Monday 19 March 2018

Covanta to recycle waste plant proceeds to UK

The Poolbeg incinerator built by Covanta will burn about 600,000 tonnes of waste a year. Photo: Colin O'Riordan
The Poolbeg incinerator built by Covanta will burn about 600,000 tonnes of waste a year. Photo: Colin O'Riordan
John Mulligan

John Mulligan

US waste-to-energy giant Covanta is to recycle €136m it generated from the sale of a 50pc stake in its new Dublin facility into a €2bn plan to roll out plants across the UK.

The controversial Dublin waste-to-energy plant was commissioned last year following a three-year construction phase.

The Poolbeg facility was built at a cost of about €500m.

Last month, it reached its goal of processing 1,800 tonnes of solid waste a day.

It aims to burn 600,000 tonnes of waste a year, and in the process generate up to 61 megawatts of power.

Last month, Sydney-based Macquarie Group's newly-acquired Green Investment Group bought a stake in Covanta's Dublin plant.

The Australian financial group will now partner with Covanta on the construction of new waste-to-energy plants in the UK.

Macquarie bought Green Investment Group from the UK government for £2.3bn in 2017.

Covanta chief executive Stephen Jones told news agency Bloomberg that the group's total equity investment in the Dublin waste-to-energy facility was between €150m and €175m.

"With GIG's investment into the facility for a 50pc stake, we are getting most of our investment back, at €136m, which enables us to fund the new growth projects in the UK," he said.

"There is a landfill levy in place in both Ireland and the UK, and this sets a fairly high gate fee for waste disposal in those countries," said Mr Jones.

"With the electricity revenues available from the waste-to-energy process along with the current gate fees, it should be possible to make low- to mid-teen equity returns on the projects we are developing."

Mr Jones added that Covanta had also refinanced the debt on the Dublin facility, bringing in a €396m senior loan due 2032 with an interest rate (including swap) of 3.1pc, and a €50m junior loan of the same tenor, at 5.2pc

"The refinancing of the Dublin project debt capitalised on the material improvement [there has been] in the financial markets in Ireland since the initial construction financing was put in place in 2014," said Mr Jones.

"The refinancing enabled us to increase leverage to a level more appropriate for a new, world-class operating facility, while also significantly reducing the interest rates and extending tenor from 2021 to 2032."

The new facilities that Covanta and Macquarie expect to build in the UK could burn as much as two million tonnes of waste a year, Mr Jones said.

He pointed out that the UK continues to export about 3.5m tonnes of waste every year.

The first four projects planned by Covanta all have planning approval. The first project is likely to be built in Bedfordshire. Construction is expected to start in about six months and be completed after three years. (Additional reporting: Bloomberg)

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