Covanta increases revenues in Q3

Waste and service revenue increased by $8 million, while energy revenue increased by $1 million.

October 25, 2016
REW Staff
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Covanta Holding Corp., Morristown, New Jersey, reported financial results for the three and nine months ended Sept. 30, 2016.

"Our waste business continues to grow, benefiting from strong market conditions and demand for our environmental solutions offerings," says Stephen J. Jones, Covanta's president and CEO. "Overall, operating performance is on track with the plan we laid out in the beginning of the year. In addition, construction of the Dublin energy-from-waste (EfW) facility is now over 75 percent complete, and this quarter we signed the remaining waste supply contracts to secure 90 percent of the facility's capacity. We look forward to moving into commercial operations by the end of Q3 2017."

For the three months ended Sept. 30, 2016, total revenue decreased by $1 million to $421 million from $422 million in Q3 2015. An increase in waste and service revenue was offset by decreases in metals and energy revenue.

Same store North America EfW revenue increased by $6 million as follows:

  • waste and service revenue increased by $8 million, driven by price and volume improvements of $6 million and $2 million, respectively
  • energy revenue increased by $1 million, with higher prices and capacity revenue offsetting lower production volume
  • recycled metals revenue decreased by $3 million, primarily driven by lower market prices

Also within North America EfW revenue, contract transitions resulted in an increase of $4 million due to additional energy revenue sharing partially offset by the expiration of an above-market power purchase agreement.

All other revenue (non-EfW operations) decreased by $15 million on a consolidated basis. Energy revenue from non-EfW operations decreased by $22 million, representing the contribution from biomass facilities and China operations in the prior year. This was partially offset by a $6 million increase in waste and service revenue primarily from newly acquired environmental solutions businesses.

Operating expense increased by $13 million to $361 million. The year-over-year increase was primarily due to:

  • an $11 million increase in North America EfW plant operating expense driven by the Durham-York facility coming online and same store cost escalation
  • an $8 million increase in North America segment non-EfW plant operating expense, primarily related to operations in our newly acquired environmental solutions businesses and higher accruals for employee incentive compensation, partially offset by shutting down remaining biomass facilities
  • a $7 million decrease in plant operating expense outside the North America segment due to the exchange of ownership interests in EfW facilities located in China

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) declined by $15 million on a year-over-year basis to $124 million, driven primarily by the China transaction and increased accrual for employee incentive compensation.

Free Cash Flow decreased by $33 million to $74 million, primarily as a result of lower Adjusted EBITDA and working capital.

Adjusted earnings per share (EPS) decreased by $0.04 to $0.18. The decrease was driven primarily by the China transaction and increased accrual for employee incentive compensation.