Set up “Waste-to-Energy” plant
project “for Dummies”!
“Make or Buy?”
International experience of risk-sharing between public and private
entities in Waste-to-Energy plants construction
Christophe Cord’homme
ESWET Member Company CNIM
Global Market Forum, Pollutec, Lyon, 04.12.2014
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 1
Waste-to-Energy Market
Characteristics
Whose? “Municipal Solid Waste (MSW) ownership” Collection and
treatment obligations legally given to local public sector in
general!
Rules of public market tenders
Strict and changing legislation
Management of external interferences:
permitting process, political issues, public opposition…
What? MSW: low-quality fuel, variable composition and high
contents of pollutants
Requiring synergies between municipalities for MSW
Extension to other wastes?: Wastewater sludge,
Commercial and Industrial waste (C&I),
clinical waste…
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 2
Waste-to-Energy Market
Characteristics
How? Large infrastructure projects with tailored technical
solution!
•
•
•
Similar to conventional Power plant (technical principle, energy
efficiency concern, availability…)
Even more complex because of MSW fuel quality and stringent
regulation in evolution
Public tender process requiring a significant, serious feasibility
study and know-how
Where? When? How much?
•
•
•
Complex interfaces (site issue, environment,
architecture, technical parameters…)
Long construction time and significant delivery risks
(delay - budget - performances)
Capital intensive and gate fee discussion
Monaco WtE
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 3
Waste-to-Energy Market
Actors on main contracts
Who? Impact of the public / private approach in waste
management!
• Public entities
(Municipalities or Public Companies responsible of
waste management) acting directly or not
• Waste management or power production private industry
(when required) providing waste management services to public
entities (waste disposal contract – BOT - BOO)
• Plant constructors
providing the entire unit to owner on turn-key
basis (EPC contract) or split into lots
• Operation and Maintenance Companies
ensuring O&M service to owner if sub contracted
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 4
Waste-to-Energy Market
Other Actors
•
Public entities
•
Waste management or power production
private industry
•
Plant constructors
•
Operation and Maintenance Companies
•
Power industry recovering produced
energy (electricity, district heating, steam…)
•
Investors, banks, lenders…
•
Advisors, consulting engineers…
•
Permit and Control authorities
•
…Public, neighbours and associations
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 5
Let’s compare
this topic with a more
« Daily Life » example!
European Suppliers of Waste to Energy Technology
Suppose that you have a new job:
Mayor of Metropolis!
SCHOOL
Imagine that you are in
charge of school
logistics!
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 7
School transport in Metropolis
Organise school transport
with buses!
SCHOOL
Public, Private or
mixed solution ?
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 8
School transport in Metropolis:
First, scope and needs to define!
Whose?
SCHOOL
How?
What?
Who?
Where?
How
much?
When?
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 9
School transport in Metropolis:
Answers and means to implement!
Plan?
Build?
Operate and
maintain?
Finance and
remunerate?
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 10
Levels of private sector
involvement: “MAKE OR BUY?”
MAKE
Approach: Public/
Private
BUY
“Lots”
“EPC”
“Private
operation”
“BOT”
“Merchant
plant”
Final Ownership
Public
Public
Public
Public
Private
Financing
Public
Public
Public
Private
Private
Operation
Public
Public
Private
Private
Private
Design
Public
Private
Private
Private
Private
Construction
Private
Private
Private
Private
Private
Competences
PUBLIC
PRIVATE
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 11
Public / private approach
in waste management
(1) Public sector including public companies and mixed companies (Stadtwerke)
Source: Suez / Bipe (2010)
Public / private market shares in different European countries for
municipal waste treatment
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 12
Examples of WtE market
organisation in different countries
France
• Municipal ownership with private operation subcontracting
• Or Delegation of Public Service to private companies (BOT)
UK
• Complete privatisation with Private Finance Initiative (PFI)
• Contractual documents detailing how to handle low probability
events but with high economical impact (British common law)
Denmark
• Public responsibilities of the treatment of all types of wastes
• Municipal ownership and operation of EfW plants
Poland
• New law in 2011: transfer of MSW ownership to cities
• European cohesion funds to build WtE
Italy
• Mixed public - private multi-utilities companies
owning /operating WtE
European Suppliers of Waste to Energy Technology
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Know-how and risk sharing
in WtE sector
•
“MAKE or BUY?” choice by public waste owner: political issue
depending on competences and risk-sharing
•
Typical risks in waste treatment:
− Plant design and construction risks
− Plant performance and availability risks during operation
− Financing risks
− “Demand” risks (waste supply, authorisations, changing
laws, energy revenues…)
• Best risk sharing between different actors to be analysed by
public client:
− Lowest and reliable cost estimation of risk coverage
− According to competences and interfaces
European Suppliers of Waste to Energy Technology
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Risk distribution and
management in WtE sector
•
Some typical associated risks:
− Realisation costs exceeding budget
− Realisation time exceeding schedule
− O&M costs exceeding operation budget
− Performances lower than expected
− Lack of availability due to bad quality equipment or O&M
performances
− Waste quantity or quality not as expected
•
Project risks are to be allocated to the most suitable parties
through fair contractual structure
•
Essential for costs optimisation and efficient delivery
European Suppliers of Waste to Energy Technology
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Allocating Project risks:
What is a fair contractual structure?
MAKE
BUY
“Lots”
“EPC”
“Private
operation”
“BOT”
“Merchant
plant”
1- “Demand” risks
(waste supply, laws,..)
Public
Public
Public
Public
Private
2- Financing
Public
Public
Public
Private
Private
3- Performances &
availability during
operation
Public
Public
Private
Private
Private
4- Plant design &
construction
Public
Private
Private
Private
Private
Typical risks sharing
Competences
PUBLIC
PRIVATE
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Conventional public
procurement for plants construction
With public ownership, public procurement for plant
construction with public funding, input-based
specifications and “short-term” contracts (3 years)
2 main approaches:
• Preliminary design (process & building) by public
with allotment for supply (2 to 6 lots in gen.)
Kara Roskilde (DK)
Management of technical and contractual interfaces
(with suppliers specificities). Costs, delays, performances and
operation risks partially supported by the public client.
• Design and Build contract with typical EPC supplier
(Engineering, Procurement and Construction)
guaranteeing global performance and delivery time.
Public risks limitation (Spread payments during
erection and Take-Over only when plant fits
for purpose)
Marchwood (UK)
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Private procurement for the
construction in case of concession
•
With “privatization”, public client
buying waste treatment service
•
But public engagement on long
term basis (20-25 years)
− For bankability conditions for
long-term financing by private sector at risk for
infrastructure building
Oxford (UK)
− For risks coverage payment transferred to private sector
with required return interest for project economy. Demand
risks covered or capped by public
•
To reduce completion risks, private lenders or investors
prefer to use Turnkey contract with reliable and proven WtE
technologies
European Suppliers of Waste to Energy Technology
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EPC general contractor
Turn-key / EPC contract:
• Fixed global price and strong engagement on delivery time
• Single competent responsible with adequate knowledge to
complete tailor-made project on budget and on time
• Avoid complex, uncertain and
time-consuming interfaces and
coordination management
• Obtain global guarantees of
performances and availability
EPC client (public or private):
Marseille (Fr)
• Specify performance criteria to be achieved and principles
rather than design himself the facilities
• Exercise control to follow work progress on the way chosen by
the Contractor
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Fair Contract conditions
Key of successful completion of Turnkey contracts: fair
contractual conditions and equitable risk-sharing
• Avoid unusual risks transfer which are hard or impossible to
evaluate
• Give all relevant information to increase certainty of
risk estimation and therefore of final price
• Good balance in project definition requiring key performances
but allowing Contractor own specific equipment design
Improvements for fair and reasonable competition:
• Compensation for unsuccessful bidders to
encourage serious preliminary feasibility studies
and avoid unsuccessful inquiries
• Standardisation of contract terms avoiding unacceptable
conditions
European Suppliers of Waste to Energy Technology
ESWET – Set up Waste-to-Energy project, Pollutec Lyon, 04.12.2014 20
Reliable and proven
technologies!
Technologies which fit to purpose! Buy a device but also a
performance: “x passengers to carry in comfort and safety for y
km/year with z l fuel /100km during n days/year…”
Importance of availability and performances to reach cost optimum!
Development of alternative technologies subject to this cost goal!
WWII gasifier bus with fuel trailer & refill
Back to the future! …with Fusion engine!
Some might be proven, but are
often not reliable or cheap enough !
Some could be
Science Fiction!!!
European Suppliers of Waste to Energy Technology
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Some References for
turnkey WtE plants
Order
year
Capacity
in
tonnes of
waste
per year
CNIM
supply
Contractor
Plant
operation
Approach
Public/
Private
LONDON
Boroughs
1990
450,000
EPC
(for BOT)
CNIM
Private
“Merchant
plant”
Ministry of Economic
Development (Public)
City of BAKU
2008
500,000
EPC(DBO)
CNIM
CNIM
(Private)
“Private
operation”
JERSEY
ISLAND
State of Jersey (Public)
State of
JERSEY
2008
105,000
EPC(DB)
JV CNIM/
CAMERONS
Public
THUMAIDE
L5&6
BELGIUM
IPALLE
(Public municipal association)
IPALLE
2006/
2009
200,000
EPC (DB)
CNIM
Public
BRNO
CZECH
REPUBLIC
SAKO A.S.
(Public municipal-owned
utility company)
SAKO A.S.
2007
224,000
EPC (DB)
Consortium
CNIM / SIEMENS
Public
SAINT-OMER
FRANCE
SMFM
(Public association of
160 municipalities)
SMFM
2007
92,000
EPC Process
(DB)
CNIM
Private
MAARDU
(TALINN)
ESTONIA
EESTI ENERGIA
(Public national state-owned
utility company)
EESTI
ENERGIA
2010
220,000
EPC (DB)
CNIM
Public
TORINO
ITALY
TRM SpA
(Public municipality-owned
company)
TRM SpA
2010
421,000
EPC (DB)
ATI CNIM/
Unieco/
Coopsette
Temp.
ATI CNIM
(Private)
“EPC”
STAFFORD
GREAT
BRITAIN
VEOLIA UK subsidiary
(Private Initiative)
STAFFORD-SHIRE
2011
300,000
EPC (DB)
Consortium CNIM/
CLUGSTON
VEOLIA
(Private)
“BOT”
LINCOLN
GREAT
BRITAIN
WRG Ltd
(Private Initiative)
Lincolnshire
County Council
2011
150,000
EPC (DB)
Consortium CNIM/
CLUGSTON
WRG Ltd
(Private)
“BOT”
Plant
location
Country
CNIM Client
(Public/Private)
Final end
customer
LONDON
GREAT
BRITAIN
SELCHP
(Private company)
BAKU
AZERBAIJAN
LA COLETTE
“EPC &
public
operation”
“EPC &
public
operation”
“EPC &
public
operation”
“Lots &
Private
operation”
“EPC &
public
operation”
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Some Large Turnkey WtE plants
London – SELCHP (UK) (1994)
Copenhagen – Amager (DK) (2017)
Photo credit : TRM- CNIM -BIG
Torino – TRM (IT) (2014)
Baku – AZERBAIJAN (2013)
European Suppliers of Waste to Energy Technology
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