Shanks Group has expressed concern over the quality and price of the waste derived fuels it produces under its 25-year disposal contract with the East London Waste Authority.
The East London output has contributed to what the Group describes as ‘a very difficult third quarter’ for its municipal division in a trading update posted today (7 February).
Shanks’ Frog Island MBT facility at Rainham, where waste is treated on behalf of ELWA
The update, for the period from 1 October 2016 to date, shows strong underlying performance in Shanks’ commercial and hazardous waste divisions – while recyclate prices have stabilised ‘in general’.
Cash levels continue to be managed closely, with core net debt decreasing by £109 million from 30 September 2016 to £134 million at 31 December 2016, according to the company.
Municipal
However, the Group suggests growth in other areas of the business has offset the ‘weaker’ performance of its municipal division, which is continuing to experience market and operational challenges.
Shanks highlights the impact of ‘both the mix and prices of the fuels’ it produces as being worse than expected – particularly under its arrangement with the East London Waste Authority.
A contract was signed in 2002 which sees Shanks accept waste from four East London boroughs – Havering, Newham, Redbridge and Barking & Dagenham – and process the material at its Frog Island mechanical biological treatment (MBT) plant into RDF.
The contract, valued at over £1 billion when it was signed, is not due to expire until 2027.
BDR
Shanks has also pointed to the temporary closure of its Barnsley, Doncaster and Rotherham (BDR) facility in South Yorkshire as another setback for the division. The shutdown allowed the main contractor to make ‘modifications’ to the facility to improve future performance.
The plant, which has been developed under a partnership with Scottish and Southern Energy, began accepting waste in 2015 with the majority of RDF sent to the Multifuel Energy Ltd recovery plant in Ferrybridge (see letsrecycle.com story).
The BDR facility in Rotherham, which began accepting waste in 2015
Shanks has highlighted ‘recovery initiatives’ announced within its interim results in November, as well as plans to develop a new ‘divisional management team’ to improve municipal performance.
The report that these actions will ‘turnaround the business’, with the benefits starting to be seen in ‘2017/18.’ It adds: “The Board believes that the ongoing strong performance of Shanks’ Commercial and Hazardous Waste Divisions will continue to offset the weaker performance from the Municipal Division.
“As a result, the Board continues to expect the Group to deliver a result for the year ending 31 March 2017 in line with its expectations.”
Merger
In an update on its ongoing merger with Benelux waste giant Van Gansewinkel Groep BV, Shanks adds that ‘in-depth planning for integration’ is underway.
A new brand will be launched on completion which reflects ‘the history and the aspirations’ of the combined Group.
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Source: letsrecycle.com Waste Managment
