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Covanta Buys Waste-to-Energy Facility

Zacks Equity Research

Covanta Holding Corp. (CVA) has purchased Camden Resource Recovery Facility from an affiliate of Foster Wheeler AG (FWLT) for $48.6 million and expects the transaction to have a positive effect on its 2013 outlook.

Located in the namesake New Jersey city, the Camden facility has a processing capacity of 1,050 tons per day of Energy-from-Waste (EfW). This is also known as waste to energy or WTE. Last year, Camden processed around 319,000 tons of waste material into more than 146,000 megawatt (MW) hours of electricity. Indeed Camden holds a leading position in sustainable waste management and renewable energy.

This EfW facility provides waste management services to Camden County and the local communities and produces about 21 MW of renewable energy that is being sold into PJM at market rates.

Covanta is one of the world’s largest owners and operators of infrastructure for the conversion of WTE, as well as other waste disposal and renewable energy production businesses. The company conducts all of its operations through subsidiaries which are engaged predominantly in the businesses of waste and energy services.

Covanta has 45 EfW facilities and this acquisition will enable the Morristown, NJ-based company to extend its horizon apart from its existing EfW facilities in the Northeast and Mid-Atlantic.

Last month, Covanta reported second quarter of 2013 earnings that surpassed the Zacks Consensus Estimate by an impressive 150%. Its top line also increased on the back of effective execution of organic growth programs like special waste and metal recovery, expansion of the Honolulu unit and contract additions.

Although Covanta made a favorable comeback in the second quarter of 2013 with its top and bottom line beating our expectation, its second quarter earnings fell short of the year-ago figure mainly due to lower equity income. Again, the soft macroeconomic conditions remain a concern.

Covanta currently carries a Zacks Rank #3 (Hold). Other companies that are currently performing well and warrant a look include Zacks Rank #1 (Strong Buy) stocks US Ecology, Inc. (ECOL) and Huaneng Power International, Inc. (HNP).

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