a total capacity of 540,000 tpa, replace existing treatment processes at Longley Lane and Reliance Street in Manchester, Cobden Street in Salford and Bredbury Parkway in Stockport plus an MBT plant at Arkwright Street in Oldham. The waste that is not recycled will be processed into a fuel for use by a North West major chemicals producer, Ineos Chlor, to provide energy for its plant at Runcorn, Cheshire. This SRF (approximately 275,000 tonnes) from the MBT process will be supplied by rail to the site s CHP generation facility. At capacity, it will be converted into approximately 29 MW electrical power and 26 tonnes per hour of steam, to be used within the plant at Runcorn. Four new enclosed IVC facilities, with a total capacity of 170,000 tpa, treat garden and kitchen waste, located at Bredbury Parkway in Stockport, Chichester Street in Rochdale, Salford Road in Bolton and Nash Road in Trafford. The solution includes continued operation of the Bolton Thermal Recovery Facility (TRF) (110,000 tonnes). The solution also includes continued use, with upgrades and improvements, of two Green Waste Shredding (GWS) facilities at Every Street in Bury and Longley Lane in Manchester. Major refurbishment or the creation of new TLSs is taking place at Raikes Lane in Bolton, Every Street in Bury, Arkwright Street in Oldham, Chichester Street in Rochdale, Cobden Street in Salford, Bayley Street in Tameside and Bredbury Parkway in Stockport. A major overhaul of 18 of the current network of Household Waste Recycling Centres (HWRCs) is underway including new sites and modernised facilities, many of which will be split level, and the retention and continued use of the seven other sites. At the time of writing 20 of the total 25 HWRCs have been completed.

7 The solution also includes the provision of four public Education Centres; Raikes Lane in Bolton, Bredbury Parkway in Stockport, Pilsworth in Bury and Longley Lane in Manchester. The network of technologies being developed across Greater Manchester will assist in improving recycling levels and the recovery of household waste to make Greater Manchester a more sustainable environment. In summary the following facilities are being built or redeveloped, as part of the Contract: One MRF; Five MBT plants (four with AD); A CHP plant at Runcorn; Four IVC; Retained use of Bolton TRF; Two GWS facilities; Seven TLS; 25 HWRCs (nine new builds, nine Major Re-developments and seven improvements); and Four public education centres (two new and two improvements). GMWDA is confident it will deliver the Greater Manchester facilities by 2012, commissioned and fully operational. The facility at Ineos Chlor will be built by 2012 and will be handed over in THE DEAL IS SIGNED ON THE 8 TH ARPIL 2009 The Contract was secured during a period of unprecedented financial turbulence. There was more than two years of intensive working between GMWDA, VLGM and the funders to achieve such success. It is to the credit of all the partners involved that the largest municipal waste contract in Western Europe has commenced. The Contract was signed with support from the European Investment Bank (EIB) and the UK Government Treasury Infrastructure Finance Unit (TIFU). The funding for the project comes from a number of sources. It is a government backed PFI Contract and will receive million PFI credits. VLGM, as sponsor, is enabling funding through a number of major financial institutions: the European Investment Bank; Bank of Ireland; Sumitomo Mitsui Banking Corporation; Banco Bilbao Vizcaya Argentaria; and the Lloyds Banking Group. The Pennon Group, Viridor s parent company, is also providing direct investment. GMWDA provides capital contribution of 68 million. Over 25 years the Contract is worth 3.8bn, which is a total of approximately 4.7bn, when landfill and GMWDA s own costs are added. The Contract provides 631m of investment. Funding is from a variety of sources - with 68 million capital contribution from GMWDA. Uniquely, GMWDA is a bank lending to its own scheme. There is approximately 125 million in PFI credits funded by the Government s PFI regime. The table below summarises the funding for the Contract.

8 Source of Funding % Commercial Banks 31 European Investment Bank 23 Equity Investment Sponsors (Viridor Waste Management, John Laing Investments 19 and Ineos Chlor) Treasury Infrastructure Funding Unit 15 Capital Contribution 8 WDA Senior Debt 4 TOTAL 100 BOOST TO LOCAL ECONOMY The Contract secures 620 jobs within the existing workforce (in what was Greater Manchester Waste Limited) and the creation of 100 new workforce jobs. The Contract, plus its associated works, is expected to provide 5,000 jobs during the early years of the construction programme. SUCCESS ON LANDFILL ALLOWANCE TRADING SCHEME (LATS) GMWDA was already meeting the LATS requirement before the Contract was signed. However, post Contract signing, GMWDA continues to meet LATS targets as well as exceed the obligations. Between 2005/06 and 2008/09 there was a surplus of 550,000 tonnes. In the benchmark year of 2009/10 there was a surplus of 85,000 tonnes. In 2012/13 it is anticipated that GMWDA will meet its allowance with a forecast of a further surplus. Once construction has finished, it is anticipated that there will be an annual surplus in excess of 40,000 tonnes, with allowances having reduced from 850,000 tonnes in 2005/06 down to 270,000 tonnes. STRENGTH OF PARTNERSHIP In partnership with the WCAs, GMWDA has achieved: success to date in waste reduction - the partnership has reduced the amount of municipal solid waste by 300,000 tonnes, from 1.4 million tonnes in 2004/05 to 1.1 million tonnes at present; increased recycling and composting from 7% in 2002/03 to 34.3% in 2009/10. On completion of the facilities this will rise to over 50%; and dissemination of best practice through contributing to conferences, visits and other public authority bodies, as well as organisations regionally, nationally and internationally. CLIMATE BENEFITS GMWDA is committed to taking action against climate change and in June 2007 signed up to the Nottingham Declaration on Climate Change. This plan plays an integral part in how GMWDA is reducing its environmental impact as well as exploring how we can adapt to our changing climate. Greater Manchester is already reducing its environmental impact year on year, not just in the important area of recycling, but also in the vital area of waste reduction.

9 The Contract will be beneficial to the Climate Change Action Plan as even more recyclables can be extracted from the waste stream, with alternative uses found for waste rather than it going to landfill. The solution has very high environmental credentials with benefits for Greater Manchester s carbon footprint. A number of the redevelopment sites have rail access, keeping vehicles off our roads. However the environmental benefits are also wider reaching than the local area. The Contract will enable the partnership to increase carbon emissions savings from approximately 92,000 tonnes of CO 2 per annum in 2008/09 to approximately 370,000 tonnes in 2015 and approximately 400,000 tonnes in EDUCATION As part of the Contract, there are waste education officers who facilitate visits at various sites across Greater Manchester and who provide online resources to support waste awareness education. The delivery of education material and facilities for visitors at four locations will showcase the new technologies. GMWDA and VLGM work closely with Key Stage Two pupils up to those involved in university studies, as well as catering for general interest groups to raise awareness of waste prevention by reducing, reusing and recycling in the local community. An interactive education centre is already available at the Bolton based Hurstwood Court facility and a purpose built classroom and welfare facility are available at the Pilsworth based power plant site. Two new education centres are being built as part of the Contract at the Bredbury Parkway site in Stockport and the Longley Lane facility in Manchester. PUBLIC FEEDBACK AND CUSTOMER SUPPORT By canvassing the opinions of the residents of Greater Manchester from the start, the technologies being developed have received unprecedented public support. During September 2009 satisfaction surveys were undertaken across Greater Manchester's HWRC network; 3,468 site users were surveyed across nine sites, assessing satisfaction levels across a number of topics. The results revealed that 99.6% of respondents were either very satisfied or quite satisfied with the site overall, a significant achievement considering the extensive redevelopment programme in place across a number of sites. Surveys will be carried out regularly to ensure GMWDA and VLGM continue to deliver a high quality service that residents want. The partnership has also been capturing users views and opinions on the redeveloped HWRCs. The reaction from HWRC users has been overwhelmingly positive. Here are just two examples of the hundreds of comments received: Jean Clatworthy from Bury was very impressed This is much better. It gives us more choice when recycling and has not taken very long at all. I am very impressed. James Bowden says This is what you want. The site is very well laid out. I used to loathe coming to the tip and now it s safe and tidy and I don t mind at all.

10 CONCLUSION The Greater Manchester Recycling and Waste Management Contract provides a long-term integrated solution to maximising resources from Greater Manchester s municipal waste. The Contract has been exceptionally successful, particularly against the backdrop of the credit crunch, and there is unprecedented public support for these often contentious technologies. The technologies provide a cost-effective solution to Greater Manchester s waste, providing tangible benefits for the environment, the residents of Greater Manchester, and the wider economy, thereby addressing the issue of Greater Manchester s municipal waste for many years to come. ACKNOWLEDGEMENTS Greater Manchester Waste Disposal Authority Viridor Laing (Greater Manchester) Limited Treasury Infrastructure Finance Unit European Investment Bank Bank of Ireland Sumitomo Mitsui Banking Corporation Banco Bilbao Vizcaya Argentaria Lloyds Banking Group The Pennon Group Ernst and Young LLP Eversheds LLP Willis Limited Entec UK Ltd Viridor Limited John Laing PLC Viridor Waste (Greater Manchester) Costain Enpure Haase CPME TEG Ineos Chlor Keppel Seghers Pinsent Masons Regen Fuels Ltd The nine Greater Manchester Waste Collection Authorities: Bolton Council; Bury Council; Manchester City Council; Oldham Council; Rochdale Council; Salford City Council; Stockport Council; Tameside Council; and Trafford Council. REFERENCES Greater Manchester Waste Disposal Authority (2006/07). Greater Manchester Municipal Waste Management Strategy, Review 2006/7. Greater Manchester Waste Disposal Authority. Office of Public Sector Information (1985). Local Government Act From the Office of Public Sector Information: (August )