Incredible turnaround as £600m waste project scrapped at cost to council of £30m

Norfolk County Council voted (by 48 to 30) in early April during an unusual meeting where it was decided that a huge planned waste management scheme, incorporating a ‘waste to energy’ plant and an already agreed £600m waste contract with Cory Wheelabrator, was to be axed just three years into its 25 year term. 

Unfortunately, this meant a substantial severance cost for the council, including: 

• £20.3m in capped compensation to Cory Wheelabrator
• £1.6m in contractor public inquiry costs
• £8.26m in exchange rate and interest rate related costs

The 25 year contract was awarded back in 2011, but substantial opposition then arose and the planning application for the ‘energy from waste’ plant required to complete the contract was held for review by the Government. A planning inquiry was held in Spring of last year and the Communities Secretary Eric Pickles reputedly then suggested a decision would be made on or before 14 January.

No decision has yet been forthcoming, which has acted to erode the estimated benefits the project was expected to provide. Specifically, the Council elaborated on their website: 

“When the contract was signed, savings of over £250m were guaranteed over its 23 years, compared to landfill. 

“The report to Council and Cabinet said that the Secretary of State’s failure to make a decision was costing around £140,000 a day, and by June the projected savings would have disappeared. The escalating cost of continuing delay follows the Government’s decision last November to withdraw Waste Infrastructure Grant worth £169m over the lifetime of the contract.” 

Thus a combination of Defra withdrawing their funding for waste allocated for Norfolk and severe delays in Government decision making meant that this scheme drifted into economic obsolescence and, ultimately, termination fees became more viable than pursuing the project to fruition. 

The local authority’s Cabinet has agreed that the termination costs should be met through the use of a contingency fund (£19m), under-spend in 2013/14 (£3m) and general reserves (£8m) on the expectation that steps will be taken to replenish those reserves. The Cabinet is reported to be intending to consider the various options at a meeting in May. 

Interestingly, a report last December by Jonathan Acton Davis QC of Atkin Chambers did clear the council and officers of taking undue risk when entering into the contract, though some will argue that £30m worth of costs now stand testament to the idea that they may have been rash when plunging into such a decision without first securing at least outline planning permission. 

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SRJ / LCB                                                                                                                            23/04/14