Interserve washes its hands of first of four loss-making waste projects

Alex Daniel
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Energy from waste plants are a more eco-friendly way to dispose of standard municipal waste than landfill sites (Source: Getty)

Troubled outsourcer Interserve is making headway in offloading a series projects which had a substantial hand in plunging the firm into more than £600m of debt.

Today the public sector contracting giant said it has finally finished one of four plants which turn waste materials into energy, hailed as “an important milestone” for the firm.

Read more: Interserve agrees key terms of rescue deal with lenders and is considering handing off building materials unit to lenders

The energy from waste (EfW) plant in Dunbar, on the south east coast of Scotland, will power 39,000 homes and businesses in Scotland, processing as much as 38 tonnes of waste an hour.

EfW plants are a more eco-friendly way to dispose of standard municipal waste than landfill sites, the latter being a practice the Scottish government is keen to phase out by 2021.

But perhaps more importantly for Interserve’s directors, its completion marks a forward step in washing their hands of a set of projects which have plagued the contractor since 2016 and cost it more than £220m.

The plant has been handed over to client Viridor, a firm which has also repeatedly been a thorn in the outsourcer’s side, first sacking it from a similar project in Glasgow in 2016, then claiming it owed Viridor’s parent company Pennon £64m in a November trading update for delays to the project.

City A.M. understands Pennon’s claim against Interserve is still ongoing.

Dougie Sutherland, executive director at Interserve, said: “We are pleased to have completed the Dunbar project and handed it over to our customer Viridor Enviroscot Ltd. This is an important milestone in the transformation of Interserve.”

Interserve chief executive Debbie White’s announcement of debt-to-equity rescue talks with the firm’s banks late last year raised eyebrows among its suppliers, many of whom have privately raised concerns they will not receive payments from the struggling outsourcer.​

Read more: Carillion one year on: Government outsourcers are still struggling with growing debt piles

Government sources have insisted they have no doubts about the company’s long-term ability to deliver large public sector contracts, but shareholders are still awaiting a follow-up from White on the result of the talks, due early this year.

Most of the firm’s worries are said to stem from the disastrous foray into building the energy from waste plants two years ago, three of which now remain. One senior government source told City A.M. at the time of the rescue deal announcement waste-to-energy was a “ring fenced” issue for the company which would soon be resolved, but US-based joint contractor on the projects Babcock and Wilcox revealed earlier this month some may not be completed until July.