ine Lawlor Presenter Morning Ireland

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Áine LawlorPresenterMorning Ireland
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• Olaf Fitzsimmons
• Associate Director
• Ulster Bank

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• Waste Management Summit 2008
• International Dimension
• Financing Considerations
• Olaf Fitzsimmons
• Associate Director
• Ulster Bank
• Corporate Banking

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Agenda

• Introduction
• European Waste Market Key Drivers
• Increasing the Market Value
• Consolidation
• Regulatory Context
• Economic Backdrop
• Interest Rate Outlook
• Financing Considerations
• Conclusion

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Ulster Bank Dedicated Sector Team

• Established lender to the sector
• Relationships with key players
• Dedicated team
• Experience expertise
• Corporate Project Finance structures
• RBS Group experience

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European Waste Market Key Drivers

• European waste management markets are driven by
  the following -
• - Technology moving up the value chain
• - Consolidation / MA activity
• - Legislation / Regulation
• Similar drivers to Irish market

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European Market Overview

• Varying levels of landfill, recycling and
  incineration solutions
• Opportunity to increased the value added element
  of Irish waste sector in coming years

Source RBS Group
Economics, EU
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Increasing the Market Value

• European markets feature wide range of downstream
  solutions which significantly increase the waste
  management market value, e.g.
• - Recycling / MRF / MBT
• - Composting Well debated in
• - Waste to Energy / Refuse Derived Fuels Irish
  market
• - Commodity recovery / Upgrading
• Private sector awaits greater certainty on
  direction of waste policy before undertaking
  significant investments in these areas.
• Opportunity for market value to significantly
  outpace market volume growth
• Opportunity for Irish economy ?

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Challenges

• Significant capital investment will be required
• Financial Risk payback, return on investment
• Operating Risks e.g. Performance criteria
• New Business models Joint Ventures / PPP / PFI
  / Consortia
• PFI / PPP planning issues, lead times, costs
• Challenge is to ensure that operating margins and
  cashflows provide an appropriate return for
  increased risk capital investment.
• Pricing power in value added sector typically
  stronger.

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Challenges

• New Risks - e.g. Commodities
• Significant price falls in recent months of c.
  50
• Linked with world financial market turmoil
• Also fundamentals driven lower global demand
  forecast reflecting weaker economic prospects
• Strengthening of dollar has also driven price
  correction
• Difficult to forecast future prices all markets
  seeing unprecedented volatility

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Aluminium 2005 to 2008 price trends
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Consolidation

• European markets remain very fragmented despite
  10bn Merger Acquisition activity 2005 - 2007
• Consolidation being driven by the following -
• - Need for integrated waste offering (PFI type
  contracts)
• - Seeking exposure to high growth markets /
  sectors e.g. UK, WTE
• - Defensive synergies / economies of scale to
  protect margins
• Similar drivers relevant in Irish market
• Irish economic slowdown may prompt further
  consolidation for defensive reasons

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Market Structure

• Public / Private market participation
• European markets feature increasing levels of
  private sector participation
• Increasing trend towards outsourcing to private
  sector driven by
• - Increasingly demanding regulation
• - Need for integrated waste solutions (private
  consortia)
• Variety of different structures for private
  sector involvement
• Irish market compares favourably in terms of
  existing level of private sector participation in
  municipal waste sector.
• Mature European markets growth opportunities
  still being driven by increasingly demanding
  waste targets policies

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Economic Backdrop

• Future investment in the waste sector will be
  against a very challenging economic backdrop
• GNP forecast to contract by 2.8 in 2008, 4 in
  2009 before returning to modest growth in 2010.
• 2009 forecast reflects -
• - Global environment has deteriorated sharply
• - Credit crisis has exacerbated housing slowdown
• - Reduced consumer spending

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Economic Backdrop

• Global environment has deteriorated sharply with
  2009 Growth forecasts revised sharply downwards
  in recent months.

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Economic Backdrop

• Reduced consumer spending.

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Economic Backdrop
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Interest Rate Outlook

• Credit crunch began August 2007 and for the past
  year interbank rates have set at a considerable
  premium to ECB continues despite recent
  aggressive ECB rate cuts.

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Interest Rate Outlook

• ECB rates expected to fall further in December
  and Q1 2009
• Current 2 year swap rate implies that ECB rates
  will average somewhere between 2.25 and 2.5
  over next 2 years

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Financing Considerations

• Significantly weaker economic backdrop,
  notwithstanding some relief from lower interest
  rates
• Competition increased as firms seek to maintain
  volumes
• Projects need to be able to withstand robust
  stress testing
• From lending perspective, waste sector still
  regarded as attractive, relatively defensive
• Acquisitions / investments still capable of being
  completed but would expect that firms will be
  more cautious

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Summary

• European waste management sector indicates the
  significant development potential in the Irish
  market
• Similar drivers of market growth and development
  Regulation, Consolidation and Technology (value
  added)
• Challenges ahead in realising the market
  potential increased business, financial and
  operating risks.
• Opportunity to outgrow underlying volume /
  economic backdrop through moving up the value
  chain.

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Key Contacts
Olaf Fitzsimmons Associate Director Phone 01
608 4338 E-mail olaf.fitzsimmons_at_ulsterbank.com G
erry Walsh Associate Director Phone 01 608
4427 E-mail gerry.walsh_at_ulsterbank.com John
Corry Senior Manager Phone 01 608
4202 E-mail john.corry_at_ulsterbank.com
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• Waste Management Summit 2008
• International Dimension
• Financing Considerations
• Olaf Fitzsimmons
• Associate Director
• Ulster Bank
• Corporate Banking

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• Andreas Versmann
• Policy Officer
• EU Commission

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European legislation on wasteand the new Waste
Framework Directive Commissions perspective

• Andreas Versmann
• DG Environment, European Commission

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EUROPEAN WASTE LEGISLATION

• Current State

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EU Waste Legislation
Framework Legislation

Waste Framework Directive Dir 2006/12/EC To be
replaced to the revised
Hazardous Waste Directive Dir.91/689/EEC
Waste Shipment Regulation (Reg. (EEC)
259/93) Just revised
Waste Treatment Operations

Incineration 89/369 429 (MW) 94/67
(HW) Replaced by 2000/76/EC
Landfill 99/31/EC
Recycling
Waste Streams
Sewage Sludge Dir. 86/278/EEC
Batteries and Accumulators Dir. 91/157/EEC
93/86/EEC COM(2003)723
Packaging and Packaging Waste Dir. 94/62/EC
PCBs Dir.96/59/EC
End-of-life Vehicles Dir 2000/53 EC
Mining Waste Com (2003)319
Waste oils Dir 75/439/EEC
Titanium Dioxide Dir 78/176/EEC
Waste electric and electronic equipment Dir.2002/9
5EC
Restriction of Hazardous Substances Dir.2002/95EC
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European Waste Management- What has been
achieved?

• waste treatment facilities under control
• of environmental authorities
• waste disposal is subject to environmental
  standards
• disposal of hazardous waste monitored
• shipment of waste monitored
• recycling and recovery of waste increased

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European Waste Management- problems

• implementation problems
• lack of environmental standards for recovery and
  recycling
• waste prevention not efficient
• recovery and recycling limited
• state of waste management differs between EU
  Member States

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Recycling, incineration and landfilling of
municipal solid wastes in the EU
Source EEA, 2007.
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The General ProblemLack of Sustainability
Threats to ecosystem services
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• POLICY ANSWER

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The Vision integrating Resources, Products and
Waste Policies
Thematic Strategy on Sustainable Use
of Resources
EU 6th ENV Action Programme
Thematic Strategy on the Prevention and Recycling
of Waste
Sustainable Production Consumption
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• WASTE FRAMEWORK DIRECTIVE
• main changes

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Waste Framework Directive- main changes

• Simplification of waste management legislation
• Clarification of legal definitions and scope
• Introduction of life-cycle thinking in waste
  management
• New instruments for waste prevention
• Promotion of energy recovery from waste
• Targets for the recycling of waste

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Simplification of waste legislation

• Incorporation of other legislation
• Directive on Hazardous Waste
• Directive on Waste Oils

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Clarification of definitions and scope

• Waste
• End-of-waste
• By-products
• Specification of scope
• Unexcavated contaminated soil and immovable
  property
• Excavated uncontaminated soil and naturally
  occurring material
• Animal by-products
• Sediments relocated inside waters

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Clarification streamlining definitions

• Recovery
• Substitution of other materials as principal
  result
• Substitution in the recovery plant or in the
  wider economy
• Energy-efficiency threshold for MSW-incinerators
• gt 65 new installations
• gt 60 existing installations
• Recycling
• Exclusion of energy recovery and backfilling

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5-step life-cycle-thinking Waste Hierarchy
PREVENT
PREPARING FOR REUSE
RECYCLING (COMPOSTING)
OTHER RECOVERY (ENERGY RECOVERY)
DISPOSAL
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New dimension of prevention

• New requirements concerning prevention
• MS to establish waste prevention programmes
• Programmes to set out prevention objectives,
  describe prevention measures, determine
  qualitative and quantitative benchmarks or
  targets for waste prevention
• Indicators to be developed by the Commission
• Commission to create a system for sharing
  information on best practice regarding waste
  prevention and develop guidelines for MS

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New recycling targets

• By 2020, the preparing for re-use and recycling
  of
• 50 by weight of at least paper, metal, plastic
  and glass from household and possibly other
  origins as far as these waste streams are similar
  to waste from households
• 70 by weight of non-hazardous construction
  demolition waste (recycling and backfilling
  operations)

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• WASTE FRAMEWORK DIRECTIVE
• State of play and outlook

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• WFD approved by Parliament and Council
• Comes into force after publication
• Member States to transpose the new Waste
  Framework Directive within 2 years
• Commission will support and monitor transposition
• Commission
• Guidelines for waste prevention programms
• Calculation methods for WFD recycling targets
• End-of-waste criteria for certain waste streams
• Greenpaper and impact assessment on bio-waste

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European Commission DG ENV.G.4 Sustainable
Consumption and Production Avenue de Beaulieu
5 B-1160 Brussels
Thank you for your attention
http//ec.europa.eu/environment/waste/index.htm
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• Q A

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Afternoon break and exhibition viewing