A company bidding for a multi-million pound council waste contract has pulled out of the race saying incinerators cannot be justified.

Biffa Waste Services was one of six firms invited to bid for the contract by East Sussex County Council and Brighton and Hove City Council last year.

The controversial private finance initiative deal, which includes building two burners at North Quay, Newhaven, and Mountfield Mine, near Robertsbrige, will be worth an estimated £1 billion over 20 years.

Plans to build incinerators to burn waste have sparked angry protests since they were first unveiled two years ago.

It is understood that Biffa, the greenest of the big waste companies in Britain, has told the two councils the proposals would prevent the successful tenderer from exploring alternatives to incineration.

Burners of the size proposed would have been its last option and Biffa said it did not believe the terms of the contract gave it the time or incentive to draw up a different strategy.

The company has largely abandoned large-scale incineration of waste, saying the environmental and financial cost is too high.

In a report last year, Biffa said over-reliance on incinerators could jeopardise hopes of boosting recycling and stifle moves to minimise waste or adopt more innovative green technologies.

Joelle van Tinteren of the anti-incinerator group Defenders of the Ouse Valley and Estuary, said it was no surprise Biffa had pulled out.

She said: "The tragedy here is that out of a poor waste strategy, Biffa was our only hope of a slightly more green approach."

Both councils said the reasons behind Biffa's decision to withdraw were confidential.

A spokeswoman for East Sussex County Council said the authority "regretted" Biffa's decision, adding: "We are not able to give reasons as this would be prejudicial to the tendering process."

In a statement, the company said it could not discuss its decision because it was bound by a confidentiality agreement with the councils.

Only four of the original six companies which tendered for the contract are still bidding. They are Onyx Aurora, Sita (GB), Viridor Waste Management and the Waste Recycling Group.

United Waste Services, the sixth company invited to bid, pulled out when it was absorbed by Sita.

The contract, which could be extended to 30 or 40 years, is expected to be signed in December.