Covanta identifies strong growth prospects in UK EfW market

US-based industrial waste management company Covanta has highlighted its investments into UK Energy-from-Waste (EfW) facilities as its primary opportunities for growth, during the company’s latest earnings call.

Covanta's Dublin EfW facility (cc-by-sa/2.0 © David Dixon)
Covanta's Dublin EfW facility (cc-by-sa/2.0 © David Dixon)
It cited the UK’s favourable regulatory environment and demand for EfW facilities as key reasons for its continued focus towards expansion within the UK market.

Speaking after the release of Covanta’s Q4 2020 results, CEO Mike Ranger said: “The UK market remains attractive for additional Waste-to-Energy development, given the significant regulatory support and market demand for landfill alternatives.”

“From that perspective, you should view the financial outlook for international as a floor, not a ceiling.”

To date, Covanta has invested in four EfW sites across the UK and one in Ireland, which are expected to annually generate $60 million (approximately £42.6 million) in combined cashflow once all fully operational.

“We will soon have, when coupled with our Dublin project, five new assets located in one of the best markets in the world, in terms of waste pricing and public support,” Ranger added.

Once fully operational, Covanta expects the four UK-based plants to have a processing capacity of 1.5 million tons.

The Covanta Dublin EfW site has been operational since 2017 and processes up to 600,000 tonnes of waste per year, producing electricity for over 100,000 homes.

Covanta’s most recent investment was the £35 million Protos EfW facility in Cheshire, alongside partners Biffa and Macquarie Group. The site is due to be completed in 2024 when Covanta will become the operators of the facility.

Covanta will also be the operators of its Rookery site in Bedfordshire and the Newhurst site in Leicestershire, due to be completed in 2022 and 2023 respectively.

“Rookery is right on schedule and budget with major construction nearly complete,” added Ranger. “Around the middle of the year, we expect to begin receiving and processing waste as the plant moves into the hot commissioning phase.”

“Given our progress to date and experience commissioning new plants, we expect Rockery to be in full operation and generating EBITDA in the first half of next year.”

Covanta expects the Rookery site to generate $30 million (approximately £21.3 million) of adjusted EBITDA on an annual basis and the five projects to generate $110 million (approximately £78.1 million) in total.

The development of Covanta's UK investments are led by the Europe President of Covanta Owen Michaelson, who will drive the completion of the four construction projects and ‘create additional value through development of projects in our pipeline,’ according to Ranger.

“In some, the UK remains a primary growth avenue, and we believe our source of tremendous potential value for shareholders,” Ranger concluded.