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Covanta to buy facilities from Veolia subsidiary
July 6, 2009 / 2:16 PM / in 8 years

Covanta to buy facilities from Veolia subsidiary

BANGALORE (Reuters) - Renewable energy company Covanta Holding Corp (CVA.N) said it will acquire waste incinerator facilities from Veolia Environment’s (VIE.PA) VE.N North American subsidiary in a cash deal worth $450 million, to increase its waste management capacity.

“I think it’s a very good deal for Covanta. The current state of the market is allowing them to get it for an attractive price,” Jefferies and Co analyst Paul Clegg said by phone.

The transaction to buy the energy-from-waste facilities from the French water and environmental services company is expected to be accretive to Covanta and will add about $60 million of operating cash flow during 2010, the company said.

Energy-from-waste (EfW) is the process of creating energy in the form of electricity or heat from the incineration of waste source.

“Each of the seven EfW businesses to be acquired includes a long-term operating contract with the respective municipal client... Collectively, these seven EfW facilities process approximately 3 million tons of waste per year,” Covanta said.

The company said force reductions were not anticipated in the facilities, which employ a total of about 500 people and added the purchase price excluded net debt and minority interest.

Covanta said the facilities were located in California, Florida, Canada and two in New York and Pennsylvania each.

“If you look at the assets and where they are located, they map very well to the company’s existing facilities and make the opportunities for additional synergies that much stronger,” Clegg said.

Separately, Veolia said the sale of its North American EfW contracts was a part of its disposal program.

Faced with lower profits and calls for better financial discipline by investors, Veolia said in March it planned to sell assets worth 3 billion euros ($4.17 billion) between 2009 and 2011, including at least 1 billion euros ($1.39 billion) worth this year.

Shares of Covanta went up almost 2 percent to $16.96 before paring gains to trade 1.5 percent down at $16.42, while Veolia’s American Depository shares were down almost a percent at $29.20 Monday morning on the New York Stock Exchange.

($1=.7181 Euro)

Editing by Jarshad Kakkrakandy

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