North America EfW revenue increased by $39 million.
Energy-from-waste (EfW) facility owner/operator Covanta Holding Corp., Morristown, New Jersey, has reported financial results for the three and 12 months ended Dec. 31, 2014.
For the 12 months ended Dec. 31, 2014, total revenue increased by $52 million to $1.68 billion from $1.63 billion in 2013. The primary driver for the increase was North America EfW revenue, which increased by $39 million, the company reports.
Same-store North America EfW revenue increased by $49 million as follows:
- waste and service revenues increased by $14 million;
- energy revenues increased by $17 million, driven by an $11 million increase related to higher prices and a $7 million increase related to higher energy production; and
- recycled metals revenues increased by $17 million, driven by a $13 million increase in volume, primarily as a result of capital investment to increase recovery rates, and a $5 million increase due to higher market prices.
Also within North America EfW revenue, contract transitions, including lower debt service revenues, resulted in a decrease of $18 million. Transactions, primarily related to the full-year impact from the Camden, New Jersey, facility acquisition, increased revenue by $11 million.
Other operating revenue decreased by $21 million, primarily in light of lower construction revenue, while non-EfW waste and services revenues in the North America segment increased by $19 million, primarily because of transfer stations acquired in the fourth quarter of 2013.
All other energy revenue (non-EfW operations) increased by $10 million on a consolidated basis, driven by a $2 million increase in revenue from biomass operations due to higher energy prices and $8 million in higher steam revenue from a facility in China.
Excluding write-offs, operating expenses increased by $81 million to $1.48 billion. The year-over-year increase was primarily because of:
- a $23 million increase in North America EfW plant operating expenses primarily resulting from an $11 million increase in EfW same store plant operating expenses and an $11 million increase due to transactions;
- a $40 million increase in North America segment non-EfW plant operating expenses, primarily related to additional expenses from transfer stations acquired in the fourth quarter of 2013, higher wood fuel cost at our biomass facilities, higher employee incentive compensation, and other expenses related to increased revenue as noted above, partially offset by the benefit of higher renewable energy credits, which are accounted for as a contra expense; and
- a $15 million increase in consolidated general and administrative expenses, primarily due to higher non-cash stock compensation and expenses incurred related to the implementation of our cost efficiency initiatives.
Excluding write-offs (2014 and 2013 include net write-offs of $64 million and $15 million, respectively), operating income decreased by $29 million to $207 million in 2014 due to the revenue and expense items noted above.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) declined by $20 million on a year-over-year basis to $474 million in light of contract transitions (primarily a reduction in debt service billings), higher scheduled plant maintenance expense, lower construction profit and one-time gains that occurred in 2013.
Free cash flow declined by $5 million to $240 million, primarily as a result of lower adjusted EBITDA and higher maintenance capital expenditures, partially offset by favorable working capital changes.
Adjusted EPS (earnings per share) increased by $0.01 to $0.39. The increase was driven by lower book interest expense and higher equity income, partially offset by lower operating income.
The company summarizes the highlights for the 2014 year as follows:
- commenced construction of Dublin EfW facility;
- won Pinellas County, Florida, EfW facility operating contract and commenced operations;
- record recycled metal and special waste volumes and revenue;
- executed waste and service contracts totaling approximately 4 million tons per year – continued track record of successfully extending long-term client relationships;
- launched efficiency improvement initiative – on track to deliver $30 million in Adjusted EBITDA benefit in 2015;
- extended expected benefit of tax (net operating loss) NOL into late decade; and
- increased regular dividend by 52 percent to $1.00 per share (annualized);
"I am very pleased with our team's performance. We delivered a solid year operationally and financially, and we positioned Covanta for long-term growth with a number of strategic wins, most notably commencing construction of the Dublin facility and winning a new contract to operate the Pinellas facility,” Anthony Orlando, Covanta president and CEO says. “Furthermore, we continued our track record of successfully extending waste and service contracts, our organic growth initiatives are delivering results and we announced an important efficiency improvement program that will benefit 2015."
Stephen J. Jones, Covanta incoming president and CEO, further states, "I am extremely excited for the opportunity to lead such a dynamic organization. The company has a solid base business that generates strong free cash flow, which allows us tremendous flexibility to invest in strategic growth opportunities while also returning capital to shareholders. I'm looking forward to joining the best team in the industry, which is always focused on improving operations to better serve our clients, and engaging with all of Covanta's stakeholders."