Issue - meetings

(Environment Portfolio Holder) To consider the attached report.

Mover: Councillor N. Avey, Environment Portfolio Holder

Councillor N. Avey submitted a report regarding the financial impact of the inability to sell recycling materials in the Chinese market. He stated that, following specialist advice, a settlement offer had been made by the Council in recognition of the investment made by Biffa to improve the quality of output materials from their Material Recycling Facilities and to ensure all of the Council’s recycling materials were reprocessed and recycled. A financial contribution to Biffa Municipal had been agreed by Cabinet on 14 June 2018 and required agreement from Council.

Report as first moved ADOPTED

RESOLVED:

(1)      That a one off Capital supplementary estimate in the sum of £200,000 in 2018/19 be approved; and

(2)     That the first payment of a Revenue supplementary estimate in the sum of £50,000 for 2018/19 be approved.

(Environment Portfolio Holder) To consider the attached report (C-005-2018/19).

(1)        That the background into difficulties in exporting recycling materials to China resulting in significant capital and ongoing investments made by Biffa in their Material Recycling Facility (MRF) to improve and enhance the quality of output materials be noted;

(2)        That the making of a financial contribution be agreed in recognition of the investment made by Biffa which would improve the quality of output materials from their MRF ensuring all of the Council’s recycling materials were reprocessed and recycled and nothing was sent to landfill;

(3)        That the following be agreed for payment to Biffa in the total sum of £500,000 over the remaining six years of the contract:

            (a)        a supplementary capital estimate in the sum of £200,000 for 2018/19           be recommended to the Council for approval for the one off capital payment;

            (b)        a supplementary revenue estimate in the sum of £50,000 for 2018/19          be recommended to the Council for approval for the first of the revenue            payments; and

            (c)        revenue growth bids in the sum of £50,000 per annum for five years             starting in 2019/20 be approved for the remaining revenue payments;

(4)        That the Recycling Index Unit Rate (RIUR) of £44.66 for the period from November 2017 to November 2018 be agreed and that the consequential loss of income to the Council of £8,650 in 2018/19 be found from within the budget of the Neighbourhoods Directorate;

(5)        That the Procurement Rules be waived for the appointment of WYG Environmental Limited to assist with the contractual variation to the Waste Management contract with Biffa agreed above; and

(6)        That any opportunities for increasing income across all Council services to mitigate the risk of increased costs to the Council as a result of market fluctuation in income from recycling materials be considered by the Acting Chief Executive.

The Environment Portfolio Holder presented a report on the financial impact of the inability to sell recycling materials in the Chinese market.

The Portfolio Holder reminded the Cabinet that, at its meeting on 10 April 2018, it had considered a report setting out the difficulties arising from the Chinese Government’s decision to ban the import of paper produced by Material Recycling Facilities (MRF) in the United Kingdom. This had resulted in excess paper in the reprocessing market, which in turn had led to a major drop in its resale value, and, as it was a buyer’s market, there was an increased focus on quality. Biffa had made significant capital investment in improving their Edmonton MRF, approximately £4.6million, where the recycling materials from the District were processed. Biffa had claimed that the capital and ongoing operational costs amount to £133,680 per annum attributable to the processing costs of the Council’s recyclate. In addition, Biffa had asked for an additional £39,000 in relation to historical errors in the way Recycling Unit Index Rate (RIUR) was calculated.

The Portfolio Holder explained that the Council could reject all of Biffa’s requests for making a contribution towards these costs. However, there were two risks with this approach:

            (i)         Biffa might elect to cease processing materials and recycling materials             could end up in landfill; and

            (ii)        this would put further significant financial pressure on the Waste             Management contract.

The Portfolio Holder explained that specialist advice was obtained by the Council from WYG Environmental Limited, who had considered the options and provided market intelligence to enable Officers to recommend a settlement offer to Biffa. Although the capital investment would benefit the MRF for longer, it was not reasonable for the Council to pay for more than the first ten years of contract. Some of the costs were related to contamination found in the recycling materials, as inadvertently some non-recycling materials had found their way into recycling, and in arriving at the settlement figure the Council had factored in contamination levels.

The Portfolio Holder stated that a settlement of £500,000 split into a one off capital contribution of £200,000 and six yearly payments of £50,000 was considered a fair and reasonable commercial offer; particularly if it was linked to the mitigation of risks on the future market for commodity prices. It was felt that these steps were necessary to guarantee the future stability of the current contract.

The Assistant Director of Neighbourhoods reiterated that one of the reasons for appointing WYG Environmental was to gain access to data from other Councils and judge whether the Council was being treated in a fair and equitable manner. The Acting Chief Executive added that the contract had been procured through a competitive dialogue process which had produced a risk sharing arrangement for recyclable materials between the Council and Biffa. Not many Councils had this sort of arrangement so this Council was achieving good value for money from this aspect of the contract, generating an income of £2.5million for  ...  view the full minutes text for item 15

(Environment Portfolio Holder) To consider the attached restricted report (C-056-2017/18).

(1)        That the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials and the impact this was having on the financial sustainability of the Council’s Waste Management contract with Biffa Municipal Limited be noted;

(2)        That the request by Biffa Municipal Limited for additional payments from the Council to cover the additional costs arising from the decision of the Chinese Government be noted:

(3)        That the specialist external technical advice received by the Council in relation to the request from Biffa Municipal Limited for financial assistance to deal with the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials be noted; and

(4)        That a further report be submitted to a future meeting of the Cabinet when responses to the questions raised in the proposed letter to be sent to Biffa Municipal Limited were received and details of the impact of the changes plus options for mitigation were known.

The Environment Portfolio Holder presented a report concerning the potential impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials.

The Portfolio Holder reminded the Cabinet that the Chinese Government’s decision to impose tougher quality standards on imported recycling materials was reported at the previous meeting, and the global impact of this decision was now becoming clearer. The Council’s waste management contractor had been adversely affected by this decision, but they were not alone in this as other large recycling processors across the UK had also been impacted. Biffa Municipal Limited had written to the Council and requested the Council to pay the additional costs attributed to its recycling materials. The rationale was that these external factors were outside their control and could not have been foreseen when they entered into the contract with the Council, thus placing a considerable financial strain on their contract with the Council.

The Portfolio Holder reported that, following the publication of the agenda, the Council had engaged WYG Environment Planning Transport Limited (WYG), a respected specialist consultancy in the field of waste management and recycling, who had assisted the Council during the procurement process for this contract. WYG confirmed that all Material Recycling Facility operators in the UK had been impacted by this decision of the Chinese Government. The Council was keen to work with Biffa on this issue but, following advice from WYG, it was clear that not enough information was currently available to make an informed decision. It was agreed to seek further clarification from Biffa and a letter was sent on 29 March 2018. A further report would be presented to the Cabinet when more information had been obtained from Biffa.

The Portfolio Holder added that the next meeting of the Waste Management Partnership Board was scheduled for 17 April 2018, and there was the possibility that a separate container could be needed in the future to isolate paper from the other recyclable materials.

Decision:

(1)        That the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials and the impact this was having on the financial sustainability of the Council’s Waste Management contract with Biffa Municipal Limited be noted;

(2)        That the request by Biffa Municipal Limited for additional payments from the Council to cover the additional costs arising from the decision of the Chinese Government be noted:

(3)        That the specialist external technical advice received by the Council in relation to the request from Biffa Municipal Limited for financial assistance to deal with the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials be noted; and

(4)        That a further report be submitted to a future meeting of the Cabinet when responses to the questions raised in the proposed letter to be sent to Biffa Municipal Limited were received and details of the impact of the changes plus options for mitigation were known.

Reasons for Decision:

To consider options to  ...  view the full minutes text for item 143