Interserve plc’s slide into administration last week has been blamed largely on the company’s involvement in the waste-to-energy (WtE) sector. On the face of it, this development will do little to inspire confidence in the future for the UK’s waste sector infrastructure projects but coming so soon after the liquidation of Interserve’s rival outsourcer Carillion, it begs the question whether the collapse stems from exposure to the WtE industry or is more a consequence of internal corporate failings.
According to Interserve’s Chairman, Glyn Barker, things started to go wrong in mid-2016 when ‘huge problems’ began to appear in its WtE contracts. He is on record as saying, “not only did they produce huge losses and drain the company’s cash flow, but because of the unusual nature of these projects, over the following two years, as things continued to deteriorate, there remained great uncertainties about what it would cost, finally, to deal with these problems.”
Interserve’s Chief Executive of 13 years, Adrian Ringrose, left the company in November 2016 and on the following day, news emerged that its role on the Glasgow Recycling and Renewable Energy Centre (GRREC) had been terminated after Viridor claimed it had “continually and repeatedly failed to meet delivery milestones.”
Earlier, in May 2016, Ringrose had said the cost of exiting the WtE sector would be £70 million. More recent estimates put this figure at £227 million.
This morning’s breaking news is that over the weekend, a ‘pre-pack’ insolvency arrangement was put in place, administrators EY were installed and Interserve plc’s assets were immediately moved to Montana 1 Limited, a group controlled by Interserve plc’s lenders. This move means that the company will continue to operate, out of insolvency, with Montana 1 trading as Interserve Group Limited.
Where this leaves the development of the much-delayed £145 million Derby and Derbyshire Waste Treatment Centre, which was being developed by a joint venture between Interserve and Renewi, is uncertain. Operations were expected to start by the end of 2018 and while that did not materialise, Renewi and its clients, Derby City Council and Derbyshire County Council, have not given any indication that project completion will not be achieved at some stage soon.