Project Costs and Funding
In early 2019 NLWA developed its detailed cost estimate of £1.2bn at 2019 cash prices, which has continued to provide a reliable basis to manage the cost performance of this important project for the residents of north London.
The 2019 estimate was validated by a robust benchmarking exercise, which examined the major elements of the project’s construction costs against comparable infrastructure projects, providing strong evidence that enables us to inform our decision making as the project proceeds.
The estimated impact of inflation was included in all major decisions and factored into boroughs’ future financing plans. Inflation predictions for the project were based on assumptions of inflation in 2019 by the Bank of England at 2% inflation per year, but these were recognised to be uncertain given the length of time of the project and scale of procurement for work contracts.
Having committed over 80% of the work contracts, the project remains on track to deliver within the original cost estimate at the 2019 price point and an outturn cost can be viewed with more certainty. Taking into account that inflation has impacted most infrastructure programmes, with actual levels peaking in 2022 at 9.1% above the Bank of England’s assumptions, the project is forecasting an outturn cost including inflation in a range of £1.42bn - £1.52bn.
How the project is funded
North London Waste Authority is responsible for the cost-effective disposal of waste collected by Barnet, Camden, Enfield, Hackney, Haringey, Islington and Waltham Forest councils.
The disposal of this waste is paid for in the form of a levy charged to the seven boroughs by NLWA. The cost of the NLHPP will be paid for by this levy for managing the disposal of their waste. The cost including inflation is fully accounted for in this levy and boroughs have taken account of the levy in their future financing plans. Building the project represents a cost effective route for waste disposal in north London for the future. Providing a publicly owned facility in north London means councils avoid sending waste to third party and private sector organisations which cost more in the long term. The cost per tonne of waste treated in north London is, and will continue to be, very competitive compared to costs in the open market.
NLWA is committed to funding this project with the most cost-effective solution. As a public authority, NLWA is able to borrow from sources such as the Public Works Loan Board to secure finance at the lowest cost possible to the taxpayer. £970 million has already been secured by the Authority to pay for the project at an average borrowing rate of 2.4%. As a result of this low borrowing cost NLWA’s levy can continue to represent good value for money for our boroughs, remaining amongst the most cost effective of joint waste disposal authorities.