Ashurst closes 29 waste/biomass projects in past five years

The financial close of the Newhurst Resource Recovery Facility project, developed by Biffa plc, the Green Investment Group and Covanta Energy, marks the end of a five year period in which the Ashurst waste team has closed 29 projects, bringing the Ashurst total to 56 since 2002.

Commenting, partner Nick Stalbow said:

"Over the last five years, energy from waste and gasification projects have reached financial close with commitments from the merchant waste sector only. Initially the tier 1 waste suppliers were essential to closing merchant waste projects, but we have now closed projects with significant capacity committed to waste aggregators and regional players. This completes a remarkable transition from the municipal-driven projects of the previous 10 years.

"Ashurst's waste team has been at the forefront of this transition, advising on the bank-funded projects such as Kemsley, Rookery, Earls Gate and Newhurst, as well as on the projects funded by infrastructure funds, such as Lostock, Hooton, Newport, Bridgwater, Hoddesdon and Drakelow. As the capacity gap begins to close, we are entering into a period where a number of UK projects are competing to reach financial close, whilst COVID-19 has tested the resilience of merchant waste supply chains. Ashurst is proud to have a dedicated waste team that has been active in this sector since 2000, with an unrivalled record of helping deals to reach financial close."

Partner Anthony Johnson added:

"As well as the shift from tier 1 waste suppliers to waste aggregators and regional players, we have seen some interesting developments in the UK in terms of the approach taken to de-risking fluctuating power prices, with power income remaining a key revenue source for EfW and gasification projects. One way that this has been achieved is for projects to take advantage of private wire or corporate PPA opportunities, which in most cases offer fixed pricing for generators at levels above wholesale power prices. Physical or financial power hedging (i.e. forward selling power at a fixed price) has become another attractive option for EfW/gasification projects, and mechanisms enabling power hedging are now commonplace in standard form PPAs with licenced electricity suppliers.

"Finally, following a long period during which CfD subsidy support has not been available for EfW (with CHP) technologies, the Government has recently announced its intention to reintroduce such support in the 2021 CfD allocation round. While the Government expects that CfDs will be offered to EfW (CHP) and other "more established" technologies at strike prices below the average expected wholesale price for electricity, a revenue stabilising mechanism like the CfD may be a welcome addition to EfW/gasification projects that are currently in development in light of the record low (and in some periods, negative) wholesale power prices that we have seen during the COVID-19 pandemic."

Partner Cameron Smith further added:

"The next two to three years will be an interesting period of transition in the global EfW space. In the more developed markets, such as the UK, we are likely to see developers compete to develop the last wave of merchant EfW projects which are likely to use up the remaining uncommitted municipal and commercial waste streams available and thereby close the capacity gap which has been written about at length by commentators and consultants.

"In more developing markets, opportunities will continue to present themselves and the restrictions on developers' abilities to develop new EfW project are more likely to be linked to the macroeconomic conditions and governance in each jurisdiction, as well as the prevailing regulatory environment, rather than the availability of waste feedstocks. Across Africa, we are starting to see the first signs of real activity in this area, led by the efforts of the IFC and Ugandan Government in developing the first major waste PPP project in the City of Kampala."

Project overview