A waste management company that was suing WasteServ over a €600 million contract decision has backed out of the case.
In a legal filing dated April 11, FCC Medioambiente International told the court that it is no longer appealing WasteServ’s decision to award the mega-deal to build a waste-to-energy plant to a consortium led by French waste giants Paprec Energies.
FCC Medioambiente will play no further role in those proceedings, its lawyers told the court.
The Madrid-based company was one of three bidders for the massive contract to build a waste-to-energy plant in Magħtab, which WasteServ originally estimated would cost €550 million.
That facility will essentially incinerate much of Malta’s black bag waste, dramatically reducing the amount of waste dumped at the landfill while generating electricity to pump into the national grid.
A consortium led by French energy giants Paprec and involving local contractors Bonnici Bros ultimately won the deal with a bid of €590 million.
Although €50 million higher than WasteServ’s initial estimate, that bid was still significantly cheaper than the €830 million bid filed by FCC Medioambiente or the €780 million bid presented by a consortium made up of Japanese conglomerate Hitachi and Greek energy firm Terna.
The Hitachi-Terna consortium immediately appealed the tender decision but had its appeal rejected by the Public Contracts Review Board.
Undeterred, the consortium took its objections to court and was joined in the case by FCC Medioambiente.
Among other things, both objectors argued that the winning bid submitted by the Paprec-Bonnici consortium was abnormally low and that it would be “impossible” to build and operate the facility WasteServ wanted at that price.
But, on April 11, lawyers representing FCC told the court of appeal that they were no longer pursuing the case. A spokesperson for the Spanish-run company told Times of Malta it did not wish to comment further on the matter.
Sole objector
Its decision to drop its appeal means that the Hitachi-Terna consortium is now alone in objecting to the WasteServ decision. Those objections will be heard by a court of appeal made up of three judges and led by Chief Justice Mark Chetcuti.
The court case is the final legal hurdle standing between WasteServ and the massive infrastructural project, which is believed to be the single-largest public contract ever awarded and which will take an estimated 3.5 years to build.
Developing a waste-to-energy plant is crucial to Malta’s efforts to achieve EU-imposed waste targets. Malta dumps well over 80% of its waste into landfills – a negative EU record – and is also among a small cluster of EU countries projected to miss all the EU’s 2035 waste recycling targets.
The government’s plan to fix those shortcomings is its ‘Ecohive’ complex plan for Magħtab, where waste is currently dumped into a landfill.
Aside from plans to develop a waste-to-energy facility, WasteServ also intends to build three other facilities in Magħtab: a plant that will convert organic waste into compost, a recycling facility for paper, plastic and metal waste and a skip management facility that will process bulky waste from open-topped skips.
WasteServ has spent years trying to get its waste-to-energy project off the ground. An initial call for tender issued in 2020 was cancelled after it attracted no final bidders, with a revised request for tender made in 2022.
The company hired Danish consultants COWI to advise on the bid, with a British firm, Frith, paid to audit the process in real-time.
Claims of an advantage
Apart from poking holes in the price offered by the Paprec-Bonnici consortium, the Hitachi-Terna group is arguing that WasteServ breached confidentiality by publishing non-binding prices of the three shortlisted bidders before the tender was adjudicated.
WasteServ says that is misleading, as it is standard procedure for non-binding prices to be published before the final decision is made when adjudicating ‘competitive procedure with negotiation’ calls for tender – the type of process used in this case.
In any case, WasteServ lawyers have argued, publishing non-binding bids gave the Hitachi-Terna consortium the opportunity to make their final bid more competitive.
The consortium initially submitted a €980 million bid but trimmed around €200 million off when submitting their final offer.
Lawyers have also noted that a COWI representative concluded that Hitachi-Terna’s bid was much higher than the winning one because the consortium intended to make more money out of it.
The expert said that the consortium appeared to be factoring in an 8% profit margin while the Paprec-Bonnici consortium was poised to make 5.9% from the deal.
The Hitachi-Terna consortium also believes the tender evaluation and its subsequent appeal before the Public Contracts Review Board were tainted due to conflicts of interest by some of those involved, including PCRB chair Kenneth Swain.
Aside from leading the PCRB, Swain is a non-executive director at State energy company Enemalta. The Hitachi-Terna consortium argues that made him unsuitable to hear its appeal as WasteServ is contractually bound to sell energy generated by the Magħtab plant to Enemalta.
Its conflict of interest complaints were dismissed by the PCRB, which, ultimately, concluded that WasteServ’s decision to award the contract to the Paprec-Bonnici consortium should be upheld.
The court of appeal is due to start hearing the Hitachi-Terna case filed against that decision later this month.