August 11th, 2017
This week, Eunomia published issue 12 of its Residual Waste Infrastructure Review (RWIR). Each issue relies on us updating our database of waste treatment facilities, so that we can compare available treatment capacity with the amount of waste requiring treatment – but it also gives us the latest picture of who the big players are in the market.
Colleagues last shared this data with Isonomia readers back in 2012, identifying the ‘Big 7’ waste treatment companies that had the most treatment capacity and how many projects they had in their future development pipelines. These were: Viridor, Veolia, Sita (now Suez) Shanks (now Renewi), FCC, Cory and Biffa.
Since then, the market has moved considerably, making this a good time to revisit the data. Who has been successful in converting their planning pipeline into operational facilities? Who is in danger of failing to do so? And who has ended up with the largest portfolio of waste treatment capacity?
Taken as a group, the Big 7 operators we identified in 2012 have been very successful in taking residual waste treatment capacity projects that were then consented or in planning through to being operational or under construction in 2017. This surge in development has enabled them to bring through the development pipeline sufficient capacity to treat almost six million tonnes per annum (tpa) of residual waste, increasing their capacity by over 65% in just five years.
(Note that throughout this article we refer to the consented capacity of facilities, rather than what in the RWIR we call “effective” treatment capacity. Here, an MBT plant that is permitted to process 200,000 tpa of waste will be counted as 200,000 tpa of capacity. In the RWIR, we would count only the tonnage by which the MBT plant reduced the residual waste towards our estimates of capacity. In the RWIR, we also make an allowance of 5% of consented capacity for downtime on incinerators.)
However, this group has been far less active when it comes to identifying new projects. In 2012 they had nearly over six million tonnes of capacity in the planning system; now the figure is less than 2.3 million tpa. Thus, the total capacity that they could develop if they built out their entire pipeline has only increased slightly, from nearly 15.5 million tpa in 2012 to 16.7 million tpa today.
This pattern perhaps reflects the focus that some of the big players have had on securing long term contracts with local authorities. Their success in this field has enabled them to secure feedstock and investment capital for much of their new fleet; but with the market now largely saturated, they seem to have relatively little interest in building facilities focused solely on merchant waste.
Turning to the ‘other’, smaller developers within the sector, the picture is quite different. Only around four million tonnes of capacity has been built, an increase of less than 50%. This has eaten into the amount of consented capacity, but close to 13 million tpa of this still remains, while the capacity proposed or in planning has remained fairly consistent, suggesting a continuing appetite for development.
The limited success they have had perhaps reflects a different strategy: many smaller operators have focused on developing treatment capacity for the merchant sector, which leaves their projects subject to less certainty over long-term feedstock supply and more competitive gate fees. As a result, these projects can have greater difficulty in securing the necessary investment capital to proceed.
That said, the behaviour of the Big 7 operators from 2012 has been far from uniform. In fact, it now makes more sense to talk of a “million tonne club” of five companies, all of which have been very active in developing sites.
- Viridor has increased its capacity by 1.5 million tonnes (64%), and remains the biggest operator with 3.8 million tonnes overall.
- Shanks has achieved the greatest level of growth, developing or acquiring 1.9 million tonnes of capacity, around half of this being MBT plants, and increasing its fleet by 322%.
- Suez has developed 1.4 million tpa of new facilities, mainly incinerators, more than doubling the capacity it had in 2012.
- FCC has increased its treatment capacity by around 500,000 tonnes, or 50%.
- Bucking the growth trend is Veolia, whose operational capacity has increased by just 150,000 tpa; nevertheless, the company remains the UK’s second biggest residual waste treatment operator.
The companies at the smaller end of the previous Big 7 have not significantly grown their fleet:
- Cory’s increased the permitted capacity of its Riverside facility in London, but did not develop any new sites.
- Biffa saw the operational capacity of one of its facilities reduce slightly, and brought through no new plant, leading to a slight fall in its overall capacity.
- Urbaser Balfour Beatty (UBB) therefore overtook Biffa as the UK’s 7th largest operator, with around 600,000 tpa of capacity operational or under development (all new in the last five years). However, two thirds of the operational total is provided by their MBT plant in Essex, which is the subject of a contractual dispute, and therefore has a somewhat uncertain future.
It is also striking that many of the 2012 Big 7 have built out or abandoned most (or all) of their planning pipeline. Shanks, Cory and Viridor now have no uncommitted facilities (since 2012, we have introduced the category of ‘committed’ to identify projects with planning consent that also have finance in place and are therefore almost certain to proceed). Suez, Veolia and FCC have all reduced their remaining stock of projects considerably, and each now has less than 500,000 tpa in the pipeline.
Biffa had also exhausted its pipeline; but, in June 2017 they announced a new partnership with Covanta, apparently to develop two already consented facilities, at Newhurst and Ince Park , with a combined consented capacity of over a million tpa. This suggests a renewed interest in the market following the company’s floatation on the stock market. It remains to be seen whether, under current market conditions, these projects can be brought through to operation, but were Biffa and Covanta to succeed, it would propel Biffa past UBB (who have only 60,000 tpa in the pipeline) and Cory, and into the million tonne club.
While the pace of development has been rapid over the last five years, the majority of this has been attributable to the efforts just four or five companies; and it is striking that the developers that have been most successful in bringing projects through to fruition now have very little capacity in their pipelines. There are still many millions of tonnes of consented capacity that could be developed, but the great majority of this sits with smaller operators. This may indicate that any new facility development will be increasingly piecemeal as it becomes ever more reliant on the price competitive merchant market and the ability of developers with a limited track record to secure finance.