Friday, May 26, 2017

News: Rotherham waste facility operator reports on difficult year

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Renewi plc (formerly Shanks plc) has reported on a difficult year for its municipal division which included "challenges" at its multimillion pound Rotherham facility.

Earlier this year Rothbiz reported on the temporary closure of the 220,000 sq ft "BDR" development at Brookfield's Park in Manvers to address a "latent defect and upgrade certain areas of the facility."

In its financial results for the year ending March 31, the international waste-to-product business reported that revenue at its municipal business grew by 8% to £203m as a result of the full year effect of commissioning its facilities at Wakefield and Barnsley, Doncaster and Rotherham (BDR), and construction activity in Surrey, Canada. However, the division recorded a trading loss for the year of £2.7m, compared to a profit of £9.4m in the previous year.

The UK business made a trading loss of £4.2m, compared to a profit of £7.8m in the previous year, impacted by the markets for the fuel that the plants recover from waste which "have experienced significant challenges over the past year and these worsened rather than improved in the second half."

The Manvers centre creates material suitable for recovery and recycling and includes Mechanical Biological Treatment (MBT) and Anaerobic Digestion (AD) facilities.

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Barnsley, Doncaster and Rotherham Councils secured £77m through the Private Finance Initiative (PFI) for the scheme and Shanks Group plc joined in partnership with SSE (Scottish and Southern Energy plc) to progress the plans. Known as 3SE, the operators signed a 25 year contract worth in excess of £750m with the councils for the treatment of black bag waste.

The operator, now known as Renewi following the merger between Shanks and the Van Gansewinkel Group, said in its report that: "The PFI sector in the UK has continued to face significant challenges for market participants. An increasing number of PFI contracts across the country have come under pressure as a result of austerity measures, poor performance or because the contracts are inappropriate in the current market environment. Within this unfavourable market background, our Municipal Division's portfolio of assets has been vulnerable contractually to the volatile recovered fuel markets, rising incinerator gate fees and the weakness of Sterling."

It added that first full year in production of Wakefield and BDR facilities "was challenging from an operational perspective" as it struggled to get the plants up to full optimisation. A new managing director and a recovery plan have been put in place which involves implementing urgent plans to bring the facilities up to full capacity and to maximise power generation, particularly in generating gas at the BDR plant.

Work to improve productivity and plant up-time by optimising maintenance and equipment reliability is also taking place to reduce unplanned stoppages.

The firm also said that it would negotiate off-take terms and secure better priced outlets for both refuse derived fuel (RDF), solid recovered fuel (SRF) and certain recyclates where appropriate. It will also negotiate improvements to local municipal contracts where possible.

The financial report also shows that accountants have included onerous contract provisions of £28.2m on the balance sheet relating to the municipal division. A new £8.6m provision relates to the BDR operating contract and a £9m provision covering incremental capital works that are required at BDR and Wakefield to enable the plants to function as intended.

Peter Dilnot, CEO of Renewi said that the company "will fix the Municipal Division and build up momentum for sustained growth and earnings accretion in 2018/19."

Renewi website
BDR website

Images: Renewi


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