Monday, 9 January 2017

Was council duped by New Earth?


Councillors in the Scottish Borders faced demands for an extra £27 million less than a year after handing an £80 million waste management contract to Dorset 'specialists' New Earth Solutions, according to previously confidential material released via Freedom of Information (FOI).

The company told their local government clients in early 2012 that NES could no longer obtain funding for the construction of a stand alone Mechanical Biological Treatment [MBT] facility at Easter Langlee, Galashiels without the inclusion of the company's untried, useless Advanced Thermal Treatment (ATT) technology - a process supposed to produce energy from waste - in the deal.

Despite the fact that consortiums of banks were funding conventional MBT projects in the UK at the time, and even though this method of waste treatment received a ringing endorsement from management professions, Borders elected members sanctioned a disastrous change to the NES contract which would result in the collapse of the entire project.

A number of sections of a confidential report submitted to SBC in October 2012 have been freed from the censor's redactions, revealing yet more disturbing aspects of the costly liaison between the council and NES which cost council and contractor at least £6 million.

The contract for the MBT plant at Galashiels had been signed amid a glowing blaze of publicity in March/April 2011.

New Earth said the state-of-the-art MBT process to be used at the site would divert waste from landfill in line with the Scottish Governments Zero Waste policy and also help Scottish Borders to increase its recycling rates by recovering metals and plastics.

Stakeholders in the project were assured New Earth planned to have the facility up-and-running within 18 months, claiming the company had a proven capability in developing major new waste treatment infrastructure projects quickly. It was one of the most hollow promises in waste management history, and the funding for the venture was never in place. The contract was torn up in February 2015.

The FOI revelations show NES requested a special meeting with SBC representatives on January 12 2012. The firm's managing director confirmed that NES could no longer get financial backing for the MBT facility, and the two stage process of building the ATT plant several years down the line was not deliverable for several reasons.

Among the factors cited were: "The environment for delivering ATT of waste in Scotland was not conducive to achieving funding confidence as there was a risk of SEPA (Scottish Environment Protection Agency) removing the permit after seven years" and "the unacceptable level of returns for funders without the prospect of ATT technology and the revenues it would generate".

The secret report to councillors goes on to state: "NES requested that in order for the MBT facility to be constructed the existing version of the project agreement would have to be changed to provide funders with the required return on investment.

"The project team's initial evaluation of the NES proposals indicated that if all of the proposals were conceded by SBC for the terms of the contract, it would add an estimated £27 million to the current value of the contract.

"This would mean that the original estimated cost avoidance against the 'do nothing' scenario (continue to landfill waste for 24 years) would be wiped out. These proposals were therefore unacceptable to the council and NES were informed of this".

We are told the project team set up "a structured set of meetings" with NES to fully investigate the issues associated with delivering a MBT solution only.

However, research by Not Just Sheep & Rugby would suggest NES were on extremely shaky ground in arguing that stand alone MBT was incapable of attracting bank funding. So should they have been forced to stick to the original terms of the contract and suffer any consequences?

Around the same time it was announced the Green Investment Bank had provided £30.4 million of senior debt for a MBT only facility near Wakefield, West Yorkshire in a contract between Shanks - rejected as bidders for the Borders project - and Wakefield Council. A syndicate of other private banks from Europe and Japan, together with Barclays brought total funding for the Yorkshire venture to £121.7 million.

Perhaps many banks were less inclined to get involved with NES because of its already heavy indebtedness, and because it was not one of the so-called "big six" UK waste management businesses. The NES Group is now in administration with investors losing many millions of pounds. 

It has been suggested the demand for an extra £27 million from NES should have been followed by the immediate termination of the Borders contract in January 2012. Instead, councillors were persuaded to opt for a Deed of Variation to incorporate ATT into the scheme, resulting in an administrative and financial mess which cost taxpayers dearly.

Maybe they did not read a policy position statement on MBT issued by the Chartered Institute of Waste and Environmental Management [CIWEM].

The institute declared: "The number of MBT plants in the UK is increasing with 19 permitted by the end of 2010 with a combined capacity of 2.7 million tonnes. Further developments are under way in England, Scotland, Wales and Northern Ireland to deliver additional capacity over the next four years. MBT should be seen as a means of improving waste hierarchy performance".

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