the council of the city of wakefield waste management pfi project … management project/54....

Waste PFI Project

Final Business Case

THE COUNCIL OF THE CITY OF WAKEFIELD

WASTE MANAGEMENT PFI PROJECT

FINAL BUSINESS CASE

3 OCTOBER 2012

Waste PFI Project

Final Business Case

Wakefield Waste PFI – FBC 3 October 2012 2

CONTENTS

ABBREVIATIONS .............................................................................................. 6 1 Executive Summary ................................................................................... 8

1.1 Introduction ....................................................................................... 8 1.2 Background ...................................................................................... 9

1.3 Strategic Waste Management Objectives ....................................... 12 1.4 Procurement Strategy and Process ................................................ 13 1.5 Risk Management, Risk Allocation and Contractual Issues ............ 18 1.6 Project Team and Governance ....................................................... 20 1.7 Sites, Planning and Design ............................................................ 20 1.8 Cost, Budgets and Finance ............................................................ 21

1.9 Stakeholder Communications ......................................................... 22 1.10 Timetable ........................................................................................ 22

2 Background .............................................................................................. 24 2.1 Introduction ..................................................................................... 24 2.2 Details of Key Characteristics of Area and Authority ...................... 24 2.3 Analysis of Waste Arising ............................................................... 25

2.4 Details of Current Arrangements for Collection and Disposal ......... 26 2.4.1 Waste Collection ............................................................................. 26

2.4.2 Waste Disposal............................................................................... 27 2.4.3 Recycling Contracts ........................................................................ 28 2.5 Performance of Existing Service..................................................... 29

2.6 Waste Composition ........................................................................ 32 3 Strategic Waste Management Objectives ................................................ 35

3.1 Introduction ..................................................................................... 35

3.1.1 The EU Landfill Directive ................................................................ 35

3.1.2 UK Government Policy ................................................................... 35 3.1.3 Strategy and Objectives ................................................................. 36 3.1.4 Kerbside Recycling Schemes ......................................................... 37

3.1.5 Upgrading and Rationalising HWRCs ............................................. 38 3.1.6 Composting and MRFs ................................................................... 38

3.1.7 Residual Waste Treatment Plant .................................................... 38 3.2 Municipal Waste Management Strategy ......................................... 39 3.3 Public Consultation ......................................................................... 39

3.4 Waste Minimisation ........................................................................ 40 3.5 Recycling and Composting ............................................................. 40 3.6 Landfill Objectives .......................................................................... 45 3.7 Appraisal of Technology Options for Residual Waste Treatment ... 49 3.8 Environmental Impact ..................................................................... 51

4 Procurement Strategy and Reference Project .......................................... 54 4.1 Introduction ..................................................................................... 54

4.2 Overall Strategy for Procurement ................................................... 56 4.3 Output Specifications for the Waste PFI Project ............................. 56 4.3.1 Output Specifications ...................................................................... 56 4.3.2 Service Required from the Contractor ............................................ 61 4.4 Pre-Qualification ............................................................................. 63

Waste PFI Project

Final Business Case


4.5 ITN/RACB Stage ............................................................................ 68 4.5.1 Details of Evaluation Criteria .......................................................... 68 4.5.2 ITN/RACB Technical Solutions ....................................................... 72 4.5.3 Performance of the ITN Bids/RACB ............................................... 73 4.5.4 Cost of the RACB ........................................................................... 75

4.6 BAFO/Final BAFO .......................................................................... 75 4.6.1 Details of Evaluation Criteria .......................................................... 75 4.6.2 BAFO/Final BAFO Technical Solutions .......................................... 76 4.6.3 Performance of BAFO/Final BAFO Bids ......................................... 76 4.6.4 Cost of the BAFO/Final BAFO bids ................................................ 77

4.7 Quality of Competition .................................................................... 78 4.7.1 The Procurement Process .............................................................. 78 4.7.2 PQQ / ISOP Stage .......................................................................... 79

4.7.3 ITN Stage ....................................................................................... 79 4.7.4 BAFO .............................................................................................. 82 4.7.5 Final BAFO ..................................................................................... 83

4.7.6 Preferred Bidder ............................................................................. 84 4.8 The Solution Proposed by the Proposed Preferred Bidder ............. 86

5 Risk Management, Risk Allocation and Contractual Structures................ 90 5.1 Introduction ..................................................................................... 90 5.2 Risk Management ........................................................................... 90

5.3 Risk Allocation Register .................................................................. 92 5.4 Commercial Issues Not Covered by SoPC4 ................................. 100

5.4.1 Guaranteed Minimum Tonnage .................................................... 100 5.4.2 Exclusivity ..................................................................................... 100 5.4.3 RDF Offtake Agreement ............................................................... 101 5.4.4 Digestate Offtake Agreement ....................................................... 101

5.4.5 Ferrybridge Environmental Permit Failure .................................... 102

5.4.6 Economic Reinstatement Test ...................................................... 102 5.4.7 Third Party Income Sharing .......................................................... 103

5.4.8 Carbon Reduction Commitment ................................................... 103 5.5 Project Agreement and other Contractual Documents ................. 103 5.5.1 Project Agreement ........................................................................ 103

5.5.2 Proposed Derogations .................................................................. 103 5.5.3 Payment Mechanism .................................................................... 103

5.6 Markets for Process Outputs ........................................................ 109 5.7 Budgetary Sheet Treatment ......................................................... 110

6 Project Team and Governance............................................................... 111

6.1 Introduction ................................................................................... 111 6.2 Legal Context ............................................................................... 111

6.3 Project Governance ...................................................................... 113 6.4 Project Management .................................................................... 115

6.4.1 Pre-Financial Close Stage ............................................................ 115 6.4.2 Post-Financial Close Stage .......................................................... 116 6.5 Advisors ........................................................................................ 118 6.5.1 Legal Advisors .............................................................................. 118 6.5.2 Financial Advisors ........................................................................ 119 6.5.3 Technical Advisors ....................................................................... 119

Waste PFI Project

Final Business Case


6.5.4 Insurance Advisors ....................................................................... 119 6.5.5 WIDP Support............................................................................... 119 6.6 Outline of Partnership Arrangements with Other WDAs ............... 120 6.7 District Involvement ...................................................................... 120

7 Sites, Planning and Design .................................................................... 121

7.1 Introduction ................................................................................... 121 7.2 Site Specific Planning Status ........................................................ 121 7.3 Site Identification .......................................................................... 123 7.4 Securing the Sites ........................................................................ 124 7.5 Planning Health Framework ......................................................... 125

7.6 Design Issues ............................................................................... 125 8 Cost, Budgets and Finance .................................................................... 126

8.1 Introduction ................................................................................... 126

8.2 Procurement Costs ....................................................................... 126 8.3 Cost of the Preferred Bidder‟s Solution ........................................ 127 8.4 Funding ........................................................................................ 128

8.5 Affordability Analysis .................................................................... 128 8.5.1 Projected Authority Budgets ......................................................... 129

8.5.2 Waste Infrastructure Credit Payments .......................................... 129 8.5.3 Council‟s LATS Strategy ............................................................... 130 8.5.4 Recyclate/Energy Income ............................................................. 130

8.5.5 Sinking Fund Interest .................................................................... 130 8.5.6 Landfill Tax ................................................................................... 131

8.5.7 Contract Monitoring Costs ............................................................ 131 8.5.8 Sensitivity Analysis ....................................................................... 131 8.5.9 Cost and Impact of Carbon ........................................................... 131 8.5.10 Council‟s Capital Contribution ...................................................... 131

8.6 Member Approval of Affordability and Contract Award ................. 133

8.7 Council‟s VfM Assessment ........................................................... 134 8.8 HM Treasury VfM Qualitative Assessment ................................... 135

8.9 HM Treasury VfM Quantitative Assessment ................................. 138 9 Stakeholder Communications................................................................. 139

9.1 Introduction ................................................................................... 139

9.2 Strategy ........................................................................................ 143 9.3 Planning Health Framework ......................................................... 144

9.4 TUPE ............................................................................................ 144 10 Timetable ............................................................................................... 145 APPENDIX 1 – Defra‟s Criteria for Awarding Waste Infrastructure Credits .... 147

APPENDIX 2 – Planning Health Framework .................................................. 148 APPENDIX 3 – Project Data Template ........................................................... 149

APPENDIX 4 – Project Risk Registers ........................................................... 169 APPENDIX 5 – Waste Minimisation Plan ....................................................... 170

APPENDIX 6 – Derogations Table ................................................................. 171 APPENDIX 7 – Preferred Bidder Letter .......................................................... 172 APPENDIX 8 – Report to Leader and Cabinet Member – Progress Report on Waste Procurement Strategy ......................................................................... 173 APPENDIX 9 – Cabinet Report - Delivery of the Municipal Waste Management Strategy .......................................................................................................... 174

Waste PFI Project

Final Business Case


APPENDIX 10 – Contract Targets and Output Specifications ........................ 175 APPENDIX 11 – Payment Mechanism ........................................................... 176 APPENDIX 12 – Project Agreement ............................................................... 177 APPENDIX 13 – Financial Model .................................... 178 APPENDIX 14 – Waste Flow Model .......................................... 179 APPENDIX 15 – Amec Technical Due Diligence Report and Technical Advisors Letter of Support ............................................................................................. 180 APPENDIX 16 – Materials and Energy Marketing Plan .................................. 181 APPENDIX 17 – Site Layouts......................................................................... 182 APPENDIX 18 – WMDC VfM Analysis - November 2011 .............................. 183 APPENDIX 19 – ESA95 Questionnaire Response ......................................... 184 APPENDIX 20 – Waste PFI Contract Structure.............................................. 185 APPENDIX 21 - RDF Offtake Market Failure Risk ......................................... 186

APPENDIX 22 – Ferrybridge Environmental Permit Failure Risk ................... 187 APPENDIX 23 – Environmental Impacts Calculator ....................................... 188 Submitted as a separate document ................................................................ 188 APPENDIX 24 – Commercial Paper setting out the Interaction between Third Party Income sharing and Substitute Waste drafting ...................................... 189 Submitted as a separate document ................................................................ 189 APPENDIX 25 – Residual Waste Treatment Plant Flow Process Diagram .... 190

Waste PFI Project

Final Business Case


ABBREVIATIONS

The following abbreviations are used in this report: AD Anaerobic Digestion BAFO Best and Final Offer BMW Biodegradable Municipal Waste BPEO Best Practicable Environmental Option BSF Building Schools for the Future BVPI Best Value Performance Indicator CHP Combined Heat and Power CMT Corporate Management Team Defra Department of the Environment, Food and Rural Affairs DETR Department of Environmental, Transport and the Regions EfW Energy From Waste EOI Expression of Interest EPA Environmental Protection Act 1990 FBC Final Business Case FSMDR Full Service Mixed Dry Recyclables (comprising glass, plastic

bottles, cans, paper and card) GMT Guaranteed Minimum Tonnage GMTP Guaranteed Minimum Tonnage Payment GOYH Government Office for Yorkshire and the Humber GRUK Glass Recycling UK GRL Global Renewable UK Ltd HHW Household Waste HWRC Household Waste Recycling Centre ISMDR Initial Service Mixed Dry Recyclables (comprising glass,

plastic bottles and cans) ISOP Invitation to Submit Outline Proposals ITN Invitation to Negotiate IPR Intellectual Property Rights IVC In Vessel Composting LASU Local Authority Support Unit LATS Landfill Allowance Trading Scheme LDF Local Development Framework MBT Mechanical Biological Treatment MRF Materials Recycling Facility MWMS Municipal Waste Management Strategy NI National Indicator NNDR National non Domestic Rates NPV Net Present Value OBC Outline Business Case OGC Office of Government Commerce OJEU Official Journal of the European Union PFI Private Finance Initiative PMT Project Management Team PQQ Pre-Qualification Questionnaire PUK Partnerships UK RACB Revise and Confirm Bids RDF Refuse Derived Fuel

Waste PFI Project

Final Business Case


SPV Special Purpose Vehicle (Wakefield Waste PFI Ltd) TLS Transfer Loading Station TUPE Transfer of Undertakings (Protection of Employment) UDP Unitary Development Plan VfM Value for Money WCA Waste Collection Authority WDA Waste Disposal Authority WDPD Waste Development Plan Document WET Waste and Emissions Trading WIDP Waste Infrastructure Delivery Programme WIP Waste Implementation Programme WRAP Waste Resources Action Programme WRG Waste Recycling Group WWML Welbeck Waste Management Ltd

Waste PFI Project

Final Business Case


1 Executive Summary

The dates and numbers in this FBC are based on the most recent information available and may be subject to minor changes through to financial close. The Council, Shanks and the Funding Club are now progressing the financial close process with a view to achieving financial close by 30 November 2012 and initial service commencement on or around 21 January 2013. In July and August 2012 the WIDP team scrutinising this FBC raised a number of clarification questions following the submission of the draft FBC. The Council has responded to all these clarification questions separately. These responses have not been added to this final version to avoid any confusion. The responses provided to date are therefore still valid.

1.1 Introduction

This document sets out Wakefield Metropolitan District Council‟s (the Council) FBC for provision of waste management services in Wakefield. The waste PFI project will enable the Council to fulfil the requirements of its approved MWMS by means of a 25 year service contract for recycling, treatment and disposal under the Government‟s PFI. The Council will retain responsibility for the collection of waste at the kerbside. The waste PFI contract will deliver the treatment facilities required to achieve the Council‟s landfill allowance targets established through the EU Landfill Directive and the UK Government‟s enabling legislation and increase levels of recycling identified in the Waste Strategy 2007 and confirmed by the Government Review of Waste Policy in England 2011. The Council submitted it‟s OBC for the waste PFI project in August 2004 and this was subsequently approved at Project Review Group on 14 December 2004. In approving the OBC the Council was awarded £33 million in PFI credit grant. (It is noted that subsequent to a letter from Defra dated 22 July 2011, PFI credit/grant is now referred to as the Waste Infrastructure Credit/Grant and this term has been used for the purposes of this FBC). Following the 2010 elections, the coalition government undertook a comprehensive spending review. As a result of the review into local government funded waste treatment infrastructure, the Council‟s waste PFI project was one of 11 projects which continued to receive an allocation of PFI credits on the basis that it will contribute towards achieving the 2020 national landfill diversion targets. This FBC is submitted to demonstrate the Council‟s case for confirmation of the original £33 million Waste Infrastructure Credit approval. Section 4.7 of this FBC sets out the changes that have been made to the preferred bidder consortium following the appointment of VT Group plc (VT) in 2007, the acquisition of VT by Babcock International Group Plc subsequently renamed Babcock Southern Holdings Ltd (Babcock) in 2010 and Shanks Group Plc (Shanks) entering into a Teaming Agreement with Babcock in February 2011. As a consequence of the

Waste PFI Project

Final Business Case


changes that have occurred during the procurement process, the preferred bidder consortium now comprises Shanks, Babcock and the Funding Club (comprising Barclays, BayernLB, SMBC and UK Green Investments (“UKGI”). The waste PFI contract will be awarded by the Council to the SPV which will be Wakefield Waste PFI Limited. Following financial close, Babcock‟s involvement in the waste PFI project will cease. For the purposes of this FBC document Wakefield Waste PFI Limited is referred to as „the waste PFI contractor‟.

1.2 Background

Wakefield Metropolitan District (the District) covers an area of approximately 350 km2 and has a current population in the order of 323,900 people. The Council is a Unitary Authority with responsibilities for both collection and disposal of municipal waste from approximately 146,770 households. In 2011/12 the Council collected in the order of 166,350 tonnes of municipal waste which has continued a falling trend over the past few years. This falling trend is believed to be similar to that affecting other authorities in the Yorkshire and Humberside region and more generally on a national basis. The waste PFI contract is for recycling, treatment and disposal of all municipal waste derived in the District. The Council will retain responsibility for collection and is committed to developing a collection profile which complements the waste PFI contractor‟s proposed treatment solution. The waste PFI contract will account for anticipated increases in waste arisings as a result of projected housing growth which will result in municipal waste arisings increasing to approximately 213, 700 tonnes by the end of the waste PFI contract. Full details of waste growth are set out in section 2.3. The capacity of the key waste treatment facilities which are set out in detail in section 1.4 have been designed to deal with the anticipated housing growth together with some additional headroom for treating third party waste. The provision of additional headroom will enable the waste PFI contractor to treat third party waste which will provide a third party income stream which will be shared between the Council and the waste PFI contractor. Full details of third party income are set out in section 5.5.3. The Council acknowledges that there are some uncertainties around future waste arisings and a result a commercial agreement has been reached with the waste PFI contractor to include a GMT payment profile, as set out in section 5.4.1, and based on the following bandings: Band 1 – Band 2 – Band 3 – As part of this commercial agreement the Payment Mechanism includes provision for compensating the Council should waste arisings fall below Band 1 through the third party income adjustment. The Council has agreed to give the waste PFI contractor „exclusivity‟ to all municipal waste arisings collected by the Council up to the basecase levels within the wasteflow

Waste PFI Project

Final Business Case


model. This will provide certainty to the waste PFI contractor that the Council will not „cherry pick‟ the waste streams that it requires the waste PFI contractor to treat and provides the waste PFI contractor with full waste composition risk. Above the basecase waste flows the Council retains the option to send waste elsewhere should economics prevail. It should be noted however that it is unlikely that the Council would exercise this option having agreed a significantly increased waste budget to deliver the waste PFI contract. The Council has undertaken a comprehensive procurement exercise between 2005 and the current date, which originally resulted in the appointment of the VT Consortium (comprising VT, Estech Europe Limited (Estech) and ) as the preferred bidder in November 2007. A summary of the procurement exercise is set out in section 1.4 and full details are set out in section 4.7. As a result of the delays in reaching financial close, the composition of the VT Consortium has undergone a number of changes, including funding support for the waste PFI contract, which has resulted in the preferred bidder consortium now being led by Shanks. The position that has been reached with the preferred bidder consortium is as set out in this FBC and as a result the waste PFI contract will be awarded to Wakefield Waste PFI Limited as the SPV. The waste PFI contract structure is included at Appendix 20. The VT Consortium‟s technical solution for treatment of the Council‟s municipal waste streams was via a combination of the following processes: Residual waste through MBT (autoclave, dry post sorting to recover

recyclable materials and AD of the organic fibre fraction) FSMDR through a MRF Garden waste through covered aerated tunnel composting Following Shanks joining the preferred bidder consortium in February 2011, Shanks reviewed the technical solution and confirmed that with some minor changes the treatment process would remain the same although the configuration of the residual waste process train would be amended to include a front end sort („dirty MRF‟) to remove recyclable material prior to autoclaving and AD of the organic fraction. Full details of the technical solution are set out in section 1.4 of this FBC. The waste PFI project will be delivered in two phases: Phase 1 – from initial service commencement to completion of all of the new waste treatment facilities (“the Initial Service Period”). It is anticipated that this Initial Service Period will last approximately 2 years; Phase 2 – from the end of the Initial Service Period to the expiry of the waste PFI contract (“the Full Service Period”) During the Initial Service Period the waste PFI contractor will be responsible for managing the existing seven HWRCs, two TLSs and Bring Sites, and for waste disposal and recycling. In addition the waste PFI contractor will also construct, commission all the new waste management facilities. Details of the new waste management facilities are set out below:

Waste PFI Project

Final Business Case


South Kirkby Residual waste treatment facility including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall (“the Residual Waste Treatment Plant” (“RWTP”)) Enclosed windrow composting facility MRF Collection depot including parking area and associated administration building Site management offices Education Centre HWRC Denby Dale Road TLS HWRC Glasshoughton HWRC Welbeck Refurbishment of the existing HWRC During the Full Service Period the waste PFI contractor will be responsible for operating all the new waste management facilities together with waste disposal and recycling. The existing seven HWRCs in operation during the Initial Service Period will be reduced to four new HWRCs at Denby Dale Road, Welbeck, South Kirkby and Glasshoughton prior to the commencement of the Full Service Period. The MWMS confirmed that the four new HWRCs will provide for the needs of the Wakefield public during the term of the waste PFI contract. The Council implemented a new alternate weekly collection service during 2007/08 to increase recycling in the District. This current collection strategy is outlined below: Residual waste 240 litre bin Garden waste 240 litre bin Paper and card 140/240 litre bin ISMDR 55 litre box Each of these streams is collected on an alternate weekly basis. ISMDR and paper and card are collected on a fortnightly basis on the alternate weeks to those used for the residual waste and garden waste collections. When the key waste treatment facilities have been built this collection profile will be amended by combining the collection of paper and card with the ISMDR in the one 240 litre bin. At this point the 55 litre box will be withdrawn. The Council‟s recycling performance in 2011/2012 was 39.3%.

Waste PFI Project

Final Business Case


Disposal of residual waste and garden waste is currently subject to a contract between the Council and WWML which operates the Welbeck landfill site on behalf of WRG. This „take or pay‟ contract expires in November 2013 and the waste PFI contract includes obligations for the waste PFI contractor to comply with the existing contract requirements, including the minimum tonnage provisions, until its expiry date. Following expiry of the existing contract the waste PFI contractor will be responsible for obtaining a replacement landfill contract through the market testing provisions in the waste PFI contract. In addition to this landfill contract the Council has a number of recycling contracts which will be novated to the waste PFI contractor in the short term. The waste PFI contractor will subsequently be responsible for replacing these in the longer term. Due to the delay in the procurement programme, and in consultation with the waste PFI contractor, these existing recycling contracts were initially extended to 31 January 2013. The Council is currently arranging for further extensions to tie in with the revised financial close programme and to allow for a smooth transition of services to the waste PFI contractor.

1.3 Strategic Waste Management Objectives

Through the EU Landfill Directive and Waste Strategies 2000 and 2007 the European Union and the Government identified requirements to reduce the amount of biodegradable municipal waste sent to landfill and to increase levels of recycling and composting. To meet the requirements identified above, the Council produced its MWMS in 2003/04 and the outcome for delivery of this strategy was through the procurement of a waste PFI contract. As part of the development of the MWMS, a comprehensive options assessment was undertaken to confirm the technical solution to be developed for its delivery. This strategy also included a comprehensive public consultation exercise during its production. To ensure the Council meets the targets identified through the EU Landfill Directive and subsequently the Waste Strategy 2007 the Council has established the following targets within the waste PFI contract (“the Contract Targets”):

Household Waste Recycling Target (including composting) – 52% by 2015;

HWRC Recycling Targets – per site; and

BMW to Landfill Target – waste PFI contractor has to meet the Council‟s statutory BMW diversion targets.

For comparative purposes Table 1.1A outlines the changes in the Household Waste Recycling Target since the original OBC was submitted together with the waste PFI contractor‟s predicted performance against the Household Waste Recycling Target. These figures are abstracted for the national Target Years and full details are set out in section 3.5. Table 1.1A Household Waste Recycling Target since OBC

Waste PFI Project

Final Business Case


Year National Waste

Strategy

OBC Reference

Project

Waste PFI Contract Target

Predicted Waste PFI Contract

Performance

% % % %

2009/10 40 51 N/A N/A

2014/15 45 52 52

2019/20 50 52 52

Also for comparative purposes Table 1.1B outlines the changes in BMW Diversion since the original OBC was submitted together with the waste PFI contractor‟s predicted performance. These figures are abstracted for the national Target Years and full details are set out in section 3.6. Table 1.1B BMW to Landfill Target since OBC

Year OBC Reference

Project

Waste PFI Contract Target

Predicted Waste PFI Contract

Performance

% % %

2009/10 N/A N/A

2014/15 74.9

2019/20 74.3

To achieve the Contract Targets the waste PFI contract includes for the provision of new waste treatment facilities for dealing with municipal waste through a combination of pre-treatment, MBT, MRF and an enclosed windrow composting facility. The waste PFI contract also includes for upgrading and rationalising the network of HWRCs and Bring Sites in the District. Although the original procurement process for the waste PFI project did not incorporate a specific carbon reduction analysis the Council has nonetheless undertaken an analysis based on the waste PFI contractor‟s proposed solution. This analysis has been undertaken using the Waste and Resources Assessment Tool for the Environment (WRATE) software developed by the Environment Agency in 2008. The full details of this analysis are set out in section 3.8. In summary terms the waste PFI contract will save around 31,000 tonnes of CO2 equivalent per year throughout the contract term compared against that should the existing service provision being continued. This equates to some 780,000 tonnes of CO2 equivalent in total during the contract term.

1.4 Procurement Strategy and Process

Waste PFI Project

Final Business Case


Following the approval of the MWMS the Council agreed that this strategy would best be delivered through a waste PFI contract for disposal, treatment and recycling. The OBC, submitted in August 2004, was approved by Project Review Group in December 2004 following which the Council commenced its procurement under the Negotiated Procedure within EU and UK procurement legislation. Full details of the procurement process are set out in section 4.7. The OJEU notice was advertised in January 2005 following which the Council undertook a comprehensive procurement exercise. The procurement has been carried out in accordance with the following stages: Stage 1: PQQ/ISOP Stage 2: ITN Stage 3: RACB Stage 4: BAFO Stage 5: Final BAFO Stage 6: Preferred Bidder Expressions of interest were originally received from 27 companies and following detailed assessments of the PQQ and ISOP submissions 4 companies were selected to participate in the procurement process. The 4 companies were Cleanaway Ltd (Cleanaway), Enterprise/Estech Consortium (comprising Enterprise Managed Services (Enterprise) and Estech) GRL and WRG. All 4 companies were issued with documents for the ITN bid process in August 2005. GRL subsequently withdrew from the procurement process in September 2005 following its appointment as preferred bidder for the Lancashire waste PFI project. At different times during the procurement stages the remaining 3 companies that pre-qualified have changed ownership. Cleanaway was acquired by Veolia ES Holdings Plc (Veolia), WRG by Fomento de Construcciones y Contratas (FCC) and Estech by VT. Enterprise also withdrew from the Enterprise/Estech Consortium. Full details of these changes in ownership are set out in section 4.7. The full details of the evaluation framework which was used to evaluate the bids at the various procurement stages are set out in sections 4.4 and 4.5. The framework was adjusted between the ITN and BAFO stages to reflect the detailed development of the proposals during that period. At both ITN and BAFO stages the technical solutions of the 3 bidders were comprehensively evaluated to ensure they delivered the Council‟s requirements for the waste PFI project. The 3 bidders provided alternative technical solutions at different stages to match the requirements identified during the procurement process. Following the 6 procurement stages identified above the Council subsequently appointed the VT Consortium as its preferred bidder in November 2007. Due to the downturn in the economic climate in 2008 which resulted in significant increases in the waste PFI contract costs, and also required the Council to undertake project reviews at different stages, a number of delays have occurred in the procurement process. During the preferred bidder stage such delays were also attributable to changes in the identity of the VT Consortium.

Waste PFI Project

Final Business Case


In July 2010 VT was acquired by Babcock and was subsequently renamed Babcock Southern Holdings Ltd. As a consequence of these changes, the preferred bidder consortium became the Babcock Consortium (comprising Babcock Southern Holdings Ltd, Estech and a Funding Club of ). Following Babcock‟s decision in October 2010 to exit the waste management market and to not proceed with the waste PFI contract, Babcock, in consultation with the Council, undertook an exercise to strengthen its preferred bidder consortium. After an extensive search for a preferred bidder partner Babcock invited Shanks to join the preferred bidder consortium and signed a Teaming Agreement in February 2011 to formalise the arrangements. As a consequence of the terms of the Teaming Agreement, Shanks took the lead role in the preferred bidder consortium which at that time comprised Shanks, Babcock Southern Holdings Ltd, Estech and

. Since joining the preferred bidder consortium Shanks has reviewed the financial support for the waste PFI contract and the Funding Club has been established to form what is now the Preferred Bidder Consortium (comprising Shanks, Babcock Southern Holdings Ltd and the Funding Club). Appendix 20 sets out the details of the waste PFI contract structure. The waste PFI contract will be awarded to Project Co (Wakefield Waste PFI Limited as the SPV). Shanks Waste Management Limited will act as both the construction sub-contractor (EPC) and operating sub-contractor (OPCO). Initially Shanks PFI Investments Limited was to subscribe through a holding company (HoldCo) structure for equity share in the SPV. The Funding Club will provide Senior Debt in a gearing ratio with the equity shareholding.

In addition Shanks has requested that an option be included in the waste PFI contract for a transfer of of the equity shareholding in HoldCo to John Laing Investments Limited post financial close. This is consistent with Shanks‟ policy in other PFI contracts that it manages. The terms of the waste PFI contract have been amended to allow for this change in ownership during the normal „lock in‟ period. The Council has assessed the PQQ submitted to establish this change of ownership and is satisfied that

Waste PFI Project

Final Business Case


should this change of ownership occur the revised contract structure to take the waste PFI contract forward will not be compromised. During the Initial Service Period the waste PFI contractor will operate the Council‟s existing HWRC network of 7 existing sites until such time as the new HWRCs are provided. Following the provision of the new facilities the closure of existing sites will be implemented in accordance with the following programme: Open Denby Dale Road Close existing Ossett HWRC. Open Glasshoughton Close existing Ferrybridge and Castleford

HWRCs. Open South Kirkby Close existing Fitzwilliam and South Kirkby

Manface Quarry HWRCs. To enable the existing HWRC/TLS at Denby Dale Road to be rebuilt it will be necessary to close the site. During this re-building period the waste PFI contractor will provide temporary facilities (HWRC and TLS) from a site at Calder Vale Road in central Wakefield. The Calder Vale Road site is being leased by the waste PFI contractor during the period for re-building the Denby Dale Road site. The waste PFI contractor‟s technical solution for the delivery of the waste PFI contract requires a number of new waste treatment facilities to be provided that integrate with the Council‟s proposed changes to its collection strategy as set out in section 1.2. In summary terms the Council proposes to collect household waste at the kerbside using a 3 stream profile comprising of residual waste, garden waste and the FSMDR. The waste PFI contractor‟s solution to the treatment of these 3 waste streams is based around the key waste treatment facilities to be built at the former South Kirkby Colliery site. The residual waste stream will be treated through the RWTP, the FSMDR through the MRF and the garden waste through the enclosed windrow composting facility. The flow diagram below sets out details of the waste flow inputs, plant capacities and waste flow outputs from the 3 key waste treatment facilities for the final year of the waste PFI contract (2036):

Waste PFI Project

Final Business Case


* The enclosed windrow composting facility at South Kirkby has a capacity of 25,000 tonnes. Where the input of garden waste exceeds this capacity, the waste PFI contractor will retain responsibility for treating this either on the South Kirkby site by reducing the retention time in the enclosed windrow composting facility or by providing off-site windrow composting.

The RWTP will be operational from April 2015, the enclosed windrow composting facility August 2015 and the MRF from February 2015. In addition to the key waste treatment facilities identified above the waste PFI contractor will provide and operate 4 HWRCs during the Full Service Period as set out below: Denby Dale Road, Wakefield This site will incorporate a new combined HWRC

and TLS to replace the existing HWRC/TLS. The HWRC will have a maximum capacity of

25ktpa and will be operational from October 2014. The TLS will have a maximum capacity of 100ktpa

and will be operational from October 2014. Welbeck, Normanton This existing HWRC will have minor refurbishment

works carried out to extend the number of containers available for use by the public.

The HWRC will have a maximum capacity of

25ktpa and will be refurbished and operational from August 2013 until November 2017. The end

Waste PFI Project

Final Business Case


date for the Welbeck HWRC is dictated by the current planning permission for the Welbeck landfill site which is due to be restored by May 2018.

Glasshoughton A new HWRC will be provided at this site with a

maximum capacity of 25ktpa which will be operational from January 2014.

South Kirkby A new HWRC will be provided at the main South

Kirkby site with a separate access to that for the key waste treatment facilities identified above.

The HWRC will have a maximum capacity of

25ktpa and will be operational from February 2015.

1.5 Risk Management, Risk Allocation and Contractual Issues

At the OBC stage the Council formulated its risk allocation register to deal with key contractual risk areas such as planning, site availability, markets, process residues, Landfill Tax and Landfill Allowances. Details of this are included for reference in section 5.1 of this FBC. There are some key project risks which have been removed as a result of the delay in the procurement process. In summary terms these are listed below:

Planning – all sites for the new facilities are owned by the Council, have secured planning permissions, and are outside their planning judicial review periods.

Environmental Permit – the environmental permit for the key waste treatment site at South Kirkby was submitted in February. The Environment Agency formally issued the Environmental Permit to Shanks on 29 June 2012. The judicial review period for the South Kirkby permit lapsed on 28 September 2012 and there have been no objections.

Waste Treatment Facility Designs – these are significantly advanced such that following financial close there will be a limited time period prior to construction works commencing. This should ensure that all the new facilities can be delivered during .

Glasshoughton HWRC – the Council has completed the construction of the access road to the proposed HWRC at Glasshoughton thus opening up the site for development.

Denby Dale Road Redevelopment – to provide service continuity when the Denby Dale Road HWRC and TLS is closed for re-construction the waste PFI contractor has secured a lease for a site at Calder Vale Road in central Wakefield for use as a temporary HWRC and TLS. In addition planning permission for the temporary facilities has also been secured.

LATS – the risks associated with LATS have significantly decreased with the proposals to abolish LATS in 2013. It is anticipated that there will be a deficit during the first two years of the waste PFI contract which will be covered by the Council as the new waste treatment facilities will not be available.

Waste PFI Project

Final Business Case


RDF Offtake Market Failure –

Ferrybridge Permit Failure –

Economic Reinstatement Test –

The waste PFI project is one of the Council‟s highest risk projects and as such has always required careful and pro-active management. From the Council‟s Executive down, management of the risks associated with the waste PFI project are held at a number of levels throughout the Council. From the early days of the procurement process the Council established a Project Board and PMT to ensure the waste PFI project was delivered in a timely and efficient manner. Both levels of management have held their own risk registers to ensure that all the risks are managed effectively and at the correct level. Copies of the risk registers are included at Appendix 4. The project management followed the principles established in PRINCE 2 and the establishment of the Project Board and the PMT ensured that the Council was able to deal effectively with emerging issues that developed during the process. In addition to the principles established in PRINCE 2 the Council has subjected the waste PFI project to the 4ps Gateway review process. Gateways 1, 2 and 3 have been completed. Gateway 3 (the Investment Decision) was undertaken during January 2008. As a result of project delays there have been no further Gateway reviews to date. Following the downturn in the economic climate in 2008/09 a number of changes have occurred within the waste PFI project requiring a further level of risk management to be undertaken. The Council has continuously updated the changes in risk profile throughout the procurement process. The waste PFI contract was originally drawn up on the basis of Standardisation of PFI Contracts Version 3 (SoPC3). Following discussions with the WIDP commercial team during the procurement process, where appropriate to do so, the waste PFI contract has subsequently been updated to conform to certain provisions of the following standard documents:

Waste PFI Project

Final Business Case


(i) Standardisation of PFI Contracts Version 4 (SoPC4); (ii) Local Authorities Supplement; (iii) 4ps waste management procurement pack (as appropriate); (iv) 2010 WIDP standard form contract (as appropriate); and (v) the former standard BSF drafting (as appropriate). A number of meetings have been held with the WIDP commercial team regarding derogations from standard documentation and this FBC includes the draft derogations table at Appendix 6. The Payment Mechanism has been developed using the principles of the WIDP guidance tailored to the Council‟s project specific requirements. Full details of the Payment Mechanism are set out at section 5.5 and Appendix 11. The Initial Service Output Specification and the Full Service Output Specification have been developed using the 4ps waste management procurement pack tailored to the Council‟s project specific requirements. Full details of the output specifications are set out at section 4.3 and copies are included at Appendix 10. Under HM Treasury‟s consolidated budgeting guidance, departmental budgets (including Defra) follow National Accounts, which are prepared under the European System of Accounts (ESA95). The HM Treasury paper „Technical Guidance on the Application of the Standards used in the production of National Accounts to PFI and Similar Transactions‟ („the Guidance‟) describes the risk transfer tests that should be applied by Central Government Departments in determining whether or not their PFI projects will have to come „on balance sheet‟ for National Accounts purposes. The Council has undertaken an assessment of this waste PFI project against the Guidance and determined that on the basis of the risk transfer tests performed, it is likely that the waste PFI project meets the criteria for being „off balance sheet‟ for National Accounting purposes. The ESA95 questionnaire response is provided in Appendix 19.

1.6 Project Team and Governance

The Council is a Unitary Authority with responsibility for waste collection and disposal. The legal context for the waste PFI project is identified at length in section 6.2 of this FBC which sets out the „vires‟ context in which the procurement has been conducted. The Council management structure is led by the Cabinet supported by its CMT. Management of the waste PFI project itself has been undertaken following PRINCE 2 principles including the establishment of a Project Board and PMT. The PMT has been supported by both internal and external advisors with significant expertise that is appropriate to the scale of the waste PFI project. The external advisors are experts in their individual fields with significant experience in the waste PFI market. Full details of the project management and governance are set out in section 6.

1.7 Sites, Planning and Design

The Council established a site for the key waste treatment facilities in the south of the District at South Kirkby early on in the waste PFI project. The Council also identified sites at Denby Dale Road, Welbeck and Glasshoughton for other facilities. These sites

Waste PFI Project

Final Business Case


are owned by the Council, planning permission has been obtained and the judicial review period for each planning permission has expired. To satisfy the planning permission for South Kirkby an early works programme to „prove‟ the three existing mine caps was undertaken and completed in November 2011. In addition the Council has completed the construction of a new access road to the proposed HWRC at Glasshoughton. Full details in relation to sites and planning are set out in section 7. The design of the sites has followed the concepts of „form follows function‟ and is in keeping with the adjacent landforms surrounding the sites. Special attention has been given to the Education Centre and office accommodation at South Kirkby, The Education Centre will be used to promote waste minimisation and education sessions and other public usage. On completion of the main facilities at South Kirkby the Council‟s contract management staff will co-locate with the waste PFI contractor‟s operational staff. In addition to the key waste treatment facilities being provided at South Kirkby the waste PFI contract also includes for the provision of a small collection depot to house the Council‟s collection fleet which is currently located at a separate Council depot at South Kirkby.

1.8 Cost, Budgets and Finance

The Council has assessed the affordability of the waste PFI project by comparing the planned costs of the waste PFI contractor‟s solution against the Council‟s available budget over the whole term of the waste PFI contract. A sinking fund will be used to smooth the effect of any timing differences so that the Unitary Charge is fully financed by the end of the contract term. The costs and wasteflow assumptions included within the waste PFI contractor‟s Financial Model have been the subject of review by the Council‟s technical team to ensure credibility and reasonableness, based on their knowledge and market intelligence of the waste sector. The Council understands that the current affordability position of the waste PFI contractor is subject to external factors, for example interest swap rates which are continuously being reviewed with the waste PFI contractor during this final stage of the procurement process. The Council is confident, based on current swap rates, that the Financial Model does include sufficient buffer to mitigate against any increases in swap rates. However any additional funding that may be required to deliver the waste PFI project will be secured from Council resources as delivery of the waste PFI project remains a high priority for the Council. The Council has assessed the likelihood of the waste PFI project to deliver VfM in accordance with HM Treasury guidance throughout the procurement stage. A series of ongoing checks has been undertaken in the form of a quantitative evaluation (using the HM Treasury VfM Model) and a qualitative evaluation including the quality of competition, risk sharing, stability of costs and financial flexibility (included in section 8). In addition the Council has assessed VfM against several non-PFI delivery models including a “do minimum” option which are set out in section 8.7. The VfM analysis has

Waste PFI Project

Final Business Case


been carried out at a number of key stages during the procurement process and the final version was updated in November 2011. This final version demonstrates that the PFI option remains the VfM solution for the Council. A copy of the final VfM report is included in Appendix 18 to this FBC.

1.9 Stakeholder Communications

The Council‟s MWMS was approved following a comprehensive consultation process involving the Council‟s internal departments, external authorities, the private sector and the general public. During the procurement process Elected Members and the public have been continually updated on the progress of the waste PFI project. Following the appointment of the VT Consortium as Preferred Bidder a number of joint consultation events took place throughout the District, but particularly around the South Kirkby area which will include the site for the key waste treatment facilities. As a result of the consultation process there has been no organised challenge to the proposals from the general public. The waste PFI project continues to receive support from all political parties within the Council. VT and the Council subsequently established a Community Liaison Group in South Kirkby, including local Members, members of the local Town Council, and representatives from the general public to ensure communication channels are maintained during the construction and operational phase. Following the introduction of Shanks to the preferred bidder consortium, the South Kirkby Community Liaison Group meetings have continued with Shanks taking the lead role. Approximately 30 members of staff from the Council will transfer to Shanks Waste Management Limited as Operating Sub-contractor under the TUPE regulations. These staff members and trade union representatives have been constantly advised of progress and issues during the procurement phase. VT, Babcock, Shanks and the Council have issued a number of press releases and related articles to keep the general public aware of the progress and changes during the procurement process. Despite the severe delays in the overall procurement process the Council has consistently stood behind its original decision to deliver the MWMS through the PFI route. Full details in relation to stakeholder communications are set out at section 9.

1.10 Timetable

The Council originally appointed the VT Consortium as Preferred Bidder in November 2007. Subsequent changes have been made to the preferred bidder consortium during the past three years through acquisitions and joint working arrangements which have resulted in the current Preferred Bidder Consortium being led by Shanks since February 2011. The Council and Shanks are now working to a programme to reach financial close by 30 November 2012. Based on the above programme it is anticipated that the Initial Service Period will commence in January 2013. Construction of the key waste treatment facilities at South

Waste PFI Project

Final Business Case


Kirkby will commence in May 2013 and the Full Service Period will commence in August 2015. A more detailed programme is set out in section 10.

Waste PFI Project

Final Business Case


2 Background

2.1 Introduction

The current status of the Council, the District and changes made since the OBC was submitted are set out in the following sections. The sections below also set out the Council‟s current service delivery arrangements together with the performance of the existing services.

2.2 Details of Key Characteristics of Area and Authority

The District covers an area of approximately 350km2 in West Yorkshire with two thirds of the District being rural. The Council‟s population is in the region of 323,900 compared with that of approximately 320,000 at OBC stage. The Council currently collects from approximately 146,770 households compared with approximately 140,000 at OBC stage. The District is at the centre of the UK‟s transport network and is well served by the national road network, with major motorways running north-south (M1) and (A1) and east-west (M62). The rail network is also well established with the east coast mainline running through Wakefield. The Council has Unitary Authority responsibilities for waste management and therefore acts as both the WCA and WDA. The Council is made up of 21 Wards with 3 local Members per Ward. Since 1986 the Council has been a Labour controlled authority and this was the case when the OBC was submitted in 2004. Following the local elections in May 2012, control of the Council continues to rest with Labour. The current political make-up of the Council is as follows: Labour 52 seats Conservatives 11 seats Executive functions of the Council rest with the Cabinet which is led by the Leader of the Council, Cllr Peter Box CBE, together with 6 Cabinet Members representing different service areas. In 2011/12 the Council collected in the order of 166,350 tonnes of municipal waste which is anticipated to increase through additional housing growth during the next 25 years to around 210,000 tonnes per year. The 2011/12 out turn waste flow figures follow a falling trend over the past few years which is now showing signs of bottoming out.

Waste PFI Project

Final Business Case


2.3 Analysis of Waste Arising

Table 2.1 Historic Waste Arisings

Year WCA Household Collected Waste (tonnes)*

WCA Collected Commercial Waste (tonnes)**

HWRC Collected Household Waste (tonnes)***

Other Municipal Waste****

Total Municipal Waste Arising

%

Change

2004/05 129,545 26,699 36,410 10,735 203,389

2005/06 127,946 25,409 34,035 10,460 197,850 -2.8

2006/07 127,512 21,245 37,153 8,926 194,836 -1.5

2007/08 123,267 22,354 34,902 9,212 189,735 -2.7

2008/09 117,812 19,441 34,304 8,544 180,101 -5.3

2009/10 114,352 15,456 34,572 9,132 173,512 -3.8

2010/11 115,304 12,610 33,249 9,826 170,989 -1.5

2011/12 110,569 12,884 32,457 10,439 166,349 -2.8

*Kerbside collected waste ** Includes waste from gullies *** HWRC waste including inert and gypsum **** All other waste arisings

The historic reduction in waste arisings as set out in Table 2.1 above are similar to those generally in the Yorkshire and Humberside region and more generally on a national basis.

Projected Arisings

Table 2.1 demonstrates a period of negative waste growth from 2005/06 to 2011/12. The growth in the number of additional households within the District is projected to be 1600 per annum (Regional Spatial Strategy May 2008). However, this increase in households has been adjusted in the early years to reflect the economic downturn and reduced house building (2011/12 800 households, 2012/13 1000 households, 2013/14 1200 households, 2014/15 1400 households, 2015/16 onwards 1600 households).This amounts to 1.1% of the existing stock of approximately 145,800 properties. This growth in housing has therefore been added to the existing housing stock each year to 2037/38. The result is an overall small percentage growth in projected waste arisings of 0.5% in the early years, increasing to 0.8% by the end of the waste PFI contract as demonstrated in Table 2.2. For the purposes of waste flow modeling the Council and the waste PFI contractor have agreed to base the Waste Flow Model on the 2010/11 February arisings projected to the end of 2010/11. This was agreed to use the most up to date information available at the time and has been the basis of the waste flow modeling since. Waste Flow Model reflects these agreed base arisings. The tonnages set out in Table 2.2 are consistent with Waste Flow Model version 19. A copy of of the Waste Flow Model is included at Appendix 14.

Waste PFI Project

Final Business Case


Table 2.2 Projected Arisings

Year WCA Household Collected Waste (tonnes)*

WCA Collected Commercial Waste (tonnes)

HWRC Collected Household Waste (tonnes)**

Other Municipal Waste ***

Total Municipal Waste Arisings

%

Change

2011 115,263 12,394 33,448 9,953 171,058 0.5%

2012 116,047 12,407 33,675 9,991 172,120 0.6%

2013 116,988 12,419 33,948 10,037 173,392 0.7%

2014 118,086 12,432 34,267 10,089 174,873 0.9%

2015 119,340 12,444 34,631 10,148 176,563 1.0%

2016 120,595 12,457 34,995 10,207 178,253 1.0%

2017 121,849 12,469 35,359 10,266 179,943 0.9%

2018 123,104 12,482 35,723 10,325 181,633 0.9%

2019 124,358 12,494 36,087 10,384 183,323 0.9%

2020 125,613 12,506 36,451 10,443 185,013 0.9%

2021 126,867 12,519 36,815 10,502 186,704 0.9%

2022 128,122 12,532 37,179 10,561 188,394 0.9%

2023 129,377 12,544 37,543 10,620 190,084 0.9%

2024 130,631 12,557 37,907 10,679 191,774 0.9%

2025 131,886 12,569 38,271 10,738 193,464 0.9%

2026 133,140 12,582 38,635 10,797 195,155 0.9%

2027 134,395 12,594 38,999 10,856 196,845 0.9%

2028 135,649 12,607 39,363 10,915 198,535 0.9%

2029 136,904 12,619 39,728 10,975 200,225 0.9%

2030 138,158 12,632 40,092 11,034 201,916 0.8%

2031 139,413 12,645 40,456 11,093 203,606 0.8%

2032 140,667 12,657 40,820 11,152 205,296 0.8%

2033 141,922 12,670 41,184 11,211 206,987 0.8%

2034 143,176 12,683 41,548 11,270 208,677 0.8%

2035 144,431 12,695 41,912 11,329 210,367 0.8%

2036 145,686 12,708 42,276 11,388 212,058 0.8%

2037 146,940 12,721 42,640 11,447 213,748 0.8% *Kerbside Collected Waste ** HWRC Waste including inert and gypsum *** All other waste arisings

2.4 Details of Current Arrangements for Collection and Disposal

2.4.1 Waste Collection

The Council as a Unitary Authority has responsibility for both waste collection and waste disposal. During 2011/12 the Council collected approximately 166,350 tonnes of

Waste PFI Project

Final Business Case


municipal waste comprising 144,350 tonnes of household waste collected at the kerbside and through the HWRC network from approximately 146,770 households,, 11,030 tonnes of commercial waste collected through a number of arrangements with public and private sector clients and 10,970 tonnes of inert waste. During the period from 2004 through to 2007 kerbside collections involved a number of different material streams including residual waste in 240/140 litre bins, garden waste in 240/140 litre bins and paper and card in 240/140 litre bins or via 55 litre boxes. These different collection profiles resulted from historic data and infrastructure available during this period. Residual waste was collected on a weekly basis and paper and card and garden waste collected on a monthly basis. Over the past few years the Council has reviewed its kerbside collection arrangements to ensure that ultimately they align with the requirements of the waste PFI contract. The Council has also been proactive in advance of the waste PFI contract coming on line to maximise recycling in the District and minimise its exposure to the LATS. The Council implemented a new alternate weekly collection service during 2007/08 to increase recycling in the District. This current collection strategy is outlined below: Residual waste 240 litre bin Garden waste 240 litre bin Paper and card 140/240 litre bin ISMDR 55 litre box Each of these streams is collected on an alternate weekly basis. ISMDR and paper and card are collected on a fortnightly basis on the alternate weeks to those used for the residual waste and garden waste collections. To ensure compatibility with the waste PFI contract when the waste PFI contractor‟s key waste treatment facilities are available at South Kirkby the Council‟s collection arrangements will be modified. This will involve combining the paper and card with the ISMDR collected at the kerbside into one fortnightly collection using 240 litre bins. The 55 litre box will then be withdrawn from the collection service.

2.4.2 Waste Disposal

All waste currently collected by the Council, which is not recycled, is disposed of to landfill at the Welbeck and Hazel Lane Quarry (Catplant) landfill sites. The Welbeck site is operated and managed by a private sector company, WWML, part of WRG. The Hazel Lane Quarry at Hampole, Doncaster is operated by Catplant Ltd which provides void space for WRG. The Council has a Primary Contract with WWML at the Welbeck landfill site. This Primary Contract is a „take or pay‟ contract based on the delivery of a minimum

of residual waste, and has a built in mechanism to reduce the minimum tonnage to . This reduction has not yet been implemented. In addition the Primary Contract includes provision for the treatment of up to of garden waste together with inactive waste. The Primary Contract terminates in November 2013.

Waste PFI Project

Final Business Case


In addition to the Primary Contract, the Council has an Interim Contract (Interim II) with WRG for landfill of residual waste above the minimum tonnages in the Primary Contract. Interim II has no guaranteed tonnage provisions. Interim II has been operated on a rolling twelve month period during the procurement process and will be extended beyond the existing November 2012 expiry date. Both the Primary Contract and Interim II contain assignment provisions which will enable them to be transferred to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period to ensure a smooth transition of services to the waste PFI contractor. The waste PFI contract includes obligations for the waste PFI contractor to comply with the existing requirements of the Primary Contract and Interim II, including the minimum tonnage provisions. Following expiry of the Primary Contract and Interim II, the waste PFI contractor will be responsible for obtaining replacement landfill contracts in accordance with the market testing provisions in the waste PFI contract. Welbeck has approximately of landfill void space and has a planning permission for landfill up to 2018 by which time the landfill site has to be restored. Given the rate of fill and the anticipated reduction in the amounts to be landfilled in the future, the existing capacity should be sufficient for the foreseeable future. In addition to the maximum tonnages of garden waste delivered to WWML under the Primary Contract, the Council also has an additional contract in place with

for the treatment of garden waste over the maximum tonnage allowed under the Primary Contract. This contract has been extended to the end of March 2013. This contract contains assignment provisions which will enable it to be transferred to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period to ensure a smooth transition of services to the waste PFI contractor.

2.4.3 Recycling Contracts

The Council has a contract in place with for disposal of the kerbside collected ISMDR using a 55 litre box. The Council currently receives an income stream from this contract. This contract commenced in October 2007 and will be extended beyond the existing November 2012 expiry date. This contract contains novation provisions which will enable it to be novated to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period to ensure a smooth transition of services to the waste PFI contractor. Following expiry of this novated contract it is anticipated that the waste PFI contractor will enter into a new contract until the new MRF becomes operational at South Kirkby following which the waste PFI contractor will be required to make its own arrangements for the disposal of FSMDR in accordance with the waste PFI contract. The Council has a contract for kerbside collected paper and card with

. The kerbside collections of paper and card are delivered to the existing TLSs at Denby Dale Road in Wakefield and Carrwood Road in Castleford.

collect the paper and card from these TLSs. The contract with currently terminates on 31 January 2012 but this has been initially extended to 31

Waste PFI Project

Final Business Case


January 2013. The Council is currently arranging for further contract extensions to tie in with the revised financial close programme and to allow for a smooth transition of services to the waste PFI contractor. This contract contains novation provisions which will enable it to be novated to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period to ensure a smooth transition of services to the waste PFI contractor. Following the expiry of this novated contract it is anticipated that the waste PFI contractor will enter into a new contract until the new MRF becomes operational at South Kirkby following which the waste PFI contractor will make arrangements for the disposal of FSMDR in accordance with the waste PFI contract. In addition to the contracts with and outlined above the Council has a number of other contracts for disposing of recyclable materials collected at HWRCs and Bring Sites throughout the District. Arrangements have been made with these external contractors to initially extend the existing contracts until 31 January 2013. The Council is currently arranging for further contract extensions to tie in with the revised financial close programme and to allow for a smooth transition of services to the waste PFI contractor. Where these contracts contain novation provisions, the contracts will be novated to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period. Where these contracts do not contain novation provisions, the Council and the waste PFI contractor have made arrangements with the relevant contractors to enable Shanks Waste Management Limited as Operating Sub-contractor to continue with these short term arrangements from commencement of the Initial Service Period. The Council has an agreement with , for the collection, processing, recycling and disposal of plastic bottles and cans from existing Bring Sites within the District. collect plastic bottles and cans and separate them at a small recycling facility in Wakefield. This arrangement between the Council and will be terminated on commencement of the Initial Service Period and the staff will transfer to Shanks Waste Management Limited as Operating Sub-contractor under TUPE.

2.5 Performance of Existing Service

Recycling and Composting Performance

Table 2.3 sets out the historic recycling and composting performance in Wakefield. Prior to 2007/08 the Council offered a limited recycling service collecting paper and card and a separate garden waste collection to some households in the District. The paper and card service started in 2002/03 and provided 24,000 households in the District with a 240 litre bin and 36,000 households with a mix of 55 litre boxes and sacks. This was extended to an additional 48,000 households with 140 litre bins and replaced 12,000 properties which had sacks with 140 litre bins from 2004/05 onwards. Collections were on a monthly basis. The garden waste collection started in 2002/03 serving 36,000 households with 240 litre bins on a fortnightly basis from spring to autumn with a six-week collection cycle over the winter. This had developed by

Waste PFI Project

Final Business Case


2006/07 to providing an additional 48,000 households with 240 litre bins with frequency of collection being the same as in 2002/03.

Table 2.3 Historic Household Waste Recycling and Composting Performance

Year Recycling (tonnes)

Recycling % of Household Waste

Composting (tonnes)

Composting % of Household Waste

2004/05 18,157 11.1% 16,676 10.2%

2005/06 19,840 12.2% 15,915 9.8%

2006/07 22,017 13.4% 17,928 10.9%

2007/08 23,495 14.8% 17,978 11.3%

2008/09 32,599 21.4% 21,637 14.2%

2009/10 35,884 23.9% 22,952 15.3%

2010/11 37,305 25.0% 22,449 15.0%

2011/12 36,725 25.4% 20,052 13.9%

(Note: this is all household waste i.e. includes Bring Site and HWRC tonnages) The Council implemented a new alternate weekly collection service during 2007/08 to increase recycling in the District. This current collection strategy is outlined below: Residual waste 240 litre bin Garden waste 240 litre bin Paper and card 140/240 litre bin ISMDR 55 litre box Each of these streams is collected on an alternate weekly basis. ISMDR and paper and card are collected on a fortnightly basis on the alternate weeks to those used for the residual waste and garden waste collections. The introduction of this alternate weekly collection scheme has resulted in a significant improvement in the Council‟s recycling and composting rates for household waste. Table 2.4 demonstrates the improvements in recycling and composting rates since 2007/08. Table 2.4 Recycling and Composting Performance for Household Waste Since New Alternate

Weekly Collection Scheme Rollout Commenced

2007/08 2008/09 2009/10 2010/11 2011/12

Recycling Rate 14.8% 21.4% 23.9% 25% 25.4%

Composting Rate 11.3% 14.2% 15.3% 15% 13.9%

Combined Recycling and Composting Rate

26.1% 35.6% 39.2% 40% 39.3%

Waste PFI Project

Final Business Case


The increase in overall recycling and composting performance is thought to be primarily attributable to the addition of the new recyclable materials, the expansion of the garden waste and recyclables scheme, and the move to alternate weekly collections of residual waste. The waste flow modelling for the procurement reflects this decision. The Council has been involved with the WRAP in respect of its communications campaigns for Real Nappies, Home Composters (2004) and Love Food Hate Waste (2009/10). WRAP communications teams were also consulted through the WIP (LASU) project for advice when the Council was considering the best methodology to use for publicity campaigns, use of door-step engagement teams and assessing best container size. These initiatives were all aimed at maximising participation in recycling and capture of recyclate. WIP funding has also been used to carry out baseline compositional analysis in 2004 and 2005. Residual Waste Treatment

Table 2.5 presents historic information relating to the disposal of residual waste and the quantity of municipal waste diverted from landfill. Between 2002/03 and 2010/11 the total arisings of municipal waste have fluctuated, however in the last seven years an annual decrease in arisings has occurred. Overall between 2002/03 and 2010/11 there has been a decrease in municipal waste arisings of approximately 17%. Within this time period the tonnage of waste recycled and composted amounts to an increase of approximately 217% since 2003/04. The only waste stream to be thermally treated is clinical waste, accounting for the low tonnage of waste thermally treated. Table 2.5 Historic Municipal Waste Arisings

Year Total Municipal Waste Arising (tonnes)

Recycling & Composting (tonnes)

Thermal Treatment (tonnes)

Municipal Waste Landfilled (tonnes)

Municipal Waste Diversion (%)*

2004/05 203,389 34,833 102 168,454 17.18%

2005/06 197,850 35,755 270 161,825 18.21%

2006/07 194,836 39,945 191 154,700 20.60%

2007/08 189,735 41,473 253 148,009 22.00%

2008/09 180,101 54,236 340 125,525 30.30%

2009/10 173,512 58,836 339 114,337 34.10%

2010/11 170,989 59,754 330 110,905 35.14%

2011/12 166,349 56,777 333 108,065 35.04%

% Municipal waste not landfilled

The quantity of BMW arising in the municipal waste stream and the resulting quantity of BMW landfilled are presented in Table 2.6. Clearly the total BMW arising follows the

Waste PFI Project

Final Business Case


pattern of decreasing municipal waste arisings over the past few years. Table 2.6 shows that since the introduction of the Landfill Allowances in 2005/06 the quantity of BMW landfilled has reduced by over 31%.

Table 2.6 Historic BMW Arisings

Year Total BMW Arising (tonnes)

BMW Landfilled (tonnes)

LATS Allowance

Surplus/Deficit

2002/03 138,248

2003/04 135,061

2004/05 138,305

2005/06 134,990 104,468 131,657 28,884

2006/07 132,853 98,382 123,404 25,174

2007/08 129,020 95,149 112,399 18,606

2008/09 122,468 80,372 98,644 18,272

2009/10 117,756 73,495 82,137 16,142

2010/11 115,750 71,564 72,995 1,431

2011/12 112,950 72,052 63,852 -8,200

Note: Data on BMW landfilled has not been back calculated for years prior to LATS

2.6 Waste Composition

Table 2.7 outlines the kerbside collected household waste streams composition assumptions on which this FBC is based. The national assumptions and the assumptions used at the OBC stage are also detailed and the % differences shown. The Council did not use the national assumptions for its OBC development because more up to date regional data was available to inform the modelling undertaken at that time. The Council has had further waste compositional analyses of the kerbside collected household waste streams undertaken since the OBC submission. This data has informed the change in composition assumptions adopted between OBC and FBC. This data has been used alongside known composition data for waste streams where source separation takes place (e.g bring banks, HWRCs, and commercial recycling). The waste PFI contractor has included in its Waste Flow Model, replicated in the FBC, compositional analysis adjustments to reflect the results of survey work from the Yorkshire and Humber Regional Trade Waste Compositional Analysis project carried out by MEL Research in March 2006 for a small tonnage of trade collected waste. The residual waste at HWRCs has also been split according to the analysis carried out by MEL in a survey of Wakefield‟s HWRCs in November 2004. Further survey work in 2008/09 has also influenced and reinforced the composition in Wakefield.

Waste PFI Project

Final Business Case


The Council‟s kerbside collection proposals during the Initial Service Period and Full Service Period are set out in section 1.2. In addition to the kerbside collection the Council also collects commercial waste as required. The Council is not taking any composition risk in relation to its collection and delivery arrangements and as such composition risk will be the responsibility of the waste PFI contractor.

Table 2.7 Waste Composition Assumptions

Waste Stream National Assumption (%)

Council Assumption at OBC*

Waste PFI Contractor Assumption at FBC

Difference between Council‟s OBC and Contractors FBC Assumption (%)

Garden Waste 20%

Paper and Card

18% 33%

Kitchen Waste 17%

General Household Sweepings

9% 6%

Glass 7% 9%

Wood 5%

Scrap Metal/White Goods

5%

Dense Plastic 4% 6%

Plastic Film 4% 5%

Textiles 3% 2%

Metal Packaging

3%

Nappies 2%

Soil 3%

Miscellaneous Combustibles

8%

Miscellaneous Non Combustibles

2%

Ferrous Metals 6%

Non Ferrous Metals

2%

Putrescibles 22%

Hazardous

Waste PFI Project

Final Business Case


Waste Stream National Assumption (%)

Council Assumption at OBC*

Waste PFI Contractor Assumption at FBC

Difference between Council‟s OBC and Contractors FBC Assumption (%)

WEEE

Total 100% 100%

Note: Additional material streams to those specified in the guidance document. *Kerbside Household Waste Composition

Waste PFI Project

Final Business Case


3 Strategic Waste Management Objectives

3.1 Introduction

The OBC submitted in August 2004 clearly outlined the strategic objectives at the time the OBC was written together with the rationale for the decisions taken to achieve those objectives. The objectives and rationale are reproduced below, updated to reflect the position reached by the Council in the intervening period. In this section 3 all the data set out in Tables 3.1 - 3.11 (as appropriate) have been compiled from Waste Flow Model

. It is anticipated that some minor changes may be made to the Waste Flow Model prior to financial close. These changes will not be significant requiring amendments to this FBC.

3.1.1 The EU Landfill Directive

The EU Landfill Directive seeks to prevent or reduce the possible negative environmental effects of landfill by introducing uniform standards throughout the European Union. The EU Landfill Directive sets specific standards for the reduction of BMW disposed of to landfill and fines will be levied if these standards are not achieved:

By 2010, to reduce BMW disposed of to landfill by 25% of 1995 baseline figures;

By 2013, to reduce BMW disposed of to landfill by 50% of 1995 baseline figures; and

By 2020, to reduce BMW disposed of to landfill by 65% of 1995 baseline figures.

The above reflects that the UK applied for and was granted a 4-year derogation to the targets specified within the EU Landfill Directive.

3.1.2 UK Government Policy

The UK Government‟s response to the EU Landfill Directive and other political pressures was manifested in several target-setting initiatives. The UK Government passed the WET Act through parliament that enacted the LATS. The LATS set each WDA a statutory target for the amount of BMW permitted to be sent to landfill, which is matched by an allocation of the respective quantity of Landfill Allowances for each year. Initially under the LATS regime penalties were to be levied against those WDAs that exceeded their Landfill Allowances, estimated to be in the order of £150 per tonne. It is noted that in the Government Review of Waste Policy in England 2011 the LATS regime will be abolished in 2013. The driver to the reduction in waste to landfill will now be through Landfill Tax which it is currently proposed to increase from the 2011/12 figure of £56/tonne to £80/tonne by 2014.

Waste PFI Project

Final Business Case


Prior to the WET Act, the DETR issued its national targets for the recycling and recovery of municipal waste in its publication Waste Strategy 2000. These were as follows:

To recycle or compost at least 25% of household waste by 2005; To recycle or compost at least 30% of household waste by 2010; To recycle or compost at least 33% of household waste by 2015; To recover value from 40% of municipal waste by 2005; To recover value from 45% of municipal waste by 2010; and To recover value from 67% of municipal waste by 2015.

Also, to provide incentives to local government to implement the targets set in Waste Strategy 2000, the DETR issued BVPIs in March 2001 setting out short-term statutory performance standards for individual local authority recycling levels. The performance standard for the Council was to recycle 18% of household waste by 2005/06. Waste Strategy 2007 subsequently set higher national targets than in 2000 as indicated below:

recycling and composting of household waste – at least 40% by 2010, 45% by 2015 and 50% by 2020; and

recovery of municipal waste – 53% by 2010, 67% by 2015 and 75% by 2020.

The Government Review of Waste Policy in England 2011 endorsed the revised Waste Framework Directive target to recycle 50% of waste from households by 2020. It also abolished some data reporting requirements and some targets and legislative burdens, including the abolition of the LATS from 2013. However the review did express the government‟s commitment to divert waste from landfill and offered support for the provision of recovery infrastructure as a renewable energy source.

3.1.3 Strategy and Objectives

The Council‟s objective is to ensure the sustainable management of the waste stream, significantly increasing levels of recycling and diversion of BMW away from landfill. In order to achieve this objective the Council has set the following key targets during the Full Service Period for its waste PFI project:

Provide processing capacity for kerbside-collected FSMDR and organic material that enables their recycling or composting with

; Provide, modify and operate HWRCs that achieve at least recycling at

each HWRC; Achieve a minimum of 52% overall recycling and composting of household

waste by 2015; and Meet the EU Landfill Directive targets set for Wakefield for diversion of BMW

through a combination of recycling and/or composting and, if necessary, waste recovery. The anticipated performance against the LATS targets are shown in Table 3.1. Although the LATS regime is to be abolished from 2013 the targets shown in Table 3.1 are now replicated as a Contract Target in the waste PFI contract.

Waste PFI Project

Final Business Case


Table 3.1 Anticipated performance against contracted landfill allowance targets

Year Landfill Allowance

Contracted Landfill

Allowance

BMW Landfilled

Allowance Available (required)

tonnes per annum

2010/11

2012/13

2019/20

Note: 2010/11 target year has been included for information only

In order that the service outputs of the waste PFI project meet the national targets of both Waste Strategy 2007 and those driven by the WET Act, NIs and local performance indicators, and deliver the high levels of recycling and composting that the Council aspires to achieve as part of its own strategy, the key elements of the waste PFI project are envisaged to be as outlined below. In addition to the 52% Household Waste Recycling Target from 2015/16 onwards the Contract Targets over the 3 years 2012/13, 2013/14 and 2014/15 are , and

respectively. The waste PFI contract is likely to commence at the beginning of 2012/13 and the ability of the waste PFI contractor to influence these targets is limited until the key waste treatment facilities are operational. It is therefore accepted that achieving these Contract Targets will come primarily through the alternate weekly collection arrangements outlined elsewhere in this document. It should be noted that within the waste PFI contractor‟s waste flow model the anticipated household waste recycling and composting performance is approximately

when all the key waste treatment facilities are fully operational. This anticipated performance is dependent on the digestate from the AD process being sent for beneficial use and therefore counting towards the recycling calculation.

3.1.4 Kerbside Recycling Schemes

The availability of kerbside recycling services has been extended to cover all viable households, and alterations to the collection of residual waste have been made such that participation in recycling schemes is strongly encouraged. Section 2.4.1 outlines the changes made to the kerbside collection arrangements since the submission of the OBC and also outlines proposed changes to compliment the waste PFI contract when the key waste treatment facilities are available. One change to the kerbside collection profile submitted as part of the OBC is to remove the proposal to collect „biowaste‟ (combined kitchen and garden waste) and to retain the existing garden waste only profile. This change was agreed in consultation with the VT Consortium at that time and better reflected VT‟s technical solution for treating residual waste through AD. The position has not changed since Shanks joined the

Waste PFI Project

Final Business Case


Preferred Bidder Consortium and the waste PFI project now includes for a separate kerbside collection of garden waste. Retaining the kitchen waste in the residual waste stream increases the potential for gas production through the AD process, thus enhancing energy production. This enables the South Kirkby site to be mostly self-sufficient in heat and power as well as providing a surplus of power to be fed back to the national grid as „renewable‟ energy, attracting Renewable Obligation Certificates, but also utilising surplus heat to dry the digestate.

3.1.5 Upgrading and Rationalising HWRCs

It is proposed that the existing HWRC network is replaced with a network of modern and appropriately sited facilities capable of receiving segregated waste and achieving at least 50% recycling and composting performance per HWRC. Section 1.4 identifies how the rationalisation of the HWRC network will take place under the waste PFI contract.

3.1.6 Composting and MRFs

The proposed enclosed windrow composting facility and MRF will provide processing capacity for the increased garden waste and FSMDR generated from the kerbside collection, and derived from the upgraded HWRCs and Bring Sites. The changes to the alternate weekly collection scheme following the Initial Service Period will deliver kerbside collected materials for recycling or composting with an anticipated

. It is anticipated that rejects from the composting process will be fed into the residual waste treatment facility. The enclosed windrow composting facility will be capable of producing a proportion of compost compliant with PAS 100, whilst the remainder will be manufactured to meet appropriate end user market specifications. This will assist in the achievement of an overall recycling and composting rate of a minimum of 52% of household waste by 2015. It is anticipated that with markets found for the digestate output from the AD process the recycling figures are anticipated to increase to around . The processing of FSMDR will be carried out through the MRF identified in section 1.4. Similarly garden waste collected at the kerbside or through the enhanced HWRC network will be treated through the enclosed windrow composting facility provided at the South Kirkby site as outlined in 1.4.

3.1.7 Residual Waste Treatment Plant

The residual waste will be processed through a residual waste treatment facility including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall. The post autoclave sorting system will achieve further separation of recyclables and „heavies‟ by wet sorting/floatation for recovery of recyclables and refinement of the organic rich fines fraction which will be treated by AD to recover a methane rich gas prior to its beneficial use on land. This process maximises the recovery of recyclable material from residual waste and facilitates the recovery of energy both directly through AD and indirectly through the supply of a RDF. The quantity of residual waste not suitable for recycling or recovery is

Waste PFI Project

Final Business Case


much reduced and so allows the Council to meet the requirements of the EU Landfill Directive. The pre-sort „dirty MRF‟ will separate recyclable material and the organic rich fines fraction from the residual waste. The non-recyclable material will be further refined to produce a RDF which is proposed to be treated at the new bio-fuel facility to be built by SSE Generation at Ferrybridge. The process flow diagram for the residual waste treatment plant is shown in detail at Appendix 25.

3.2 Municipal Waste Management Strategy

The Council‟s approved MWMS was incorporated within the OBC submitted in August 2004. Key parts of the strategy are set out elsewhere in this FBC. The Council has not updated the MWMS since it was prepared in 2003/04 but is currently in the process of reviewing the strategy linking through to the implementation of the waste PFI project.

3.3 Public Consultation

During the preparation of the Council‟s MWMS in 2003 the Council undertook a comprehensive consultation process to identify the best solution for delivering waste management in the District for the foreseeable future. The outcome of this consultation process was explained in detail in Appendix 6 of the MWMS submitted with the OBC. A summary of the consultation methodology is included below. The Council had a responsibility to provide information in order to see increased awareness of waste management issues. The Council‟s main message was one of social responsibility and was presented through the methods of engagement as set out in Table 3.2. The Council identified various forms of communication to maximise the effectiveness of the main message in the campaign “Re-thinking Rubbish in Wakefield” as set out in Table 3.2.

Table 3.2 Forms of Communication

Method Of Engagement

Public Community Voluntary

Waste Management

Industry

Elected Members

Staff Interested Groups

Newsletters- citizen

(138,000 distributed)

Document - 500

distributed

Press / media

Waste PFI Project

Final Business Case


Method Of Engagement

Public Community Voluntary

Waste Management

Industry

Elected Members

Staff Interested Groups

VIDEO-Roadshow/ meetings

Radio adverts

(4 weeks)

Area Panel (8)

Website

Workshops (3)

Local

Authorities

Telephone Helpline

Youth Assembly

Roadshows July/Aug (9)

MORI Survey (4000)

Since the submission of the OBC and the appointment of the VT Consortium as preferred bidder in November 2007 there have been a number of public consultation exercises details of which are set out in section 9.2.

3.4 Waste Minimisation

The Council‟s policies for waste minimisation were outlined in detail in Appendix 5 of the MWMS submitted with the OBC. The current waste minimisation plan is included in Appendix 5 of this FBC. The waste PFI contractor is required to assist the Council in promoting and development waste minimisation initiatives throughout the contract term. Service Output 1 of the Output Specification sets out in detail the waste PFI contractor‟s responsibilities in relation to waste minimisation and is summarised in section 4.3.1.

3.5 Recycling and Composting

The Council‟s objectives regarding recycling and composting performance are documented in the MWMS. The objective for recycling and composting set out in the MWMS was:

Waste PFI Project

Final Business Case


To exceed the Waste Strategy 2000 Targets (the most current strategy at the time of the preparation of the MWMS).

To achieve this, the Council proposed to:

Move to alternate weekly collections of residual waste; Introduce a enhanced recycling and organics collection service to the majority

of households in the District; and Procure an MBT solution for the treatment of residual waste, allowing

mechanical removal of any additional recyclable materials prior to biological treatment of the residual fraction reducing the biodegradable content of the residual waste.

Modelling undertaken at the time indicated that an MBT solution would allow the Council to exceed the existing Waste Strategy 2000 recycling and composting targets. The OBC built on the Waste Strategy 2000 objectives by setting minimum recycling and composting service requirements for the solutions to be submitted. These are presented in Table 3.3. Table 3.3 Minimum Recycling and Composting Targets (%)

Year Recycling/Composting (%)

2010 51%

2015 52%

The OBC pre-dated the Waste Strategy 2007 however the high targets set have meant that four years on the solution chosen is anticipated to meet and exceed the Waste Strategy 2007 recycling and composting targets of 45% and 50% respectively for 2015 and 2020. As a result of the delays in procurement of the waste PFI contract, the Council has not met its original 51% target by 2010. The output specifications for the waste PFI contract further specify the service requirements in relation to recycling and composting performance. These are specified in Table 3.4. Table 3.4 Household Waste Recycling Target

Contract Year Household Waste Recycling Target

2012/13

2013/14

2014/15

2015/16 and thereafter 52%

The collection at the kerbside of residual, recyclable and compostable waste will be undertaken by the Council. The treatment of all kerbside collected waste and garden

Waste PFI Project

Final Business Case


waste from HWRCs will be undertaken by the waste PFI contractor by means of its enclosed windrow composting facility, MRF, and residual waste treatment facilities. The recyclables at Bring Sites and HWRCs will be managed and marketed by the waste PFI contractor. The waste PFI contractor will meet the Household Waste Recycling Target and the BMW to Landfill Target to divert BMW from landfill through these proposed processes. The projected tonnages for recycling and composting are presented in Table 3.5.

Table 3.5 Projected Household Waste Recycling and Composting Performance

Year Total Municipal Waste Recycling (tonnes)*

Total HHW Recycling (tonnes)*

% of HHW Recycling

Total Municipal Waste Compost-ing tonnes)

Total HHW Compost-ing (tonnes)

% of HHW Compost-ing

% HHW Recycled & Compost-ing

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

Waste PFI Project

Final Business Case


Year Total Municipal Waste Recycling (tonnes)*

Total HHW Recycling (tonnes)*

% of HHW Recycling

Total Municipal Waste Compost-ing tonnes)

Total HHW Compost-ing (tonnes)

% of HHW Compost-ing

% HHW Recycled & Compost-ing

2033

2034

2035

2036

Notes: *Municipal waste recycling figures include digestate from the AD facilities and all HWRC inerts (household waste recycling does not include HWRC inerts).

The total tonnage of municipal waste arising over the waste PFI contract period is tonnes of which will be diverted ( of the total municipal waste

arisings). The tonnage of BMW arising over the waste PFI contract period is tonnes (based on 68% biodegradable content). Following treatment through the residual waste treatment facilities and accounting for all diversion from landfill, the waste PFI contractor calculates the biodegradable element of the tonnes of residual waste that will be landfilled is tonnes (i.e. of the landfilled tonnage is deemed biodegradable). Total diversion of BMW from landfill is therefore tonnes ( of total municipal waste content). Tables 3.6 and 3.7 set out the overall composting and recycling projections included in the waste PFI contract and compared against the equivalent projections anticipated at OBC stage. Table 3.6 Recycling Performance Comparison

Year PFI Contract OBC Stage

2012 32.1%

2013 31.9%

2014 31.7%

2015 31.6%

2016 31.5%

2017 31.4%

2018 31.3%

2019 31.3%

2020 31.2%

2021 31.1%

2022 31.0%

2023 30.9%

2024 30.8%

Waste PFI Project

Final Business Case


2025 30.7%

2026 30.6%

2027 30.6%

2028 30.5%

2029 30.4%

2030 30.3%

2031 30.3%

2032 30.3%

2033 30.3%

2034 30.3%

2035 30.3%

2036 30.3%

Table 3.7 Composting Performance Comparison


2012 24.6%

2013 24.4%

2014 24.3%

2015 24.3%

2016 24.2%

2017 24.2%

2018 24.1%

2019 24.0%

2020 24.0%

2021 23.9%

2022 23.9%

2023 23.8%

2024 23.8%

2025 23.7%

2026 23.7%

2027 23.6%

2028 23.6%

2029 23.5%

2030 23.5%

2031 23.5%

2032 23.5%

2033 23.5%

2034 23.5%

Waste PFI Project

Final Business Case


2035 23.5%

2036 23.5%

3.6 Landfill Objectives

The Council‟s objectives regarding landfill performance were first documented in the MWMS. The objectives for landfill performance set in the MWMS were:

To meet the Waste Strategy 2000 Targets (the most current strategy at the time of the preparation of the MWMS);

To treat all waste to reduce its environmental impact before sending it to landfill; and

to reduce the amount of BMW sent to landfill compared with the amount sent in 1995 by:

o 75% by 2010 o 50% by 2013 o 35% by 2020

To achieve these, the Council proposed to:

Move to alternate weekly collections of residual waste; Introduce an enhanced recycling and organics collection service to the majority

of households in the District; and Procure an MBT solution for the treatment of residual waste, allowing

mechanical removal of any additional recyclable materials prior to biological treatment of the residual fraction reducing the biodegradable content of the residual waste.

The OBC then built on the MWMS objectives by setting minimum BMW diversion requirements for the waste PFI project. These are specified in Table 3.8. Table 3.8 Minimum BMW Diversion Targets

Year Diversion of BMW (%)

2010 75%

2015 77%

2020 and thereafter 90%

The modelling undertaken by the waste PFI contractor indicates the anticipated tonnages of municipal waste, recycling and composting, thermal treatment of RDF and municipal waste landfilled throughout the contract period. These figures are presented in Table 3.9. The waste PFI contractor‟s solution intends to achieve these figures by continuation of the existing kerbside collection arrangements, improvement of selected HWRC sites, and use of an MBT technology solution through its residual waste treatment facility (including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall).

Waste PFI Project

Final Business Case


Table 3.9 Projected Municipal Waste Arisings

Year Total Municipal Waste Arising (tonnes)

Recycling & Composting (tonnes) *

Waste Used in producing energy (AD plant) (tonnes) & non energy recovery diversion

Municipal Waste Landfilled (tonnes)

Municipal Waste Diversion (%)*

2012 172,120

2013 173,392

2014 174,873

2015 176,563

2016 178,253

2017 179,943

2018 181,633

2019 183,323

2020 185,013

2021 186,704

2022 188,394

2023 190,084

2024 191,774

2025 193,464

2026 195,155

2027 196,845

2028 198,535

2029 200,225

2030 201,916

2031 203,606

2032 205,296

2033 206,987

2034 208,677

2035 210,367

2036 212,058

* Recycling and composting tonnages reflect recycling of HWRC inert waste

Waste PFI Project

Final Business Case


Table 3.10 sets out the BMW landfill projections included in the waste PFI contract and compared against the equivalent projections anticipated at OBC stage. During the first two years of the waste PFI contract, the new waste management facilities to be provided will be at construction stage and the waste PFI contractor will not be able to influence BMW diversion. By the time the new waste management facilities are commissioned the LATS will have been abolished. The Council has historically managed its LATS obligations and will continue to make appropriate arrangements for buying LATS allowances during the first two years of the waste PFI contract during which there will be a shortfall until the abolition of the LATS in 2013.

Table 3.10 BMW Landfill Projections and Comparison

Year Total BMW Arising (tonnes)*


Landfill Allowance

Surplus/ Deficit

2012 117,042

2013 117,907

2014 118,914

2015 120,063

2016 121,212

2017 122,361

2018 123,511

2019 124,660

2020 125,809

2021 126,958

2022 128,108

2023 129,257

2024 130,406

2025 131,556

2026 132,705

2027 133,854

2028 135,004

2029 136,153

2030 137,303

2031 138,452

2032 139,601

Waste PFI Project

Final Business Case


Year Total BMW Arising (tonnes)*


Landfill Allowance

Surplus/ Deficit

2033 140,751

2034 141,900

2035 143,050

2036** 89,403

*The BMW landfill figures are calculated using a methodology similar to that in WasteDataFlow/M-Beam. The data reflects recovery of digestate from the AD facilities and recycling of HWRC inerts. **A pro-rata calculation has been applied to the 2036 figures as the contract expires part way through the year.

Table 3.11 sets out the projected levels of landfill diversion included in the waste PFI contract and compared against the equivalent projections anticipated at OBC stage. Table 3.11 BMW Landfill Diversion Comparison


2012 75.4%

2013 75.2%

2014 74.9%

2015 74.8%

2016 74.7%

2017 74.5%

2018 74.4%

2019 74.3%

2020 74.2%

2021 74.0%

2022 73.9%

2023 73.8%

2024 73.7%

2025 73.6%

2026 73.5%

2027 73.3%

2028 73.2%

2029 73.1%

2030 73.0%

2031 73.0%

2032 73.0%

2033 73.0%

Waste PFI Project

Final Business Case



2034 73.0%

2035 73.0%

2036 73.0%

The improvement in landfill diversion from the OBC stage to the FBC stage is primarily due to the change in the MBT technology from not producing a RDF to one which produces a RDF with off-site thermal recovery.

3.7 Appraisal of Technology Options for Residual Waste Treatment

Options Assessed

In 2002 the Council initiated an options appraisal in order to establish the technology options available to it for the treatment of its residual waste. The options appraisal took into consideration a range of technologies, and the associated costs and benefits in order to help establish the option which best met the needs of the Council. The options appraisal investigated a number of options, four of which were deemed to be able to meet the Council‟s 8 objectives as set out in the MWMS. A base case scenario (remaining with the current situation) was also modelled to allow the options to be evaluated against socio-economic and environmental objectives. The options modelled are outlined below: Option 0 - base case This option was an extension of the existing planned actions to improve the recycling rate to meet the short-term recycling BVPI (18% by 2005/06). The kerbside collection of dry recyclables and garden waste was proposed to be continued with residual waste landfilled. Option 2A - meets recycling targets and MBT This option extended beyond the base case in that the recycling schemes for kerbside collection would be extended to the majority of households, to achieve the Waste Strategy 2000 targets. Of the existing seven HWRCs, six would have been replaced by three large, modern and appropriately located facilities. The generation of additional recyclate from the HWRCs, and the kerbside collection of dry recyclables and organics would have required additional composting and MRFs. It was modelled that this would achieve approximately 33% recycling of household waste by 2015. The remaining waste would be processed through a MBT facility that would recycle approximately 5% of the waste through mechanical sorting technology. The residual waste would be anaerobically digested to generate energy and render the waste non-biodegradable for the purposes of the EU Landfill Directive, this material would then be landfilled. Option 2B - meets recycling targets and EfW This option was the same as Option 2A with respect to collection, recycling and composting. The remaining waste would be processed through an EfW facility to recover value from the Council‟s residual waste stream. The EfW facility would collect approximately 3% of the waste as metals, which would be sent for recycling, although under the NI definition this recycling would not contribute to the Household Waste Recycling Target.

Waste PFI Project

Final Business Case


Option 3A - maximum recycling and MBT This option extended beyond Option 2A in that the recycling schemes for kerbside collection would be extended to all households. Participation in the kerbside recycling schemes would be heavily encouraged to achieve an increase in the recycling rate to approximately 50% by 2015. The plans for HWRC extension and reorganisation were the same as in Option 2A. The generation of additional recyclate from the HWRCs and the kerbside collection of dry recyclables and organics would require additional composting and MRFs. The residual waste collected fortnightly would be processed through a MBT facility as outlined in Option 2A. Option 3B - maximum recycling and EfW This option extended beyond Option 2B in that the recycling schemes for kerbside collection were extended to all households. Participation in the kerbside recycling schemes would be heavily encouraged to achieve an increase in the recycling rate to approximately 46% by 2015. The plans for HWRC extension and reorganisation are the same as in Option 2A. The generation of additional recyclate from the HWRCs and the kerbside collection of dry recyclables and organics would require additional composting and MRFs. The residual waste would be processed through an EfW facility to generate energy as outlined in Option 2B. The assessment of the waste PFI project options was conducted using the BPEO approach as outlined in Waste Strategy 2000 (the most current strategy at the time of the preparation of the Options Appraisal) and formed a fundamental part of the Council‟s MWMS.

BPEO assessment

The BPEO assessment methodology assessed the performance of the waste PFI project options against environmental, economic and planning criteria following the approach as outlined in Waste Strategy 2000, which stated: “Decisions on waste management, including decisions on suitable sites and installations for treatment and disposal, should be based on a local assessment of the Best Practicable Environmental Option. 1” The BPEO assessment enabled a cost-benefit analysis to be undertaken on the five waste PFI project options to determine the waste PFI project option that provided the best trade-off between financial and non-financial criteria. Details of the full BPEO assessment methodology are included in the MWMS. The results of the BPEO assessment showed that the maximum recycling options, 3A and 3B, were the preferred options, with only a small difference between the residual waste treatment technologies, MBT and EfW. All of the modelled options outperformed the base case “do nothing more” option. Details of the BPEO assessment results are included in the MWMS and a summary of the weighted scores is shown in Table 3.12:

1 Waste Strategy 2000:England and Wales (Part1), page 40

Waste PFI Project

Final Business Case


Table 3.12 Summary of weighted scores from the BPEO assessment

Objectives Options

Base case 2A 2B 3A 3B

Environmental 0.06 0.36 0.46 0.38 0.46

Socio-economic 0.10 0.05 0.10 0.16 0.21

Operational 0.16 0.12 0.13 0.11 0.13

Total score 31.7% 52.9% 69.1% 65.6% 79.2%

A sensitivity analysis was undertaken as well as an assessment of the ability for each of the options to meet recycling and diversion targets. The results of these assessments revealed that a maximum recycling option would be the preferred waste PFI project option. Although the EfW option did score highly in the BPEO assessment there were a number of issues surrounding the planning risks associated with the mass burn EfW element of option 3B. The sensitivity analysis revealed only a small difference between options 3A and 3B and as a result the preferred waste PFI project option was option 3A, which is based on maximum recycling with MBT treatment of the residual waste. The technology solution proposed by the waste PFI contractor reflects option 3A of the appraisal of technology options undertaken at OBC and is therefore consistent with the Council‟s MWMS which identified option 3A as the preferred solution.

3.8 Environmental Impact

In 2008 the Environment Agency developed the Waste and Resources Assessment Tool for the Environment (WRATE) software to assist strategic decision making in the waste industry. The WRATE considers the environmental impact of a number of solutions against six default indicators; climate change, acidification, eutrophication, freshwater aquatic ecotoxicity, human toxicity and resource depletion. Whilst the Council undertook an evaluation of the environmental impact of the solution in the options appraisal as summarised in section 3.7 to determine the reference project, the development of the OBC and the procurement of the solution took place before the WRATE was available. As no WRATE bid models have been developed as part of the procurement the Council have developed a WRATE model to evaluate the environmental impact of the solution. The model comprises a „baseline‟ scenario to represent the position if the current services were continued and a „solution‟ scenario representing the proposed solution offered by the waste PFI contractor. The results of the WRATE evaluation are shown in Figure 3.1.

Waste PFI Project

Final Business Case


Figure 3.1 WRATE Modelling Results

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

Climate Change Acidification Eutrophication

Freshwater Aquatic

Ecotoxicity Human Toxicity

Resource Depletion

Baseline

CFT Solution

As the WRATE considers the impact of a solution, a negative result shows a benefit, therefore the lower the value the better the solution‟s performance. As can be seen in Figure 3.1 above the waste PFI contractor‟s solution provides benefits against all of the six environmental indicators considered within the WRATE compared to the baseline position. The waste PFI contractor‟s solution also has an overall environmental benefit against all of the indicators with the exception of the eutrophication potential. The waste PFI contractor‟s solution saves 31,100 tonnes of CO2 equivalent each year, across the duration of the 25 year contract which results in a saving of 780,000 tonnes of CO2 equivalent. A breakdown of the sources of the carbon impact is provided in Figure 3.2. Columns 1 and 3 show the detailed breakdown of the annual CO2 equivalent emissions into the elements of the solution (Recycling, Treatment, Landfill, Transport and Intermediate Facilities). Columns 2 and 4 show the aggregate impact.

Figure 3.2 WRATE Global Warming Impact Modelling Results

-3000

-2000

-1000

0

1000

2000

3000

Detail Total Detail Total

Baseline Solution

Euro

pe

an P

ers

on

s Eq

uiv

ale

nt

Recycling

Treatment and Recovery

Landfill

Intermediate Facilities

Transport

Total

Waste PFI Project

Final Business Case


Carbon Assessment

The Council has undertaken a carbon assessment based on the Environmental Impacts Calculator. This assessment was submitted directly to WIDP in December 2011and it is understood that this was acceptable. For the purposes of this FBC, the Environmental Impacts Calculator is included at Appendix 23. CHP The residual waste treatment facility includes two gas engines driving generators to produce electricity. It is currently anticipated that there will be sufficient power produced from the CHP facilities to serve the key waste treatment facilities at South Kirkby together with a small excess load. Any excess electrical power will be exported to the National Grid. Hot water will be recovered and used to heat the AD digester tanks. A biogas flare is also included.

Waste PFI Project

Final Business Case


4 Procurement Strategy and Reference Project

4.1 Introduction

Following the approval of the MWMS the Council agreed that this strategy would best be delivered through a waste PFI contract for disposal, treatment and recycling. The OBC, submitted in August 2004, was approved by Project Review Group in December 2004 following which the Council commenced its procurement under the Negotiated Procedure within EU and UK procurement legislation. Full details of the procurement process are set out in section 4.7. The OJEU notice was advertised in January 2005 following which the Council undertook a comprehensive procurement exercise. The procurement has been carried out in accordance with the following stages: Stage 1: PQQ/ISOP Stage 2: ITN Stage 3: RACB Stage 4: BAFO Stage 5: Final BAFO Stage 6: Preferred Bidder Expressions of interest were originally received from 27 companies and following detailed assessments of the PQQ and ISOP submissions 4 companies were selected to participate in the procurement process. The 4 companies were Cleanaway Ltd (Cleanaway), Enterprise/Estech Consortium (comprising Enterprise Managed Services (Enterprise) and Estech) GRL and WRG. All 4 companies were issued with documents for the ITN bid process in August 2005. GRL subsequently withdrew from the procurement process in September 2005 following its appointment as preferred bidder for the Lancashire waste PFI project. At different times of the procurement stages the remaining 3 companies that pre-qualified have changed ownership. Cleanaway was acquired by Veolia ES Holdings Plc (Veolia), WRG by Fomento de Construcciones y Contratas (FCC) and Estech by VT. Enterprise also withdrew from the Enterprise/Estech Consortium. Full details of these changes in ownership are set out in section 4.7. The full details during the evaluation framework which was used to evaluate the bids at the various procurement stages are set out in sections 4.4 and 4.5. The framework was adjusted between the ITN and BAFO stages to reflect the detailed development of the proposals during that period. At both ITN and BAFO stages the technical solutions of the 3 bidders were comprehensively evaluated to ensure they delivered the Council‟s requirements for the waste PFI project. The 3 bidders provided refined technical solutions at different stages to match the Council‟s requirements identified in the tender documents. Following the 6 procurement stages identified above the Council subsequently appointed the VT Consortium as its preferred bidder in November 2007.

Waste PFI Project

Final Business Case


Due to the downturn in the economic climate in 2008 which resulted in significant increases in the waste PFI contract costs, and also required the Council to undertake project reviews at different stages, a number of delays have occurred in the procurement process. During the preferred bidder stage such delays were also attributable to changes in the identity of the VT Consortium. In July 2010 VT was acquired by Babcock and was subsequently renamed Babcock Southern Holdings Ltd. As a consequence of these changes, the preferred bidder consortium became the Babcock Consortium (comprising Babcock Southern Holdings Ltd, Estech and a Funding Club of ).

Following Babcock‟s decision in October 2010 to exit the waste management market and to not proceed with the waste PFI contract Babcock, in consultation with the Council, undertook an exercise to strengthen its preferred bidder consortium. After an extensive search for a preferred bidder partner Babcock invited Shanks to join the preferred bidder consortium and signed a Teaming Agreement in February 2011 to formalise the arrangements. As a consequence of the terms of the Teaming Agreement, Shanks took the lead role in the preferred bidder consortium which at that time comprised Shanks, Babcock, Estech and . Since joining the preferred bidder consortium Shanks has reviewed the financial support for the waste PFI contract and a revised Funding Club (comprising BayenLB, , Barclays, SMBC and the UKGI) has been established to form what is now the Preferred Bidder Consortium (comprising Shanks, Babcock, Estech and the Funding Club). Appendix 20 sets out the details of the waste PFI contract structure. The waste PFI contract will be awarded to Project Co (Wakefield Waste PFI Limited as the SPV). Shanks Waste Management Limited will act as both the construction sub-contractor (EPC) and operating sub-contractor (OPCO). Initially Shanks PFI Investments Limited was to subscribe through a holding company (HoldCo) structure for equity share in the SPV. The Funding Club will provide Senior Debt in a gearing ratio with the equity shareholding.

Waste PFI Project

Final Business Case


In addition Shanks has requested that an option be included in the waste PFI contract for a transfer of of the equity shareholding in HoldCo to John Laing Investments Limited post financial close. This is consistent with Shanks‟ policy in other PFI contracts that it manages. The terms of the waste PFI contract have been amended to allow for this change in ownership during the normal „lock in‟ period. The Council has assessed the PQQ submitted to establish this change of ownership and is satisfied that should this change of ownership occur the revised contract structure to take the waste PFI contract forward will not be compromised. This FBC is now submitted in support of the final arrangements concluded between the Council and the Preferred Bidder Consortium. In conclusion from the above it is clear that the preferred bidder process has been extremely complex. The Council has continued to support the waste PFI project through the difficulties experienced over the past few years and at all key stages has reviewed the procurement related issues to ensure that the waste PFI project can still be delivered. The process has been thorough, competitive and well managed such that the final decision to award the waste PFI contract to the Preferred Bidder Consortium is the correct decision and will enable the Council to deliver its MWMS.

4.2 Overall Strategy for Procurement

Section 4.7 outlines the procurement strategy and the outcome of the delivery of the MWMS through a semi integrated waste PFI contract for treatment, recycling and disposal of municipal waste. The waste PFI contract together with the proposed changes that will be made to the retained waste collection service will together deliver the approved MWMS. The procurement strategy that has been undertaken reflects that strategy approved by the Council in 2003 and included in the OBC. There have been some minor changes through the development of the procurement process as would be expected under the Negotiated Procedure. These changes are not considered to be significant in the overall context of the procurement. The procurement process as set out in section 4.7 will enable the Council to deliver its MWMS, provide high levels of recycling and enable the Council to meet its contractual landfill allowance targets for the period of the waste PFI contract.

4.3 Output Specifications for the Waste PFI Project

4.3.1 Output Specifications

The output specifications were produced originally based on guidance in the 4ps waste management procurement pack. These specifications have been developed since the OBC stage and adapted for the specific needs of the Council.

Waste PFI Project

Final Business Case


In order to manage the waste PFI contract effectively two output specifications have been devised. The Initial Service Output Specification applies to the time period between commencement of the Initial Service and full commissioning of the key waste treatment facilities. The Full Service Output Specification applies to the period of time after all such new and refurbished facilities are commissioned to contract close. The Initial Service Output Specification and the Full Service Output Specification cover the following areas of the service delivery. Copies of these documents are included in Appendix 10:

Service Output 1 Waste Minimisation, Education Centre (Full Service only),

Education Service Staff, Education Service, Information

and Waste Composition Audit

Service Output 2 Communications, Customer Charter, User Satisfaction

and Community Liaison Plans

Service Output 3 Waste Reception Points, Opening Hours, Waste

Reception & Waste Handling, Weighbridges, Waste

Transportation and Road Vehicles & Containers

Service Output 4 Management & Marketing of Reclaimed Materials and

Waste Derived Products

Service Output 5 Waste Treatment & Disposal

Service Output 6 Household Waste Recycling Centres and Bring Sites

Service Output 7 Emergency Plan, Business Continuity Plan and Expiry

Plan

Service Output 8 Quality & Environmental Management Systems,

Information Recording, Integrated Management

Information Reporting System (IMIRS), Monitoring &

Reporting, Monthly Progress Reports & Annual Service

and Environmental Reports and Staffing

Service Output 9 Health & Safety and Welfare & Training

Service Output 10 Landfill

Service Output 11 Temporary Services (Initial Service only)

The output specifications detail the exact requirements of the waste PFI contract for each area of the service delivery. The Initial Service Output Specification covers the same general topics as the Full Service Output Specification with amendments as a result of the difference in the services and facilities to be managed in the Initial Service Period. Each of the service outputs is summarised below: Service Output 1 – Waste Minimisation, Education Centre (Full Service only), Education Service Staff, Education Service, Information and Waste Composition Audit The waste PFI contractor shall develop, implement and operate a range of services to support waste minimisation and education so as to be able to maximise recycling and minimise the volumes of waste sent to landfill. As part of this service the waste PFI

Waste PFI Project

Final Business Case


contractor must provide at Full Service a fully equipped Education Centre with facilities for providing educational events to a wide range of audiences from schools, colleges, and other external bodies. Wherever possible the waste PFI contractor must link educational events to school curricula and to assist this process shall employ a fully qualified teaching resource. In addition the Education Centre shall be equipped with interactive displays on waste minimisation and education which will be updated on a regular basis. These displays shall be open to the public during the working day. The waste PFI contractor will be required to staff and manage the Education Centre. The waste PFI contractor shall support the Council in developing waste minimisation and education throughout the contract term. Service Output 2 – Communications, Customer Charter, User Satisfaction and Community Liaison Plans The waste PFI contractor shall work closely with the Council in developing and implementing customer liaison standards which provide a comprehensive service to customers, both internal to the Council and external to the Wakefield public. These standards should be no less than provided by the Council generally and should be interactive with Council operational requirements. In addition the waste PFI contractor shall establish community liaison groups closely associated with the sites where key waste management facilities are provided. The waste PFI contractor shall undertake specific customer user surveys at HWRCs and Bring Sites and shall assist the Council in undertaking its statutory obligations in relation to customer surveys on a wider basis. Service Output 3 – Waste Reception Points, Opening Hours, Waste Reception &

Waste Handling, Weighbridges, Waste Transportation and Road Vehicles &

Containers

The waste PFI contractor shall develop, implement and operate a service which provides facilities for the receipt of Contract Waste and for transportation for treatment, recycling and disposal. The Council shall deliver and the waste PFI contractor shall receive all Contract Waste in accordance with the agreed waste acceptance procedures. The waste PFI contractor shall arrange for the transportation of all Contract Waste collected by the Council or delivered by the public at designated reception points, for onward treatment and/or disposal at the facilities provided by the waste PFI contractor. Transportation shall be via vehicles and containers to required standards, and by pre-approved routes during the Full Service Period. All reception points shall have appropriate weighbridge provision to enable the waste PFI contractor to carry out the waste PFI contract requirements for reporting on waste data flow and tonnage throughputs.

Service Output 4 – Management & Marketing of Reclaimed Materials and Waste

Derived Products

Waste PFI Project

Final Business Case


The waste PFI contractor shall develop, implement and operate a service which ensures that all reclaimed materials and waste derived products are managed, marketed and as far as practicable utilised to maximise recycling and minimise waste deposited in landfill. The waste PFI contractor shall keep all records necessary to demonstrate an audit trail for materials sent for reuse, recycling, composting and AD. The waste PFI contractor shall establish markets for disposal of reclaimed materials and waste derived products and shall ensure that such markets conform to the waste PFI contract requirements. The waste PFI contractor shall produce on an annual basis a Materials and Energy Marketing Plan which shall identify all elements of how reclaimed materials and waste derived products are to be dealt with. The waste PFI contractor shall at all times comply with this plan. Service Output 5 – Waste Treatment & Disposal

During the Initial Service Period and the Full Service Period the waste PFI contractor shall develop, implement and operate a service which handles all Contract Waste to achieve the Contract Targets. During the Full Service Period this will include providing the key waste treatment facilities for the proposed changes to the Council‟s household waste collections reducing from 4 streams to 3 streams (FSMDR, garden waste and residual waste) and for other household waste collected at HWRCs and Bring Sites. The facilities to be provided by the waste PFI contractor shall include a MRF, enclosed windrow composting facility and residual waste treatment facility (including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall). In addition the waste PFI contractor shall treat commercial waste collected by the Council as part of its collection activity. Service Output 6 – Household Waste Recycling Centres and Bring Sites

During the Initial Service Period the waste PFI contractor shall develop, implement and operate the current network of seven HWRCs for the reception of household waste. During the Full Service Period the waste PFI contractor shall provide three new HWRCs and one refurbished HWRC to enable five of the existing outdated HWRCs to be closed. The waste PFI contractor shall operate the HWRC network to achieve the HWRC Recycling Target outlined in section 4.3.2. In the Full Service Period the waste PFI contractor shall ensure that each new HWRC has one midweek late night opening until 8.00pm. The waste PFI contractor shall manage the existing Bring Site network for the deposit of household waste by members of the public. The waste PFI contractor shall rationalise the network to give the public the opportunity to maximise recycling by providing appropriate skips/containers to reflect public demand. Service Output 7 – Emergency Plan, Business Continuity Plan and Expiry Plan

The waste PFI contractor shall develop, implement and operate a service which manages emergencies, business continuity and expiry arrangements. These services shall ensure a seamless transition when incidents occur that require alternative arrangements to normal service provision to be put in place, and provides and manages arrangements on expiry of the waste PFI contract.

Waste PFI Project

Final Business Case


The waste PFI contractor shall develop an Emergency Plan to deal with major incidents at each site. A Business Continuity Plan shall be developed and implemented to ensure that the waste PFI contractor provides alternative arrangements for receipt and treatment of Contract Waste when its key facilities are unavailable. These business continuity arrangements shall have minimum impact on the delivery of Contract Waste by the Council‟s in-house collection service. The waste PFI contractor shall develop and implement an Expiry Plan for the transfer of services at the end of the contract term. The plan shall also identify basic requirements in the case of early termination of the waste PFI contract. Service Output 8 – Quality & Environmental Management Systems, Information Recording, Integrated Management Information Reporting System (IMIRS), Monitoring & Reporting, Monthly Progress Reports & Annual Service and Environmental Reports and Staffing The waste PFI contractor shall develop, implement and operate a service management system to an accredited standard that provides a comprehensive reporting tool for all elements of the service. The output specifications include a detailed schedule of reporting requirements which the waste PFI contractor has to report against. The waste PFI contractor shall ensure that an electronic integrated management system is provided for storage of all data and reporting requirements and which is available to the Council at all times and is updated before the start of the next business day. The system shall also include an electronic link to all the weighbridge facilities provided by the waste PFI contractor. Staffing requirements are specified. Service Output 9 – Health & Safety and Welfare & Training The waste PFI contractor shall be responsible for all aspects of health and safety during both the Initial Service Period and the Full Service Period of the waste PFI contract. Included in the service requirements is the need for undertaking regular health and safety audits of all the key sites. The waste PFI contractor shall develop, implement and operate a Welfare and Training Plan to ensure that all staff operating the waste PFI contract are suitably qualified and are given the opportunity to attain minimum qualification standards. The plan shall be reviewed regularly and updated as appropriate. Service Output 10 - Landfill The waste PFI contractor shall be responsible for all landfill requirements emanating from the waste PFI contract. This requirement includes the management of the existing landfill contracts to be assigned from commencement of the Initial Service Period and all future landfill throughout the contract term.

Waste PFI Project

Final Business Case


Service Output 11 – Temporary Services (Initial Service only) The waste PFI contractor will be responsible for providing temporary facilities (HWRC and TLS) during the period that the Denby Dale Road site is closed for rebuilding. The waste PFI contractor will implement the planning permission for a temporary HWRC and TLS at Calder Vale Road in Wakefield. This facility will be used to replace the existing services provided from the Denby Dale Road site during the period of its closure for re-building.

4.3.2 Service Required from the Contractor

The draft output specification produced for the OBC had the following key elements as the basis of the waste PFI contract:

Provide processing capacity for kerbside collected dry recyclables and organic material that enables their recycling or composting with a

; Provide, modify and operate four HWRCs and achieve at least recycling

across the four sites; Achieve a minimum of 52% overall recycling and composting of household

waste by 2015; and Meet the EU Landfill Directive targets set for Wakefield for diversion of BMW

through a combination of recycling and, if necessary, the recovery process. These targets still form the basis of the waste PFI contract and have been consistent requirements throughout the procurement stage. The outline services to be provided by the waste PFI contractor during the Initial Service Period are:

Assisting the Council with waste minimisation, education and community liaison activity;

Management, treatment and disposal of recyclable, compostable and residual waste;

Marketing of all reclaimed materials and waste derived products; Management and operation of all HWRCs, TLSs and Bring Sites; Updating of required HWRC sites; Provision of temporary facilities (HWRC and TLS); and Construction of Education Centre, MRF, enclosed windrow composting facility

and residual waste treatment facility (including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall).

Following completion of the Works, the following services will be provided by the waste PFI contractor during the Full Service Period:

Assisting the Council with waste minimisation, education and community liaison activity including operation of the Education Centre;

Management, treatment and disposal of recyclable, compostable and residual waste;

Marketing of all reclaimed materials and waste derived products; Management and operation of all HWRCs, TLSs and Bring Sites; and

Waste PFI Project

Final Business Case


Operation of MRF, enclosed windrow composting facility and residual waste treatment facility (including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall).

Under the terms of the waste PFI contract the waste PFI contractor is required to achieve the following Contract Targets: 1. Household Waste Recycling Target (as set out in Table 4.1) - This target refers to

the overall tonnage of household waste to be re-used, recycled, composted or anaerobically digested in each contract year, as a proportion of the total tonnage of household waste received.

Table 4.1 Household Waste Recycling Target

Contract Year Household Waste Recycling Target

2012/13

2013/14

2014/15

2015/16 and thereafter 52%

2. BMW to Landfill Target (as set out in Table 4.2) - This target refers to the maximum

tonnage of BMW to be sent to landfill by the waste PFI contractor during any contract year.

Table 4.2 BMW to Landfill Target

Year

(1 April - 31 March)

Council‟s BMW to Landfill Allowance

(tonnes)*

BMW to Landfill Target (tonnes)

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

2018/19

2019/20 and thereafter

*These are the Council‟s Allowances which the waste PFI contractor must meet.

Waste PFI Project

Final Business Case


3. HWRC Recycling Target (for the Initial Service Period)

The HWRC Recycling Target during the Initial Service Period shall be aggregated across all the existing HWRCs operated by the waste PFI contractor.

4. HWRC Recycling Target (for the Full Service Period)

The HWRC Recycling Target for each new HWRC for each contract year (or part thereof) shall be .

4.4 Pre-Qualification

Following approval of the OBC the waste PFI contract was advertised in the OJEU and national technical journals in January 2005. As a result of the adverts, 27 companies expressed an interest in submitting pre-qualification documentation. All 27 companies were sent details of the waste PFI project together with PQQ and ISOP questionnaires. Subsequent to this 4 companies submitted fully completed PQQs and ISOPs. The 4 companies were Cleanaway, the Enterprise/Estech Consortium, GRL and WRG. All 4 companies‟ PQQs were evaluated first followed by an evaluation of the submitted ISOPs.

Following discussions with Estech in the summer of 2005 it became apparent that Enterprise were no longer taking an active part in the Enterprise/Estech Consortium leaving Estech as the lead bidder in its own right.

Table 4.4 outlines the proposed technologies of the 4 bidders at ISOP stage. Table 4.4 Outline of Solutions provided by Bidders at ISOP

Company Proposed Solution – Garden/Kitchen Waste

Proposed Solution – Dry Recyclables

Proposed Solution - Residual Waste

Cleanaway IVC MRF Autoclave with AD and power generation. Residues to landfill as cover material.

Estech IVC MRF Autoclave with AD and power generation. Residues to markets.

Waste PFI Project

Final Business Case


Company Proposed Solution – Garden/Kitchen Waste

Proposed Solution – Dry Recyclables

Proposed Solution - Residual Waste

WRG AD with energy recovery and secondary composting

MRF MBT processing facilities with AD with energy recovery and secondary aerobic composting. Residues to landfill or as a RDF.

GRL IVC MRF MBT (Percolation Process involving pasteurisation and biogas production), IVC and MRF for recovery of recyclables. Residues to landfill.

Table 4.5 compares the ISOPs against the OBC Reference Case. In broad terms all the proposed options fitted reasonably well with the OBC Reference Project.

Waste PFI Project

Final Business Case


Table 4.5 Comparison of ISOPs against OBC Reference Project

Service Item OBC Reference Project

Cleanaway Estech GRL WRG

Optimum Collection Services

3 bin residual waste, garden and kitchen waste, mixed dry recyclables

3 bin residual waste, garden waste, mixed dry recyclables

Not specified or advised. Their process is apparently not reliant on source segregation schemes. It is commendable but not essential for their process solution.

Preference stated for kerbside scheme collecting source separated products such as newsprint, magazines, cardboard, mixed plastic, glass by colour, batteries, electronic goods, garden waste, textiles, kitchen waste and residual waste.

Council‟s currently proposed three bin approach is satisfactory. But entirely the council‟s risk.

Bring Sites No Yes Not discussed Yes (180 glass) Yes, focus on glass

HWRCs Operation Yes Yes, number not specified Yes, no details provided

Yes, 3 sites 3 – 4 operational sites, some with retail areas for sale of reuse items

HWRC 50% recycling rate

Yes Not specified Not specified Not specified Not specified

Garden Waste Collection for Composting

Yes Yes Would probably like the garden waste collection service retained for composting, but not discussed in detail

No Yes

Mixed Garden/Household Waste Collection for Composting

Yes No No Yes No

Dry Recyclables Collection

Mixed dry Mixed dry (paper, card, cans, plastic bottles, glass containers)

Commendable but not required. No detailed discussion.

Preference for co-mingled or segregated not specified

Yes, as council proposals

Waste Transfer station

No No Yes Unclear

MRF Yes MRF at Wheldale, Castleford

Linked to the autoclave and it is unclear as to whether a MRF for clean mixed dry

Yes, for co-mingled or source separated waste

Yes, OKLM technology

Waste PFI Project

Final Business Case




recyclables is to be provided, in addition.

Windrow/On-farm Composting

Yes Yes at Wheldale Not discussed No Yes

IVC Yes No No, autoclave provides sanitisation of ABP etc.

Yes, SCT system No

MBT Yes No No Yes, UR-3R system Yes, stabilization of bio fraction and RDF manufacture, Horstmann GMBH technology

Autoclave Plant No Yes (at Welbeck), unspecified system

Yes, Fibrecycle system

No No

AD No Possibly, if floc requires treatment

No Yes, with energy recovery (700kw electrical power)

Possibly

Thermal Energy Recovery from Residual Waste

No Possibly as an outlet for floc if other markets not secured.

Possibly as an outlet for floc if other markets not secured.

Possibly Possibly

Welbeck Landfill Issues

N/A Not discussed, but required for site of autoclave unit.

Not discussed Not discussed Will be flexible and possibly do a deal with WMDC

Visitor/Education Centre

Yes (Not Costed?)

No Yes at Fibrecycle plant

Yes Yes

Identified Sites No Wheldale Sustainable Growth Park and Welbeck

No No Welbeck

Recycling Target 51% to 52% HHW – 34% Municipal waste – 43% (Model Assumptions Unclear)

Up to 80% (subject to market)

51% by 2010 Primarily from council collection activity

Statement of LATS Compliance

Yes No. Only if autoclave floc finds an outlet

No. Not proven. Dependant on outlet for floc being secured, or on unspecified treatment of the biodegradable and active elements of

Yes No, only if RDF finds an outlet

Waste PFI Project

Final Business Case




the floc.

Recyclate Markets N/A Identified (currently experience)

Identified (theoretical)

Identified (theoretical) Identified (current experience)

MBT Residue Market

Landfill Landfill Cover at zero tax (see below)

A number of innovative markets for floc are discussed. There is no evidence to support the sustainability of the identified markets.

Landfill (stabilised) RDF, landfill as stabilised product

Compost/Soil Conditioner Market

Landfill Cover. It is suggested that the autoclave output will be able to be used as a landfill cover at zero rate Landfill Tax.

Suggested use as a soil conditioner, subject to discussion with compost manufacturer.

High grade OGM (organic growth medium)

low grade soil conditioner

Other - - - - Possibly a green energy facility, biogas plant, wind farm

Waste PFI Project

Final Business Case


One of the most significant points that was highlighted by the evaluation of the outline solutions received was that around the relative importance that would be placed on the Council‟s in house collection arrangements if the high level of recycling and composting (BVPI 82a/b definitions) was to be achieved. During the evaluation of the ISOPs the Environment Agency clarified that any compost-like product produced from residual waste would not be accepted as a beneficial product and would retain its definition as a waste. In considering the importance placed on the Council‟s in-house collection arrangements and the clarification from the Environment Agency on the residual waste compost like output together with the measures to be applied in determining the BMW content of waste for diversion, doubts were cast on the ability of the MWMS to deliver the required landfill diversion without significant emphasis on waste minimisation and kerbside collection activity. The Council addressed this challenge through detailed modelling of kerbside collection performance and the design of a collection system that would complement the proposals brought forward by bidders at ISOP without favouring any specific bidder's proposed solution.

4.5 ITN/RACB Stage

4.5.1 Details of Evaluation Criteria

In preparing the ITN submission requirements the Council and its advisors established an evaluation methodology against which all bid submissions would be considered. A summary of the ITN evaluation criteria is set out below. This evaluation criteria was also used for the RACB. The detailed evaluation of the bids comprised the following two main elements:

1. a quantitative evaluation (i.e. the cost of the bid to the Council); and 2. a qualitative evaluation of Service Delivery and Technical, Financial and

Commercial, Legal and Contractual, and Overall Integrity. Bids were evaluated on the basis of the most economically advantageous tender. The Council allocated the following maximum score for each section of the qualitative evaluation:

Service Delivery and Technical – 60% Financial and Commercial – 20% Legal and Contractual – 15% Overall Integrity – 5%

Service Delivery and Technical

The Service Delivery and Technical responses were evaluated using scores that reflected the extent to which bids met the Council's expectations. The weighting given to each service delivery heading was as follows:

Waste PFI Project

Final Business Case


Ability to Achieve BMW Diversion and Recycling Targets - 40%

Robustness of the Mass Flow Model (supported by the Waste Flow Diagram

and the BMW Mass Balance)

Robustness of assumptions behind the Mass Flow Model

Suitability of proposed facilities

Ability of proposals to meet or exceed BMW diversion targets

Ability of proposals to meet or exceed Recycling targets

Deliverability of facilities to programme

Robustness of proposals for management of facilities

Flexibility of outlets for secondary materials

Adaptability of solution to changes in waste volume and composition

Processing and Treatment Technology - 25%

Proven reliability and deliverability of technology (including reference plants)

Proven track record of construction of similar plant

Strength of consortium to internally manage process risk

Track record of bidder in operation of similar plant (including experience of

proposed operating arrangements)

Design parameters including availability and contingency

Design and operation for safety

Strategic fit of the Works to the proposed Service

Security of sub-contract agreements in delivery of the Service

Suitability of land, property and licence agreements

Planning and Site Issues

Quality of Service to the Council and Public - 23%

Approach to management and maintenance of sites and facilities

Management of the public and other stakeholders interface

Ability to meet or exceed recycling target for HWRCs

Site layout and design

Approach to sustainability in design and operation

Approach to marketing secondary materials

Approach to working with the Council

Environmental Management and Quality Systems

Waste PFI Project

Final Business Case


Aesthetics

Interface with the Council Collection Systems – 12%

Changes required to Council collection structure and systems

Proposals for the transition/hand-over of existing services and contracts

Level of risk transfer in meeting Contract Targets

Financial and Commercial

The Financial and Commercial evaluation was undertaken to reflect the extent to which bids met the Council's expectations in the following areas:

Financial robustness of the Bid – 30 % Deliverability of the funding package – 20 % Response to Payment Mechanism proposals – 50%

Financial Robustness of the Bid The evaluation took account of the robustness of the assumptions used in the bidder's Financial Model. Sensitivity analysis was used to model the effects of different base assumptions i.e:

the credibility of the financial assumptions used in bidders' financial models;

sensitivities on the Unitary Charge to changes under different macro-

economic assumptions including interest rates, inflation and exposure to

Landfill Tax;

the robustness of the Finance Plan (including gearing, cover ratios achieved,

hedging strategy and standby facilities);

reliance on third party income proposals;

Bidders' comments on risk sharing arrangements; and

financial robustness of SPV / consortium structure of the bidder.

Deliverability of the funding package Account was taken of the level of commitment of Funders to the funding package proposed. Any pre-conditions in the funding arrangements were assessed including any proposals for refinancing during the Contract Period. In particular, financing structures were evaluated by assessing:

terms and conditions of financing (including bank margins, fees and cover

ratio requirements) and the degree of conditionality attached;

in instances of a „corporate finance‟ solution being proposed, the value of

direct performance related Parent Company Guarantees provided direct to

Waste PFI Project

Final Business Case


the Council, the conditions attached to it, and the credit quality of the entity

providing the guarantee;

terms and conditions relating to any guarantees and other security required to

realise financing (including liability caps);

in instances of inter-company funding, the existence of the funding

guarantees from the lending entity; and

the degree of commitment of finance from equity investors and senior debt

funders.

Payment Mechanism Proposals Account was taken of the level of acceptance to the proposed draft Payment Mechanism or alternative clauses, submitted by bidders, that fell within the principles outlined by the Council. Legal and Contractual

The Legal and Contractual evaluation awarded scores to reflect the extent to which bids met the Council's expectations as follows:

Derogations from: SoPC3;

Local Government Supplement to SoPC3;

4ps waste pack;

draft PUK insurance guidance; and

relevant guidance relating to staff transfers.

40%

Acceptance of the Draft Contract and its Schedules (other than that referred to in the above criteria)

20%

Acceptance of risk allocation (as set out in the supplied risk matrix)

20%

Insurance 20%

Overall Integrity and Best Value

Bids were also assessed on the extent to which the Service Delivery and Technical, Financial and Commercial, and Legal and Contractual areas were consistent with each other in providing a comprehensive and consistent bid. The evaluation focused on the solution as a package to provide a holistic overview of the consistency, comprehensiveness, coherence, credibility and effective

Waste PFI Project

Final Business Case


deliverability of the sum of the parts of the bid. Best Value considerations were taken into account in assessing the Overall Integrity of the bid. The final assessment combined all elements (Service Delivery and Technical, Financial and Commercial, Legal and Contractual, and Overall Integrity and Best Value).

4.5.2 ITN/RACB Technical Solutions

The proposals submitted by the 3 bidders at ITN/RACB are summarised below. CIC: South Kirkby Site

MRF at South Kirkby site

IVC at South Kirkby site

MBT (aerobic tunnel composting) at South Kirkby site

HWRC at South Kirkby site Other Facilities

Redevelopment of the Denby Dale Road TLS

Redevelopment of the Denby Dale Road HWRC

HWRC refurbishment at Welbeck

HWRC at Pontefract (site to be identified) The VT consortium: South Kirkby Site


IVC at South Kirkby site

Autoclave and AD at South Kirkby site





HWRC at Glasshoughton (site to be identified) WRG: South Kirkby Site


AD (garden/kitchen waste) at South Kirkby site

MBT incorporating aerobic composting and maturation at South Kirkby site





Waste PFI Project

Final Business Case


HWRC at Glasshoughton (site to be identified)

4.5.3 Performance of the ITN Bids/RACB

Table 4.6 sets out the principal characteristics of the 3 bids received and the performance against the proposed Contract Targets as set out in the original ITN documents issued in August 2005.

Waste PFI Project

Final Business Case


Table 4.6 Performance of ITN Bids/RACB

Item Target CIC VT Consortium WRG

Acceptance of Proposed Council Collection Service

- Yes Yes Yes (enhanced collection system performance may be required to meet

BVPI 82a/b performance)

Denby Dale Road TLS - Yes Yes Yes (Combined with HWRC on same site)

New Wakefield HWRC - Yes Yes No, Included at Denby Dale Road TLS

Welbeck HWRC - Upgrade Only Upgrade only Full redevelopment within fully enclosed unit. Includes additional TLS

capacity

Pontefract/Castleford HWRC - Yes Yes Yes. Includes additional TLS capacity

South Kirkby HWRC - Integrated with new treatment facilities

Integrated with new treatment facilities

Integrated with new treatment facilities

MRF (approx throughput 2019/20) -

IVC (approx throughput 2019/20) - Yes 40,000tpa Yes 40,000tpa Yes 40,000tpa

Autoclave (approx throughput 2019/20)

- Yes, 140,000tpa Yes, 145,000tpa No

AD (approx throughput 2019/20) - 80,000 94,000 122000 (plus 40,000 garden/kitchen)

HWRC Performance (Guaranteed) 50% 54% 50% (57% may be achieved)

57% (65% aspiration)

BVPI 82a/b 2009/10 (%) - 51.10% 66.44% 34.03% (40.60)

BVPI 82a/b 2012/13 (%) 51% (at 2010/11) 54.80% 68.44% 44.25% (53.98)

BVPI 82a/b 2019/20 (%) 52% (at 2015/16) 57.00% 75.67% 48.21% (54.30)

LATS Headroom/Surplus 2009/10 (kt) 0 tpa 43,831 tpa 29,320 tpa 4,002 (3,489) tpa

LATS Headroom/Surplus 2012/13 (kt) 0 tpa 31,989 tpa 2,342 tpa 19,095 (18,177) tpa

LATS Headroom/Surplus 2019/20 (kt) 0 tpa 14,312 tpa 9,203 tpa 3,158 (2,232) tpa Note: GRL withdraw prior to submission of ITN bids.

Waste PFI Project

Final Business Case


4.5.4 Cost of the RACB

Table 4.7 sets out the cost assumptions of each RACB over the duration of the waste PFI contract. The OBC Reference Project information is provided for comparative purposes. Table 4.7 Cost of RACB

OBC Reference

Project

CIC VT Consortium WRG

£m £m £m £m

Capital Costs

Land Acquisition

Life Cycle Costs

Operating Costs

Revenue

Landfill Tax

Tradable Allowances

Total

Notes: OBC Reference Project costs are expressed in Net Present Cost terms @ October 2006 prices. Bid costs are expressed in Net Present Costs terms @ April 2007 prices. Funding costs have not been included in this analysis. * WRG‟s lifecycle costs are included within Operating Costs as they are not separately identifiable as lifecycle costs within the Bid Finance.

4.6 BAFO/Final BAFO

4.6.1 Details of Evaluation Criteria

The evaluation criteria adopted at BAFO and Final BAFO stage were primarily the same as for the ITN/RACB stage outlined in 4.5.1 other than amendments to the maximum score in each evaluation area to reflect the development of the bids during the BAFO and Final BAFO negotiations. The maximum scores for the BAFO and Final BAFO stage were as follows:

Service Delivery and Technical – 35%

Waste PFI Project

Final Business Case


Financial and Commercial – 30% Legal and Contractual – 30% Overall Integrity – 5%

4.6.2 BAFO/Final BAFO Technical Solutions

The changes to proposed technologies submitted by Veolia and WRG at the BAFO and/or Final BAFO stage differed from those submitted by CIC and WRG at ITN/RACB stage as set out in section 4.5.2 in the following respect: Veolia: Following the acquisition of Cleanaway by Veolia, as set out in section 4.7, the proposed residual waste treatment solution was changed. Veolia suggested that in line with its corporate risk management policies, it only preferred to deliver established waste treatment solutions with an operational track record. The autoclave and AD solution proposed by Cleanaway did not meet its requirements and an alternative was therefore proposed. The revised solution was structured around aerobic tunnel composting with biologically stabilised residues being landfilled. Although it met the proposed Contract Targets, it did so by transferring risk back to the Council through increased kerbside collection performance. The removal of the AD element of the revised waste treatment solution meant that power would no longer be generated on site, with a corresponding loss in electricity revenue. WRG: The solution proposed by WRG at ISOP included the treatment of a large portion of the residual waste stream by AD. Gas generated from the process was to be used to generate electrical power on the site. WRG advised that its new owners, FCC, were experienced in AD of residual waste and were unwilling to develop a plant that was as heavily reliant on that technology as set out in WRG‟s earlier proposals. However AD of the kitchen/garden waste was to be retained. The removal of the AD element from the residual waste part of the proposal resulted in a loss of energy generation potential. Contract Targets for BMW landfill diversion could be met, albeit by a narrow margin, on condition that the Council‟s in-house collection service performed as, or better, than predicted. In addition to the changes proposed by Veolia and WRG, the VT Consortium‟s standard bid remained substantially unchanged. However the VT Consortium submitted a variant bid based on a flash pyrolysis plant that would be fed with dried fibre from the autoclave as an alternative to the AD plant. The VT Consortium also suggested that kitchen waste could be left within the residual waste stream in order to benefit from increased gas generation through the AD process. 4.6.3 Performance of BAFO/Final BAFO Bids Table 4.8 sets out performance of the three bids against the proposed Contract Targets set out in the BAFO documents in March 2007.

Waste PFI Project

Final Business Case


Table 4.8 Performance of BAFO Bids

Item Target Veolia VT Consortium

WRG

HWRC Performance

50%

BVPI Performance 2015/16

52%

LATS Headroom/Surplus 2009/10 (kt)

-14,977 tpa


8,5622 tpa


3,837 tpa

4.6.4 Cost of the BAFO/Final BAFO bids

Table 4.9 sets out the cost assumptions of the BAFO bids over the duration of the waste PFI contract. The OBC Reference Project information is provided for comparative purposes. Table 4.9 Cost of BAFO Bids

OBC Reference

Project

Veolia VT Consortium

WRG

£m £m £m £m

Capital Costs

Land Acquisition

Life Cycle Costs

Operating Costs

Revenue

Landfill Costs

Landfill Tax

Tradable Allowances

Total

Waste PFI Project

Final Business Case


Notes OBC Reference Project costs are expressed in Net Present Cost terms @ October 2006 prices. Bid costs are expressed in Net Present Cost terms @ October 2007 prices. Funding costs have not been included in this analysis. * WRG‟s lifecycle costs are included within Operating Costs as they are not separately identifiable as lifecycle costs within the Bid.

Table 4.10 sets out the cost assumptions of the Final BAFO bids over the duration of the waste PFI contract. The OBC Reference Project information is provided for comparative purposes. Table 4.10 Cost of Final BAFO Bids

OBC Reference

Project

VT Consortium WRG

£m £m £m

Capital Costs

Land Acquisition

Life Cycle Costs

Operating Costs

Revenue

Landfill Costs

Landfill Tax

Tradable Allowances

Total

Notes OBC Reference Project costs are expressed in Net Present Cost terms @ October 2006 prices. Bid costs are expressed in Net Present Cost terms @ April 2008 prices. Funding costs have not been included in this analysis. * WRG‟s lifecycle costs are included within Operating Costs as they are not separately identifiable as lifecycle costs within the Bid.

4.7 Quality of Competition

4.7.1 The Procurement Process

The procurement has been carried out using the Negotiated Procedure, comprising the following stages:

Waste PFI Project

Final Business Case


PQQ/ISOP ITN RACB BAFO Final BAFO Preferred Bidder

4.7.2 PQQ / ISOP Stage

Following approval of the OBC the waste PFI contract was advertised in the OJEU and national technical journals in January 2005. As a result of the adverts, 27 companies expressed an interest in submitting pre-qualification documentation. All 27 companies were sent details of the waste PFI project together with PQQ and ISOP questionnaires. Subsequent to this 4 companies submitted fully completed PQQs and ISOPs. The 4 companies were Cleanaway, the Enterprise/Estech Consortium, GRL and WRG. All 4 companies‟ PQQs were evaluated first followed by an evaluation of the submitted ISOPs.

Following discussions with Estech in the summer of 2005 it became apparent that Enterprise were no longer taking an active part in the Enterprise/Estech Consortium leaving Estech as the lead bidder in its own right.

4.7.3 ITN Stage

Following the pre-qualification process, the 4 bidders identified below were approved to be invited to submit ITN bids to the Council for the waste PFI project: i) Cleanaway ii) Estech iii) GRL iv) WRG All 4 bidders were issued with the ITN documents on 8 August 2005 with a tender return date of 2 December 2005.

Following a series of clarification meetings with all 4 bidders during September 2005, GRL formerly advised the Council on 29 September 2005 that they would be withdrawing from the tender process and would not be submitting an ITN proposal

Waste PFI Project

Final Business Case


because it had been appointed as preferred bidder for the Lancashire CC waste PFI project. Following an extensive site selection process the Council formally approved part of the former South Kirkby Colliery site for the key waste treatment facilities in November 2005. To enable the 3 remaining bidders to provide ITN submissions based around the Council‟s preferred site the ITN return date was extended until the end of February 2006. All 3 bidders submitted ITN bids in accordance with the revised programme.

Cleanaway advised the Council during the ITN bid period that it was to be joined in a consortium by Interserve Investments plc in a joint venture to deliver the waste PFI project. This consortium, the Cleanaway/Interserve Consortium (CIC) submitted a revised PQQ which passed the pre-qualification test and allowed CIC to remain in the tender process. On this basis the CIC bid was subsequently evaluated alongside those of the VT Consortium and WRG. As a consequence of the changes identified above, the ITN tender submissions were received in February 2006 was received from the following: i) VT Consortium ii) CIC iii) WRG The Council's preferred option and standard bid approach was for a MRF facility to deal with all dry recyclables, a composting facility to deal with any organic waste, and a MBT facility to deal with all residual waste. The ITN bids comprised the following: VT Consortium a substantially compliant standard bid. No compliant variant bid was

provided. CIC a substantially compliant standard bid plus a variant bid providing a

revised technology solution which would impact on the Council's in- house collection service and which would not require an IVC plant.

WRG a substantially compliant standard bid. No compliant variant bid was

provided. All 3 bidders provided substantially compliant standard bids although offering different technical solutions. CIC and VT submitted solutions based on autoclave MBT technology while WRG‟s technology was based around aerobic and AD for the

Waste PFI Project

Final Business Case


MBT process. All standard bids included MRF and IVC for maximising the recycling requirements of the waste PFI contract. All the bids complied with the requirements for improving and rationalising the HWRC network to further maximise recycling opportunities. Following the completion of the ITN evaluation process the Council considered all 3 bids to be technically deliverable but at that stage the costs submitted by the 3 bidders were considered to require further refinements. In addition it was noted that all 3 bids showed a substantial cost increase from the position at the OBC stage. To ensure that all 3 bidders were treated equally they were requested to submit RACB to review their costs prior to the Council moving to the next stage of the procurement process. RACB were received during early June 2006 and the ITN evaluation process completed. The RACB process ensured that the Council was fully aware of the cost implications as well as the quality evaluations before proceeding to the next stage of the procurement process. The detailed evaluation of the RACB was undertaken during June 2006 and comprised the following two main elements as set out in section 4.5.1 and based on the evaluation framework developed for the waste PFI project:

1. a quantitative evaluation (i.e. the cost of the bid to the Council); and 2. a qualitative evaluation of Service Delivery and Technical, Financial and Commercial, Legal and Contractual, and Overall Integrity.

The Legal and Contractual evaluation showed that all 3 bidders had left key issues on the table for the next stage of the procurement process together with a proposed shift of the risk profile back to the Council that would need to be addressed at the next stage. All 3 bidders were also suggesting some significant departures from standard drafting positions that would require derogations from Defra/PUK prior to financial close. Following the review of the RACB process it was apparent that from a financial perspective the gap between all 3 bids had closed and all 3 bids offered significant benefits to the Council. The Council therefore decided not to deselect any bidder at this stage and take all 3 forward to the BAFO stage. All 3 bidders were consulted on this proposal and agreed to continue in the procurement process. Cleanaway advised the Council on 30 June 2006, after the RACB evaluation process, that its ultimate parent company, the Australian based Brambles Group, had agreed to sell Cleanaway to Veolia. The formal acquisition of Cleanaway by Veolia was completed in September 2006. Following the acquisition of Cleanaway by Veolia, Veolia advised the Council that Interserve Investments Plc‟s involvement in the waste PFI project would cease. WRG advised the Council in June 2006 that it was to be acquired by the Spanish company FCC but would continue to trade as WRG. The formal acquisition of WRG by FCC was completed in October 2006. Following the acquisition of Cleanaway by Veolia and WRG by FCC, Veolia and FCC submitted revised PQQs. Veolia and FCC passed the pre-qualification test and were allowed to remain in the tender process.

Waste PFI Project

Final Business Case


4.7.4 BAFO

As outlined above the 3 bidders invited to submit BAFO proposals for the Council‟s waste PFI contract were: i) Veolia ii) VT Consortium iii) WRG Between August and December 2006 further clarification meetings were held with all 3 bidders to help them refine their BAFO bids to meet the Council‟s requirements. This also allowed some resolution of key issues to be undertaken prior to formal BAFO bids being submitted. BAFO bids were subsequently received by the Council in March 2007 and evaluated during the period up to July 2007. The BAFO documents were issued to bidders on 8 December 2006 with a return date for submissions of 28 February 2007. Following a short extension to the bid period requested by bidders the BAFO submissions were received on 28 March 2007 and all 3 bidders submitted compliant standard bids. The VT Consortium also submitted a variant bid proposal incorporating an advanced thermal treatment option to treat the residue from its MBT process. The VT variant bid was not sufficiently developed to warrant a detailed evaluation. Veolia also submitted a fully developed variant bid including suggested financial and technical changes to the standard bid. As part of the evaluation process the Council commissioned technical due diligence reports on the bidders‟ technology solutions from Entec UK Ltd and Enertech Engineering Consultants, both of whom have specific expertise in new technologies. The conclusions of these reports were considered and it was clear that there were no absolute „red card‟ issues which would preclude any technical solution at this stage. There were some key concerns around the design/construction of the autoclave and AD proposals from the VT Consortium which needed to be addressed prior to any possible preferred bidder appointment. In addition the Council identified that there was a potential issue with the IPR of the various technical processes that would need to be transferred to the Council following early termination, or at the end of the contract term, to enable the Council to continue to operate the key waste treatment facilities. Bidders were instructed to review their IPR position with the key technology suppliers and provide evidence to the Council within a set time scale that the licences they obtained could be transferred to the Council. The VT Consortium and WRG provided the necessary evidence by 9 July 2007 as requested, however Veolia provided evidence on 13 July, four days late. The VT Consortium and WRG IPR responses were reviewed as part of the evaluation process and it was agreed that there was no issue in relation to IPR that would prevent them being taken forward to the next stage, although some further due diligence would be required before a preferred bidder appointment could be made. The Veolia IPR response was not taken account of in the evaluation as the decision to de-select it (see below) had been made prior to receipt of its IPR response. It

Waste PFI Project

Final Business Case


should be noted that any analysis of Veolia‟s IPR response would not have affected the decision to de-select it from the procurement process. Following the detailed BAFO evaluation it became apparent that the cost of the

BAFO bid submitted by Veolia was significantly higher than those submitted by the

VT Consortium and WRG (as can be seen from Table 4.9) and therefore Veolia was

deselected from the bid process. The 2 remaining BAFO bids were still too close to choose between and a further period of clarification was undertaken during August/September 2007 with both the VT Consortium and WRG prior to further BAFO (Final BAFO) bids being submitted by the end of September 2007.

4.7.5 Final BAFO

Both the VT Consortium and WRG were issued with Final BAFO instructions in correspondence dated 17 & 23 July 2007 and it was subsequently agreed that Final BAFO bids were to be submitted by 28 September 2007. Throughout the period from July to September both bidders were engaged in negotiations with the Council on key issues. Some technical changes were made to comply with the Council‟s Final BAFO requirements and key financial issues were further modified and resolved to a clearer position. With respect to key Legal and Contractual issues these were clarified and where necessary advice was taken from Defra/PUK with respect to derogation issues from standard contractual drafting. This process was to ensure that there would be few key commercial issues outstanding with whichever bidder was appointed preferred bidder. Following the period of negotiations Final BAFO bids were submitted to the Council on 28 September. Both the VT Consortium and WRG submitted compliant standard Final BAFO bids and WRG submitted a variation to its standard bid incorporating alternative financial sensitivities around third party revenue and indexation proposals. WRG also identified a preference for a technical variation which required the Council to segregate the collection of glass at the kerbside from plastic bottles, cans, paper and card. Following the detailed evaluation exercise there was little to choose between the VT Consortium and WRG with only separating the qualitative scores. As both scored above it was clear that they had submitted high quality Final BAFO bids. In addition it was evident that the VT Consortium and WRG had further strengthened their overall positions compared to those at the initial BAFO stage. The VT Consortium scored the higher in the Service Delivery and Technical section of the evaluation and improved its score from the initial BAFO stage. WRG‟s Service Delivery and Technical score reduced slightly primarily through its less flexible technical solution which put more onus on the Council‟s in-house collection service to deliver the Contract Targets. Both the VT Consortium and WRG significantly improved their scores in the Financial and Commercial section of the evaluation demonstrating a better understanding of the Payment Mechanism and taking more risk through changes in their position on „caps‟ on liabilities for LATS, deductions and Landfill Tax. However further work would still be required in these areas with the preferred bidder as the waste PFI contract moved towards financial close.

Waste PFI Project

Final Business Case


Significant progress was made with both the VT Consortium and WRG in the Final BAFO stage on Legal and Contractual issues, particularly in relation to derogations from SoPC4 drafting on key issues. The input from WIDP‟s commercial team through its „Transactor‟ support played a key role in discussions with Defra/PUK in achieving positions on the key issues. As a consequence both the VT Consortium and WRG improved their scores in this area of the evaluation with WRG scoring the better of the two. The overall cost to the Council of the Final BAFO bids was calculated. This looked at both the standard bid positions and the financial variations submitted by WRG. This analysis demonstrated that the VT Consortium‟s standard bid offered the best financial solution to the Council, being below the WRG submission. On this basis and taking into account the qualitative evaluation which also favoured the VT Consortium‟s Final BAFO bid the Council‟s Cabinet took the decision on 27 November 2007 to appoint the VT Consortium as preferred bidder subject to agreement of the preferred bidder appointment letter. The formal preferred bidder appointment letter is included at Appendix 7. It was further recommended that WRG be retained as the reserve bidder to ensure that should final negotiations with the VT Consortium fail to reach a satisfactory conclusion the Council would have the option of revisiting the WRG bid with a view to taking WRG forward to final contract negotiations.

4.7.6 Preferred Bidder

Following the appointment of the VT consortium as preferred bidder, VT advised the Council that it had completed the acquisition of Estech together with the intellectual property rights to the Estech autoclave technology in June 2008. Following the downturn in the economic climate during 2008 the VT Consortium reviewed its financial support to the waste PFI contract and subsequently following a formal funding review a Funding Club was formed comprising

. As a consequence and joined the VT Consortium with NordLB providing of the senior debt and and providing each. Following the formation of the Funding Club the Council and the VT Consortium continued to negotiate the terms of the waste PFI contract and during the first half of 2009 it became obvious that the Funding Club was taking a more aggressive view on waste PFI project risks than had previously been taken when was supporting the VT Consortium itself. The Funding Club had particular concerns regarding the off-take arrangements for the fibre output from the autoclave process and falling waste levels generally. Throughout the second and third quarters of 2009, the Council (together with support from the WIDP commercial team), the VT Consortium and the Funding Club continued to negotiate the details of the waste PFI contract. These extended negotiations caused a significant delay to the procurement programme and a significant increase in the waste PFI contract costs.

Waste PFI Project

Final Business Case


In the last quarter of 2009 the VT Consortium submitted a revised financial model incorporating the impact of the changes to the commercial structure and the new funding terms proposed by the Funding Club. These changes significantly increased the cost of the waste PFI contract. As a consequence of the changes outlined above the Council in conjunction with its external advisors re-assessed the waste PFI project on a number of grounds during the last quarter of 2009 and the first quarter of 2010. The VT Consortium was informed of this review of the waste PFI project however it was not party to the details of this review. This review added further delay to the procurement programme. In March 2010 VT advised that Babcock had made a formal offer to acquire VT. In May 2010 the Council and the VT Consortium re-engaged fully to progress the waste PFI contract to financial close. During this initial re-engagement process the VT Consortium informed the Council that was taking place in the Funding Club. As a consequence joined the VT Consortium with providing

of the senior debt and and providing each. The formal acquisition of VT by Babcock was completed on 9 July 2010 and VT was renamed Babcock Southern Holdings Ltd. As a consequence of these changes, the preferred bidder consortium at that time comprised Babcock Southern Holdings Ltd, Estech and the revised Funding Club of

(the Babcock Consortium). Following its acquisition of VT, Babcock reviewed the former VT business portfolio alongside its own future business proposals and concluded that waste management did not fit its future business model. In October 2010 Babcock advised the Council that following this review it was proposing to undertake an exercise to exit the waste market and as a consequence was not proposing to complete the waste PFI contract. This decision was not anticipated by the Council and caused a further delay in the procurement programme. The Council and Babcock assessed the implications on the waste PFI project of Babcock‟s decision to exit the waste market and not complete the waste PFI contract. To ensure the continued delivery of the waste PFI project it was agreed that Babcock would undertake an exercise to find a partner to strengthen the preferred bidder consortium. This would enable Babcock to exit the waste management business by withdrawing from the preferred bidder consortium at financial close. Babcock undertook a comprehensive market testing and due diligence process and as a result invited Shanks to join the preferred bidder consortium and signed a „Teaming Agreement‟ with Shanks on 10 February 2011 to formalise the arrangements. As a consequence of this Teaming Agreement, Shanks has taken the lead bidder role in the Preferred Bidder Consortium to progress the waste PFI contract to financial close. To ensure that Shanks was assessed as a suitable company which the Council could ultimately contract with Shanks submitted a PQQ. This was evaluated by the Council and its external advisors against the original PQQ criteria and demonstrated that Shanks would be an acceptable partner in the Preferred Bidder Consortium and

Waste PFI Project

Final Business Case


following Babcock‟s withdrawal from the Preferred Bidder Consortium would still provide the necessary technical and financial strength in its own right to contract with the Council. As a consequence of Babcock withdrawing from the Preferred Bidder Consortium it is anticipated that Shanks will acquire the relevant parts of the Babcock waste management business necessary for the delivery of the waste PFI project. This will include the Babcock „First of Class‟ autoclave facility in Wakefield where Babcock has built a full size autoclave which will eventually be transferred to the South Kirkby site for full service delivery. Following Shanks taking the lead role in the Preferred Bidder Consortium it has reviewed the financial support to the waste PFI contract. It originally short listed six banks as possible funders however de-selected and in November 2011. During March 2012 and following detailed discussions with the remaining Funding Club (comprising ) both and

. Shanks subsequently held discussions with further potential funders and as

a result SMBC and the UKGI have joined the Funding Club. This revised Funding Club will take the waste PFI project to financial close. This revised position has resulted in amended funding terms in line with current „market‟ terms. This has had a financial impact on the waste PFI contract costs but these have been contained within the overall affordability envelope. (See Section 8). The Council and Shanks have agreed a programme to achieve financial close by 30 November 2012. As can be seen from the outline of the process above the procurement of this waste PFI project has been extremely complex with numerous external influences adding delays to the procurement programme at different stages. It should be noted however that throughout the procurement the Council‟s Executive (at Member and Chief Officer level) has continued to fully support the waste PFI project. 4.8 The Solution Proposed by the Proposed Preferred Bidder The technical solution proposed the waste PFI contractor is set out in detail in section 1.4 and reproduced below for completeness. The waste PFI contractor‟s solution to the treatment of the 3 waste streams is based around new waste treatment facilities to be built at the former South Kirkby Colliery site. The residual waste stream will be treated through the RWTP, the FSMDR through the MRF and the garden waste through the enclosed windrow composting facility. The flow diagram below sets out details of the waste flow inputs, plant capacities and waste flow outputs from the 3 key waste treatment facilities for the final year of the waste PFI contract (2036):

Waste PFI Project

Final Business Case


* The enclosed windrow composting facility at South Kirkby has a capacity of 25,000 tonnes. Where the input of garden waste exceeds this capacity, the waste PFI contractor will retain responsibility for treating this either on the South Kirkby site by reducing the retention time in the enclosed windrow composting facility or by providing off site windrow composting.

The RWTP will be operational from April 2015, the enclosed windrow composting facility August 2015 and the MRF from February 2015. The Council‟s Technical Advisor was commissioned to produce a report on the waste PFI contractor‟s proposed technical solution as set out above. A copy of this report “Amec‟s (formerly Entec) Technical Due Diligence Report “is included at Appendix 15. This report is based on the waste PFI contractor‟s Works Delivery Plan (version 16). In addition to the technical due diligence report referred to above, Amec has produced a technical assessment of the waste PFI contractor‟s Works Delivery Plan (version 16). A copy of this assessment “Works Delivery Plan WDP16 Technical Assessment” is included at Appendix 15. The Works Delivery Plan will be developed further following financial close and the waste PFI contractor is currently updating version 16 to a new version 17. It has been agreed that version 17 will be that included in the final documents list at financial close. Amec will continue to review updated versions of the Works Delivery Plan as further development takes place. Since the reports based on version 16 were prepared recent changes have been made to the technical solution as a result of the ongoing design process. These

Waste PFI Project

Final Business Case


changes are summarised below and will be included in version 17. The changes are considered to be non-material changes and do not affect the substance of the reports referred to above. Infrastructure Works

Changes to the size and positioning of the autoclave building to make available more space for the effluent treatment plant;

Effluent treatment plant amended to deal with surplus water from the AD plant which was formally within the residual waste treatment building;

Changes to AD tank layout to make available more space for the effluent treatment plant;

Changes to the road layout to improve access to key buildings;

Removal of vehicle maintenance building;

Addition of sprinkler tank in the residual waste treatment reception hall; and

Updates to doors and flue positions. Residual waste treatment facility – pre-sort MRF

Changes to equipment type, arrangement and layout as a result of change of supplier from Stadler to MachineX; and

Changes to storage areas for recycled materials within the facility. Residual waste treatment facility – autoclave

Changes to steam plant equipment arrangement and layout. Residual waste treatment facility – AD plant

Reduction in feedstock conditioning lines post autoclave unit;

Changes to AD tank material resulting from detailed design process; and

Removal of surplus liquid food stock tank. Residual waste treatment facility – effluent treatment plant

Removal from autoclave building to external tank farm area; and

Changes to plant design to facilitate treatment of surplus water from AD plant prior to disposal to public sewer and to comply with discharge consent from Yorkshire Water.

Materials recycling facility

Changes to equipment type, arrangement and layout as a result of change of supplier from Stadler to MachineX; and

Increased bale storage area within the building. Composting facility

Amended layout within the building to ease traffic movements for delivery and removal of materials.

Waste PFI Project

Final Business Case


The waste PFI contractor has discussed the changes summarised above with the local planning authority (“LPA”) and these are deemed to be non-material changes in planning terms and will not affect the approved planning permission. In addition to the reports referred to above, Amec has provided a “Technical Advisors Letter of Support” as requested by WIDP which is also included at Appendix 15. The letter of support confirms that the technical solution is appropriate, the overall configuration of the key waste treatment facilities is logical, and there are no significant concerns which would adversely affect the delivery of the waste PFI project.

Waste PFI Project

Final Business Case


5 Risk Management, Risk Allocation and Contractual Structures

5.1 Introduction

The Council developed the OBC Project Risk Register to identify the key risks in the waste PFI project and in consultation with its external advisors developed an approach to managing these key risks. The OBC Project Risk Register is set out in section 5.2. The OBC Project Risk Register was reviewed and expanded for the ITN stage. The ITN Project Risk Register was based on the 4ps waste management procurement pack, SoPC drafting, market advice from the Council‟s external advisors and on a project specific basis. During the procurement process the ITN Project Risk Register has been further developed and as a result the FBC Project Risk Register sets out the risk allocation as agreed with the waste PFI contractor. This risk allocation is reflected in the final version of the waste PFI contract. Appendix 4 Part A provides a comparison of the risk allocation as developed between the ITN stage and that reflected in the final version of the waste PFI contract. In addition to the Project Risk Registers the Council identified the waste PFI project as one of the Council‟s „highest risk‟ projects which required careful and pro-active management during the procurement process. To ensure that these risks were managed properly 2 additional Risk Registers were established and have been monitored on a regular basis. These additional Risk Registers are as follows:

PMT Risk Register Project Board Risk Register

Copies of the latest PMT and Project Board Risk Register are included at Appendix 4 Part B and Part C respectively. As part of the overall risk management the waste PFI project has been subjected to the 4ps Gateway Review process which is an independent review under the direction of the 4ps. As part of the governance of the waste PFI project regular meetings are held with the Council‟s internal audit section and Audit Commission to review progress and these meetings further enhance the risk management of the waste PFI project. 5.2 Risk Management The OBC Project Risk Register was included in the OBC and set out a brief overview of the main risks that it envisaged would be transferred to the private sector partner under a PFI solution and which otherwise would have been borne by the Council under a conventional procurement. This OBC Project Risk Register is set out in Table 5.2.

Waste PFI Project

Final Business Case


Table 5.2 OBC Project Risk Register

Risk Description

Planning Risk This risk relates to the consequences of failing to obtain planning permission, which would result in termination of the waste PFI project or significant variation to the service solution. There is also a risk of potential delay implicit in meeting the requirements of planning conditions. Pre-planning application considerations may lead to waste PFI project amendments or abandonment. Some planning constraints will need to be addressed at the planning permission stage.

Design Risk This is the risk that the design of the chosen solution does not allow the output requirements to be met. Planning constraints may affect the waste PFI project design.

Construction Risk This risk relates to all issues associated with the construction phase, such as latent defects, such as contaminated land, or construction defects, archaeological discoveries, ecological issues or unforeseen ground conditions.

Demand Risk This risk is essentially associated with the volume of waste arising and composition of the waste and relates to their impact on the cost and performance of the service.

Performance Risk This risk relates essentially to the achievement of recycling and recovery rates as well as any other service levels set out in the output specification.

Technology and Obsolescence Risk

This risk relates to the fact that an alternative approach may be required at some stage throughout the term of the waste PFI contract.

Operating Risk This risk relates to higher than expected operating costs and the extent to which service provision meets the availability and standard requirements of the output specification.

Third Party Income Risk

The income from recyclates or any other third party income may not meet the levels assumed at the outset of the waste PFI contract.

Residual Value Risk

Residual value risk is the risk that facilities associated with the service will be required and will have a value at the expiry of the waste PFI contract. Furthermore, the value of the waste PFI project assets at the end of the waste PFI project may either be significantly different to that assumed at the outset or may not ultimately be realised. This could arise due to incorrect assumptions or impairment to the value of the assets.

Regulatory Risk Regulatory or legislation risk should be allocated on the basis that the “party best placed to control risk should manage it”. This risk covers the main areas where changes may impact on the capital costs or operating costs of delivering the service including:

Waste management legislation;

Landfill Tax;

Waste PFI Project

Final Business Case


Risk Description

Health & safety;

Human Rights Act; and

Town and Country Planning Legislation.

Financing Risk The ability to obtain finance to fund the waste PFI project, and which can be secured on the terms set out in the winning tenderer‟s bid.

During preparation of the ITN documents the OBC Project Risk Register was developed following a workshop involving the Council‟s internal financial, technical and legal team and its external advisors. A number of key project risks within each heading of the OBC Project Risk Register were identified. Each risk was allocated as either being a public sector risk, a private sector risk or a shared risk. The ITN Project Risk Register is included at Appendix 4 Part A. As a result of the final negotiated waste PFI contract, the risk allocation as set out at the ITN stage has changed and further potential risks have been identified. Each risk was allocated as either being a public sector risk, a private sector risk or a shared risk. Appendix 4 Part A identifies such changes and section 5.3 sets out in detail the changes that have been made and the reasons for such changes.

5.3 Risk Allocation Register

The risk allocation in the waste PFI project has been further refined and developed as a result of negotiations with the waste PFI contractor and the FBC Project Risk Register has been developed as part of this process. The FBC Project Risk Register is included at Appendix 4 Part A which identifies the changes in risk allocation since ITN together with additional risks that have been identified during the course of negotiations. Table 5.3 below summarises the changes in risk allocation between ITN and FBC stage together with additional risks.

Waste PFI Project

Final Business Case


Table 5.3 Changes in risk allocation

Waste PFI Project

Final Business Case


Waste PFI Project

Final Business Case


5.4 Commercial Issues Not Covered by SoPC4

The following key commercial issues have been agreed with waste PFI contractor and are now included within the Project Agreement and/or the Payment Mechanism as appropriate. The WIDP commercial team have been involved in the development of these key issues which are now approved. The key issues are summarised below: 5.4.1 Guaranteed Minimum Tonnage As a result of discussions with the Funders the Payment Mechanism has been amended to include a GMTP profile based around the following bandings: Band 1 – Band 2 – Band 3 – In the event that the tonnage of Contract Waste in any relevant contract year exceeds the Maximum Annual Tonnage in the relevant contract year, the Payment Mechanism includes a “Maximum Annual Tonnage Surplus Payment” which allows the Contractor to be reimbursed for the cost of alternative disposal for each tonne of Contract Waste which exceeds the Maximum Annual Tonnage. Where the Eligible Tonnage of Contract Waste has been below the level of Adjusted GMT in any contract year the Payment Mechanism includes a Third Party Income Adjustment which allows the Council to share in any excess third party income where the third party income generated by the waste PFI contractor exceeds the guaranteed levels of third party income in the Base Case financial model and to clawback any GMT downside (in the event that the Council delivers Contract Waste to the waste PFI contractor below the GMT level) by utilising any upside from third party income. The basis of the Third Party Income Adjustment is set out in the “Commercial Paper setting out the Interaction between Third Party Income sharing and Substitute Waste drafting” included at Appendix 24. The Third Party Income Adjustment principle has been agreed with the waste PFI contractor

and is considered to provide the Council with a better financial position than that provided through the standard contract position . This revised payment proposal has been agreed primarily to protect the repayment of Senior Debt where waste growth cannot be guaranteed due to the current falling waste growth being experienced across most of the United Kingdom. 5.4.2 Exclusivity In addition to the GMTP profile the waste PFI contractor has requested that it be given exclusivity to all the Council‟s Contract Waste to protect its ability to recover third party income which is guaranteed to the Council through the financial model.

Waste PFI Project

Final Business Case


It has been agreed that exclusivity will be granted to the waste PFI contractor up to and including the expected level in the base case wasteflow model. There are compensation provisions provided in the waste PFI contract for the waste PFI contractor‟s benefit in circumstance where the Council does not comply with the exclusivity provisions. 5.4.3 RDF Offtake Agreement The Council and the waste PFI contractor have agreed that the RDF will be disposed of to the proposed Bio-fuel plant being built by Ferrybridge MFE Ltd at the existing Ferrybridge power station.

Shanks Waste Management Ltd (as Operating Sub-Contractor) will enter into a 25 year supply contract with Ferrybridge MFE Ltd for the thermal treatment of the RDF produced from the residual waste treatment facility at South Kirkby. In addition there will be a direct agreement between Ferrybridge MFE Ltd, Shanks Waste Management Ltd, the Council and Shanks Group Plc (as guarantor to Shanks Waste Management Ltd) which allows the Council to step into the Offtake agreement for its remaining term in the event of early termination of the waste PFI contract.

As part of the commercial arrangements there is a significant security structure built into the waste PFI contract to minimise the potential risk that the Council may be exposed to should it elect to terminate the waste PFI contract in the event of a Market Failure. The Council has kept the WIDP Commercial Team fully informed in respect of the agreement that has been reached and the Council‟s justification for this commercial arrangement and security structure is set out in Appendix 21. The contractual arrangements to reflect the commercial position are included in the waste PFI contract. 5.4.4 Digestate Offtake Agreement The Council and the waste PFI contractor have agreed that the Digestate will be disposed of to 4Recycling Ltd for use as a soil improver. Shanks Waste Management Ltd (as Operating Sub-Contractor) will enter into a 25 year Offtake agreement with

Waste PFI Project

Final Business Case


Shanks SRF Trading Ltd which will itself sub-contract with 4Recycling Ltd for disposal of the digestate produced from the residual waste treatment facility at South Kirkby. In addition there will be a direct agreement between 4Recycling Ltd, Shanks SRF Trading Ltd and the Council, together with a direct agreement between Shanks Waste Management Ltd (as Operating Sub-Contractor), Shanks SRF Trading Ltd and the Council which allows the Council to step into the Offtake agreements for their remaining term in the event of early termination of the waste PFI contract. If the Digestate Offtake agreement is terminated because the Digestate cannot be used as a soil improver, the Council, the waste PFI contractor and the Funding Club have agreed that the waste PFI contractor could convert the Digestate into a RDF. This RDF would then be disposed of under the RDF Offtake agreement and the commercial arrangements, as set out in paragraph 5.4.3, would apply. 5.4.5 Ferrybridge Environmental Permit Failure

As set out in paragraph 5.4.3 above, the RDF produced at the South Kirkby site will be disposed of to the proposed Ferrybridge Bio-fuel plant. The Ferrybridge Bio-fuel plant has received its appropriate planning approval and Ferrybridge MFE Ltd has applied for the appropriate Environmental Permit. A draft Environmental Permit was issued on 28 September 2012 and it is anticipated that the final permit will be issued mid November 2012. Following this there will be a 3 month judicial review period. Ferrybridge MFE Ltd has commenced construction of the proposed Ferrybridge Bio-fuel plant which is anticipated to be completed by May 2015.

The Council has kept the WIDP Commercial Team fully informed in respect of the agreement that has been reached and the Council‟s justification for this commercial arrangement is set out in Appendix 22. The contractual arrangements to reflect the commercial position are included in the waste PFI contract.

5.4.6 Economic Reinstatement Test

The Funding Club require the inclusion of an Economic Reinstatement Test in the waste PFI contract to cover a situation where the waste management facilities at the South Kirkby site are destroyed or partly destroyed.

Waste PFI Project

Final Business Case


It has been agreed to adopt the standard WIDP drafting and this is set out in the waste PFI contract. 5.4.7 Third Party Income Sharing

The principles of third party income sharing are set out at section 5.4.1. 5.4.8 Carbon Reduction Commitment The Council will reimburse the waste PFI contractor for any Carbon Reduction Commitment costs, at the prevailing rates, in respect of the volume of electricity and gas consumed by the waste management facilities in the contract year which do not exceed the Target Electricity and Target Gas amounts, as appropriate, set by the waste PFI contractor for the relevant contract year. The waste PFI contractor will be liable for any Carbon Reduction Commitment costs in respect of any volumes exceeding the Target Electricity and Target Gas amounts, as applicable.

5.5 Project Agreement and other Contractual Documents

5.5.1 Project Agreement A copy of the current version of the Project Agreement is included at Appendix 12. The Project Agreement was originally based on SoPC3. Following discussions with the WIDP commercial team during the procurement process, the Project Agreement has subsequently been updated to conform where possible to the following standard documents: (i) Standardisation of PFI Contracts Version 4 (SoPC4); (ii) Local Authorities Supplement; (iii) 4ps waste management procurement pack (as appropriate); (iv) 2010 WIDP standard form contract (as appropriate); and (v) the former standard BSF drafting (as appropriate). These changes to the Project Agreement have been incorporated to reflect a reasonable risk share approach. 5.5.2 Proposed Derogations Throughout the negotiations with the waste PFI contractor the PMT has been assisted directly by its „WIDP Transactor‟ and members of the WIDP commercial team. Appendix 6 sets out the derogations for the waste PFI project which have been discussed with the WIDP Commercial Team. In addition Appendix 6 also sets out those derogations outstanding and requiring approval as part of this FBC submission.

5.5.3 Payment Mechanism

5.5.3.1 Overview

Waste PFI Project

Final Business Case


The Payment Mechanism has been drafted on the basis of the WIDP standard document (as amended on a project specific basis). A copy of the Payment Mechanism is included at Appendix 11. The Payment Mechanism is based on a single annual service charge (“the Unitary Charge”) which will be payable to the waste PFI contractor in respect of the service outputs defined within the scope of the waste PFI project in accordance with the output specifications. The service outputs are set out in section 4.3. The Unitary Charge will be paid in monthly instalments (the “Monthly Payment) and will be subject to a series of performance standards and Contract Targets against which performance of the waste PFI contractor will be measured, with adjustments being made from the monthly Unitary Charge if those standards and targets are not attained. The performance standards and Contract Targets are set out in the output specifications and associated drafting and the components of the Unitary Charge are detailed below. The waste PFI contractor will be required to measure its performance under the waste PFI contract and report monthly to the Council. The Council will audit the measurement and reporting carried out by the waste PFI contractor through its contract management team. The invoicing and payment arrangements are based on the principle of „zero‟ debtor days. The waste PFI contractor will invoice the Council for the monthly Unitary Charge in respect of a contract month based on the Unitary Charge forecast undertaken at the start of the contract year. The Unitary Charge forecast is revised at quarterly intervals during the contract year to enable the Monthly Payment to be updated to reflect any differences between forecast and actual amounts (in tonnage and performance). The Council is required to pay that part of the invoice that is not disputed within 15 Business Days of receipt. Full details of the invoicing and payment arrangements can be found in Clause 57 (“Payment”) of the waste PFI contract. By no later than twenty Business Days after the end of the contract year, the actual tonnage and performance level for the contract year will be known and a final reconciliation invoice will be issued by the waste PFI contractor to ensure the amount paid by the Council reconciles to the amount payable based on actual tonnages and performance for the contract year. The waste PFI contract price has been through the sale of recyclates and energy produced from the waste treatment processes. Up to GMT, 52% of the Unitary Charge is indexed (28% RPIx and 20% AEI). For all other tonnage bands the Unitary Charge is wholly indexed by RPIx. 5.5.3.2 Components of the Unitary Charge Base Payment The main element of payment (the “Base Payment”) will be based on the “tonnage” element of Contract Waste delivered to the waste PFI contractor each contract year. This “tonnage” element is made up of a GMT profile with three discrete payment bands.

Waste PFI Project

Final Business Case


Full details of the payment profiles are included in section 5.4 of this FBC. The purpose of the Base Payment is to provide a payment for the service that varies with the tonnages of all Contract Waste accepted by the waste PFI contractor for each contract year after the Service Commencement Date. During the Initial Service Period, the relevant rate per tonne payable to the waste PFI contractor will be set at a lower rate to reflect the reduced level of service; this rate will increase at the Full Service Commencement Date once all new waste management facilities have been issued with practical completion and acceptance tests certificates and are available for use by the Council (to the extent that this is not ahead of the Planned Service Commencement Date). Landfill Payment The Council will reimburse the waste PFI contractor for:

(i) landfill gatefees at the prevailing rates in the existing Welbeck landfill contract until its expiry in November 2013 and thereafter at the rates applicable in any subsequent landfill contracts which will be determined in accordance with the market testing provisions (in accordance with Clause 62 of the waste PFI contract); and

(ii) Landfill Tax, at the prevailing rates, in respect of any tonnage of Contract

Waste disposed of to Landfill by the waste PFI contractor in the Contract Year which does not exceed the Landfill Target for Active Waste and the Landfill Target for Inactive Waste, as appropriate, set by the waste PFI contractor for the relevant contract year.

The waste PFI contractor will be liable for the costs of all landfill gatefees and Landfill Tax in respect of any volumes exceeding the Target Active Landfill Tonnage and Target Inactive Landfill Tonnage. Where the tonnage of Contract Waste disposed of to Landfill in the contract year which is Active Landfill Tonnage is less than the Landfill Target for Active Waste for the relevant contract year, the Landfill Tax saved at the rate set out in the Base Case will be shared between the Council and the waste PFI contractor. Compensation Payment The Payment Mechanism includes a Compensation Payment element which reimburses the waste PFI contractor for costs incurred as a result of extended opening hours and rejected loads. BMW Diversion Performance Deduction If the tonnage of BMW, from accepted Contract Waste, which is disposed of to Landfill is greater than the BMW to Landfill Target, a BMW Diversion Performance Deduction will be incurred by the waste PFI contractor. This Deduction is capped at

for each tonne of BMW disposed of to Landfill in excess of the BMW to Landfill Target.

Waste PFI Project

Final Business Case


Performance Deductions Chapter 2 of both the Initial Service Output Specification and the Full Service Output Specification sets out the Performance Framework against which the waste PFI contractor is measured. The Performance Framework sets out the consequences in the event that the waste PFI contractor fails to achieve the service requirements. Performance deductions apply on the occurrence of circumstances set out in Chapter 2 of the relevant output specifications. Mileage Deductions A Mileage Deduction applies where the waste PFI contractor is not able to accept Contract Waste and the Council‟s collection vehicles are diverted to an acceptable Alternative Waste Reception Point (in accordance with the Business Continuity Plan). The Deduction reflects the additional mileage and other operational costs incurred by the Council as a result of the waste being diverted. Non Acceptance Deductions A Non Acceptance Deduction applies where the Council‟s collection vehicles are diverted to an acceptable Alternative Waste Reception Point and that Alternative Waste Reception Point is Unavailable. The Deduction reflects the additional costs incurred by the Council as a result of disposing of Contract Waste at an alternative source. Third Party Income Adjustment The Payment Mechanism includes a Third Party Income Adjustment which allows the Council to share in any excess third party income where the third party income generated by the waste PFI contractor exceeds the guaranteed levels of third party income in the Base Case financial model and to clawback any GMT downside (in the event that the Council delivers Contract Waste to the waste PFI contractor below the GMT level) by utilising any upside from third party income. The basis of the Third Party Income Adjustment is set out in the “Commercial Paper setting out the Interaction between Third Party Income sharing and Substitute Waste drafting” included at Appendix 24. Recycling Deduction The output specifications include the Contract Targets for the Council in relation to recycling of household waste and HWRC waste. Where the waste PFI contractor fails to meet either of the Recycling Targets in a contract year, a Recycling Deduction will apply. In respect of household waste, the extent to which the Recycling Deduction will apply is subject to the Council meeting its Guaranteed Council Contribution towards the Household Waste Recycling Target. Other Components NNDR

Waste PFI Project

Final Business Case


The Payment Mechanism allows for reimbursement to the waste PFI contractor of NNDR in respect of the sites included within the waste PFI contract. Exceptional Cost (Insurance) The Payment Mechanism allows for reimbursement to the waste PFI contractor of an Insurance Cost Increase during an Insurance Review Period. Exceptional Saving (Insurance) The Payment Mechanism allows for the Council to be reimbursed for an Insurance Cost Decrease during an Insurance Review Period. Specific Waste Payment The Payment Mechanism includes a Specific Waste Element which applies a fee to each item of Specific Waste derived from HWRCs e.g. clinical waste handled by the waste PFI contractor. Specific waste items are subject to the market testing provisions, in accordance with clause 62 of the waste PFI contract. Waste Minimisation and Community Liaison Fee The Payment Mechanism includes a Waste Minimisation and Community Liaison Fee Element which will apply on an annual basis as a one-off rate and will reflect the level of support the waste PFI contractor has provided in relation to assisting the Council with its Waste Minimisation and Community Liaison activities in accordance with Service Output 1 of the relevant output specifications. Changes to the Works or Service – Agreed Abatement Where the waste PFI contractor does not complete or implement a change to the Works or Service within agreed timescales, then the Payment Mechanism allows for the Council to be reimbursed for an “Agreed Abatement” in accordance with the waste PFI contract for every day of the delay. Maximum Annual Tonnage Surplus Payment In the event that the tonnage of Contract Waste in any relevant contract year exceeds the Maximum Annual Tonnage in the relevant contract year, the Payment Mechanism includes a “Maximum Annual Tonnage Surplus Payment” which allows the Contractor to be reimbursed for the cost of alternative disposal for each tonne of Contract Waste which exceeds the Maximum Annual Tonnage. Carbon Reduction Commitment The Council will reimburse the waste PFI contractor for any Carbon Reduction Commitment costs, at the prevailing rates, in respect of the volume of electricity and gas consumed by the waste management facilities in the contract tear which do not exceed the Target Electricity and Target Gas amounts, as appropriate, set by the waste PFI contractor for the relevant contract year. The waste PFI contractor will be liable for any Carbon Reduction Commitment costs in respect of any volumes exceeding the Target Electricity and Target Gas amounts, as applicable.

Waste PFI Project

Final Business Case


Pension Costs The Payment Mechanism allows for the waste PFI contractor or the Council, whichever is applicable, to be reimbursed for costs associated with changes to the pension provisions in accordance with Clause 77 (Pension Costs) of the waste PFI contract. Market Tested Services Payment The Payment Mechanism includes a Market Tested Services Payment which allows the Council to reimburse the Contractor for costs associated with the market tested services set out below subject to market testing, in accordance with Clause 62 of the waste PFI contract:

a) transport of Contract Waste from Denby Dale Road to South Kirkby;

b) transport of RDF from South Kirkby to Ferrybridge;

c) supply of fuel for transport of Contract Waste within or between the waste management facilities and landfill sites;

d) supply of fuel for transport of Contract Waste within the waste management facilities;

e) supply of gas consumed by the residual waste treatment facility at South Kirkby;

f) supply of water consumed by the residual waste treatment facility at South Kirkby;

g) supply of electricity for the residual waste treatment facility at South Kirkby; and

h) the Landfill Gatefee; RDF Offtake Facility Upside Share

Excess Commercial and Industrial Payment

Waste PFI Project

Final Business Case


In the event that the tonnage of commercial and industrial waste in any relevant contract year exceeds of the commercial and industrial waste included in the Base Case financial model for the relevant contract year, the Payment Mechanism includes a “Commercial and Industrial Payment” which allows the waste PFI contractor to be reimbursed for the waste PFI contractor‟s costs of handling each additional tonne of commercial and industrial waste. Commissioning Payment The Payment Mechanism includes a “Commissioning Payment” to reimburse the waste PFI contractor for the costs of processing and diverting Contract Waste delivered for the purposes of commissioning the residual waste treatment facility at the South Kirkby site.

5.6 Markets for Process Outputs

The technical solution proposed by the waste PFI contractor includes a pre sort treatment of residual waste to extract key process outputs prior to the autoclave cycle. A RDF will be produced from predominantly paper, card and plastic film which will be sent for recovery. The organic rich fines element will be treated through the autoclave and further refined to remove recyclables and heavy material prior to AD and drying. Following the AD cycle the digestate output will be sent to market as a soil conditioner. The soil conditioner will count towards the overall household waste recycling target achieved by the waste PFI contractor‟s. In addition to the RDF and digestate product identified above, the waste PFI contract will produce a wide range of other materials that will be sent to market for recycling, recovery or re-use. The Waste Flow Model includes all details of the anticipated process outputs for each year of the waste PFI contract and also includes a schematic of the overall waste treatment process train. The waste PFI contractor has developed a Materials and Energy Marketing Plan which sets out the initial marketing arrangements and market development activities current at the date of signing the waste PFI contract for all the material streams produced from the various treatment processes. The Materials and Energy Marketing Plan includes the following details:

Material type;

Approximate annual tonnages;

Proposed markets; and

Proposed outlets. The current draft Materials and Energy Marketing Plan is included at Appendix 16 and this will be reviewed and updated on an annual basis throughout the contract period.

Waste PFI Project

Final Business Case


The waste PFI contract price has been through the sale of recyclates and energy produced from the waste treatment processes. The has been guaranteed as part of the waste PFI contract costs and as a consequence the risk of failing to achieve this guaranteed income stream rests with the waste PFI contractor. Where this guaranteed income stream is exceeded the waste PFI contract includes a mechanism whereby the Council and the waste PFI contractor will share any excess revenue on a basis.

5.7 Budgetary Sheet Treatment

Under HM Treasury‟s consolidated budgeting guidance, departmental budgets (including Defra) follow National Accounts, which are prepared under the European System of Accounts (ESA95). The HM Treasury paper „Technical Guidance on the Application of the Standards used in the production of National Accounts to PFI and Similar Transactions‟ („the Guidance‟) describes the risk transfer tests that should be applied by Central Government Departments in determining whether or not their waste PFI projects will have to come on balance sheet for National Accounts purposes. The Council has undertaken an assessment of this waste PFI project against the Guidance and determined that on the basis of the risk transfer tests performed, it is likely that the waste PFI project meets the criteria for being off balance sheet for National Accounts purposes. The ESA95 questionnaire response is provided in Appendix 19.

Waste PFI Project

Final Business Case


6 Project Team and Governance

6.1 Introduction

The Council is a Unitary Authority with responsibility for both waste collection and disposal. The waste PFI project has been developed to deliver the Council‟s approved MWMS. Wakefield‟s neighbouring authorities (Leeds, Bradford and Calderdale, Barnsley, Doncaster, and Rotherham, and North Yorkshire) are all currently in procurement for long term waste management contracts. Kirklees Council procured its PFI contract some years ago. The project governance and project management arrangements identified below clearly demonstrate that the Council has conducted a robust procurement and approvals process throughout the development of the waste PFI project. This will be continued for the operations phase when new contract management arrangements will be established.

6.2 Legal Context

The Council has unitary responsibilities for waste management and thus serves as the WCA and WDA simultaneously. The vires context in which this procurement exercise is being conducted is as follows:

The Council is a WDA and a WCA under the Environmental Protection Act 1990 (section 30), and has a duty to make arrangements for such in accordance with the provisions of that Act and in particular sections 45 (collection) & 51 (disposal) thereof;

The Council has a duty under section 3 of the Local Government Act 1999 to make arrangements to secure Best Value in the manner in which its functions are exercised;

The Council is under a duty to ensure the economic, social and environmental well-being of its area under section 2 of the Local Government Act 2000;

Under section 1 of the Local Government (Contracts) Act 1997 and section 111 of the Local Government Act 1972 the Council has power to enter into contracts for the purposes of or in connection with the discharge of its functions;

The Council has power to certify the contract pursuant to section 3 Local Government (Contracts) Act 1997; and

The waste PFI contract is being procured in accordance with the provisions relating to the negotiated procedure for services contracts pursuant to Regulation 10 of the Public Services Contracts Regulations 1993.

The waste PFI contract falls within Part A of the Public Services Contracts Regulations 1993, which applies to all local authorities and as such is a contract with a value above the threshold limits set subsequent to these Regulations. The Public Contracts Regulations 2006 had not been implemented by the UK Government at the time of going out to tender for this waste PFI project. The procurement directive,

Waste PFI Project

Final Business Case


Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004, on the co-ordination of procedures for the award of public works contracts, public supply contracts and public services contracts, did not have direct effect at the time of going out to tender, in accordance with the principle in Pubblico Ministero v Ratti. This principle states that a directive only has direct effect once its implementation date has passed. As article 80 of Directive 2004/18/EC sets the implementation date at 31 January 2006, this Directive only had direct effect and applied to procurement after this date. However, in order to comply with the ECJ ruling in the case of Alcatel Austria v Bundesterium fürWissenschaft und Verkher {1999} E.C.R.I-7671 the Council proposes to serve contract award notices and observe a standstill period in compliance with the Public Contracts Regulations 2006 as amended by the Public Contracts (Amendment) Regulations 2009 (SI 2009/2992) prior to entering into the waste PFI contract. Under Regulation 10 of the Public Services Contracts Regulations 1993, for the purpose of seeking offers in relation to provision of services, the Council had to choose from one of three types of tendering procedures: open, restricted or negotiated. The normal procedure for Council tenders is via the open or restricted procedures other than in exceptional circumstances, e.g. this waste PFI contract, where the Negotiated Procedure was considered to be appropriate. The exceptional and specific circumstances for use of the Negotiated Procedure are set out in detail below:

Affordability: the Council has identified an affordability gap in delivering the required solution, and detailed pricing cannot be determined in advance of the procurement process. The mix of technical and operational solutions required to deliver the waste PFI project is likely to vary between companies. It is not possible to commit to a definitive financial model in advance, and a prescriptive solution is likely to result in limiting competition.

PFI: The final form that the partnership will take, including structure, staff

transfer issues, gain share and risk transfer, will vary significantly depending on the final solution and the selected partner organisation(s). It is not possible to produce the necessary detailed service specification and contractual documentation without negotiation. Furthermore, the Negotiated Procedure is the recommended route for the procurement of PFI contracts, particularly in a high-risk project such as the Council‟s preferred waste management solution.

Within the proposed partnership it was considered that by seeking to achieve

a solution using new processes, the final nature and scope of services to be provided could not be adequately defined in advance. Whilst it was possible to define the operational output requirements from the partnership, it was not possible to specify and cost the investment requirements and the payment and performance mechanism. This was due to the following:

uncertainty over the optimum processes that will be available during

the term of the waste PFI contract; and the need for the Council to work with a partner to identify the optimum

development route for the waste PFI project.

Waste PFI Project

Final Business Case


The open or restricted procedures cannot deliver the above, and there is a high risk that the Council would not be able to obtain a contract that would deliver Best Value. In the case of the waste PFI project, owing to there being no definitive financial model in advance, and to the final form of the partnership depending on the selected partner organisation, it was considered that the negotiated procedure was the only appropriate one to use and that the waste PFI project falls within Regulation 10(2)(b) and (c) of the Public Services Contracts Regulations 1993; 10(2)(b) “Exceptionally, when the nature of the services to be provided, or the

risks attaching thereto, are such as not to permit prior overall pricing.”

10(2)(c) “When the nature of the services to be provided, in particular in the case of Intellectual Services or services specified in Category 6 of Part A or Schedule 1, is such that specifications cannot be drawn up with sufficient precision, to permit the award of the contract using the open or restricted procedure.”

The Council‟s Contract Procedure Rules (7.12), at that time stated that:

“In the exceptional cases where a Chief Officer considers that a negotiated procurement procedure is required, he or she should consult with the Head of Partnering and Procurement to develop an appropriate procurement strategy.”

The Head of Partnering and Procurements was consulted and concurred with the rationale outlined above for the use of the Negotiated Procedure for the waste PFI project. The decision to use the Negotiated Procedure in these exceptional and specific circumstances was approved by the Project Board on 6 August 2004. Post Financial Close The Council owes statutory obligations for waste management and acts as both WDA and WCA. The Council will continue to retain these statutory functions after completion. The waste PFI project allows the waste PFI contractor to undertake functions of waste management on behalf or for the Council in accordance with the Council's MWMS and as set out in the waste PFI contract and contract schedules.

6.3 Project Governance

From the outset of the waste PFI project the Council established a PMT to undertake the procurement process. The PMT includes representatives from the Council and its external advisors. The Council appointed a Project Manager for the waste PFI project, initially , and superseded by in September 2007. had previously been the Waste Procurement Manager and part of the original PMT. has from 1 January 2010 assumed the role of Project Director. Further details of the PMT are set out in section 6.4. To augment the internal team and external advisors WIDP has provided „Transactor‟ support to the waste PFI project throughout the procurement process. Initially this

Waste PFI Project

Final Business Case


support was provided by from 4ps who was superseded by . Over the past two years this support has been provided for WIDP by from Local Partnerships. In addition to the PMT the Council established a Project Board to oversee and give guidance to the PMT. The Board has been chaired by Elected Members and the current Chair is , Cabinet Assistant - Carbon Reduction and Waste Management PFI. The Council‟s approvals process is undertaken by the Cabinet. Cabinet is led by the Leader of the Council, , supported by six other Cabinet Members representing individual service areas. Prior to the Cabinet decision making process all key decisions are submitted through the CMT. CMT is led by the Chief Executive, , supported by three Corporate Directors of key service areas and the Director of Finance and Property. The Project Board and PMT provide reports on key issues to CMT for assessment prior to submission to Cabinet. The Council‟s Management Structure is outlined below:

Following approval of this FBC a new Project Board will be established with revised membership and terms of reference to reflect that the waste PFI project will have moved to the operational phase. Membership of the new Project Board will include representatives from the current Project Board to provide continuity.

Waste PFI Project

Final Business Case


6.4 Project Management

6.4.1 Pre-Financial Close Stage

As identified in section 6.3 the project management arrangements include the establishment of the Project Board and PMT. Membership of both the Project Board and PMT has changed during the term of the waste PFI project and the current membership of each is outlined below: Project Board

Cabinet Member (Environment and Communities) Cabinet Assistant – Carbon Reduction and Waste PFI -

Chair Corporate Director Communities

Project Director Waste PFI Service Director (Legal & Governance)

Service Director (ICT & Procurement) Service Director (Cleaner and Greener) Strategic Waste Policy Manager

Director of Finance and Property (Delegated to Graham Saxton – Chief Finance Manager)

WMDC Internal Audit PMT

Project Director Waste PFI WMDC Strategic Waste Policy Manager

WMDC Strategic Waste Technical Manager WMDC Principal Legal Advisor WMDC Chief Finance Manager

WMDC Senior Legal Advisor WMDC Group Finance Manager

Walker Morris (External Legal Advisors) PwC (External Financial Advisors) PwC (External Financial Advisors) Amec (External Technical Advisors) WIDP Transactor

The PMT is assisted at various stages by other staff from both internal and external resources. Other officers of the Council (i.e. Finance, Street Scene, Property, Planning and Legal) have been involved to provide support as required during the process. From the outset it was agreed to project manage the procurement using PRINCE2 principles and these have been adopted throughout. In addition the waste PFI project has been subject to the 4ps Gateway Review process. To date three reviews have been undertaken, Gates 1, 2 and 3 at different times. Gateway 3 Review (The Investment Decision) was completed in January

Waste PFI Project

Final Business Case


2008. As a result of project delays there have been no further Gateway reviews to date. The Project Director and Chief Finance Manager have held regular briefings with the Audit Commission and Internal Audit throughout the procurement process. This has ensured that the project management arrangements continue to fulfil the requirements of both internal and external audit. The representative of Internal Audit also supplies formal reports to the Project Board on the waste PFI project and risk management arrangements.

6.4.2 Post-Financial Close Stage

The Project Director will be involved in the handover of the waste PFI project to the contract management team following financial close. , who has been supporting the waste PFI project delivery on a full time basis over the past two years, has been appointed Strategic Waste Policy Manager which includes responsibilities as the contract manager for the waste PFI contract. In addition the Council has established a contracts management team for the operational phase of the waste PFI contract comprising the following full time employees: Strategic Waste Policy Manager (Waste PFI Contract Manager) Strategic Waste Technical Manager Strategic Waste Data Management Officer Strategic Waste Administration Officer The contracts management team will initially be based in Normanton Town Hall and will relocate to the South Kirkby site when all the facilities at the site have been completed. In addition further support will be provided by the Council‟s in house financial and legal teams who have been involved in the waste PFI project during the procurement phase. This in house support will provide continuity as the waste PFI project moves to the operational phase. During the Initial Service Period the Council will engage its current external advisors to support the in house teams as necessary. The basis of this engagement is likely to be on a „call off‟ arrangement based on a schedule of hourly rates. As set out in section 6.4.1 above, the Council currently has a clear governance structure in place for managing the pre-financial close period. There will be an equally robust structure in place for the post-financial close period as detailed below. The governance structure for the post financial close period is being developed for inclusion in the waste PFI Contract Management Manual and takes account of the pre-existing arrangements. At every stage the governance arrangements for the waste PFI project will be clearly documented and the formal procedures will be followed in practice. These will address where accountability sits in the Council and set out where responsibilities rest for all types of decision making.

Waste PFI Project

Final Business Case


The waste PFI Contract Management Manual is being developed using the WIDP “Guidance on Managing a Residual Waste PFI/PPP Contract“. The waste PFI Contract Management Manual will include a governance chart showing the Contractor‟s management structure and the Councils governance arrangements, so there are clear lines of communication and that decisions can be made at appropriate levels. The waste PFI Contract Management Manual will document the procedures and terms of reference for each of the tiers of governance. These will include;

composition and roles;

frequency of meetings and numbers of members required;

requirements, constraints, interfaces, dependencies;

responsibilities and delegations;

reporting mechanisms; and

procedures.

The contract management arrangements will:

meet the representation needs of all relevant stakeholders;

meet the requirements of the project;

fit with the Council‟s overall governance structures and procedures;

deliver the requirements and the remit and terms of reference of any team or board;

do not include any overlap in responsibilities between different levels of governance;

satisfy the requirement for continuity of approach and knowledge from the procurement period into the post-financial close period;

interface appropriately and effectively with the waste PFI contractor‟s governance arrangements;

facilitate good decision making;

support the contract management team;

enable information about the project to be controlled and communicated;

champion the project within the Councils organisation;

enable the project to be evaluated;

challenge the contract management team when required – for example making sure that the Waste PFI Contract Manager is always acting in the interest of the Council; and

fulfil all relevant probity obligations.

Once the governance arrangements are finalised they will be clearly documented and communicated to all parties that need to be aware of the arrangements. These arrangements will be incorporated into the waste PFI Contract Management Manual. A Contract Management Board is being established and will typically meet monthly during the initial operational period and less frequently once the Contractor has demonstrated an ability to maintain a stable and acceptable level of service. The primary objectives and functions of the Contract Management Board are to:

review the regular contract monitoring report and investigate any matters arising from it as appropriate;

consider how to resolve issues regarding production of information which impinge on the Board‟s ability to perform its role;

Waste PFI Project

Final Business Case


continually review the fit between the project‟s outputs and the Councils strategic objectives;

review budget reports for the contract management arrangements;

consider the impact of any delays to the timetable on the Council; and

review any areas of conflict between the Council and the waste PFI contractor and advise on the appropriate action to be taken.

The constitution and the procedures for the Contract Management Board will be incorporated in the waste PFI Contract Management Manual and will set out:

the membership of the Board;

the quorum for a meeting;

the frequency of meetings;

the Board‟s terms of reference;

the authority of the Board and reporting arrangements;

the duties and responsibilities of Board members in relation to the waste PFI project; and

the quality assurance arrangements of the Board. A Senior Responsible Officer (SRO) is being appointed outside the contract management structure. The SRO will provide a vital link between the contract management team and the corporate governance structure of the Council. The contract management team will have a number of training requirements prior to initial service commencement to enable the effective management of the waste PFI contract. The training will be provided in accordance with the WIDP “Guidance on Managing a Residual Waste PFI/PPP Contract” following the completion of the WIDP Memorandum of Understanding. Specific training on the operation of the Payment Mechanism will be provided by PwC as part of its post-financial close project support. The Council and the waste PFI contractor will also undertake training on the waste PFI contractor‟s management and reporting system which is being provided as part of the waste PFI contract. The Council has included for the establishment of the contract management arrangements within the overall budget for the waste PFI project including the provision of external advisor support during the initial operational period.

6.5 Advisors

The role of external advisors during the procurement phase is explained in detail below. As the waste PFI contract moves into the operational phase this role will be re-assessed and the need for external advisor support reviewed.

6.5.1 Legal Advisors

The Council appointed Walker Morris Solicitors to provide external legal support for the waste PFI project prior to submission of the OBC. Walker Morris were the Council‟s external legal support team for its Street Lighting PFI project which closed in December 2003 and at OBC stage were operating within a framework agreement providing general external legal advice to the Council. Walker Morris has continued to provide this external legal support throughout the procurement process.

Waste PFI Project

Final Business Case


Where necessary during the operational phase, Walker Morris will continue to support the Council‟s internal legal advisors.

6.5.2 Financial Advisors

The Council‟s financial advisors during the preparation of the OBC were Ernst and Young. Ernst and Young were supported at that stage by AET Ltd as technical advisors. Following the submission of the OBC the Council undertook a tender exercise for financial and technical support for the procurement phase. The procurement of financial and technical support was undertaken using the OGC S-CAT process. The outcome of this procurement process was the appointment of PricewaterhouseCoopers (PwC) as financial advisors and Entec UK Ltd as technical advisors.

During the early stage of the operational phase PwC will continue to support the Council‟s internal financial advisors as required.

6.5.3 Technical Advisors

As indicated in section 6.5.2 the Council‟s technical advisors were changed for the procurement process from AET Ltd to Entec UK Ltd. In 2011 Entec UK Ltd was acquired by Amec Ltd.

During the construction period, Amec will be commissioned to provide further technical support during the development of the final design of the waste management facilities and revisions to the works delivery plan.

6.5.4 Insurance Advisors

The Council undertook a procurement exercise for external insurance advice. Following this exercise AON Ltd were appointed

.

6.5.5 WIDP Support

As indicated in section 6.3 the Council has been supported during the procurement phase by WIDP Transactor(s). This was formalised by signing a Memorandum of Understanding in June 2007.

Waste PFI Project

Final Business Case


The Council will involve WIDP post financial close and sign a new Memorandum of Understanding as required by the informal consultation process issued by Defra in July 2011.

6.6 Outline of Partnership Arrangements with Other WDAs

The Council is a Unitary Authority and thus acts as both WCA and WDA and therefore there are no partnership arrangements with other WDAs.

6.7 District Involvement

The Council is a Unitary Authority and thus acts as both WCA and WDA and therefore there is no other district involvement.

Waste PFI Project

Final Business Case


7 Sites, Planning and Design

7.1 Introduction

The Council acts as the LPA for applications in the District. Waste management planning applications have been traditionally determined by reference to the UDP which provided guidance against which planning applications were judged. At the time of the commencement of the waste PFI project the Council started to produce its LDF which ultimately included the WDPD against which future waste management applications would be considered. To avoid potential delays to the waste PFI project through being caught up in the programme for delivery of the WDPD the Council agreed to commence its preparation of the WDPD later in the LDF programme such that the sites and planning issues associated with the waste PFI project could progress unhindered. The WDPD has subsequently been adopted and includes the requirements of sites for delivery of the MWMS and the waste PFI project within its adopted status. As a consequence, delivery of sites for the waste PFI project in planning terms has progressed side by side with the development of the WDPD.

7.2 Site Specific Planning Status

The delivery of the waste PFI project is dependent on the following 4 key sites:

(i) South Kirkby; (ii) Denby Dale Road; (iii) Glasshoughton; and (iv) Welbeck.

The former South Kirkby Colliery site was identified for the key waste treatment facilities outlined in section 1.4. The existing Denby Dale Road site in Wakefield has been approved for the re-building of a new TLS and HWRC. A site in the east of the District at Glasshoughton has been acquired for a new HWRC and the existing HWRC site at Welbeck will be refurbished. The latest site layouts of South Kirkby, Denby Dale Road, Welbeck and Glasshoughton are included in Appendix 17. Planning applications for the 4 sites identified above have been approved by the LPA. All permissions were granted with a development commencement date of 3 years from the date of approval. The current status of each site is listed below. In addition to the 4 key sites, temporary facilities (HWRC and TLS) will be provided at Calder Vale Road in Wakefield, during the re-building of Denby Dale Road. Details of the temporary facilities are set out in section 1.7 and the status of Calder Vale Road and Ossett is listed below.

Waste PFI Project

Final Business Case


South Kirkby The South Kirkby planning application was approved on 27 November 2008 for the key waste treatment facilities. In addition smaller applications for (a) fencing and initial groundworks and (b) temporary car parking facilities during the construction period have also been approved by the LPA. To implement this planning permission, development had to commence before 26 November 2011. To satisfy this requirement, a scheme was agreed with the LPA for the proving and capping of existing mine shafts which would satisfy the LPA that development has commenced. The waste PFI contractor prepared an advanced works contract for the works identified above which were completed during October/November 2011 i.e. before the planning permission expiry date. The existing permission for the temporary car parking facilities expired on 7 December 2011. Due to the delay in the procurement process the waste PFI contractor has applied for an extension to this permission. This extension was approved on 24 October 2011 and extends the date for development to commence until 23 October 2014. However use of the car park by the waste PFI contractor must cease by 30 June 2014 in accordance with the Council‟s proposed future use of the car park site. Denby Dale Road The Denby Dale Road planning application was approved by the LPA on 29 January 2009. This is the second key site for waste PFI project. The existing permission runs out on 28 January 2012. Due to the delay in the procurement process the waste PFI contractor has applied for an extension to this permission. This extension was approved on 25 November 2011 and extends the date for development to commence until 24 November 2016. Welbeck The planning application for the refurbishment of the existing HWRC at Welbeck was submitted in September 2008 and was approved by the LPA on 19 February 2009. The planning permission was due to expire on 15 March 2012. Early works have been carried out to satisfy the LPA that development has commenced. Glasshoughton The planning application for a new HWRC at Glasshoughton was submitted in December 2008 and was approved on 25 June 2009. The planning permission expiry date is 24 June 2012. The Glasshoughton development includes the construction of a new HWRC and a new access road to the HWRC. The construction of the access road was completed in December 2011 and therefore development has commenced in advance of the planning permission expiry date. Calder Vale Road The planning permission for the temporary facilities (HWRC and TLS) was approved on 8 November 2010. This permission was granted to cover the period from January 2011 to December 2012.

Waste PFI Project

Final Business Case


Due to the delay in the procurement process the waste PFI contractor has applied for an extension to this permission to 31 March 2014. This extension was approved on 25 November 2011 and extends the date for development to commence until 31 March 2014. Ossett The planning permission for the HWRC and temporary TLS at Ossett was approved on 28 August 2009. This was prior to the waste PFI contractor‟s decision to provide the temporary TLS facilities from Calder Vale Road site as indicated above. Due to the delay in the procurement process the waste PFI contractor has applied for an extension to this permission although the use of the Ossett site will now be restricted to a HWRC only. This extension was approved on 25 November 2011 and extends the date for development to commence until 24 November 2014. Use as a HWRC is restricted to 31 October 2014 and the planning condition provides sufficient time for the Council to carry out the restoration of the site by 31 October 2015.

7.3 Site Identification

The 4 key sites have been identified in section 7.2 and the facilities to be provided at each site are set out below. South Kirkby, Denby Dale Road and Glasshoughton will be used for the term of the waste PFI contract. Use of Welbeck is limited to November 2017 due to its alignment with the overall Welbeck landfill site planning permission. South Kirkby Residual waste treatment facility including pre and post autoclave sorting systems, autoclave, AD facilities, CHP facilities and associated reception hall Enclosed windrow composting facility MRF Collection depot including parking area and associated administration building Site management offices Education Centre HWRC Denby Dale Road TLS HWRC Glasshoughton HWRC Welbeck HWRC In addition to the 4 key sites identified above, an additional site will be used for the term of the waste PFI contract. Carrwood Road

Waste PFI Project

Final Business Case


TLS Commercial and industrial waste sorting facility In addition to the sites identified above, the existing sites and facilities set out below will be used for the waste PFI contract during the Initial Service Period. Ossett HWRC Ossett will close when the re-building of the Denby Dale Road HWRC is complete. Castleford HWRC Castleford will close when Glasshoughton HWRC is complete. Ferrybridge HWRC Ferrybridge will close when Glasshoughton HWRC is complete. Fitzwilliam HWRC Fitzwilliam will close when the South Kirkby HWRC is complete. South Kirkby Manface Quarry HWRC South Kirkby Manface Quarry will close when the South Kirkby HWRC is complete. Calder Vale Road Temporary TLS Temporary HWRC

7.4 Securing the Sites

The South Kirkby site was identified for the key waste treatment facilities following a comprehensive site search process in 2005 and was approved for this use by the Council in November 2005. The site is owned by the Council and will be leased to the waste PFI contractor for the 25 year term of the waste PFI contract. The Denby Dale Road site is also owned by the Council and will be leased to the waste PFI contractor for the 25 year term of the waste PFI contract.

Waste PFI Project

Final Business Case


The existing site at Welbeck is owned by the Council but the existing planning permission for this site is limited in accordance with the planning permission for the overall Welbeck landfill site which must be restored by May 2018. The site will be leased to the waste PFI contractor until November 2017 to enable the Council to restore the site by May 2018. The Council acquired the site for the Glasshoughton HWRC in December 2009. This site also includes the land required to build the access road to the new HWRC. The site will be leased to the waste PFI contractor for the 25 year term of the waste PFI contract. The existing HWRCs at Ossett, Castleford, Ferrybridge and Fitzwilliam are owned by the Council and will be leased to the waste PFI contractor for the Initial Service Period. The existing South Kirkby Manface HWRC site is leased by the Council from the South Kirkby and Moorthorpe Town Council until January 2015 and will be sublet to the waste PFI contractor until such time as the new HWRC at South Kirkby is completed. The temporary site at Calder Vale Road has been leased by the waste PFI contractor for the period required to re-build the Denby Dale Road facilities. There are assignment provisions in this lease should the waste PFI contract terminate after the facilities at the Denby Dale Road site are demolished and before they are rebuilt that will allow the Council to take the lease of the Calder Vale Road site to operate the temporary facilities (HWRC and TLS) until it can complete the re-building of Denby Dale Road itself.

7.5 Planning Health Framework

Section 7.2 and Appendix 2 evidence that all the sites required to deliver the waste PFI project have received planning permission. These confirm that there are no planning issues preventing delivery of the waste PFI project within the required programme.

7.6 Design Issues

The overall design concept has been to follow the criteria of “form follows function”. This is in keeping with the overall setting of the waste management facilities at both South Kirkby and Denby Dale Road. Both developments are industrial type buildings with profile steel sheeting for cladding. The enclosed windrow composting facility handling area is roofed with an innovative lightweight fabric structure. It has been recognised that the Education Centre and office accommodation at the South Kirkby site should warrant special attention. This building incorporates a number of design concepts that seek to combine its function as an educational area and office block with themes of sustainability. The waste PFI contractor is seeking the appropriate BREAM classification for this element of the works.

Waste PFI Project

Final Business Case


8 Cost, Budgets and Finance

8.1 Introduction

Throughout the negotiations with the VT Consortium following its appointment as Preferred Bidder (and subsequently with the Preferred Bidder Consortium) the Council has worked continuously to fully ensure all cost changes have been agreed and understood. The Council and its financial advisors have closely tracked all changes to the financial models and the details presented below identify the position that has been reached to date. Some changes may be made prior to financial close but, other than finalising the financing structure and terms, these are expected to be minimal.

8.2 Procurement Costs

At the commencement of the procurement process following OBC approval the Council established a contingency fund for procurement costs based on an indicative figure of . This indicative figure was not broken down into individual advisor costs. It was acknowledged at the time and reported to Cabinet on 25 November 2003 that further funding would likely be required for subsequent years as the procurement progressed. As the procurement has been extended considerably beyond that anticipated at OBC stage as set out in this FBC the procurement costs are significantly more than originally estimated. Regular reports on procurement costs have been made through the Project Board and subsequently in Cabinet reports, and the Council has continuously amended the budgets to ensure the delivery of the waste PFI project was funded appropriately. Table 8.1 below sets out the anticipated outturn procurement costs to financial close. It is not considered appropriate in this case to relate actual costs back against those estimated at OBC stage due to the extended procurement process. Table 8.1

Per FBC

Line Item Nominal Percentage

£m %

Authority In house costs*

Financial advisors

Legal advisors

Technical advisors

Insurance advisors

Communications advisors

Pensions actuarial advisors

Other procurement costs

Total

Waste PFI Project

Final Business Case


* Costs have also been incurred by services within the Council in terms of providing professional support to the waste PFI project. The waste PFI project has had a full-time Project Director and support from a range of officers within finance, legal and waste technical services. With the exception of the Project Director post, all support has been provided from existing budgets and staff resources and no additional costs have been incurred by those budgets as a result of providing support to the waste PFI project. The Council does not operate a staff time recording system however, and therefore it is not possible to quantify with any degree of accuracy the value of this internal staff time support.

8.3 Cost of the Preferred Bidder‟s Solution Table 8.2 summarises the current project cost of the preferred bidder‟s solution in nominal terms, as compared with the OBC (2004) and preferred bidder appointment (2007). This information has been extracted from the current version of the Shanks financial model , as presented in Appendix 13. Table 8.2 – Comparison of Costs at OBC, Preferred Bidder Appointment and FBC Stages

As per OBC As per PB As per FBC Line Item Nominal

£m % Nominal

£m % Nominal

£m %

Unitary Charge Third Party Income (net) Capital Contribution Tradable Allowances

Total waste PFI contractor Income

Capex Lifecycle Costs Operating Costs Funding Costs Other Costs

Total waste PFI contractor Costs

Table 8.3 summarises the financial implications over the term of the waste PFI contract. This information has been extracted from the current version of the Shanks financial model which is included at Appendix 13. Table 8.3 Financial Implications

Line Item (£m) Nominal % NPV %

Unitary Charge

Third Party Income (net)

Capital Contribution

Total waste PFI contractor Income

Capex

Lifecycle Costs

Operating Costs

Funding Costs

Other Costs (see Note below)

Waste PFI Project

Final Business Case


Total waste PFI contractor Costs

Note to Table: NPV Costs shown @ April 2011 prices and discounted @ 3.5% real Other Costs include Corporation Tax, Movements in Cashflow and Reserves, Interest Received on Surplus Balances and Working Capital.

8.4 Funding

Shanks and Babcock will form Wakefield Waste PFI Limited as the SPV to deliver the waste PFI project supported by a „geared‟ project finance structure. Currently four funders (BayernLB, Barclays, SMBC and the UKGI)

of the Senior Debt Requirement.

The presence of four banks should ensure that if any of the existing banks were unable to fund or were not “on market” in their terms, the waste PFI project would be able to fund with the three remaining banks. Table 8.4 summarises the key senior debt terms and fees for the waste PFI contractor‟s financial model. Although funding markets are less volatile than has been seen in recent times, these terms are continuously being reviewed with the waste PFI contractor during the procurement process. The Council is currently working with the waste PFI contractor and its funders on assessing the impact of funding structure and funding term sensitivities on the affordability of the Bid. Senior Debt funding terms included in the current Financial Model provided by the waste PFI contractor are shown in Table 8.4. Table 8.4 Senior Debt Terms and Fees

Senior Debt – Key Terms Currently shown

in Model

Base Interest Rate (swap rate) Credit Spread

Mandatory Liquid Asset (MLA) Margins during Construction Margins during Operations (to Mar 22) Margins during Operations (Mar 22 to Mar 29) Margins during Operations (Mar 29 to Mar 35)

Arrangement Fee (% of Facility) Commitment Fee (% of Facility)

Each member of the Funding Club has received its “Investment Committee” approval to provide the necessary funding for the waste PFI project. Each member of the Funding Club is progressing its approvals process with a view to obtaining “Credit Committee” sign off by the end of October 2012.

8.5 Affordability Analysis

The summary affordability analysis as set out in Table 8.5 shows the projected Council budgets (additional) costs of the waste PFI contract. The Council‟s waste

Waste PFI Project

Final Business Case


management budgets for the three years prior to the submission date of the FBC were 2010/11 £8.699m, 2011/12 £9.457m and 2012/13 £10.083m. The projected annual additional budgetary requirement of the waste PFI contract increases as the new facilities are constructed and reaches (2012/13 prices) by Full Service commencement. The Council has made provision for these additional budgetary costs within its budgeting and medium term financial planning processes, which have been approved by Full Council. The waste PFI contract provides for a sharing mechanism between the Council and the waste PFI contractor for any financial benefits which arise from the sale of additional recyclate income over the level of that guaranteed in the base case. Table 8.5 Affordability Analysis

Affordability Analysis

Per OBC Per FBC

Sources Nominal

£m %

Nominal £m

%

Projected Council Budgets (existing)

Projected Council Budgets (additional)

Waste Infrastructure Credits Payments

Waste PFI Contract Management Costs

Total

Costs

Unitary Charge (excluding Landfill Tax)

Landfill Tax

Waste PFI Contract Monitoring Costs

Prudential Borrowing Costs

Specific Waste

Total

8.5.1 Projected Authority Budgets

The affordability model includes the Council‟s approved waste disposal budget as per the Medium Term Financial Plan to 2016/17. The 13 December 2011 Cabinet report sets out to Members the ongoing costs of the waste PFI contractor‟s solution over the contract period, demonstrating the annual budgetary commitments required to fund the waste PFI contract, both in the basecase and as well as a result of changes to key assumptions.

8.5.2 Waste Infrastructure Credit Payments

Waste PFI Project

Final Business Case


Waste Infrastructure Credit is assumed to be £33 million in accordance with the DfT Endorsement Letter dated 6th January 2005. This FBC is submitted to demonstrate the Council‟s case for confirmation of the original £33 million Waste Infrastructure Credit approval. The annuity method of calculating Waste Infrastructure Credit has been assumed with an applicable notional interest rate of and a scaling factor of . The NPV of capital costs included within the waste PFI contractor‟s Financial Model is

(April 2011 prices).

8.5.3 Council‟s LATS Strategy

It is noted that in the Government Review of Waste Policy in England 2011 the LATS regime will be abolished in 2013. During the first two years of the waste PFI contract, the new waste management facilities to be provided will be at construction stage and the waste PFI contractor will not be able to influence BMW diversion. By the time the new waste management facilities are commissioned the LATS regime will have been abolished. The Council has historically managed its LATS obligations and it is currently anticipated that there will be a deficit in the next two years and the Council will continue to make appropriate arrangements for buying LATS allowances during the period up to 2013.

8.5.4 Recyclate/Energy Income

No income has been assumed within the Council‟s own income sources in respect of recyclate income. Income guaranteed by the waste PFI contractor in respect of recyclate income is and (April 2011 prices). Income guaranteed by the waste PFI contractor in respect of electricity sales is

and (April 2011 prices). The income guarantee is based on (Standard Rate at April 2011 prices) guaranteed for the term of the waste PFI contract and (April 2011 prices) guaranteed for 20 years of the waste PFI contract following Full Service commencement and (April 2011 prices) guaranteed for the term of the waste PFI contract.

8.5.5 Sinking Fund Interest

The Council has matched its additional budget costs profile to the waste PFI contractor‟s Financial Model such that the additional budgetary contribution which needs to be made is phased in across the first three years of the waste PFI contract. The Council‟s budget plans take into account this phased increase and provide for the full increased cost from Full Services commencement. The Council also has a Waste PFI Reserve to provide for any one-off costs of delivering the waste PFI project. It is considered therefore that a sinking fund arrangement is not required for the funding of this project.

Waste PFI Project

Final Business Case


8.5.6 Landfill Tax

The waste PFI contractor is liable for any Landfill Tax incurred in respect of volumes of waste landfilled in excess of the Landfill Target for Active Waste and Landfill Target for Inactive Waste, as appropriate. To the extent that the volumes of waste landfilled are below the Landfill Target for Active Waste and Landfill Target for Inactive Waste, as appropriate, then the risk that the prevailing rate of Landfill Tax varies from that assumed in the Financial Model lies with the Council. The waste PFI contract includes a sharing mechanism between the Council and the waste PFI contractor for any Landfill Tax savings which arise as a result of the waste PFI contractor landfilling active waste below the Landfill Target for Active Waste.

8.5.7 Contract Monitoring Costs

Budgetary provision for the waste PFI contract monitoring costs has been made based on a contract monitoring team of 4 staff, reducing to 3 from year 5 of the waste PFI contract once all the new facilities are constructed and fully operational.

8.5.8 Sensitivity Analysis

The Council has previously undertaken a sensitivity analysis on key assumptions within the financial model (e.g. inflation and waste growth) to allow members to understand the potential impact on the waste PFI project affordability of both downside and upside changes. This analysis was included in the earlier FBC submission. The Council understands that the current affordability position of the waste PFI contract is subject to external factors, for example interest swap rates which are continuously being reviewed with the waste PFI contractor during this final stage of the procurement process. The Council is confident, based on current swap rates, that the Financial Model does include sufficient buffer to mitigate against any increases in swap rates however any additional funding that may be required to deliver the waste PFI project will be secured from Council resources as delivery of the waste PFI project remains a high priority for the Council. 8.5.9 Cost and Impact of Carbon Refer to section 3.7 and Appendix 23.

8.5.10 Council‟s Capital Contribution

As part of the final negotiation process, and to improve the waste PFI project affordability, the Council has agreed to make a £5m capital contribution to the scheme. The value of this contribution has been set to reflect a number of small changes in the technical solution that were not part of the waste PFI project when the Preferred Bidder appointment was made. These changes include covers to the composting maturation area together with gas membranes under the key building at the South Kirkby site.

Waste PFI Project

Final Business Case


The £5m capital contribution will be funded from Prudential Borrowing and paid to the waste PFI contractor on satisfaction of the following condition precedents: 1. Shanks PFI Investments has injected all its share capital into the SPV; 2. The waste PFI contractor has fully drawn down the Equity Bridge Loan

(based on financial model this is ); 3. 4. The waste PFI project has received all planning and permitting consents

required in particular the following: (i) the Environment Permit for the South Kirkby site; (ii) the planning permission for the South Kirkby site; (iii) the planning permission for the Ferrybridge Bio-fuel plant; (iv) the Environmental Permit for the Ferrybridge Bio-fuel plant; and

5. The Funding Club‟s Technical Advisor has signed off completion of a predefined list of milestones linked to the capital programme included in the Base Case financial model which should have been completed at the point conditions 1, 2 and 3 above are satisfied.

According to the Financial Model conditions 1, 2 and 3 will be satisfied by the end of December 2013. In respect of condition 4, all planning consents have been obtained, the Environment Permit for South Kirkby has been obtained and the draft Environmental Permit for the Ferrybridge Bio-fuel plant has been obtained. The waste PFI contractor is expected to have received the Environmental Permits for Denby Dale Road, Glasshoughton and Calder Vale Road by May 2013. Ferrybridge MFE Ltd is expected to have received the final Environmental Permit for the Ferrybridge Bio-fuel plant by the end of November 2012. The predefined milestones referred to at condition 5 are as follows and are taken from the construction programme related to Financial Model :

The net benefit to the Council taking into account the cost of Prudential Borrowing is

.

Waste PFI Project

Final Business Case


8.6 Member Approval of Affordability and Contract Award

Cabinet granted approval to the submission of the FBC following a report submitted in March 2009 and despite the passage of time this Cabinet decision still stands. Following the Council‟s detailed review of the waste PFI project and VfM in early 2010 a report was submitted to the Leader of the Council and Cabinet Member (Environment) by the Chief Executive in April 2010. This report was considered at a meeting between the Leader, Cabinet Member (Environment), Chief Executive and key members of the Council‟s Executive on the 4 May 2010. A copy of this report is included in Appendix 8. Following the meeting on 4 May 2010 an Officer Delegated Decision was taken by the Chief Executive in consultation with the Leader, Cabinet Member (Environment) and Corporate Director (Business and Resources) to complete the final negotiations with VT leading to contract award subject to Defra approval of the FBC and following receipt of the „Promissory Note‟ from HM Treasury. A copy of this Delegated Decision is also included in Appendix 8. On 13 December 2011 Cabinet delegated authority for the award of the waste PFI contract to the Chief Executive in consultation with the Leader of the Council. A copy of the Cabinet report is included at Appendix 9 together with the approved minutes. Cabinet Members wanted to ensure that decisions relating to the waste PFI project were taken in the public arena and as a consequence the report was taken as a public report. As there were some key issues relating to the project that it was not possible to include in the public report a detailed briefing was carried out prior to the formal Cabinet meeting on 13 December 2011. Members were provided with details of the following items:

Affordability Analysis

Budget Impact

Value for Money Analysis

Legal Procurement Context

Key Commercial Risks The changes in risk profile which had been agreed since Member approval of the Cabinet Report dated 13 December 2011 are the subject of a further report to Cabinet on 23 October 2012. This report together with the Cabinet minutes formally setting out the decision will be submitted to WIDP in support of this FBC. The 23 October 2012 Cabinet decision will approve in principle the award of the waste PFI contract to the waste PFI contractor and will delegate the final award of the waste PFI contract to the Chief Executive and the Leader of the Council, in accordance with the Council‟s constitution, conditional on:

approval by Defra of this FBC;

receipt by the Council of the Promissory Note for the Waste Infrastructure Credits from Defra; and

confirmation that the waste PFI contract still demonstrates that it is the most economically advantageous tender.

Waste PFI Project

Final Business Case


This delegated decision taken by the Chief Executive and the Leader of the Council will be submitted to WIDP under separate cover.

8.7 Council‟s VfM Assessment

At different stages of the procurement process the Council has undertaken a number of VfM assessments to confirm that at all times the waste PFI project was still the best option. The assessment at each stage has included both the waste PFI contract costs and the Council‟s in-house collection costs. The Council initially developed two alternative options to compare against the waste PFI contract model. These options are set out below: Non PFI Option 1 This was developed to increase the recycling rates to best mirror those provided under the waste PFI contract, including the kerbside collection of food waste and improvements to existing waste facilities to further enhance levels of recycling. Non PFI Option 2 This was a “do minimum” option which simply reflected the Council continuing its current collection and disposal activities with some small improvements which do not fundamentally change the way the service is currently delivered. Both non PFI Options 1 and 2 were still significantly dependant on disposing of residual waste to landfill and were modelled for comparative purposes against the waste PFI option. Following Shanks joining the preferred bidder consortium, Shanks submitted its initial financial model in June 2011 with subsequent revisions during July 2011. As a result of this, the Council has had to review the VfM assessment of the latest waste PFI contract costs against the non PFI options. As part of this final review the Council engaged the WIDP Commercial Team and developed a series of further non PFI options which were a variation of non PFI Option 1 but included alternative methods of disposal of the residual waste stream. These further options have been analysed against the PFI option to further demonstrate VfM. These additional options are summarised below and set out in detail in Appendix 18: Non PFI Option 3 Non PFI Option 1 with residual waste treated through an EfW facility situated within a 25 mile radius of the Wakefield waste transfer centres. Non PFI Option 4 Non PFI Option 1 with residual waste pre-treated at an appropriate gate fee at a facility within a 25 mile radius of the Wakefield waste transfer centres to create an RDF.

Waste PFI Project

Final Business Case


Non PFI Option 5 Non PFI Option 1 with residual waste pre-treated at an appropriate gate fee at a facility within a 70 mile radius of the Wakefield waste transfer centres to create an RDF. Non PFI Option 6 Non PFI Option 1 with residual waste sent to the Sterecycle plant in Rotherham at an appropriate gate fee. This option has been assumed to be within a 25 mile radius of the Wakefield waste transfer centres. Non PFI Option 7 Non PFI Option 1 with the Council procuring and operating a „Dirty MRF‟ treatment facility to create an RDF with thermal treatment of the RDF at a facility within a 25 mile radius of the Wakefield waste transfer centres. This option relies on Prudential Borrowing for the capital costs. Following discussions with the WIDP Commercial Team a further non PFI option was considered which involved the Council exporting its residual waste for incineration at a facility in continental Europe. The Council considers that there are a number of key issued against this option which are set out in Appendix 18 and as a result the Council has not undertaken a quantitative assessment of this option. Taking into account the VfM assessment carried out of all the non PFI options identified above against the waste PFI contractor‟s latest costs the Council has demonstrated that the waste PFI contract still represents the VfM solution.

8.8 HM Treasury VfM Qualitative Assessment

The Council has assessed the likelihood of the waste PFI project to deliver VfM in accordance with the “Stage 3 - Procurement Level Assessment” guidance issued by HM Treasury during November 2006. This guidance stipulates that once the Council has entered into the formal procurement stage, VfM should be assessed in relation to a series of ongoing „checks‟ which take the form of a qualitative evaluation. These „checks‟ involve an assessment of the following four main VfM drivers:

The Quality of the Competition Risk Sharing Stability of Costs Financial Flexibility

An assessment of the performance of this waste PFI project against each of the main VfM drivers is provided below. The Quality of the Competition

Detail on the quality of competition is provided in section 4 to this FBC.

Waste PFI Project

Final Business Case


Risk Sharing

To ensure that the Council is successful in transferring an appropriate level of risk to the waste PFI contractor, the Council has relied upon standard guidance wherever possible. The Council has followed the commercial and contractual positions that the standard guidance recommends should be secured with the private sector. These main sources of guidance are: (i) Standardisation of PFI Contracts Version 4 (SoPC4); (ii) Local Authorities Supplement; (iii) 4ps waste management procurement pack (as appropriate); (iv) 2010 WIDP standard form contract (as appropriate); and (v) the former standard BSF drafting (as appropriate). Where project or sector specific derogations have been required from the standard guidance position, these have been approved by the WIDP commercial team. Following the signing of the Teaming Agreement between Babcock and Shanks and with Shanks taking the lead role in the Preferred Bidder Consortium in February 2011 the Council sought guidance from the WIDP commercial team regarding the waste PFI contract as developed at that time. It was agreed that it was not necessary to conform the waste PFI contract to the 2010 WIDP standard form contract. Following the signing of the Teaming Agreement as outlined above, the Payment Mechanism has been developed using the principles of the WIDP guidance tailored to the Council‟s project specific requirements. Full details of the Payment Mechanism are set out at section 5.5 and Appendix 11. The Council is confident that the Payment Mechanism ensures the appropriate level of risk transfer to the waste PFI contractor. The output specifications have been developed using the 4ps waste management procurement pack tailored to the Council‟s project specific requirements. Full details of the output specifications are set out at section 4.3 and Appendix 10. The Council is confident that its output specifications ensure the appropriate level of risk transfer to the waste PFI contractor. Stability of Costs

The procurement process has successfully managed to maintain the competitive pressure on all three Bidders at both ITN and BAFO stages. The PMT and its external financial and technical advisors developed a suite of financial proformae, as part of the ITN and BAFO Instructions to the Bidders‟ documentation, to ensure that the solution proposed by Bidders was sufficiently transparent to enable the Council to have an understanding of the detailed costs underpinning the price and that solutions could be evaluated against suitable cost benchmarks. It was a mandatory condition in the procurement process that Bidders had to complete these financial proformae. The robustness of the underlying costs, as submitted by Bidders in the financial proformae, was reviewed and evaluated by the Council‟s technical evaluation team by assessing credibility and reasonableness, based on their knowledge and market intelligence of the waste PFI sector, as well as consistency with the respective

Waste PFI Project

Final Business Case


technical solution proposed by each Bidder. This exercise formed a key part of the evaluation process and informed a significant part of the technical and financial discussions which took place with Bidders during the ITN and BAFO stages. The Council utilised competitive tension during the ITN and BAFO stages to maintain pressure on the Bidders to further reduce their costs. The Council has continued to explore opportunities through negotiation with the relevant preferred bidder consortia, to further improve the price of the waste PFI contract without the Council taking back transferred risk. The Council and its financial advisors have recently undertaken an exercise to compare the forecast costs of the waste PFI contract with several non PFI alternatives over a 25 year period. Financial adjustments were made to the options, where appropriate, to endeavour to ensure that a like-for-like comparison had been undertaken. When the quantifiable analysis was considered alongside the non quantifiable risks, the waste PFI contract proved to still represent VfM to the Council. A copy of the Council‟s latest VfM analysis is included in Appendix 18. Financial Flexibility

The waste PFI contractor is financing its funding requirement for the waste PFI contract through fixed rate bank debt. This provides the Council with more certainty in relation to Unitary Charge payments as the Unitary Charge will not change with movements in interest rates over the term of the waste PFI contract. Bank debt is also considered to be a more flexible means of accommodating changes to the waste PFI contract than other forms of finance such as bond finance. As part of the procurement process, the Council has assessed the financial strength of the respective Bidders to ensure that there is sufficient flexibility in the financial structure during circumstances of contractor distress. These assessments have included the changes in preferred bidder consortium membership during the preferred bidder period following the acquisition of VT by Babcock and the subsequent Teaming Agreement signed between Babcock and Shanks. Based on the evaluation undertaken at the PQQ stage of the waste PFI project, the lead organisations from each respective Bidder were assessed as having strong credit rating which would help support the robustness of the solution. The waste PFI contractor‟s Senior Lenders require that the SPV maintain certain cover ratios (a safety measure which ensures the waste PFI contract can pay the interest and principal on the senior debt requirement) and have the right to step in and manage the waste PFI contract if specified ratios are broken. Whilst the waste PFI contract brings the Council long-term (25-year) certainty over the waste PFI service provision, the waste PFI contract still retains sufficient flexibility to meet variations to the Council‟s requirements throughout the term of the waste PFI contract. To facilitate efficient management of the waste PFI contract, reduce costs, and ensure continued delivery of services, the waste PFI contract provides a robust and flexible mechanism for dealing with Council requests for variations to the service through Clause 55 (Changes to the Works or Service) of the waste PFI contract. The mechanism clearly defines the responsibilities of the Senior Lenders, imposes fixed timescales for different levels of variation and penalises the waste PFI contractor for not adhering to these timescales.

Waste PFI Project

Final Business Case


8.9 HM Treasury VfM Quantitative Assessment

The Council has undertaken a quantitative assessment of the waste PFI project to deliver VfM in accordance with guidance issued by HM Treasury during November 2006. The output of the HM Treasury model shows that the waste PFI project offers VfM through the PFI route of under a pre-tax equity IRR of . The Council has also submitted a sensitivity which assumes zero pre FBC Optimism Bias. This sensitivity shows that the waste PFI project offers value for money through the PFI route of under a pre-tax equity IRR of . A copy of the HM Treasury VfM quantitative assessment was submitted to Defra on 17 October 2011 and this is also included at Appendix 18.

Waste PFI Project

Final Business Case


9 Stakeholder Communications

9.1 Introduction

During the preparation of the Council‟s MWMS in 2003, the Council undertook a comprehensive public consultation exercise over a 6 month period. A summary of the consultation methodology is set out in section 3.3. Throughout the procurement process of the waste PFI project the Council established a Communication Plan. The Communication Plan is set out in Table 9.2. . The purpose of the Communication Plan was to identify those Stakeholders with an interest in the waste PFI project and the methodology, level and detail of the communication required. Communication has been critical to the waste PFI project to ensure that:

Stakeholders receive regular updates on the development of the waste PFI project;

Concerns and questions are answered; and Key decisions are made at the appropriate time to progress the waste PFI

project to the agreed timescales. The Council identified various forms of communication to publicise the waste PFI project as set out in Table 9.1. Table 9.1 Forms of Communication

Type Comment

Intranet Pages General progress updates, key milestone achievements etc.

Briefings To Leader of the Council, Chief Executive, CMT, Cabinet, Departmental Management Teams, Trade Unions, staff groups etc.

Presentations To senior managers, Elected Members, Project Board, Scrutiny Committee, Local Town and Parish Councils etc.

Press Releases Specific press releases to inform progress on the waste PFI project at various stages.

Internal Newsletters

For both directly affected staff through „Focus‟ or project specific newsletters, and to all WMDC staff through „Insight‟

External Newsletters

Use of the Council‟s Citizen Newspaper which is delivered to all households in the District.

Waste PFI Project

Final Business Case


Collaborative Website

To provide key information for bidders during the tender process and to act as a conduit for updating tender documentation.

The Communication Plan below gives more specific details of how the communication strategy has been developed through the procurement phase:

Waste PFI Project

Final Business Case


Table 9.2 Communication Plan

Stakeholder Frequency Comments Provider

Chief Executive Monthly Advance Project Board Reports and key briefing papers Cabinet Member (Environment), Corporate Director (Communities), Project Director Waste PFI

Leader of the Council

At key stages of the waste PFI project

Key briefing papers Project Director Waste PFI and Corporate Director (Communities)

Cabinet

At key stages of the waste PFI project

Cabinet Reports and associated briefings Corporate Director (Communities)

CMT At key stages of the waste PFI project

CMT Reports and associated briefings Corporate Director (Communities)

Project Board

At established PB meetings and at key stages of the waste PFI project

Project Board Reports and briefings. Project Director Waste PFI Chief Finance Manager

Corporate Director (Communities)

At established meetings with Project Director Waste PFI

Weekly 1-2-1 Progress briefings Project Director Waste PFI

Communities DMT At regular DMT meetings as required.

Progress reports as the waste PFI project progresses Corporate Director (Communities)

Elected Members

As required – directed by Cabinet/CMT

Project Reports and briefings Corporate Director (Communities)/ Project Director Waste PFI

PMT

At all PMT Meetings Reports/briefings Key PMT personnel

Internal Audit

Regular up-dates and at key stages of the waste PFI project

Reports and briefings to confirm strong management control, affordability, VfM, best practice and probity in the procurement process.

Project Director Waste PFI /Chief Finance Manager

Waste PFI Project

Final Business Case


Stakeholder Frequency Comments Provider

Audit Commission

Regular up-dates and at key stages of the waste PFI project

Reports and briefings to confirm strong management control, appropriate accountancy treatments, best practice etc.

Project Director Waste PFI /Chief Finance Manager

Defra

Monthly Monitoring Reports as required by Defra

Regular progress reports as required by Defra and briefings as necessary

Project Director Waste PFI

4ps/Local Partnerships

At Gateway Review periods.

Progress updates in accordance with the Gateway Review programme agreed between the Council and 4ps.

All key stakeholders.

Existing Contractors

As necessitated by the procurement strategy

Progress briefings/ negotiations as required. PMT

Trade Unions and Staff Reps

As often as required to keep TU‟s and SR‟s up to date

Briefings of TU and staff representatives at appropriate stages to ensure best practice in accordance with employment regulations and guidance. Formal programme as part of the TUPE process in place.

Initially by Project Director Waste PFI and Strategic Waste Policy Manager, but ultimately by Preferred Bidder

Waste Management Staff

As required to keep staff up to date

Staff briefings/Newsletters at regular intervals to ensure staff are kept up to date with progress. Formal programme as part of the TUPE process in place.

Initially by Project Director Waste PFI and Strategic Waste Policy Manager

All WMDC Staff

At key stages in the waste PFI project

Via the Intranet/Internal Newsletters as appropriate. Internal management arrangements

Other Local Authorities

Through the WIDP Waste Network Group meetings and via individual contacts

Attendance, discussions and participation in national forums with other Local Authorities.

Initially by Project Director Waste PFI and Strategic Waste Policy Manager.

Waste PFI Project

Final Business Case


9.2 Strategy

Following the appointment of the VT Consortium as the preferred bidder, the Council and VT undertook a joint communication strategy primarily but not exclusively, in connection with the development of the key waste treatment facilities at South Kirkby. During February and March 2008 a series of public information days were held in and around the South Kirkby area to ensure that local residents were fully aware of the proposals prior to the submission of the planning application. In addition to the public information days at South Kirkby two further exhibitions were held, in Castleford and Wakefield to widen the scope of proposals for the waste PFI project. VT subsequently produced a number of newsletters which were circulated to approximately 12,000 properties in the South Kirkby area to update householders on the progress of the waste PFI project and the planning applications. These newsletters were also made available to elected Members and were displayed in public buildings. Following submission of the planning application for the South Kirkby site a Community Liaison Group (CLG) was established in South Kirkby. This CLG included Elected Local Members of the Council, representatives from South Kirkby and Moorthorpe Town Council, representatives from the local community together with officers from the Council and staff from VT. The CLG is chaired by Councillor Dick Taylor, Cabinet Assistant, Carbon Reduction and Waste PFI. Terms of reference have been agreed with the group and following approval of the planning permission a series of meetings have been held and it is proposed that the CLG will continue to operate during the operational phase and beyond. Following the appointment of the Babcock Consortium as preferred bidder, staff from Babcock attended the CLG meetings to ensure continuity. Following Babcock‟s decision to exit the waste market CLG meetings were held in order to ensure that regular updates on the progress of the waste PFI project were maintained. Since Shanks took the lead role in the Preferred Bidder Consortium, staff from Shanks will attend all future CLG meetings. It is not anticipated that further community liaison groups will be established for the other key sites (Denby Dale Road and Glasshoughton) however this will be reviewed as the waste PFI contract moves into the operational phase. In addition there is an existing community liaison group for the Welbeck landfill site and once the waste PFI contract is operational there will be opportunities for the waste PFI contractor to attend future meetings. Both the Council and the waste PFI contractor are pro-actively providing information to the public through existing media. The waste PFI contractor will establish a dedicated website for the waste PFI contract and this will contain a detailed explanation of the proposals. Council Officers and staff from VT historically held joint seminars on the proposals for Elected Members of the Council. Presentations used at these seminars have also been used to widen the communication to the Town and Parish Councils within the Wakefield area. The waste PFI contractor will continue to support future presentations as appropriate.

Waste PFI Project

Final Business Case


9.3 Planning Health Framework

The current position in respect of site identifications and planning permissions is set out in section 7. The Council‟s WDPD was adopted in December 2009 within the overall LDF process. The preparation of the WDPD ran alongside the preparation of planning applications for the waste PFI project. The sites identified for the waste PFI project have been allocated within the WDPD accordingly.

9.4 TUPE

The current TUPE list identifies approximately 29 staff that will transfer to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period. The Council and VT (and subsequently Babcock and Shanks) have regularly updated staff and the trade unions throughout the procurement process of the impending transfer and the terms under which the transfer will take place. Following Babcock‟s decision to exit the waste market and since Shanks took the lead role in the Preferred Bidder Consortium, and on the basis that staff will transfer to Shanks Waste Management Limited as Operating Sub-contractor from commencement of the Initial Service Period, a joint presentation to all TUPE staff was held in August 2011. The presentation involved the Council, Shanks staff, representatives from Babcock and trade union representatives. In addition Shanks has recently undertaken one to one discussions with all members of staff on the TUPE list to explain how Shanks will operate the waste PFI contract and how individual staff will fit into this operation. Shanks Waste Management Limited as Operating Sub-contractor has applied for Admitted Body Status to the West Yorkshire Pension Fund such that the pension rights of existing staff are maintained as though the staff were still employed by the Council. Staff will transfer to Shanks Waste Management Limited as the Operating Sub-contractor on their existing terms and conditions and any changes to those will be as a result of discussions with individual staff and their trade union representatives. Throughout the procurement process the Council has maintained a continuous dialogue with the trade unions to ensure a smooth transfer of staff from commencement of the Initial Service Period. The trade union representatives have been supportive of the transfer process and this support is continuing as the waste PFI contract moves towards financial close and subsequently to the operational phase.

Waste PFI Project

Final Business Case


10 Timetable

The dates set out below are based on the most recent information available and may be subject to minor changes through to financial close. Index Stage OBC Date

dd/mm/yy Actual Date

dd/mm/yy 1 Submission of EoI N/A 15/04/2004 2 Approval of EoI N/A [ ] 3 Business Case Approved by

Council N/A 28/7/04

4 Submission of OBC 30/7/04 3/8/04 5 Mayoral Approval (if relevant) N/A N/A 6 Defra Approval of OBC 28/9/04 14/12/04 7 PRG Approval of OBC 28/9/04 14/12/04 8 OJEU Published 15/10/04 1/1/05 9 Descriptive Document Issued 30/11/04 4/2/05 10 PQQ Issued 30/11/04 4/2/05 11 PQQ Returned 15/1/05 1/4/05 12 ISOP Issued 1/2/05 4/2/05 13 ISOP Returned 1/4/05 1/4/05 14 ITN Issued 1/6/05 8/8/05 15 ITN Returned 1/9/05 24/2/06 16 Call For Final Tenders 15/11/05 8/12/06 17 Preferred Bidder Selected 15/3/06 27/11/07 18 Submission of draft FBC N/A 01/05/2012 and

31/07/2012 19 Submission of final FBC N/A 02/10/2012

20 Defra Approval of FBC N/A 16/11/2012

21 Contract Awarded N/A 30/11/2012 22 Financial Close 30/9/06 30/11/2012 23 Planning Application Submitted South Kirkby

June 2008 Denby Dale Road July 2008 Welbeck September 2008 Glasshoughton December 2008

24 Planning Application Approved South Kirkby 27 November 2008 Denby Dale Road 29 January 2009 Welbeck 19 February 2009 Glasshoughton 25 June 2009

Waste PFI Project

Final Business Case


25 Environmental Permit Submitted or proposed timescales for submission

South Kirkby February 2012 Denby Dale Road

Glasshoughton

26 Environmental Permit Approved or proposed timescales for approval

South Kirkby 29 June 2012 Denby Dale Road

Glasshoughton

27 Construction Commences May 2013

28 Start of Commissioning MRF

Enclosed windrow compositing facility April 2015 Residual waste treatment facility February 2015

29 Operational Commencement Initial Services

Full Services

Full details of the procurement process are set out in section 4.7.

Waste PFI Project

Final Business Case


APPENDIX 1 – Defra‟s Criteria for Awarding Waste Infrastructure Credits

Waste PFI Project

Final Business Case


APPENDIX 2 – Planning Health Framework

Section 7 deals with the specific position relating to planning for the waste PFI project There are four key sites required to deliver the MWMS, South Kirkby, Denby Dale Road, Welbeck and Glasshoughton. All four sites have received planning permissions as identified below: South Kirkby 27 November 2008 Denby Dale Road 29 January 2009 (as extended by a subsequent planning

consent approved on 25 November 2011) Welbeck 19 February 2009 Glasshoughton 25 June 2009 In addition there are two temporary permissions which have been approved at Ossett and Calder Vale Road in Wakefield. The Ossett planning permission extends the use of the site for a HWRC and for a temporary TLS. The Calder Vale Road planning permission is for use as a temporary HWRC and TLS. Both these permissions were to provide alternative facilities when the Denby Dale Road site is closed for re-building. The Calder Vale Road site will now be used for the temporary HWRC and TLS and the Ossett site will continue to be used as an HWRC. All of the permanent planning permissions have conditions requiring development to commence within three years of the date of the permissions with the exception of Denby Dale Road which has been extended to 24 November 2016. The waste PFI contractor has taken appropriate action to extend the permission as necessary in accordance with the construction programme. In addition to planning approvals set out above, the waste PFI contractor submitted an application for the Environmental Permit for the South Kirkby site in February 2012. The final Environmental Permit was issued on 29 June 2012. The subsequent judicial review period expired on 28 September 2012 and there have been no objections. The waste PFI contractor is committed to submitting the Environmental Permit applications for Denby Dale Road and Glasshoughton following financial close with a view to receiving the permits by May 2013. The Council and the waste PFI contractor have agreed with the Environment Agency that the Environmental Permits for the existing sites that will be leased to the waste PFI contractor from initial service commencement will be transferred to the waste PFI contractor as of the initial service commencement date. As set out in this FBC, the RDF produced at the South Kirkby site will be subject to an Offtake agreement with Ferrybridge MFE Ltd for disposal at the proposed Ferrybridge Bio-fuel plant. Ferrybridge MFE Ltd has received planning permission for the Ferrybridge Bio-fuel plant and has also submitted an application for an Environmental Permit. The draft Environmental Permit was issued on 28 September 2012 and the final permit is anticipated to be issued by the end of November 2012. The normal 3 month judicial review period will follow.

Waste PFI Project

Final Business Case


APPENDIX 3 – Project Data Template

The figures set out below are based on the most recent information available (Financial Model Wakefield ) and may be subject to minor changes through to financial close.

Respondent Details

Name:

Job Title: Project Director – Waste PFI

Telephone Number:

Email Address:

Address: Wakefield MDC Communities Directorate Waste Services Normanton Town Hall High Street Normanton WF6 2DZ

Date Form Completed:

Waste PFI Project

Final Business Case


Section 1 – General Project Information

1.01 Project Name: Waste Management PFI Project

1.02 Category: Tick as appropriate.

√ PFI – Using HMT Definition

PPP – Other Public Private Partnerships

Other Joint Venture – Projects which cannot be categorized using the preceding options.

1.03 Sector: The business, service or industry sector most applicable to the project.

Waste

1.04 Project Details: Provide a short description of the project and its key features.

The waste PFI contract is for the treatment, recycling and disposal of all municipal waste collected by Wakefield MDC. In addition the waste PFI contract includes for management of the existing HWRC and Bring Site networks together with a working partnership with the Council in developing waste minimisation and education objectives. The waste PFI project is to deliver the requirements of its approved MWMS through MBT of residual waste. The waste PFI project requires recycling and composting to a minimum level of 52% by 2015 and for the waste PFI contractor to meet the BMW to Landfill Target.

1.05 Region: Enter the County, Unitary Authority or London Borough where the project is based.

City of Wakefield Metropolitan District (Wakefield is a Unitary Authority)

1.06 Specific Location(s): Enter the specific location of the project if it is not detailed in the above field.

See above

1.07 Parliamentary Constituencies covered by relevant Waste Disposal Authorities:

Wakefield; Normanton, Pontefract and Castleford; and Hemsworth.

1.08 What date was the OJEU dispatched?

1 January 2005

1.09 What date was the Outline 14th December 2004

Waste PFI Project

Final Business Case


Business Case Approved by the Department?

Waste PFI Project

Final Business Case


Section 1 – General Project Information (cont)

1.10 Who were the bidders invited to participate in dialogue?

Cleanaway Ltd Estech Europe Ltd Global Renewables UK Ltd Waste Recycling Group Ltd

1.11 Date Preferred Bidder appointed:

22nd February 2008

1.12 Date project will reach financial close:

30 November 2012

1.13 Date project will reach Commercial Close:

30 November 2012

1.14 Name of the Central Government Sponsor Department:

Defra

1.15 Special features relating to the project: Detail special features, e.g. any awards that the project may have won, an innovative approach to procurement or design.

The Council believe the waste treatment of residual waste through autoclave and AD technology will provide a unique combination of technologies for achieving high levels of recycling and therefore a significant reduction in waste sent to landfill. The processes themselves are not new but used in combination provide a „state of the art‟ solution which also includes the production of a RDF for processing at the proposed bio-fuel plant to be built by Ferrybridge FME Ltd at Ferrybridge Power Station and the production of „green energy‟ as a by-product of the treatment process at South Kirkby.

1.16 Confirm any conditions on the project stipulated on the award of PFI-credits either by Defra or PRG and provide details of how they have been addressed:

a) Contract to be based on standard contract documentation (SoPC3 at that time) b) Sharing of non commercial documentation with other Local Authorities

Waste PFI Project

Final Business Case


Section 2 - Commercial Terms

2.01 Not Used

2.02 PFI Credits Awarded: Express this in £m.

£33m

2.03 Net Present Value (NPV) of the Authority payments under the Contract (e.g. the unitary charge, assuming no performance deductions): Express this in £m and explain if it includes non-standard elements.

2.04 The assumptions used to calculate the NPV:

a) Base date b) Year 1 full UC c) % discount rate d) Indexation (% fixed and

indexed; indexation choice)

a) 31 March 2011 b) Year 1 Full UC = 2013/14 (Initial Service Period) c) d)

2.05 Contract Term:

a) Enter the length of the contract in years (including construction).

b) Enter length of operational period

a) The contract term will be 25 years from Initial Service commencement. b) The operational phase is the same 25 years – approximately 2 years of Initial Services followed by 23 years of Full Services following completion of construction of the key waste treatment facilities at South Kirkby.

2.06 Third Party Income:

a) Detail the sources and the amount of any third party income applicable to the project. This should be expressed as an NPV over the lifetime of the project in £m.

b) Analyse total SPV revenue (in percentage terms) into Unitary Charge, 3rd party waste, energy income, and other 3rd party income

a)

b)

2.07 Are the assumptions in 2.04 used to calculate the value

Yes

Waste PFI Project

Final Business Case


in 2.06 above? (Yes/No). If not, please detail the

assumptions used to calculate this value:

2.08 (a) Number of Staff Transferred Under TUPE (if applicable):

Approximately 29

2.08 (b) Expected number of jobs created during construction phase

200+

2.08 (c) Expected number of jobs created during operational phase

80

2.09 Are any operational facilities being transferred to the contractor?

√ Yes No

2.10 If the answer to 2.09 is “Yes” please provide details of the type of facility, its capacity and its expected operational life (in years)

Denby Dale Road TLS and HWRC. HWRCs at the following sites – Ossett, Welbeck, Castleford, Ferrybridge, Fitzwilliam and South Kirkby (Manface). Denby Dale Road – To be rebuilt and to be operated for the contract term. Welbeck HWRC – to be operated until 2017 All other sites to be operated for approximately the 2 year Initial Services period and then handed back to the Council when the new facilities are constructed.

2.11 What is the contractual Planning Long Stop Date?

N/A – all sites have full planning permissions.

2.12 What was/is the planned date of operation for the new facilities being provided under the PFI contract?

All key waste treatment facilities will be operational from August 2015

2.13 What is the national accounting regulation applied to this project? [NB: This is not the same as the accounting standard applied to the Local Authority‟s accounts]

European System of Accounts 1995 (ESA95).

2.14 Accounting Treatment:

Detail the accounting treatment relevant to the

ON Balance Sheet

√ OFF Balance Sheet

Waste PFI Project

Final Business Case


project under ESA 95.

Insurance Details

2.15 Total construction premium: £ tbc

2.16 The modelled Gross Operational premium for the first year following Full Service Commencement:

2.17 Base Cost for insurance: £ included above

Waste PFI Project

Final Business Case


2.18 Operating Cost Details

Base Date The financial model submitted by the waste PFI contractor does not provide the requisite breakdown as required below.

Cost Category Base Cost per annum

Indexation Category (e.g. RPI)

Indexation rate (e.g. 2.5%)

FM - Labour

O&M Admin & Licence

Landfill Disposal

Fuel Costs

Utility Costs

SPV Personnel Bosts

SPV @dmin and Licence

Haulage

National Non-Domestic Rates

Insurance

Maintenance Cost

2.19 Lifecycle Details

Total lifecycle cost during contract life (nominal)

Total lifecycle cost during contract life (re`l)

Average lifecycle cost per annum (nominal)

Waste PFI Project

Final Business Case


Average lifecycle cost per annum (real)

Waste PFI Project

Final Business Case


2.20 Sources and Uses of Funds during Construction

Sources £m

Senior Debt

Equity

Sub Debt


Not Used -

Total

Uses £m

Construction

Development cost

Financing upfront fee

Financing cost

Reserve accounts

Net Revenue

Not Used -

Total

2.21 Sources and Uses of Funds – During operation

Sources £m

Unitary Charge

3rd Party Waste Income

Electricity Income

Other 3rd Party Income

Interest income


Other -

Total

Waste PFI Project

Final Business Case


Uses £m

Operating Cost

Lifecycle Cost

Senior Debt interest

Senior Debt principal

Sub Debt interest

Sub Debt principal

Bridging Loan interest

Bridging Loan principal

Equity return

Tax

Other

Total

2.22 Third party income assumptions

Quantity of electricity exported pa 3,132 MWH in first year

Electricity guaranteed floor price / MWh Please also provide details on the price assumptions during the contract life (e.g. indexed or different floor price assumptions)

Third party waste – gate fee / tonne (£)

ROCs assumptions

Recyclables assumptions

Waste PFI Project

Final Business Case


Section 3 - Public Sector Authority Details

3.01 Name of the Contracting Authority:

The Council of the City of Wakefield

3.02 Key Contact(s): Provide details of the key members of the Contracting Authority‟s project team

Name

Job Title Corporate Director (Communities) – Project Owner

Project Director – Waste PFI

Telephone Ntmber

Email Address

Address Town Hall Wood Rtreet Wakefield WF1 2HQ

Normanton Town Hall High Street Normanton WF6 2DZ

3.03 Status of Authority: Tick as appropriate

Central Government

Non Departmental Public Body

Agency

√ Local Government

Other Local Body (e.g. Emergency Services, NHS Trust)

3.04 Lead Public Sector Advisors: Provide the names of the lead advisors to the Contracting Authority.

Financial Advisor PricewaterhouseCoopers LLP

Technical Advisor AMEC Ltd

Legal Advisor Walker Morris Solicitors

Insurance Advisor AON Ltd

Other Key Advisor(s) – WIDP Transactor

3.05 Name of the National Audit Office

Waste PFI Project

Final Business Case


Audit Body Responsible for the Contracting Authority? Tick as appropriate.

√ Audit Commission

Audit Scotland

Northern Ireland Audit Office

Wales Audit Office / Swyddfa Archwilio Cymru

Waste PFI Project

Final Business Case


Section 4 - Private Sector / Contractor Details

4.01 Name of the Private Sector Partner:

Wakefield Waste PFI Ltd

4.02 Type of company or partnership: Tick as appropriate.

√ Company Limited by Shares (CLS)

Company Limited by Guarantee (CLG)

Limited Liability Partnership (LLP)

4.03 Details of all the Shareholders (past and present) of the Project Company:

Shareholder 1 Shareholder 2 Shareholder 3

Shareholder Name: Shanks PFI Investments Limited

Babcock International Group Plc

Percentage Shareholding:

Date Holding Commenced:

28/08/2012 28/08/2012

Date Holding Ceased: (if applicable)

N/A See section 1.4 of the FBC

Shareholder 4 Shareholder 5 Shareholder 6

Shareholder Name:

Percentage Holding:

Date Holding Commenced:

Date Holding Ceased (if applicable):

Waste PFI Project

Final Business Case


Section 4 - Private Sector / Contractor Details (cont)

4.04 Key Private Sector Contractors: Provide the names of the companies responsible for these aspects of the project.

Name Value (£m; nominal value)

Turnkey Contractor

Waste Services

Shanks Waste Management Limited

Civils Contractor

Kier Construction Limited

Facilities Management

Shanks Waste Management Limited

Other Key Contractor(s)

MachineX (MRF) HotRot (Composting) Ros Rocca (Wet MRF, AD CHP) Joseph Rhodes (Autoclave)

4.05 Which of the following options for value testing apply to your project?

Benchmarking – which costs?

Market testing – which costs? √ - landfill gatefee, transport related services, utilities and specific waste items

4.05.01 Under the terms of the contract, how often is benchmarking/market testing scheduled to take place? Refer to your project agreement.

Landfill gatefee, transport related services and utilities – 5 years or as appropriate Specific waste items – annually or as appropriate

4.05.02 Date benchmarking/market testing next scheduled to take place:

To be agreed

4.05.03 If none of the options for value testing apply to your project, provide details below e.g. fixed price, RPI.

N/A

4.06 Lead Private Sector Advisors: Provide the names of the lead advisors to

Financial Advisor

DWPF

Technical Advisor

SLR - permitting

Legal Advisor DLA Piper

Waste PFI Project

Final Business Case


the SPV. Insurance Advisor

Marsh Ltd

Other Key Advisor(s)

Barton Wilmore - planning

Waste PFI Project

Final Business Case


Section 5 – Finance: Initial Transaction Details

5.01 Borrower Name: Provide the name of the private sector party – usually the joint venture or SPV – accountable for the project debt.

Wakefield Waste PFI Ltd

5.02 Senior Debt (Amount): Provide the amount of the senior debt in £m.

Bank or Corporate Financed Projects

5.03 If the project is Bank or Corporate Financed, the type of Senior Debt: Tick as appropriate.

Corporate The senior debt is provided or guaranteed by shareholder(s) or parent company(ies).

Guarantor name(s):

√ Limited Recourse The senior debt involves limited obligations of the sponsor companies.

Authority The senior debt is provided or guaranteed by the public sector.

Bond Financed Projects

5.04 If the project is Bond Financed, type of bond applicable to the project:

Wrapped

Unwrapped

Index Linked To which index is the bond linked?

Retail Price Index (RPI)

Consumer Price Index (CPI)

Fixed Rate

5.05 If the project is Bond Financed, the name of the Monoline

Waste PFI Project

Final Business Case


Insurance Company:

5.06 If the project is Bond Financed, the Rating of the Bond:

5.07 Name of the Rating Agency:

Moody‟s

Standard & Poor‟s

Fitch Ratings

5.08 Equity Capitalisation: Detail the value of shareholders‟ funds invested in or committed in the SPV at financial close in £m. N.B. Detail pure equity and NOT shareholder sub-debt. Shareholder sub-debt is dealt with at Q5.15 onwards.

5.09 Principal Banks or Bond Arranger(s):

BayernLB, Barclays, SMBC and the UKGI

5.10 Debt Tenor:

a) Detail the number of years from financial close to final maturity of the senior debt agreement.

b) Detail the repayment period and tail (years)

c) Repayment profile

a) September 2012 to 30 September 2035 b) Tail 2 years c)

5.11 Margins, Spreads & Fees: Detail information relating to the pricing of the Senior Debt. i.e.

a) Arrangement Fee b) Commitment Fee c) Margin (please give details

if it varies e.g. during construction and operation)

d) Credit margin on interest-rate swap (or inflation

a) b) c)

Waste PFI Project

Final Business Case


swap) e) MLAs on bank debt f) For a bond, please state

the benchmark gilt, the spread over the benchmark gilt, and the monoline fee

d) e) f)

5.12 Is/was a funding competition planned/held during the PB stage for the Senior Debt?

√

Yes No

5.13 Key Funding Parameters: Use this space to provide key information about the terms of financing.

5.14 Is there Shareholder Loan/Sub Debt?

√ Yes No

Shareholder Loan / Sub Debt Details

5.15 Amount: Express this in £‟m.

5.16 Shareholder Loan – Principal Provider:

5.17 Shareholder Loan – Term: Express this in number of years (from financial close to final maturity)

April 2014 to September 2037

5.18 Shareholder Loan – Margins, Spreads and Fees:

5.19 Is there Third Party Loan/Sub Debt?

Yes √ No

Third Party Loan/Sub Debt Details

5.21 Amount? Express this in £m.

n/a

5.22 Third Party Loan – Principal Provide:

n/a

Waste PFI Project

Final Business Case


5.23 Third Party Loan – Term: Express this in number of years.

n/a

5.24 Third Party Loan – Margins, Spreads and Fees:

n/a

5.25 Gearing: What is the ratio of funding sources within the capital structure, e.g. 90:10 for Senior Debt to Equity (subordinated debt and pure equity capitalisation)?

5.26 IRR a) Project IRR (real pre tax) b) Project IRR (real post tax) c) Blended Threshold Equity

IRR (real post tax) What is the Internal Rate of Return to Shareholders, as a percentage rate, from Equity and Sub-Debt?

d) Blended Threshold Equity IRR (nominal post tax)

N.B. There are many alternative

measures. Unless specifically stated, please give the IRR after the SPV‟s own tax but before shareholders‟ tax; expressed in „real terms‟ ie after removing impact of inflation – this will be lower than the „nominal‟/‟cash terms‟ figure which includes inflation.

a) b) c) d)

Waste PFI Project

Final Business Case


APPENDIX 4 – Project Risk Registers

Project Board Risk Register Submitted as a separate document

PMT Risk Register Submitted as a separate document

Waste PFI Project

Final Business Case


APPENDIX 5 – Waste Minimisation Plan

Submitted as a separate document

Waste PFI Project

Final Business Case


APPENDIX 6 – Derogations Table


Waste PFI Project

Final Business Case


APPENDIX 7 – Preferred Bidder Letter


Waste PFI Project

Final Business Case


APPENDIX 8 – Report to Leader and Cabinet Member – Progress Report on Waste Procurement Strategy

Part 1 – Report to Leader and Cabinet Member – 4th May 2010 Submitted as a separate document Part 2 – Officer Delegated Decision Notice – 4th May 2010 Submitted as a separate document

Waste PFI Project

Final Business Case


APPENDIX 9 – Cabinet Report - Delivery of the Municipal Waste Management Strategy

Part 1 - Cabinet Report - Delivery of the Municipal Waste Management Strategy – 13 December 2011 Submitted as a separate document

Part 2 – Approved Cabinet Minutes – 13 December 2011 Submitted as a separate document

Waste PFI Project

Final Business Case


APPENDIX 10 – Contract Targets and Output Specifications


Waste PFI Project

Final Business Case


APPENDIX 11 – Payment Mechanism


Waste PFI Project

Final Business Case


APPENDIX 12 – Project Agreement


Waste PFI Project

Final Business Case


APPENDIX 13 – Financial Model


Waste PFI Project

Final Business Case


APPENDIX 14 – Waste Flow Model


Waste PFI Project

Final Business Case


APPENDIX 15 – Amec Technical Due Diligence Report and Technical Advisors Letter of Support


Waste PFI Project

Final Business Case


APPENDIX 16 – Materials and Energy Marketing Plan


Waste PFI Project

Final Business Case


APPENDIX 17 – Site Layouts


Waste PFI Project

Final Business Case


APPENDIX 18 – WMDC VfM Analysis - November 2011


Waste PFI Project

Final Business Case


APPENDIX 19 – ESA95 Questionnaire Response


Waste PFI Project

Final Business Case


APPENDIX 20 – Waste PFI Contract Structure


Waste PFI Project

Final Business Case


APPENDIX 21 - RDF Offtake Market Failure Risk


Waste PFI Project

Final Business Case


APPENDIX 22 – Ferrybridge Environmental Permit Failure Risk


Waste PFI Project

Final Business Case


APPENDIX 23 – Environmental Impacts Calculator


Waste PFI Project

Final Business Case


APPENDIX 24 – Commercial Paper setting out the Interaction between Third Party Income sharing and Substitute Waste drafting


Waste PFI Project

Final Business Case


APPENDIX 25 – Residual Waste Treatment Plant Flow Process Diagram
