£500m bill to buy way out of waste deal

GREATER Manchester has spent £500m buying out its troubled waste and recycling private finance initiative (PFI) due to spiralling costs, the M.E.N. can reveal.

Local leaders stepped in due to the rising price of the complex £3bn, 25-year private finance contract with Viridor Laing, signed less than a decade ago.

That arrangement – which also included a range of sub-contractors and commercial banks – saw a new ‘energy-from-waste’ plant built in Runcorn, Cheshire, along with four newly-refurbished waste plants in Greater Manchester itself. But the Runcorn plant opened two years late, while a series of ‘significant’ snagging issues with the technology at the local facilities also caused costs to rise, according to insiders.

Greater Manchester Waste Disposal Authority’s £500m buy-out is being funded by around £300m in borrowing from the region’s combined authority – via Oldham council, Manchester council and the region’s pension fund – along with £120m government borrowing. The remainder comes from up-front cash already held by the waste authority. It is understood the final price-tag was negotiated down from around £800m.

However, officials insist they are now confident the move will save the region money, although they have not said how much.

The 2009 waste PFI was signed in the wake of the economic crash, when the cost of disposing rubbish in landfill was spiralling due to new taxes and regulations.

Local insiders insist that a PFI – in which private firms fund the upfront construction of facilities before leasing them over a long period – was the only way to pay for new sites at the time, but claim they had always planned to refinance the arrangement further down the line.

However, the Runcorn plant opened two years late in 2015 and new technology in the region’s four anaerobic digestion plants – in Salford, Sharston, Newton Heath and Bredbury – had ‘significant defects.’

That meant costs rose and refinancing became more difficult, while due to the complexity of the PFI deal, Greater Manchester Waste Disposal Authority and the 10 councils within it had little control over arrangements.

It is understood they have been unable to recover any legal costs for the delays and snagging issues due to the terms of the PFI, but audit documents going before the combined authority this week say the buy-out will now lead to ‘more cost-effective arrangements.’

The new arrangements will see the lease on the region’s anaerobic plants revert to the waste disposal authority, before being re-let to a new contractor, the tender for which has now been issued.

In the meantime, Viridor Waste (Greater Manchester) will continue to provide the waste contract on an interim basis, while continuing to run the Runcorn plant into the future.

A spokesman for Viridor said: “Viridor and Greater Manchester agreed to end the PFI contract last year and, by working with all partners, this has now been successfully re-set.

“Since 2009, Viridor has helped to transform waste services across the north west of England and a high standard of service to the community continues to be delivered.”