Contract first to benefit with £120m from the Treasury's PFI rescue fund
The long-delayed £3.8bn Manchester waste PFI scheme has finally been signed off following a £120m intervention from the government’s new Treasury PFI unit.
The 25-year deal, which is being undertaken by a consortium of Viridor and John Laing, will involve £640m of building work to create a network of new recycling plants across the city. Costain is preferred bidder for the £330m contract within this to build new treatment plants and incinerators.
The deal is the first to be completed with the help of the Treasury’s Infrastructure Finance Unit, which is to put £120m of senior debt into the scheme, after the banks originally financing the scheme refused to fund the whole deal.
The Treasury’s new PFI unit was set up last month to rescue deals, like this one, that were in danger of falling through because of the problems raising finance in the current environment.
The consortium said the deal will create 5,000 construction jobs. The aim of the scheme is to be able to recycle 50% of Manchester’s waste, up from the 30% recycled today.
The Department for Environment Food and Rural Affairs has also put £125m supporting the scheme, £25m than the £100m of PFI credits originally on the table.
The deal has been more than five years in the making, and is almost two-years late, with sign off originally expected in June 2007. Signing the deal was initially delayed while the scope of the scheme was extended, but it then ran in to trouble gaining bank finance during the credit crunch.
Councillor Neil Swannick, chair of the Greater Manchester Waste Disposal Authority, said he was very pleased to get the deal finally signed. He added: “This has been on the go for nearly five years now, it’s been very difficult. The Treasury unit has been very helpful since it’s start up – and have come up with this funding in double-quick time.”
David Hardy, Director of John Laing PLC said the deal will be a major step forward for Greater Manchester. He said: “This is fantastic example of how the public and private sectors can work together, particularly in the current tough financial and economic environment, to create forward-thinking solutions that will benefit communities across the region."