Covanta Holding Corp., New Jersey, announced its first quarter earnings April 25. Here are the highlights of Covanta President and CEO Steve Jones’ operational and business update and financial review.
Total revenue for the first quarter of 2019 was $453 million compared with $458 million for the first quarter of 2018. Adjusted EBITDA was $84 million in the first quarter compared with $100 million for the first quarter of 2018. Net income for the first quarter was $5 million and free cash flow was $6 million.
Jones on the company’s financial performance:
“We’re executing well on our 2019 plan, as we generated $84 million of adjusted EBITDA and $6 million of free cash flow during the first quarter, and our financial outlook for the year remains unchanged. We processed 5.2 million tons in the first quarter, a 7 percent increase over last year as a result of strong plant operations and the expansion of our portfolio.
“From an end-market perspective, our number one focus remains the waste markets and we continue to benefit from a strong disposal price environment. For the quarter, tip fees were up 5 percent overall. Recall that this growth rate is occurring even as nearly 80 percent of our tip fee waste is under contract. On top of the strength in MSW, we continue to increase integration of profile waste in our waste from energy plants, with revenue up 9 percent in the quarter. This growth is a product of expanding market demand for sustainable non-landfill solutions, effective sales execution and an increase of internalization of volumes through our network of material processing facilities.”
On starting operations at the Marine Transfer Station:
“In March, we hit an important milestone as we began operations at the MTS in Manhattan. The facility is currently ramping volume. It is ultimately expected to deliver 170,000 tons annually for processing at our Delaware Valley and Niagara sites under a 20-year contract. Including the new MTS, Covanta will sustainably process roughly one-third of residential waste collected by N.Y.C.”
On Covanta’s extended partnership with Babylon, New York:
“We extended a long-term partnership in the quarter, signing a new 15-year waste disposal agreement with the town of Babylon, New York.
“Long Island remains short of waste disposal options and we continue to work closely with our clients to provide solutions to this growing issue. The historic arrangement with Babylon was under a service fee contract structure, but the new agreement transitions to a tip fee structure, where we will benefit from a greater share of the energy revenue under our long-term power contract.”
On closing the Warren County New Jersey facility:
“While all three plants were well run, they suffered from relatively small sizes and we saw limited opportunities for improved economics under our ownership. We’re pleased to have found a new owner for Springfield and Pittsfield who will focus solely on their operations and continue to support the local communities. We expect this transaction to close in the second quarter.
“Going forward, we believe that this will reduce the risk in our portfolio and allow management to sharpen its focus on more profitable opportunities. A few underperforming plants remain in our fleet and we’ll continue to look at all options to either improve their performance or exit operations.”
On the Rookery South Energy Recovery Facility, U.K., project:
“Alongside partners Green Investment Group and Veolia, we reached financial close on the Rookery project late last month. It is the biggest of the four projects we’ve announced, and we expect to process right around 545,000 metric tons of waste annually.
“I appreciate the hard work of our development team and our partners as well as the support of the project lenders to help us reach this critical milestone. With financial close behind us, we’re in full scale construction. As is typical for these projects, construction is anticipated to take about 3 years, which puts commercial operations in 2022. Once operational, Covanta will be the operator of the plant under long-term arrangement, while Veolia will supply the majority of the waste.”