David Gerrard, finance director of Veolia’s UK
environmental services arm, tells Maryann Tan about his leasing
policies
How much of the Veolia UK’s revenue this year came from
the environmental services division?
We reported in the waste activities side over £1bn in revenue in
2007. We’re the largest of the four divisions in the UK by quite
some way.
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Are you also the largest in terms of revenue and profit
contribution?
Waste, in terms of revenue yes, and I’m fairly sure in terms of
profit too.
Do you use asset finance for a large proportion for your
plant and machinery requirement? Do you use it more for wheeled
vehicles than for fixed plant?
We use it purely for vehicles. That’s waste collection vehicles,
vans and so on.
What proportion of your fleet is financed by
leasing?
All of it.
How much do you spend on leasing costs a year?
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By GlobalDataIt does vary because the number of trucks that we
lease largely depends on which contracts we win and which we renew,
so if we have a year where we have a number of large contracts that
are either won or renewed then the leasing costs are higher. Our
contracts are between five and seven years in duration and you
might get a year when the number of wins or re-wins are quite low
and that will affect the number of vehicles we lease. Each year
it’s millions of pounds.
Can you name the lessors that you do the most business
with?
We deal with the four or five major UK banks.
When do you use asset finance, is this often through
point-of sale facilities through equipment suppliers or do you
always prefer to arrange finance and equipment supply
separately?
We arrange the finance separately after we’ve acquired the assets,
through a broker.
Why do you prefer using brokers?
Historically, it’s always been more advantageous for us to do it
that way and it’s more efficient and it’s always proved to be that
way.
Do you see particular attractions in operating
leases?
No, they are all finance leases.
Why do you prefer finance leases?
The leases that we go for are connected to the
contracts we have which are typically 7 years in length so it’s
more efficient to take out finance leases.
Do you find that finance companies have appeared to
change their own preferences for the type of contract they write in
recent years?
Not particularly, no.
When you take over a local authority contract (e.g. for
refuse collection or disposal) from another contractor, or from the
council’s direct labour operation, and this previous operator was
using asset finance, do you ever negotiate to take over a running
equipment lease?
No, in almost all the contracts we take, you’d be required to
replace all the vehicles with new vehicles.
Do you find that government environmental programmes and
incentives such as the WRAP programme, are easily adaptable for
asset finance, or do they in effect favour outright purchase over
leasing?
I don’t think there’s a great difference to be honest.
Brief history of Veolia Environmental Services UK
Veolia Environmental Services UK (VES) is the waste management
arm of Veolia Environnment UK and one of four divisions providing
public utility services – the other three being Water, Energy and
Transport.
VES has been operating in the UK since 1990 and today employs a
workforce of 13,000 with
annual turnover of over £1 bln a year. VES reports the highest
revenue among the four Veolia divisions.
With the financial backing of its French parent and a history in
providing public utilities dating back to the 19th century, it’s no
surprise that Veolia is quickly becoming a formidable name in the
UK.
In 2006, Veolia acquired Cleanaway Holdings, one of its biggest
UK rivals in waste for €859m. This added to the group’s portfolio
of UK acquisitions which by then already included water companies,
Three Valleys Water, Folkestone & Dover Water Services and
Tendring Hundred Water Services. According to reports, Veolia is
keeping an eye out for more companies to gobble.
Last June, Veolia announced a €2.6 bln capital injection,
signalling further investments in its subsidiaries across
Europe.
In the UK, VES serves 73,000 commercial and industrial customers
and has about 160 contracts for waste collection, recycling, street
cleansing and maintenance in partnership with 70 local
authorities.
It also operates 14 landfills with a total void capacity of 47m m3,
total installed power generation of 233 MW, 6 energy recovery
facilities and 5 composting facilities.
