Naturally, the question of financial return is central to whether Aggregate Industries and parent Holcim ultimately take Straitgate forward to a planning application. We have argued before that the commercial viability of a quarry here can only be marginal at best, and is a factor not yet assessed by DCC despite the NPPF saying "Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable." Holcim is now however working to a new financial benchmark.
A summary of the initial hearing held with AI on 16 May 2012 for the Competition Commission makes clear that "Holcim had recently publicly announced a new cost-cutting plan in order to improve the group’s profitability. Holcim needed to achieve an overall return on investment (after tax) of 8 per cent, while AI’s operations were only currently achieving a 2.7 per cent return (before tax)."
Yet "there had also been significant increases in the production costs, particularly for fuel and energy, for these products. Increased taxation such as the aggregates levy and carbon taxes had also raised costs." In December Holcim announced it was "to accelerate a restructuring program and write off 410 million Swiss francs of fixed assets in Europe".
Investigations by AI and its consultants will uncover more about Straitgate's commercial potential, but here's a list of some of the other costs that AI will need to consider, over and above operating costs, before breaking the ground at Straitgate Farm once again:
Cost of preliminary work: surveys, consultants, boreholes, test pits, material testing
Cost of planning permissions and appeals; legal costs; professional fees
Cost of public relations: exhibitions, local liaison
Cost of site infrastructure: weighbridge, offices, etc.
Cost of access modifications: road modifications, land purchase required for access
Cost of a 15 mile round trip for each load of as-dug material transported to Blackhill, if permitted. If not
Cost of moving and constructing new plant at Rockbeare if permitted
Cost of acceptable standoffs from homes thereby reducing the recoverable resource
Cost of protecting the setting of the listed Straitgate Farmhouse thereby reducing the resource
Cost of restricting excavation to 1m above highest water table as enforced elsewhere
Cost of downstream flooding mitigation - in perpetuity
Cost of preserving stream flows to wetland habitats in Ancient Woodland - in perpetuity
Cost of protecting private water supplies
Cost of restoration (if it were to ever get that far)
Cost of a community fund for local projects in compensation to local people
Less of course what AI can sell the site for afterwards, which could be significant if industrial development were to be permitted, or not, as in the case of Foxenhole where 38 acres sold for £300k last year - no more than the going rate for farmland.
Would Holcim accept a lower return in order to maintain local sales control? Would a Swiss-based multinational care? In the end the limited resource and the cost burdens may well undermine the commercial rationale for proceeding, particularly if Holcim's 8% target is to be met.
