Mr. Owen Keegan:

I am delighted to have the opportunity to brief the joint committee on the Dublin waste to energy project and update it since the project was last considered by it on 3 February 2010. Since taking up my position as city manager, I have been concerned about the project and anxious to bring it to a resolution.

The background to the Dublin waste to energy project, together with a project chronology, is set out in detail in section 2 of our submission document. Dublin City Council, acting on behalf of the four Dublin local authorities, has been pursuing the provision of the waste to energy facility following the adoption of the Dublin region waste strategy in 1998. The Dublin waste to energy project was developed as a public private partnership, PPP, using the appropriate EU procurement procedure and carried out in accordance with the capital appraisal and PPP guidelines issued by the Department of Finance. The public tender competition was conducted by the client's representative on behalf of Dublin City Council to award a contract for the design, build, financing, operation and maintenance of a thermal treatment facility.

A project board was established in January 2004 to oversee the project. The project board comprised representatives from Dublin City Council, the Department of the Environment, Heritage and Local Government, the National Development Finance Agency, NDFA, and the client’s representative. In response to a public procurement process, three bids were received on 16 April 2004. In June 2005 the procurement report was finalised and issued to the Department of the Environment, Heritage and Local Government, the NDFA and the Dublin local authorities. The project was subject to financial assessment by the NDFA, which confirmed in 2005 and again in 2007 following a financial restructuring by the preferred bidder that the project represented value for money.

The project documents were submitted for approval to the Department and National Development Finance Agency, NDFA, in approximately June 2005. In September 2005, a letter issued by the assistant secretary in the environment division of the Department confirmed that the Department, following a detailed technical review, had no objection to Dublin City Council proceeding to enter into contractual arrangements based on the documents received. A project board meeting was held on 14 May 2007 at which Dublin City Council requested approval to proceed to finalise the project agreement with the public-private partnership company. The project board decided that approval to award the contract for the project would be given in accordance with the original sanction. The project agreement was executed on 4 September 2007. Planning permission was granted by An Bord Pleanála on 19 November 2007. The Environmental Protection Agency subsequently granted a waste licence for the facility in December 2008, and the necessary licences from the Commission for Energy Regulation, CER, were granted on 4 September 2009.
Since the Dublin waste to energy project was conceived in the late 1990s it has remained entirely consistent with regional, national and EU waste management policy. In addition to its importance in meeting waste management objectives for the Dublin region, its provision is crucial if the State is to meet 2016 landfill diversion targets without dependence on the export of municipal waste to overseas facilities. The policy background is dealt with in detail section 3 of the submission.
Delivery of the Dublin waste to energy project has proved extremely challenging and has gone on for far too long. In particular, it has been subject to unanticipated delays due to a range of factors largely outside the control of the Dublin local authorities, all of which are detailed in the submission. These factors include a successful High Court challenge to a variation to the regional waste management plan, which was necessary, following the increasing penetration by private waste operators in the Dublin household waste market, if the Dublin local authorities were to be in a position to retain control of waste arising in the Dublin region in order to meet the "put or pay" provisions in the original project agreement. There was also a complaint to the Competition Authority, a failure to secure foreshore licences required to facilitate the project and still-unresolved complaints to the European Commission on state aid and public procurement grounds, stretching back over three years, which have yet to be determined. I have dealt with the delay factors in detail in section 5 of the submission.
These delays have contributed to the very significant costs which have been incurred to date by the Dublin local authorities and the public-private partnership company in seeking to advance the project. A total of €96.3 million had been spent on the project by the Dublin local authorities to 31 December 2013. Of this total, €4.5 million was recouped from the PPP company, in accordance with the project agreement, and grant aid of €7.5 million was received from the Department. The net cost to Dublin local authorities has been €84.4 million, and full details of the expenditure incurred are set out in section 2 of the submission.
Total expenditure to date on the project should be seen in the context of an anticipated investment by the PPP company of approximately €500 million on the waste to energy facility should the project proceed. With the termination of the client representative contract from 31 January 2014, expenditure on the project from 1 February 2014 will be confined to site security costs, Dublin City Council project engineer costs and certain ongoing costs arising from the statutory consents - dealing with monitoring on the site - pending a decision on whether the project is to go ahead.
The principal local government auditor, as part of his audit of Dublin City Council’s accounts for the year ended 31 December 2011, reviewed cumulative expenditure on the Dublin waste to energy facility to 31 December 2011. In his report he drew attention in particular to a number of issues. There were serious weaknesses in the financial management of the project by the city council, there was escalation in the cost of relocating Westway Terminals Hibernian Ltd., and there was also escalation in the cost of the client representative, CR, contract due to the fact that the contract was extended well beyond the 50% increase in value permitted under EU procurement rules. He noted that the continued appointment of the CR should have been reviewed as far back as 2005, when the 50% threshold rule was breached in accordance with procurement guidelines.
On foot of the local government auditor’s report, financial management of the Dublin waste to energy project by Dublin City Council has been considerably strengthened, especially in the monitoring and controlling of expenditure. In addition, the executive board overseeing the project meets on a fortnightly basis and their meetings are minuted. The council’s response on the cost of relocating Westway Terminals Hibernian Ltd. is set out in section 5 of this submission, as is the council’s position on the CR contract, which will terminate on 31 January 2014.
If the project does not proceed, the bulk of the costs incurred by the Dublin local authorities will not be recouped. In addition, the PPP company has incurred significant costs to date and it may seek to recover these costs. If the project does proceed then, subject to certain assumptions, there is a real prospect that the Dublin local authorities will recoup the investment they have made in the project to date, albeit over a long period. In addition, the Dublin waste to energy facility will make a significant contribution to the achievement of regional and national waste management targets. The project will generate on average 275 jobs, with a peak of 500 jobs during the construction phase and 60 jobs once the facility is operational. It will also generate significant community gain.
The current status of the project is that the PPP company has put in place a funding package which is acceptable to the Dublin local authorities. The project agreement has been renegotiated to reflect the new funding package and the removal of the "put or pay" clause in the original project agreement. Dublin City Council is awaiting the outcome of the complaints to the European Commission. Assuming a favourable outcome to these complaints from the council's perspective and that the project can proceed to construction phase, Dublin City Council will proceed as follows. The revised or renegotiated project agreement will be finalised; a detailed suite of reports - including the revised project agreement - will be submitted to both the NDFA and the project board for approval; the views of the elected members of the four Dublin local authorities will be sought; and, subject to the necessary NDFA and project board approvals, a final decision will be made to proceed or not to proceed with the project by the Dublin local authority managers.
In summary, the message is that this project was and always has been in line with Government and EU waste management policy. The project has gone on for far too long, largely due to factors outside the control of Dublin City Council. I am determined to bring this project to a resolution and I have sought to minimise any ongoing expenditure in the project, with effect from 1 February 2014, at which stage the client representative contract will be terminated. It is undoubtedly the case that the city council has made mistakes in the management of this project. We have learned from those mistakes and sough to address them. With regard to any concern about whether this project represents value for money, the final proposal will be subject to independent verification by the NDFA, and we cannot proceed unless it certifies that it still represents value for money. In the context of national and regional waste management objectives, this project is still required.