Explanatory Note on the above NOTICE

In June 2009, SWaMP2008 published a contract notice in the Official Journal of the European Union advertising its procurement of a Residual Waste Treatment Contract.

This is a long term service contract (approximately 25 years) under which a contractor (the “Contractor“) would be appointed to treat residual municipal waste (i.e. waste that has not been reused, recycled or composted) and provide associated services (including but not limited to the management, sale and/or disposal of waste outputs) under a Public Private Partnership (PPP) model (the “Contract“). The Contract is intended to facilitate the diversion of significant quantities of municipal solid waste from landfill in Northern Ireland to assist in meeting statutory targets and to meet all other legal requirements.

The competition for the Contract is being conducted in accordance with the Public Contracts Regulations 2006 (as amended) using the Competitive Dialogue procedure.

Following publication of the contract notice, six candidates submitted Pre-Qualification Questionnaires to SWaMP2008. These candidates were assessed in relation to their financial and technical capacity to undertake the Contract. Two applicants were eliminated from the competition as they did not meet certain minimum requirements for qualification. Four candidates were selected to proceed to the competitive dialogue phase of the procurement, which commenced in May 2010.

One bidder withdrew shortly after the commencement of the dialogue phase for its own commercial reasons. Dialogue was conducted with the remaining three bidders for a number of months before one of these bidders withdrew from the process.

In October 2010, the two remaining bidders submitted detailed solutions, however in April 2011, one of these also withdrew from the process, leaving Quinn Group Limited (Company No: NI41532) as the sole remaining bidder for the Contract.

To date, SWaMP2008 has been of the view that it is in the best interests of the Project and the stakeholders to continue dialogue with a single bidder.

In order to enhance the proposal, it is now proposed that two new partners not previously involved in the procurement process are introduced – Costain Group (a leading construction undertaking in the UK which brings considerable experience concerning the construction, engineering, delivery of waste infrastructure and services) and Equitix (an asset investment company which has considerable expertise in the delivery and management of PPP/PFI contracts and infrastructure). It is also proposed that Quinn Manufacturing Group Limited (Company No: NI608284) will be involved in the project going forwards, instead of Quinn Group Limited.

SWaMP2008 recognised that the revised arrangements are a very positive step forward and considers that the combination of these three companies is likely to provide a much strengthened bid, while maintaining a similar vision for service delivery to that originally proposed (i.e. a mechanical biological treatment (MBT) plant (based on Entsorga technology) and an education centre based at the Lisbane site (which have the benefit of planning permission).

A summary of the principal changes proposed is set out below. Essentially, these changes are as follows:

1) Changes in the equity make-up of the Contractor or Special Purpose Vehicle (SPV) which will contract with SWaMP2008;

2) Changes to both the Engineer Procure Construct (EPC) and Operations & Maintenance (O&M) Sub-contractors and the Guarantors of the EPC and O&M activities;

3) Potential changes to the fuel off-take arrangements.

(1) Changes to Equity in SPV

It was originally proposed that Quinn Group Limited would own 100% of the equity in the SPV established to contract with SWaMP2008 for the Project.

It is now proposed that Quinn Manufacturing Group will hold 20% of the equity in the SPV, Costain Engineering & Construction Limited (Company Number 02440829) (Costain) will hold 50% and Equitix Limited (Company Number 06026637) (Equitix) will hold 30%.

The SPV will be governed by a shareholders agreement at financial close. It is envisaged that Costain will be the lead member of the SPV going forwards, with Equitix closely involved in the key commercial and financial aspects and the Quinn Manufacturing Group performing a significant role in operations, as explained below.

(2) Changes to both the EPC and O&M Sub-Contractors and their Guarantors

Under the Contract between SWaMP2008 and the appointed Contractor, it is anticipated that there will be two primary sub-contracts: an EPC Sub-Contract (for the construction of new facilities) and an O&M Sub-Contract (for the ongoing provision of waste treatment services during the balance of the term of the Contract).

It was originally proposed that:

a) the EPC Sub-Contract would be let to a third party which would also act as Guarantor in relation to the construction of the transfer stations and MBT plant (using Entsorga technology); and

b) a Quinn Group subsidiary company would be the O&M Sub-Contractor and Quinn Group Limited would be the Guarantor in relation to the following:

- operation of the transfer stations;

- operation of the MBT plant (possibly by way of a joint venture with Entsorga initially);

- all haulage arrangements;

- a 25 year off-take contract for waste residues to be taken and used as input fuel (known as Solid Recovered Fuel or ‘SRF’) at a Quinn cement kiln facility in the Republic of Ireland (subject to contingency arrangements being put in place);

- provision of landfill services; and

- provision of interim services pending construction of the MBT plant.

This solution has been the subject of ongoing dialogue with SWaMP2008, including the projected waste flows in the SWaMP2008 administrative area. New data on waste flows is already in the public domain and can be viewed at www.doeni.gov.uk/niea/waste-home/municipal_data_reporting.htm

The current proposals (subject to further dialogue with SWaMP2008) are as follows:

a) Costain will be the EPC Sub-Contractor and Guarantor for the purposes of the construction of both the transfer stations and the MBT plant (replacing the other third party construction contractor originally proposed). Importantly, the process technology provider will remain as Entsorga. Costain, as the EPC Sub-Contractor and Guarantor, will wrap construction and Entsorga process risks.

b) Costain will be the O&M Sub-Contractor and Guarantor of the operational services. The O&M Sub-Contract will include:

- operation of the MBT plant;

- operation of the transfer stations;

- all haulage arrangements;

- the arrangement of any necessary landfill services; and

- the provision of interim services pending construction of the MBT plant.

Quinn Manufacturing Group Limited will be responsible for the following services (which will be sub-contracted down to it by Costain, the O&M Sub-Contractor):

- operation of the transfer stations;

- all haulage arrangements.

Off-take services are dealt with below.

The requirement for interim services (prior to full operation of the MBT plant) and the arrangements for the same have yet to be fully dialogued, although these are likely to be provided by a third party contracted to the Costain O&M Sub-Contractor who will assume the risk for such services.

The technical and financial standing of the new bidding consortium and those parties whose resources are to be relied upon in the course of the performance of the Contract has not yet been considered, but it is SWaMP2008′s intention to re-evaluate the proposed consortium against the Pre-Qualification criteria to ensure that it has the technical, economic and financial ability to carry out the Contract.

(3) SRF Off-Take Solution

It was originally proposed that the “Solid Recovered Fuel” output from the MBT plant process would be used as a fuel for a Quinn cement kiln in the Republic of Ireland (subject to contingency arrangements also being put in place elsewhere) and that an off-take contract would be provided in respect of this. It is now proposed that Quinn Manufacturing Group Limited will provide the SRF off-take services at the same Quinn cement kiln in the Republic of Ireland (subject to contingency arrangements being put in place elsewhere).

Costain will be the Guarantor for the purposes of the SRF off-take under the O&M arrangements referred to above.

Land

The principal land required for the project is that which is required to host the MBT plant to be constructed by the Contractor. Transfer stations are also to be developed at sites owned by constituent councils in the region. It was originally proposed that the MBT plant would be located at Lisbane, County Armagh (which already has the benefit of planning permission for such a MBT plant). Under the revised proposals, the Lisbane site will continue to be available for the construction of the MBT plant and the consortium will be able to benefit from the planning permission which has been granted for this site.

Summary

Whilst various changes are proposed, it is important to note that the vision of the service delivery remains the same – a MBT plant based on Entsorga technology plus an education centre based at the Lisbane site, which have the benefit of planning permission.

The operational delivery of the services will now be split between Quinn Manufacturing Group Limited and Costain, with Costain assuming prime responsibility for operating the MBT plant and overall provision of operational services.

The consortium is now in the final stages of dialogue with SWaMP2008. It is currently anticipated that dialogue will conclude in Summer/Autumn 2012 and that SWaMP2008 will be in a position to invite a final tender shortly thereafter.