SECTOR UPDATE AUTUMN 2012 Waste and environmental sector update This Autumn 2012 update includes: A review of mergers and acquisitions activity in the waste and environmental sector for Q1- Q3 of 2012 Trends and challenges in the Anaerobic Digestion (AD) sector How PPP/PFI schemes are transforming residual household waste processing in this country If you would like to discuss the content of this update, or any other sector issues, please get in touch with us: Emma Grice T +44 (0)161 953 6315 E [email protected]Contents 2 M&A update 4 Trends and challenges in the Anaerobic Digestion (AD) sector 5 Waste PPP/PFI schemes are transforming how residual household waste will be processed in this country
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Grant Thornton - Waste and environmental sector update
Waste and environmental sector update - covering key sector activity, deals and updates.
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SECTOR UPDATE AUTUMN 2012
Waste and environmentalsector updateThis Autumn 2012 update includes:
A review of mergers and acquisitions activity in the waste and environmental sector for Q1- Q3 of 2012
Trends and challenges in the Anaerobic Digestion (AD) sector
How PPP/PFI schemes are transforming residual household waste processing in this country
If you would like to discuss the content of this update, or any other sector issues, please get in touch with us:
4 Trends and challenges in the Anaerobic Digestion (AD) sector
5 Waste PPP/PFI schemes are transforming how residual household waste will be processed in this country
M&A updateQ3 2012 M&A volumes
• DealvolumesinQ3haveseenasmalllevelofgrowthafterlowerlevelsofactivityinthefirsthalfoftheyear,bringingthetotalnumberof transactions up to 26 for 2012. If therecentincreaseinthenumberoftransactionscontinuesintoQ4,2012willrepresentareasonableoverallyearforM&Aactivitywithinthesector.
• ThisslightincreaseinactivityforQ3isaresultofamarginallylargerproportion of overseas acquisitions madecomparedtothefirsttwoquartersof2012,as20%ofthedealsincludedaforeignacquiror.However,thisrepresentsamuchlowerfigurewhencomparedtoQ3ofthepreviousyearwhen8outof14dealshadinternatonal involvement.
• Fig2highlightsthedealvaluesseenin2012whencomparedtopreviousyears.While2012hasnotseenanydealsover£60minenterprisevalue,amuchhigherproportionofdealsrangedfrom£10to£59mhavebeencompletedincomparison to 2011.
• Therehasbeenanoticableincreaseinthesignificanceoftheconsultancysub-sectorafterthethirdquartersawthreemoredealsbeingcompletedmaking up nearly a quarter of all waste and environmental sector deals in 2012.
Trends and challenges in the anaerobic digestion (AD) sector
Funding and Incentives: Theprincipledriversthathaveencouraged developers to take an interest indevelopingADplantshavebeenGovernmentincentivesintheformofRenewableObligationCertificates(ROCs)forlargerplants,Feed-inTariffs(FITs)forsmallerplantsandmorerecentlytheRenewableHeatIncentive(RHI)scheme.AllofthesesupportmechanismsarecomplexandsubjecttoconstantchangebutwithoutthemitisunlikelythatthegrowthofADschemeswouldcontinue.
Land, planning and operations: It may takelongerthanoriginallyanticipatedtosecureplanningpermissionandtheconnectiontothetransportnetworkiscrucial.Thedigestateoutputisveryheavyduetoitswatercontentandthiscanresultintransportcostsbeingsignificantlyhigherthanplanned.Inaddition,theoperationofanADplantislikelytorequirededicated,specialiststafftominimisedowntimeandbreakages.Industry voices are warning farmers thattherunningofanADplantisnotsomethingthatcansimplybetaggedontothedayjobofrunningafarm.
End markets: Finally,potentialproblemslieaheadwhenconsideringtheendmarketthathasbeenenvisionedfortheproject.Pricesachievedforoutputsmaybelessthananticipated,duetoinsufficientmarketresearchhavingbeencarriedout.Moreover,thereistheriskthattheplantmaynotproducethequantityorquality
• Theseprojectstypicallyseeaspecialpurposeentitydelivertheworks through an Engineering, Procurement and Construction (EPC)subcontractcoveringthecivilconstructioncombinedwithprovisionofthewastetechnology.
toprovidelongtermdebt,thesemayinevitablyhaveweakerrelationshipswithUKbasedcivilengineeringcontractorsandtherefore may seek stronger security packages to satisfy their credit committees.
• ItisalsocommonforthewasteprocessingtechnologiestobeimportedfromtheEurozoneandforForeignExchangeswapstoberequired.Thesecanprovidepricecertaintybyhedgingagainstforeignexchangerisk,eitherdirectlywheredatesarefirmorthroughuseofoptionswheretimingislesscertain,forexamplewhere construction can only occur once planning and permitting approvalsaresecured.