Cambridgeshire County Council wants to renegotiate its £700m, 27 year PFI to handle waste in bid to save money
PUBLISHED: 09:48 15 September 2016
Eight years into its 27-year £700 million Private Finance Initiative (PFI) deal to handle waste, Cambridgeshire County Council wants to renegotiate the contract even though officials admit "there are limited options".
Graham Hughes, the council’s executive director for the economy, transport and environment, says: “The waste PFI is costing the council a significant amount of money and this is increasing so the intention is to renegotiate this to remove some of this cost.
“As this is the largest contract with the economy, transport and environment it is potentially the area which can generate most savings.
“The current contract is working and does mean that Cambridgeshire is recycling waste but there are areas where the contract can be improved.”
In a report to the general purposes committee on September 20, he wants approval for looking at the contract.
“There is a good degree of confidence that we can make significant savings, particularly £1 million in year one,” he said. The county council he believed had a “strong and positive” relationship with Amey, the company that is delivering the PFI contract.
On their 400 acre site at Waterbeach near Ely the company processes over 300,000 tonnes of waste each year with half being composted or recycled. Amey also operates nine recycling centres across the county and two waste transfer stations.
Mr Hughes says if the county council did nothing about the contract this would result in “continually escalating costs, due to changes in waste legislation, the continual increase of landfill tax as well as population growth and economic growth increasing the quantity of waste collected”.
Options being considered include reducing the cost of disposing of products of the Mechanical Biological Treatment (MBT) but more fundamental changes could include reducing the operating cost of removal of the MBT.
“Refinancing is the option that is likely to deliver the greatest savings,” he said. If the council withdrew completely from the contact and made alternative arrangements there would be “huge financial repercussions and minimal advantages”.
Councillors will be told a high level negotiating team is already in place to identify changes and to deliver changes.
Mr Hughes said both the chief executives of Amey and of the council were committed to making savings and terms of reference have been agreed.
However he warns any changes are dependent upon government support “and Amey will need to seek the consent of their senior lenders for any changes to the contract”.
Under the heading of “assumptions and risks” Mr Hughes says changes can only happen if Amey are willing to consider and negotiate.
“There are a number of parties behind the PFI such as lenders and DEFRA so there is a risk that they will not agree,” concludes Mr Hughes.