THAT CABINET:

1.       (a)     agreed that the current position within the parameters set out in Annex 1 represented an acceptable position for Herefordshire Council to progress Mercia Waste Management Limited's ("Mercia") proposals for the Hartlebury Energy from Waste (EfW) plant by entering variation of the existing WMSC in accordance with the following recommendations;

          (b)      agreed that such proposals for the EfW plant were affordable (subject to 2 below) and delivered value for money if the Councils’ secured funding for the project from the Public Loans and Works Board in accordance with Option 2 set out in the report;

          (c)       the Chief Financial Officer was authorised to come to an agreement with DEFRA on a reduction in Waste Infrastructure Grant (WIG) credits (as detailed in 11.5) in order to ensure the deliverability of Option 2;

          (d)     agreed that the Council should enter a variation of  the existing WMSC with Mercia to give effect to Option 2 to enable the construction and operation of a new EfW Plant at Hartlebury for the remainder of the WMSC as the most appropriate approach for Herefordshire Council's waste treatment arrangements;

          (e)       subject to 2 below, the Director for Economy, Communities and Corporate  be authorised (in consultation with the Chief Financial Officer and in conjunction with Worcestershire County Council) to conclude a variation to the WMSC with Mercia including enabling the construction of the EfW Plant at Hartlebury and its operation for the remainder of the WMSC and to take all necessary steps to put Option 2 into effect including execution of that variation in accordance with the Council's constitution and its certification under the Local Government (Contracts) Act 1997;

          (f)        the Director for Economy, Communities and Corporate be authorised to update the Joint Working Agreement between Herefordshire Council  and Worcestershire County Council to reflect the design life of the EfW Plant which will extend beyond the period of the WMSC;

          (g)      that Council be recommended through a further report direct from the Chief Financial Officer on the details of the council's position as potential providers of appropriate funding for the project, to:

                   (i)      amend its Treasury Policy Strategy and associated Treasury Management Statements and authorise a loan of up to £40 million (noting that Worcestershire County Council intend to loan £125 million) to Mercia for the purposes of the varied WMSC (Option 2);

                   (ii)     add up to £40 million  to the Council's Capital Programme in order to enable the Council to provide such a loan to Mercia;

                   (iii)    authorise the Chief Financial Officer to take all necessary steps to obtain the funding for Option 2 from the Public Works Loan Board (PWLB);

                   (iv)     amend the Medium Term Financial Strategy (MTFS) as appropriate;

                   (v)       consider whether any arrangements are appropriate to ensure that the Council is able to properly take account of its interests as both  the Waste Disposal Authority and as the funder; and

                   (vi)     authorise the Chief Financial Officer in consultation with the Solicitor to the Council to finalise a loan agreement with Mercia and advance funds as authorised above to Mercia by way of stage payments, properly authorised by the councils' joint independent certifier, as a loan repayable over the remaining life of the WMSC.

2.         The authorisation in 1(e) above be conditional upon (and the matter returned to Cabinet should any of those conditions not be met):

          (a)      The Council reaching an agreement with DEFRA on reduced Waste Infrastructure Grant (WIG) credits, formerly known as PFI credits, as set out in 1(c) above;

          (b)      No objection being received in writing from DEFRA or Her Majesty's Treasury (HMT) to Option 2 before 20 December 2013;

          (c)      Final discussions with Mercia to (i) bring the proposal within what the Leader in consultation with the Chief Financial Officer considers to be sufficiently close to the affordability envelope as set out in the report and (ii) conclude negotiations with the Engineering, Procurement and Construction Contractor, before executing the variation;

          (d)      Worcestershire County Council giving approvals substantially in the same or a substantially similar form as those contained within 1 (a) to (e) above; and

          (e)      agreement being reached with Worcestershire County Council on the terms of the revised Joint Working Arrangements between the two councils.

3.         Cabinet noted the progress in relation to the Waste Management Service Contract (WMSC) since the reports to Cabinet in February 2012 and December 2012.