The waste sector has ever been a tricky one for PPP and the latest English project to be tangled up in legal battles serves as a cautionary tale for the global infrastructure sector.

Essex County Council and the SPV contracted to deliver and operate the mechanical biological treatment (MBT) plant – Tovi Eco Park – in Basildon have locked horns in the latest example of a waste project going wrong.

UBB (Waste) Essex Limited – the SPV led by Urbaser and Balfour Beatty – made it to financial close on Essex Waste PFI at the end of May 2012 with lenders BayernLB, NordLB and SMBC.

All went well until it came to throwing switches and now – according to court documents acquired by IJGlobal – the two parties have locked horns, legal proceedings initially launched on 28 April 2017 in the High Court of Justice.

Essex claims the SPV is “in breach of contract in that it has failed to discharge properly its design obligations and that it has failed to commission and operate the facility in accordance with the terms of the contract”.

In the Particulars of Claim, the authority claims that UBB has not passed contractual acceptance tests, it is in breach of contract and that the council wants to terminate the contract. IJGlobal has even heard that at one stage it was calling for the facility to be demolished.

Without boring you with legalese, the council claims that the Basildon facility is “incapable of passing the contractual acceptance tests” which justifies the authority in terminating the contract under Clause 67.

The council claims the plant doesn’t work to the standard required, while the SPV insists it is being sent the “wrong calibre of waste” making it impossible for UBB to achieve the performance parameters it agreed to deliver.

Meanwhile the UBB SPV is claiming breach of contract – putting a price tag of £60 million to £90 million on that – for failing to provide it with the right feedstock, while admitting it has experienced tech issues.

The circular argument has the council insisting that the plant is not fit for purpose, while the SPV points to the biodegradable element of the waste which is lower than figured in the original mass-balance model, therefore the putrescible content is significantly lower than assumed.

Sources say that the project’s feedstock was hugely impacted by Essex County Council signing a deal in early 2014 with Tamar Energy for it to handle 54,000 tonnes of food and garden waste at its anaerobic digestion facility… waste that should have been sent to Tovi Eco Park.

As one source close enough to the situation to have a distinct whiff of decomposing household waste says: “It’s a classic example of both parties being wrong, both parties knowing they are wrong, but no-one wanting to blink first and admit it.”

Once again, according to sources, the plant is being run as efficiently and effectively as possible. If it received the ideal feedstock, some say it would likely still not be able to run at optimal capacity. However, with feedstock being diverted to the Tamar facility in Halstead, it’s a moot point.

As Councillor Simon Walsh, cabinet member for environment and waste at Essex County Council, says: “Essex County Council is currently in ongoing discussions with the operator of the MBT facility in Basildon, UBB Waste (Essex) Ltd, about some contractual issues.

“Both parties have been using the appropriate contractual mechanisms to attempt to resolve these issues. Where matters have remained unresolved, referral to the court was the next stage in the process.

“Because of the confidential nature of the contract and the status of discussions, we cannot discuss these matters publicly, and it would of course be wrong for us to do so. Both parties are bound by exactly the same constraints.”

Rather importantly, he adds: “It is important to note that the Basildon MBT facility is operating, and achieving considerable diversion from landfill.”

And so the battle lines are drawn and it’s proving to be expensive.

Painful / expensive process…

In the schedules of loss, submitted Thursday 30 November, it reveals that the lenders have already forked out £4.8 million on advisory fees since the process kicked off in spring (2017).

A judge has yet been assigned to this case and it is up for pre-trial review on 22 February 2019 (yes, you read that right) and scheduled for the trial to start on 10 April 2019. There is a good chance this will be brought forward.

And the list of advisers is… impressive.

Essex County Council advisory team:

• Slaughter and May – legal
• Deloitte – financial
• Ricardo – technical
• Marcus Taverner – QC

The SPV team includes:

• Norton Rose Fulbright – legal
• PwC – financial
• Urbaser – technical

The EPC party is advised by:

• Pinsent Masons – legal
• Roger Stewart – QC

The lenders have:

• Hogan Lovells – legal
• KPMG – financial
• Mott MacDonald – technical

Ahem, let’s scroll back for a second – the council’s being advised by Slaughters, led by the blue chip firm’s head of dispute resolution, Sarah Lee… that’s punchy. It also rather points to how serious this matter is being taken by the authority.

No insult intended, but you don’t really expect to see the hallowed likes of Slaughter and May weighing in on the council’s side.

Judgement day – system failure…

This is not the first time we have seen public and private side go hammer and tong at each other over waste PPPs, and usually it’s caused by these two issues – technology and feedstock.

MBT and gasification have more than their fair share of issues since IJGlobal started writing about waste as an issue that the UK needed to tackle. Back in 2005, we were writing about the need for the UK to throw off its reputation as the dirty man of Europe.

That has largely been achieved and the amount of waste ending up in landfill is hugely reduced. The amount of waste being sent to landfill from 2000 to 2009 fell by 45%. This trend has continued in recent years with 25.1% in 2012, down to 23.1% in 2014.

With MBT facilities, a lot of the problems centre on projects where they have been concluded without an end offtake in place. Essex and Lancashire (which closed in 2007) are good examples of this.

In the waste space, it has been irritating to be told repeatedly that technologies are proven when – possibly – they were at an independent level, but as a component of a bigger picture, they most certainly were not.

The position UBB finds itself in is cause by this, but also be the authorities which, with the very best of intentions, agreed to solutions at a time when they were less fiscally constrained than they are these days.

Now, as councils do all they can to slash costs, it is too tempting for them to seek an alternative that improves their balance sheets and waste projects are suffering as a result, with dire consequences.

And if the lenders have racked up £4.8 million on advisers at this early stage in the process – and the council will have a similar bill to pay (they were asked, but have yet to reply) – you’ve got to wonder where this is going to end up.

In truth, it looks like a lot of money to hose down the drain on a dispute that will likely end up – like Manchester Waste – with a deal being struck.