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Covanta developing ash processing system to create new revenue opportunities

Covanta Holding Corp. is building its first total processing system to reduce long-term ash disposal costs. Covanta also intends for the systems to help it become more sustainable and generate new revenue opportunities.

The company is building its first total processing system, or TAPS, plant at its Pennsylvania metal processing facility. The plant is designed to process over 400,000 tons of ash from its multiple energy-from-waste facilities, according to a January announcement.

The plant is supposed to be fully operational by the fourth quarter, but Covanta extended the construction timeline to optimize the equipment.

"This is the first system of type and exciting long-term opportunity for Covanta, so we want to make sure we get this first one right," President and CEO Stephen Jones said during the company's Oct. 25 third-quarter earnings call.

Covanta has spent a little under $5 million on TAPS year-to-date and expects increased spending as it completes construction by 2020.

During the third quarter, the company issued its first series of tax-exempt green bonds to fund spending on the TAPS plant and an energy-from-waste plant in Pennsylvania. The bonds have a 20-year term and a 3.25% coupon.

"We now have over $500 million of corporate tax-exempt bonds like this outstanding, and we look to tap into this market in the future as an efficient means of funding domestic investment," Jones said.

Covanta is in discussion with clients to determine where the next rollout of TAPS projects will be.

"How long it will take to roll out over the whole fleet? I'd say probably 2, 3 years, something like that, and then probably on the later end of that timeline," Executive Vice President and CFO Bradford Hegelson said during the earnings call. "The pacing item is going to be permitting."

Covanta on Oct. 24 reported adjusted EBITDA of $125 million for the third quarter, compared to $122 million in the same quarter a year ago. The company reaffirmed its full-year 2019 adjusted EBITDA guidance of $420 million to $445 million.