Veolia to invest 750 million pounds in UK recycling

By Geert De Clercq

PARIS (Reuters) - French water and waste group Veolia plans to invest 750 million pounds in its British recycling business in the next five years, aiming to take advantage of rising landfill taxes that push municipalities and companies to recycle more.

Veolia UK chief executive Estelle Brachlianoff said gradually rising landfill taxes had been a major revenue driver for Veolia in Britain, where it has annual revenue of about 2 billion pounds (2.4 billion euros), making it the company's second-largest market after France.

"We expect Britain will be a major growth area for Veolia in the coming five years as we help this country become greener," Brachlianoff told Reuters in a telephone interview.

Three quarters of Veolia's UK revenue comes from waste recycling, the rest from energy services and water.

Unlike other countries which boost recycling through legislation and subsidies, Britain imposes a steadily increasing landfill tax, now around 85 pounds per tonne.

Brachlianoff said that as the tax had been consistent and predictable, it had spurred a large recycling industry. Twenty years ago Britain was landfilling some 80 percent of its waste; that percentage has now more than halved, she said.

Companies such as Veolia, France's Suez, Britain's Biffa and Pennon unit Viridor as well as a string of smaller niche players are recycling paper, plastic, wood, metals and glass, while organic waste is composted, burned or used as feedstock for biogas production.

Veolia also handles hazardous waste and decommissions North Sea oil rigs. Over the past decade, the firm has invested more than 1.5 billion pounds in its British operations. Unlike in its French market, it does not operate drinking water concessions, but sells services to utilities.

Veolia also sells energy efficiency services to industrial customers and operates 10 energy-from-waste plants, which feed over 2 gigawatt hours (GWh) of electricity per year to the grid.

Brachlianoff said if all of Britain's waste was reused, up to 10 percent of its green energy and up to two percent of its power could come from waste incineration.

"Waste cannot replace nuclear or coal, but among green energies it is significant, not a niche market," she said.

The sector can be challenging for non-specialists.

Britain's Interserve said last month it would exit its energy-from-waste business after taking a 70 million pound charge.

Brachlianoff said waste was hard to burn as it can be heterogeneous, containing high-energy plastics as well as wet organic material.

She said some waste, such as asbestos or inert materials, could not be recycled for now.

"Some five percent of waste will still go to landfill for quite a while," she said.

(Reporting by Geert De Clercq; Editing by Mark Potter)