Rubbish to Resource: Financing New Waste Infrastructure



'It is a timely document that needs to be read and with its lessons understood not just by industry, local government, Parliament, and within Government itself at a national level'.

Jamie Reed MP, Shadow Minister for Environment, Food and Rural Affairs


 

'This report has addressed a number of financial barriers and has pointed the way towards how to get over those and where we go as far as that vital investment is concerned'

Dr Alan Whitehead MP, Chair, Associate Parliamentary Sustainable Resource Group research inquiry


 


'As this report suggests, new and innovative ways of providing a framework of certainy and new sources of finance is an imperative to achieving society's ambition of managing our waste in an increasingly sustainable manner'

Nigel Aitchison, Industrial Partner, Foresight Group




This report was sponsored by:






Published: 6 September 2011

To download a copy of the report, click here

Report Overview
 
The Associate Parliamentary Sustainable Resource Group (APSRG) conducted a parliamentary inquiry into the financing of new waste infrastructure. Evidence was collected through a range of interviews with a cross section of individuals and organisations representing the waste sector, finance, the legal profession, interest groups, local authorities and government. These interviews were combined with four steering group meetings and complemented by in-depth desk-based research exploring the relevant literature from academia, government and industry.  
 
Background
 
The UK needs to invest in waste management infrastructure immediately.
 
£8 billion is required by 2020 if the UK is to manage its waste sustainable and effectively, meeting and exceeding EU and domestic landfill diversion targets.
 
By 2030, £15 billion must be invested in the waste sector overall.
 
Despite the Government’s assertion that there will be enough merchant facilities in combination with Private Finance Initiative (PFI) and Public Private Partnership (PPP) projects to meet European targets, there have been questions about the robustness of the calculations that have been used.
 
Constraints on public sector spending, the fall in bank in bank lending, the inherent risk in waste infrastructure projects and regulatory and policy uncertainty are together, hindering the necessary investment in new waste infrastructure projects. To overcome these barriers, an approach is needed where policy and investor certainty and risk mitigation is provided to ensure that the necessary investment is made.
 
Report findings
 
The report, Rubbish to Resource: Financing New Waste Infrastructure, attempts to address and overcome these barriers by outlining how the bankability of waste infrastructure projects can be improved.
 
The report’s recommendations have been designed to target central government, local authorities, the waste industry and the finance community. If successfully implemented, the recommendations will stimulate the necessary investment in waste infrastructure. They provide solutions to ensure that the necessary waste infrastructure capacity would be built and a range of options which would increase the deliverability of waste infrastructure projects. As a consequence, such recommendations would help the UK to move beyond fulfilling European targets and to fully value waste as a resource. 
 
 
 
Recommendations
 
A Framework for Investment
 
1.   Government must establish a coordinating committee, rooted in the Cabinet Office with representation from across the departments, agencies and non-departmental public bodies whose policy remits encompass waste, in order to provide investors with greater certainty over policy stability and coordination.
 
2.    Government must ensure that its financial incentives supporting the business case for waste infrastructure provide certainty to developers and financiers, and target the most commercially viable projects.
 
Municipal Solid Waste (MSW) and Merchant Plants
 
3.   Government should use the Green Investment Bank to devise and issue a guarantee product to de-risk the development of C&I waste capacity to encourage the development of merchant or joint local authority and C&I waste facilities.
 
4.    Local authorities should explore taking on more off-take risk in order to expedite the delivery of hybrid and local authority waste infrastructure projects and deliver better value for money.
 
Widening the Range of Finance Options
 
5.   The development of stronger links between the private waste sector and real estate investors, landowners and developers should be encouraged to allow the exploration of potential opportunities to release lower cost forms of capital. This should also be facilitated by additional clarification on the definitions of waste and recyclables processing as part of industrial use class definitions in the planning system.
 
6.    Government should use the Green Investment Bank to provide mezzanine debt to reduce the risk to senior debt lenders in financing waste infrastructure projects.
 
7.    Government should use the Green Investment Bank to provide pari-passu equity to encourage institutional funds to provide greater private equity contributions and deleverage senior debt in order to drive the development of merchant waste facilities.

The report was launched on 6th September.

To download a copy of the report, click here
To read more about the launch, click here


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