Council pays $19m to save city's recycling system as firm fails

A $19.1 million council bailout of the company behind Christchurch's recycling system has been made to save the city from "disaster".

The Christchurch City Council has spent $18m to buy Meta Holdings, the company that runs the city's recycling plant and waste depots.

It has borrowed an extra $1.1m to complete commissioning of the recycling plant and fund operations, while also taking on Meta's $15.4m debt.

The council was made aware of Meta's financial problems in May, but bailout negotiations had been kept secret.

Meta Holdings was close to receivership after being caught in what it described as a "perfect storm" of a plunging recyclables market and falling waste volume at recycling depots.

Christchurch Deputy Mayor Norm Withers said it was essential to bail out the company to avoid a "citywide disaster".

"If this were to cease, one could only imagine the chaos," he said. "There was a degree of urgency. We have a duty of care to the ratepayers of this city to maintain the collection of refuse."

The three-bin system started in February.

Meta Holdings does not collect the bins, but runs the plant that processes recyclable material and the depots that process other waste.

Meta Holdings chairman Ken Sparrow said the market for recycled newspapers, metals and plastics had fallen by at least 50 per cent over the past year.

The price for recycled newspaper had fallen from $210 a tonne last year to $80. Meta was unable to find a buyer for newspaper for the last three months of 2008.

"I think in the future the recycling plant will be extremely profitable because world commodity prices are coming back up quite quickly," Sparrow said.

Council chief executive Tony Marryatt said the council would own and operate the plants and depots for three months and then decide their future.

The operation could be taken in-house, contracted out, or a new council-controlled trading organisation formed to run it.

Marryatt said the three-month operation would not cost ratepayers, as the borrowing expenses for the $19.1m would be covered by depot and recycling revenue.

"Our cost of borrowing is less than Meta's, so we are confident that by restructuring the debt there are cost efficiencies we can make," he said. "We can operate it for three months with no cost to the ratepayer."

The decision was made without consultation because the situation was urgent and com 1/2mercially sensitive, he said.

All but one of Meta's 99 staff would be offered continued employment.

Cr Helen Broughton was the only councillor to vote against the bailout at an urgent meeting last Wednesday.

She said the financial woes could have been predicted.

She said the council-owned company City Care should have run the operation because it had more experience. "We took a really high-risk call and it has ended predictably."