Lakeside EfW andCrayford MRFTuesday, 12 July 2011

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David Dupont

Group Director of Finance

4

• Pennon Group Plc is a large FTSE 250 utility infrastructure company. The Group is

committed to:

- sustainable development;

- enhancing the environment; and

- providing high quality customer services

• We have around £4.1 billion assets and employ over 4,300 people

• The Group has two principal subsidiaries:

- South West Water provides water and sewerage services in Devon, Cornwall

and parts of Dorset and Somerset

- Viridor is one of the UK‟s leading recycling, waste management and renewable

energy businesses

Pennon Group PlcOverview

5

Colin Drummond

Chief Executive, Viridor Ltd

6

ViridorEfW: Major Planning Successes since 31 March 2010

• Cardiff EfW (Trident Park)

• planning permission achieved June 2010

• Dunbar EfW/CHP (1)

• planning appeal won December 2010

• Ardley EfW (Oxfordshire)

• planning permission achieved February 2011 and Residual Waste Treatment

PPP contract signed March 2011; Secretary of State decision being challenged

locally

• Avonmouth EfW

• planning appeal won with costs April 2011; Secretary of State decision being

challenged locally

• Total 1.3m tonnes, 125MW (electricity plus heat)

(1) Combined Heat and Power

Viridor Renewable Energy Summary – Operational

• Landfill gas

108MW (as at 31 March 2011)

• Lakeside Energy from Waste (EfW) plant at Colnbrook near Heathrow joint venture

with Grundon Waste Management

410,000 tonnes pa and up to 37MW

• Bolton EfW facility (part of GMW sub-contract)

120,000 tonnes pa and 9MW

• Reliance Street, Manchester mechanical biological treatment / anaerobic digestion

(first of 4 facilities as part of GMW sub-contract) operational post year-end

50,000 tonnes pa and 2MW

• Total operational capacity 136.5MW (1)

(1) Includes share of joint venture capacity

Viridor Renewable Energy Summary – Consented

• Runcorn / Ineos Chlor Combined Heat and Power (EfW / CHP)

750,000 tonnes pa, 120MW, Phases I and II

– both phases under construction

• Ardley (Oxfordshire) EfW - 300,000 tonnes, 25MW

– contracts signed March 2011; Secretary of State‟s planning decision subject to

challenge

• Exeter EfW - 60,000 tonnes pa, 3MW

• Cardiff EfW - (Trident Park) - 350,000 tonnes pa, 30MW

• Dunbar EfW / CHP - 300,000 tonnes pa, total 40MW

• Avonmouth EfW - 350,000 tonnes pa, 30MW; Secretary of State‟s planning decision

subject to challenge

• Planning permission achieved for 3 further AD plants in Manchester, now all under

construction; also in Somerset and Croydon

• Total consented but not operational capacity (1) c.190MW (electricity plus heat)

• Target total capacity over 300MW (1) in 5 years‟ time

(1) Includes share of joint venture capacity

Viridor Current PPP/PFI Projects

• Oxfordshire PPP – contract signed March 201125 years; £205m capexEfW; 300kt; 25MW (1)

• Greater Manchester PFI – April 200925 years; £640m capex, 1.1m tonnes paUK‟s largest ever combined waste and renewable energy projectHWRCs, MRFs, MBT, AD, composting, transfer stations, bulk transport (including rail)associated EfW / CHP (Runcorn)

• South London Waste Partnership PPP – September 200814 years, 450kt parecycling, transfer stations, transport, AD, landfill

• Somerset PPP – May 200625 years, 200kt palandfill, composting, HWRC centres, partnership re AD / future residual treatment

• West Sussex PFI – April 200525 years, 350kt paHWRCs, MRF, transfer stations and bulk transport

(1) Secretary of State’s planning decision subject to challenge

ViridorPPP Prospects (1)

• Provisional preferred bidder for Cheshire

• One of last two for South Lanarkshire

• One of last two for Glasgow

• One of last two for South London Waste Partnership

• One of last two for each of Peterborough EfW and MRF

• One of last two for West Lothian

• One of last three for South East Wales (Gwyrdd)

• One of last three for Heads of the Valleys

• Viridor continues to bid selectively for other contracts

• Increasing landfill tax is the fundamental driver for the above projects

• Healthy list of prospects including renewable energy / Combined Heat and Power and recycling opportunities

(1) Government PFI cutbacks may lead to some delays or changes (PPP vs merchant)

Viridor Operational Highlights – Recycling

• Volumes traded increased by 0.3m tonnes (22%) to 1.7m tonnes with improved mix

existing business 0.2m tonnes (13% increase)

acquisitions 0.1m tonnes

• Overall recycling revenues per tonne back up to peak levels (after the deterioration in

H2 2008/09 and H1 2009/10)

• Landfill tax to increase by £8 per year from current £56 per tonne to £80 per tonne

from 1 April 2014

enhances long-term economics of recycling and energy recovery

• Recycling and Waste Management Business of the Year (National Recycling Awards,

July 2010)

• Profit per tonne in recycling appreciably above the level in landfill

• Recyclate very economical compared to virgin materials

ViridorAcquisitions

• 2010/11 five recycling companies acquired for c.£50m:

Reconomy, £23.8m: 3 MRFs in East Anglia and the South Midlands

Pearsons, £16.0m: MRF and associated facilities in Norfolk

Adapt Recycling, £0.7m: recycling and waste management operator in Bury

Swinnerton, £1.8m: recycling and waste management operator, also in Bury

Martock, £7.4m: MRF and associated facilities in Somerset

• Above acquisitions

have significant operational synergies in the UK

provide additional recyclate volumes for Viridor network

nationally

internationally

• Reinforces Viridor‟s position as the largest operator of MRFs in the UK

• For a three minute introduction to Viridor‟s MRFs, see http://www.youtube.com/user/ViridorTV

ViridorFinancials Outlook

• Next step change in Viridor‟s performance will come as major EfW projects start to

come on stream in 2013/14

a 300kt EfW plant generates c.£25m plus EBITDA (UK GAAP basis) once

operational

• Runcorn EfW/CHP under construction

Phase I to open late 2012/13 (20% Viridor ownership)

Phase II to open late 2014/15 (100% ownership)

• Planning permissions achieved for four further major EfW plants (two subject to

challenge)

• EfW could more than double Viridor‟s EBITDA (currently £117m) by 2015/16

• For the next two years Viridor‟s profits will be driven by Recycling

Dan Cooke

Communications Manager, Viridor

WELCOME TOLAKESIDE EfW

Dan Cooke – External Affairs Manager

December 2005

May 2007

• Lakeside EfW Ltd is a joint venture with Grundon and

Viridor – leading UK recycling, renewable power and

waste players

• Cost to build the plant: £160M

• Design life: 25 years

• Capable of treating 410,000 tonnes of waste per year

• 37 MW capacity - equates to generating 250,000 MWh

of electricity annually to the national grid

• Lakeside EfW is privately funded and therefore the

cost to the tax payer is nothing.

• Created 46 new jobs

Lakeside EfW Overview

The Waste Hierarchy and Resource

Efficiency

• Waste Hierarchy: Reduce, Re-Use, Recycle,

Recover, Dispose

• Grundon and Viridor – recycling-led service providers

• Facility inputs from local authorities and businesses

across SE England – delivering landfill diversion and

improved resource efficiency

• Lakeside recovers energy from non-hazardous

residual (post-recycling) waste only

• New generation plant – safe, robust and efficient

• CHP-ready

Project Structure

LakesideOwner

TakumaEPC

FortumO&M

FichtnerOwners Engineer

Actual Layout

Waste

Flue Gas

Slag

Fly Ash

Primary Air

Secondary Air

Recirculation

Flue Gas

Combustion Flow

Steam Water Cycle

FurnaceSuperhtrEconomsr

Feed Water Pumping

Boiler Drum

Feedtank & DA

Bypass Station

Steam Turbine

Gen

ACC

Cond Tank

Make Up WaterWTP

CWI

Reducing StationCombustion

Air

Air Pre-heater

•Two process streams - throughput of 27 tonnes of waste per hour each.

•Each stream will produce approximately 5.5 tonnes of bottom ash, and 1 tonne metals - re-useable commodities

•Ash from the Flue Gas Treatment (FGT) system is approximately 0.9 tonnes per hour (c.24 tpd) - classed as hazardous waste - taken from site, neutralised and landfilled.

•95% of input produces energy or is recycled

•<5% final disposal

Lakeside EfW

• State-of-the–art engineering, monitoring and environmental control systems

• Emissions controlled and monitored by Lakeside EfW

• Also monitored and regulated by the Environmental Agency.

• Emissions from all EfW plants must comply with the Waste Incineration Directive (WID) – do not compromise local air quality standards.

Environment

Monitoring Lakeside EfW

The plant is designed to meet the requirements of the Waste

Incineration Directive (WID) as a minimum for release.

Abatement equipment is designed to reduce emissions:-

– Lime to remove acidic gases such as HCl, SO2 and HF

– Activated Carbon to reduce dioxins, PCB's, PAH's, mercury

vapour and heavy metal salts.

– The final stage is a bag filter to remove particulates

– NOx removal is by ammonia injection into the furnace to reduce

the NOx to N2

Monitoring Lakeside EfW

The plant will not continue to operate if:

• emission limit values are exceeded for a period of more than 4

hours

• Continuous monitoring equipment is out of service for more

than 4 hours

• Cumulative duration of abnormal operation exceeds 60 hours

in either of the above cases, calculated over one calendar year.

• Total particulates shall not exceed 150 mg/m3

• Total particulates half hourly limit 30 mg/m3 or 10 mg/m3 daily

average

How do We Compare – 58 mile Stretch?Annual emissions from the Lakeside EfW facility and the

Surrey section of the M25

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

Oxides of nitrogen Carbon monoxide Fine Particulate Matter

Volatile Organic Compounds

Ton

ne

s e

mit

ted

pe

r ye

ar Annual Actual Emissions to air from Lakeside EfW

Annual Actual Emissions to air from the Surrey Section of the M25

Substance

Actual Emissions from Lakeside

EfW (tonnes per annum)

Permitted Emissions from Lakeside EfW

(tonnes per annum)

Surrey Section of the M25 (tonnes per

annum)

Actual EfW emissions as a percentage of

the Surrey Section of the M25

Oxides of Nitrogen (NOx) 306 416 2,987 10.3%

Carbon Monoxide (CO) 24 104 2,330 1.0%

Fine Particulate Matter(PM10)

2.73 21 78 3.5%

Volatile OrganicCompounds (VOCs)

4 21 366 1.0%

Carbon Dioxide 355,614 n/a 696,818 51.0%

Annual Emissions – Lakeside vs

Surrey M25

Lakeside - Summary

• Converts up to 410,000 tonnes residual waste into 37MW

of power

• By-products (bottom ash and metals) recycled

• Safe, robust and reliable technology

• EfW – potential significant contribution to base-load

power for UK

• Value for money treatment option

• Complements high levels of recycling, delivers landfill

diversion and improved resource efficiency.

H & S Site Tour Brief

• PPE - Everyone will wear :-

High-visibility jacket or vest

Hard hat

Glasses

Gloves

Protective footwear

• All visitors will sign an induction form

Site Tour Brief

• Please stay in your groups and stay with your escort

• Please be aware of moving vehicles and of contractors moving around sometimes carrying equipment

• In the event of an emergency the site siren will sound

• Vacate the building and go to the muster point which is by the Grundon offices

Emergency

Assembly Point

Gate C

Gate D

Enjoy your visit!

Graham Warren

SE Regional Director, Viridor

Stuart Wood

Regional Manager, Viridor

Introduction to Crayford Materials Recycling Facility

Graham Warren and Stuart Wood

Viridor South East Region

Site history

• Former oil terminal

• Recycling facility developed by Grosvenor Waste

Management

• Acquired by Viridor in 2007

Location

• South east London

• C. 2 miles from M25 Dartford crossing

• Good road links to M25 and London

• Potential for river/rail links

• Improved local access from adjacent development

Crayford MRF

• One of Europe‟s largest and most-advanced MRFs

• Produces high-quality materials for end-market

reprocessing.

• Helps local authorities meet recycling targets and

businesses improve their environmental performance.

• Inputs include:

– Source segregated materials (glass and plastic bottle

banks, paper – office grade or mixed)

– Commingled collections

Operational overview

• Site capacity approximately 350,000 tonnes per annum

• Can operate 24 hours per day/363 days per annum

• Wide range of contracts servicing local authorities across the UK - emphasis on London and the Home Counties.

– 200,000 tpa of commingled recyclate from local authorities

– Trade dry recyclables, single stream materials

– Reject rate 4%

Operational overview (2)

• Site has 3 plants – Main MRF, Mini MRF and Plastics

Plant

– All of them use the latest mechanical sorting

technology

– Range of NIR separators

– Strict manual inspection and quality control processes

in place

– End products are single stream recyclables: paper,

card, cans, tins, plastic bottles, glass and textiles.

Main MRF

• Processes 38 tonnes of commingled material per hour

with 32 employees per shift

• Material is fed through a bag splitter – some Councils in

London collect their recycling in plastic sacks.

• Next stage is the trommel – a rotating drum – to screen

out glass fines and mid-size fraction

• End-product is a high quality paper material (news and

pams).

Main MRF (2)

• Mid-size fraction enters a „Ballistic Separator‟, this

separates remaining paper from containers (plastic

bottles, tins and cans)

• Containers are then fed by overhead conveyor to the

Plastics Plant.

• Paper coming out from the ballistic separator is quality

inspected, producing News and Pams and mixed-paper

grade products.

• Glass screened from the trommel is fed to the glass

processing plant to remove any contaminants and then

using a „Destoner‟ the light fraction is separated by

difference of density.

Mini MRF

• It‟s a smaller version of main MRF and processes 12

tonnes of material per hour with 16 employees per shift.

• Same processing equipment: trommel, ballistic

separators and destoner.

• It was built in 2006 to allow additional throughput.

Plastic plant

• Processes containers – plastic bottles, aluminium cans,

steel tins and glass

– Feedstock from main and mini MRFs plus dual stream

local authority container collections

– Processes 6 tonnes of material per hour with 5

employees per shift

– Highly automated facility, commissioned in 2006

Plastic plant (2)

• A trommel pre-screens glass and fines (<60mm).

• Utilises optical sorting technology (infra-red) to remove

contaminants and identify different plastic polymers –

HDPE, PET.

• Over-band magnet removes steel tins.

• An „eddy-current‟ separator removes aluminium cans.

• At the end, a manual inspection assures quality of output.

Baling

• Three channel-press balers – each with a capacity of

processing 30 tonnes per hour.

• All end-products (except glass) are baled into mill-sized

bales of c.1 tonne.

Analysis – Data Reporting

• 24 hour analysis team sampling inputs, outputs and real

time production data

• Providing comprehensive monthly reports to local

authority and commercial clients on the quality and

composition of their inputs.

• Bespoke designed material weighing and database

system installed in 2010

Dispatch

• Bales are stored in despatch yard before being put into

shipping containers or curtain-sided vehicles.

• Site loads c. 40 shipping containers per day.

• All loads are rigorously recorded and photographed to

ensure traceability.

Imminent Site Developments

• Materials Shredder, for granulation of single stream hard

plastic polymers and fabric materials, such as carpets

and textiles.

• Upgrade of glass processing plant, for production of

higher grade glass cullit products suitable for colour

sorting, for the glass re-melt market.

• Installation of pre-sort cabin to allow more efficient

processing of trade and Commercial recyclables.

Basic Site Rules and Safety

• Site will be operational during visit

• Please leave incendiary materials behind

• Please wear PPE at all times when in the working area

• Be aware of vehicle movements

• Take extra care on steps and walkways

• Observe pedestrian routes

• Please stay as a group with your tour leader

In the event of an emergency

• Please follow the instructions of your Tour Leader

• The Assembly Point is the Main Car Park through which

you will have entered the complex

Thank you

and please enjoy your visit

Herman van der Meij

Commercial Sales Director, Viridor

Viridor Resource Management Limited

Materials, Marketing and Logistics

Herman van der Meij

Purpose & Objectives

VRML is charged with the responsibility for:

• The national, European and international marketing and sale of all

VWM‟s recyclables from its facilities through the UK;

• Onward logistics to end customers;

• Third party material procurement/trading - expand upon its activity and

transport to end customers or Viridor facilities for further treatment (VGR,

VPR and VER);

• Financial – take care of Viridor‟s financial interest within these markets;

• Robust marketing strategy – develop and implement strategy that shall

serve the company well through medium and long term market cycles;

• Efficiently and effectively manage the marketing, associated risks and

logistics of over 1 million tonnes of recyclables per year; and

• Position and then place quality products within the global markets in a

timely, professional, competitive and profitable manner.

Market Drivers

Recyclate demand and price key drivers by:

• Supply and demand – global economic trends and

supply and demand among manufacturers/reprocessors;

• Legislation and directives – National and European – setting

targets for landfill diversion, recovery and use, based on „polluter

pays‟ principals;

• Virgin raw materials – environmental impact and increasing cost of

sourcing and processing – more need for recyclables;

• „Raw materials poor‟ regions – typically the rapidly expanding

major manufacturing locations in China, India, Vietnam and

Indonesia; and

• currency exchange rates; and

Market Drivers

• high quality output grades that meet manufacturing‟s quality

standards, optimising end markets throughout the long term and

maximising revenue.

Material Fractions in Co-mingled Input

45%

8%17%

17%

2%2%2% 3% 2%1%1%

Material FractionsNews & pams OCC Mixed papers Glass

Fe Al Metals HDPE PET

LDPE Hard plastics Tetra Pak E fraction Landfill

Material Purchase & Sales Structure

LogisticsPLASTICSProcurement

SourcePRN / PERN’sMETALS GLASSPAPER

Tenders

Municipal

Commercial&

Industrial

Waste Man Co’s

Sold through Market Specialists

Sold through Market Specialists

Sold through Market Specialists

Sold through Market Specialists

VIRIDOR

Sold through Market Specialists

Marketing and Sales

• Comprehensive materials and market intelligence.

• „Customer Support‟ - understanding and servicing the customers needs.

• „Door to Door Service‟ – Logistics Department – UK, EU and

International.

• Maximising our economies of scale – allows us to enter into sales

arrangements and to purchase transport and shipping at competitive

rates.

• Local markets – preference is to sell into most local market available

(wherever possible).

• International – established EU and global markets for all material

grades.

• Financial – monitoring credit limits, checking Letter of Credits are OK

and being sure we diversify the sales. “A deal is done as soon as we

have the money in our bank!!”

The UK is now a net exporter of

recyclables since July 2006

GDP and Paper Consumption per

Capita for the Ten Largest Economies

COUNTRY

GDP Per

Capita

($)

PAPER PRODUCTION

(MILLION)

POPULATIO

N (MILLION)

PER CAPITA CONSUMPTION

(KG/YEAR/PERSON)

USA 47,568 83.8 305 297.1

JAPAN 42,653 28.93 127 233.6

FRANCE 40,591 9.87 65 178.7

GERMANY 40,512 23.17 82 231.7

UNITED KINGDOM 36,298 5.28 60 201.2

ITALY 33,828 10.11 59 205.7

RUSSIA 10,512 7.56 142 37.5

BRAZIL 10,471 9.15 196 39.5

CHINA 4,520 78.03 1,321 44.7

INDIA 3,563 8.5 1,148 8.5

Export sales are increasingly essential

• Decline in UK paper industry.

• Difficulty absorbing materials from increased

recycling targets.

• 38 UK mills closed since 2000 (energy costs key risk).

• 1.8M tonnes reduction in mill capacity since 2000 (300 KT in 2006

alone).

• UK exported 4.4M tonnes of paper in 2010 – a 2M tonne increase

since 2004.

• Asia absorbed 3.2M tonnes, China 2.7M tonnes in 2010, Viridor has

got +/- 18% market share of the UK export to China.

• Positive – Palm, Kings Lynn and Saica, Trafford Park, Manchester ,

severla new paper machines in Europe.

Certification and Auditors

Waste Management License (EA)

Waste Carrier and Broker License (EA)

PERN – Packaging Waste Exporter Accreditation (EA, DEFRA and

Environment Exchange)

WEEE Exporter Accreditation (EA)

PRN – Glass Packaging Re-processors Accreditation (EA, DEFRA and

Environment Exchange)

AQSIQ – China Import Accreditation (CCIC)

ISO 1400:2004 EMS Accreditation (BSI)

ISO 9001:2000 Quality Management Systems (BSI)

OHSAD 18001 (BSI)

Integrated Management System PAS 99 (BSI)

Participating in ESA‟s RRS Audit Scheme (B.Veritas/ESA)

Quality Assurance

• Input

– Non-conformances issued by email, including photographs

– Full record analysis of all suppliers input

– Trend analysis

– Monthly issuing of Quality Management information to all suppliers

• Output– Quality Assurance operatives on line

– Full recorded analysis of every output grade

– Quality assurance of every production grade

– Shift Quality Assurance tags on every bale

• Audit Trail– Dedicated shipping department

– PRN Accredited

– Audited by EA and DEFRA

– AQSIQ/CCIC system and audit

– ESA-RSS Audit Scheme

ISO 9001 FS 515984ISO 9001 FS 515984 ISO 14001 EMS 72946ISO 14001 EMS 72946

To end with a small but strong quote from Jim Rogers a

famous Raw Materials Guru!!

“I am very optimistic about the price of raw materials.

I think you’ll be rich because you’re in the right place

at the right time.”

THANK YOU!