PFI funding for three energy from waste projects has been withdrawn by Defra following its analysis that it was likely to meet landfill diversion targets.
The Merseyside Recycling and Waste Authority (MRWA), North Yorkshire County Council and City of York Council, and Bradford and Calderdale Council will all have PFI funding withdrawn by Defra.
In its reasons for withdrawing the funding in a report called Forecasting 2020 waste arisings and treatment capacity, Defra used models to predict waste arisings and treatment by 2020.
Defra’s analysis for withdrawing the funding stated that if financial support is given to all of the projects yet to reach financial close, “there is an estimated 95 per cent likelihood of meeting the 2020 diversion target using the ranges of inputs that we believe to be realistic. In this scenario the mean surplus capacity is approximately 2.3 million tonnes”.
But if the financial support for these three projects is withdrawn, the likelihood of meeting the target falls by 2 per cent to 93 per cent and surplus capacity is predicted to be approximately 2.1 million tonnes.
MRWA is expected to go-ahead with its £1 billion project when councillors meet this week despite losing £90 million in PFI credits as it would face likely face legal challenges from potential bidders while still having to find a home for its residual waste.
Covanta and SITA are shortlisted to build and operate facilities for MRWA and it is understood that MRWA was preparing to reveal who was the preferred bidder when Defra withdrew the credits.
Bradford and Calderdale will lose £62.1 million for its plans for a combined heat and power facility with an FCC Environment and Skanska joint venture PRR announced as preferred bidder, while North Yorkshire has lost £65 million towards its 25-year, £1.4 billion contract with Amey Cespa.
North Yorkshire County Council leader 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of the Government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing.
“We have undergone a lengthy procurement process of more than five years, and Defra has been closely involved in that process – even to the extent of providing a permanent liaison officer at senior level. At no stage in that period, during which there have been continuing assessments to ensure that the scheme remains viable, value for money, and necessary, has any issue been raised by the Government. There have been repeated indications from Government throughout this period that the scheme will be funded through PFI.
“To make this unexpected announcement, without consulting us and without warning, is extremely disappointing.
“The treatment solutions included in the Allerton Waste Recovery Park scheme would allow us to move away from having to rely on landfill to deal with the household waste that remains after waste reduction, reuse and recycling activities that have taken place.
“We will now examine all the options available to us, to determine how to move forward in light of this announcement by Defra.”