Covanta provides update on UK waste-to-energy projects

By Erin Voegele | February 23, 2021

Covanta Holding Corp. provided an update on the development of its four U.K. waste-to-energy projects currently under construction and its ongoing strategic review during a fourth quarter earnings call held Feb. 19.

Mike Ranger, president and CEO of Covanta, opened the call with an update of the strategic review of the company’s businesses and strategies announced last year that aims to understand where value can be unlocked and how to do so. Ranger said efforts to date have shown a clear opportunity to deliver more value to shareholders and the company is now in the process of selecting how exactly to unlock that value.

First, Ranger said the company believes that some of its assets are undervalued by the market. As such, he said Covanta will evaluate the best alternatives to recognize that value. Second, he said the review has shown that the profitability of Covanta’s core waste-to-energy business is not uniform. “A subset of our plants derives the majority of our current cash flow,” he said. “Our efforts here will be to improve asset-level contributions. Or, if not possible, we will work to exit less profitable operations. The specific levers we will use for this effort will be unique in each plant situation, but we will act decisively to reduce risk and improve cash flow.”

The third objective, and a likely consequence of any resizing of the company’s asset portfolio, would be an evaluation of costs and capital allocation, Ranger said. “I expect that the company that emerges from this review will be leaner and more focused,” he continued. “Importantly, we expect to be better able to pursue and fund growth in the remaining business.”  Lastly, Ranger said, an expected outcome of the review will be reducing financial leverage. He also noted that the company expects to begin making announcements on specific actions by the middle of 2021.

Regarding the U.K. waste-to-energy projects, Ranger said development of the Rookery facility is on schedule and on budget. The plant is expected to begin receiving and processing waste in mid-year as it moves into the hot commissioning phase. The Rookery plant is expected to reach full operations in the first half of 2022.

Brad Helgeson, chief financial officer, provided an update of the three other waste-to-energy projects under construction in the U.K. The Newhurst and Earls Gate projects are expected to begin operations in 2023, with Protos scheduled to be operational in 2024, he said.

Covanta reported revenue of $1.9 billion for 2020, up from $1.87 billion in 2019. Net loss was $28 million for 2020, compared to a net income of $10 million the previous year. Adjusted EBITDA was $424 million in 2020, down slightly from $428 million in 2019.