Hazardous waste overview
The market for hazardous waste in the UK is based on a legislative environment underpinned by the implementation of the European Union’s Waste Framework Directive and the UK’s own hazardous waste National Policy Statement (NPS), which encourage sustainable methods of managing waste and the development of treatment, recycling and recovery facilities as the key focus of future waste management activities. NPS confirmed the need for the portfolio of treatment and disposal facilities and services developed by Augean. Importantly, the Group plays an active part in five of the eight sectors identified as essential for the management of hazardous wastes in the UK. The Waste Hierarchy provides a framework for waste management and implementation of infrastructure which will allow sustainable waste management solutions. However, the Waste Hierarchy is a simplification of Best Overall Environmental Outcome, which is the goal of environmental strategy, policy and regulation, and for hazardous wastes there is a particular need to consider the fate of the persistent and toxic pollutants in the waste.
The hazardous waste market is highly segmented with a total volume of approximately 5 million tonnes (Environment Agency) of waste handled in the UK each year. Within this arena Augean continues to focus on the treatment and disposal of waste from the growth areas of construction and demolition activities, Oil & Gas, energy from waste operators, specialist manufacturers and other industrial producers.
Approximately 0.9 million tonnes of Hazardous waste are disposed per annum to hazardous landfill sites and the total UK capacity for hazardous landfill is at most 14 million cubic metres and declining as hazardous landfills are closing and new hazardous landfills are not being permitted (source: Environment Agency and management estimates). Augean’s Energy & Construction business continues to be a leading provider within this market, holding in excess of 40% of the UK’s remaining and reducing scarce hazardous landfill capacity.
Energy-from-Waste and Biomass Energy waste market
Augean’s treatment and disposal to landfill includes the management of certain by-products from energy-fromwaste (EfW) plants, required to deliver the UK’s obligation to significantly reduce the landfilling of municipal solid waste by 2020, and from biomass energy plants. These facilities produce air pollution control residues (APCR) and intermediate bottom ash (IBA), also known as fly ash. The Group has developed the capability to treat and dispose of these ashes and residues at our sites at Port Clarence and East Northants Resource Management Facility (ENRMF), handling approximately a 40% market share (2017: approximate 40% share). This market is expected to grow at 9% compound average growth rate through to 2022. Disappointingly, due to operational issues, no new incinerators came on line in 2018. Despite this, it is pleasing that the Group was able to grow ash volumes by double digit percentage in 2018. The Group actively monitors technological developments in the treatment and recycling of this material to ensure its long term competitive position in this market. The Group’s overall volumes from this market increased 14% in 2018.
Construction waste market
Construction soils are a key input to the Group’s landfill sites. In 2018, the Group received volumes of this waste into its sites at ENRMF and Port Clarence where contaminated soils are treated and disposed to landfill. The volume of these soils available to the Group is variable and linked to activity in the construction sector, including the progress of large-scale infrastructure projects. The market for these soils, by nature, is not operated on a long term contracted basis. It is sensitive to the prevailing market spot price, influenced by haulage costs and thus proximity to the disposal site.
The Group has also invested in soil washing and treatment equipment to promote recycling of a proportion of such materials, as required by the market. During 2018, the Group reassembled a construction sales team which resulted in construction waste volumes being up over 140% in the second half of the year. Overall construction volumes were increased by 24% over 2017.
Radioactive waste market
The Group’s key radioactive waste market is the nuclear decommissioning market, relating to the closure and dismantling of the UK’s redundant nuclear power and research facilities. This is managed on behalf of the UK government by the Nuclear Decommissioning Authority (NDA). The disposal of naturally occurring radioactive material (NORM) generated principally from the Oil and Gas industry is the second key radioactive waste market for the Group. Augean has planning permission and environmental permits in place to dispose of low activity low level waste (LLW), very low level waste (VLLW) and NORM. The NDA publishes regular forecasts on the volumes of radioactive wastes requiring disposal and treatment.
During 2018 the volumes of radioactive waste processed by the Group increased by 82%
Industrial waste market
The waste market has again remained stable as a result of shutdown and maintenance work being carried out across a broad range of sectors and overall growth in the UK manufacturing sector. During 2018 the Group grew its share in this market with sales increasing by 39%.
As large energy-intensive industries have moved production out of the UK, the demand for organic waste derived fuels in the UK market has reduced. The market has some reliance on facilities in mainland Europe for the recovery of energy from these fuels. The opportunity to send waste to energy recovery routes within mainland Europe has remained stable and Augean benefits from these disposal routes. The impact of Brexit on these routes is difficult to predict but the position is being closely monitored with the Group Board having access to expert advice. The Group has established additional disposal routes outside of Europe, which it believes will ensure business continuity in this regard. Additionally, inventories will be managed down to reduce risk as we progress towards the planned exit date.
North Sea Oil & Gas waste services market
The markets for waste produced in the exploration, appraisal, development, production and decommissioning of North Sea oil & gas are centred on Aberdeen, extend to the Shetland Isles for the northern sector, and Great Yarmouth for the Southern sector. Augean North Sea Services (ANSS) provide a full range of services, equipment rental and manpower provision for the containment, treatment and associated specialised industrial cleaning of all Oil & Gas offshore and terminal wastes. These include the cuttings and slop waters from drilling, contaminated waters from the production process, production wastes, oil sludges, including those contaminated with low level naturally occurring radioactive material (NORM), swarf containment from abandonment activities, as well as a more general range of industrial general and hazardous wastes. In addition, ANSS now provide full NORM decontamination of wellbore and topside production equipment in their new decommissioning Centre in the Port of Dundee.
The dependence of the UK’s energy sector on oil and gas will continue over several decades, leading to increased levels of demand for specialised industrial service related waste management for offshore production facilities and onshore terminals, as the sector, depending on economics, extends the life of, or begins decommissioning the assets in the North Sea.
The market has seen an upturn in Decommissioning related plug and abandonment activities. NORM builds up over time on the downhole production equipment, processing lines and topside equipment, which requires decontamination with specialised industrial jetting equipment resulting in the generation of NORM scale. The volume of downhole and topside equipment requiring decontamination is rising rapidly alongside plug and abandonment decommissioning activities, requiring specialised decontamination, treatment and disposal.
The Group’s sales in this market increased by 19% in 2018.
The above segments represent the Group’s targeted growth markets. Each has shown growth during 2018, proving the Group’s strategic choices.
The business currently has two short term objectives against which progress has been made in 2018. After further progress has been achieved a revised long term strategy will be presented to Shareholders.
|Resolve HMRC Position||HMRC has issued the Group with assessments in relation to its treatment and disposal of hazardous waste. Based on the legal and other advice received by the Group over several years, Augean is very confident that the Group has met its obligations in respect of landfill tax, consistent with the law and official guidance at the time.||Resolution of issue|
|Maximise profitability and cash generation of business||The Board has implemented several rounds of cost reduction including a management reorganisation, which have resulted in a significant cost saving and increase in profitability.||Year-on-year profit growth
Increase in cash balance