Covanta restarts Fairfax plant, discusses future plans

By Erin Voegele | February 26, 2018

On Feb. 22, Covanta Holding Corp. released fourth quarter 2017 financial results, reporting its 80 MW energy-from-waste (EfW) plant in Fairfax, Virginia, restarted operations in late December. The company also reported that its Dublin EfW facility is operating well and provided an update of its strategic partnership with the U.K.-based Green Investment Group.  

During an investor call, Steve Jones, president and CEO of Covanta, called 2017 “a year of tremendous progress” in the company’s international development initiatives. He said Covanta’s Dublin facility reached commercial operation at the beginning for the fourth quarter, as anticipated. “Plant performance, to-date, has been even better than expected,” Jones said. “This is a tremendous asset.”

“This success and the strong economics of the plant were key factors in our partnering with GIG,” Jones continued. As announced in December, GIG invested €136 million in exchange for a 50 percent stake in the facility, Jones said.

Covanta and GIG first announced their partnership to develop, fund and own EfW projects in the U.K. and Ireland in late 2017. At that time, the two organizations announced plans to combine their respective U.K. development pipelines, which included a total of six projects. During the fourth quarter investor call, Jones said Rookery is the most of advanced of these projects, noting it received its environmental permit on Jan. 26. Site work has begun, he said, and Covanta plans to move into full construction after financing closes, which is currently expected to occur during the second quarter of this year.

Regarding the Fairfax plant, Jones said Covanta completed the installation of upgraded fire protection and suppression equipment at the plant. The facility restarted operations in late 2017. The Fairfax facility was idle for much of last year after being damaged during a fire in February 2017. Jones called the timing of the recovery longer than expected and noted it had a collateral impact on the company’s 2017 performance.

Jones said that aggregate plant performance was below expectations last year. That was largely driven by a nearly a full year of downtime at Fairfax, which is one of Covanta’s largest EfW facilities. Despite aggregate performance being below expectations, he stressed that the majority of Covanta’s facilities had excellent operations, with 10 plants reaching all-time records in terms of waste processing.

Jones also outlined several steps Covanta is taking to further improve operating results, particularly at its largest tip-fee plants. First, he said that Covanta has had tremendous success at plants that have implemented continuous improvement, and the company expects to drive these initiatives further through its fleet. Several plants have also implemented stable operations, he said, which is a program where plants use statistical analysis to drive operating performance, with the goal of operating at peak performance every day. “The plants that have implemented this program are currently the best performing plants in our fleet, and we are eager to replicate this success at other plants,” Jones said.

Second, Jones indicated that Covanta has undertaken a thorough fire protection review of its facilities and will begin installing upgraded systems and equipment to reduce the likelihood and potential impact of future fires. That effort will take a few years to complete, he said.

Third, he said the company will continue review its plant and contract portfolio to ensure that it is investing in the right plants and that its operating contracts provide adequate compensation for the costs and risks inherent in maintaining these plants. “As we move forward, we will discontinue operations at certain facilities if we’re not receiving a reasonable return for our efforts and expertise,” Jones said, noting the company will also prioritize its investments in facilities that provide the highest return to shareholders.

Covanta reported $1.75 billion in revenue for the full year 2017, down from $1.7 billion in 2016. Net income was $57 million, compared to a net loss of $4 million reported for the previous year. Adjusted EBITDA was $408 million, down from $410 million in 2016.