Covanta "Off to Strong Start" with Q1 2019 Financial Results

The guidance range for adjusted EBITDA is $440 million to $465 million for Q1 2019, compared to actual EBITDA of $457 million in 2018.

The guidance range for free cash flow is $120 million to 145 million for Q1 2019, compared to $100 million in 2018.

Jones said Covanta is executing well on its 2019 plan, as the company generated $84 million of adjusted EBITDA and $6 million of free cash flow during the first quarter. Free cash flow is $6 million, compared to negative $52 million, or up $58 million, from Q1 2018.

Covanta also announced it completed 30 percent of scheduled maintenance work in Q1.

The company recorded a $57 million gain related to the Rookery South Energy Recovery Facility development project and a $9 million loss related to the pending divestiture of the company’s Springfield and Pittsfield, Mass., energy-from-waste (EfW) facilities. Covanta recorded a $204 million gain on the sale of 50 percent of its Dublin, Ireland, project to its joint venture with GIG and a $6 million gain on the sale of its remaining interests in China.

The company reported that its waste business is strong: EfW tip fee prices are up more than 5 percent in Q1 on same-store basis. EfW profiled waste revenue is up 9 percent in Q1. Manhattan Marine Transfer Station began operations in March, and the company extended the Babylon, N.Y., relationship with a new 15-year agreement. “While we do not expect to be at 5 percent every quarter, we still expect to see full-year, same-store tip fee price improvements of more than 3 percent,” explained Jones.

Optimizing its North America portfolio, Covanta closed its Warren County, N.J., facility and reached an agreement to divest Springfield and Pittsfield facilities. “We are focused on optimizing our fleet by exploring alternative options for some of our less profitable plants,” explained Jones. “The desired outcome in these situations is to make meaningful changes to improve profitability or unlock upside opportunities. However, in some cases, the right answer is to redeploy our resources and capital elsewhere. This quarter, we closed the Warren County, N.J., facility as previously announced and reached an agreement to divest in Springfield and Pittsfield assets. 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 are pleased to have found a new owner for Pittsfield and Springfield who will focus solely on their operations and will continue to support the local communities. We expect this transaction to close in the second quarter. Given the small size and financial contributions of these three facilities, this will not have an impact on our overall material expectations for the year. But going forward, we believe 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 will continue to look at all options to improve their performance or exit operations.”

Covanta also reached financial close on its Rookery project in the U.K. Full-scale construction is underway, targeting commercial operations in 2022. Covanta monetized $44 million upfront, and approximately half of targeted $40 million to $50 million free cash flow from announced U.K. pipeline is now in construction.