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£120m still needed to build waste incinerator
PLANS for a £120 million incinerator pitched as the future for waste disposal in the county are on slow burn over cost concerns.
Herefordshire Council is to investigate “alternative financing” for the scheme fearing bank loans may not be the best value for money.
Worcestershire County Council, its project partner, is doing the same.
The move has prompted campaigners to call for the whole “high risk and speculative”
scheme to be scrapped. But both councils say they are committed to pushing the project through in the new year.
Set for Hartlebury, near Kidderminster, the energy-from-waste plant has a government backed go-ahead and is integral to a joint 25-year waste disposal contract signed by both councils.
Contractor Mercia Waste will build the PFI-funded plant to take some 200,000 tonnes of residual waste a year – around 50,000 tonnes of which will come from Herefordshire.
Without an incinerator – or fallback plan – Herefordshire Council faces millions of pounds in Government and European Union-imposed fines for sending waste to landfill.
Current landfill options are already close to capacity.
A report put to the council’s cabinet says the existing deal is based on relatively expensive bank debt financing and needs to be reviewed.
Other options could include institutional financing via bonds or a pension provider, or part-borrowing from the Government.
Campaigner Rob Wilden, of Herefordshire and Worcestershire Action Group, said local authorities should not be engaging in speculative high risk commercial ventures.
Both counties currently spend £39m a year disposing waste and landfill taxes are about to rise to £8 a tonne.
The total costs of the incinerator project are being kept under wraps for commercial reasons, but council chiefs have estimated the setting up alone will be about £120m.
Critics believe the total bill to taxpayers during the lifetime of the contract could reach £1 billion.
The decision of Herefordshire Council’s cabinet authorises senior council officers and the cabinet member for major contracts – Councillor Harry Bramer – to work with Worcestershire CC and Mercia Waste on alternative financing for the plant.
Residual waste from both counties goes to two landfill sites in Worcestershire, both of which will be full by 2023 if disposal continues at its current rate.
Based on an initial examination of the project model – and adjusting Herefordshire Council’s current budget to bring it into line with waste tonnage predictions – the average annual cost to both councils under current arrangements could be around £32m a year. This compares with an average cost to both councils of about £38m a year under Mercia’s proposals with the energy from waste plant.
The potential increase of around £6m a year equates to an increase of about £36 per tonne should landfill still be used as the main means of disposal.
Should that space be exhausted by 2023 then, on current estimates, the councils could be expected to pay rates similar to that proposed by Mercia, with a mark-up, and no controls or capacity guarantees.
The original PFI contract for the plant was awarded a grant to support the additional cost of private sector bank financing.
Due to inflation and other economic factors, that grant only supports about half of the level of debt that would be required by the project going forward.
Both councils have already been warned to be cautious about mixing different sources of finance in terms of the project procurement and the rules associated with PFI.