Penalty clause taken out of latest Poolbeg waste contract


US WASTE-MANAGEMENT company Covanta has declined to comment on reports that its contract with Dublin City Council for the Poolbeg incinerator has been substantially renegotiated.

According to reliable sources, the latest version of the contract no longer includes a controversial “put or pay” clause under which the Dublin local authorities would face penalties if they failed to supply a minimum of 320,000 tonnes of waste per annum for the facility.

The contract term has been reportedly extended to 45 years, potentially doubling its value, in return for Covanta dropping the clause, and the Dublin authorities now expect to be able to sell their “preferential access rights” to the private sector.

This could allow them to recoup an estimated €80 million in public money invested in the project so far, including the cost of land acquisition.

In the meantime, a final deadline of August 31st has been set for Covanta to raise funding for the project.

It is understood that global investment group Macquarie has been appointed to raise €350 million in debt or mezzanine funding for construction of the 600,000- tonne incinerator, with Covanta agreeing to contribute €100 million to €150 million in equity for the project.

A spokesman for the company would only say that Covanta and the city council continued to work together toward the agreed final extension of August 31st to put in place “the necessary financial arrangements” to enable the project to proceed.

A council spokeswoman said: “We announced last month that the project partners have agreed a final extension until 31st August to allow this work to be completed and there will be no further comment on the project in the meantime.”

It is not known whether the latest Poolbeg timeline will be affected by Sandymount residents Joe McCarthy and Valerie Jennings lodging a formal complaint to the European Commission late last month over substantial changes to the contract terms since the procurement process began.

They claim EU rules on public procurement have been breached by Dublin City Council, in particular because the capacity was increased by 50 per cent – from 400,000 to 600,000 tonnes per annum – apparently to satisfy Covanta’s commercial requirements.

“This procurement process has been flawed from the beginning, has taken over a decade and has yet to reach a conclusion,” they claim.

“The excessive length of the process has affected the validity of the accepted tender and the validity of the contract terms.”

Mr McCarthy and Ms Jennings noted the original tender was awarded in 2005 to Elsam, a Danish company.

Subsequently, Elsam was taken over by Dong Energy, which then reduced its commitment to financing the project from 100 per cent to 25 per cent of the cost.

“Dublin City Council then sought a new partner and, in 2007, transferred the contract to a new supplier without going to tender” – thereby breaching EU rules, they say.

The beneficiary was “a non-EU company, namely Covanta of New Jersey, USA”.