The £397M contract for the Greater Manchester waste PFI is the largest part of Costain’s waste business, but there is much more to come explains sector director Mark Huddart.
More from: A greater power
“In the early part of this decade the waste business was just a minor part of our business,” says Costain sector director for waste Mark Huddart. “But now we have an order book worth over a half a billion pounds and it’s Costain’s fastest growing sector.”
Building this new business began back in 2004. European legislation such as the Landfill Directive was driving major changes to how local authorities would treat waste streams with compulsory targets demanding that by 2020, 65% of waste is diverted away from landfill and 50% of waste is recycled or composted.
Costain’s team decided that the processing, civil engineering and PFI experience gained in sectors such as water, roads and healthcare, were ideal for application in the waste sector.
“In the early part of this decade the waste business was just a minor part of our business, but now we have an order book worth over a half a billion pounds.”
Mark Huddart, Costain
Against this backdrop, Costain strategy and business development director Stephen Wells initiated a steering group which analysed the market, devised a draft strategy and for the next year the group worked hard to identify opportunities and build contacts in the sector.
Instrumental in this was Wells’ membership of the UK Trade & Investment Environmental Sector Advisory Group board where the firm found itself to be the only major contractor.
In early 2009 this hard work paid off with contracts being signed for PFI waste projects at Greater Manchester and Belvedere in South East London. In Manchester Costain is taking a leading role as the engineering procurement and construction (EPC) contractor and in London it is carrying out major civils work worth £125M for EPC contractor Switzerland’s Von Roll Innova.
This means we have two flagship jobs in the UK,” explains Huddart. “One is the Manchester project which will take one twentieth of the UK’s municipal waste. The other is the Belvedere energy from waste project which will be the largest of its type in the UK.”
London’s Belvedere energy from waste project, being developed by client Cory Environmental, is also known as the Riverside Resource Recovery facility. It will produce 62MW of energy from up to 585,000t of waste, delivered by barges on the Thames that will keep 100,000 lorries off London’s congested roads. “It will make a real contribution to London’s ability to meet its landfill diversion targets,” says Huddart.
In Manchester Costain is responsible for designing and building the entire construction programme which involves bringing new waste processing technologies to the UK, but it wants to go further. In future schemes it is bidding as part of the PFI concession company, positioned as both investor as well as contractor .
“At the moment we are working with United Utilities (UU) and Laing Investments on two bids in the waste sector − the Bradford and Calderdale Waste Partnership and for Leicestershire County Council,” says Huddart.
Costain is the main contractor for United Utilities five year water framework programme, but it has expanded on its client/contractor relationship by establishing the 4D joint venture.
The two firms, together with consultant MWH deliver the work programme for Southern Water as well as delivering major capital projects outside of the framework such as the £225M Brighton & Hove Waste Water Treatment Works. This arrangement with UU is now being brought into the waste sector. “A major client has become a major partner,” says Huddart.
“A major client has become a major partner.”
Mark Huddart, Costain
This puts Costain at a different level, on a par with developers delivering waste solutions, says Huddart. “We are also targeting the operations and maintenance market in waste. We do this in other sectors such as water and roads. We can deliver the plants, keep them running and maintain them.”
He also says the firm has the financial stability and clout to secure finance for future PFIs. “We have very good relationships in the City and we used these to help the Manchester project. Banks have to be sure the EPC contractor can deliver and so we had a lot of interaction with them over Greater Manchester. We know we have a network in the City that can add a lot of value.”
Of course the municipal waste contracts that Costain has had so much success with to date are just part of the UK’s waste management story. Commercial and industrial waste account for more than two thirds of the 100M.t produced every year in the UK. So far this is not covered by European legislation but this is expected to change.
“A big driver for commercial and industrial (C&I) waste is the landfill tax escalator which goes up at £8 per tonne per year until 2013 where it will be a rate of £72/tonne. Gate fees could be in excess of £100 a tonne. We believe that will drive big changes in the waste sector so we are looking at that and for partners that can we go forward with in the C&I market,” says Huddart.