Agenda item

Further to Minute 41 of the Cabinet, the City Council considered a joint report of the Managing Director of Coventry Municipal Holdings Limited and the Chief Operating Officer, which set out preferred options to finance the development of the material recycling facility (MRF) by seeking funding to Tom White via a commercial loan.

A corresponding private report detailing confidential financial matters was also submitted for consideration (Minute 74 below refers).

The Business Plan for Tom White (TW) for 2022/23 was approved by the Shareholder Committee in March 2022 which supported Tom White business growth and ongoing development.

The business plan outlined proposals to redevelop the Tom White recycling infrastructure at Longford Road site.  Once completed, the redevelopment would improve the environmental performance of Tom White, dramatically increase the recycling rates for commercial waste and help to increase the financial dividend payable from Tom White back to the Shareholder (the Council).

The recycling facility redevelopment was core to these growth objectives, and the diagram at Appendix C showed how the new MRF sits in the context of overall waste management and recycling in Coventry and the sub-region.

The current recycling plant and equipment used by Tom White has historically suffered from lack of planned maintenance under previous ownership and was now experiencing significant breakdowns, with plant availability reducing considerably.  During April to December 2021, the facility experienced 72 days of plant downtime.  The impact of this was an increased cost of maintenance (plant and vehicle repairs and spares) and increased plant hire in the financial year 2021/22.  There was also an increased cost of disposal due to more material going to landfill due to the plant not being available to sort material for an alternative, cheaper and environmentally sustainable disposal route as a fuel source for onward processing.

The existing plant performance was causing significant cost pressures in Tom White, such that month to month the business is currently operating at about ‘break even’.  Accordingly, the new plant solution would remove the cost pressures that undermine profitability and allow the business to get back on track for profit and dividend availability.

In the short term the Tom White management team have hired new resilient mobile equipment to compensate for the poor performance of the plant.  This meant that the old unreliable plant did not need to be operated, thereby cutting significantly the maintenance costs and subsequent impacts.  However, this was not a long term solution for the volume of waste processed through the facility, nor would it provide the opportunity to enhance recycling rates and improve financial returns to the shareholder. 

The management team at Tom White have been working with its preferred supplier to design the new facility to move away from waste disposal but focus on treating commercial waste as a commodity from which the maximum environmental and economic benefit should be extracted. Therefore the solution was focused on creating zero waste to landfill. 

The business plan would increase economic stability with the business case for the recycling facility increasing financial stability of Tom White each year.

The approval of the business plan by the Coventry Shareholder Committee was subject to funding.  The report put forward the preferred options to finance the development of the material recycling facility by seeking funding to Tom White via a commercial loan for the sum, as detailed in the corresponding private report to enable delivery of the recycling infrastructure.

RESOLVED that the City Council:

1)  Approves a loan up to the value detailed in the Private Report on commercial market terms for the purposes of delivering the recycling infrastructure.

2)  Approves the addition of up to the value detailed in the Private Report to the Councils approved capital programme for the purposes of entering into the loan.

3)  Approves the increase in the Commercial Investment Strategy limit for 2022/23 for investment in service loans as detailed in the Private Report.

4)  Delegates authority to the Chief Operating Officer (S151 Officer) and the Chief Legal Officer, following consultation with the Cabinet Member for Strategic Finance and Resources, to finalise and agree the detailed terms of the transaction with Tom White. The authority under this delegation shall also include the power to enter into the necessary legal agreements and subsequently the power to negotiate and agree any such variations as is deemed necessary to the terms of the loan facility and ancillary documents.