Hundreds of millions added to cost of incinerator project

North London Waste Authority insists controversial new North London incinerator “continues to be the best value option by far”, reports Victoria Munro

Construction at the incinerator site near Chingford (credit: NLWA)
Construction at the incinerator site near Chingford (credit: NLWA)

The estimated cost of building a new North London incinerator has risen by hundreds of millions of pounds.

When North London Waste Authority (NLWA) began construction work in 2019 on its ‘North London Heat and Power Project’ – which includes building a larger replacement incinerator at Edmonton Eco Park as well as new recycling facilities – the total costs were estimated at the time to be £1.2billion.

However, a new report for the NLWA board reveals the current estimate is now between £1.42bn and £1.52bn. The report explains the original budget “did not include subsequent inflation”, which the Bank of England believed at that time would remain at around 2% in the coming years. Last October, inflation rose to just over 11%.

The report reads: “The NLWA has successfully mitigated its exposure to the subsequent exceptional levels of inflation, unlike many other major infrastructure projects which have been more adversely affected.

“The upward pressure on the project’s cost has been effectively mitigated with the careful management of borrowing and appropriate risk-sharing with contractors.

“Over 80% of costs for the project are now secured under contract, and it is possible to forecast the outturn cost with a degree of certainty.

“As more of the project is delivered, NLWA’s exposure to inflation risk will continue to diminish, though there is still some uncertainty given the ever-changing financial climate, which is outside the project’s control.”

NLWA insists the current incinerator, built in 1969, is no longer fit for purpose and argues it has “a duty […] to provide facilities to deal with waste” from the seven North London boroughs it serves “in the best possible way”.

Environmental campaigners meanwhile have viciously opposed the project, arguing the new incinerator’s capacity of 700,000 tonnes a year will greatly exceed demand, while emitting more pollution.

NLWA awarded a contract to build the new incinerator to Spanish company Acciona in December 2021, estimating it would cost £960million, with the additional recycling facilities taking the total project cost to £1.2bn. Acciona “remains on plan” to finish construction in late 2026.

When contacted for comment, a NLWA spokesperson argued the project is “on time and budget to deliver at £1.2bn in 2019 prices”.

They said: “Given that it is a project lasting over ten years with record high levels of inflation currently affecting the economy, it shows careful management that we are expecting outturn costs to include relatively low inflation.

“The project also continues to be the best value option by far for North London’s waste disposal. Sending the waste elsewhere would add at least £20million per year to the cost for council taxpayers, as well as being worse for the environment.”

NLWA chair Clyde Loakes added: “Many other large public and private infrastructure projects are facing challenges due to the economic uncertainty generated by the mini-budget of 23rd September, which unleashed well-documented and major inflationary pressures throughout the economy.

“We are all still feeling the consequences of that mini-budget, whether in the increased cost of our shopping or in the many infrastructure projects that are now far more expensive and, in some instances, delivering scaled-back plans. Despite this, NLWA has been able to successfully mitigate against inflation and continues to deliver value for the residents of North London.”

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