Revenue from energy recovery facilities (ERFs) helped drive Pennon profits last year and the firm plans to increase its generation capacity by more than 50% by 2020.
Pennon owns both South West Water and Bournemouth Water, deriving most of group profit from water businesses. It also owns waste and recycling firm Viridor and uses the energy it generates from burning rubbish both to sell on the markets and to supply and hedge its own consumption (the water business uses the equivalent of a third Viridor’s generation capacity). As well as earning waste gate fees, there is also a subsidy revenue stream for the energy (both power and heat).
The group exported 1.5 terrawatt hours (TWh) during the year from generation assets of 280MW, including anaerobic digestors, solar and landfill gas.
ERFs provided 178MW of generating capacity. When its four new plants come on stream in 2020/21 that capacity will stand at 276MW, an increase of 55%, with waste tonnage capacity increasing by a similar amount.
Of those new plants, the Glasgow facility, from which Interserve was removed earlier this year, should begin commissioning later this year, according to Pennon’s annual report.
“We expect demand for ERFs to continue to exceed capacity into the long term,” said CEO Chris Loughlin.
While the company believes energy from waste has the benefit of displacing landfill and other fossil-derived energy, the group said gross greenhouse gas emissions increased by 14%, as its newly commissioned ERFs reached full operating capacity.
Earnings before interest, taxes, deductions and amortisation (Ebitda) for the ERF business stood at £106.9m, up 19 per cent.
For the Pennon group, adjusted Ebitda stood at £546m, up 7.4 per cent. Underlying profit before tax was up 18.3 per cent to £250m.
See the annual report here.