Final bill for scrapping Norfolk incinerator revealed
PUBLISHED: 11:06 01 December 2014 | UPDATED: 11:06 01 December 2014
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The final compensation payment for cancelling Norfolk’s controversial incinerator contract has been paid - with County Hall having lost £33.7m because of the saga.
The last payment of almost £6m was made by Norfolk County Council to Cory Wheelabrator, which would have run the Willows plant near King’s Lynn, was made on Friday.
In September, the council was confident the compensation it would have to pay would be “considerably lower” than the £20.3m compensation cap, but that has not proved to be the case.
In July, the council paid just under £11.8m to the banks for interest rate-related hedging costs, while the council also had to pay more than £1m towards the public inquiry costs.
The county council voted by 48 votes to 30 to terminate the contract for the proposed incinerator at Saddlebow at an extraordinary meeting in April.
Council officers had said that, due to delays in securing planning permission for the Willows project, the controversial project no longer offered good value for money, and councillors agreed to ditch it.
Tom McCabe, interim executive director of community and environmental services at Norfolk County Council, said: “We built up a reserve in order to pay the substantial costs of terminating the contract and we have now made a final settlement in line with that.
“The costs associated with ending the contract are significant and we have had to satisfy ourselves that they are justifiable, which is why this process has taken some time.”
George Nobbs, Labour leader of Norfolk County Council said: “I welcome the certainty that this agreement brings. This is a significant act of closure in a sad and sorry saga which was not of my administration’s making or choice.
“I very much welcome the fact that this now finally removes any risk of further costs being incurred in the future. However, it has been a salutary lesson of how not to do things.
“It is a matter of deep regret to me that this matter has caused so much damage to relations within our county and I hope that today we can all turn to a new page.”
A spokesman for Cory Wheelabrator said: “As a result of the termination, Willows was contractually entitled to payment by Norfolk of compensation for sums it had incurred in developing the project referred to in the contract as the force majeure termination sum.
“Norfolk and Willows have been in discussion about the calculation of that compensation and have reached agreement in relation to the calculation and payment of the compensation in accordance with the terms of the contract.”
The actions of councillors during the incinerator saga are currently being investigated by former council leader Stephen Revell.
Meanwhile, a group of councillors and officers had formed a waste advisory group to explore how the county would deal with waste in the future.
One of that group’s recommendations was that, when looking at possible solutions, the council would not consider an incinerator in Norfolk, but would allow waste to be burned at the Great Blakenham incinerator in Suffolk.
However, at last month’s meeting of the council’s environment, development and transport committee, the committee rejected the recommendation - re-igniting the possibility of such a plant being built in Norfolk in the future.
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WAS IT A STANDARD CONTRACT?
One of the many issues opponents of the incinerator had is why Cory Wheelabrator stood to get so much compensation, should the plant not get built.
To anti-incineration campaigners, the level of breakage costs aroused suspicion the contract Norfolk County Council signed was not standard.
An article published in a trade publication in June 2012 quoted Mike Harlow, a partner in KPMG, who worked on the Cory Wheelabrator contract, as saying: “significant discussion was had negotiating changes to the standard contract”, including to accommodate, among other things, compensation on termination.
A Freedom of Information Act request by anti-incinerator campaigners revealed that article prompted an email to DEFRA (who had agreed to award PFI credits to the council for the project) from Joel Hull, the county council’s residual waste services project director.
In it, he wrote that the report went into “intense detail about the financial elements and structure of CW’s bid; way more than we have ever released or would feel comfortable in releasing.”
The county council, when asked why Mr Hull felt that way, said it was “because it revealed financial information about Cory Wheelabrator’s bid which the officer considered was potentially commercially sensitive”.
They said he wrote to Defra to “clarify” that the authority had not released that information.
The county council explanation for the contract was: “The contract complies with the principles and approach set by the government for all of the procurements that were run by local authorities under Defra’s Waste Infrastructure Delivery Programme.
“However, in some parts of the standard contract whilst the principles have to be adhered to the draft contract terms are not fully prescriptive.
“This is to accommodate the wide range of different proposals from different bidders that the government expected to attract through its programme, to make the process as competitive as possible and maximise value for money.
“One example of this is the ability to accommodate different funding approaches by different bidders. For example, some bidders fund their bids through corporate finance (where they fund the project from their own balance sheets and/or corporate debt – for example Veolia’s project for Leeds City Council) or project finance (where they fund the project predominantly through ring fenced bank debt, with some equity injection).
“In the case of Cory Wheelabrator’s bid it was a hybrid of these, they intended to borrow money from banks to fund the project and were prepared to stand behind some of that money themselves.”
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