Prudential Borrowing is one of a number of funding mechanisms available for waste infrastructure procurements. For the reasons discussed in the Frequently Asked Questions section of this note, WIDP considers that:
• Prudential Borrowing is most likely to be suitable for low risk assets, such as land and Household Waste recycling Centres, and for assets whose capital cost is below HMT's recommended threshold (£20Million) below which the use of private finance is not considered likely to offer value for money;2
• Private finance is the most appropriate method of funding for large-scale residual waste infrastructure, particularly projects involving process technologies or combustion engineering;
• Projects that do not fall neatly into one of these categories, either because they are above the £20Million threshold but rely on low-technology (e.g. green waste in-vessel composting), or are below the threshold but may be using relatively novel technologies (e.g. some Materials Recovery Facilities) should be considered on a case by case basis; and
• The skills, resources and issues involved in delivering a large or complex project funded under Prudential Borrowing should not be underestimated, especially in light of the fact that this approach currently has no track record in the UK waste sector.
Authorities should note that the purpose of this note is to provide them with an appropriate framework for a decision with regards to funding options to be made. Accordingly, WIDP's views are not a substitute for an Authority's own value for money assessment which will need to be conducted in accordance with HMT guidance on a project specific basis.
WIDP will provide Transactor support for all residual waste projects, regardless of the source of funds, including where Prudential Borrowing is the chosen funding option. Authorities should note that prudential borrowing is a funding option, not a procurement option and that the procurement route will need to be considered separately.
Authorities considering entering any type of residual waste procurement are encouraged to contact WIDP.
Amar Qureshi (amar.qureshi@DEFRA.GSI.GOV.UK)
Ben Prynn (ben.prynn@DEFRA.GSI.GOV.UK)
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2 WIDP acknowledge that in the waste sector, private sector contractors have been willing to fund projects below HMT's threshold with relatively low cost funding from their own balance sheets.