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Do modern economics mean the sale of redundant plant is impossible?

In the latest of his regular columns for Demolition and Recycling International, RVA’s Managing Director Richard Vann gave his thoughts on whether modern economics make selling redundant plants impossible.

If you haven’t read the full article, you can catch up here….

Impossible is a strong word. By definition, it means something that is completely out of the question – it cannot be done.

But of course, this statement is not true when it comes to the sale of redundant plant. There are occasions when assets that have reached the end of their useful life for one operator, can still contain inherent value in the eyes of another. A sale therefore can go ahead.

Consideration of this route is understandable. The goal – for any soon-to-be-decommissioned facility – should always be to maximise the return on assets where possible and safe to do so. However, factors such as plant age, former processes, recovery cost, testing, market forces and commercial competition, will all form part of the decision as to what should happen next.

As my dismantling for re-erection column stressed in the last issue of D&RI, the sale of redundant plant should be realistically viewed and often not prioritised as the ‘plan A’ for an unwanted facility, as the challenges likely to obstruct a sale are significant in both scale and quantity.

Supply and demand

Firstly, there are the basic economics of supply and demand at play.

In developed parts of the world – across virtually every heavy industry – operators are seeking ever more efficient processing technologies. Sometimes this is to stay on the right side of the law, if the ageing plant risks breaching necessary legislative or EHS standards. But there are capacity, ecological, financial and innovation advantages associated with investing in smarter and more modern equipment too, which, collectively, can prove the catalyst for operators looking to proceed with an ‘out with the old’ strategy.

This widespread availability of redundant assets means that from a resale perspective, the market is becoming saturated with standard and off-the-shelf kit, and such plants – or component parts of them – are consequently becoming harder to sell.

Copycat technologies

Processing markets are becoming further saturated because – as markets are maturing and operators’ expectations are becoming increasingly sophisticated – all eyes are on the latest plant and equipment. But many countries are so proficient at designing and manufacturing ‘copycat’ technologies – often for very affordable investment levels – that any ageing assets would need to be extremely advanced to justify purchasing something ‘second hand’ as opposed to brand new.

Could you sell a ten-year-old laptop on eBay, for example, when so many better, more current models exist – often without breaking the bank? It would probably be a struggle – especially if the laptop is shipped in hundreds and thousands of component parts that require re-assembly before it can be used.

Finding a ‘buyer’

The sale of a redundant asset is – perhaps unsurprisingly – far easier if the facility is to be transferred to an operator within the same group as the seller.

When RVA was engaged to oversee the decontamination, demolition and dismantling of a manufacturing facility on an 11-hectare site on Jurong Island, Singapore, for example, selected plant items were carefully recovered so that they could be transferred to the owner’s sister plants worldwide.

This project was bound by tight timescales, given a commercial driver for the client to exit the site within defined lease and permit parameters. The work was therefore planned sequentially with designated demolition areas handed over in a carefully phased manner. Potential sources of ignition were subject to strict controls, due to the nature of the chemicals housed nearby and the presence of some units which had to remain operational during the initial stages of the programme.

Had this shipment of assets been dependent on the involvement of a third-party buyer, the project specifics may have been quite different, due to the complexities involved. In-house transfers are often easier than external ones, as the ‘owner’ has control at both ends.

Sometimes, sadly, deals also fall through. And the longer a plant lays idle – whether comprehensively mothballed or not – the greater the chance, on the whole, that an eventual sale will prove difficult. The condition of the asset is likely to deteriorate, and with the passage of time there is usually an increased risk that EHS and legislative compliance will no longer be guaranteed. In addition the cost of keeping an asset in saleable condition increases exponentially with time and can erode any potential commercial gain.

What is financially viable?

Acknowledging that the operator will undoubtedly wish to proceed with the most financially advantageous – and hopefully safe – route map for their decommissioning project, a feasibility and options study will prove an extremely valuable modelling exercise before any works begin.

It is crucial to explore all possible project scenarios because, sometimes, the route eventually selected may not have initially been considered or deemed possible, due to false perceptions of the associated financial burden.

The complete clearance of a plant is often the most straightforward and cost-advantageous exercise overall, for example. This is because, from a technical perspective, a full clearance usually only requires a global or battery limits isolation strategy. In simple terms, the plant is usually rendered ‘cold and dark’ so that, once residual hazards have been removed, all structures can then be demolished for scrap and the site taken back to flat slab. This then paves the way for the construction of a new facility, or the sale of the site ‘as is’. In many instances the net cost/gain of such a project could be far more attractive than that to facilitate the sale of a redundant plant.

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Total Petrochemicals UK Ltd

The Polystryrene Plant of Total Petrochemicals UK stopped production in 2013. The site was to be demolished and a small team of employees were retained to oversee the project. After some initial training in demolition it became apparent that specialist assistance was required to help our staff but also in order to comply with legislation in terms of competence and CDM regulations.

After competitive tender, RVA were appointed to the role of CDM-C for the project.

RVA provided a very competent team of staff to see us through the hazards, they worked alongside our site knowledge with their demolition expertise. RVA ensured that the demolition contractor followed appropriate method statements and completed risk assessments.

I would recommend the use of RVA in the role of CDM-C.

 

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Invista (Germany)

RVA acted as project engineers and specialist demolition consulting engineers in our D&R project. They are one of the best, most professional companies we have dealt with and we would have no hesitation in recommending them.

RVA worked closely and collaboratively with our teams, paying attention to our interests and not losing focus on the overall target. We cannot recall a situation where RVA didn’t react flexibly or innovatively to adjust their work plans and resources to the benefit of our project. The team always provided us with a high quality service and fulfilled our safety, health and environmental expectations excellently.

(adjusted translation from German).

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GrowHow UK Limited

RVA has demonstrated flexibility and dedication in the face of a very difficult specification and has had a firm hand on site activities throughout the [prill tower demolition] project, giving us confidence at all times that the job was been carried out to optimum standard.

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BASF plc

We appointed RVA Group to project manage the dismantling and demolition of our polymer production facilities in Kaipiainen, Finland. We had prior experience of working with RVA in the North East of England, and employed the company once again on the strength of the team’s specialist industry knowledge, and our need for a thoughtful, coordinated and attentive approach on the live Kaipiainen site.

RVA’s experience and professionalism ensured a safe and smooth project delivery. All work was completed on time and to budget and, most importantly, without incident. We would not hesitate to recommend RVA’s services in future for this type of work.

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Ineos Vinyls

RVA was contracted to INEOS to provide specialist engineering consultancy and CDM coordinator services for the dismantling and demolition works at the INEOS Vinyls Barry Site, Penarth, Wales. This involved managing the demolition contractor and its activities to meet the requirements of the demolition contract between INEOS and the demolition contractor, and to ensure the work was completed in accordance with appropriate legislation, and within exemplary SHE standards.

The RVA work was in three phases, Phase 1 ‘Project Identification & Development’ , Phase 2 ‘Enabling & Pre Site Works’ and Phase 3 ‘Project Execution’.

RVA has proven themselves to be an experienced, competent and professional organisation.

Specifically, RVA set up formal monitoring and control processes to ensure that accurate and reliable information was presented at regular intervals covering all the key deliverables of the project with particular emphasis on the demolition contractor’s SHE performance, completion of key activities versus programme, minimisation of unjustified variations and control of approvals.

As the client, I was kept well informed via various communication channels. Any issues or incidents were highlighted quickly and dealt with competently and professionally.

I believe that RVA managed and controlled the dismantling and demolition works and overall project competently, which enabled the delivery of a safe and effective demolition of the Barry plant, within the strict requirements of the contract.

I pass on my thanks to the way that all 3 parties Contractor/RVA/Ineos worked together on site for the Barry demolition. I was genuinely delighted with the work and cooperation…and the way [you] went about finding solutions, working together and rising to the challenges that these projects invariably raise… things were dealt with in a professional and pragmatic way.

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