Veolia ES Southwark Ltd PFI and Contract Information 21st May 2010 Presented by; Simon Bussell, Managing Director

Veolia Environmental Services United Kingdom No.1 waste services in the UK Circa 12,500 employees A fleet of over 5,000 vehicles Work with over 130 local authorities providing refuse, recycling, st cleansing, landscapes and disposal contracts Serves over 75,000 commercial and industrial customers 46 treatment and disposal facilities 2

Our market UK Waste volumes 335.1m tonnes p.a. (2008) 33.42m tonnes p.a Municipal (2008/09) % Composition (2008/09 UK) 10% - Incineration 53% - Landfill 36% - Recycling

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%.

Market Trends 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

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

UK Waste Requirements 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.

Waste PFIs Recent developments / issues in The Competitive Dialogue Process still early stages price information at ISOS too long before ISDS no time enough during IDSD Engagement of planning process during procurement Involvement of planners early – Synchronize Contract procurement and Development Plan Background work in advance Pre application work before PB? Bid costs increasing BREAM Standardisation of contracts : SOPC4 – Common approach on keys risks (planning, delays...) New technologies

Waste PFIs Recent developments / issues in Guidance re desegregation vs. Integrated Contracts Two tier Authorities Interface issues with residual waste contract Responsibility, costs, complexity Evaluation of topics such as carbon reduction efficiency HEALTH & SAFETY Architecture Construction and engineering issues Interest in Waste Market Indexation (industry indexes vs RPI) Time/info required for the preparation of bids Risks (ground conditions) CAPEX is the biggest risk

Proven PPP/PFI Integrated Contracts Veolia 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

Municipal Services Integrated/PFI/PPP Merseyside Facilities MRF Facility (25,000 tpa) Merseyside Proposed Facilities MRF Facility (65,000 tpa) Nottinghamshire Facilities MRF Facility (85,000 tpa) Nottinghamshire Proposed Facilities ERF Facility (180,000 tpa) Sheffield Shropshire Proposed Facilities ERF Facility (90,000 tpa) Composting Facility (60,000 tpa) Integrated Waste Management Facilities Birmingham Southwark Proposed Facilities MBT Facility (110,000 tpa) MRF Facility (85,000 tpa) Hampshire West Berkshire Proposed Facilities MRF Facility (20,000 tpa) Composting Facility (30,000 tpa) Integrated Waste Management Facilities East Sussex Facilities MRF Facility (80,000 tpa) East Sussex Proposed Facilities ERF Facility (210,00 tpa) Composting Facility (46,000 tpa)

Veolia ERF - Portsmouth New Facilities in PFI/PPP era Veolia ERF - Newhaven Veolia ERF - Marchwood Veolia ERF - Chineham Veolia ERF - Portsmouth

PFI Pipeline between now and 2012/13 South London Waste Partnership Essex West Midlands North London Waste Authority West London Waste Authority Suffolk Staffordshire Leeds Leicestershire Hertfordshire

Veolia ES Southwark Ltd Business 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

Business Description 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

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 Facilities Old 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 Facilities Old Kent Road IWMF layout

Development Plans OKR IWMF SELCHP Recycling Collections The Development SRF Third party inputs SELCHP District Heating Network Bulking bays Recycling Collections Estates Recycling Collections Co- mingled recycling collections Kitchen Waste Elephant and Castle (E&C) Development MIMS Workshops