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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95-6021257
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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445 South Street, Morristown, NJ
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07960
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(Address of Principal Executive Office)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.10 par value per share
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New York Stock Exchange
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting
company
o
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Emerging growth
company
o
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(Do not check if a smaller
reporting company)
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Class
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Outstanding at February 16, 2018
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Common Stock, $0.10 par value
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130,992,568
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Part of Form 10-K of Covanta Holding Corporation
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Documents Incorporated by Reference
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Part III
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Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 2018 Annual Meeting of Stockholders.
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seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities;
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our ability to renew or replace expiring contracts at comparable prices and with other acceptable terms;
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adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, tax laws, labor laws and healthcare laws;
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failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;
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our ability to avoid adverse publicity or reputational damage relating to our business;
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advances in technology;
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difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;
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difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
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limits of insurance coverage;
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our ability to avoid defaults under our long-term contracts;
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performance of third parties under our contracts and such third parties' observance of laws and regulations;
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concentration of suppliers and customers;
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geographic concentration of facilities;
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increased competitiveness in the energy and waste industries;
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changes in foreign currency exchange rates;
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limitations imposed by our existing indebtedness and our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;
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exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
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the scalability of our business;
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our ability to attract and retain talented people;
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failures of disclosure controls and procedures and internal controls over financial reporting;
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our ability to utilize net operating loss carryforwards;
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general economic conditions in the United States and abroad, including the availability of credit and debt financing;
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restrictions in our certificate of incorporation and debt documents regarding strategic alternatives; and
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other risks and uncertainties affecting our businesses described in
Item 1A. Risk Factors
of this Annual Report on Form 10-K and in other filings by Covanta with the SEC.
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Preserve and grow the value of our existing portfolio.
We intend to maximize the long-term value of our existing portfolio of facilities by continuously improving safety, health and environmental performance, working to provide superior customer service, continuing to operate at our historic production levels, maintaining our facilities in optimal condition, extending waste and service contracts, and conducting our business more efficiently. We intend to achieve organic growth by expanding our customer base, service offerings and metal recovery, adding waste, service or energy contracts, investing in and enhancing the capabilities of our existing assets, and deploying new or improved technologies, systems, processes and controls, all targeted at increasing revenue or reducing costs.
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Expand through project development and/or acquisitions in selected attractive markets.
We seek to grow our portfolio, primarily through development of new facilities or businesses, competitive bids for new contracts, and acquisitions, where we believe that market opportunities will enable us to utilize our skills and/or invest our capital at attractive risk-adjusted rates of return. We focus these efforts in markets where we currently have projects in operation or under construction, and in other markets with strong economic fundamentals and predictable legal and policy support. In addition to our focus on EfW and related waste sourcing activities, we are seeking to expand our environmental service offerings through both organic growth and acquisitions.
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Develop and commercialize new technology.
We believe that our efforts to protect and expand our business will be enhanced by the development of additional technologies in such fields as recycling, alternative waste treatment processes, gasification, combustion controls, emission controls and residue recovery, reuse or disposal. We have advanced our research and development efforts in some of these areas relevant to our EfW business, and have patents and patents pending for advances in controlling emissions.
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Advocate for public policy favorable to EfW and other sustainable waste and materials management solutions.
We seek to educate policymakers and regulators about the environmental and economic benefits of EFW and advocate for policies and regulations that appropriately reflect these benefits. Our business is highly regulated, and as such we believe that it is critically important for us, as an industry leader, to play an active role in the debates surrounding potential policy developments that could impact our business.
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Maintain a focus on sustainability.
Providing sustainable waste, materials, and energy services to our customers is the cornerstone of our business. Our corporate culture is focused on the triple bottom line of sustainability (people, planet, prosperity) in support of our mission. In addition to robust financial reporting, we are committed to transparently reporting our environmental, social and governance standards, policies, and performance, including through our corporate sustainability report. We seek to continuously improve our performance across these aspects to remain an industry leader.
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Allocate capital efficiently for long-term shareholder value.
We plan to allocate capital to maximize shareholder value by: investing in our existing businesses to maintain and enhance assets; investing in new projects and strategic acquisitions that offer attractive returns on invested capital and further our strategic goals; maintaining a strong balance sheet; and consistently returning capital to our shareholders.
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•
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$132 million
declared in dividends to stockholders; and
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$171 million
for growth investments, including
$117 million
towards construction of the Dublin EfW facility (a majority of which was financed with non-recourse project subsidiary debt),
$17 million
to acquire three environmental services businesses, and
$33 million
for various organic growth investments, which included metals recovery projects and investments related to our profiled waste and environmental services businesses.
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In December 2017, we entered into a strategic partnership with Green Investment Group Limited (“GIG”), a subsidiary of Macquarie Group Limited, to develop, fund and own EfW projects in the U.K. and Ireland. This partnership is structured as a 50/50 joint venture (“JV”) between Covanta and GIG and creates a platform to develop waste infrastructure projects and pursue new opportunities for EfW project development or acquisitions. As an initial step, GIG invested in our Dublin EfW facility, which began commercial operations in October 2017, acquiring 50% ownership through the JV for €136 million, while we retained a 50% equity interest in the project and retained our role as operations and maintenance ("O&M") service provider. GIG's investment in the Dublin EfW project closed on February 12, 2018, and we used proceeds from the transaction to repay borrowings under our Revolving Credit Facility. As development projects in the the JV's pipeline reach financial close and move into the construction phase, the JV will acquire the available ownership in each project, with a premium payable to the partner that originally developed and contributed the project to the JV. We will serve as the preferred O&M service provider for all JV projects on market competitive terms.
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During the
year ended
December 31, 2017
, we acquired three environmental solutions businesses, in separate transactions, for a total of
$17 million
. Also during 2017, we expanded our materials processing capabilities at our Milwaukee CES facility. These acquisitions and organic growth initiatives further expanded our CES capabilities, including client service offerings and geographic reach.
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In April 2017, we began utilizing our regional metals processing facility, located in Fairless Hills, Pennsylvania, to process non-ferrous metal recovered at our EfW facilities. The non-ferrous metals are cleaned and separated by size and type for purposes of improving product quality to create a higher-valued recycled metal product and expanding our potential end markets.
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In December 2017, we extended our service agreements with the Lancaster County Solid Waste Management Authority for the operation and maintenance of the Lancaster County and Harrisburg EfW facilities for an additional 15 years through 2032.
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In June 2017, we extended our agreement with the Delaware County Solid Waste Authority to process waste at our Delaware Valley EfW facility for an additional five years under terms similar to our existing contract.
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In February 2017, we extended our agreement with the Southeastern Connecticut Regional Resource Recovery Authority for waste disposal at our Southeast Connecticut EfW facility for an additional four years, restructuring the new contract as a tip fee arrangement.
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During September 2017, we settled a dispute with Hennepin County regarding extension provisions in our service contract to operate the Hennepin Energy Recovery Center. We received $8 million in connection with the settlement and will continue to operate the facility through March 2018. During the year ended December 31, 2017, we recorded a gain on settlement of $8 million as a reduction of "Other operating expense, net" in our consolidated statement of operations.
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In February 2017, our Fairfax County EfW facility experienced a fire in the front-end receiving portion of the facility. We resumed operations in December 2017. The cost of repair or replacement and business interruption losses are insured under the terms of applicable insurance policies, subject to the policy provisions and deductibles. We expect receipt of insurance recoveries for both property loss and business interruption to continue through 2018. For additional information, see
Item 1. Financial Statements - Note 13. Supplemental Information - Insurance Recoveries.
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Tip Fee
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Service Fee
( Covanta Owned)
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Service Fee
(Client Owned)
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Number of facilities:
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20
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4
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17
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Client(s):
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Host community and municipal and commercial waste customers
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Host community, with limited merchant capacity in some cases
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Dedicated to host community exclusively
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Waste or service
revenue:
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Per ton “tipping fee”
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Fixed fee, with performance incentives and inflation escalation
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Energy revenue:
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Covanta retains 100%
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Share with client
(Covanta retains approximately 20% on average)
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Metals revenue:
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Covanta retains 100%
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Share with client
(Covanta typically retains approximately 50%)
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Operating costs:
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Covanta responsible for all operating costs
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Pass through certain costs to client
(e.g. ash disposal)
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Project debt service:
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Covanta project subsidiary responsible
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Paid by client explicitly as part of service fee
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Client responsible for debt service
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After service contract
expiration:
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N/A
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Covanta owns the facility; clients have certain rights set forth in contracts; facility converts to Tip Fee or remains Service Fee with new terms
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Client owns the facility; extend with Covanta or tender for new contract
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(1)
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These facilities either sell electricity into the regional power pool at prevailing market rates or have contractual arrangements to sell electricity at prevailing market rates
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(2)
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These facilities use a refuse-derived fuel technology.
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(3)
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These facilities have been designed to export steam for sale. See table below for the equivalent electric output. The equivalent electric output is part of, not in addition to, the design capacity megawatts ("MW") listed in the table above.
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Facility
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Equivalent Electric Output (MW)
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Niagara
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66
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Indianapolis
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52
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Tulsa
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25
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Huntsville
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15
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Pittsfield
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5
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Lancaster
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5
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(4)
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This facility transitioned from a service fee (owned) to a tip fee contract effective February 2017.
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(5)
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The client has a termination option under the service agreement.
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Design Capacity
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Location
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Waste
Processing
(Metric
TPD)
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Gross
Electric
(MW)
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Nature of Interest
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1.
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Dublin
(1)
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Ireland
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1,800
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58
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50% Owner/Operator
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2.
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Trezzo
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Italy
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500
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18
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13% Owner/JV Operator
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SUBTOTAL
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2,300
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76
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(1)
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For additional information see
Item 8. Financial Statements and Supplementary Data-
Note 3.
New Business and Asset Management
,-Dublin EfW Facility
and
Green Investment Group Limited (“GIG”) Joint Venture.
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As of December 31,
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2017
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2016
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2015
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2014
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Consumer Price Index
(1)
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2.1
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%
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2.1
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%
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0.7
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%
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0.8
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%
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PJM Pricing (Electricity)
(2)
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$
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28.69
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$
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24.85
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$
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36.00
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$
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56.99
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NE ISO Pricing (Electricity)
(3)
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$
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32.75
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$
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29.74
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$
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42.93
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$
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64.58
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Henry Hub Pricing (Natural Gas)
(4)
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$
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2.99
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$
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2.52
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$
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2.60
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$
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4.33
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#1 HMS Pricing (Ferrous Metals)
(5)
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$
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268
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$
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197
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$
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217
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$
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355
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Scrap Metals - Old Cast Aluminum Scrap
(6)
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$
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0.61
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$
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0.57
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$
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0.63
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$
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0.75
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(1)
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Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the U.S. Department of Labor Bureau of Labor Statistics.
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(2)
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Average price per MWh for full year. Pricing for the PJM PSEG Zone is provided by the PJM ISO.
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(3)
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Average price per MWh for full year. Pricing for the Mass Hub Zone is provided by the NE ISO.
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(4)
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Average price per MMBtu for full year. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, Energy Information Administration, Washington, DC.
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(5)
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Average price per gross ton for full year. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price is published by American Metal Market.
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(6)
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Average price per pound for full year. Calculated using the high price of Old Cast Aluminum Scrap ($/lb) published by American Metal Market.
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regional population and overall waste production rates;
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the number of waste disposal sites (including principally landfills, other EfW facilities and transfer stations) in existence or in the planning or permitting process;
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the available disposal capacity (in terms of tons of waste per day) that can be offered by other regional disposal sites;
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the extent to which local governments seek to control transportation and/or disposal of waste within their jurisdictions;
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the extent to which local governments and businesses continue to value sustainable approaches to handling of wastes; and
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the availability and cost of transportation options (e.g., rail, inter-modal, trucking) to provide access to more distant disposal sites, thereby affecting the size of the waste market itself.
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avoids CO
2
emissions from fossil fuel power plants;
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avoids methane emissions from landfills; and
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avoids GHG emissions from mining and processing metal because it recovers and recycles metals from waste.
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The Regional Greenhouse Gas Initiative (“RGGI”) is an operating regional “cap-and-trade” program focused on fossil fuel-fired electric generators which does not directly affect EfW facilities. We operate one fossil-fuel fired boiler at our Niagara facility included in the RGGI program. Virginia issued a proposed regulation in November 2017 to reduce GHG emissions from its electricity sector and link to the RGGI program. EfW facilities were not included in the proposal.
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California's Global Warming Solutions Act of 2006 ("AB 32"), seeks to reduce GHG emissions in California to 1990 levels by 2020. AB 32 includes an economy-wide “cap-and-trade” program, which could impact our California EfW facilities.
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Regulatory amendments finalized in 2017 extended an exclusion of EfW facilities from the cap-and-trade program through the end of 2017. A resolution passed by the Board of the California Air Resources Board (“CARB”) directs the agency to provide transition assistance to EfW facilities beginning in 2018. The specific degree of assistance to be provided is uncertain at this time.
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The province of Ontario, Canada has developed a greenhouse gas cap and trade program under which EfW facilities, including the Durham-York facility, do not incur a compliance obligation under the program through the end of 2020. We cannot predict at this time the treatment of EfW facilities after 2020.
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Name and Title
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Age
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Experience
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Stephen J. Jones President and Chief Executive Officer
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56
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President and Chief Executive Officer since 2015. Prior to joining Covanta, Mr. Jones was employed by Air Products and Chemicals, Inc. (“Air Products”), a global supplier of industrial gases, equipment and services from 1992 through 2014. Mr. Jones served as Senior Vice President and General Manager, Tonnage Gases, Equipment and Energy, from 2009 through 2014. Mr. Jones also served as Air Products’ China President from 2011 through 2014 at Air Products’ office in Shanghai. He was also a member of Air Products’ Corporate Executive Committee from 2007 through 2014. Mr. Jones joined Air Products in 1992 as an attorney in the Law Group representing various business areas and functions and in 2007 he was appointed Senior Vice President, General Counsel and Secretary.
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Bradford J. Helgeson Executive Vice President and Chief Financial Officer
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41
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Executive Vice President and Chief Financial Officer since 2013. Mr. Helgeson served as Vice President and Treasurer from 2007 to 2013. Prior to joining Covanta in 2007, Mr. Helgeson was Vice President, Finance and Treasurer at Waste Services, Inc., a publicly-traded environmental services company with operations in the United States and Canada, from 2004 to 2007. Prior to these roles, Mr. Helgeson held positions in the investment banking departments at Lehman Brothers from 2000 to 2004 and at Donaldson, Lufkin & Jenrette from 1998 to 2000.
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Michael J. de Castro Executive Vice President, Supply Chain
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55
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Executive Vice President, Supply Chain since 2015. Mr. de Castro was employed by Air Products from 2006 to 2010, serving in various operational capacities including Director, Global Operations Americas. Mr. de Castro was Chief Executive Officer of Interstate Waste Services ("IWS") from 2010 to 2013 when he returned to Air Products, serving as Director, Global Operations Strategic Development and as Fulfillment Director in the Performance Materials Division. Prior to his tenure at IWS and Air Products, Mr. de Castro held a variety of positions at American Ref-Fuel Company for 16 years, including of Vice President, Operations.
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Derek W. Veenhof Executive Vice President, Asset Management
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51
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Executive Vice President since 2013. Mr. Veenhof served as Senior Vice President (2011-2013) and Vice President (2007-2010) of Covanta commercial subsidiaries managing contracting and market development efforts in waste and metals recycling. From 2002 to 2006, Mr. Veenhof was Covanta’s Area Manager responsible for the Metro NY, NJ and Philadelphia market areas. Mr. Veenhof joined Covanta in 1997, serving as the Niagara Facility Business Manager from 1997-2001.
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Timothy J. Simpson Executive Vice President, General Counsel and Secretary
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59
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Executive Vice President, General Counsel and Secretary since 2007. Mr. Simpson served as Senior Vice President, General Counsel and Secretary from 2004 to 2007. Previously, he served as Senior Vice President, General Counsel and Secretary of Covanta Energy from March 2004 to October 2004. Mr. Simpson joined Covanta in 1992.
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Matthew R. Mulcahy Executive Vice President and Head of Corporate Development
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54
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Executive Vice President and Head of Corporate Development since 2017. Mr. Mulcahy served as Senior Vice President and Head of Corporate Development for Covanta from 2012 to 2016 and Senior Vice President of Business Development from 2007 through 2011. From 2003 to 2007, Mr. Mulcahy served as Vice President of Covanta Secure Service and TransRiver Marketing, a Covanta subsidiary. From 2000 to 2003, Mr. Mulcahy was Covanta’s Vice President, Project Implementation. Mr. Mulcahy joined Covanta in 1990.
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Paul E. Stauder Senior Vice President and President, Covanta Environmental Solutions
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52
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Senior Vice President since 2016 and President of Covanta Environmental Solutions, a subsidiary of Covanta Energy, since 2015. Mr. Stauder served as Senior Vice President of Business Management for Covanta Energy from 2008 to 2014, with primary responsibility for all commercial and client aspects of Covanta’s EFW facilities. Prior to that role, Mr. Stauder served in a number of positions with Covanta Energy, including Regional Vice President, overseeing EfW plants and independent power plants. Mr. Stauder joined Covanta in 1997.
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Michael A. Wright Senior Vice President and Chief Human Resources Officer
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55
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Senior Vice President and Chief Human Resources Officer since 2009. Mr. Wright served as President of The Wright Group, Inc., a boutique human capital consulting firm from 2008 to 2009, prior to which Mr. Wright spent 25 years serving in a variety of positions at the Altria family of companies (Kraft and Philip Morris), including Vice President-Human Resources & Technology for Altria Corporate Services, Inc. from 2006 to 2008.
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Manpreet Grewal Vice President and Chief Accounting Officer
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39
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Mr. Grewal was appointed Vice President and Chief Accounting Officer in 2017. Prior to joining Covanta, he was the Senior Director, Global Financial & Operational Audits from 2016 through 2017 for Johnson Controls plc, a leading provider in building technologies and solutions and automotive batteries globally. Prior to this position, Mr. Grewal spent 13 years working in a variety of finance and accounting roles at Tyco International plc, prior to Tyco’s 2016 merger with Johnson Controls. From 2014 through 2015 Mr. Grewal was the Director, Internal Audit and from 2012 to 2013, he was the Sr. Manager, Accounting Research & Shared Processes for Tyco.
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performance by multiple contractors critical to our ability to perform under our new customer agreements;
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logistics associated with transportation of waste via barge, rail or other methods with which we have limited experience;
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reliance on joint venture parties or technology providers with whom we have limited experience; and
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risks associated with providing new materials handling or treatment services.
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supply or transportation interruptions;
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the breakdown, failure or unplanned maintenance or repair of equipment or processes;
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difficulty or inability to find suitable replacement parts for equipment;
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the unavailability of sufficient quantities of waste or fuel;
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fluctuations in the heating value of the waste we use for fuel at our EfW facilities;
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failure or inadequate performance by subcontractors;
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disruption in the transmission of electricity generated;
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labor disputes and work stoppages;
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unforeseen engineering and environmental problems;
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unanticipated cost overruns;
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weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism; and
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the exercise of the power of eminent domain.
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making it difficult for us to meet our payment and other obligations under our outstanding indebtedness;
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limiting our ability to obtain additional financing to fund working capital, capital expenditures, new projects, acquisitions and other general corporate purposes;
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subjecting us to the risk of increased sensitivity to interest rate increases on indebtedness under our credit facilities;
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limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industries in which we operate and the general economy; and
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placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
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the continued operation and maintenance of our facilities, consistent with historical performance levels;
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maintenance or enhancement of revenue from renewals or replacement of existing contracts and from new contracts to expand existing facilities or operate additional facilities;
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market conditions affecting waste disposal and energy pricing, as well as competition from other companies for contract renewals, expansions and additional contracts, particularly after our existing contracts expire;
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the continued availability of the benefits of our net operating loss carryforwards; and
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general economic, financial, competitive, legislative, regulatory and other factors.
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difficulties in identifying, obtaining and permitting suitable sites for new projects;
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the inaccuracy of our assumptions with respect to the cost of and schedule for completing construction;
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difficulty, delays or inability to obtain financing for a project on acceptable terms;
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delays in deliveries of, or increases in the prices of, equipment sourced from other countries;
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the unavailability of sufficient quantities of waste or other fuels for startup;
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permitting and other regulatory issues, license revocation and changes in legal requirements;
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labor disputes and work stoppages;
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unforeseen engineering and environmental problems;
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interruption of existing operations;
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unanticipated cost overruns or delays; and
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•
|
weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism.
|
•
|
support agreements in connection with construction, service or operating agreement-related obligations;
|
•
|
direct guarantees of certain debt relating to our facilities;
|
•
|
contingent obligations to pay lease payment installments in connection with certain of our facilities;
|
•
|
agreements to arrange financing for projects under development;
|
•
|
contingent credit support for damages arising from performance failures;
|
•
|
environmental indemnities; and
|
•
|
contingent capital and credit support to finance costs, in most cases in connection with a corresponding increase in service fees, relating to uncontrollable circumstances.
|
•
|
changes in law or regulations;
|
•
|
changes in electricity pricing;
|
•
|
changes in foreign tax laws and regulations;
|
•
|
changes in United States federal, state and local laws, including tax laws, related to foreign operations;
|
•
|
compliance with United States federal, state and local foreign corrupt practices laws;
|
•
|
changes in government policies or personnel;
|
•
|
changes in general economic conditions affecting each country, including conditions in financial markets;
|
•
|
changes in labor relations in operations outside the United States;
|
•
|
political, economic or military instability and civil unrest;
|
•
|
expropriation and confiscation of assets and facilities; and
|
•
|
credit quality of entities that pay for our services or purchase our power.
|
Item 5.
|
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
2017
|
|
2016
|
||||||||||||||||||||
|
|
High
|
|
Low
|
|
Dividend
Declared
|
|
High
|
|
Low
|
|
Dividend
Declared
|
||||||||||||
First Quarter
|
|
$
|
16.50
|
|
|
$
|
14.85
|
|
|
$
|
0.25
|
|
|
$
|
17.75
|
|
|
$
|
12.48
|
|
|
$
|
0.25
|
|
Second Quarter
|
|
$
|
15.80
|
|
|
$
|
13.00
|
|
|
$
|
0.25
|
|
|
$
|
17.22
|
|
|
$
|
15.52
|
|
|
$
|
0.25
|
|
Third Quarter
|
|
$
|
15.28
|
|
|
$
|
13.08
|
|
|
$
|
0.25
|
|
|
$
|
17.16
|
|
|
$
|
14.43
|
|
|
$
|
0.25
|
|
Fourth Quarter
|
|
$
|
17.30
|
|
|
$
|
14.60
|
|
|
$
|
0.25
|
|
|
$
|
15.95
|
|
|
$
|
13.45
|
|
|
$
|
0.25
|
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
(In millions)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
46
|
|
|
$
|
84
|
|
|
$
|
94
|
|
|
$
|
84
|
|
|
$
|
190
|
|
Property, plant and equipment, net
|
|
$
|
2,606
|
|
|
$
|
3,024
|
|
|
$
|
2,690
|
|
|
$
|
2,607
|
|
|
$
|
2,579
|
|
Assets held for sale
|
|
$
|
653
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
4,441
|
|
|
$
|
4,284
|
|
|
$
|
4,234
|
|
|
$
|
4,178
|
|
|
$
|
4,357
|
|
Long-term debt (incl. current portion)
|
|
$
|
2,349
|
|
|
$
|
2,252
|
|
|
$
|
2,263
|
|
|
$
|
1,948
|
|
|
$
|
2,062
|
|
Project debt (incl. current portion)
|
|
$
|
174
|
|
|
$
|
383
|
|
|
$
|
198
|
|
|
$
|
222
|
|
|
$
|
212
|
|
Liabilities held for sale
|
|
$
|
540
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
4,014
|
|
|
$
|
3,815
|
|
|
$
|
3,594
|
|
|
$
|
3,394
|
|
|
$
|
3,451
|
|
Total Covanta Holding Corporation stockholders' equity
|
|
$
|
427
|
|
|
$
|
469
|
|
|
$
|
638
|
|
|
$
|
782
|
|
|
$
|
902
|
|
Item 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
“Organic growth”: reflects the performance of the business on a comparable period-over-period basis, excluding the impacts of transactions and contract transitions.
|
•
|
“Transactions”: includes the impacts of acquisitions, divestitures, and the addition or loss of operating contracts.
|
•
|
“Contract transitions”: includes the impact of the expiration of: (a) long-term major waste and service contracts, most typically representing the transition to a new contract structure, and (b) long-term energy contracts.
|
|
|
Year Ended December 31,
|
|
|
||||||||
Consolidated:
|
|
2017
|
|
2016
|
|
Variance
Increase (Decrease) |
||||||
|
|
(In millions)
|
||||||||||
OPERATING REVENUE:
|
|
|
|
|
|
|
||||||
Waste and service revenue
|
|
$
|
1,231
|
|
|
$
|
1,187
|
|
|
$
|
44
|
|
Energy revenue
|
|
334
|
|
|
370
|
|
|
(36
|
)
|
|||
Recycled metals revenue
|
|
82
|
|
|
61
|
|
|
21
|
|
|||
Other operating revenue
|
|
105
|
|
|
81
|
|
|
24
|
|
|||
Total operating revenue
|
|
1,752
|
|
|
1,699
|
|
|
53
|
|
|||
OPERATING EXPENSE:
|
|
|
|
|
|
|
||||||
Plant operating expense
|
|
1,271
|
|
|
1,177
|
|
|
94
|
|
|||
Other operating expense
|
|
51
|
|
|
86
|
|
|
(35
|
)
|
|||
General and administrative expense
|
|
112
|
|
|
100
|
|
|
12
|
|
|||
Depreciation and amortization expense
|
|
215
|
|
|
207
|
|
|
8
|
|
|||
Impairment charges
|
|
2
|
|
|
20
|
|
|
(18
|
)
|
|||
Total operating expense
|
|
1,651
|
|
|
1,590
|
|
|
61
|
|
|||
Operating income
|
|
$
|
101
|
|
|
$
|
109
|
|
|
$
|
(8
|
)
|
Consolidated (in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2017
|
|
2016
|
|
Variance
|
||||||
EfW tip fees
|
|
$
|
572
|
|
|
$
|
551
|
|
|
$
|
21
|
|
EfW service fees
|
|
393
|
|
|
406
|
|
|
(13
|
)
|
|||
Environmental services
|
|
129
|
|
|
104
|
|
|
25
|
|
|||
Municipal services
(1)
|
|
194
|
|
|
186
|
|
|
8
|
|
|||
Other
|
|
42
|
|
|
36
|
|
|
6
|
|
|||
Intercompany
|
|
(99
|
)
|
|
(96
|
)
|
|
(3
|
)
|
|||
Total waste and service revenue
|
|
$
|
1,231
|
|
|
$
|
1,187
|
|
|
$
|
44
|
|
Consolidated
(1)
(in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2017
|
|
2016
|
|
Variance
|
||||||
Energy sales
|
|
$
|
288
|
|
|
$
|
321
|
|
|
$
|
(33
|
)
|
Capacity
|
|
46
|
|
|
40
|
|
|
6
|
|
|||
Other revenue
|
|
—
|
|
|
9
|
|
|
(9
|
)
|
|||
Total energy revenue
|
|
$
|
334
|
|
|
$
|
370
|
|
|
$
|
(36
|
)
|
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||||||||
Total EfW (in millions):
|
|
2017
|
|
2016
|
|
Variance
|
|||||||||||||||||||||
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
|
|
Volume
|
|||||||||||
At Market
|
|
$
|
23
|
|
|
0.8
|
|
|
13
|
%
|
|
$
|
33
|
|
|
1.0
|
|
|
17
|
%
|
|
$
|
(10
|
)
|
|
(0.2
|
)
|
Contracted
|
|
216
|
|
|
2.5
|
|
|
41
|
%
|
|
245
|
|
|
3.1
|
|
|
51
|
%
|
|
(29
|
)
|
|
(0.6
|
)
|
|||
Hedged
|
|
95
|
|
|
2.7
|
|
|
46
|
%
|
|
83
|
|
|
1.9
|
|
|
32
|
%
|
|
12
|
|
|
0.8
|
|
|||
Total EfW
|
|
$
|
334
|
|
|
6.0
|
|
|
100
|
%
|
|
$
|
361
|
|
|
6.1
|
|
|
100
|
%
|
|
$
|
(27
|
)
|
|
(0.1
|
)
|
|
Year Ended December 31,
|
||||||||||||||||||
|
Metal Revenue
(in millions)
|
|
Tons Sold
(in thousands) (1) |
|
Tons Recovered
(in thousands) |
||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Ferrous Metal
|
$
|
48
|
|
|
$
|
38
|
|
|
302
|
|
|
345
|
|
|
396
|
|
|
401
|
|
Non-Ferrous Metal
|
34
|
|
|
23
|
|
|
31
|
|
|
36
|
|
|
38
|
|
|
36
|
|
||
Total
|
$
|
82
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the portion of total volume that is equivalent to Covanta’s share of revenue under applicable client revenue sharing arrangements.
|
Consolidated (in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2017
|
|
2016
|
|
Variance
|
||||||
Plant maintenance
|
|
$
|
311
|
|
|
$
|
279
|
|
|
$
|
32
|
|
All other
|
|
960
|
|
|
898
|
|
|
62
|
|
|||
Plant operating expense
|
|
$
|
1,271
|
|
|
$
|
1,177
|
|
|
$
|
94
|
|
|
|
Year Ended December 31,
|
|
|
||||||||
Consolidated:
|
|
2016
|
|
2015
|
|
Variance
Increase (Decrease) |
||||||
|
|
(In millions)
|
||||||||||
OPERATING REVENUE:
|
|
|
|
|
|
|
||||||
Waste and service revenue
|
|
$
|
1,187
|
|
|
$
|
1,104
|
|
|
$
|
83
|
|
Energy revenue
|
|
370
|
|
|
421
|
|
|
(51
|
)
|
|||
Recycled metals revenue
|
|
61
|
|
|
61
|
|
|
—
|
|
|||
Other operating revenue
|
|
81
|
|
|
59
|
|
|
22
|
|
|||
Total operating revenue
|
|
1,699
|
|
|
1,645
|
|
|
54
|
|
|||
OPERATING EXPENSE:
|
|
|
|
|
|
|
||||||
Plant operating expense
|
|
1,177
|
|
|
1,129
|
|
|
48
|
|
|||
Other operating expense
|
|
86
|
|
|
73
|
|
|
13
|
|
|||
General and administrative expense
|
|
100
|
|
|
93
|
|
|
7
|
|
|||
Depreciation and amortization expense
|
|
207
|
|
|
198
|
|
|
9
|
|
|||
Impairment charges
|
|
20
|
|
|
43
|
|
|
(23
|
)
|
|||
Total operating expense
|
|
1,590
|
|
|
1,536
|
|
|
54
|
|
|||
Operating income
|
|
$
|
109
|
|
|
$
|
109
|
|
|
$
|
—
|
|
Consolidated (in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2016
|
|
2015
|
|
Variance
|
||||||
EfW tip fees
|
|
$
|
551
|
|
|
$
|
507
|
|
|
$
|
44
|
|
EfW service fees
|
|
406
|
|
|
418
|
|
|
(12
|
)
|
|||
Environmental services
|
|
104
|
|
|
60
|
|
|
44
|
|
|||
Municipal services
(1)
|
|
186
|
|
|
159
|
|
|
27
|
|
|||
Other
|
|
36
|
|
|
38
|
|
|
(2
|
)
|
|||
Intercompany
|
|
(96
|
)
|
|
(78
|
)
|
|
(18
|
)
|
|||
Total waste and service revenue
|
|
$
|
1,187
|
|
|
$
|
1,104
|
|
|
$
|
83
|
|
Consolidated
(1)
(in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2016
|
|
2015
|
|
Variance
|
||||||
Energy sales
|
|
$
|
321
|
|
|
$
|
308
|
|
|
$
|
13
|
|
Capacity
|
|
40
|
|
|
38
|
|
|
2
|
|
|||
Other revenue
|
|
9
|
|
|
75
|
|
|
(66
|
)
|
|||
Total energy revenue
|
|
$
|
370
|
|
|
$
|
421
|
|
|
$
|
(51
|
)
|
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||||||||
|
|
2016
|
|
2015
|
|
Variance
|
|||||||||||||||||||||
Total EfW (in millions):
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
|
|
Volume
|
|||||||||||
At Market
|
|
$
|
33
|
|
|
1.0
|
|
|
17
|
%
|
|
$
|
46
|
|
|
1.4
|
|
|
24
|
%
|
|
$
|
(13
|
)
|
|
(0.4
|
)
|
Contracted
|
|
245
|
|
|
3.1
|
|
|
51
|
%
|
|
238
|
|
|
3.0
|
|
|
53
|
%
|
|
7
|
|
|
0.1
|
|
|||
Hedged
|
|
83
|
|
|
1.9
|
|
|
32
|
%
|
|
62
|
|
|
1.4
|
|
|
23
|
%
|
|
21
|
|
|
0.5
|
|
|||
Total EfW
|
|
$
|
361
|
|
|
6.1
|
|
|
100
|
%
|
|
$
|
346
|
|
|
5.8
|
|
|
100
|
%
|
|
$
|
15
|
|
|
0.3
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
Metal Revenue
(in millions)
|
|
Tons Sold
(in thousands) (1) |
|
Tons Recovered
(in thousands) |
||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Ferrous Metal
|
$
|
38
|
|
|
$
|
38
|
|
|
345
|
|
|
330
|
|
|
401
|
|
|
353
|
|
Non-Ferrous Metal
|
23
|
|
|
23
|
|
|
36
|
|
|
32
|
|
|
36
|
|
|
32
|
|
||
Total
|
$
|
61
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the portion of total volume that is equivalent to Covanta’s share of revenue under applicable client revenue sharing arrangements.
|
Consolidated (in millions):
|
|
Year Ended December 31,
|
|
|
||||||||
|
|
2016
|
|
2015
|
|
Variance
|
||||||
Plant maintenance
(1)
|
|
$
|
279
|
|
|
$
|
270
|
|
|
$
|
9
|
|
All other
|
|
898
|
|
|
859
|
|
|
39
|
|
|||
Plant operating expense
|
|
$
|
1,177
|
|
|
$
|
1,129
|
|
|
$
|
48
|
|
(1)
|
Plant maintenance costs include our internal maintenance team and non-facility employee costs for facility scheduled and unscheduled maintenance and repair expense.
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2017 vs 2016
|
|
2016 vs 2015
|
||||||||||
|
|
(In millions)
|
||||||||||||||||||
CONSOLIDATED RESULTS OF OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
|
(147
|
)
|
|
(138
|
)
|
|
(134
|
)
|
|
(9
|
)
|
|
(4
|
)
|
|||||
(Loss) gain on asset sales
|
|
(6
|
)
|
|
44
|
|
|
—
|
|
|
(50
|
)
|
|
44
|
|
|||||
Loss on extinguishment of debt
|
|
(84
|
)
|
|
—
|
|
|
(2
|
)
|
|
(84
|
)
|
|
2
|
|
|||||
Other expense, net
|
|
1
|
|
|
(1
|
)
|
|
(1
|
)
|
|
2
|
|
|
—
|
|
|||||
Total other expense
|
|
$
|
(236
|
)
|
|
$
|
(95
|
)
|
|
$
|
(137
|
)
|
|
$
|
(141
|
)
|
|
$
|
42
|
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2017 vs 2016
|
|
2016 vs 2015
|
||||||||||
|
|
(In millions, except percentages)
|
||||||||||||||||||
CONSOLIDATED RESULTS OF OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income tax (benefit) expense
|
|
$
|
(191
|
)
|
|
$
|
22
|
|
|
$
|
(84
|
)
|
|
$
|
(213
|
)
|
|
$
|
106
|
|
Effective income tax rate
|
|
142
|
%
|
|
150
|
%
|
|
302
|
%
|
|
|
|
|
(1)
|
For information on dividends declared to shareholders and share repurchases, see
Liquidity and Capital Resources
below.
|
|
|
Year Ended December 31,
|
||||||||||
Adjusted EBITDA
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net Income (Loss) Attributable to Covanta Holding Corporation
(a)
|
|
$
|
57
|
|
|
$
|
(4
|
)
|
|
$
|
68
|
|
Depreciation and amortization expense
|
|
215
|
|
|
207
|
|
|
198
|
|
|||
Interest expense, net
|
|
147
|
|
|
138
|
|
|
134
|
|
|||
Income tax (benefit) expense
(a)
|
|
(191
|
)
|
|
22
|
|
|
(84
|
)
|
|||
Impairment charges
(b)
|
|
2
|
|
|
20
|
|
|
43
|
|
|||
Loss (gain) on asset sales
(c)
|
|
6
|
|
|
(44
|
)
|
|
—
|
|
|||
Loss on extinguishment of debt
(d)
|
|
84
|
|
|
—
|
|
|
2
|
|
|||
Property insurance recoveries, net
(e)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Net income attributable to noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Capital type expenditures at client owned facilities
(f)
|
|
55
|
|
|
39
|
|
|
31
|
|
|||
Debt service billing in excess of revenue recognized
|
|
5
|
|
|
4
|
|
|
1
|
|
|||
Business development and transaction costs
|
|
5
|
|
|
2
|
|
|
3
|
|
|||
Severance and reorganization costs
|
|
1
|
|
|
3
|
|
|
4
|
|
|||
Non-cash compensation expense
|
|
18
|
|
|
16
|
|
|
18
|
|
|||
Other
(g)
|
|
6
|
|
|
7
|
|
|
9
|
|
|||
Adjusted EBITDA
|
|
$
|
408
|
|
|
$
|
410
|
|
|
$
|
428
|
|
(a)
|
The year ended December 31, 2017 include a provisional net tax benefit of $183 million ($1.40 per diluted share) associated with the enactment of the Tax Cuts and Jobs Act of 2017. The enactment of this legislation resulted in an estimated income tax benefit and net income increase of $204 million, primarily due to a one-time revaluation of our net deferred tax liability based on a U.S. federal tax rate of 21%, partially offset by the estimated impact of a one-time transition tax on our unremitted foreign earnings totaling $21 million, which we will elect to offset with historical net operating losses. These amounts are provisional and subject to change.
For additional information,
see Item 8. Financial Statements And Supplementary Data
— Note 14. Income Taxes.
|
(b)
|
During the year ended
December 31, 2016
, we recorded a non-cash impairment totaling
$20 million
which primarily consisted of
$13 million
related to the previously planned closure of our Pittsfield EfW facility in March 2017, which we now continue to operate, and $3 million related to an investment in a joint venture to recover and recycle metals. During the year ended December 31, 2015, we recorded non-cash impairments of our biomass facility assets of $43 million.
|
(c)
|
During the
year
ended
December 31, 2017
, we recorded a
$6 million
charge for indemnification claims related to the sale of our interests in China, which was completed in 2016. During the year ended ended December 31, 2016, we recorded a $41 million gain on the sale of our interests in China. For additional information see
Item 8. Financial Statements And Supplementary Data —
Note 4.
Dispositions and Assets Held for Sale
and
Note 18.
Subsequent Events.
|
(d)
|
During the year ended
December 31, 2017
, we recorded a $71 million loss related to our Dublin debt refinancing and a $13 million loss related to the redemption of our 7.25% Senior Notes.
For additional information,
see Item 8. Financial Statements And Supplementary Data
— Note 10. Consolidated Debt.
|
(e)
|
During the year ended
December 31, 2017
, we recorded a $2 million property insurance gain related to our property insurance recoveries.
|
(f)
|
Adjustment for impact of adoption of FASB ASC 853 -
Service Concession Arrangements.
These types of capital equipment related expenditures at our service fee operated facilities were historically capitalized prior to adoption of this new accounting standard effective January 1, 2015 and are capitalized at facilities that we own.
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flow provided by operating activities
|
|
$
|
243
|
|
|
$
|
286
|
|
|
$
|
254
|
|
Cash paid for interest, net of capitalized interest
|
|
132
|
|
|
135
|
|
|
131
|
|
|||
Cash paid for taxes
|
|
—
|
|
|
6
|
|
|
2
|
|
|||
Capital type expenditures at service fee operated facilities
(a)
|
|
55
|
|
|
39
|
|
|
31
|
|
|||
Equity in net income from unconsolidated investments
|
|
1
|
|
|
4
|
|
|
13
|
|
|||
Dividends from unconsolidated investments
|
|
(2
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|||
Adjustment for working capital and other
|
|
(21
|
)
|
|
(58
|
)
|
|
2
|
|
|||
Adjusted EBITDA
|
|
$
|
408
|
|
|
$
|
410
|
|
|
$
|
428
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Diluted earnings (loss) per share
|
|
$
|
0.44
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.51
|
|
Reconciling items
(1)
|
|
(0.81
|
)
|
|
(0.03
|
)
|
|
(0.44
|
)
|
|||
Adjusted EPS
|
|
$
|
(0.37
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
0.07
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Reconciling Items
|
|
|
|
|
|
|
||||||
Impairment charges
(a)
|
|
2
|
|
|
20
|
|
|
43
|
|
|||
Loss (gain) on asset sales
(a)
|
|
6
|
|
|
(44
|
)
|
|
—
|
|
|||
Property insurance recoveries
(a)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Severance and reorganization costs
|
|
1
|
|
|
2
|
|
|
7
|
|
|||
Loss on extinguishment of debt
(a)
|
|
84
|
|
|
—
|
|
|
2
|
|
|||
Effect on income of derivative instruments not designated as hedging instruments
|
|
—
|
|
|
2
|
|
|
(6
|
)
|
|||
Effect of foreign exchange loss on indebtedness
|
|
(2
|
)
|
|
(1
|
)
|
|
3
|
|
|||
Other
|
|
1
|
|
|
—
|
|
|
1
|
|
|||
Total Reconciling Items, pre-tax
|
|
90
|
|
|
(21
|
)
|
|
50
|
|
|||
Pro forma income tax impact
(b)
|
|
(4
|
)
|
|
2
|
|
|
(20
|
)
|
|||
Impact of IRS audit settlement
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|||
Adjustment to uncertain tax positions
|
|
—
|
|
|
14
|
|
|
—
|
|
|||
Tax liability related to expected gain on sale of China assets
(b)
|
|
—
|
|
|
—
|
|
|
4
|
|
|||
Grantor trust activity
|
|
(9
|
)
|
|
1
|
|
|
—
|
|
|||
Impact of federal tax reform rate change
(a)
|
|
(204
|
)
|
|
—
|
|
|
—
|
|
|||
Transition tax
(a)
|
|
21
|
|
|
—
|
|
|
—
|
|
|||
Total reconciling Items, net of tax
|
|
$
|
(106
|
)
|
|
$
|
(4
|
)
|
|
$
|
(59
|
)
|
Diluted per share impact
|
|
$
|
(0.81
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.44
|
)
|
Weighted average diluted shares outstanding
|
|
131
|
|
|
129
|
|
|
133
|
|
(a)
|
For additional information, see
Adjusted EBITDA
above.
|
(b)
|
We calculate the federal and state tax impact of each item using the statutory federal tax rate and applicable blended state rate.
|
•
|
Contribution from the organic growth initiatives discussed above;
|
•
|
A full year of service fee contribution from the operation of the Dublin EfW facility, which commenced operations in late 2017, and a pro rata contribution from our share of the JV, which now owns the project. For further information on the Dublin EfW facility, see
Item 8. Financial Statements And Supplementary Data
Note 3.
New Business and Asset Management
; and
|
•
|
A full year of operations at our Fairfax County energy-from-waste facility, which experienced a fire in the front-end receiving portion of the facility in February 2017 and resumed operations in December 2017.
|
•
|
Up to $15 million lower anticipated prices for electricity as compared to 2017, including lower anticipated market pricing as compared to our hedged prices in 2017, lower anticipated pricing on collared energy, and mark-to-market on the expiration of long-term power purchase agreements; and
|
•
|
Approximately $20 million related to waste and service contract transitions, most notably the non-recurring benefit that we received in 2017 from the settlement of our contract dispute with Hennepin County.
|
|
As of December 31, 2017
|
||
Cash
|
$
|
46
|
|
Unutilized capacity under the Revolving Credit Facility
|
363
|
|
|
Total cash and unutilized capacity under the Revolving Credit Facility
|
$
|
409
|
|
•
|
On December 14, 2017, we executed agreements for project financing totaling €446 million ($534 million) to refinance the existing project debt and a convertible preferred investment related to our Dublin project. For additional information on the project financing terms, see
Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt - Dublin Project Refinancing.
|
•
|
In March 2017, we sold $400 million aggregate principal amount of 5.875% Senior Notes due July 2025. We utilized the net proceeds of the 5.875% Notes offering together with funds borrowed under our Credit Facilities, to redeem the 7.25% Senior
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
|
$
|
243
|
|
|
$
|
286
|
|
|
$
|
254
|
|
Less: Maintenance capital expenditures
(a)
|
|
(111
|
)
|
|
(110
|
)
|
|
(102
|
)
|
|||
Free Cash Flow
|
|
$
|
132
|
|
|
$
|
176
|
|
|
$
|
152
|
|
Less: Changes in working capital
|
|
(44
|
)
|
|
(41
|
)
|
|
21
|
|
|||
Free Cash Flow Before Working Capital
|
|
$
|
88
|
|
|
$
|
135
|
|
|
$
|
173
|
|
(a)
|
Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures that primarily maintain existing facilities are classified as maintenance capital expenditures. Maintenance capital expenditures in 2017 include amounts incurred but not paid as of December 31, 2017. The following table provides the components of total purchases of property, plant and equipment:
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Maintenance capital expenditures
|
|
$
|
(111
|
)
|
|
$
|
(110
|
)
|
|
$
|
(102
|
)
|
Maintenance capital expenditures incurred but not yet paid
|
|
5
|
|
|
—
|
|
|
—
|
|
|||
Capital expenditures associated with construction of Dublin EfW facility
|
|
(117
|
)
|
|
(162
|
)
|
|
(184
|
)
|
|||
Capital expenditures associated with organic growth initiatives
|
|
(33
|
)
|
|
(46
|
)
|
|
(34
|
)
|
|||
Capital expenditures associated with the New York City MTS contract
|
|
—
|
|
|
(3
|
)
|
|
(30
|
)
|
|||
Capital expenditures associated with Essex County EfW emissions control system
|
|
(4
|
)
|
|
(33
|
)
|
|
(26
|
)
|
|||
Total capital expenditures associated with growth investments
|
|
(154
|
)
|
|
(244
|
)
|
|
(274
|
)
|
|||
Capital expenditures associated with property insurance events
|
|
(17
|
)
|
|
(5
|
)
|
|
—
|
|
|||
Total purchases of property, plant and equipment
|
|
$
|
(277
|
)
|
|
$
|
(359
|
)
|
|
$
|
(376
|
)
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Domestic
|
$
|
11
|
|
|
$
|
18
|
|
International
|
35
|
|
|
66
|
|
||
Total Cash and Cash Equivalents
|
$
|
46
|
|
|
$
|
84
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
Corporate Debt:
|
|
||||||
Revolving Credit Facility
|
$
|
445
|
|
|
$
|
343
|
|
Term Loan due 2019
|
191
|
|
|
196
|
|
||
7.25% Senior Notes due 2020
|
—
|
|
|
400
|
|
||
6.375% Senior Notes due 2022
|
400
|
|
|
400
|
|
||
5.875% Senior Notes due 2024
|
400
|
|
|
400
|
|
||
5.875% Senior Notes due 2025
|
400
|
|
|
—
|
|
||
4.00% - 5.25% Tax-Exempt Bonds due 2024 - 2045
|
464
|
|
|
464
|
|
||
3.48% - 6.61% Equipment financing capital leases due 2024 through 2028
|
69
|
|
|
69
|
|
||
Total corporate debt (including current portion)
|
$
|
2,369
|
|
|
$
|
2,272
|
|
|
|
|
|
||||
Project Debt:
|
|
|
|
||||
Domestic project debt - service fee facilities
|
$
|
68
|
|
|
$
|
78
|
|
Domestic project debt - tip fee facilities
|
9
|
|
|
16
|
|
||
Union County EfW facility capital lease
|
94
|
|
|
99
|
|
||
Dublin Senior Term Loan due 2021
|
—
|
|
|
155
|
|
||
Dublin Junior Term Loan due 2022
|
—
|
|
|
58
|
|
||
Total project debt (including current portion)
|
$
|
171
|
|
|
$
|
406
|
|
Total Debt Outstanding
|
$
|
2,540
|
|
|
$
|
2,678
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
Revolving Credit Facility
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
445
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
445
|
|
Term Loan
|
|
5
|
|
|
5
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
191
|
|
|||||||
Senior Notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
800
|
|
|
1,200
|
|
|||||||
Tax-Exempt Bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|
464
|
|
|||||||
Equipment Leases
|
|
5
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|
40
|
|
|
69
|
|
|||||||
Project Debt
|
|
23
|
|
|
18
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
106
|
|
|
171
|
|
|||||||
Total
|
|
$
|
33
|
|
|
$
|
29
|
|
|
$
|
640
|
|
|
$
|
14
|
|
|
$
|
414
|
|
|
$
|
1,410
|
|
|
$
|
2,540
|
|
(In millions)
|
|
Total
|
|
Payments Due by Period
|
||||||||||||||||
2018
|
|
2019 and
2020
|
|
2021 and
2022
|
|
2023 and
Beyond
|
||||||||||||||
RECORDED LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Project debt
|
|
$
|
171
|
|
|
$
|
23
|
|
|
$
|
26
|
|
|
$
|
16
|
|
|
$
|
106
|
|
Term Loan
(1)
|
|
191
|
|
|
5
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|||||
Revolving Credit Facility
(1)
|
|
445
|
|
|
—
|
|
|
445
|
|
|
—
|
|
|
—
|
|
|||||
6.375% Senior Notes
(2)
|
|
400
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|||||
5.875% Senior Notes due 2024
(3)
|
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||
5.875 Senior Notes due 2025
(4)
|
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||
Tax-exempt bonds due 2024-2045
(5)
|
|
464
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|||||
Equipment leases
(6)
|
|
69
|
|
|
5
|
|
|
12
|
|
|
12
|
|
|
40
|
|
|||||
Total debt obligations
|
|
$
|
2,540
|
|
|
$
|
33
|
|
|
$
|
669
|
|
|
$
|
428
|
|
|
$
|
1,410
|
|
Less: Non-recourse debt
(7)
|
|
(240
|
)
|
|
(28
|
)
|
|
(38
|
)
|
|
(28
|
)
|
|
(146
|
)
|
|||||
Total recourse debt
|
|
$
|
2,300
|
|
|
$
|
5
|
|
|
$
|
631
|
|
|
$
|
400
|
|
|
$
|
1,264
|
|
Uncertainty in income tax obligations
(8)
|
|
$
|
48
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
35
|
|
OTHER:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest payments
(9)
|
|
$
|
1,323
|
|
|
$
|
145
|
|
|
$
|
263
|
|
|
$
|
211
|
|
|
$
|
704
|
|
Less: Non-recourse interest payments
|
|
(214
|
)
|
|
(11
|
)
|
|
(19
|
)
|
|
(18
|
)
|
|
(166
|
)
|
|||||
Total recourse interest payments
|
|
$
|
1,109
|
|
|
$
|
134
|
|
|
$
|
244
|
|
|
$
|
193
|
|
|
$
|
538
|
|
Purchase obligations
(10)
|
|
30
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases
|
|
71
|
|
|
9
|
|
|
17
|
|
|
14
|
|
|
31
|
|
|||||
Retirement plan obligations
(11)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|||||
Total obligations
|
|
$
|
3,561
|
|
|
$
|
151
|
|
|
$
|
931
|
|
|
$
|
609
|
|
|
$
|
1,870
|
|
(1)
|
Interest payments on the Term Loan and letter of credit fees are estimated based on current LIBOR rates and are estimated assuming scheduled principal repayments.
See Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt
.
|
(2)
|
Interest on the 6.375% Senior Notes is payable semi-annually in arrears on April 1 and October 1 of each year, and will mature on October 1, 2022 unless earlier redeemed or repurchased.
See Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt
.
|
(3)
|
Interest on the 5.875% Senior Notes due 2024 is payable semi-annually in arrears on March 1 and September 1 of each year and will mature on March 21, 2024 unless earlier redeemed or repurchased.
See Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt
.
|
(4)
|
Interest on the
5.875%
Senior Notes due 2025 is payable semi-annually on January 1 and July 1 of each year, commencing on July 1, 2017, and will mature on July 1, 2025 unless earlier redeemed or repurchased.
See Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt
.
|
(5)
|
The tax-exempt bonds bear interest between 4% and 5.25%. Interest on the $335 million of tax-exempt bonds issued in 2012, is payable semi-annually on May 1 and November 1 of each year. Interest on the $130 million of tax-exempt bonds issued in 2015, is payable semi-annually on January 1 and July 1 of each year. For a detailed description of the terms of the Tax-Exempt bonds, see
Item 8. Financial Statements And Supplementary Data — Note 10. Consolidated Debt.
|
(6)
|
The original lease terms range from
10 years
to
12 years
and the fixed interest rates range from
3.48%
to 6.61%.
|
(7)
|
Payment obligations for the project debt and equipment leases associated with owned energy-from-waste facilities are limited recourse to operating subsidiaries and non-recourse to us, subject to operating performance guarantees and commitments.
|
(8)
|
Accounting for uncertainty in income tax obligations is based upon the expected date of settlement taking into account all of our administrative rights including possible litigation.
|
(9)
|
Interest payments represent accruals for cash interest payments.
|
(10)
|
Purchase obligations relate to capital commitments related to our New York City waste transport and disposal contract. See
Item 8. Financial Statements And Supplementary Data — Note 3. New Business and Asset Management
for additional information
.
|
(11)
|
Retirement plan obligations are based on actuarial estimates for our non-qualified pension plan obligations and post-retirement plan obligations only as of
December 31, 2017
.
|
|
Commitments Expiring by Period
|
||||||||||
|
Total
|
|
Less Than
One Year
|
|
More Than
One Year
|
||||||
Letters of credit issued under the Revolving Credit Facility
|
$
|
192
|
|
|
$
|
20
|
|
|
$
|
172
|
|
Letters of credit - other
|
70
|
|
|
70
|
|
|
—
|
|
|||
Surety bonds
|
196
|
|
|
—
|
|
|
196
|
|
|||
Total other commitments — net
|
$
|
458
|
|
|
$
|
90
|
|
|
$
|
368
|
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions
|
Revenue and Expense Recognition (Construction Contracts)
Construction contracts are typically signed in conjunction with agreements to operate a newly constructed project. Upon completion of the construction element of these contracts, we recognize service revenue over the term of the service element of the contract.
Revenue under existing fixed-price construction contracts are recognized using the percentage-of-completion method, measured by the cost-to-cost method.
If we enter new contracts that contain multiple element arrangements, the revenue will be allocated between construction revenue and other project revenue (waste disposal revenue and electricity and steam sales) based on the relative fair value of each element provided the delivered elements have value to customers on a standalone basis. Amounts allocated to each element are based on its objectively determined fair value, such as the sales price for the product or service when it is sold separately or competitor prices for similar products or services.
|
|
We estimate our total construction costs for the contract throughout the project. As the project progresses, revisions to our estimated costs may be necessary.
Given the unique nature of our business, we are likely to use our best estimate of selling price in allocating revenue between construction, and other project revenue (waste and service revenue, and electricity and steam sales). This allocation would be performed at the inception of the new contracts and when a material modification occurs.
|
|
If a revision to our estimated construction costs is required, the amount of revenue and the related operating income recognized will also fluctuate.
The allocation of revenue will impact the timing of revenue recognized for each unit, where the amount allocated to construction will be recognized in earlier periods followed by the remainder over the service period. Any subsequent modification to the contracts that are considered material could result in a change in the amount and timing of revenue to be recognized.
|
Purchase Accounting
We allocate acquisition purchase prices to identified tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition, with any residual amounts allocated to goodwill. The fair value estimates used reflect our best estimates for the highest and best use by market participants.
|
|
These estimates are subject to uncertainties and contingencies. For example, we used the discounted cash flow method to estimate the value of many of our assets, which entailed developing projections of future cash flows.
|
|
If the cash flows from the acquired net assets differ significantly from our estimates, the amounts recorded could be subject to impairments. Furthermore, to the extent we change our initial estimates of the remaining useful life of the assets or liabilities, future depreciation and amortization expense could be impacted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions |
Long-lived Assets and Intangible Assets
Our long-lived assets include property, plant and equipment; waste, service and energy contracts; amortizable intangible assets; and other assets. We evaluate the recoverability of the long-lived assets when there are indicators of possible impairment. Such indicators may include a decline in market, new regulation, recurring or expected operating losses, change in business strategy, or other changes that would impact the use or benefit received from the assets. The assessment is performed by grouping the long-lived assets at the lowest level of identifiable cash flows for the related assets or group of assets (such as the facility level). Initially the carrying value of the asset or asset group is compared to its undiscounted expected future cash flows. If the carrying value is in excess of the undiscounted cash flows, the carrying value is then compared to the fair value. Fair value may be estimated based upon the discounted cash flows, market or replacement cost methods based on the assumptions of a third-party market participant. Impairment is recognized if the fair value is less than the carrying value.
|
|
Our judgments regarding the existence of impairment indicators are based on regulatory factors, market conditions, anticipated cash flows and operational performance of our assets. When determining the fair value of our asset groupings and intangible assets for impairment assessments, we make assumptions regarding their fair values which are dependent on estimates of future cash flows, discount rates, and other factors. |
|
Future events or change in circumstances may occur that require another assessment in future periods based on cash flows and discount rates in effect at that time. |
Goodwill
As of December 31, 2017, we had $313 million of goodwill recorded in our North America reportable segment, which is comprised of two reporting units (see
Note 8. Other Intangible Assets and Goodwill).
We evaluate our goodwill annually and when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
We have the option to perform our initial assessment over the possible impairment of goodwill either qualitatively or quantitatively. Under the qualitative assessment, consideration is given to both external factors (including macroeconomic and industry conditions) and our own internal factors (including internal costs, recent financial performance, management, business strategy, customers, and stock price). During the fourth quarter of 2017 we performed the required annual impairment review of our recorded goodwill and determined that there was no indication of impairment as the fair value of our reporting units exceeded their carrying values.
|
|
Our judgments regarding the existence of impairment indicators are based on regulatory factors, market conditions, anticipated cash flows and operational performance of our assets.
When determining the fair value of our reporting unit for impairment assessments, we make assumptions regarding the fair value which is dependent on estimates of future cash flows, discount rates, and other factors.
|
|
The impairment assessment of goodwill performed in the periods presented resulted in the conclusion that the fair value was not less than the carrying value.
In future years, if there is a significant change in the estimated cash flows, discount rates or other factors that cause the fair values to significantly decrease, there could be impairments which could materially impact our results of operations.
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions
|
I
nsurance Reserves and Self-Insurance for Employee Benefit Plans
We retain a substantial portion of the risk related to certain general liability, workers’ compensation and medical claims. However, we maintain stop-loss coverage to limit the exposure related to employee benefit plans and liability insurance over retained risks. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported ("IBNR"). We use actuarial methods which consider a number of factors to estimate our ultimate cost of losses. Our insurance reserves and medical liability accrual was $16 million as of December 31, 2017 and 2016.
|
|
We believe that the amounts accrued are adequate; however, our liabilities could be significantly affected if future occurrences or loss developments differ from our estimates of both claims filed and losses incurred but not yet reported.
|
|
A 1% change in average claim costs would impact our self-insurance expense by less than $1 million.
|
Deferred Tax Assets
As described in
Item 8. Financial Statements And Supplementary Data — Note 14. Income Taxes
, we have recorded a deferred tax asset related to our NOLs.
The NOLs will expire in various amounts beginning on December 31, 2028 through December 31, 2033, if not used.
Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
|
|
We estimated that we had gross NOLs of approximately $240 million for U.S. federal income tax purposes, $389 million for state income tax purposes and $287 for foreign tax purposes
as of December 31, 2017. We estimated our tax credits to be approximately $48 million and our deferred tax assets are offset by a valuation allowance of approximately $77 million.
The amount recorded was calculated based upon future taxable income arising from (a) the reversal of temporary differences during the period the NOLs are available and (b) future operating income expected, to the extent it is reasonably predictable. Judgment is involved in assessing whether a valuation allowance is required on our deferred tax assets. |
|
The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax.
We re-measured our US deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of our deferred tax balance was $204 million of tax benefit.
To the extent our estimation of the reversal of temporary differences and operating income generated differs from actual results, we could be required to adjust the carrying amount of the deferred tax assets.
For the transition tax for which we were able to determine a reasonable estimate, we recognized a provisional amount of $21 million, which is included as a component of income tax expense from continuing operations with a corresponding reduction of deferred tax asset related to the utilization of gross NOL of approximately $59 million.
|
|
|
|
Page
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In millions, except per share amounts)
|
||||||||||
OPERATING REVENUE:
|
|
|
|
|
|
|
||||||
Waste and service revenue
|
|
$
|
1,231
|
|
|
$
|
1,187
|
|
|
$
|
1,104
|
|
Energy revenue
|
|
334
|
|
|
370
|
|
|
421
|
|
|||
Recycled metals revenue
|
|
82
|
|
|
61
|
|
|
61
|
|
|||
Other operating revenue
|
|
105
|
|
|
81
|
|
|
59
|
|
|||
Total operating revenue
|
|
1,752
|
|
|
1,699
|
|
|
1,645
|
|
|||
OPERATING EXPENSE:
|
|
|
|
|
|
|
||||||
Plant operating expense
|
|
1,271
|
|
|
1,177
|
|
|
1,129
|
|
|||
Other operating expense, net
|
|
51
|
|
|
86
|
|
|
73
|
|
|||
General and administrative expense
|
|
112
|
|
|
100
|
|
|
93
|
|
|||
Depreciation and amortization expense
|
|
215
|
|
|
207
|
|
|
198
|
|
|||
Impairment charges
|
|
2
|
|
|
20
|
|
|
43
|
|
|||
Total operating expense
|
|
1,651
|
|
|
1,590
|
|
|
1,536
|
|
|||
Operating income
|
|
101
|
|
|
109
|
|
|
109
|
|
|||
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
||||||
Interest expense, net
|
|
(147
|
)
|
|
(138
|
)
|
|
(134
|
)
|
|||
(Loss) gain on asset sales
|
|
(6
|
)
|
|
44
|
|
|
—
|
|
|||
Loss on extinguishment of debt
|
|
(84
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Other expense, net
|
|
1
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Total other expense
|
|
(236
|
)
|
|
(95
|
)
|
|
(137
|
)
|
|||
(Loss) income before income tax benefit (expense) and equity in net income from unconsolidated investments
|
|
(135
|
)
|
|
14
|
|
|
(28
|
)
|
|||
Income tax benefit (expense) (Note 14)
|
|
191
|
|
|
(22
|
)
|
|
84
|
|
|||
Equity in net income from unconsolidated investments
|
|
1
|
|
|
4
|
|
|
13
|
|
|||
NET INCOME (LOSS)
|
|
57
|
|
|
(4
|
)
|
|
69
|
|
|||
Less: Net income attributable to noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
NET INCOME (LOSS) ATTRIBUTABLE TO COVANTA HOLDING CORPORATION
|
|
$
|
57
|
|
|
$
|
(4
|
)
|
|
$
|
68
|
|
|
|
|
|
|
|
|
||||||
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
130
|
|
|
129
|
|
|
132
|
|
|||
Diluted
|
|
131
|
|
|
129
|
|
|
133
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Earnings (Loss) Per Share Attributable to Covanta Holding Corporation Stockholders:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.44
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.44
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
||||||
Cash Dividend Declared Per Share:
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In millions)
|
||||||||||
Net income (loss)
|
|
$
|
57
|
|
|
$
|
(4
|
)
|
|
$
|
69
|
|
Foreign currency translation
|
|
17
|
|
|
(7
|
)
|
|
(22
|
)
|
|||
Net unrealized (loss) gain on derivative instruments, net of tax (benefit) expense of $0, ($8) and $7, respectively
|
|
(10
|
)
|
|
(21
|
)
|
|
10
|
|
|||
Other comprehensive income (loss) attributable to Covanta Holding Corporation
|
|
7
|
|
|
(28
|
)
|
|
(12
|
)
|
|||
Comprehensive income (loss)
|
|
64
|
|
|
(32
|
)
|
|
57
|
|
|||
Less: Net income attributable to noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Comprehensive income (loss) attributable to Covanta Holding Corporation
|
|
$
|
64
|
|
|
$
|
(32
|
)
|
|
$
|
56
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In millions, except per
share amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
46
|
|
|
$
|
84
|
|
Restricted funds held in trust
|
43
|
|
|
56
|
|
||
Receivables (less allowances of $14 million and $9 million, respectively)
|
341
|
|
|
332
|
|
||
Prepaid expenses and other current assets
|
73
|
|
|
72
|
|
||
Assets held for sale
|
653
|
|
|
—
|
|
||
Total Current Assets
|
1,156
|
|
|
544
|
|
||
Property, plant and equipment, net
|
2,606
|
|
|
3,024
|
|
||
Restricted funds held in trust
|
28
|
|
|
54
|
|
||
Waste, service and energy contracts, net
|
251
|
|
|
263
|
|
||
Other intangible assets, net
|
36
|
|
|
34
|
|
||
Goodwill
|
313
|
|
|
302
|
|
||
Other assets
|
51
|
|
|
63
|
|
||
Total Assets
|
$
|
4,441
|
|
|
$
|
4,284
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
10
|
|
|
$
|
9
|
|
Current portion of project debt
|
23
|
|
|
22
|
|
||
Accounts payable
|
151
|
|
|
98
|
|
||
Accrued expenses and other current liabilities
|
313
|
|
|
289
|
|
||
Liabilities held for sale
|
540
|
|
|
—
|
|
||
Total Current Liabilities
|
1,037
|
|
|
418
|
|
||
Long-term debt
|
2,339
|
|
|
2,243
|
|
||
Project debt
|
151
|
|
|
361
|
|
||
Deferred income taxes
|
412
|
|
|
617
|
|
||
Other liabilities
|
75
|
|
|
176
|
|
||
Total Liabilities
|
4,014
|
|
|
3,815
|
|
||
Commitments and Contingencies (Note 16)
|
|
|
|
||||
Equity:
|
|
|
|
||||
Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding)
|
—
|
|
|
—
|
|
||
Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, outstanding 131 and 130, respectively)
|
14
|
|
|
14
|
|
||
Additional paid-in capital
|
822
|
|
|
807
|
|
||
Accumulated other comprehensive loss
|
(55
|
)
|
|
(62
|
)
|
||
Accumulated deficit
|
(353
|
)
|
|
(289
|
)
|
||
Treasury stock, at par
|
(1
|
)
|
|
(1
|
)
|
||
Total Equity
|
427
|
|
|
469
|
|
||
Total Liabilities and Equity
|
$
|
4,441
|
|
|
$
|
4,284
|
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
OPERATING ACTIVITIES:
|
|
(In millions)
|
||||||||||
Net income (loss)
|
|
$
|
57
|
|
|
$
|
(4
|
)
|
|
$
|
69
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
|
215
|
|
|
207
|
|
|
198
|
|
|||
Amortization of long-term debt deferred financing costs
|
|
7
|
|
|
6
|
|
|
8
|
|
|||
Loss (gain) on asset sales
|
|
6
|
|
|
(44
|
)
|
|
—
|
|
|||
Impairment charges
|
|
2
|
|
|
20
|
|
|
43
|
|
|||
Loss on extinguishment of debt
|
|
84
|
|
|
—
|
|
|
2
|
|
|||
Provision for doubtful accounts
|
|
9
|
|
|
2
|
|
|
1
|
|
|||
Stock-based compensation expense
|
|
18
|
|
|
16
|
|
|
18
|
|
|||
Equity in net income from unconsolidated investments
|
|
(1
|
)
|
|
(4
|
)
|
|
(13
|
)
|
|||
Deferred income taxes
|
|
(193
|
)
|
|
21
|
|
|
(11
|
)
|
|||
IRS audit settlement
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|||
Change in restricted funds held in trust
|
|
1
|
|
|
22
|
|
|
28
|
|
|||
Dividends from unconsolidated investments
|
|
2
|
|
|
2
|
|
|
5
|
|
|||
Other, net
|
|
(13
|
)
|
|
(1
|
)
|
|
21
|
|
|||
Change in working capital, net of effects of acquisitions:
|
|
|
|
|
|
|
||||||
Receivables
|
|
(27
|
)
|
|
(19
|
)
|
|
(12
|
)
|
|||
Debt services billings in excess of revenue recognized
|
|
5
|
|
|
(1
|
)
|
|
5
|
|
|||
Prepaid and other current assets
|
|
—
|
|
|
18
|
|
|
(1
|
)
|
|||
Accounts payable and accrued expenses
|
|
59
|
|
|
45
|
|
|
(8
|
)
|
|||
Deferred revenue
|
|
7
|
|
|
(2
|
)
|
|
(5
|
)
|
|||
Changes in noncurrent assets and liabilities, net
|
|
5
|
|
|
2
|
|
|
(1
|
)
|
|||
Net cash provided by operating activities
|
|
243
|
|
|
286
|
|
|
254
|
|
|||
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Purchase of property, plant and equipment
|
|
(277
|
)
|
|
(359
|
)
|
|
(376
|
)
|
|||
Acquisition of businesses, net of cash acquired
|
|
(16
|
)
|
|
(9
|
)
|
|
(72
|
)
|
|||
Proceeds from asset sales
|
|
4
|
|
|
109
|
|
|
—
|
|
|||
Property insurance proceeds
|
|
8
|
|
|
3
|
|
|
1
|
|
|||
Other, net
|
|
(8
|
)
|
|
2
|
|
|
(1
|
)
|
|||
Net cash used in investing activities
|
|
(289
|
)
|
|
(254
|
)
|
|
(448
|
)
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In millions)
|
||||||||||
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from borrowings on long-term debt
|
|
400
|
|
|
—
|
|
|
294
|
|
|||
Proceeds from borrowings on revolving credit facility
|
|
952
|
|
|
744
|
|
|
895
|
|
|||
Payments of equipment financing capital lease
|
|
(5
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|||
Proceeds from borrowings on project debt
|
|
—
|
|
|
—
|
|
|
59
|
|
|||
Proceeds from borrowings on Dublin project financing
|
|
643
|
|
|
159
|
|
|
86
|
|
|||
Payment related to Dublin interest rate swap
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|||
Payments on the Dublin Convertible Preferred
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|||
Principal payments on long-term debt
|
|
(415
|
)
|
|
(4
|
)
|
|
(196
|
)
|
|||
Payments of borrowings on revolving credit facility
|
|
(850
|
)
|
|
(749
|
)
|
|
(692
|
)
|
|||
Proceeds from equipment financing capital lease
|
|
—
|
|
|
—
|
|
|
15
|
|
|||
Principal payments on project debt
|
|
(382
|
)
|
|
(51
|
)
|
|
(85
|
)
|
|||
Payments of deferred financing costs
|
|
(21
|
)
|
|
(6
|
)
|
|
(11
|
)
|
|||
Payment of Dublin financing costs
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|||
Cash dividends paid to stockholders
|
|
(131
|
)
|
|
(131
|
)
|
|
(133
|
)
|
|||
Common stock repurchased
|
|
—
|
|
|
(20
|
)
|
|
(30
|
)
|
|||
Financing of insurance premiums, net
|
|
20
|
|
|
—
|
|
|
—
|
|
|||
Change in restricted funds held in trust
|
|
(37
|
)
|
|
28
|
|
|
5
|
|
|||
Other, net
|
|
(3
|
)
|
|
(10
|
)
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
|
3
|
|
|
(44
|
)
|
|
203
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
5
|
|
|
—
|
|
|
(4
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
|
(38
|
)
|
|
(12
|
)
|
|
5
|
|
|||
Cash and cash equivalents at beginning of period
|
|
84
|
|
|
96
|
|
|
91
|
|
|||
Cash and cash equivalents at end of period
|
|
46
|
|
|
84
|
|
|
96
|
|
|||
Less: Cash and cash equivalents of assets held for sale at end of period
|
|
—
|
|
|
—
|
|
|
2
|
|
|||
Cash and cash equivalents of continuing operations at end of period
|
|
$
|
46
|
|
|
$
|
84
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Cash Paid for Interest and Income Taxes:
|
|
|
|
|
|
|
||||||
Interest
|
|
$
|
149
|
|
|
$
|
150
|
|
|
$
|
141
|
|
Income taxes, net of refunds
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Covanta Holding Corporation Stockholders’ Equity
|
|
Noncontrolling
Interests in
Subsidiaries
|
|
Total
|
||||||||||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated
Earnings (Deficit)
|
|
Treasury Stock
|
|
|||||||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||||||||||||
Balance as of December 31, 2014
|
|
136
|
|
|
$
|
14
|
|
|
$
|
805
|
|
|
$
|
(22
|
)
|
|
$
|
(15
|
)
|
|
3
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
784
|
|
Opening retained earnings adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|||||||
Common stock repurchased
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(19
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|||||||
Distribution to partners of noncontrolling interest of subsidiaries
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Acquisition of noncontrolling interests in subsidiaries
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||||
Comprehensive (loss) income, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
68
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
57
|
|
|||||||
Balance as of December 31, 2015
|
|
136
|
|
|
$
|
14
|
|
|
$
|
801
|
|
|
$
|
(34
|
)
|
|
$
|
(143
|
)
|
|
5
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
640
|
|
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|||||||
Common stock repurchased
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(11
|
)
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
(18
|
)
|
|||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||||
Exchange of China equity investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Comprehensive (loss) income, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|||||||
Balance as of December 31, 2016
|
|
136
|
|
|
$
|
14
|
|
|
$
|
807
|
|
|
$
|
(62
|
)
|
|
$
|
(289
|
)
|
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
469
|
|
Cumulative effect change in accounting for share based payments (Note 1)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|||||||
Shares issued in non-vested stock award
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Comprehensive loss, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
57
|
|
|
|
|
|
—
|
|
|
—
|
|
|
64
|
|
|||||||
Balance as of December 31, 2017
|
|
136
|
|
|
$
|
14
|
|
|
$
|
822
|
|
|
$
|
(55
|
)
|
|
$
|
(353
|
)
|
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
427
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Pass through costs
|
$
|
59
|
|
|
$
|
41
|
|
|
$
|
52
|
|
|
|
As of December 31,
|
||||||||||||||
|
|
2017
|
|
2016
|
||||||||||||
|
|
Current
|
|
Noncurrent
|
|
Current
|
|
Noncurrent
|
||||||||
Debt service funds - principal
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
10
|
|
|
$
|
7
|
|
Debt service funds - interest
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total debt service funds
|
|
10
|
|
|
8
|
|
|
11
|
|
|
7
|
|
||||
Revenue funds
|
|
4
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Other funds
|
|
29
|
|
|
20
|
|
|
42
|
|
|
47
|
|
||||
Total
|
|
$
|
43
|
|
|
$
|
28
|
|
|
$
|
56
|
|
|
$
|
54
|
|
|
|
As of December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Land
|
|
$
|
25
|
|
|
$
|
29
|
|
Facilities and equipment
|
|
4,312
|
|
|
4,188
|
|
||
Landfills (primarily for ash disposal)
|
|
67
|
|
|
63
|
|
||
Construction in progress
|
|
54
|
|
|
433
|
|
||
Total
|
|
4,458
|
|
|
4,713
|
|
||
Less: accumulated depreciation and amortization
|
|
(1,852
|
)
|
|
(1,689
|
)
|
||
Property, plant, and equipment — net
|
|
$
|
2,606
|
|
|
$
|
3,024
|
|
|
|
As of December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Beginning of period asset retirement obligation
|
|
$
|
25
|
|
|
$
|
30
|
|
Accretion expense
|
|
2
|
|
|
2
|
|
||
Net change
(1)
|
|
(1
|
)
|
|
(7
|
)
|
||
End of period asset retirement obligation
|
|
26
|
|
|
25
|
|
||
Less: current portion
|
|
(2
|
)
|
|
—
|
|
||
Noncurrent asset retirement obligation
|
|
$
|
24
|
|
|
$
|
25
|
|
(1)
|
Comprised primarily of expenditures and settlements of the asset retirement obligation liability, net revisions based on current estimates of the liability and revised expected cash flows and life of the liability.
|
|
Foreign Currency Translation
|
|
Pension and Other Postretirement Plan Unrecognized Net Gain
|
|
Net Unrealized Loss on Derivatives
|
|
Total
|
||||||||
Balance at December 31, 2015
|
$
|
(34
|
)
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
(34
|
)
|
Other comprehensive loss before reclassifications
|
(2
|
)
|
|
—
|
|
|
(21
|
)
|
|
(23
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Net current period comprehensive loss
|
(7
|
)
|
|
—
|
|
|
(21
|
)
|
|
(28
|
)
|
||||
Balance at December 31, 2016
|
$
|
(41
|
)
|
|
$
|
2
|
|
|
$
|
(23
|
)
|
|
$
|
(62
|
)
|
Net current period comprehensive income
(loss)
|
17
|
|
|
—
|
|
|
(10
|
)
|
|
7
|
|
||||
Balance at December 31, 2017
|
$
|
(24
|
)
|
|
$
|
2
|
|
|
$
|
(33
|
)
|
|
$
|
(55
|
)
|
Standard
|
Description
|
Effective Date
|
Effect on the financial statements or other significant matters
|
ASU 2017-12
Derivatives and Hedging
(Topic 815)
|
The amendments expand an entity’s ability to apply hedge accounting for nonfinancial and financial risk components and allow for a simplified approach for fair value hedging of interest rate risk. The guidance eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, ASU 2017-12 simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance. For cash flow and net investment hedges existing at the date of adoption, a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings is required as of the beginning of the year of adoption. The amended presentation and disclosure guidance is required only prospectively.
|
First quarter of 2019, early adoption is permitted.
|
We are currently evaluating the impact this guidance will have on our consolidated financial statements and related disclosures.
|
ASU 2017-10
Service Concession Arrangements
(Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force)
|
The guidance provides clarity on determining the customer in a service concession arrangement.
|
First quarter of 2018, early adoption is permitted.
|
This guidance is not expected to have a material impact on our consolidated financial statements.
|
ASU 2017-09
Compensation—Stock Compensation
(Topic 718): Scope of Modification Accounting
|
Provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this update should be applied prospectively to an award modified on or after the adoption date.
|
First quarter of 2018, early adoption is permitted.
|
This guidance is not expected to have a material impact on our consolidated financial statements.
|
ASU 2017-05,
Other Income: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
|
The ASU provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. Specifically, the ASU clarifies the scope of an “in substance nonfinancial asset”, clarifies the treatment of partial sales of nonfinancial assets and clarifies guidance on accounting for contributions of nonfinancial assets to joint ventures and equity method investees. The ASU may be applied by either a full or modified retrospective approach.
|
First quarter of 2018, early adoption is permitted.
|
This guidance is not expected to have a material impact on our consolidated financial statements.
|
ASU 2017-04
Intangibles—Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill Impairment
|
The standard updated guidance to eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (referred to as Step 2). As a result, an impairment charge will equal the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis.
|
First quarter of 2020, early adoption is permitted.
|
The impact of this guidance for the Company will depend on the outcomes of future goodwill impairment tests.
|
ASU 2017-03
Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323)
|
The portion of this ASU related to Topic 250 states that when a registrant does not know or cannot reasonably estimate the impact that future adoption of certain new accounting standards are expected to have on the financial statements, then in addition to making a statement to that effect, that registrant should consider additional qualitative financial statement disclosures addressing the significance of the impact the standard will have on the financial statements when adopted.
|
Effective upon issuance
|
We have included such disclosures for ASU 2014-09 and ASU 2018-01 but not for ASU 2016-02 since we have not yet performed sufficient analysis on future effects upon implementation of the new standards. We have concluded that the portion of this ASU related to Topic 323 is not applicable and, therefore, does not have a material impact on our consolidated financial statements.
|
ASU 2016-18
Statement of Cash Flows (Topic 230): Restricted Cash |
The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The standard requires a retrospective adoption method.
|
First quarter of 2018, early adoption is permitted.
|
Adoption of this guidance will eliminate the disclosure of "Change in restricted funds held in trust", which we currently include in "Net cash provided by operating activities" and "Net cash provided by financing activities" on our consolidated statement of cash flows.
|
Restricted funds held in trust
|
$
|
77
|
|
Receivables
|
10
|
|
|
Property, plant and equipment, net
|
563
|
|
|
Other assets
|
3
|
|
|
Assets held for sale
|
$
|
653
|
|
Accounts payable
|
1
|
|
|
Accrued expenses and other liabilities
|
22
|
|
|
Project debt
(1)
|
510
|
|
|
Deferred income tax
|
7
|
|
|
Liabilities held for sale
|
$
|
540
|
|
(1)
|
See
Note 10.
Consolidated Debt - Dublin Project Refinancing
for further information.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Total repurchases
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
32
|
|
Shares repurchased
|
—
|
|
|
1.2
|
|
|
2.1
|
|
|||
Weighted average cost per share
|
$
|
—
|
|
|
$
|
15.29
|
|
|
$
|
15.33
|
|
|
|
|
|
|
|
||||||
Dividends declared
|
$
|
132
|
|
|
$
|
132
|
|
|
$
|
133
|
|
Per share
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
Year Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Basic weighted average common shares outstanding
|
130
|
|
|
129
|
|
|
132
|
|
Dilutive effect of restricted stock and restricted stock units
(1)
|
1
|
|
|
—
|
|
|
1
|
|
Diluted weighted average common shares outstanding
|
131
|
|
|
129
|
|
|
133
|
|
|
Year Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Stock options
|
—
|
|
|
1
|
|
|
1
|
|
Restricted stock
|
—
|
|
|
1
|
|
|
1
|
|
Restricted stock units
|
—
|
|
|
1
|
|
|
—
|
|
|
|
|
|
|
|
|
North America
|
|
All Other
(1)
|
|
Total
|
||||||
Year Ended December 31, 2017
|
|
|
|
|
|
||||||
Operating revenue
|
$
|
1,721
|
|
|
$
|
31
|
|
|
$
|
1,752
|
|
Depreciation and amortization expense
|
$
|
209
|
|
|
$
|
6
|
|
|
$
|
215
|
|
Impairment charges
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Operating income
|
$
|
95
|
|
|
$
|
6
|
|
|
$
|
101
|
|
Equity in net income from unconsolidated investments
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
|
|
|
|
|
||||||
As of December 31, 2017
|
|
|
|
|
|
||||||
Total assets
|
$
|
3,753
|
|
|
$
|
688
|
|
|
$
|
4,441
|
|
Capital additions
|
$
|
155
|
|
|
$
|
122
|
|
|
$
|
277
|
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2016
|
|
|
|
|
|
||||||
Operating revenue
|
$
|
1,692
|
|
|
$
|
7
|
|
|
$
|
1,699
|
|
Depreciation and amortization expense
|
$
|
207
|
|
|
$
|
—
|
|
|
$
|
207
|
|
Impairment charges
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
20
|
|
Operating income (loss)
|
$
|
116
|
|
|
$
|
(7
|
)
|
|
$
|
109
|
|
Equity in net income from unconsolidated investments
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
|
|
|
|
|
||||||
As of December 31, 2016
|
|
|
|
|
|
||||||
Total assets
|
$
|
3,794
|
|
|
$
|
490
|
|
|
$
|
4,284
|
|
Capital additions
|
$
|
188
|
|
|
$
|
171
|
|
|
$
|
359
|
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2015
|
|
|
|
|
|
||||||
Operating revenue
|
$
|
1,607
|
|
|
$
|
38
|
|
|
$
|
1,645
|
|
Depreciation and amortization expense
|
$
|
197
|
|
|
$
|
1
|
|
|
$
|
198
|
|
Impairment charges
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
43
|
|
Operating income
|
$
|
108
|
|
|
$
|
1
|
|
|
$
|
109
|
|
Equity in net income from unconsolidated investments
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
13
|
|
|
|
|
|
|
|
(1)
|
All other includes the financial results of our international assets.
|
|
United States
|
|
Other
|
|
Total
|
||||||
Operating Revenue:
|
|
|
|
|
|
||||||
Year Ended December 31, 2017
|
$
|
1,705
|
|
|
$
|
47
|
|
|
$
|
1,752
|
|
Year Ended December 31, 2016
|
$
|
1,677
|
|
|
$
|
22
|
|
|
$
|
1,699
|
|
Year Ended December 31, 2015
|
$
|
1,589
|
|
|
$
|
56
|
|
|
$
|
1,645
|
|
|
United States
|
|
Assets Held
for Sale
|
|
Other
|
|
Total
|
||||||||
Total Assets:
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2017
|
$
|
3,727
|
|
|
$
|
653
|
|
|
$
|
61
|
|
|
$
|
4,441
|
|
Year Ended December 31, 2016
|
$
|
3,763
|
|
|
$
|
—
|
|
|
$
|
521
|
|
|
$
|
4,284
|
|
Year Ended December 31, 2015
|
$
|
3,847
|
|
|
$
|
97
|
|
|
$
|
290
|
|
|
$
|
4,234
|
|
|
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||
|
|
Remaining Weighted Average Useful
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Waste, service and energy contracts (asset)
|
|
21 years
|
|
$
|
494
|
|
|
$
|
243
|
|
|
$
|
251
|
|
|
$
|
526
|
|
|
$
|
263
|
|
|
$
|
263
|
|
Waste and service contracts (liability)
|
|
3 years
|
|
$
|
(66
|
)
|
|
$
|
(62
|
)
|
|
$
|
(4
|
)
|
|
$
|
(131
|
)
|
|
$
|
(124
|
)
|
|
$
|
(7
|
)
|
|
Waste, Service
and Energy
Contracts
(Amortization
Expense)
|
|
Waste and
Service
Contracts
(Contra-Expense)
|
||||
Year Ended December 31, 2015
|
$
|
25
|
|
|
$
|
(6
|
)
|
Year Ended December 31, 2016
|
$
|
21
|
|
|
$
|
(6
|
)
|
Year Ended December 31, 2017
|
$
|
14
|
|
|
$
|
(2
|
)
|
2018
|
$
|
13
|
|
|
$
|
(2
|
)
|
2019
|
13
|
|
|
(2
|
)
|
||
2020
|
13
|
|
|
—
|
|
||
2021
|
13
|
|
|
—
|
|
||
2022
|
13
|
|
|
—
|
|
||
Thereafter
|
186
|
|
|
—
|
|
||
Total
|
$
|
251
|
|
|
$
|
(4
|
)
|
|
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||
|
|
Remaining Weighted Average Useful
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Customer relationships and other
|
|
7 years
|
|
$
|
50
|
|
|
$
|
18
|
|
|
$
|
32
|
|
|
$
|
43
|
|
|
$
|
13
|
|
|
$
|
30
|
|
Permits
|
|
Indefinite
|
|
4
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||
Other intangible assets, net
|
|
|
|
$
|
54
|
|
|
$
|
18
|
|
|
$
|
36
|
|
|
$
|
47
|
|
|
$
|
13
|
|
|
$
|
34
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
Annual remaining amortization
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
32
|
|
|
Total
|
||
Balance at December 31, 2015
|
$
|
301
|
|
Goodwill related to acquisitions
|
1
|
|
|
Balance at December 31, 2016
|
302
|
|
|
Goodwill related to acquisitions
|
11
|
|
|
Balance at December 31, 2017
|
$
|
313
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
Future minimum rental payments
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
31
|
|
|
$
|
71
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
LONG-TERM DEBT:
|
|
|
|
||||||
Revolving credit facility (3.58% - 3.83%)
|
$
|
445
|
|
|
$
|
343
|
|
||
Term loan, net (3.12%)
|
191
|
|
|
195
|
|
||||
Credit Facilities Sub-total
|
$
|
636
|
|
|
$
|
538
|
|
||
7.25% Senior notes due 2020
|
$
|
—
|
|
|
$
|
400
|
|
||
6.375% Senior notes due 2022
|
400
|
|
|
400
|
|
||||
5.875% Senior notes due 2024
|
400
|
|
|
400
|
|
||||
5.875% Senior notes due 2025
|
400
|
|
|
—
|
|
||||
Less: deferred financing costs related to senior notes
|
(15
|
)
|
|
(14
|
)
|
||||
Senior Notes Sub-total
|
$
|
1,185
|
|
|
$
|
1,186
|
|
||
4.00% - 5.25% Tax-exempt bonds due 2024 through 2045
|
$
|
464
|
|
|
$
|
464
|
|
||
Less: deferred financing costs related to tax-exempt bonds
|
(5
|
)
|
|
(5
|
)
|
||||
Tax-Exempt Bonds Sub-total
|
$
|
459
|
|
|
$
|
459
|
|
||
3.48% - 6.61% Equipment financing capital leases due 2024 through 2028
|
69
|
|
|
69
|
|
||||
Total long-term debt
|
$
|
2,349
|
|
|
$
|
2,252
|
|
||
Less: current portion
|
(10
|
)
|
|
(9
|
)
|
||||
Noncurrent long-term debt
|
$
|
2,339
|
|
|
$
|
2,243
|
|
||
PROJECT DEBT:
|
|
|
|
||||||
North America project debt:
|
|
|
|
||||||
4.00% - 5.00% project debt related to service fee structures due 2018 through 2035
|
$
|
68
|
|
|
$
|
78
|
|
||
5.00% Union capital lease due 2018 through 2053
|
94
|
|
|
99
|
|
||||
5.25% - 6.20% project debt related to tip fee structures due 2018 through 2020
|
9
|
|
|
16
|
|
||||
Unamortized debt premium, net
|
4
|
|
|
4
|
|
||||
Less: deferred financing costs related to North America project debt
|
(1
|
)
|
|
(1
|
)
|
||||
Total North America project debt
|
$
|
174
|
|
|
$
|
196
|
|
||
Other project debt:
|
|
|
|
||||||
Dublin senior loan due 2021 (5.72% - 6.41%) ⁽¹⁾
(a)
|
$
|
—
|
|
|
$
|
155
|
|
||
Less: debt discount related to Dublin senior loan
(a)
|
—
|
|
|
(6
|
)
|
||||
Less: deferred financing cost related to Dublin senior loan
(a)
|
—
|
|
|
(18
|
)
|
||||
Dublin senior loan, net
(a)
|
$
|
—
|
|
|
$
|
131
|
|
||
Dublin junior loan due 2022 (9.23% - 9.73%)
(a)
|
$
|
—
|
|
|
$
|
58
|
|
||
Less: debt discount related to Dublin junior loan
(a)
|
—
|
|
|
(1
|
)
|
||||
Less: deferred financing costs related to Dublin junior loan
(a)
|
—
|
|
|
(1
|
)
|
||||
Dublin junior loan, net
|
$
|
—
|
|
|
$
|
56
|
|
||
Total other project debt, net
|
$
|
—
|
|
|
$
|
187
|
|
||
Total project debt
|
$
|
174
|
|
|
$
|
383
|
|
||
Less: Current portion
|
(23
|
)
|
|
(22
|
)
|
||||
Noncurrent project debt
|
$
|
151
|
|
|
$
|
361
|
|
||
TOTAL CONSOLIDATED DEBT
|
$
|
2,523
|
|
|
$
|
2,635
|
|
||
Less: Current debt
|
(33
|
)
|
|
(31
|
)
|
||||
TOTAL NONCURRENT CONSOLIDATED DEBT
|
$
|
2,490
|
|
|
$
|
2,604
|
|
||
(1)
Reflects hedged fixed rates.
|
(a)
|
During the fourth quarter of 2017 the Dublin project debt was repaid as part of a refinancing. As of December 31, 2017 the refinanced debt was classified as "Liabilities held for sale" on our consolidated balance sheet. For further information see
Note 4. Dispositions and Assets Held for Sale, Note 10. Consolidated Debt- Dublin Project Refinancing
and
Note 18.
Subsequent Events.
|
|
Total
Facility Commitment
|
|
Expiring
(1)
|
|
Direct Borrowings
|
|
Outstanding Letters of Credit
|
|
Unutilized Capacity
|
||||||||
Revolving Credit Facility
|
$
|
1,000
|
|
|
2020
|
|
$
|
445
|
|
|
$
|
192
|
|
|
$
|
363
|
|
•
|
incur additional indebtedness (including guarantee obligations);
|
•
|
create certain liens against or security interests over certain property;
|
•
|
pay dividends on, redeem, or repurchase our capital stock or make other restricted junior payments;
|
•
|
enter into agreements that restrict the ability of our subsidiaries to make distributions or other payments to us;
|
•
|
make investments;
|
•
|
consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis;
|
•
|
dispose of certain assets; and
|
•
|
make certain acquisitions.
|
•
|
a maximum Leverage Ratio of
4.00
to 1.00 for the trailing four quarter period, which measures the principal amount of Covanta Energy’s consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs (“Consolidated Adjusted Debt”) to its adjusted earnings before interest, taxes, depreciation and amortization, as calculated in the Credit Agreement (“Credit Agreement Adjusted EBITDA”). The definition of Credit Agreement Adjusted EBITDA in the Credit Facilities excludes certain non-recurring and non-cash charges.
|
•
|
a minimum Interest Coverage Ratio of
3.00
to 1.00, which measures Covanta Energy’s Credit Agreement Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy as calculated in the Credit Agreement.
|
•
|
incur additional indebtedness;
|
•
|
pay dividends or make other distributions or repurchase or redeem their capital stock;
|
•
|
prepay, redeem or repurchase certain debt;
|
•
|
make loans and investments;
|
•
|
sell restricted assets;
|
•
|
incur liens;
|
•
|
enter into transactions with affiliates;
|
•
|
alter the businesses they conduct;
|
•
|
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
|
•
|
consolidate, merge or sell all or substantially all of their assets.
|
Series
|
|
Amount
|
|
Maturity
|
|
Coupon
|
|
Use of Proceeds
|
||
Massachusetts Series 2012A
|
|
$
|
20
|
|
|
2027
|
|
4.875%
|
|
New proceeds for qualifying capital expenditures in Massachusetts
|
Massachusetts Series 2012B
|
|
67
|
|
|
2042
|
|
4.875%
|
|
Redeem SEMASS project debt
|
|
Massachusetts Series 2012C
|
|
82
|
|
|
2042
|
|
5.25%
|
|
Redeem Haverhill project debt
|
|
Niagara Series 2012A
|
|
130
|
|
|
2042
|
|
5.25%
|
|
Redeem Niagara project debt
|
|
Niagara Series 2012B
|
|
35
|
|
|
2024
|
|
4.00%
|
|
Redeem Niagara project debt
|
|
New Jersey Series 2015A
|
|
90
|
|
|
2045
|
|
5.25%
|
|
Finance qualifying expenditures at Essex County facility
|
|
Pennsylvania Series 2015A
|
|
40
|
|
|
2043
|
|
5.00%
|
|
Refinance outstanding tax-exempt debt
|
|
|
|
$
|
464
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||
Annual Remaining Amortization
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
66
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||
Annual Remaining Amortization
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
40
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Less:
Current
Portion
|
|
Total
Noncurrent
Project Debt
|
||||||||||||||||||
Debt
|
|
$
|
23
|
|
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
106
|
|
|
$
|
171
|
|
|
$
|
(23
|
)
|
|
$
|
148
|
|
Premium and deferred financing costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||||||
Total
(1)
|
|
$
|
23
|
|
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
109
|
|
|
$
|
174
|
|
|
$
|
(23
|
)
|
|
$
|
151
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Capitalized interest
|
$
|
17
|
|
|
$
|
26
|
|
|
$
|
10
|
|
Project debt included in Liabilities held for sale:
|
|
||
Dublin Senior Loan due 2032 (2.77% - 3.57%) ⁽¹⁾
|
$
|
474
|
|
Less: debt discount related to Dublin Senior Loan
|
(10
|
)
|
|
Less: deferred financing costs related to Dublin Senior Loan
|
(13
|
)
|
|
Dublin Senior Loan, net
|
451
|
|
|
Dublin Junior Loan due 2032 (4.23%-5.36%)
|
$
|
60
|
|
Less: debt discount related to Dublin Junior Loan
|
—
|
|
|
Less: deferred financing costs related to Dublin Junior Loan
|
(1
|
)
|
|
Dublin Junior Loan, net
|
59
|
|
|
Total project debt included in Liabilities held for sale, net
|
$
|
510
|
|
(1)
Reflects hedged fixed rates.
|
|
•
|
Final maturity on November 24, 2032 (approximately 15 years after the operational commencement date of the facility).
|
•
|
Scheduled repayments will be made semi-annually according to a 15-year amortization profile, beginning in 2018. The Dublin Senior Loan is pre-payable at our option, subject to potential prepayment costs under Tranche A and B.
|
•
|
Borrowings will bear interest as follows:
|
•
|
Tranche A: At a fixed rate equal to
3.00%
|
•
|
Tranche B: At a fixed rate equal to
2.77%
|
•
|
Tranche C: At the 6-month Euro Interbank Offered Rate ("EURIBOR") plus
2.15%
. We entered into interest rate swap agreements in order to hedge our exposure to adverse variable interest rate fluctuations under Tranche C.
|
•
|
The Dublin Senior Loan is a senior obligation of the project company and certain other related subsidiaries, all of which are wholly-owned by us, and is secured by a first priority lien on substantially all of the project-related assets. The Dublin Senior Term Loan is non-recourse to us and our subsidiary Covanta Energy.
|
•
|
The Dublin Senior Loan credit agreement contains positive, negative and financial maintenance covenants that are customary for a project financing of this type. Our ability to service the Dublin Junior Loan and to make cash distributions to common equity is subject to ongoing compliance with these covenants, including maintaining a minimum debt service coverage ratio and loan life coverage ratio on the Dublin Senior Loan.
|
•
|
Final maturity on December 24, 2032 (one month after the maturity of the Dublin Senior Loan).
|
•
|
Scheduled repayments will be made semi-annually according to a 15-year amortization profile, beginning in 2018. The loan is pre-payable at our option subject to potential prepayment costs under Tranche B. The loan shall also be reduced by an incremental amount equal to
10%
of Excess Cashflow, as defined in the credit agreement, on each of the Repayment Dates occurring between October 31, 2026 through April 30, 2029 and
20%
of Excess Cashflow thereafter.
|
•
|
Tranche A borrowings will bear interest at the 6-month Euro Interbank Offered Rate ("EURIBOR") plus
4.50%
|
•
|
Tranche B borrowings will bear interest at a fixed rate equal to
5.358%
.
|
•
|
The Dublin Junior Loan is a junior obligation of the project company and certain other related subsidiaries, all of which are wholly-owned by us, and is secured by a second priority lien on substantially all of the project-related assets and a first priority lien on the assets of the top tier project holding company. The Dublin Junior Loan is non-recourse to us and our subsidiary Covanta Energy.
|
•
|
Under the Dublin Junior Loan credit agreement, our ability to make cash distributions to common equity is subject to ongoing compliance with the covenants under the agreement, including maintaining a minimum debt service coverage ratio on the Dublin Junior Loan.
|
•
|
For cash and cash equivalents, restricted funds, and marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee.
|
•
|
Fair values for long-term debt and project debt are determined using quoted market prices.
|
•
|
The fair value of our interest rate swaps are determined by applying the Euribor forward curve observable in the market to the contractual terms of our floating to fixed rate swap agreements. Prior to the Dublin Project Refinancing, the fair value for interest rate swaps was determined by obtaining quotes from two counterparties (one is a holder of the long position and the other is in the short) and extrapolating those across the long and short notional amounts. The fair value of the interest rate swaps is adjusted to reflect counterparty risk of non-performance, and is based on the counterparty’s credit spread in the credit derivatives market.
|
•
|
The fair values of our energy hedges were determined using the spread between our fixed price and the forward curve information available within the market.
|
•
|
The fair value of our foreign currency hedge was determined by obtaining quotes from counterparties and is based on market accepted option pricing methodology which utilizes inputs such as the currency spot rate as of the balance sheet date, the strike price of the options and volatility.
|
|
|
|
|
As of December 31,
|
||||||
Financial Instruments Recorded at Fair Value on a Recurring Basis:
|
|
Fair Value Measurement Level
|
|
2017
|
|
2016
|
||||
|
|
|
|
(In millions)
|
||||||
Assets:
|
|
|
|
|
|
|
||||
Cash and cash equivalents:
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
|
|
1
|
|
$
|
37
|
|
|
$
|
79
|
|
Money market funds
|
|
1
|
|
9
|
|
|
5
|
|
||
Total cash and cash equivalents:
|
|
|
|
46
|
|
|
84
|
|
||
Restricted funds held in trust:
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
|
|
1
|
|
6
|
|
|
12
|
|
||
Money market funds
|
|
1
|
|
25
|
|
|
36
|
|
||
U.S. Treasury/agency obligations
(1)
|
|
1
|
|
10
|
|
|
14
|
|
||
State and municipal obligations
|
|
1
|
|
11
|
|
|
46
|
|
||
Commercial paper/guaranteed investment contracts/repurchase agreements
|
|
1
|
|
19
|
|
|
2
|
|
||
Total restricted funds held in trust:
|
|
|
|
71
|
|
|
110
|
|
||
Restricted funds held in trust included in assets held for sale:
(2)
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
|
|
1
|
|
77
|
|
|
—
|
|
||
Total restricted funds held in trust included in assets held for sale
|
|
|
|
77
|
|
|
—
|
|
||
Investments:
|
|
|
|
|
|
|
||||
Mutual and bond funds
(3)
|
|
1
|
|
2
|
|
|
2
|
|
||
Derivative asset — energy hedges
(4)
|
|
2
|
|
—
|
|
|
3
|
|
||
Total assets:
|
|
|
|
$
|
196
|
|
|
$
|
199
|
|
Liabilities:
|
|
|
|
|
|
|
||||
Derivative liability — energy hedges
(5) (6)
|
|
2
|
|
$
|
5
|
|
|
$
|
1
|
|
Derivative liability — interest rate swaps
(5) (6)
|
|
2
|
|
—
|
|
|
20
|
|
||
Derivative liability — interest rate swaps included in liabilities held for sale
(2)
|
|
2
|
|
7
|
|
|
—
|
|
||
Total liabilities:
|
|
|
|
$
|
12
|
|
|
$
|
21
|
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
Financial Instruments Recorded at Carrying Amount:
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Accounts receivables
(7)
|
|
$
|
342
|
|
|
$
|
342
|
|
|
$
|
333
|
|
|
$
|
333
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
|
$
|
2,349
|
|
|
$
|
2,371
|
|
|
$
|
2,252
|
|
|
$
|
2,237
|
|
Project debt
|
|
$
|
174
|
|
|
$
|
179
|
|
|
$
|
383
|
|
|
$
|
387
|
|
Project debt included in liabilities held for sale
(2)
|
|
$
|
510
|
|
|
$
|
510
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
The U.S. Treasury/agency obligations in restricted funds held in trust are primarily comprised of Federal Home Loan Mortgage Corporation securities at fair value.
|
(2)
|
As of December 31, 2017, assets and liabilities related to our Dublin EfW facility met the criteria to be classified as held for sale on our consolidated balance sheet. For further information see
Note 4. Dispositions and Assets Held for Sale
and
Note 18.
Subsequent Events.
|
(3)
|
Included in other noncurrent assets in the consolidated balance sheets.
|
(4)
|
Included in prepaid expenses and other current assets in the consolidated balance sheets.
|
(5)
|
Included in accrued expenses and other current liabilities in the consolidated balance sheets.
|
(6)
|
Included in other noncurrent liabilities in the consolidated balance sheets.
|
(7)
|
Includes
$1 million
of noncurrent receivables in other noncurrent assets in the consolidated balance sheets as of
December 31, 2017 and 2016
.
|
|
|
|
|
Amount of (Loss) Gain Recognized In Income on Derivatives
|
||||||||||
Effect on Income of Derivative Instruments Not Designated As Hedging Instruments
|
|
Location of Gain or (Loss) Recognized
in Income on Derivatives
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||||
Foreign currency hedge
|
|
Other expense, net
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
6
|
|
Calendar Year
|
|
Hedged MWh
|
2018
|
|
2.9
|
2019
|
|
0.6
|
Total
|
|
3.5
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Insurance gains for property and clean-up costs, net of impairment charges
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Insurance gains for business interruption costs, net of costs incurred
|
$
|
23
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Insurance recoveries for business interruption and clean-up costs, net of costs incurred
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
North America segment:
|
|
|
|
|
|
||||||
Impairment charges
|
$
|
2
|
|
|
$
|
20
|
|
|
$
|
43
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
Prepaid expenses
|
$
|
22
|
|
|
$
|
28
|
|
Hedge receivables
|
—
|
|
|
3
|
|
||
Spare parts
|
22
|
|
|
21
|
|
||
Renewable energy credits
|
6
|
|
|
3
|
|
||
Other
|
23
|
|
|
17
|
|
||
Total prepaid expenses and other current assets
|
$
|
73
|
|
|
$
|
72
|
|
|
|
|
|
||||
Operating expenses, payroll and related expenses
|
$
|
145
|
|
|
$
|
164
|
|
Deferred revenue
|
14
|
|
|
16
|
|
||
Accrued liabilities to client communities
|
17
|
|
|
19
|
|
||
Interest payable
|
37
|
|
|
30
|
|
||
Dividends payable
|
36
|
|
|
35
|
|
||
Other
|
64
|
|
|
25
|
|
||
Total accrued expenses and other current liabilities
|
$
|
313
|
|
|
$
|
289
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
4
|
|
|
$
|
(2
|
)
|
|
$
|
(91
|
)
|
State
|
|
2
|
|
|
6
|
|
|
16
|
|
|||
Foreign
|
|
(1
|
)
|
|
(2
|
)
|
|
2
|
|
|||
Total current
|
|
5
|
|
|
2
|
|
|
(73
|
)
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
(204
|
)
|
|
28
|
|
|
7
|
|
|||
State
|
|
(2
|
)
|
|
(9
|
)
|
|
(11
|
)
|
|||
Foreign
|
|
10
|
|
|
1
|
|
|
(7
|
)
|
|||
Total deferred
|
|
(196
|
)
|
|
20
|
|
|
(11
|
)
|
|||
Total income tax (benefit) expense
|
|
$
|
(191
|
)
|
|
$
|
22
|
|
|
$
|
(84
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Income tax expense (benefit) at the federal statutory rate
|
|
$
|
(47
|
)
|
|
$
|
5
|
|
|
$
|
(10
|
)
|
State and other tax expense
|
|
(2
|
)
|
|
1
|
|
|
1
|
|
|||
Tax rate differential on foreign earnings
|
|
10
|
|
|
4
|
|
|
8
|
|
|||
Permanent differences
|
|
4
|
|
|
4
|
|
|
4
|
|
|||
Income from Grantor Trust
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|||
Production tax credits/R&E tax credits
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||
State ITC credit
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
|||
Change in valuation allowance
|
|
31
|
|
|
2
|
|
|
(7
|
)
|
|||
Liability for uncertain tax positions
|
|
—
|
|
|
16
|
|
|
(82
|
)
|
|||
Adjustment to deferred tax
|
|
(1
|
)
|
|
(5
|
)
|
|
4
|
|
|||
Impact of deferred tax re-measurement for federal tax rate change
|
|
(204
|
)
|
|
—
|
|
|
—
|
|
|||
Tax reform transition tax
|
|
21
|
|
|
—
|
|
|
—
|
|
|||
Expiration of non-qualified stock options
|
|
3
|
|
|
—
|
|
|
—
|
|
|||
Other
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
|||
Total income tax expense (benefit)
|
|
$
|
(191
|
)
|
|
$
|
22
|
|
|
$
|
(84
|
)
|
|
|
||
|
Amount of
Carryforward
Expiring
|
||
2028
|
$
|
10
|
|
2030
|
29
|
|
|
2031
|
1
|
|
|
2032
|
1
|
|
|
2033
|
197
|
|
|
2035
|
1
|
|
|
2036
|
1
|
|
|
|
$
|
240
|
|
|
|
As of December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss carryforwards
|
|
$
|
119
|
|
|
$
|
143
|
|
Accrued expenses
|
|
15
|
|
|
20
|
|
||
Prepaid and other costs
|
|
48
|
|
|
71
|
|
||
Deferred tax assets attributable to pass-through entities
|
|
10
|
|
|
17
|
|
||
Retirement benefits
|
|
2
|
|
|
3
|
|
||
Other
|
|
3
|
|
|
4
|
|
||
AMT and other credit carryforwards
|
|
48
|
|
|
55
|
|
||
Total gross deferred tax asset
|
|
245
|
|
|
313
|
|
||
Less: valuation allowance
|
|
(77
|
)
|
|
(71
|
)
|
||
Total deferred tax asset
|
|
168
|
|
|
242
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Unbilled accounts receivable
|
|
3
|
|
|
3
|
|
||
Property, plant and equipment
|
|
538
|
|
|
780
|
|
||
Intangible assets
|
|
33
|
|
|
36
|
|
||
Deferred tax liabilities attributable to pass-through entities
|
|
8
|
|
|
22
|
|
||
Deferred gain on convertible debt
|
|
4
|
|
|
13
|
|
||
Swap income
|
|
—
|
|
|
—
|
|
||
Prepaid expenses
|
|
—
|
|
|
—
|
|
||
Other, net
|
|
1
|
|
|
5
|
|
||
Total gross deferred tax liability
|
|
587
|
|
|
859
|
|
||
Net deferred tax liability, including deferred tax liability held for sale
|
|
419
|
|
|
617
|
|
||
Less: Deferred tax liability held for sale
(1)
|
|
7
|
|
|
—
|
|
||
Net deferred tax liability
|
|
$
|
412
|
|
|
$
|
617
|
|
(1)
|
As of December 31, 2017, assets and liabilities related to our Dublin EfW facility met the criteria to be classified as held for sale on our consolidated balance sheet. For further information see
Note 4. Dispositions and Assets Held for Sale
and
Note 18.
Subsequent Events.
|
Balance at December 31, 2014
|
$
|
133
|
|
Additions based on tax positions related to the current year
|
12
|
|
|
Reductions for tax positions of prior years
|
(109
|
)
|
|
Balance at December 31, 2015
|
36
|
|
|
Additions based on tax positions related to the current year
|
16
|
|
|
Additions for tax positions of prior years
|
4
|
|
|
Reductions for lapse in applicable statute of limitations
|
(3
|
)
|
|
Reductions for tax positions of prior years
|
(4
|
)
|
|
Payment
|
(6
|
)
|
|
Balance at December 31, 2016
|
43
|
|
|
Additions based on tax positions related to the current year
|
1
|
|
|
Additions for tax positions of prior years
|
6
|
|
|
Reductions for lapse in applicable statute of limitations
|
(1
|
)
|
|
Reductions for tax positions of prior years
|
(2
|
)
|
|
Additions due to acquisitions
|
1
|
|
|
Balance at December 31, 2017
|
$
|
48
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
||||||||||
|
|
Total Compensation Expense
Year Ended December 31,
|
Unrecognized
stock-based
compensation expense
|
|
Weighted-average years to be recognized
|
|||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
|||||||||||
Restricted Stock Awards
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
1.4
|
Restricted Stock Units
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
1.4
|
Tax benefit related to compensation expense
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
15
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested at the beginning of the year
|
|
1,220
|
|
|
$
|
17.20
|
|
Granted
|
|
828
|
|
|
$
|
16.22
|
|
Vested
|
|
(585
|
)
|
|
$
|
16.53
|
|
Forfeited
|
|
(74
|
)
|
|
$
|
17.67
|
|
Nonvested at the end of the year
|
|
1,389
|
|
|
$
|
16.46
|
|
|
|
Number of Shares
|
|
Weighted-Average
Grant Date Fair Value
|
|||
Nonvested at the beginning of the year
|
|
1,803
|
|
|
$
|
16.25
|
|
Granted
|
|
624
|
|
|
$
|
15.94
|
|
Vested
|
|
(71
|
)
|
|
$
|
18.35
|
|
Forfeited
|
|
(541
|
)
|
|
$
|
17.09
|
|
Nonvested at the end of the year
|
|
1,815
|
|
|
$
|
15.80
|
|
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value
(2)
|
|||||
2014 Stock Option Plan
|
|
(in thousands, except per share amounts)
|
|||||||||||
Outstanding at the beginning of the year
|
|
1,080
|
|
|
$
|
21.38
|
|
|
|
|
|
||
Granted
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Exercised
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Expired
|
|
(855
|
)
|
|
$
|
20.62
|
|
|
|
|
|
||
Forfeited
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Outstanding at the end of the year
(1)
|
|
225
|
|
|
$
|
24.30
|
|
|
1.06
|
|
$
|
—
|
|
Options exercisable at year end
|
|
225
|
|
|
$
|
24.30
|
|
|
1.06
|
|
$
|
—
|
|
(1)
|
All options outstanding as of
December 31, 2017
are fully vested.
|
(2)
|
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the closing stock price on the last trading day of
2017
and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of
2017
(December 29, 2017). The intrinsic value changes based on the fair market value of our common stock.
|
|
|
Commitments Expiring by Period
|
||||||||||
|
|
Total
|
|
Less Than
One Year
|
|
More Than
One Year
|
||||||
Letters of credit issued under the Revolving Credit Facility
|
|
$
|
192
|
|
|
$
|
20
|
|
|
$
|
172
|
|
Letters of credit - other
|
|
70
|
|
|
70
|
|
|
—
|
|
|||
Surety bonds
|
|
196
|
|
|
—
|
|
|
196
|
|
|||
Total other commitments — net
|
|
$
|
458
|
|
|
$
|
90
|
|
|
$
|
368
|
|
|
|
Quarter Ended
|
||||||||||||||||||||||||||||||
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
||||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
Operating revenue
|
|
$
|
404
|
|
|
$
|
403
|
|
|
$
|
424
|
|
|
$
|
418
|
|
|
$
|
429
|
|
|
$
|
421
|
|
|
$
|
495
|
|
|
$
|
457
|
|
Operating (loss) income
|
|
$
|
(23
|
)
|
|
$
|
(14
|
)
|
|
$
|
20
|
|
|
$
|
5
|
|
|
$
|
46
|
|
|
$
|
60
|
|
|
$
|
58
|
|
|
$
|
58
|
|
Net (loss) income
|
|
$
|
(52
|
)
|
|
$
|
(37
|
)
|
|
$
|
(37
|
)
|
|
$
|
(29
|
)
|
|
$
|
15
|
|
|
$
|
54
|
|
|
$
|
131
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
(Loss) earnings per share:
|
||||||||||||||||||||||||||||||||
Basic
|
|
$
|
(0.41
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
0.11
|
|
|
$
|
0.42
|
|
|
$
|
1.02
|
|
|
$
|
0.06
|
|
Diluted
|
|
$
|
(0.41
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
0.11
|
|
|
$
|
0.42
|
|
|
$
|
1.01
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash dividend declared per share:
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
|
|
|
Additions
|
|
|
|
|
||||||||||||
|
|
Balance
Beginning
of Year
|
|
Charged to
Costs and
Expense
|
|
Charged to
Other
Accounts
|
|
Deductions
|
|
Balance at
End of
Period
|
||||||||||
|
|
(In millions)
|
||||||||||||||||||
2017 – Reserves for doubtful accounts
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
14
|
|
2016 – Reserves for doubtful accounts
|
|
$
|
7
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
2015 – Reserves for doubtful accounts
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
•
|
Revised task assignments to ensure that discrete items impacting the blended state tax rate are subject to a more comprehensive review process by successive levels of management;
|
•
|
Enhanced the review of the application of the state tax rate to cumulative deferred income tax balances;
|
•
|
Implemented specific technologies minimizing our reliance on supplementary spreadsheets to perform tax calculations, reducing the risk of manual computational error and allowing for a more effective and timely review of tax accounting results;
|
•
|
Implemented analytical procedures to validate actual tax accounting results to supplement internal control reviews using the expected impact of discrete items as a basis;
|
•
|
Enhanced the analysis and formalized the documentation of tax-sensitive aspects of a business transaction, and;
|
•
|
Enhanced the review of the above referenced tax analysis.
|
|
|
|
/s/ Stephen J. Jones
|
|
Stephen J. Jones
|
|
President and Chief Executive Officer
|
|
|
|
/s/ Bradford J. Helgeson
|
|
Bradford J. Helgeson
|
|
Executive Vice President and Chief Financial Officer
|
(a)
|
Documents filed as part of this report:
|
(1)
|
Consolidated Financial Statements of Covanta Holding Corporation:
|
(2)
|
Financial Statement Schedules of Covanta Holding Corporation:
|
(3)
|
Exhibits:
|
|
|
|
Exhibit No.
|
|
Description
|
|
||
|
|
|
Articles of Incorporation and By-Laws.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Instruments Defining Rights of Security Holders, Including Indentures.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Material Contracts.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
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||
|
|
|
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||
|
|
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||
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|
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|
||
|
|
|
|
||
|
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|
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||
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|
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||
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|
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|
||
|
|
|
|
||
|
|
|
|
||
|
|
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||
|
|
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||
|
|
|
|
||
|
|
|
|
||
|
|
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|
||
|
|
|
|
||
|
|
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|
||
|
|
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||
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||
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||
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||
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|
||
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||
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|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
Other.
|
||
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Document
|
†
|
Not filed herewith, but incorporated herein by reference.
|
*
|
Management contract or compensatory plan or arrangement.
|
|
(b) Exhibits: See list of Exhibits in this Part IV, Item 15(a)(3) above.
|
|
|
|
|
|
(c) Financial Statement Schedules: See Part IV, Item 15(a)(2) above.
|
|
COVANTA HOLDING CORPORATION
(Registrant)
|
|
|
|
|
|
By:
|
/
S
/ S
TEPHEN
J. J
ONES
|
|
|
Stephen J. Jones
|
|
|
President and Chief Executive Officer
|
Name
|
|
Title
|
|
Date
|
|
|
|
||
/S/
S
TEPHEN J. JONES
Stephen J. Jones
|
|
President and Chief Executive Officer and Director (Principal Executive Officer)
|
|
February 26, 2018
|
|
|
|
||
/S/
B
RADFORD
J. H
ELGESON
Bradford J. Helgeson
|
|
Executive Vice President, Chief Financial Officer (Principal Financial Officer)
|
|
February 26, 2018
|
|
|
|
||
/S/
M
ANPREET
S. G
REWAL
Manpreet S. Grewal
|
|
Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
February 26, 2018
|
|
|
|
|
|
/S/
S
AMUEL
Z
ELL
Samuel Zell
|
|
Chairman of the Board
|
|
February 26, 2018
|
|
|
|
||
/S/
D
AVID
M. B
ARSE
David M. Barse
|
|
Director
|
|
February 26, 2018
|
|
|
|
||
/S/
R
ONALD
J. B
ROGLIO
Ronald J. Broglio
|
|
Director
|
|
February 26, 2018
|
|
|
|
||
/S/
P
ETER
C. B. B
YNOE
Peter C. B. Bynoe
|
|
Director
|
|
February 26, 2018
|
|
|
|
||
/S/
L
INDA
J. F
ISHER
Linda J. Fisher
|
|
Director
|
|
February 26, 2018
|
|
|
|
||
/S/
J
OSEPH
M. H
OLSTEN
Joseph M. Holsten
|
|
Director
|
|
February 26, 2018
|
|
|
|
||
/S/
D
ANIELLE
P
LETKA
Danielle Pletka |
|
Director
|
|
February 26, 2018
|
|
|
|
|
|
/S/
M
ICHAEL
W. R
ANGER
Michael W. Ranger
|
|
Director
|
|
February 26, 2018
|
|
|
|
|
|
/S/
R
OBERT
S. S
ILBERMAN
Robert S. Silberman
|
|
Director
|
|
February 26, 2018
|
|
|
|
|
|
/S/
J
EAN
S
MITH
Jean Smith
|
|
Director
|
|
February 26, 2018
|
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(In millions, except ratios)
|
||||||||||||||||||
Earnings as defined in Regulation S-K:
(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
(Loss) income from continuing operations before income tax expense, equity in net income from unconsolidated investments
|
$
|
(135
|
)
|
|
$
|
14
|
|
|
$
|
(28
|
)
|
|
$
|
4
|
|
|
$
|
79
|
|
Capitalized interest
|
(17
|
)
|
|
(26
|
)
|
|
(9
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||||
Dividends from unconsolidated investments
|
2
|
|
|
2
|
|
|
5
|
|
|
11
|
|
|
7
|
|
|||||
Fixed Charges
|
165
|
|
|
168
|
|
|
151
|
|
|
157
|
|
|
168
|
|
|||||
Total Earnings
|
$
|
15
|
|
|
$
|
158
|
|
|
$
|
119
|
|
|
$
|
170
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Fixed Charges as defined in Regulation S-K:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
147
|
|
|
$
|
138
|
|
|
$
|
134
|
|
|
$
|
147
|
|
|
$
|
159
|
|
Capitalized interest
|
17
|
|
|
26
|
|
|
9
|
|
|
2
|
|
|
1
|
|
|||||
Imputed interest on operating leases
|
1
|
|
|
4
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|||||
Total Fixed Charges
|
$
|
165
|
|
|
$
|
168
|
|
|
$
|
151
|
|
|
$
|
157
|
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Ratio of Earnings to Fixed Charges
(3)
|
.09x
|
|
|
0.94x
|
|
|
0.79x
|
|
|
1.08x
|
|
|
1.51x
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For purposes of computing the ratio of earnings to fixed charges, the term “earnings” shall be defined as income from continuing operations before income tax expense and equity in net income from unconsolidated investments plus dividends from unconsolidated investments and fixed charges less capitalized interest.
|
(2)
|
For purposes of computing the ratio of earnings to fixed charges, the term “fixed charges” shall be defined as interest expense, capitalized interest and imputed interest for operating leases.
|
Company Name
|
|
Jurisdiction of
Incorporation
|
Advanced Waste Services of Indiana, Inc.
|
|
Wisconsin
|
Camden County Energy Recovery Associates, L.P.
|
|
New Jersey
|
Chesapeake Waste Solutions, Inc.
|
|
Delaware
|
Covanta 4Recovery Philadelphia LLC
|
|
Delaware
|
Covanta 4Recovery Transfer Systems LLC
|
|
Delaware
|
Covanta Abington Transfer Solutions LLC
|
|
Delaware
|
Covanta Alexandria / Arlington, Inc.
|
|
Virginia
|
Covanta ARC LLC
|
|
Delaware
|
Covanta B-3, LLC
|
|
New York
|
Covanta Babylon, Inc.
|
|
New York
|
Covanta Bristol, Inc.
|
|
Connecticut
|
Covanta Burnaby Renewable Energy , ULC
|
|
Canada
|
Covanta Camden GP, LLC
|
|
Delaware
|
Covanta Caribbean SRL
|
|
Barbados
|
Covanta Company of SEMASS, LLC
|
|
Delaware
|
Covanta Connecticut (S.E.), LLC
|
|
Delaware
|
Covanta Dade Metals Recovery LLC
|
|
Florida
|
Covanta Dade Renewable Energy, LLC
|
|
Florida
|
Covanta Delano, Inc.
|
|
Delaware
|
Covanta Delaware Valley II, LLC
|
|
Delaware
|
Covanta Delaware Valley, L.P.
|
|
Delaware
|
Covanta Delaware Valley OP, LLC
|
|
Delaware
|
Covanta Durhan York Renewable Energy Limited Partnership
|
|
Canada
|
Covanta Energy (Ireland) Limited
|
|
Ireland
|
Covanta Energy Americas, Inc.
|
|
Delaware
|
Covanta Energy Asia Holdings Ltd.
|
|
Mauritius
|
Covanta Energy Asia Pacific Holdings Ltd.
|
|
People's Republic of China
|
Covanta Energy China (Delta) Limited
|
|
Republic of Mauritius
|
Covanta Energy China (Gamma) Limited
|
|
Republic of Mauritius
|
Covanta Energy Group, LLC
|
|
Delaware
|
Covanta Energy India (Balaji) Limited
|
|
Republic of Mauritius
|
Covanta Energy International Investments Limited
|
|
Republic of Mauritius
|
Covanta Energy Limited
|
|
United Kingdom
|
Covanta Energy, LLC
|
|
Delaware
|
Covanta Energy Marketing LLC
|
|
Delaware
|
Covanta Energy Philippine Holdings, Inc.
|
|
Philippines
|
Covanta Environmental Solutions, LLC
|
|
Delaware
|
Covanta Environmental Solutions Carriers II, LLC
|
|
Wisconsin
|
Covanta Essex Company
|
|
New Jersey
|
Covanta Essex II, LLC
|
|
Delaware
|
Covanta Essex LLC
|
|
Delaware
|
Covanta Europe Assets Limited
|
|
United Kingdom
|
Covanta Europe Engineering Limited
|
|
Ireland
|
Covanta Europe Holdings S.a.r.l.
|
|
Luxembourg
|
Covanta Europe Operations Limited
|
|
Ireland
|
Covanta Fairfax, Inc.
|
|
Virginia
|
Covanta Five Limited
|
|
Republic of Mauritius
|
Covanta Harrisburg, Inc.
|
|
Delaware
|
Covanta Haverhill Associates, LLC
|
|
Massachusetts
|
Covanta Haverhill, Inc.
|
|
Massachusetts
|
Covanta Hempstead Company
|
|
New York
|
Covanta Hempstead II, LLC
|
|
Delaware
|
Covanta Hennepin Energy Resource Co, LLC
|
|
Delaware
|
Covanta Hillsborough, Inc.
|
|
Florida
|
Covanta Holding UK Limited
|
|
United Kingdom
|
Covanta Holding 2 UK Limited
|
|
United Kingdom
|
Covanta Holding 3 UK Limited
|
|
United Kingdom
|
Covanta Honolulu Resource Recovery Venture, LLC
|
|
Hawaii
|
Covanta Hudson Valley Renewable Energy LLC
|
|
Delaware
|
Covanta Huntington, LLC
|
|
Delaware
|
Covanta Huntsville, Inc.
|
|
Alabama
|
Covanta Hydro Operations West, Inc.
|
|
Delaware
|
Covanta Ince Park Limited
|
|
United Kingdom
|
Covanta Indianapolis, Inc.
|
|
Indiana
|
Covanta Kent, Inc.
|
|
Michigan
|
Covanta Lake II, Inc.
|
|
Florida
|
Covanta Lancaster, Inc.
|
|
Pennsylvania
|
Covanta Lee, Inc.
|
|
Florida
|
Covanta Long Beach Renewable Energy Corp.
|
|
Delaware
|
Covanta Luxembourg S.a.r.l
|
|
Luxembourg
|
Covanta Luxembourg Global Holdings S.a.r.l
|
|
Luxembourg
|
Covanta Luxembourg Holdings S.a.r.l
|
|
Luxembourg
|
Covanta MacArthur Renewable Energy, Inc.
|
|
New York
|
Covanta Marion Land Corp.
|
|
Oregon
|
Covanta Marion, Inc.
|
|
Oregon
|
Covanta Mendota, LLC
|
|
California
|
Covanta Metals Marketing LLC
|
|
Delaware
|
Covanta Montgomery, Inc.
|
|
Maryland
|
Covanta Niagara I, LLC
|
|
Delaware
|
Covanta Newhurst Development Limited
|
|
United Kingdom
|
Covanta Onondaga Limited Partnership
|
|
Delaware
|
Covanta Onondaga Two LLC
|
|
Delaware
|
Covanta Operations of Union LLC
|
|
New Jersey
|
Covanta OPW Associates, Inc.
|
|
Connecticut
|
Covanta Pasco, Inc.
|
|
Florida
|
Covanta Pittsfield, LLC
|
|
New York
|
Covanta Plymouth Renewable Energy, LLC
|
|
Delaware
|
Covanta Power International Holdings, Inc.
|
|
Delaware
|
Covanta Projects of Wallingford, LLC
|
|
Delaware
|
Covanta Projects, LLC
|
|
Delaware
|
Covanta Protos Development Limited
|
|
United Kingdom
|
Covanta Rookery South Limited
|
|
UK
|
Covanta SECONN LLC
|
|
Delaware
|
Covanta Southeastern Connecticut Company
|
|
Connecticut
|
Covanta Southeastern Connecticut, L.P.
|
|
Delaware
|
Covanta Springfield, LLC
|
|
New York
|
Covanta Stanislaus, Inc.
|
|
California
|
Covanta Sustainable Solutions, LLC
|
|
Delaware
|
Covanta TARTECH LLC
|
|
Delaware
|
Covanta Tulsa Renewable Energy LLC
|
|
Delaware
|
Covanta Union, LLC
|
|
Delaware
|
Covanta Wallingford Associates, Inc.
|
|
Connecticut
|
Covanta Warren Energy Resource Co., LLC
|
|
Delaware
|
Covanta Waste to Energy Asia Limited
|
|
Hong Kong
|
Covanta Waste to Energy Asia Ltd
|
|
Mauritius
|
Covanta Waste to Energy of Italy, Inc.
|
|
Delaware
|
Covanta York Renewable Energy LLC
|
|
Delaware
|
Dublin Waste to Energy Group (Holdings) Limited
|
|
Ireland
|
Dublin Waste to Energy (Holdings) Limited
|
|
Ireland
|
Dublin Waste to Energy Limited
|
|
Ireland
|
Dublin Waste to Energy Supply Limited
|
|
Ireland
|
ECOvanta, LLC
|
|
Delaware
|
Edison (Bataan) Cogeneration Corporation
|
|
Philippines
|
Enereurope Holdings III, B.V.
|
|
Netherlands
|
Environmental Pharmaceuticals, LLC
|
|
Arizona
|
GARCO, Inc.
|
|
North Carolina
|
Hidro Operaciones Don Pedro S.A.
|
|
Costa Rica
|
Industrial Oil Services Corp.
|
|
New York
|
Koma Kulshan Associates L.P.
|
|
California
|
Mount Kisco Transfer Station, Inc.
|
|
New York
|
MSW Energy Finance Co. II, Inc.
|
|
Delaware
|
OLMEC Insurance Ltd.
|
|
Bermuda
|
Peabody Monofill Associates, Inc.
|
|
Massachusetts
|
Recoil, Inc.
|
|
Pennsylvania
|
SEMASS Partnership
|
|
Massachusetts
|
Sorinco, Inc.
|
|
Canada
|
South Fork II Associates Limited Partnership
|
|
Washington
|
TransRiver Canada Incorporated
|
|
Canada
|
Waste Recovery Solutions, Inc.
|
|
Florida
|
(1)
|
Registration Statement (Form S-8 No. 333-119609) pertaining to the Covanta Holding Corporation (formerly Danielson Holding Corporation) Equity Award Plan for Employees and Officers and the Covanta Holding Corporation Equity Award Plan for Directors of Covanta Holding Corporation,
|
(2)
|
Registration Statement (Form S-8 No. 333-130046) pertaining to the registration of an additional 2,000,000 shares of common stock as a result of an increase in the number of shares of common stock issuable under the Covanta Holding Corporation Equity Award Plan for Employees and Officers,
|
(3)
|
Registration Statement (Form S-8 No. 333-150705) pertaining to the registration of an additional 6,300,000 shares of common stock as a result of an increase in the number of shares of common stock issuable under the Covanta Holding Corporation Equity Award Plan for Employees and Officers and the Covanta Holding Corporation Equity Award Plan for Directors of Covanta Holding Corporation,
|
(4)
|
Registration Statement (Form S-8 No. 333-195793) pertaining to the Covanta Holding Corporation 2014 Equity Award, and
|
(5)
|
Registration Statement (Form S-3 No. 333-220460) pertaining to the registration of common stock, preferred stock, warrants, debt securities, subscription rights, purchase contracts, purchase units, and depositary shares
|
1.
|
I have reviewed this
Annual
Report on Form
10-K
of Covanta Holding Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
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5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/
S
/ S
TEPHEN
J. J
ONES
|
|
Stephen J. Jones
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this
Annual
Report on Form
10-K
of Covanta Holding Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/
S
/ B
RADFORD
J. H
ELGESON
|
|
Bradford J. Helgeson
|
|
Executive Vice President and Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Covanta Holding Corporation;
|
|
|
|
/
S
/ S
TEPHEN
J. J
ONES
|
|
Stephen J. Jones
|
|
President and Chief Executive Officer
|
|
|
|
/
S
/ B
RADFORD
J. H
ELGESON
|
|
Bradford J. Helgeson
|
|
Executive Vice President and Chief Financial Officer
|
|
|