Veolia off the ticket for nation’s only waste-to-energy plants as Acciona muscles in
Veolia is the one company in the world synonymous with the concept of turning waste into energy but the French firm looks to have lost its rights to run the only two commercial plants in Australia.
It was the “night of the long knives” for the big men in rubbish.
By time it was over, Bede Noonan from Acciona Australia reigned supreme and Veolia – the world leader in waste – had lost not one but possibly both of its roles running the nation’s only two commercial waste-to-energy plants.
This is a story about two “‘take no prisoners” men, two infrastructure projects that had cost the taxpayer, equity holders and creditors more than $1.5bn; and sitting above all that, the hugely contentious process of burning “red bin” rubbish normally destined for landfill to create energy for the grid.
The Australian can reveal that Veolia – a world leader in waste to energy – has just been kicked out operating the $700m-plus Kwinana plant and has stopped being paid on the $500m-plus East Rockingham plant, the nation’s only two near-operational commercial projects.
The two Perth waste-to-energy facilities were partly funded with taxpayer dollars. They’ve been plagued with delays of three years and counting. Kwinana is still in the ramp-up phase and East Rockingham is yet to open.
The victor (of sorts) in both these battles is Acciona Australia, an 80/20 ownership between the Spanish-listed construction giant Acciona, and Bede Noonan, who runs the Australian company he set up with his brother Andre.
The fact they managed to out-muscle the €21bn ($35bn) French giant at two financially crippled infrastructure projects shows just how hard the Noonan brothers were prepared to fight when their backs were against the wall.
“We want to be in control of our own destiny,” Noonan says of the decision to terminate Veolia’s contract at Kwinana. “Now, we’ve bought the entire debt on East Rockingham. There is only one group that is standing there and putting its money in and get things done and that’s Acciona.”
At the start, both Kwinana and East Rockingham sounded like good investments. Until the pandemic hit, and then suddenly neither was, for anyone (except the lawyers) involved.
The two separate projects have been a revolving wheel of bankers, financiers, lawyers, and then eventually accountants, administrators and distressed debt-to-equity specialists.
In 2018 Macquarie Bank spearheaded the Kwinana project, located in an industrial suburb southwest of Perth, with its usual web of public and private financing and a leveraged structure of debt and equity. Initially it probably planned to sell the finished asset into one of its Macquarie-managed funds, ensuring it could clip the money ticket in perpetuity. Acciona was awarded the building contract.
A year later and following the same playbook, the nearby East Rockingham project kicked off with Acciona, Hitachi and John Laing all taking equity.
Like so many things that Macquarie does, the idea of backing a commercial waste-to-energy project made sense.
It’s a massive industry globally. Paris-headquartered Veolia is the world leader by revenue in waste, and operates more than 65 waste-to-energy plants around the world.
Its plants burn waste to create pressurised steam, which is then used to supply heating networks, or, in the case of Australia, pushed into a specially built turbo-generator to create electrical energy.
In places such as Denmark the concept is widely accepted. Copenhagen even has a €550m plant known as CopenHill owned by the five municipalities it takes the waste from, that doubles as a ski slope.
The Australian general population still needs convincing.
Various federal government entities such as the Clean Energy Finance Corporation and Australian Renewable Energy Agency have both financially backed Kwinana and East Rockingham.
After all, Australia has a problem with mounting piles of landfill and simultaneously intermittent power shortages, particularly as the country’s ageing coal-fired power plants are decommissioned.
It sounds good, but these projects are extremely expensive to build, need to be located near transport hubs, and few Australians are keen to have one in their backyard.
Kirkman has possibly a bigger problem than the “sell” of waste-to-energy now though, given Veolia – the voice of the movement in Australia – has been unceremoniously booted off its roles.
Coming unstuck
In 2022, Acciona asked the Supreme Court to define the meaning of force majeure so that it could determine whether West Australia’s border closures during the pandemic could classify as one in the case of Kwinana. Acciona may have asked for additional costs of $410m plus an extra two years to finish the build, if it had fit this definition. The judge did not rule.
Then facing the prospect of either a complete write-off of the near insolvent project or buying out Macquarie and the debt holders for about 90c in the dollar, they chose the latter. “We’ve invested $800m,” says Noonan. “Macquarie just walked away.”
But in being forced to inject more money to recover their investment, tensions began to mount at Acciona that Veolia weren’t being forced to bear any of the pain. “Bearing in mind, Veolia had come to us, as they had to previous project co-owners, being very concerned and saying that their contract was out of the money, and they desperately wanted to totally renegotiate,” Noonan says.
Next door at the East Rockingham plant, receivers were called in last August and fired everyone including Acciona from the project, keeping only Veolia. Veolia could – and did – argue at both projects that it wasn’t responsible for the cost overruns and several years of construction delays.
Veolia’s role was as the global leader, to provide expert advice during the build, which it did. It was also signed up to run both projects separately for the life of the plants on an operator and maintenance contract.
Importantly, the deals both involved Veolia – the biggest rubbish collector in Perth – providing the waste needed to be incinerated.
Facing years of red ink, it is believed Noonan told Kirkman it was time for Veolia to feel some pain too. It was time for them to pay more to drop off their waste. Meantime, Veolia is believed to have thought it was getting the short end of the stick too, and thought it should be paid more for its advisory work.
Neither Noonan nor Kirkman would confirm or deny any private conversations between the two.
“Did their people and our people have some challenging conversations? Probably,” says Noonan, but he is adamant there is no bad blood between either him and Kirkman or the company. “There is no animosity towards Veolia.”
Regardless, distrust was mounting. It’s understood Veolia had complained both separate projects weren’t being built to standard by Acciona, with issues raised over many years. They would not be taking a haircut for a problem not of their doing.
Kirkman may well have thought they had Noonan off their backs, at least at East Rockingham. But this proved wrong. Once more, faced with the prospect of injecting more money or losing their entire investment, Noonan – with the backing of his Spanish JV partners, purchased the senior debt in East Rockingham and put themselves back in the drivers seat. “We’ve now bought the entire debt on East Rockingham. There is only one company one group that stands there, puts their money in and get things done,” says Noonan,
Now Kirkman realised he needed to take notice. But his play may have come too late.
While baulking at paying more to drop the waste at the plant than it would a gate fee at a landfill site, he is understood to have tried to negotiate.
For Noonan the damage was already done. This past week Veolia had its contract at Kwinana terminated. At East Rockingham, Veolia has stopped being paid. Noonan says it’s up to receiver Cor Cordis as to whether they terminate the contract, but as its largest creditor his views would be heard.
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