2.25 For the EU landfill targets to be achieved, the new facilities must be delivered to the timescales planned. Capital intensive waste treatment facilities, which provide significant diversion from landfill, have however often been subject to delays compared to the project timetables. In total, it takes between five and nine years from the planning stage to bring these new facilities into operation. Delays can occur at project development, procurement and after contract letting.
16 | Typical risk margins on waste PFI projects compared with other PFI projects | ||
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| Waste PFI projects (%) | Other PFI infrastructure such as hospitals and schools (%) | |
Before the effects of the current problems in the financing markets | 1.2 | 0.8-1.0 | |
Including the effects of the current problems in the financing markets1 | 1.7 | 1.3 | |
Source: Defra and PUK database of projects | |||
NOTE 1 Since the problems in the finance markets few deals have been closed and financing rates have been volatile and a wide range of rates have been experienced. | |||
CASE EXAMPLE 2 |
Waste products and the wider market Leicester City Council's PFI Project, signed in 2003, utilises mechanical biological treatment technology that produces a fuel material from mixed wastes. The facility is not yet fully operational to expected contract output standards due to post contract modifications to the anaerobic digester. It should, however, realise its full potential by December 2008. The contractor has found the market for solid recovered fuel is currently restricted and the use of it is generally concentrated around use in cement kilns. The contractor on this project also indicated that overseas companies were able to provide higher specification materials for similar prices. If the material cannot be used or sold it is sent to landfill. The waste counts as Biological Municipal Waste (BMW). The amount is significant - 20,000 tonnes in 2007- enough to impact on the diversion performance of the project as a whole. Liability has been disputed between the authority and the contractor: it costs approximately £25 a tonne (at present) to send this material to landfill and this cost will rise as landfill costs increase. With the Department's issue of the May 2006 PFI credit allocation criteria, authorities are now required to identify firm outlets for solid recovered fuel as a condition of credit award. |