Veolia ES Southwark Ltd

PFI and Contract Information

21st May 2010

Presented by;

Simon Bussell, Managing Director

No.1waste services in the UK

Circa

12,500employees

A fleet of over

5,000vehicles

Work with

over 130 local authorities providingrefuse, recycling,st cleansing, landscapes and disposal contracts

Serves over 75,000commercialand industrialcustomers

46treatment and disposal facilities

Veolia Environmental Services United Kingdom

UK Waste volumes

335.1m tonnes p.a. (2008)

324.7m tonnes p.a. (2013)

33.42m tonnes p.a Municipal (2008/09)

% Composition (2008/09 UK)

10% - Incineration

53% - Landfill

36% - Recycling

Our market

Market Trends Waste market estimated at £8 billion and

growing at 7% per annum.

Approximately 5,000 players in a quickly consolidating market with top five players holding 43%.

UK reliant on landfill as a disposal option although Landfill Tax is currently £48 per tonne and due to rise to £72 from April 2013.

Increasing levels of legislation – driven by the EU – Landfill Directive.

Municipal recycling rate has moved from 6% to 27% in the last ten years and in England is now 38%.

NIMBY is a dominant feature in the market

Planning and consent procedures are slow and arduous

Inadequate infrastructure to meet proposed targets (estimated £10bn to £12bn to bridge the gap)

Majority of focus on municipal waste – 33 million tonnes (10% of total waste) – in future attention will be on commercial and industrial waste

Carbon agenda

PFI Project Finance Initiative and PPP are current hot spots

Market Trends

o Capacity gap : 8.9 million tonnes of residual waste treatment in 2012/13

o Requires capital expenditure £5-6bn, of which £3-4bn may be through PFI procurement

o DEFRA was given a further £2bn of funding through PFI credits (equivalent to £700m per annum)

o Off-Balance sheet Procurement of Infrastructure and related Services in a long term “concession – type” contract

o Appropriate risk transfer – Payments performance based

o Five projects closed in 2006/07, another 5 before April 08, peak deal flow likely to be 15 in 2011/12

Waste PFI

Introduction toIntroduction toWaste PFI

Capacity gap : 8.9 million tonnes of residual waste treatment in 2012/13

Requires capital expenditure £5-6bn, of which £3-4bn may be through PFI procurement

DEFRA was given a further £2bn of funding through PFI credits (equivalent to £700m per annum)

Off-Balance sheet Procurement of Infrastructure and related Services in a long term “concession – type” contract

Appropriate risk transfer – Payments performance based

In total, five projects closed in 2006/07, another 5 before April 08, peak deal flow likely to be 15 in 2011/12

Waste Infrastructure Development Programme (WIDP)

Need for Private Sector

Expertise

Finance

Evolution of a PPP/PFI marketplace for Municipal Waste Sector

Procurement via Local Authorities

48 Waste Disposal Authorities in England and Wales.

UK Waste Requirements

Recent developments / issues inWaste PFIs

o The Competitive Dialogue Process o still early stages

o price information at ISOS

o too long before ISDS

o no time enough during IDSD

o Engagement of planning process during procurement

o Involvement of planners early – Synchronize Contract procurement and Development Plan

o Background work in advance

o Pre application work before PB?

o Bid costs increasing

o BREAM

o Standardisation of contracts : SOPC4 – Common approach on keys risks (planning, delays...)

o New technologies

Recent developments / issues inWaste PFIs

o Guidance re desegregation vs. Integrated Contracts

oTwo tier Authorities

o Interface issues with residual waste contract

o Responsibility, costs, complexity

o Evaluation of topics such aso carbon reduction efficiency

o HEALTH & SAFETY

o Architecture

o Construction and engineering issueso Interest in Waste Market

o Indexation (industry indexes vs RPI)

o Time/info required for the preparation of bids

o Risks (ground conditions)

o CAPEX is the biggest risk

ProvenPPP/PFIIntegrated

ContractsVeolia is a key player in the PPP/PFI Integrated market with 9

contracts handling 3.1m tonnes of waste and recyclables Birmingham City Council Sheffield City Council Hampshire County Council East Sussex County and Brighton & Hove City

Councils (PFI) ‘03 Nottinghamshire County Council (PFI) ‘06 Shropshire County Council (PFI) ‘07 London Borough of Southwark (PFI) ‘08 West Berkshire (PFI) ‘08 Merseyside (PFI) ‘09

Shropshire Proposed Facilities

o ERF Facility (90,000 tpa)

o Composting Facility (60,000 tpa)

o Integrated Waste Management Facilities

East Sussex Facilities

o MRF Facility (80,000 tpa)

East Sussex Proposed Facilities

oERF Facility (210,00 tpa)

oComposting Facility (46,000 tpa)

West Berkshire Proposed Facilities

o MRF Facility (20,000 tpa)

o Composting Facility (30,000 tpa)

o Integrated Waste Management Facilities

Southwark Proposed Facilities

o MBT Facility (110,000 tpa)

o MRF Facility (85,000 tpa)

Sheffield

Birmingham

Hampshire

Nottinghamshire Facilities

oMRF Facility (85,000 tpa)

Nottinghamshire Proposed Facilities

o ERF Facility (180,000 tpa)

Merseyside Facilities

o MRF Facility (25,000 tpa)

Merseyside Proposed Facilities

o MRF Facility (65,000 tpa)

Municipal ServicesIntegrated/PFI/PPP

Veolia ERF - Marchwood

Veolia ERF - Portsmouth

Veolia ERF - Newhaven

Veolia ERF - Chineham

New Facilities in PFI/PPP era

PFI Pipeline between now and 2012/13

Suffolk

Staffordshire

Leeds

Leicestershire

Hertfordshire

South London Waste Partnership

Essex

West Midlands

North London Waste Authority

West London Waste Authority

Veolia ES Southwark LtdBusiness Description 25-year PFI contract from 11th Feb 2008 Central London:

Population 251,300 Socially and economically diverse

borough Properties

129,889 (2009) - of which 60,000 is social housing, 90% high rise 161,423 (2031)

Contract Value - £665m PFI grant – £34.5m New Labour Administration

Recycling, treatment & disposal of circa 120k tpa contract waste, rising to 150k tpa in 2031

Collections of: Household waste inc bulky and clinical wastes Dry recyclables and garden waste

Contract Recycling targets: 30% by March 2011 44% by March 2020 - LBS aspiration of 50%.

Extensive waste minimisation, education and communications/PR obligation

181 VES staff inc 160 TUPE transfer, rising to 240+ staff with introduction of Old Kent Road IWMF in late 2011

Business Description

Map & Key Milestones 2010-12 Existing Manor Place Depot to end of 2011

Old Kent Road IWMF operational from Q4 2011/Q1 2012

Planning consent granted 16th February 2010 Construction from May/June 2010 Equipment from early-mid 2011 Commissioning / operational – Q4 2011/Q 2012

Recruitment of process and training of additional 60+ staff from mid 2011

Recycling target – 30% in 2010/11

Switch to borough wide co-mingled (clear sack or bin) collections Q3/Q4 2011

28,500 tpa residual waste to Energy Recovery (SELCHP) rising to 60,000 tpa from 2015

Implementation of District Heating Network from SELCHP to serve 40,000 Southwark Council houses as part of OKR planning obligation

Existing Waste Management Facilities Manor Place Depot

Existing Waste Management Facilities Manor Place Depot

Planned FacilitiesOld Kent Road IWMF

OKR IWMF to incorporate:

MBT – residual waste (87.5ktpa) MRF – dry recycs (87.5ktpa) WTS – bulky and street cleansing wastes (40ktpa) HWRRC – public delivered bulky wastes Municipal depot – for collection fleet Resource Centre – visitor centre, mess-room and offices

Planned FacilitiesOld Kent Road IWMF layout

Development Plans

1. OKR IWMF

o The Development

o SRF

o Third party inputs

2. SELCHP

o District Heating Network

o Bulking bays

3. Recycling Collections

o Estates Recycling Collections

o Co- mingled recycling collections

o Kitchen Waste

4. Elephant and Castle (E&C)

Development

5. MIMS

6. Workshops