In recent years, Portsmouth, New Hampshire-based Wheelabrator Technologies has become a force to be reckoned with in the New England waste and recycling market.
Currently among the most active acquirers of collection and transfer assets in the area, the almost 90-year-old company has been pursuing an aggressive vertical integration strategy since it was purchased by Macquarie Infrastructure and Real Assets (MIRA)—a division of Macquarie Group—in 2019.
In 2020 alone, the company completed a series of strategic acquisitions to further expand its collection, transfer and disposal capacity, which included the purchases of Londonderry, New Hampshire-based Charles George Companies (CGC) and Eliot, Maine-based Shipyard Waste Solutions. Most recently, Wheelabrator acquired the assets of United Material Management (UMM) in December 2020, which provided pivotal infrastructure to move the company’s waste volumes via rail.
UMM operates 34 routes from six locations in Massachusetts, including two rail-served transfer stations and an advanced construction and demolition (C&D) recycling facility. According to Wheelabrator, the acquisition of UMM’s 22,000 residential and 2,500 commercial and roll-off customers, and UMM’s rail and transfer infrastructure, expands the company’s collection and disposal services in New England while providing a direct connection to its Ohio landfills for municipal solid waste (MSW) and C&D volumes.
“UMM just completed back in early summer [of 2020] a very large waste transfer station [with rail access]. So, we felt that that infrastructure was a critical piece for us from a strategic perspective to move more waste out of the market in New England,” says Bob Boucher, president and CEO of Wheelabrator. “In addition, they were finishing up another transfer station that has capabilities to move MSW via rail to our landfills in Ohio. All in all, UMM [was a prime acquisition target] because of our ability to get two transfer stations and a hauling company in one acquisition.”
A shift towards rail
Having access to rail-served transfer stations has become increasingly desirable for waste management companies in the Northeast as many states grapple with shrinking disposal capacity. For Massachusetts in particular, the state began pushing for greater landfill diversion in the 1990s, especially for recyclable and toxic materials. Such regulations have exacerbated pressures to export volumes out of state.
“Massachusetts is a challenging marketplace in the fact that we’re probably one of the only states, maybe besides California and a couple others, that have significant waste bans in place,” says Benjamin James “BJ” Harvey, the executive vice president for E.L. Harvey, a Westborough, Massachusetts-based waste management company. “So, as landfill closures happen, there are no new landfills or waste-to-energy facilities coming online to handle the excess tonnage.”
While long-haul trucking is a viable option for many disposal companies within the state to transport their waste, Harvey says the market for it can be volatile. “What we can’t control is the price of fuel,” he says. “[We] can make a deal with the landfill for a fixed cost, but the fuel prices [are unpredictable].”
According to Boucher, this was a driving factor behind Wheelabrator’s desire to expand its waste-by-rail operations.
“There’s been established trucking routes for waste to leave the marketplace from a long-haul perspective, but we just feel that we can’t be competitive with trucking in most instances. And then over time as more landfills get closed up in this area and as more [waste is transported] by truck, we’re probably going to have a situation where truck access is not going to be as robust as it is today,” he says.
“We feel that there are good profitability opportunities in rail. For us, that’s less trucks on the road from a safety perspective and then obviously all the environmental, social and governance (ESG) opportunities,” Boucher adds. “Additionally, given where our landfills are located in Ohio, it’s difficult for us to get waste by truck out of [the New England] market and to those landfills. So, rail is our first choice.”
Wheelabrator, which owns and operates a total of 14 waste-to-energy facilities, currently processes more than 11 million tons of waste annually, with 6.7 million tons being converted into clean, renewable energy that powers 340,000 homes. However, the facilities have scheduled outages on an annual basis, leaving some waste with nowhere to go.
“[Having access to rail-served transfer stations] allows us more control in and around moving volumes to help benefit our outage schedule. Now that we have a pretty substantial amount of hauling in the New England area, [rail access] gives us more flexibility from our perspective,” says Boucher.
“It’s important from a service offering perspective … that we have other outlets for our waste. The waste removal portion of our business relies heavily on logistics; so, the ability to have assets in certain markets keeps costs down for our customers and makes us more competitive,” he adds.
For Wheelabrator, the acquisition of UMM has granted the company a geographical advantage in an area of the country where the waste disposal market has largely hit a standstill.
“I think fundamentally, given where the [recently acquired] transfer stations are [located], they’ve got their own waste catchment,” says Boucher. “So, the position geographically in the market and their ability to attract waste just gives us a good, solid platform to grow that business with the backstop that we have our own capacity in our own landfills.”
Wheelabrator’s broadening portfolio hasn’t stopped with the acquisition of UMM, though. Recently, the company confirmed that it will acquire Stamford, Connecticut-based Tunnel Hill Partners and rebrand as WIN Waste Innovations in a strategic merger that, at the time of this writing, is set to close March 25.
The new brand, which is forecasted to become one of the largest private companies in the U.S. waste sector, has a projected $1 billion annual revenue run rate. The brand will be formally launched in late April, with the company rolling out a new logo, colors and tagline across the organization in the next few months.
“The resources of the new combined company will ensure we more seamlessly deliver reliable waste solutions for our customers. As part of the newly expanded company, we will be operating a dedicated customer service department designed to manage the needs of every customer, across the full range of services we provide,” a Wheelabrator spokesperson says. “Our customers will still benefit from the relationships they have established with individual company representatives; however, moving forward, every customer will also have access to a more comprehensive portfolio of best-in-class services.”
Founded in 2008 by the principals at American Infrastructure MLP Funds as a platform for servicing the waste industry, Tunnel Hill is currently the largest waste-by-rail company in the U.S. With the addition of Tunnel Hill under the WIN Waste brand, the company portfolio will now include 20 transfer stations, three MRFs, 334 collection vehicles and 1,877 rail cars.
“Our goal has always been to bring together a group of the best-in-class operators and infrastructure to create a vertically integrated network of assets providing customers end-to-end service offerings. … WIN Waste Innovations will be investing in people, assets, infrastructure, technology and processes to offer a curb-to-grid model that provides essential services that benefit our customers, communities and the planet,” a Wheelabrator spokesperson says.
As reported by Moody’s, WIN Waste will issue a $1 billion seven-year term loan to fund a sponsor dividend of $629 million and repay $306 million of the existing debt of Tunnel Hill. The company will also have a $400 million five-year revolving credit facility, which is expected to be undrawn at transaction close.
The individual companies, which had been acquired separately by MIRA, still remain under private equity ownership.
“We will continue to offer solutions tailored to the needs of our customers such as a curb-to-grid model that provides essential services that benefit our customers, communities and the planet and support our customers in achieving ESG goals,” says Wheelabrator. “We have established ourselves as a vertically integrated company with operations along the entire value chain. From collection to transfer to processing and disposal, we represent a comprehensive and sustainable approach to waste management, including tailored solutions to meet our customers’ needs.”
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