Covanta takes steps to weather the storm of COVID-19

By Erin Voegele | April 23, 2020

Covanta Holdings Corp. discussed the impact COVID-19 is having on its business and operations during an April 15 conference call. Several of the company’s waste-to-energy (WtE) plants are taking in COVID-19 medical waste and construction is continuing on two U.K. WtE facilities.

“At its core, Covanta operates critical infrastructure at a world-class level, providing essential services under long-term contracts,” said Stephen Jones, president and CEO of Covanta. “While our near term focus is on navigating this difficult and uncertain environment, our long-term strategy, objectives and shareholder value proposition are unchanged.”

Jones stressed Covanta’s priority is to provide a safe work environment and ensure that the company’s employees are able to efficiently work. The company transitioned all corporate and administrative staff work from home starting in mid-March. Essential plant operating employees continue to report to their facilities.

According to Jones, Covanta has taken several steps to ensure plant employees remain safe. “We have instituted numerous protocols in line with CDC guidelines, including increased social distancing at work, more frequent disinfection, particularly in common areas, and increased usage of personal protection equipment,” he said. “These protocols have proven effective to date. In total, we’ve experienced nine COVID-19 cases across our nearly 4,000 employees, even as our plants are located in some of the most heavily impacted parts of the country.”

Jones said three of the company’s plants are permitted to accept regulated medical waste. “We’ve been able to receive COVID-19 infected material at those locations,” he said, noting that the waste-to-energy plants combust waste at more than 2,000 degrees. “Where we have permits, we are able to process this waste in safe, environmentally compliant, and cost effective manner,” Jones added. “Given the concerns around these materials, we’ve added further protocols at plants that accept this material to ensure limited contact and incremental personal protection. In this way, we are pleased to do our small part to help deal with this public health crisis.”

Work is continuing on two of the three WtE projects under construction in the U.K. “Construction work continues at both Rookery and Newhurst, as the English government considers construction to be an essential activity,” Jones said. “The Scottish government has taken a different approach, and construction at Earlsgate has been temporarily halted.” Jones said it is too soon to provide any updated construction timelines for the projects.

Jones also spoke about the impact COVID-19 is having on commodity prices, including electricity. “On the energy front, we entered the year in a highly hedged position, which will serve us well in the coming environment,” he said. “We have fairly limited exposure for the rest of the year.”

The company is also taking steps to reduce costs. Jones said Covanta plans to eliminate all non-essential travel for the remainder of the year. The company is also working to reduce other discretionary spending, especially with third-party consultants. A hiring freeze is being implemented for new corporate positions. In addition, those in higher levels of management will take a base salary reduction for an initial period of 12 weeks. All other corporate and support staff will see a 20 percent reduction through a combination of wage reductions and furloughs, Jones continued. “We do not take these steps lightly, but we believe it’s important to address costs aggressively where we can while supporting full operations at our facilities,” he said.

Jones also noted Covanta is withdrawing its initial guidance for 2020 given the increase in uncertainty, both in the operating environment and the broader economy resulting from the COVID-19 pandemic. “We will be working to minimize the ultimate impacts of the situation on our target for this year, and our business is well positioned to weather the storm,” he said. “But, with such a high degree of uncertainty from things out of our control, we don’t believe that adjusting public targets is a fruitful exercise right now.”