June 8, 2009

Incinerator firm hopes to raise $400 million bond

The US firm leading the consortium to build an incinerator at Poolbeg in Dublin is attempting to raise $400 million from bond investors to part-finance the project.

Covanta, a US-quoted energy firm, is heading Dublin Waste to Energy Ltd, which has been awarded the contract to build and operate the incinerator. The consortium recently assured Dublin City Council that all funding was in place for the project.

However, Covanta has struggled to secure finance for phase one of the project, and is now seeking to raise $400 million through ‘‘cash-convertible senior notes’’. It is proposing to pay investors a return of 6.5 per cent a year on their capital. [Should read 3.25% p.a. ??]

In documents filed last week with the Securities and Exchange Commission in the US, Covanta said the net proceeds of the bond issue would be used for working capital, including ‘‘funding a portion of the construction cost for a 1,700 metric energy-from waste facility in Dublin’’.

It is understood that Covanta had tried to raise bank debt, but no institution was willing to act as the primary banker to the Poolbeg project, due to the lack of liquidity on the international credit markets.

However, a number of lenders have informed the consortium that they may consider part-financing latter aspects of the project. The planned incinerator is a central element of the country’s waste management strategy. If completed as planned, it will burn 600,000 tonnes of waste a year, creating electricity for 50, 000 homes and hot water heating for a further 60,000 households. However, there has been opposition both to the Poolbeg project, and to incineration in general in Ireland, with a number of projects beset by delays.

Last week, John Gormley, the Green Party Minister for the Environment, is sued a circular which stated that he would introduce a levy to be borne by companies incinerating waste and anybody selling waste for incineration.

Gormley has also instructed the director general of the Environmental Protection Agency (EPA),Dr Mary Kelly, and all council managers nationwide, that they must in future ‘‘refrain from exercising their powers in such a way as to direct waste to landfill or incineration’’.

Gormley told the EPA and the council heads that he was initiating a Strategic Environmental Assessment (SEA), instructing them that government policy had taken decisive steps to encourage recycling and discourage incineration.


1 comment:

The Galway Tent said...

Covanta has total debts of $2.3 Billion.
Total capitalisation is only $3.6 Billion.

Covanta seems to be financing projects in strong currency areas (Euro; China) with dollar based debt. Curious.


Capitalization table:

As of March
31, 2009

As Adjusted(1)
(In thousands)
Cash and cash equivalents and restricted funds held in trust:
Cash and cash equivalents $ 496,353
Restricted funds held in trust 328,805

Total cash and cash equivalents and restricted funds held in trust $ 825,158

Project debt (non-recourse) $ 1,012,329
Unamortized premium on project debt 18,164
Other long-term debt 462
Covanta Energy’s first lien term loan facility (due 2014) 637,000
Debentures(2) 314,084
Notes offered hereby(3) 322,180

Total debt $ 2,304,219

Covanta Holding Corporation Stockholders’ equity:
Preferred stock ($0.10 par value; authorized 10,000 shares; none issued on an actual or as adjusted basis) $ —
Common stock ($0.10 par value; authorized 250,000 shares; issued 155,506 shares and outstanding 154,841 shares on an actual and as adjusted basis)(4) 15,551
Additional paid-in capital(5) 881,588
Accumulated other compensation loss (10,332 )
Accumulated earnings 348,568
Treasury stock, at par (67 )

Covanta Holding Corporation stockholders’ equity 1,235,308

Noncontrolling interests in subsidiaries 31,187

Total equity $ 1,266,495

Total capitalization $ 3,570,714