Incinerators, Teesworks land deals and everything in-between
From Hartlepool to Redcar the question of burning rubbish appears to be of high value for the future of these sites
Today’s edition of The Teesside Lead, the lucky thirteenth edition, is something of a deep dive into all things Teesworks and land transactions.
It’s not been reported elsewhere yet that Hartlepool Council has completed a land deal to build an incinerator at Teesworks with six other councils, and I’ll use that as a starting point to go into depth about the world of land deals on the site, using the infamous £100 Teesworks land purchase as a case study.
It’s sort of a greatest hits of my all-consuming life’s work over the last two years, and hopefully you can use it as a reference point in the future.
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Hartlepool Borough Council has contractually secured the land to be used for a proposed waste incinerator at the Teesworks site, The Teesside Lead can reveal, although questions remain over the ownership of the site’s freehold, with potentially billions of pounds of public money at stake.
A document from the Tees Valley Energy Recovery Facility (TVERF) project, providing an update to stakeholders in October, says Hartlepool Council entered an option agreement for the land on the former Redcar steelworks site on 28 June 2024.
According to a statement sent to The Teesside Lead by TVERF, the option agreement taken by Hartlepool Council was with Teesworks Ltd, South Tees Development Corporation (STDC) and South Tees Developments Ltd (STDL), which is different to previous known land deals on the site.
It’s not clear if the councils involved in the TVERF project will pay rent for the land to Teesworks Ltd, STDC, or a combination of both.
STDC is a subsidiary of Tees Valley Combined Authority (TVCA), set up to manage redevelopment of the enormous site of the former Redcar steelworks. STDL is its company, set up to handle land transactions related to the project, known as Teesworks.
Transparency has long been an issue with the Teesworks, with the previous government instigating an independent review to investigate allegations of corruption. Although it found no evidence of criminality, the review, which published its findings in January, raised serious concerns about governance and transparency.
As with many details with the Teesworks story, small bits of information are revealed in a piecemeal fashion, with as many new questions being raised by any that are answered. Land deals at the site are notoriously opaque.
An agreement for the land on which the SeAH Wind factory is currently being built saw Teesworks’ private partners, Chris Musgrave and Martin Corney, secure a £90m cash windfall in a complicated deal which involves a chain of sub-letting. They paid £100 for the freehold of the 90-acre site, but a side deal with the Ben Houchen-chaired STDC, the public sector body which owns most of the Teesworks site, saw them promise to pay £15m.
So far they have paid £5m for that transaction. Last year I revealed the remaining £10m isn’t due for payment until December 2025 - three years after completion of the deal.
Teesworks Ltd was initially set up as a 50-50 venture between STDC and Musgrave and Corney, before the developers were given a 90 per cent stake for free. Both they and STDC insist it was in exchange for taking on future remediation and development of the enormous site, however the government review into the project said: “the legal documentation doesn’t impose any such obligation on [Teesworks Ltd] to undertake remediation and there is no evidence that [Teesworks Ltd] has yet done so.”
A spokesperson for Teesworks Ltd refused to comment on the TVERF land deal, telling The Teesside Lead: “Teesworks Limited will not be responding to direct questions about tenants' contractual agreements or those of Teesworks Limited.”
The final tenancy agreement hasn’t yet been signed, but it includes a break clause after 29 years, with an option for rolling 5-year breaks after that. The incinerator is expected to be operational from 2029 until 2055.
The TVERF is a joint venture between the five Tees Valley councils alongside County Durham and Newcastle City Council to build an incinerator which will burn domestic waste that isn’t recycled to generate energy.
Hartlepool Council is leading the project on behalf of the other councils, and is currently considering two bids to build and operate the incinerator. One is from Viridor, which operates the largest incinerator in the UK in Runcorn, the other from Green Recovery Projects Ltd.
The contract is due to be awarded in the first half of next year, and could be worth up to £2.1bn to the successful bidder. At the end of the 29-year contract there’s an option to extend for another 11 years.
Before becoming Hartlepool’s MP, Jonathan Brash was a councillor for more than a decade. He told me how important it was that the council was open about the land deal.
“It’s integral to public confidence that we always have full openness and transparency on deals like these,” he said.
“Councils are under huge pressures leading to services being cut. I’d always urge full openness and transparency to ensure the public’s peace of mind.”
Unlike the SeAH Wind site, it doesn’t appear that Teesworks Ltd has sold a lease on its interest, however, ownership of the site, and to whom Hartlepool and its partner councils will owe rent, is still unclear.
The statement issued to The Teesside Lead by TVERF confirmed Hartlepool Council has entered an option agreement with the landowner, “which comprises Teesworks Ltd, South Tees Developments Ltd and South Tees Development Corporation as signatories to this agreement.”
The statement adds: “This Option Agreement secures the site for the TVERF development. By optioning the site in this way, and specifying this location for the facility, the project partners have created a level playing field for a competitive procurement, which will help to secure best value for the partner authorities.”
According to the councils comprising the TVERF partners, “The precise details of the Option Agreement and Lease are commercially confidential, and final project costs remain subject to a live competitive procurement process.”
Statement issued on behalf of the Tees Valley Energy Recovery Facility (TVERF) Project Partners
“The Tees Valley Energy Recovery Facility (TV ERF) is an important infrastructure project for the North-East which will allow the seven participating partner councils (Darlington, Durham, Hartlepool, Middlesbrough, Newcastle, Redcar & Cleveland and Stockton) to have full control over the management of waste from across the region that is left over after recycling (known as “residual waste”) - ensuring it is managed locally, sustainably and safely over the long term.
The project partners have been engaged in a two-stage competitive dialogue tender process to find an appropriate operator to design, build, finance and operate the TV ERF. The tenderers that remain in the procurement process are Viridor, and Green Recovery Projects Ltd (FCC), both of whom are experienced energy recovery facility developers and operators.
Hartlepool Borough Council is leading the tender process and this work is being overseen by a governance board representing all seven councils. Hartlepool Borough Council has entered into an Option Agreement with the landowner (which comprises Teesworks Ltd, South Tees Developments Ltd and South Tees Development Corporation as signatories to this agreement). This Option Agreement secures the site for the TV ERF development. By optioning the site in this way, and specifying this location for the facility, the project partners have created a level playing field for a competitive procurement, which will help to secure best value for the partner authorities.
The facility will be located on part of the former steelworks site at Grangetown, which has now been extensively remediated by the landowner. This site was selected after a comprehensive site identification and appraisal process which concluded in 2018, during which 176 potential sites were considered within the boundary of the five Tees Valley authorities.
Subject to the successful conclusion of the TV ERF procurement process and the appointment of a Preferred Tenderer, the Option Agreement will be novated from Hartlepool Borough Council to a Local Authority Special Purpose Vehicle (LA SPV), which will then enter into the 29-year lease agreement on behalf of the councils. The LA SPV is a separate legal entity that will have responsibility for managing the contract on behalf of the councils in the long-term and which will be owned and governed by the partner authorities.
The precise details of the Option Agreement and Lease are commercially confidential, and final project costs remain subject to a live competitive procurement process.”
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Jen Williams at the FT has been covering the Teesworks story in depth for a number of years now. This week she published an excellent long read on devolution and the role of metro mayors in fixing regional inequality in England.
Although that piece focuses on South Yorkshire as a case study, it’s an excellent examination of the development of the role of regional mayors (such as Ben Houchen) in being able to deliver at a local level, and how that aligns with central government strategy.
You can read it here.
However, she also published a piece last night detailing how external auditors have refused to sign off on STDC’s accounts for 2021-22 and 2022-23, saying there are “significant weaknesses” in value for money arrangements at the corporation.
You can read that here.
Putting aside environmental concerns for a moment (and I’ll get back to that later on), it appears on the surface that securing the land for the site is welcome progress on the long-delayed Redcar incinerator.
However, transparency over this transaction is crucial, especially as huge public expense has gone into the project only to see profits go into the pockets of private developers (who have yet to provide evidence of financial investment themselves).
The only deal at the Teesworks site we know about in any detail is that of the SeAH Wind factory. And it doesn’t appear to be great value for the taxpayer.
The public STDC, a subsidiary of the Tees Valley Combined Authority (TVCA), bought the entire Teesworks site through a compulsory purchase in April 2020. It has since spent over £500m in remediating the highly polluted and hazardous site to prepare it for redevelopment, and secured future borrowing of £450m.
TVCA claims to have got a good deal for the taxpayer on the SeAH site, despite the land transaction itself being worth only £97. This is the controversial “£100” deal you may have heard about.
The authority got the land valued at £12m before selling it, but a side-deal with Teesworks Ltd was worth £15m. However, upon agreeing to that transaction, published accounts show Teesworks Ltd secured a 40-year lease to financial giants Macquarie for an instant cash sum of £93.3m.
In turn, Macquarie sub-lets the land back to Tees Valley Combined Authority (TVCA) for £3.65m a year. TVCA then subleases its rights to the eventual land user, SeAH Wind, for £4.3m a year.
If SeAH occupies the site for the full 40 years (and there’s no guarantee they will), TVCA stands to gain only £26m in profit, compared to Macquarie whose initial £93.3m investment will see a return of £146m, guaranteed by the public sector for the full term.
SeAH doesn’t owe rent on the land it’s building its factory on until it’s operational, leaving TVCA with rent due to Macquarie in the meantime. I understand Teesworks Ltd has provided TVCA with the funds to cover the cost of two years of rent until the factory opens.
The government review into Teesworks, published in January, recommended renegotiating the deal which handed 90 per cent of Teesworks Ltd to Chris Musgrave and Martin Corney on favourable terms. Minutes of a meeting between them and TVCA chief executive Julie Gilhespie, which took place in August, say the duo are reluctantly entering renegotiation in order to “avoid any further negative publicity”.
It’s not yet clear what stage those renegotiations have reached, or what compromises are being offered.
However, despite wanting to avoid negative publicity, Teesworks’ media representative told me they were unwilling to comment on the nature of the deal signed by Hartlepool Council.
The statement issued by TVERF suggests the land the incinerator will be built on is owned by a combination of Teesworks Ltd and TVCA subsidiary, STDC.
TVCA did not respond to a request for comment.
Meanwhile, Newcastle City Council has said in the last week that it has “no alternative” besides sending its rubbish to be burned on Teesside.
It follows protests outside the city’s civic centre in September from health professionals concerned about health implications of burning waste on Teesside.
At a scrutiny panel meeting last week, Christine Herriot, the council’s director of operations and regulatory services, said there was “not an alternative really that would be affordable and provide us with the sustainable outcomes that the council wants.”
She was responding to councillors who were rightly concerned about the length of the contract.
Local Democracy Reporter Daniel Holland was at the meeting, and reports that Liberal Democrat Wendy Taylor said: “Our concern is that if something happens in the next five, 10, 20 years with new technology we will be stuck with this contract dealing with waste that could be dealt with in a better way.”
Her colleague Mark Mitchell asked why the council was locking itself into such a long deal.
Ms Herriot added: “It has been a well thought out decision that the council has made and committed to. We are part of the project and we have been working on this for at least three years, and we have considered the alternatives.
“We don’t want to put waste into landfill - that is the least environmentally friendly option and we have produced quite significant responses in terms of the councils that have been raised [about the TVERF].”
The length of the deal is in order to provide the incinerator’s operator with certainty over supply of waste to burn, and that a shorter deal would not be affordable.
The TVERF will have the capacity to burn 450,000 tonnes of waste otherwise due to be sent to landfill. This is similar to the amount of waste burned at the Wilton 11 incinerator on the Wilton site. It burns unrecyclable waste delivered from Merseyside on special trains.
A BBC investigation into waste incineration in September showed 597,000 tonnes of waste - mostly from the council areas involved with TVERF - was burned at Haverton Hill’s incineration plant according to the last year of available data.
It’s unclear what future there is for the Haverton Hill plant should its feedstock supply be re-routed to the other side of the river to TVERF.
A couple of months ago I went to Grangetown, a stone’s throw from the site of the proposed TVERF project, to speak to people there about the plans for BBC Radio Tees. You can listen to that here - it includes a lot of information about poor health in the vicinity of the new incinerator, and will only take about three minutes of your time.
Why divert the region’s waste to a new facility? The answer may lie in its location.
The proposed TVERF incinerator will be about 600m from the planned electric arc furnace on the British Steel site. This energy-intensive facility is politically important to mayor Ben Houchen who claims he’s bringing steelmaking back to Teesside (although British Steel’s owners are probably causing him some sleepless nights, as I’ve reported previously).
The TVERF project’s website says that in order to work, waste incinerators need the ability to export the electricity they generate, “typically to the National Grid.”
“However,” it continues, “if there is sufficient local demand (for example an energy-intensive facility), electricity can also be exported by ‘private wire’ direct to the user.”
A year ago, my digging revealed an energy company had been set up by the South Tees Development Corporation with Teesworks partners Chris Musgrave and Martin Corney. Shares in the company, Steel River Energy Limited, are split 90-10 in favour of the private developers, just as Teesworks Ltd is.
A spokesperson for STDC told me at the time, “The aims of SREL are the distribution of electricity across the Teesworks site, and the maximisation and optimisation of the private wire network on the site.”
They refuse to say what the source of power for their private network will be, but the gas-fired Net Zero Teesside plant, being built on the site of the old blast furnace, can be ruled out. Its energy will exclusively be sent to the National Grid.
If you have any stories or tip-offs let me know. I’m not accountable to shareholders or advertisers, just you, the reader.
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Thanks as always for reading, I’ll be back in your inbox on Sunday.
Leigh