Request for information about the allocation of costs of the North London Heat and Power Project (NLHPP)

Dear X,

REF: Request for financial information relating to the North London Heat and Power Project (NLHPP) / Edmonton Incinerator rebuild

Thank you for your request of 1 April 2021 regarding the above. This request is being handled under the Environmental Information Regulations (EiR) 2004 and has been allocated the reference number 2021-110[1].

To provide some context before providing the answers to your questions, NLWA is in the process of replacing the existing energy-from-waste (EfW) plant at the Edmonton EcoPark with a new energy recovery facility because the existing facility is coming to the end of its useful life. The existing plant has served north London well for nearly 50 years, but it needs replacing. The replacement energy-recovery-facility (ERF)  [2] will be more thermally efficient than the existing plant, capture heat as well as generating electricity and be more modern in design and control. The replacement ERF forms a key part of the North London Heat and Power Project (NLHPP). The NLHPP includes the ERF as well as associated works, namely a new Resource Recovery Facility which will enable more material to be extracted for recycling or reuse and for waste that can’t be recycled to be prepared for treatment, such as energy recovery; a new Reuse and Recycling Centre which will for the first time enable north London residents and businesses to bring material to the EcoPark for recycling; and a Visitor/Education Centre. ‘EcoPark House’ which will be the new home of the Edmonton Sea Cadets. 

• The Energy Recovery Facility (ERF) will generate low carbon energy from waste, in the form of heat and power. You can find out more about the ERF here.
• The Resource Recovery Facility (RRF) will include an area to process bulky waste and prepare materials for energy recovery, as well as a brand-new Reuse and Recycling Centre for residents to use. You can find out more about the RRF here.
• EcoPark House on the River Lee Navigation will include a new community hub where residents can learn about the circular economy and how to reduce the carbon impact of their waste. You can find out more about EcoPark House here.

We recognise that delivering this essential piece of national infrastructure at the lowest possible cost for north London’s residents is imperative and, as a public authority, NLWA is able to borrow from sources such as the Public Works Loan Board to secure finance at lowest cost possible to the taxpayer.

Boroughs pay for the costs of NLWA, including for the management of their residual waste   largely on a menu pricing basis, i.e. the levy on each borough is based upon a per tonne fee for treating each type of waste supplied multiplied by the number of tonnes they generate and send to NLWA for treatment, plus other costs such as the management of the reuse and recycling centres. Residual waste treatment costs make up 59% of the levy inclusive of the costs of the transfer stations, assuming that all costs of the transfer stations are allocated to residual waste transfer.

The Budget and Levy Report presented to the February 2021 Authority meeting shows the medium term forecast of expenditure for the Authority.

Following the existing arrangement with the seven north London boroughs (Barnet, Camden, Enfield, Hackney, Haringey, Islington and Waltham Forest), NLWA will continue to be financed through a levy for managing the disposal of the boroughs’ residual waste. The Authority will fund the construction of the new facilities as part of its ongoing work, but as the ERF and associated works are capital projects the costs of repaying the capital will be incorporated into the levy charges only when the relevant facilities start operations.

The cost of the project will therefore be accounted for in the levy and boroughs have taken account of this in their future financing plans.

We have numbered your questions for ease and respond as follows. Please note that we have contained our response to the capital costs of the project:

1. Reviewing the NLHPP website I note that the project will cost a total of 1.2bn

http://www.northlondonheatandpower.london/faqs/project-costs/what-are-t…. I also note that in 2019 the Authority was awarded £100m of borrowing at the Government’s Local Infrastructure Rate.

a) Could you confirm that this is not a grant, but a loan with favourable repayment terms.

Local authorities generally pay for capital projects with loans, and I can confirm that the £100 m quoted is a loan at a favourable interest rate of 1.41%. To secure this loan from the Public Works and Loans Board (PWLB) in February 2020, the Authority had to submit a business case about the project, so securing the loan provides some confidence in the prudence and thoroughness with which the Authority is operating to deliver the project.

We have also been successful in securing a second loan from the PWLB for £140 m in March 2021. This information is publicly available here:

https://www.dmo.gov.uk/responsibilities/local-authority-lending/current-data/

Scroll down to the report of 31 March 2021.

​​​​​​​b) Therefore, that the total cost to the NLWA (current projection) is £1.2bn?

Yes, the total capital cost of the project to NLWA (current projection) is £1.2 bn at March 2019 prices. This includes preparatory works, all assets, including the cost of the replacement energy-recovery-facility and associated works including the new reuse and recycling centre, resource recovery facility and education centre and the cost of demolishing the existing energy-from-waste plant.

2. I also note from the NLHPP website that the project will be paid for via a levy on council taxes in the 7 relevant local authority boroughs, namely Barnet, Haringey, Enfield, Waltham Forest, Islington, Camden and Hackney.

http://www.northlondonheatandpower.london/faqs/project-costs/how-is-the…

Could you please provide me with details on the following:

a) Which organisations will be paying this £1.2bn, how much will each organisation pay and over what timeframe will the cost be spread? 

The cost of the replacement facility and associated works, as noted above, will be paid for by the seven north London boroughs: Barnet, Camden, Enfield, Hackney, Haringey, Islington and Waltham Forest.

Payments for the capital costs of the project will be spread over varying time periods, with repayments made as and when the various facilities in the project become operational. The first repayments for the ERF will be made from 2026 when the new ERF is operational and extending to a maximum date of 2065. 

The contribution from each borough will be collected via the levy and charges mechanism, through which NLWA’s expenditure is re-charged now.

There is an inter-authority agreement (IAA) in place which sets out how the apportionment of costs is calculated. How much each borough will pay will also be determined by the tonnages of waste that they provide to NLWA for management. I attach a copy of the IAA which provides further detail.

Because the amount each borough will pay will be driven by the tonnages they send to the new facility on an annual basis, we cannot provide the actual costs that each borough will incur.  This letter therefore acts as a refusal notice under the Environmental Information Regulations, regulation Reg 12 (4): the Authority does not hold the information.

It will also be for boroughs to decide how to meet the costs which fall due to them, i.e., how much of the cost is attributed to council tax. Each borough determines the appropriate level of council tax in their areas and this arrangement will continue when the new facility is built.

The cost per tonne of waste treated in north London is, and will continue to be, very low compared to costs in the open market. The comparative cost of not building a facility and paying market rates for the disposal of north London’s waste would be significantly higher.

b) How much of this £1.2bn has already been spent, as at 31 March 2021?

We have spent £103 million on capital costs to date.

At the end of March 2021 there were also outstanding commitments for construction of a further £88 million.

We have also let various other contracts for project advisors, utilities etc. Details are available in the Contracts Register which is available on the following page of our website https://www.nlwa.gov.uk/ourauthority/transparency-and-payments

c) What is the total contribution (if any) of costs from 1 April 2021 that will be met from NLWA existing reserves?

NLWA’s usable reserves include a capital receipt of £1.4m and balances that are owed to the 7 boroughs.  The latter will be used to offset future levies.  While the capital receipt could be used to pay part of the project cost, a decision has not been taken to use the balance.

d) What is the total contribution that has been paid by each of the 7 relevant north London boroughs, to 31 March 2021?

It is standard practice to reflect capital costs in charges (known as the minimum revenue provision) in the financial year after the assets become operational. The seven north London boroughs have not been charged anything to date for the capital costs of the project.

e) What is the total contribution that will be paid by each of the 7 relevant north London boroughs, from 1 April 2021, and over what timeframe will this payment be split?

The new ERF will generate electricity and heat which will be sold to generate an income. Other costs will be met by the boroughs through their levy and charges. An explanation of the difficulty of providing the proportion of the charges to be incurred by each borough is indicated in the answer to question 2a), but not all of the costs will be added to the levy. Some costs will be charged to ‘non-household’ waste charges, i.e. some of the costs may be attributed as fees to organisations producing commercial waste. It is the responsibility of, and a matter for, each borough to determine how the costs of the process will be allocated. Repayments for the ERF will be made from 2026 when it is operational, running to 2065. Please see our response to question 2a) above for further detail.

f) Is the entirety of the cost attributed to each borough (retrospective and prospective) to be recovered via council taxes?

‘Yes’, the entirety of the costs will be attributed to the seven boroughs, but please see our answer to question ‘e’ for allocation thereafter. Sales of heat and electricity will help to reduce the costs to boroughs.

g) Are there any other funding sources from which contributions have been or will be received?

As mentioned in our response to question 2e, the sale of electricity and heat will reduce the cost to the seven north London boroughs. We are not anticipating any other external sources of capital funding.

NLWA costs are currently relatively low per tonne of waste disposed of compared with other authorities.  The new ERF facility and the associated works are both the most appropriate environmental solution and best value option for continuing to dispose of north London’s waste. We expect that this will remain the case going forwards. 

Further information about the costs of the project is available on the NLHPP website FAQs section here: http://northlondonheatandpower.london/faqs/project-costs/what-are-the-nlhpp-programme-costs/

I trust this response provides the information you are looking for regarding the upcoming repayment charges and costs for a nationally significant piece of essential long-term infrastructure, but if I can be of any further assistance, please do not hesitate to contact me if you have additional and/or more specific requests for information.

If you are dissatisfied with this response and wish to appeal, please reply to this email or submit a complaint via our website complaints page at: https://www.nlwa.gov.uk/enquiry-form

Your request should be submitted to us within 40 working days of receipt by you of this response.   

If you are still not satisfied, you have a right to appeal to the Information Commissioner: https://ico.org.uk/global/contact-us/email/

Information Commissioner's Office

Wycliffe House

Water Lane

Wilmslow

Cheshire

SK9 5AF

0303 123 1113

Yours sincerely,

External Relations Manager & Data Protection Officer