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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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Getting to grips with demolition ‘waste’

Having amassed a wealth of experience in the the specialist arena of heavy-industrial plant decommissioning, RVA is well placed to comment on the ever-evolving level of waste management excellence in the field. This month RVA contributed to leading waste and recycling magazine Secondary Commodity Markets. Read on to find out more…..

“Since its inception the demolition industry has been a committed recycler, acknowledging the commodity value and demand for materials that can be salvaged during domestic, commercial and heavy industrial executions of work. In reality it was probably one of the first ‘green’ disciplines.

For decades, contractors have yielded a revenue stream from the recycling of materials such as bricks, slates, and copper nails and piping to name but a few. However, as environmental pressures mount and legislative developments continue apace, a greater number of contractors, consultants and clients have heightened their commitment to the ‘reduce, reuse and recycle’ mantra. Sustainable working practices have rocketed up the project agenda and as a result, organisations have experienced multi-faceted benefits from the careful and continuous management of demolition projects’ waste streams.

Even the soft-strip (internal clear out) and subsequent demolition of a small domestic building can enable recyclates to be recovered. Yet the larger and more industrial the programme of works is, the greater the scope for advanced salvaging methods and the wider the variety of materials that can be retained.

A vast number of processing plant owners throughout the UK and EU are closing their sites as they rationalise their activities, relocate their operations or prepare to upgrade their equipment. Consequently they face the predicament of determining the safest, most cost-effective and environmentally sound route for their plant.

Many variables affect the methodology adopted for a given site, but organisations’ commitment to EHS excellence often sees decommissioning projects excel in terms of material collection, processing and trade.

A fundamental driver is to reduce the amount of ‘waste’ going to landfill, which of course supports the country’s impending targets and reduces waste disposal costs. Concrete and brick for example can be crushed for use as backfill, road sub-base and levelling.

Elsewhere selected items of plant can be carefully salvaged for reuse. For instance I have overseen the meticulous disassembly of a 500m long, 6,500 tonne papermaking machine that was sold for re-erection overseas. Of course such an exercise is not without its complexities, but a comprehensive grasp of the commercial environment means that plant buyers can regularly be secured and income can be generated for the original asset owners, which contributes to the overall project cost. This is perhaps the ultimate in recycling and waste stream management.

The general recycling of project materials is also very prevalent in industrial demolition due to the commodity value of arisings such as scrap metals for instance. Process vessels are often made from exotic alloys and high-value metallurgy can generate a significant income stream. We have worked on projects in the past where the monies earned from scrap materials have not only covered the cost of the works; they’ve been cash generative for the client.

This is clearly not possible with every project but the sum that can be earned from recycling does frequently determine whether the works go ahead, or not. In every case it is a matter of achieving the ‘best value’ outcome for the client concerned. One customer, a cast iron foundry owner, sought the creation of a precisely-engineered salvaging system to enable the reclamation of timber, plastic and scrap metal and uphold the organisation’s ongoing environmental commitment. The resulting ‘production line’ saw suitable material graded and segregated according to whether it met the appropriate specification and should be retained for reuse on the client’s other sites, or whether it should be sold to the industry via the usual recycling channels in the UK.

The conclusion?

Many would wrongly perceive our industry as a somewhat grubby and unrefined engineering discipline that lacks scientific precision. But the better-informed people become, the more they realise that decommissioning, demolition and dismantling engineers are highly skilled professionals that display an unparalleled commitment to sustainability and environmental excellence. It therefore cannot be disputed that the future of recycling within this arena is bright.”

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RVA operations director to present at leading demolition event

RVA Group operations director Ian Wharton has been invited to deliver an educative presentation at the Institute of Demolition Engineers’ (IDE) autumn seminar in Westminster, London.

Echoing RVA Group’s mission statement, Ian’s ‘Process Plant Sector Decommissioning & Dismantling’ presentation is designed to:

• Help deliver totally safe, environmentally secure and legislatively compliant projects

• Nurture a learning event culture aligned with a zero tolerance approach to all incidents and injuries

• Encourage engineering excellence, innovation and best value for clients.

Speaking exclusively to members of the Institute on 29 September, Ian will then encourage questions from the floor, providing delegates with additional knowledge transfer opportunities.

Ian has worked with some of the world’s largest and most prestigious blue-chip organisations, in sectors including oil and gas, pharmaceutical, chemical and petrochemical, power and energy, manufacturing, local authority and housing. He is therefore an incredibly experienced and competent engineer who is well placed to offer best-practice advice for demolition professionals seeking to further develop their expertise.

 

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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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Bayer CropScience

Regarding N51/51a demolition; RVA did a superb job and saved us a lot of time and money – no additional claims on a competitive bid package is not bad.

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ConocoPhillips Petroleum Company

The feed back from our site personnel is that this has been an extremely successful project in both execution and the relationships built with all who came in to contact with the project team.

This outcome is a testament to the work, effort and commitment shown by all involved in the project.

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