The Wight Choice

Adrian Gray, finance manager, group treasury ventures, Amey

On 30 September 2015, Amey achieved financial close on the integrated Isle of Wight Waste Contract, a 25-year waste project for the collection, recycling, treatment and disposal of residual waste for the Isle of Wight Council. The contract will involve the construction of a processing and treatment plant ensuring 90% of household waste will be diverted from landfill, treating around 75,000 tonnes per annum and producing around 20,000MWh per annum.

But what makes this project different from other PPP waste contracts?

The initial answer relates to the contract itself due to it being more than a standard design-build-finance-operate (DBFO) contract. It is unique to Amey’s portfolio as it is the only integrated contract comprising the full end-to-end service for municipal waste starting from the kerbside collection of every household on the island, right up to the treatment and disposal of the waste through the new facility being constructed as part of the contract.

In addition, this fully integrated solution is to be delivered across the entire island from day one of the contract. Setting aside the logistical challenges of delivering a service on an island, there was a requirement to provide collection and disposal services from day one even during the construction phase. Therefore an efficient interim service solution is crucial to the continuing provision of waste management services to the local residents, while minimising disruption and change to day-to-day activities.

Alongside this technical challenge came the timing challenges. With an incumbent PFI contract in place reaching expiry on 31 October, the council had a hard deadline of requiring the new contractor being in place by 1 November and, unlike many other DBFO-type PPPs, this deadline could not be missed or pushed back.

The presence of services from day one, within an arena as politically sensitive as residential waste collections, meant missing this deadline was not an option. This crucial deadline was met to the exact date thanks in large part to two key factors during 2015. The first was an efficient preferred bidder stage to financial close process of only three months, while the second was the rapid mobilisation to ensure a seamless transfer of operations between new and existing contractors.

Achieving such a quick financial close was the product of many factors, not least the rapport between Amey and the council. In a model example of the benefits of the competitive dialogue process, numerous elements of the solution were changed at each bid stage, listening to the council’s feedback and working collaboratively to meet the authority’s needs.

Core to this was the continual development of the financing solution. Working closely with the council, the finance solution was refreshed at each bid stage to submit a final tender with the optimal and best value for money solution.

Instead of raising finance from commercial banks, the project is being financed via regular prudential borrowing drawings, following the achievement of regular milestones throughout the construction period. The solution enables the authority to maximise the benefit of prudential borrowing, while still ensuring a secure and robust contractual solution is delivered, whereby the council only ever pays for works already delivered.

With financial close achieved, attention turned to completing the mobilisation activities to ensure readiness for the take-over of operations from the incumbent from 1 November. This included the adoption of all household collections on the island along with the running of its Household Waste Recycling Centres (HWRCs). With public, political and media interest high, the council was naturally keen to ensure minimal disruption to the island residents and avoid any negative press of uncollected bins mounting on the kerbsides. The smooth mobilisation, along with continuous and effective communications with the public, ensured the impact to the public was minimal with no disruption to their waste collections service.

The 25-year contract will transform how waste is collected and disposed of on the island. New mechanical treatment (MT) and advanced thermal treatment (ATT) plants will be built to maximise energy recovery, providing electricity to the island, while a dedicated visitor centre will engage communities in waste reduction programmes.

The vehicle routing and scheduling optimisation on collections will avoid congestion impacts, improve efficiencies and minimise disruption to residents and the environment. This will commence in earnest in early 2016, with a new approach to kerbside collections along with upgrades to two HWRCs, transforming the public’s interaction and increasing community involvement in recycling and waste management. Following the completion of the new MT and ATT facilities, the full operations can commence, diverting 90% of waste from landfill through a truly self-sustaining ‘on-island’ solution, delivered by islanders, for islanders.

So it may seem like just another waste PPP project on the face of it, but dig a little deeper and you will see it is a unique project with its own financial, technical and solution-driven challenges. However, through a client orientated approach, internal expertise and a drive to bring innovation to the market, the project has met the tough deadlines to date, and offers an exciting outlook for the island’s waste management for years to come.