Christchurch City Council bails out EcoCentral recycling company
Sunday, 24 June 2018
The Christchurch City Council is bailing out its recycling company to the tune of $3.2 million after a 'dramatic' drop in revenue.
EcoCentral, the council-owned company that sorts all the yellow bin recycling and operates three transfer stations, needs the money after its revenue took a hit when world commodity prices for paper, cardboard and plastics dropped.
The council made the decision to pay EcoCentral a $3.2m 'processing fee' in secret during the public excluded section of its June 14 meeting.
The fee was made public when it was released as part of the council's agenda for Friday's long term plan (LTP) ratification meeting.
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Council city services general manager David Adamson said the $3.2m was a short-term remedial step while the council, EcoCentral and its investment arm, Christchurch City Holdings Ltd (CCHL), considered long-term options.
The fee provided time for a co-ordinated solution to be developed for the medium to long term, he said.
'There has been a dramatic drop in the world commodity price for mixed paper, cardboard and low grade plastics significantly affecting EcoCentral's revenue stream.'
A Chinese ban on foreign waste came into effect on January 1, meaning all plastic, slag, unsorted waste paper and textiles once sent there for recycling have to go somewhere else.
The Ministry for the Environment's most recent figures show New Zealand sent $21m worth of waste to China in 2016, made up of $8.2m of plastic, $3.1m of slag, and $9.7m of paper.
Adamson would not say how much EcoCentral's revenue had dropped because it was commercially sensitive.
He said prices for commodities had dropped by as much as $90 a tonne, but did not say what the starting price was.
The council agenda said there had been no opportunity for the council to consult on the options for providing assistance to EcoCentral as part of the LTP process, but there was an 'urgent need' to address the matter in the short term.
The $3.2m would be funded by CCHL bringing forward dividends from 2026 into 2019.
The council had not previously paid a processing fee because it was not previously a condition of its contract with EcoCentral. It was understood other councils paid processing fees in a bid to make recycling financially viable.
EcoCentral posted a half-year profit (between July 2017 and December 2017) after tax of $880,000, compared with $870,000 during the same period a year earlier.
CCHL's interim report said EcoCentral had 'an impressive start to the year', which was reflective of stronger fibre commodity prices for recycled paper and cardboard. EcoCentral paid a dividend of $250,000 to CCHL during that period time.
Adamson said the fee would offset EcoCentral's operating costs, including the cost to run the recycling sorting machine.
'Recycling is a key service for the people of Christchurch and it is important that the provision of this service is supported while a long term solution is developed.'