☑
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
Delaware
|
|
|
95-6021257
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
|
(I.R.S. Employer
Identification Number)
|
|
|
|
|
445 South Street
|
Morristown
|
NJ
|
07960
|
(Address of Principal Executive Office)
|
|
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Class A common stock
|
CVA
|
New York Stock Exchange
|
Large Accelerated Filer
|
Accelerated
filer
|
Non-accelerated
filer
|
Smaller reporting
company
|
Emerging growth
company
|
þ
|
o
|
o
|
☐
|
☐
|
|
|
(Do not check if a smaller reporting company)
|
|
|
Class
|
|
Outstanding at February 14, 2020
|
Common Stock, $0.10 par value
|
|
131,430,105
|
Part of Form 10-K of Covanta Holding Corporation
|
|
Documents Incorporated by Reference
|
Part III
|
|
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 2020 Annual Meeting of Stockholders.
|
|
|
|
|
|
|
|
|
|
Page
|
|
||||
|
||||
|
||||
|
|
|||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
||||
|
|
|||
|
|
|||
|
|
|||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
||||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
||||
|
|
|||
|
||||
|
|
|
•
|
seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities;
|
•
|
our ability to renew or replace expiring contracts at comparable prices and with other acceptable terms;
|
•
|
adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, tax laws, labor laws and healthcare laws;
|
•
|
failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;
|
•
|
our ability to avoid adverse publicity or reputational damage relating to our business;
|
•
|
advances in technology;
|
•
|
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;
|
•
|
difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
|
•
|
our ability to realize the benefits of long-term business development and bear the cost of business development over time;
|
•
|
limits of insurance coverage;
|
•
|
our ability to avoid defaults under our long-term contracts;
|
•
|
performance of third parties under our contracts and such third parties' observance of laws and regulations;
|
•
|
concentration of suppliers and customers;
|
•
|
geographic concentration of facilities;
|
•
|
increased competitiveness in the energy and waste industries;
|
•
|
changes in foreign currency exchange rates;
|
•
|
limitations imposed by our existing indebtedness and our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;
|
•
|
exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
|
•
|
the scalability of our business;
|
•
|
our ability to attract and retain talented people;
|
•
|
failures of disclosure controls and procedures and internal controls over financial reporting;
|
•
|
our ability to utilize net operating loss carryforwards;
|
•
|
general economic conditions in the United States and abroad, including the availability of credit and debt financing;
|
•
|
restrictions in our certificate of incorporation and debt documents regarding strategic alternatives; and
|
•
|
other risks and uncertainties affecting our business described in Item 1A. Risk Factors of this Annual Report on Form 10-K and in other filings by Covanta with the SEC.
|
•
|
$135 million declared in dividends to stockholders; and
|
•
|
$56 million for growth investments, including $14 million for business development in the UK and China, $19 million to service a newly operational marine transfer station under our New York City waste transport and disposal agreement, and $22 million for various organic growth investments, which included our Total Ash Processing System ("TAPS") located in Fairless Hills, Pennsylvania.
|
•
|
In February 2020, we reached financial close on the Newhurst Energy Recovery Facility (“Newhurst”), a 350,000 metric ton-per-year, 42 megawatt EfW facility under construction in Leicestershire, England. Newhurst is our third investment in the UK with our strategic partner, GIG. The facility is expected to commence commercial operations in 2023.
|
•
|
In March 2019, we reached financial close on the Rookery South Energy Recovery Facility (“Rookery”), a 545,000 metric ton per-year, 60 megawatt EfW facility under construction in Bedfordshire, England. Rookery is our second investment in the UK with our strategic partner, GIG. Construction commenced during 2019 and Rookery is expected to commence operations in 2022.
|
•
|
In December 2019, we made an equity investment in a venture that signed a concession agreement with Zhao County, China for the construction and operation of a new 1,200 ton-per-day EfW facility. The facility will provide a sustainable waste solution to the county and nearby jurisdictions and will be approximately 200 miles from Beijing. The project is being developed jointly by Covanta and a strategic local partner. Construction is expected to begin in early 2020 with completion in less than two years.
|
•
|
In March 2019, we commenced operations at the East 91st Street Marine Transfer Station ("MTS"). The MTS is the second in a pair of marine transfer stations under a 20-year waste transport and disposal agreement between Covanta and New York City's Department of Sanitation.
|
•
|
We began participation in New Jersey's Basic Generation Services program. Under this program we will sell electricity to The Public Service Electric and Gas Company (PSE&G), a regulated gas and electric utility company serving the state of New Jersey, for a portion of the state’s residential and small business electric load requirements for the next three years. Participating in this program enables us to match our power generation to power demand that is proximate to our facilities at a fixed price.
|
•
|
In January 2019, we commenced construction of our first Total Ash Processing System located in Fairless Hills, Pennsylvania, adjacent to our existing metal processing facility. This technology separates the combined ash from EfW facilities into its component parts enabling increased recycling of small metal fractions and the recovery of aggregate for reuse as construction material while reducing the volume of ash requiring landfill disposal. The plant is entering a start-up and test phase in the first quarter of 2020 and production levels are expected to ramp up through the year.
|
•
|
Our waste contract with the town of Babylon through 2035, with mutual termination rights in 2028;
|
•
|
Our waste contract with Fairfax County through 2026; and
|
•
|
Our waste service agreement with Marion County for one additional year through 2020.
|
•
|
We ceased operations at our EfW facility in Warren County, New Jersey; and
|
•
|
We divested our interests in the following:
|
|
|
Tip Fee
|
|
Service Fee
(Covanta Owned)
|
|
Service Fee
(Client Owned)
|
Number of facilities:
|
|
18
|
|
3
|
|
18
|
Client(s):
|
|
Host community and municipal and commercial waste customers
|
|
Host community, with limited merchant capacity in some cases
|
|
Dedicated to host community exclusively
|
Waste or service
revenue:
|
|
Per ton “tipping fee”
|
|
Fixed fee, with performance incentives and inflation escalation
|
||
Energy revenue:
|
|
Covanta retains 100%
|
|
Share with client
(Covanta retains approximately 20% on average)
|
||
Metals revenue:
|
|
Covanta retains 100%
|
|
Share with client
(Covanta typically retains approximately 50%)
|
||
Operating costs:
|
|
Covanta responsible for all operating costs
|
|
Pass through certain costs to client
(e.g. ash disposal)
|
||
Project debt service:
|
|
Covanta project subsidiary responsible
|
|
Paid by client explicitly as part of service fee
|
|
Client responsible for debt service
|
After service contract
expiration:
|
|
N/A
|
|
Covanta owns the facility; clients have certain rights set forth in contracts; facility converts to Tip Fee or remains Service Fee with new terms
|
|
Client owns the facility; extend with Covanta or tender for new contract
|
|
|
|
|
|
|
Design Capacity
|
|
|
|
|
||||
|
|
|
|
Location
|
|
Waste
Processing
(TPD)
|
|
Gross
Electric
(MW)
|
|
Nature of Interest
|
|
Service Contract Expiration
|
||
|
|
TIP FEE STRUCTURES
|
|
|
|
|
|
|
|
|
|
|
||
1.
|
|
Fairfax County (1)
|
|
Virginia
|
|
3,000
|
|
|
93.0
|
|
|
Owner/Operator
|
|
|
2.
|
|
Southeast Massachusetts (1)(2)
|
|
Massachusetts
|
|
2,700
|
|
|
78.0
|
|
|
Owner/Operator
|
|
|
3.
|
|
Delaware Valley (1)
|
|
Pennsylvania
|
|
2,688
|
|
|
87.0
|
|
|
Owner/Operator
|
|
|
4.
|
|
Hempstead
|
|
New York
|
|
2,505
|
|
|
72.0
|
|
|
Owner/Operator
|
|
|
5.
|
|
Indianapolis (3)
|
|
Indiana
|
|
2,362
|
|
|
6.5
|
|
|
Owner/Operator
|
|
|
6.
|
|
Niagara (3)
|
|
New York
|
|
2,250
|
|
|
50.0
|
|
|
Owner/Operator
|
|
|
7.
|
|
Essex County (1)
|
|
New Jersey
|
|
2,277
|
|
|
66.0
|
|
|
Owner/Operator
|
|
|
8.
|
|
Haverhill (1)
|
|
Massachusetts
|
|
1,650
|
|
|
44.6
|
|
|
Owner/Operator
|
|
|
9.
|
|
Union County (1)
|
|
New Jersey
|
|
1,440
|
|
|
42.1
|
|
|
Lessee/Operator
|
|
|
10.
|
|
Plymouth (1)
|
|
Pennsylvania
|
|
1,216
|
|
|
32.0
|
|
|
Owner/Operator
|
|
|
11.
|
|
Tulsa (1)(3)
|
|
Oklahoma
|
|
1,125
|
|
|
16.8
|
|
|
Owner/Operator
|
|
|
12.
|
|
Camden (1)
|
|
New Jersey
|
|
1,050
|
|
|
21.0
|
|
|
Owner/Operator
|
|
|
13.
|
|
Alexandria/Arlington (1)
|
|
Virginia
|
|
975
|
|
|
22.0
|
|
|
Owner/Operator
|
|
|
14.
|
|
Stanislaus County (1)
|
|
California
|
|
800
|
|
|
22.4
|
|
|
Owner/Operator
|
|
|
15.
|
|
Southeast Connecticut (1)
|
|
Connecticut
|
|
689
|
|
|
17.0
|
|
|
Owner/Operator
|
|
|
16.
|
|
Bristol (1)
|
|
Connecticut
|
|
650
|
|
|
16.3
|
|
|
Owner/Operator
|
|
|
17.
|
|
Lake County
|
|
Florida
|
|
528
|
|
|
14.5
|
|
|
Owner/Operator
|
|
|
18.
|
|
Babylon (4)
|
|
New York
|
|
750
|
|
|
16.8
|
|
|
Owner/Operator
|
|
|
|
|
SERVICE FEE (COVANTA OWNED) STRUCTURES
|
|
|
|
|
|
|
|
|
||||
19.
|
|
Onondaga County
|
|
New York
|
|
990
|
|
|
39.2
|
|
|
Owner/Operator
|
|
2035
|
20
|
|
Huntington
|
|
New York
|
|
750
|
|
|
24.3
|
|
|
Owner/Operator
|
|
2024
|
21.
|
|
Marion County
|
|
Oregon
|
|
550
|
|
|
13.1
|
|
|
Owner/Operator
|
|
2020
|
|
|
SERVICE FEE (CLIENT OWNED) STRUCTURES
|
|
|
|
|
|
|
|
|
||||
22.
|
|
Pinellas County
|
|
Florida
|
|
3,150
|
|
|
75.0
|
|
|
Operator
|
|
2024
|
23.
|
|
Miami-Dade County (1)(2)
|
|
Florida
|
|
3,000
|
|
|
77.0
|
|
|
Operator
|
|
2023
|
24.
|
|
Honolulu (2)(5)
|
|
Hawaii
|
|
2,950
|
|
|
90.0
|
|
|
Operator
|
|
2032
|
25.
|
|
Lee County (5)
|
|
Florida
|
|
1,836
|
|
|
57.3
|
|
|
Operator
|
|
2024
|
26.
|
|
Montgomery County (1)(5)
|
|
Maryland
|
|
1,800
|
|
|
63.4
|
|
|
Operator
|
|
2026
|
27.
|
|
Hillsborough County
|
|
Florida
|
|
1,800
|
|
|
46.5
|
|
|
Operator
|
|
2029
|
28.
|
|
Long Beach
|
|
California
|
|
1,380
|
|
|
36.0
|
|
|
Operator
|
|
2024
|
29.
|
|
York County (1)
|
|
Pennsylvania
|
|
1,344
|
|
|
42.0
|
|
|
Operator
|
|
2035
|
30.
|
|
Palm Beach I
|
|
Florida
|
|
2,178
|
|
|
62.0
|
|
|
Operator
|
|
2029
|
31.
|
|
Palm Beach II
|
|
Florida
|
|
2,740
|
|
|
95.0
|
|
|
Operator
|
|
2035
|
32.
|
|
Lancaster County (1) (3)
|
|
Pennsylvania
|
|
1,200
|
|
|
33.1
|
|
|
Operator
|
|
2032
|
33.
|
|
Pasco County
|
|
Florida
|
|
1,050
|
|
|
29.7
|
|
|
Operator
|
|
2024
|
34
|
|
Harrisburg (1)
|
|
Pennsylvania
|
|
800
|
|
|
20.8
|
|
|
Operator
|
|
2032
|
35.
|
|
Burnaby
|
|
British Columbia, Canada
|
|
800
|
|
|
23.9
|
|
|
Operator
|
|
2025
|
36.
|
|
Huntsville (3)
|
|
Alabama
|
|
690
|
|
|
—
|
|
|
Operator
|
|
2023
|
37.
|
|
Kent County
|
|
Michigan
|
|
625
|
|
|
16.8
|
|
|
Operator
|
|
2023
|
38.
|
|
MacArthur
|
|
New York
|
|
486
|
|
|
12.0
|
|
|
Operator
|
|
2030
|
39.
|
|
Durham-York
|
|
Durham Region, Canada
|
|
480
|
|
|
17.4
|
|
|
Operator
|
|
2036
|
|
|
|
|
SUBTOTAL
|
|
59,254
|
|
|
1,592.5
|
|
|
|
|
|
(1)
|
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
|
(2)
|
These facilities use a refuse-derived fuel technology.
|
(3)
|
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.
|
Facility
|
|
Equivalent Electric Output (MW)
|
Niagara
|
|
66
|
Indianapolis
|
|
52
|
Tulsa
|
|
25
|
Huntsville
|
|
15
|
Lancaster
|
|
5
|
|
|
|
|
|
|
Design Capacity
|
|
|
||||
|
|
Project
|
|
Location
|
|
Waste
Processing
(Metric TPD)
|
|
Gross
Electric
(MW)
|
|
Nature of Interest
|
||
|
|
|||||||||||
1.
|
|
Dublin (1), (2)
|
|
Ireland
|
|
1,968
|
|
|
68.0
|
|
|
50% Owner/Operator
|
2.
|
|
Trezzo
|
|
Italy
|
|
500
|
|
|
18.0
|
|
|
13% Owner/JV Operator
|
3.
|
|
Earls Gate (1), (3)
|
|
UK
|
|
650
|
|
|
21.5
|
|
|
25% Owner (3)
|
4.
|
|
Rookery (1), (4)
|
|
UK
|
|
1,600
|
|
|
67.1
|
|
|
40% Owner/Operator (4)
|
5.
|
|
Zhao County EfW (5)
|
|
China
|
|
1,200
|
|
|
24.0
|
|
|
26% Owner (5)
|
|
|
|
|
SUBTOTAL
|
|
5,918
|
|
|
198.6
|
|
|
|
(1)
|
For additional information see Item 8. Financial Statements and Supplementary Data- Note 3. New Business and Asset Management,-Green Investment Group Limited (“GIG”) Joint Ventures.
|
(2)
|
We have a 50% indirect ownership of Dublin EfW, through our 50/50 joint venture with GIG, Covanta Europe Assets Ltd.
|
(3)
|
Facility currently under construction with operations expected to commence in early 2022. We have a 25% indirect ownership of Earls Gate, through our 50/50 joint venture with GIG, Covanta Green Jersey Assets Ltd., which owns 50% of Earls Gate.
|
(4)
|
Facility currently under construction with operations expected to commence in mid-2022. We have a 40% indirect ownership of Rookery through our 50/50 joint venture with GIG, Covanta Green UK Ltd.
|
(5)
|
Construction on the facility began in early 2020; completion is expected in less than two years. We have a 26% interest in Zhao County through our venture with Longking Energy Development Co. Ltd. For additional information see Item 8. Financial Statements and Supplementary Data- Note 3. New Business and Asset Management,-Zhao County, China Venture and Note 19. Subsequent Events.
|
|
|
As of December 31,
|
||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
||||||||
Consumer Price Index (1)
|
|
2.3
|
%
|
|
1.9
|
%
|
|
2.1
|
%
|
|
2.1
|
%
|
||||
PJM Pricing (Electricity) (2)
|
|
$
|
24.02
|
|
|
$
|
34.75
|
|
|
$
|
28.84
|
|
|
$
|
24.85
|
|
NE ISO Pricing (Electricity) (3)
|
|
$
|
31.20
|
|
|
$
|
44.06
|
|
|
$
|
33.27
|
|
|
$
|
29.74
|
|
Henry Hub Pricing (Natural Gas) (4)
|
|
$
|
2.57
|
|
|
$
|
3.17
|
|
|
$
|
2.99
|
|
|
$
|
2.52
|
|
#1 HMS Pricing (Ferrous Metals) (5)
|
|
$
|
252
|
|
|
$
|
328
|
|
|
$
|
268
|
|
|
$
|
197
|
|
Scrap Metals - Old Cast Aluminum Scrap (6)
|
|
$
|
0.42
|
|
|
$
|
0.57
|
|
|
$
|
0.61
|
|
|
$
|
0.57
|
|
(1)
|
Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the US Department of Labor Bureau of Labor Statistics.
|
(2)
|
Average price per MWh for full year. Pricing for the PJM PSEG Zone is provided by the PJM ISO.
|
(3)
|
Average price per MWh for full year. Pricing for the Mass Hub Zone is provided by the NE ISO.
|
(4)
|
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.
|
(5)
|
Average price per gross ton for full year. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price is published by American Metal Market.
|
(6)
|
Average price per pound for full year. Calculated using the high price of Old Cast Aluminum Scrap ($/lb.) published by American Metal Market.
|
•
|
regional population and overall waste production rates;
|
•
|
the number of waste disposal sites (including principally landfills, other EfW facilities and transfer stations) in existence or in the planning or permitting process;
|
•
|
the available disposal capacity (in terms of tons of waste per day) that can be offered by other regional disposal sites;
|
•
|
the extent to which local governments seek to control transportation and/or disposal of waste within their jurisdictions;
|
•
|
the extent to which local governments and businesses continue to value sustainable approaches to handling of wastes; and
|
•
|
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.
|
•
|
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.
|
•
|
California's Global Warming Solutions Act of 2006 ("AB 32"), seeks to reduce GHG emissions in California to 1990 levels by 2020, through an economy-wide “cap-and-trade” program. EfW facilities were exempt from the cap-and-trade program through the end of 2017 but began incurring a compliance obligation in 2018. The current regulation provides transition assistance to EfW facilities. A resolution passed by the Board of the California Air Resources Board (“CARB”) directs the agency to provide additional transition assistance to EfW facilities in a subsequent revision to the regulation. The specific degree of additional assistance to be provided is uncertain at this time.
|
•
|
In 2019, the New York State legislature passed the Climate Leadership and Community Protection Act which put the state on the path to achieve net zero GHG emissions by 2050. The state is currently beginning the process of developing specific policies and regulations to implement the legislation. Given EfW’s international recognition as a means of reducing GHG emissions from the waste management sector, we expect EfW facilities will have an important role to play in the transition to a net zero economy; however, the exact impact on our business in New York is uncertain at this time.
|
Name and Title
|
Age
|
Experience
|
Stephen J. Jones President and Chief Executive Officer
|
58
|
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.
|
Bradford J. Helgeson Executive Vice President and Chief Financial Officer
|
43
|
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.
|
Michael J. de Castro Executive Vice President, Supply Chain
|
57
|
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.
|
Derek W. Veenhof Executive Vice President, Asset Management
|
53
|
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.
|
Timothy J. Simpson Executive Vice President, General Counsel and Secretary
|
61
|
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.
|
Matthew R. Mulcahy Executive Vice President and Head of Corporate Development
|
56
|
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.
|
Paul E. Stauder Senior Vice President and President, Covanta Environmental Solutions
|
54
|
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.
|
Virginia D. Angilello Senior Vice President and Chief Human Resources Officer
|
50
|
Ms. Angilello was appointed Senior Vice President and Chief Human Resources Officer in 2018. Prior to joining Covanta, she worked for more than 17 years in roles of increasing responsibility at Honeywell International. Most recently, she served as Vice President, Human Resources for Performance Materials & Technologies (PMT), Integrated Supply Chain from 2015 to 2018. PMT was a $10 billion business within Honeywell, with more than 90 manufacturing facilities globally. Prior to this position she gained extensive experience in human resources leadership in both HR business partner and HR operations roles from 2007 - 2014, including having led the Honeywell HR Services, Global Operations teams.
|
Manpreet Grewal Vice President and Chief Accounting Officer
|
41
|
Vice President and Chief Accounting Officer since 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 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.
|
•
|
supply or transportation interruptions;
|
•
|
the breakdown, failure or unplanned maintenance or repair of equipment or processes;
|
•
|
difficulty or inability to find suitable replacement parts for equipment;
|
•
|
the unavailability of sufficient quantities of waste or fuel;
|
•
|
fluctuations in the heating value of the waste we use for fuel at our EfW facilities;
|
•
|
failure or inadequate performance by subcontractors;
|
•
|
disruption in the transmission of electricity generated;
|
•
|
labor disputes and work stoppages;
|
•
|
unforeseen engineering and environmental problems;
|
•
|
unanticipated cost overruns;
|
•
|
weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism; and
|
•
|
the exercise of the power of eminent domain.
|
•
|
making it difficult for us to meet our payment and other obligations under our outstanding indebtedness;
|
•
|
limiting our ability to obtain additional financing to fund working capital, capital expenditures, new projects, acquisitions and other general corporate purposes;
|
•
|
subjecting us to the risk of increased sensitivity to interest rate increases on indebtedness under our credit facilities;
|
•
|
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
|
•
|
placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
|
•
|
the continued operation and maintenance of our facilities, consistent with historical performance levels;
|
•
|
maintenance or enhancement of revenue from renewals or replacement of existing contracts and from new contracts to expand existing facilities or operate additional facilities;
|
•
|
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;
|
•
|
the continued availability of the benefits of our net operating loss carryforwards; and
|
•
|
general economic, financial, competitive, legislative, regulatory and other factors.
|
•
|
difficulties in identifying, obtaining and permitting suitable sites for new projects;
|
•
|
the inaccuracy of our assumptions with respect to the cost of and schedule for completing construction;
|
•
|
difficulty, delays or inability to obtain financing for a project on acceptable terms;
|
•
|
delays in deliveries of, or increases in the prices of, equipment sourced from other countries;
|
•
|
the unavailability of sufficient quantities of waste or other fuels for startup;
|
•
|
permitting and other regulatory issues, license revocation and changes in legal requirements;
|
•
|
labor disputes and work stoppages;
|
•
|
unforeseen engineering and environmental problems;
|
•
|
interruption of existing operations;
|
•
|
unanticipated cost overruns or delays;
|
•
|
weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism; and
|
•
|
reliance on third party contractors for performance.
|
•
|
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.
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
(In millions, except per share amounts)
|
||||||||||||||||||
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenue
|
|
$
|
1,870
|
|
|
$
|
1,868
|
|
|
$
|
1,752
|
|
|
$
|
1,699
|
|
|
$
|
1,645
|
|
Operating expense
|
|
$
|
1,780
|
|
|
$
|
1,805
|
|
|
$
|
1,651
|
|
|
$
|
1,590
|
|
|
$
|
1,536
|
|
Operating income
|
|
$
|
90
|
|
|
$
|
63
|
|
|
$
|
101
|
|
|
$
|
109
|
|
|
$
|
109
|
|
Net income (loss) (1)
|
|
$
|
10
|
|
|
$
|
152
|
|
|
$
|
57
|
|
|
$
|
(4
|
)
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings (loss) per share: (1)
|
||||||||||||||||||||
Basic
|
|
$
|
0.07
|
|
|
$
|
1.17
|
|
|
$
|
0.44
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.07
|
|
|
$
|
1.15
|
|
|
$
|
0.44
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||||||
Basic
|
|
131
|
|
|
130
|
|
|
130
|
|
|
129
|
|
|
132
|
|
|||||
Diluted
|
|
133
|
|
|
132
|
|
|
131
|
|
|
129
|
|
|
133
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividend declared per share
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
(In millions)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
37
|
|
|
$
|
58
|
|
|
$
|
46
|
|
|
$
|
84
|
|
|
$
|
94
|
|
Property, plant and equipment, net
|
|
$
|
2,451
|
|
|
$
|
2,514
|
|
|
$
|
2,606
|
|
|
$
|
3,024
|
|
|
$
|
2,690
|
|
Assets held for sale(1)
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
653
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
3,715
|
|
|
$
|
3,843
|
|
|
$
|
4,441
|
|
|
$
|
4,284
|
|
|
$
|
4,234
|
|
Long-term debt (incl. current portion)
|
|
$
|
2,383
|
|
|
$
|
2,342
|
|
|
$
|
2,349
|
|
|
$
|
2,252
|
|
|
$
|
2,263
|
|
Project debt (incl. current portion)
|
|
$
|
133
|
|
|
$
|
152
|
|
|
$
|
174
|
|
|
$
|
383
|
|
|
$
|
198
|
|
Liabilities held for sale(2)
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
540
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
3,339
|
|
|
$
|
3,356
|
|
|
$
|
4,014
|
|
|
$
|
3,815
|
|
|
$
|
3,594
|
|
Total stockholders' equity
|
|
$
|
376
|
|
|
$
|
487
|
|
|
$
|
427
|
|
|
$
|
469
|
|
|
$
|
638
|
|
(1)
|
Amounts as of December 31, 2019 and 2018 are included in Prepaid expenses and other current assets on the Consolidated Balance Sheets.
|
(2)
|
Amounts as of December 31, 2019 and 2018 are included in Other liabilities on the Consolidated Balance Sheets.
|
•
|
“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,
|
|
Variance
Increase (Decrease) |
||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
|
|
(In millions)
|
||||||||||
OPERATING REVENUE:
|
|
|
|
|
|
|
||||||
Waste and service revenue
|
|
$
|
1,393
|
|
|
$
|
1,327
|
|
|
$
|
66
|
|
Energy revenue
|
|
329
|
|
|
343
|
|
|
(14
|
)
|
|||
Recycled metals revenue
|
|
86
|
|
|
95
|
|
|
(9
|
)
|
|||
Other operating revenue
|
|
62
|
|
|
103
|
|
|
(41
|
)
|
|||
Total operating revenue
|
|
1,870
|
|
|
1,868
|
|
|
2
|
|
|||
OPERATING EXPENSE:
|
|
|
|
|
|
|
||||||
Plant operating expense
|
|
1,371
|
|
|
1,321
|
|
|
50
|
|
|||
Other operating expense
|
|
64
|
|
|
65
|
|
|
(1
|
)
|
|||
General and administrative expense
|
|
122
|
|
|
115
|
|
|
7
|
|
|||
Depreciation and amortization expense
|
|
221
|
|
|
218
|
|
|
3
|
|
|||
Impairment charges
|
|
2
|
|
|
86
|
|
|
(84
|
)
|
|||
Total operating expense
|
|
1,780
|
|
|
1,805
|
|
|
(25
|
)
|
|||
Operating income
|
|
$
|
90
|
|
|
$
|
63
|
|
|
$
|
27
|
|
|
|
Year Ended December 31,
|
|
Variance
|
||||||||
In millions:
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
EfW tip fees
|
|
$
|
638
|
|
|
$
|
624
|
|
|
$
|
14
|
|
EfW service fees
|
|
466
|
|
|
424
|
|
|
42
|
|
|||
Environmental services
|
|
140
|
|
|
141
|
|
|
(1
|
)
|
|||
Municipal services
|
|
231
|
|
|
207
|
|
|
24
|
|
|||
Other revenue
|
|
34
|
|
|
38
|
|
|
(4
|
)
|
|||
Intercompany
|
|
(116
|
)
|
|
(107
|
)
|
|
(9
|
)
|
|||
Total waste and service revenue
|
|
$
|
1,393
|
|
|
$
|
1,327
|
|
|
$
|
66
|
|
|
|
Year Ended December 31,
|
|
Variance
|
|||||
EfW facilities - Tons (1) (in millions):
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
|||
Tip fee - contracted
|
|
8.8
|
|
|
8.9
|
|
|
(0.1
|
)
|
Tip fee - uncontracted
|
|
2.0
|
|
|
2.1
|
|
|
(0.1
|
)
|
Service fee
|
|
10.7
|
|
|
9.5
|
|
|
1.2
|
|
Total Tons
|
|
21.5
|
|
|
20.5
|
|
|
1.0
|
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
|||||||||||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
|||||||||||||||
$ in millions:
|
|
Revenue (2)
|
|
Volume(2)(3)
|
|
Revenue (2)
|
|
Volume(2)(3)
|
|
Revenue
|
|
Volume
|
|||||||||
Energy sales (1)
|
|
$
|
273
|
|
|
|
|
$
|
291
|
|
|
|
|
$
|
(18
|
)
|
|
|
|
||
Capacity
|
|
44
|
|
|
|
|
52
|
|
|
|
|
(8
|
)
|
|
|
|
|||||
Other revenue
|
|
12
|
|
|
|
|
—
|
|
|
|
|
12
|
|
|
—
|
|
|||||
Total energy
|
|
$
|
329
|
|
|
6.4
|
|
|
$
|
343
|
|
|
6.5
|
|
|
$
|
(14
|
)
|
|
(0.1
|
)
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Metal Revenue
(in millions)
|
|
Tons Sold
(in thousands) (1) |
|
Tons Recovered
(in thousands) |
||||||||||||||
Ferrous Metal
|
$
|
46
|
|
|
$
|
58
|
|
|
370
|
|
|
333
|
|
|
424
|
|
|
424
|
|
Non-Ferrous Metal
|
40
|
|
|
37
|
|
|
34
|
|
|
31
|
|
|
51
|
|
|
49
|
|
||
Total
|
$
|
86
|
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Variance
|
||||||||
In millions:
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
Plant maintenance (1)
|
|
$
|
308
|
|
|
$
|
299
|
|
|
$
|
9
|
|
All other
|
|
1,063
|
|
|
1,023
|
|
|
40
|
|
|||
Plant operating expense
|
|
$
|
1,371
|
|
|
$
|
1,321
|
|
|
$
|
50
|
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
|
|
(In millions)
|
||||||||||
Interest expense
|
|
$
|
(143
|
)
|
|
$
|
(145
|
)
|
|
$
|
2
|
|
Gain on sale of business
|
|
49
|
|
|
217
|
|
|
(168
|
)
|
|||
Loss on extinguishment of debt
|
|
—
|
|
|
(15
|
)
|
|
15
|
|
|||
Other income (expense), net
|
|
1
|
|
|
(3
|
)
|
|
4
|
|
|||
Total other (expense) income
|
|
$
|
(93
|
)
|
|
$
|
54
|
|
|
$
|
(147
|
)
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(In millions, except percentages)
|
||||||||||
Income tax benefit
|
|
$
|
(7
|
)
|
|
$
|
(29
|
)
|
|
$
|
22
|
|
Effective income tax rate
|
|
264
|
%
|
|
(25
|
)%
|
|
|
|
|
Year Ended December 31,
|
|
Variance
Increase (Decrease)
|
||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(In millions, except per share amounts)
|
||||||||||
Net Income:
|
|
$
|
10
|
|
|
$
|
152
|
|
|
$
|
(142
|
)
|
|
|
|
|
|
|
|
||||||
Earnings Per Share:
|
||||||||||||
Weighted Average Shares:
|
|
|
|
|
|
|
|
|||||
Basic:
|
|
131
|
|
|
130
|
|
|
1
|
|
|||
Diluted:
|
|
133
|
|
|
132
|
|
|
1
|
|
|||
Earnings Per Share:
|
|
|
|
|
|
|
||||||
Basic:
|
|
$
|
0.07
|
|
|
$
|
1.17
|
|
|
$
|
(1.10
|
)
|
Diluted:
|
|
$
|
0.07
|
|
|
$
|
1.15
|
|
|
$
|
(1.08
|
)
|
|
|
|
|
|
|
|
||||||
Cash Dividend Declared Per Share (1)
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
—
|
|
|
|
Year Ended December 31,
|
||||||
Adjusted EBITDA
|
|
2019
|
|
2018
|
||||
Net income
|
|
$
|
10
|
|
|
$
|
152
|
|
Depreciation and amortization expense
|
|
221
|
|
|
218
|
|
||
Interest expense
|
|
143
|
|
|
145
|
|
||
Income tax benefit
|
|
(7
|
)
|
|
(29
|
)
|
||
Impairment charges (a)
|
|
2
|
|
|
86
|
|
||
Net gain on sale of businesses and investments (b)
|
|
(49
|
)
|
|
(217
|
)
|
||
Loss on extinguishment of debt (c)
|
|
—
|
|
|
15
|
|
||
Property insurance recoveries, net
|
|
—
|
|
|
(18
|
)
|
||
Loss on asset sales
|
|
4
|
|
|
1
|
|
||
Capital type expenditures at client owned facilities (e)
|
|
34
|
|
|
37
|
|
||
Accretion expense
|
|
2
|
|
|
2
|
|
||
Business development and transaction costs
|
|
2
|
|
|
3
|
|
||
Severance and reorganization costs (d)
|
|
13
|
|
|
5
|
|
||
Non-cash compensation expense
|
|
25
|
|
|
24
|
|
||
Adjustments to reflect Adjusted EBITDA from unconsolidated investments
|
|
25
|
|
|
23
|
|
||
Other (f)
|
|
3
|
|
|
10
|
|
||
Adjusted EBITDA
|
|
$
|
428
|
|
|
$
|
457
|
|
(a)
|
During the year ended December 31, 2018, we identified indicators of impairment associated with certain of our EfW facilities and recorded a non-cash impairment charge of $86 million, to reduce the carrying value of the facilities to their estimated fair value.
|
(b)
|
During the year ended December 31, 2019, we recorded a $56 million gain related to the Rookery South Energy Recovery Facility development project and an $11 million loss related to the divestiture of our Springfield and Pittsfield EfW facilities.
|
(c)
|
During the year ended December 31, 2018, we recorded a $3 million loss related to the refinancing of our tax-exempt bonds and a $12 million loss related to the redemption of our 6.375% Senior Notes due 2022.
|
(d)
|
During the year ended December 31, 2019, we recorded $13 million of costs related to our ongoing asset portfolio optimization efforts, early retirement program, and certain organizational restructuring activities.
|
(e)
|
Adjustment for capital equipment related expenditures at our service fee operated facilities which are capitalized at facilities that we own.
|
(f)
|
Includes certain other items that are added back under the definition of Adjusted EBITDA in Covanta Energy, LLC's credit agreement.
|
|
|
Year Ended December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Cash flow provided by operating activities
|
|
$
|
226
|
|
|
$
|
238
|
|
Cash paid for interest, net of capitalized interest
|
|
152
|
|
|
136
|
|
||
Cash paid for taxes
|
|
5
|
|
|
2
|
|
||
Capital type expenditures at service fee operated facilities (a)
|
|
34
|
|
|
37
|
|
||
Equity in net income from unconsolidated investments
|
|
6
|
|
|
6
|
|
||
Adjustments to reflect Adjusted EBITDA from unconsolidated investments
|
|
25
|
|
|
23
|
|
||
Dividends from unconsolidated investments
|
|
(9
|
)
|
|
(13
|
)
|
||
Adjustment for working capital and other
|
|
(11
|
)
|
|
28
|
|
||
Adjusted EBITDA
|
|
$
|
428
|
|
|
$
|
457
|
|
(a)
|
See Adjusted EBITDA - Note (f) above.
|
•
|
Improving waste tip fee prices and growth in volumes of profiled waste;
|
•
|
Increased volumes of waste processed, metals recovered and electricity sold; and
|
•
|
The full year impact of the operations of the New York City Marine Transfer Station
|
•
|
The impact of lower market prices for commodities including ferrous scrap and electricity;
|
•
|
Increasing wages and benefits to support growth throughout our business; and
|
•
|
A higher level of planned maintenance capital expenditures
|
|
|
As of December 31, 2019
|
||
Cash
|
|
$
|
37
|
|
Unutilized capacity under the Revolving Credit Facility
|
|
489
|
|
|
Total cash and unutilized capacity under the Revolving Credit Facility
|
|
$
|
526
|
|
•
|
In December 2019, we entered into an agreement whereby we will regularly sell certain receivables on a revolving basis to third-party financial institutions (the “Purchasers”) up to an aggregate purchase limit of $100 million (the “Receivables Purchase Agreement or “RPA”). Transfers under the RPA meet the requirements to be accounted for as sales in accordance with the Transfers and Servicing topic of FASB Accounting Standards Codification. We receive a discounted purchase price for each receivable sold under the RPA and will continue to service and administer the subject receivables.
|
•
|
In August 2019, we entered into a loan agreement with the Pennsylvania Economic Development Financing Authority under which they agreed to issue $50 million in aggregate principal amount of tax-exempt Solid Waste Disposal Bonds for the purpose of funding qualified capital expenditures at certain of our facilities in Pennsylvania and paying related costs of issuance.
|
•
|
To reduce our exposure to fluctuations in cash flows due to changes in variable interest rates paid on our direct borrowings under the Credit Facilities, during the year ended December 31, 2019, we entered into pay-fixed, receive-variable swap agreements on $150 million notional amount of our variable rate debt under the Credit Facilities.
|
•
|
$158 million for property, plant and equipment, including $115 million for maintenance capital expenditures and $41 million for organic growth; offset by
|
•
|
$22 million cash received upon the sale of a portion of our interests in the construction phase Rookery EfW facility to our joint venture partner GIG.
|
•
|
$206 million for property, plant and equipment, including $143 million for maintenance capital expenditures and $59 million for organic growth; and
|
•
|
$46 million for the acquisition of the Palm Beach Resource Recovery Corporation; offset by
|
•
|
$98 million cash received upon the sale of a portion of our Dublin EfW facility to our joint venture partner GIG.
|
•
|
$134 million of dividends paid to shareholders; and
|
•
|
$29 million of net repayments on our Revolving Credit Facility; and
|
•
|
$18 million of repayments of project debt; offset by
|
•
|
$50 million of proceeds from tax-exempt bonds; and
|
•
|
$30 million of proceeds from equipment financing arrangements.
|
•
|
$233 million of net repayments on our Revolving Credit Facility;
|
•
|
$134 million dividends paid to shareholders; and
|
•
|
$23 million of repayments of project debt; partially funded by
|
•
|
Approximately $200 million of net proceeds from the refinancing of Covanta Energy's previous $200 million Term Loan with a new $400 million Term Loan; and
|
•
|
$30 million of proceeds from the issuance of tax-exempt bonds.
|
|
|
Year Ended December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Net cash provided by operating activities
|
|
$
|
226
|
|
|
$
|
238
|
|
Add: Changes in restricted funds - operating (a)
|
|
20
|
|
|
4
|
|
||
Less: Maintenance capital expenditures (b)
|
|
(106
|
)
|
|
(142
|
)
|
||
Free Cash Flow
|
|
$
|
140
|
|
|
$
|
100
|
|
(a)
|
Adjustment for the impact of the adoption of ASU 2016-18 effective January 1, 2018. As a result of adoption, the statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, changes in restricted funds are eliminated in arriving at net cash, cash equivalents and restricted funds provided by operating activities.
|
(b)
|
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.
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Domestic
|
$
|
17
|
|
|
$
|
19
|
|
International
|
20
|
|
|
39
|
|
||
Total Cash and Cash Equivalents
|
$
|
37
|
|
|
$
|
58
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Corporate Debt:
|
|
|
||||||
Revolving credit facility
|
|
$
|
183
|
|
|
$
|
212
|
|
Term loan due
|
|
385
|
|
|
395
|
|
||
Senior notes
|
|
1,200
|
|
|
1,200
|
|
||
Tax-exempt bonds
|
|
544
|
|
|
494
|
|
||
Equipment financing arrangements
|
|
85
|
|
|
59
|
|
||
Finance leases(1)
|
|
6
|
|
|
5
|
|
||
Total corporate debt (including current portion)
|
|
$
|
2,403
|
|
|
$
|
2,365
|
|
|
|
|
|
|
||||
Project Debt:
|
|
|
|
|
||||
Domestic project debt - service fee facilities
|
|
$
|
47
|
|
|
$
|
58
|
|
Domestic project debt - tip fee facilities
|
|
—
|
|
|
3
|
|
||
Union County EfW facility finance lease
|
|
84
|
|
|
89
|
|
||
Total project debt (including current portion)
|
|
131
|
|
|
150
|
|
||
Total Debt Outstanding
|
|
$
|
2,534
|
|
|
$
|
2,515
|
|
(1)
|
Excludes Union County EfW Facility finance lease which is presented within project debt in our consolidated balance sheets.
|
(In millions)
|
|
Total
|
|
Payments Due by Period
|
||||||||||||||||
2020
|
|
2021 and 2022
|
|
2023 and 2024
|
|
2025 and Beyond
|
||||||||||||||
Project debt (1)
|
|
$
|
47
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
37
|
|
Long-term debt (1)
|
|
2,312
|
|
|
10
|
|
|
20
|
|
|
973
|
|
|
1,309
|
|
|||||
Equipment financing arrangements (1)
|
|
85
|
|
|
7
|
|
|
14
|
|
|
15
|
|
|
49
|
|
|||||
Finance leases(2)
|
|
90
|
|
|
7
|
|
|
14
|
|
|
15
|
|
|
54
|
|
|||||
Uncertainty in income tax obligations (3)
|
|
40
|
|
|
1
|
|
|
1
|
|
|
15
|
|
|
23
|
|
|||||
Interest payments
|
|
1,285
|
|
|
139
|
|
|
274
|
|
|
217
|
|
|
655
|
|
|||||
Operating leases
|
|
68
|
|
|
8
|
|
|
15
|
|
|
12
|
|
|
33
|
|
|||||
Retirement plan obligations (4)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||
Total obligations
|
|
$
|
3,929
|
|
|
$
|
174
|
|
|
$
|
342
|
|
|
$
|
1,252
|
|
|
$
|
2,161
|
|
(1)
|
For a detailed description of the terms of our debt instruments, see Item 8. Financial Statements And Supplementary Data — Note 15. Consolidated Debt.
|
(2)
|
For a detailed description of the terms of our debt instruments, see Item 8. Financial Statements And Supplementary Data — Note 16. Leases.
|
(3)
|
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.
|
(4)
|
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, 2019.
|
Letters of credit issued under the Revolving Credit Facility
|
|
$
|
228
|
|
Letters of credit - other
|
|
40
|
|
|
Surety bonds
|
|
137
|
|
|
Total other commitments — net
|
|
$
|
405
|
|
|
|
Total Project Debt
|
|
Percentage Ownership
|
|
Proportionate Unconsolidated Project Debt
|
|
Project Stage
|
||||
Dublin EfW (Ireland) (1)
|
|
$
|
447
|
|
|
50%
|
|
$
|
224
|
|
|
Operational
|
Earls Gate (UK) (2)
|
|
31
|
|
|
25%
|
|
8
|
|
|
Under construction
|
||
Rookery (UK) (3)
|
|
43
|
|
|
40%
|
|
17
|
|
|
Under construction
|
||
Zhao County EfW (China) (4)
|
|
—
|
|
|
26%
|
|
—
|
|
|
Under construction
|
||
Total
|
|
$
|
521
|
|
|
|
|
$
|
249
|
|
|
|
(1)
|
We have a 50% indirect ownership of Dublin EfW, through our 50/50 joint venture with GIG, Covanta Europe Assets Ltd.
|
(2)
|
We have a 25% indirect ownership of Earls Gate, through our 50/50 joint venture with GIG, Covanta Green Jersey Assets Ltd., which owns 50% of Earls Gate. The total estimated project cost is £210 million ($277 million), £147 million ($194 million) is financed through non-recourse project-based debt.
|
(3)
|
We have a 40% indirect ownership of Rookery through our 50/50 joint venture with GIG, Covanta Green UK Ltd. The total estimated project cost is £457 million ($603 million), £310 million ($409 million) is financed through non-recourse project-based debt.
|
(4)
|
We have a 26% interest in Zhao County through our venture with Longking Energy Development Co. Ltd. The total estimated project cost is RMB 650 million ($93 million), RMB 455 million ($65 million) is financed through non-recourse project debt.
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions
|
Revenue and Expense Recognition
The Company recognizes revenue in accordance with the ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. Revenue is recognized by applying the five steps described below:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
|
|
When a performance obligation is satisfied over time, the output or input method may be used to determine an appropriate method of progress. The Output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. The input method utilizes the entities inputs towards the satisfaction of a performance obligation (for example, costs incurred). Both methods may include estimates within the transaction price, contracts with customers may contain different types of variable consideration that we estimate through probability based approaches. There are certain constraining factors relating to Variable consideration that may preclude us from booking revenue in order to prevent over estimating revenue. Determining whether a factor is constrained requires judgment.
|
|
There is a degree of uncertainty that exists in determining the variable component of consideration in a contract. A significant revenue reversal is not expected but amounts recognized for revenue are adjusted based on actual performance obligations delivered which will cause fluctuations in operating income recognized.
Further estimates may change on long term construction contracts based on better information becoming available which can cause fluctuations in revenue and operating income.
|
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 use the discounted cash flow method to estimate the value of many of our assets, which entails 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
|
Equity Method Investments
We evaluate our equity investments to determine if we have the ability to exercise significant influence over the entity but not control, generally assumed to be 20%-50% ownership. Under the equity method, original investments are recorded at cost and adjusted by our share of earnings or losses of these companies. Distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach.
|
|
The determination and degree of our ability to control, or exert significant influence over, an entity involves the use of judgment. The consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement, through holding interests directly or indirectly in an entity, would give us the ability to exercise significant influence over an entity but not control.
|
|
Subsequent changes to the interests of the entity through equity ownership levels or otherwise may require a reassessment of our conclusions of whether we have the ability to exercise significant influence over the entity but not control. If upon a reassessment event we were determined to control the entities, consolidation would be required. Summarized financial information of equity method investments is included in Item 8. Financial Statements And Supplementary Data — Note 11. Equity Method Investments.
|
Long-lived 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 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 changes in circumstances may occur that require another assessment in future periods based on cash flows and discount rates in effect at that time.
|
|
|
|
|
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions |
Goodwill
As of December 31, 2019, we had $321 million of goodwill recorded in our one reportable segment, which is comprised of two reporting units, North America EfW and CES (see Item 8. Financial Statements And Supplementary Data — Note 14. Intangible Assets and Goodwill). We evaluate our goodwill annually and when an event occurs or circumstances change that could 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).
|
|
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 units for impairment assessments, we make assumptions regarding the fair value which is dependent on estimates of future cash flows, discount rates, and other factors.
|
|
We performed the required annual impairment review of our recorded goodwill for our two reporting units as of October 1, 2019. We performed a qualitative assessment for our North America EfW reporting unit and concluded that the fair value of this reporting unit continued to substantially exceed the carrying value as of the testing date.
For our CES reporting unit, we bypassed the qualitative assessment and proceeded directly to the first step of the goodwill impairment test. We determined an estimate of the fair value of this reporting unit by combining both the income and market approaches. The market approach was based on current trading multiples of EBITDA for companies operating in businesses similar to our CES reporting unit. In performing the test under the income approach, we utilized a discount rate of 10% and a long-term terminal growth rate of 2.5% beyond our planning period. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical performance.
Based on the results of the test performed, we determined that the estimated fair value of the CES reporting unit exceeded the carrying value by 5%; therefore, we did not record a goodwill impairment charge for the year ended December 31, 2019.
Given the narrow margin, we performed a sensitivity analysis on the above assumptions which determined that, while holding the market approach constant, an increase in the discount rate of 80 bps to 10.8% or a decrease in the long-term growth rate of 120 bps to 1.3% would result in impairment.
While we believe the assumptions used were reasonable and commensurate with the views of a market participant, changes in key assumptions, including increasing the discount rate, lowering forecasts for revenue, operating margin or lowering the long-term growth rate for our CES reporting unit, could result in a future impairment.
The goodwill recorded for our CES reporting unit totaled $46 million
as of December 31, 2019, and resulted from previously acquired materials processing facilities that are specially designed to process, treat, recycle, and dispose of solid and liquid wastes.
|
Policy
|
|
Judgments and estimates
|
|
Effect if actual results differ
from assumptions
|
Deferred Tax Assets
As described in Item 8. Financial Statements And Supplementary Data — Note 9. Income Taxes, we have recorded a deferred tax asset related to our NOLs.
The NOLs will expire in various amounts beginning on December 31, 2033 through December 31, 2037, 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 a valuation allowance of approximately $65 million to offset our deferred tax assets related to NOLs and our tax credit carryforward balance.
The amount was estimated 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.
|
|
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.
|
|
|
|
Page
|
|
Rookery Equity Method Investment - Variable Interest Model
|
Description of the Matter
|
As disclosed in Note 3 to the consolidated financial statements, in March 2019, the 50/50 jointly owned and governed entity (“Covanta Green”) between Covanta and Green Investment Group was used to fund an 80% investment in the Rookery project, an energy from waste facility being built in Bedfordshire, England (the “Facility”). The Company provides technical oversight and became a service provider for the Facility. The Company accounts for its 50% equity interest in Covanta Green under the equity method of accounting. For the year ended December 31, 2019, the Company recorded a $56 million gain on sale of business and investments which is included in the “Gain (loss) on sale of assets” in the consolidated statement of operations.
Auditing the assessment of whether the Company has a controlling financial interest in Covanta Green, which was determined to be a variable interest entity, was complex and required significant judgment. Management’s assessment of whether Covanta is the primary beneficiary under the variable interest model is highly judgmental and could have a significant effect on the accounting for the Company’s 50% equity interest in Covanta Green and the gain recorded in the consolidated statement of operations.
|
|
|
How We Addressed the Matter in Our Audit
|
We tested the controls over the Company’s evaluation of the accounting conclusions with respect to the variable interest model.
Our audit procedures included, among others, evaluating whether Covanta is the primary beneficiary of Covanta Green, which was determined to be a variable interest entity. We read and evaluated the key elements of all arrangements between Covanta and the entities involved in the transaction and evaluated the underlying legal and governance documents to determine whether Covanta has a controlling financial interest in Covanta Green. We made inquiries of management, obtained an understanding of and evaluated the business purpose of Covanta Green and the activities that most significantly impact the economic performance of the entity. For example, we evaluated how decisions about the most significant activities are made and the party or parties that make them, including evaluating whether Covanta’s service agreement with the Facility resulted in Covanta’s power to direct the activities that most significantly impact performance or the obligation to absorb expected losses.
|
|
|
|
Income Taxes - Uncertain Tax Positions
|
Description of the Matter
|
As discussed in Note 9 of the consolidated financial statements, the Company has recorded a liability of $40 million related to uncertain tax positions as of December 31, 2019. The Company conducts business in the US, various foreign countries and numerous states and is therefore subject to US federal and state income taxes, as well as income taxes of multiple foreign jurisdictions. Due to the multinational and multistate operations of the Company, changes in global, including US federal and state, income tax laws and regulations result in complexity in the accounting for and monitoring of income taxes including the provision for uncertain tax positions.
Auditing management’s identification and measurement of uncertain tax positions involved complex analysis and audit judgment related to the evaluation of the income tax consequences of significant business transactions, including legal entity rationalization and restructurings, and changes in income tax law and regulations in various jurisdictions, which is often subject to interpretation.
|
|
|
How We Addressed the Matter in Our Audit
|
We tested the controls over the Company’s process to account for uncertain tax positions, including management’s review of the related tax technical analyses. For example, we tested controls over management’s identification and assessment of changes to tax laws and significant transactions, which may result in uncertain tax positions.
We performed audit procedures, among others, to evaluate the Company’s assumptions and underlying data used to develop its uncertain tax positions and related unrecognized income tax benefit amounts by jurisdiction. We obtained an understanding of the Company’s legal structure through our review of organizational charts and related legal documents. We further considered the income tax consequences of significant transactions, including internal restructurings, and assessed management’s interpretation of those changes under the relevant jurisdiction’s tax law. Due to the complexity of tax law, we involved our income tax professionals to assess the Company’s interpretation of and compliance with tax laws in these jurisdictions, as well as to identify tax law changes. In certain circumstances, we involved our income tax professionals to evaluate the technical merits of the Company’s tax positions, including assessing the Company’s correspondence with the relevant tax authorities and evaluating income tax opinions or other third-party advice obtained by the Company. We also evaluated the Company’s income tax disclosures included in Note 9 to the consolidated financial statements in relation to these matters.
|
|
|
|
Impairment Evaluation of Goodwill - CES Reporting Unit
|
Description of the Matter
|
As discussed in Note 1 of the consolidated financial statements, goodwill is not amortized but rather is tested for impairment at least annually at the reporting unit level. The Company’s goodwill is assigned to its reporting units as of the initial acquisition date. In 2019, the Company performed a quantitative goodwill impairment test on its CES reporting unit, which had goodwill of $46 million as of December 31, 2019. The Company’s quantitative goodwill impairment test compares the fair value of the reporting unit to the reporting unit’s carrying value.
Auditing management’s goodwill impairment test is highly judgmental due to the subjectivity in determining the fair value of the reporting unit. Significant assumptions include future cash flow projections and the discount rate applied to those cash flows, the long-term terminal growth rate, and market proxies. These assumptions are highly subjective and involved significant judgment.
|
|
|
How We Addressed the Matter in Our Audit
|
We tested the controls over the Company’s goodwill impairment process, including management’s review of significant assumptions used in the fair value analysis.
Our audit procedures included, among others, assessing the suitability and application of the valuation methodologies and evaluating the significant assumptions and underlying data used by the Company in its analysis. For example, we compared the significant assumptions used by management to current industry and economic trends, the Company’s business model and other relevant factors. We tested the projected financial information used in the analysis and evaluated the consistency and appropriateness of the discount rates and long-term terminal growth rates used in the assessment. We also tested the market approach by evaluating the market multiple proxies in management’s analysis. We involved a valuation specialist to assist us in assessing the valuation methodologies and testing the significant assumptions used in the fair value models. We also performed sensitivity analyses of significant assumptions to evaluate the changes in fair value of the reporting unit resulting from changes in these assumptions.
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(In millions, except per share amounts)
|
||||||||||
OPERATING REVENUE:
|
|
|
|
|
|
|
||||||
Waste and service revenue
|
|
$
|
1,393
|
|
|
$
|
1,327
|
|
|
$
|
1,231
|
|
Energy revenue
|
|
329
|
|
|
343
|
|
|
334
|
|
|||
Recycled metals revenue
|
|
86
|
|
|
95
|
|
|
82
|
|
|||
Other operating revenue
|
|
62
|
|
|
103
|
|
|
105
|
|
|||
Total operating revenue
|
|
1,870
|
|
|
1,868
|
|
|
1,752
|
|
|||
OPERATING EXPENSE:
|
|
|
|
|
|
|
||||||
Plant operating expense
|
|
1,371
|
|
|
1,321
|
|
|
1,271
|
|
|||
Other operating expense, net
|
|
64
|
|
|
65
|
|
|
51
|
|
|||
General and administrative expense
|
|
122
|
|
|
115
|
|
|
112
|
|
|||
Depreciation and amortization expense
|
|
221
|
|
|
218
|
|
|
215
|
|
|||
Impairment charges
|
|
2
|
|
|
86
|
|
|
2
|
|
|||
Total operating expense
|
|
1,780
|
|
|
1,805
|
|
|
1,651
|
|
|||
Operating income
|
|
90
|
|
|
63
|
|
|
101
|
|
|||
OTHER (EXPENSE) INCOME
|
|
|
|
|
|
|
||||||
Interest expense
|
|
(143
|
)
|
|
(145
|
)
|
|
(147
|
)
|
|||
Net gain (loss) on sale of business and investments
|
|
49
|
|
|
217
|
|
|
(6
|
)
|
|||
Loss on extinguishment of debt
|
|
—
|
|
|
(15
|
)
|
|
(84
|
)
|
|||
Other income (expense), net
|
|
1
|
|
|
(3
|
)
|
|
1
|
|
|||
Total other (expense) income
|
|
(93
|
)
|
|
54
|
|
|
(236
|
)
|
|||
(Loss) income before income tax benefit and equity in net income from unconsolidated investments
|
|
(3
|
)
|
|
117
|
|
|
(135
|
)
|
|||
Income tax benefit
|
|
7
|
|
|
29
|
|
|
191
|
|
|||
Equity in net income from unconsolidated investments
|
|
6
|
|
|
6
|
|
|
1
|
|
|||
NET INCOME
|
|
$
|
10
|
|
|
$
|
152
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
||||||
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
131
|
|
|
130
|
|
|
130
|
|
|||
Diluted
|
|
133
|
|
|
132
|
|
|
131
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Earnings Per Share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.07
|
|
|
$
|
1.17
|
|
|
$
|
0.44
|
|
Diluted
|
|
$
|
0.07
|
|
|
$
|
1.15
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
||||||
Cash Dividend Declared Per Share:
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(In millions)
|
||||||||||
Net income
|
|
$
|
10
|
|
|
$
|
152
|
|
|
$
|
57
|
|
Foreign currency translation
|
|
(5
|
)
|
|
(2
|
)
|
|
19
|
|
|||
Net (loss) gain on intra-entity foreign currency transactions
|
|
(2
|
)
|
|
3
|
|
|
(2
|
)
|
|||
Net unrealized gain (loss) on derivative instruments, net of tax expense of $6, $2 and $0, respectively
|
|
4
|
|
|
21
|
|
|
(10
|
)
|
|||
Other comprehensive (loss) income
|
|
(3
|
)
|
|
22
|
|
|
7
|
|
|||
Comprehensive income
|
|
$
|
7
|
|
|
$
|
174
|
|
|
$
|
64
|
|
|
|||||||
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per
share amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
37
|
|
|
$
|
58
|
|
Restricted funds held in trust
|
18
|
|
|
39
|
|
||
Receivables (less allowances of $9 and $8, respectively)
|
240
|
|
|
338
|
|
||
Prepaid expenses and other current assets
|
105
|
|
|
64
|
|
||
Total Current Assets
|
400
|
|
|
499
|
|
||
Property, plant and equipment, net
|
2,451
|
|
|
2,514
|
|
||
Restricted funds held in trust
|
8
|
|
|
8
|
|
||
Intangible assets, net
|
258
|
|
|
279
|
|
||
Goodwill
|
321
|
|
|
321
|
|
||
Other assets
|
277
|
|
|
222
|
|
||
Total Assets
|
$
|
3,715
|
|
|
$
|
3,843
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
17
|
|
|
$
|
15
|
|
Current portion of project debt
|
8
|
|
|
19
|
|
||
Accounts payable
|
36
|
|
|
76
|
|
||
Accrued expenses and other current liabilities
|
292
|
|
|
333
|
|
||
Total Current Liabilities
|
353
|
|
|
443
|
|
||
Long-term debt
|
2,366
|
|
|
2,327
|
|
||
Project debt
|
125
|
|
|
133
|
|
||
Deferred income taxes
|
372
|
|
|
378
|
|
||
Other liabilities
|
123
|
|
|
75
|
|
||
Total Liabilities
|
3,339
|
|
|
3,356
|
|
||
Commitments and Contingencies (Note 17)
|
|
|
|
||||
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 shares)
|
14
|
|
|
14
|
|
||
Additional paid-in capital
|
857
|
|
|
841
|
|
||
Accumulated other comprehensive loss
|
(35
|
)
|
|
(33
|
)
|
||
Accumulated deficit
|
(460
|
)
|
|
(334
|
)
|
||
Treasury stock, at par
|
—
|
|
|
(1
|
)
|
||
Total Equity
|
376
|
|
|
487
|
|
||
Total Liabilities and Equity
|
$
|
3,715
|
|
|
$
|
3,843
|
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
OPERATING ACTIVITIES:
|
|
(In millions)
|
||||||||||
Net income
|
|
$
|
10
|
|
|
$
|
152
|
|
|
$
|
57
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
|
221
|
|
|
218
|
|
|
215
|
|
|||
Amortization of long-term debt deferred financing costs
|
|
5
|
|
|
5
|
|
|
7
|
|
|||
(Gain) loss on sale of business
|
|
(49
|
)
|
|
(217
|
)
|
|
6
|
|
|||
Impairment charges
|
|
2
|
|
|
86
|
|
|
2
|
|
|||
Loss on extinguishment of debt
|
|
—
|
|
|
15
|
|
|
84
|
|
|||
Provision for doubtful accounts
|
|
2
|
|
|
2
|
|
|
9
|
|
|||
Stock-based compensation expense
|
|
25
|
|
|
24
|
|
|
18
|
|
|||
Equity in net income from unconsolidated investments
|
|
(6
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|||
Deferred income taxes
|
|
(9
|
)
|
|
(31
|
)
|
|
(193
|
)
|
|||
Dividends from unconsolidated investments
|
|
9
|
|
|
13
|
|
|
2
|
|
|||
Other, net
|
|
3
|
|
|
(10
|
)
|
|
(13
|
)
|
|||
Change in working capital, net of effects of acquisitions:
|
|
|
|
|
|
|
||||||
Receivables
|
|
94
|
|
|
7
|
|
|
(27
|
)
|
|||
Prepaid and other current assets
|
|
(5
|
)
|
|
(3
|
)
|
|
5
|
|
|||
Accounts payable and accrued expenses
|
|
(77
|
)
|
|
(16
|
)
|
|
66
|
|
|||
Changes in noncurrent assets and liabilities, net
|
|
1
|
|
|
(1
|
)
|
|
5
|
|
|||
Net cash provided by operating activities
|
|
226
|
|
|
238
|
|
|
242
|
|
|||
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Purchase of property, plant and equipment
|
|
(158
|
)
|
|
(206
|
)
|
|
(277
|
)
|
|||
Acquisition of businesses, net of cash acquired
|
|
2
|
|
|
(50
|
)
|
|
(16
|
)
|
|||
Proceeds from asset sales
|
|
27
|
|
|
128
|
|
|
4
|
|
|||
Property insurance proceeds
|
|
—
|
|
|
18
|
|
|
8
|
|
|||
Payment of indemnification claim related to sale of asset
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|||
Investment in equity affiliate
|
|
(14
|
)
|
|
(16
|
)
|
|
—
|
|
|||
Other, net
|
|
(2
|
)
|
|
(6
|
)
|
|
(8
|
)
|
|||
Net cash used in investing activities
|
|
(145
|
)
|
|
(139
|
)
|
|
(289
|
)
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(In millions)
|
||||||||||
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from borrowings on long-term debt
|
|
80
|
|
|
1,165
|
|
|
400
|
|
|||
Proceeds from borrowings on revolving credit facility
|
|
536
|
|
|
740
|
|
|
952
|
|
|||
Proceeds from insurance premium financing
|
|
29
|
|
|
25
|
|
|
24
|
|
|||
Proceeds from borrowings on Dublin project financing
|
|
—
|
|
|
—
|
|
|
643
|
|
|||
Payment related to Dublin interest rate swap
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|||
Payments on the Dublin Convertible Preferred
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|||
Payments on long-term debt
|
|
(16
|
)
|
|
(944
|
)
|
|
(420
|
)
|
|||
Payments on revolving credit facility
|
|
(565
|
)
|
|
(973
|
)
|
|
(850
|
)
|
|||
Payments on project debt
|
|
(18
|
)
|
|
(23
|
)
|
|
(382
|
)
|
|||
Payments of deferred financing costs
|
|
(1
|
)
|
|
(16
|
)
|
|
(21
|
)
|
|||
Payment of Dublin financing costs
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|||
Cash dividends paid to stockholders'
|
|
(133
|
)
|
|
(134
|
)
|
|
(131
|
)
|
|||
Payment of insurance premium financing
|
|
(26
|
)
|
|
(24
|
)
|
|
(4
|
)
|
|||
Other, net
|
|
(8
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|||
Net cash (used in) provided by financing activities
|
|
(122
|
)
|
|
(189
|
)
|
|
40
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
(1
|
)
|
|
1
|
|
|
7
|
|
|||
Net decrease in cash, cash equivalents and restricted cash
|
|
(42
|
)
|
|
(89
|
)
|
|
—
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
|
105
|
|
|
194
|
|
|
194
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
|
63
|
|
|
105
|
|
|
194
|
|
|||
Less: cash, cash equivalents and restricted cash of assets held for sale at end of period
|
|
—
|
|
|
—
|
|
|
77
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
63
|
|
|
$
|
105
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
||||||
Reconciliation of cash, cash equivalents and restricted cash:
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
37
|
|
|
$
|
58
|
|
|
$
|
46
|
|
Restricted funds held in trust- short term
|
|
18
|
|
|
39
|
|
|
43
|
|
|||
Restricted funds held in trust- long term
|
|
8
|
|
|
8
|
|
|
28
|
|
|||
Total cash, cash equivalents and restricted cash
|
|
$
|
63
|
|
|
$
|
105
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Cash Paid for Interest and Income Taxes:
|
|
|
|
|
|
|
||||||
Interest
|
|
$
|
152
|
|
|
$
|
136
|
|
|
$
|
149
|
|
Income taxes, net of refunds
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Covanta Holding Corporation Stockholders’ Equity
|
|
Total
|
||||||||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated (Deficit)
Earnings
|
|
Treasury Stock
|
|
|||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||||||||
Balance as of December 31, 2016
|
|
136
|
|
|
$
|
14
|
|
|
$
|
807
|
|
|
$
|
(62
|
)
|
|
$
|
(289
|
)
|
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
469
|
|
Cumulative effect change in accounting for share based payments
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Shares issued in non-vested stock award
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Comprehensive income, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
64
|
|
||||||
Balance as of December 31, 2017
|
|
136
|
|
|
$
|
14
|
|
|
$
|
822
|
|
|
$
|
(55
|
)
|
|
$
|
(353
|
)
|
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
427
|
|
Cumulative effect change in accounting for revenue recognition
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Comprehensive income, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
174
|
|
||||||
Balance as of December 31, 2018
|
|
136
|
|
|
$
|
14
|
|
|
$
|
841
|
|
|
$
|
(33
|
)
|
|
$
|
(334
|
)
|
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
487
|
|
Cumulative effect change in accounting for ASU 2018-02 (see Note1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||||
Dividend declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(135
|
)
|
|
—
|
|
|
—
|
|
|
(135
|
)
|
||||||
Shares repurchased for tax withholdings for vested stock awards
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||||
Shares issued in non-vested stock award
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Comprehensive income, net of income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
Balance as of December 31, 2019
|
|
136
|
|
|
$
|
14
|
|
|
$
|
857
|
|
|
$
|
(35
|
)
|
|
$
|
(460
|
)
|
|
5
|
|
|
$
|
—
|
|
|
$
|
376
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Pass through costs
|
$
|
57
|
|
|
$
|
57
|
|
|
$
|
59
|
|
|
|
As of December 31,
|
||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||
|
|
Current
|
|
Noncurrent
|
|
Current
|
|
Noncurrent
|
||||||||
Debt service funds - principal
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
Debt service funds - interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total debt service funds
|
|
2
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||
Revenue funds
|
|
3
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Other funds
|
|
13
|
|
|
8
|
|
|
19
|
|
|
8
|
|
||||
Total
|
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
39
|
|
|
$
|
8
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Land
|
|
$
|
20
|
|
|
$
|
26
|
|
Facilities and equipment
|
|
4,463
|
|
|
4,367
|
|
||
Landfills (primarily for ash disposal)
|
|
78
|
|
|
75
|
|
||
Construction in progress
|
|
58
|
|
|
71
|
|
||
Total
|
|
4,619
|
|
|
4,539
|
|
||
Less: accumulated depreciation and amortization
|
|
(2,168
|
)
|
|
(2,025
|
)
|
||
Property, plant, and equipment — net
|
|
$
|
2,451
|
|
|
$
|
2,514
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Beginning of period asset retirement obligation
|
|
$
|
29
|
|
|
$
|
26
|
|
Accretion expense(1)
|
|
2
|
|
|
3
|
|
||
Net change (2)
|
|
(3
|
)
|
|
—
|
|
||
Reclassification to assets held for sale
|
|
(2
|
)
|
|
—
|
|
||
End of period asset retirement obligation
|
|
26
|
|
|
29
|
|
||
Less: current portion
|
|
(4
|
)
|
|
(5
|
)
|
||
Noncurrent asset retirement obligation
|
|
$
|
22
|
|
|
$
|
24
|
|
(1)
|
Accretion expense is included in Plant operating expense in the consolidated statements of operations.
|
(2)
|
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
|
|
Unrealized loss on intra-entity foreign currency transactions
|
|
Total
|
||||||||||
Balance at December 31, 2017
|
$
|
(17
|
)
|
|
$
|
2
|
|
|
$
|
(33
|
)
|
|
$
|
(7
|
)
|
|
$
|
(55
|
)
|
Other comprehensive (loss) income before reclassifications
|
(4
|
)
|
|
—
|
|
|
(6
|
)
|
|
3
|
|
|
(7
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
2
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
29
|
|
|||||
Net current period comprehensive (loss) income
|
(2
|
)
|
|
—
|
|
|
21
|
|
|
3
|
|
|
22
|
|
|||||
Balance at December 31, 2018
|
$
|
(19
|
)
|
|
$
|
2
|
|
|
$
|
(12
|
)
|
|
$
|
(4
|
)
|
|
$
|
(33
|
)
|
Cumulative effect change in accounting for ASU 2018-02 (see Note1)
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Balance at January 1, 2019
|
(19
|
)
|
|
3
|
|
|
(12
|
)
|
|
(4
|
)
|
|
(32
|
)
|
|||||
Other comprehensive (loss) income before reclassifications
|
(5
|
)
|
|
—
|
|
|
4
|
|
|
(2
|
)
|
|
(3
|
)
|
|||||
Net current period comprehensive (loss) income
|
(5
|
)
|
|
—
|
|
|
4
|
|
|
(2
|
)
|
|
(3
|
)
|
|||||
Balance at December 31, 2019
|
$
|
(24
|
)
|
|
$
|
3
|
|
|
$
|
(8
|
)
|
|
$
|
(6
|
)
|
|
$
|
(35
|
)
|
1.
|
Continue to apply the ASC 840 guidance, including the disclosure requirements, in the comparative periods presented in the year of adoption, the hindsight practical expedient;
|
2.
|
Continue applying our current policy for accounting for land easements that existed as of, or expired before, January 1, 2019;
|
3.
|
Not separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We elected to apply this practical expedient to all underlying asset classes;
|
4.
|
Not apply the recognition requirements in ASC 842 to short-term leases; and
|
5.
|
Not record a right of use asset or right of use liability for leases with an asset or liability balance that would be considered immaterial.
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Basic weighted average common shares outstanding
|
131
|
|
|
130
|
|
|
130
|
|
Dilutive effect of stock options, restricted stock and restricted stock units
|
2
|
|
|
2
|
|
|
1
|
|
Diluted weighted average common shares outstanding
|
133
|
|
|
132
|
|
|
131
|
|
Anti-dilutive stock options, restricted stock and restricted stock units excluded from the calculation of EPS
|
—
|
|
|
—
|
|
|
—
|
|
Revenue Type
|
|
Timing
|
|
Performance Obligations
|
|
Measure of Progress
|
|
Type
|
|
Practical Expedients
|
Service Fee
|
|
Over time
|
|
Operations/waste disposal
|
|
Time elapsed
|
|
Fixed
& Variable
|
|
Constrained (1)
& Series (2) |
Tip Fee
|
|
Over time
|
|
Waste disposal
|
|
Units delivered
|
|
Fixed
& Variable
|
|
Right to invoice
|
Energy
|
|
Over time
|
|
Energy
|
|
Units delivered
|
|
Fixed
& Variable
|
|
Right to invoice
& Series (2)
|
Capacity
|
|
Time elapsed
|
|
|||||||
Steam
|
|
Units delivered
|
|
|||||||
Metals
|
|
Point in time
|
|
Sale of ferrous &
non-ferrous metals
|
|
Units delivered
|
|
Variable
|
|
Less than 1 year
|
Other (Construction)
|
|
Over time
|
|
Construction
services
|
|
Costs incurred
|
|
Fixed
& Variable
|
|
Less than 1 year
|
|
|
|
|
|
|
|
|
|
|
|
(1) The amount of variable consideration that is included in the transaction price may be constrained, and is included only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. We estimate our variable service fee using the expected value method.
|
||||||||||
(2) Service Fee and Energy contracts have been determined to have an annual and monthly series, respectively.
|
1.
|
The performance obligation is part of a contract that has an original expected duration of one year or less.
|
2.
|
Revenue is recognized from the satisfaction of the performance obligations in the amount billable to our customer that corresponds directly with the value to the customer of our performance completed to date (i.e. “right-to-invoice” practical expedient).
|
3.
|
The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service or a series of distinct services that are substantially the same and that have the same pattern of transfer to our customer (i.e. “series practical expedient”).
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Unbilled receivables
|
|
$
|
16
|
|
|
$
|
16
|
|
Deferred revenue
|
|
$
|
18
|
|
|
$
|
15
|
|
|
|
Total Stock-Based Compensation Expense
|
|
Unrecognized
stock-based
compensation expense
|
|
Weighted-average years to be recognized
|
||||||||||||
|
|
Year Ended December 31,
|
|
|||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
As of December 31, 2019
|
|||||||||||
Restricted Stock Units
|
|
$
|
17
|
|
|
$
|
14
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
1.4
|
Performance Awards
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
1.7
|
Restricted Stock Awards
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
0.3
|
Tax benefit related to compensation expense
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-Average
Grant Date Fair Value
|
|||
Nonvested at the beginning of the year
|
|
1,832
|
|
|
$
|
14.74
|
|
Granted
|
|
1,238
|
|
|
$
|
16.70
|
|
Vested
|
|
(691
|
)
|
|
$
|
14.46
|
|
Forfeited
|
|
(107
|
)
|
|
$
|
15.73
|
|
Nonvested at the end of the year
|
|
2,272
|
|
|
$
|
15.86
|
|
|
2019
|
|
2018
|
||||
Expected life (1)
|
2.82 years
|
|
|
2.82 years
|
|
||
Expected stock price volatility (2)
|
3.28
|
%
|
|
2.63
|
%
|
||
Risk-free interest rate (3)
|
2.48
|
%
|
|
2.38
|
%
|
||
Stock price (4)
|
$
|
16.35
|
|
|
$
|
14.80
|
|
(1)
|
Represents the remaining performance measurement period as of the valuation date.
|
(2)
|
Based on each entity’s historical stock price volatility over the remaining performance measurement period.
|
(3)
|
The risk free rate equals the yield, as of the grant date, on zero coupon US Treasury STRIPS that have a term equal to the length of the remaining performance measurement period.
|
(4)
|
The stock price is the closing price of our common stock on the grant date.
|
|
|
Number of Shares
|
|
Weighted-Average
Grant Date Fair Value
|
|||
Nonvested at the beginning of the year
|
|
1,166
|
|
|
$
|
15.66
|
|
Granted
|
|
395
|
|
|
$
|
17.90
|
|
Vested
|
|
(368
|
)
|
|
$
|
15.11
|
|
Nonvested at the end of the year
|
|
1,193
|
|
|
$
|
16.57
|
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested at the beginning of the year
|
|
727
|
|
|
$
|
15.90
|
|
Granted
|
|
6
|
|
|
$
|
17.64
|
|
Vested
|
|
(474
|
)
|
|
$
|
15.73
|
|
Forfeited
|
|
(17
|
)
|
|
$
|
16.21
|
|
Nonvested at the end of the year
|
|
242
|
|
|
$
|
16.26
|
|
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (2)
|
|||||
|
|
(in thousands, except per share amounts)
|
|||||||||||
Outstanding at the beginning of the year
|
|
25
|
|
|
$
|
20.58
|
|
|
|
|
|
||
Granted
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Exercised
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Expired
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Forfeited
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Outstanding at the end of the year (1)
|
|
25
|
|
|
$
|
20.58
|
|
|
4.52
|
|
$
|
—
|
|
Options exercisable at year end
|
|
25
|
|
|
$
|
20.58
|
|
|
4.52
|
|
$
|
—
|
|
(1)
|
All options outstanding as of December 31, 2019 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 2019 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 2019. The intrinsic value changes based on the fair market value of our common stock.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Insurance gains for property and clean-up costs, net of impairment charges
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
7
|
|
Insurance gains for business interruption costs, net of costs incurred
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
23
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Impairment charges
|
$
|
2
|
|
|
$
|
86
|
|
|
$
|
2
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Prepaid expenses
|
$
|
27
|
|
|
$
|
22
|
|
Other receivable
|
22
|
|
|
—
|
|
||
Spare parts
|
20
|
|
|
21
|
|
||
Other
|
36
|
|
|
21
|
|
||
Total prepaid expenses and other current assets (1)
|
$
|
105
|
|
|
$
|
64
|
|
|
|
|
|
||||
Operating expenses, payroll and related expenses
|
$
|
139
|
|
|
$
|
150
|
|
Deferred revenue
|
12
|
|
|
10
|
|
||
Accrued liabilities to client communities
|
16
|
|
|
26
|
|
||
Interest payable
|
27
|
|
|
38
|
|
||
Dividends payable
|
38
|
|
|
36
|
|
||
Insurance premium financing
|
24
|
|
|
20
|
|
||
Other
|
36
|
|
|
53
|
|
||
Total accrued expenses and other current liabilities
|
$
|
292
|
|
|
$
|
333
|
|
(1)
|
Includes assets held for sale previously disclosed separately on the consolidated balance sheet.
|
|
United States
|
|
Other
|
|
Total
|
|||||||
Operating Revenue:
|
|
|
|
|
|
|||||||
Year Ended December 31, 2019
|
$
|
1,800
|
|
|
$
|
70
|
|
|
$
|
1,870
|
|
|
Year Ended December 31, 2018
|
$
|
1,785
|
|
|
$
|
83
|
|
|
$
|
1,868
|
|
|
Year Ended December 31, 2017
|
$
|
1,705
|
|
|
$
|
47
|
|
|
$
|
1,752
|
|
|
|
||||||||||||
|
|
United States
|
|
Other
|
|
Total
|
||||||
Total Assets:
|
|
|
|
|
|
|
||||||
As of December 31, 2019
|
|
$
|
3,466
|
|
|
$
|
249
|
|
|
$
|
3,715
|
|
As of December 31, 2018
|
|
$
|
3,635
|
|
|
$
|
208
|
|
|
$
|
3,843
|
|
As of December 31, 2017
|
|
$
|
3,727
|
|
|
$
|
714
|
|
|
$
|
4,441
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
State
|
|
2
|
|
|
1
|
|
|
2
|
|
|||
Foreign
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|||
Total current
|
|
2
|
|
|
2
|
|
|
5
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
(4
|
)
|
|
(1
|
)
|
|
(204
|
)
|
|||
State
|
|
(4
|
)
|
|
(25
|
)
|
|
(2
|
)
|
|||
Foreign
|
|
(1
|
)
|
|
(5
|
)
|
|
10
|
|
|||
Total deferred
|
|
(9
|
)
|
|
(31
|
)
|
|
(196
|
)
|
|||
Total income tax benefit
|
|
$
|
(7
|
)
|
|
$
|
(29
|
)
|
|
$
|
(191
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Domestic
|
|
$
|
(25
|
)
|
|
$
|
(43
|
)
|
|
$
|
(43
|
)
|
Foreign
|
|
22
|
|
|
160
|
|
|
(92
|
)
|
|||
Total
|
|
$
|
(3
|
)
|
|
$
|
117
|
|
|
$
|
(135
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Income tax (benefit) expense at the federal statutory rate
|
|
$
|
(1
|
)
|
|
$
|
25
|
|
|
$
|
(47
|
)
|
State and other tax expense
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|||
Tax rate differential on foreign earnings
|
|
(2
|
)
|
|
(3
|
)
|
|
10
|
|
|||
Gain on sale of business
|
|
(9
|
)
|
|
(44
|
)
|
|
—
|
|
|||
Permanent differences
|
|
4
|
|
|
5
|
|
|
(3
|
)
|
|||
Impact of state apportionment & tax rate
|
|
(2
|
)
|
|
(13
|
)
|
|
—
|
|
|||
Change in valuation allowance
|
|
1
|
|
|
3
|
|
|
31
|
|
|||
Liability for uncertain tax positions
|
|
(1
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Impact of deferred tax re-measurement for federal tax rate change
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|||
Tax reform transition tax
|
|
—
|
|
|
1
|
|
|
21
|
|
|||
Other
|
|
4
|
|
|
2
|
|
|
3
|
|
|||
Total income tax benefit
|
|
$
|
(7
|
)
|
|
$
|
(29
|
)
|
|
$
|
(191
|
)
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss carryforwards
|
|
$
|
90
|
|
|
$
|
90
|
|
Accrued and prepaid expenses
|
|
63
|
|
|
61
|
|
||
Tax credits
|
|
49
|
|
|
48
|
|
||
Interest expense
|
|
26
|
|
|
12
|
|
||
Other
|
|
8
|
|
|
23
|
|
||
Total gross deferred tax asset
|
|
236
|
|
|
234
|
|
||
Less: valuation allowance
|
|
(65
|
)
|
|
(73
|
)
|
||
Total deferred tax asset
|
|
171
|
|
|
161
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Property, plant and equipment
|
|
517
|
|
|
521
|
|
||
Intangible assets
|
|
17
|
|
|
12
|
|
||
Other, net
|
|
9
|
|
|
6
|
|
||
Total gross deferred tax liability
|
|
543
|
|
|
539
|
|
||
Net deferred tax liability
|
|
$
|
372
|
|
|
$
|
378
|
|
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
|
|
|
Additions based on tax positions related to the current year
|
2
|
|
|
Additions for tax positions of prior years
|
1
|
|
|
Reductions for lapse in applicable statute of limitations
|
(2
|
)
|
|
Reductions for tax positions of prior years
|
(8
|
)
|
|
Balance at December 31, 2018
|
41
|
|
|
Additions based on tax positions related to the current year
|
2
|
|
|
Reductions for lapse in applicable statute of limitations
|
(1
|
)
|
|
Reductions for tax positions of prior years
|
(2
|
)
|
|
Balance at December 31, 2019
|
$
|
40
|
|
|
For the Year Ended December 31, 2019
|
||
Accounts receivable sold and derecognized
|
$
|
224
|
|
Cash proceeds received (1)
|
$
|
223
|
|
Loss on accounts receivable sold (2)
|
$
|
2
|
|
|
|
||
|
December 31, 2019
|
||
Pledged receivables (3)
|
$
|
142
|
|
|
|
December 31,
|
||||
Ownership interest:
|
|
2019
|
|
2018
|
||
Dublin EfW (Ireland) (1)
|
|
50
|
%
|
|
50
|
%
|
Ambiente 2000 S.r.l. (Italy)
|
|
40
|
%
|
|
40
|
%
|
Earls Gate (UK) (2)
|
|
25
|
%
|
|
25
|
%
|
Rookery EfW (UK) (3)
|
|
40
|
%
|
|
—
|
%
|
Zhao County EfW (China) (4)
|
|
26
|
%
|
|
—
|
%
|
South Fork Plant (US)
|
|
—
|
%
|
|
50
|
%
|
(1)
|
We have a 50% indirect ownership of Dublin EfW, through our 50/50 joint venture with GIG, Covanta Europe Assets Ltd.
|
(2)
|
We have a 25% indirect ownership of Earls Gate, through our 50/50 joint venture with GIG, Covanta Green Jersey Assets Ltd., which owns 50% of Earls Gate.
|
(3)
|
We have a 40% indirect ownership of Rookery through our 50/50 joint venture with GIG, Covanta Green UK Ltd.
|
(4)
|
We have a 26% interest in Zhao County through our venture with Longking Energy Development Co. Ltd.
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Statement of Operations:
|
|
|
|
|
|
|
||||||
Operating revenue
|
|
$
|
120
|
|
|
$
|
112
|
|
|
$
|
17
|
|
Operating income
|
|
$
|
28
|
|
|
$
|
31
|
|
|
$
|
1
|
|
Net income
|
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
December 31,
|
||||||||
|
|
|
|
2019
|
|
2018
|
||||||
Balance Sheet:
|
|
|
|
|
|
|
||||||
Current assets
|
|
|
|
$
|
180
|
|
|
$
|
80
|
|
||
Long-term assets
|
|
|
|
$
|
1,008
|
|
|
$
|
834
|
|
||
Current liabilities
|
|
|
|
$
|
104
|
|
|
$
|
69
|
|
||
Long-term liabilities
|
|
|
|
$
|
735
|
|
|
$
|
521
|
|
•
|
For marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value.
|
•
|
Fair values for long-term debt and project debt are determined using quoted market prices (Level 1).
|
•
|
The fair value of our floating to fixed rate interest rate swaps is determined using discounted cash flow valuation methodologies that apply the appropriate forward floating rate curve observable in the market to the contractual terms of our swap agreements. 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.
|
|
|
|
|
As of December 31,
|
||||||
Financial Instruments Recorded at Fair Value on a Recurring Basis:
|
|
Fair Value Measurement Level
|
|
2019
|
|
2018
|
||||
|
|
|
|
(In millions)
|
||||||
Assets:
|
|
|
|
|
|
|
||||
Investments — mutual and bond funds (1)
|
|
1
|
|
$
|
2
|
|
|
$
|
2
|
|
Derivative asset — energy hedges(2)
|
|
2
|
|
12
|
|
|
—
|
|
||
Total assets:
|
|
|
|
$
|
14
|
|
|
$
|
2
|
|
Liabilities:
|
|
|
|
|
|
|
||||
Derivative liability — energy hedges (3)
|
|
2
|
|
$
|
—
|
|
|
$
|
13
|
|
Derivative liability — interest rate swaps (3)
|
|
2
|
|
$
|
2
|
|
|
$
|
—
|
|
Total liabilities:
|
|
|
|
$
|
2
|
|
|
$
|
13
|
|
(1)
|
Included in other noncurrent assets in the consolidated balance sheets.
|
(2)
|
The short-term balance is included in Prepaid expenses and other current assets and the long-term balance is included in Other assets in the consolidated balance sheets.
|
(3)
|
The short-term balance is included in Accrued expenses and other current liabilities and the long-term balance is included in Other liabilities in the consolidated balance sheets.
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
Financial Instruments Recorded at Carrying Amount:
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
|
$
|
2,383
|
|
|
$
|
2,459
|
|
|
$
|
2,342
|
|
|
$
|
2,245
|
|
Project debt
|
|
$
|
133
|
|
|
$
|
138
|
|
|
$
|
152
|
|
|
$
|
154
|
|
Calendar Year
|
|
Hedged MWh
|
2020
|
|
2.7
|
2021
|
|
0.8
|
2022
|
|
0.1
|
Total
|
|
3.6
|
|
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||
|
|
Remaining Weighted Average Useful
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Waste, service and energy contracts
|
|
18 years
|
|
$
|
447
|
|
|
$
|
211
|
|
|
$
|
236
|
|
|
$
|
522
|
|
|
$
|
271
|
|
|
$
|
251
|
|
Customer relationships, permits and other
|
|
5 years
|
|
52
|
|
|
30
|
|
|
22
|
|
|
52
|
|
|
24
|
|
|
28
|
|
||||||
Intangible assets, net
|
|
|
|
$
|
499
|
|
|
$
|
241
|
|
|
$
|
258
|
|
|
$
|
574
|
|
|
$
|
295
|
|
|
$
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Waste and service contracts (liability)
|
|
14 years
|
|
$
|
(72
|
)
|
|
$
|
(66
|
)
|
|
$
|
(6
|
)
|
|
$
|
(72
|
)
|
|
$
|
(64
|
)
|
|
$
|
(8
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Intangible assets, net
|
|
$
|
22
|
|
|
$
|
20
|
|
|
$
|
20
|
|
Waste and service contracts (contra-expense)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
|
Year Ended December 31,
|
|||||||||||||||||
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|||||||||
Intangible assets, net
|
|
21
|
|
|
20
|
|
|
20
|
|
|
18
|
|
|
15
|
|
||||
Waste and service contracts (contra-expense)
|
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
||
Balance at December 31, 2017
|
$
|
313
|
|
Goodwill related to acquisitions
|
8
|
|
|
Balance at December 31, 2018
|
321
|
|
|
Goodwill related to acquisitions
|
—
|
|
|
Balance at December 31, 2019
|
$
|
321
|
|
|
Average Rate(1)
|
|
December 31, 2019
|
|
December 31, 2018
|
|||||
LONG-TERM DEBT:
|
|
|
|
|||||||
Revolving credit facility
|
4.17
|
%
|
|
$
|
183
|
|
|
$
|
212
|
|
Term loan, net due 2023
|
4.26
|
%
|
|
384
|
|
|
394
|
|
||
Credit Facilities Sub-total
|
|
|
$
|
567
|
|
|
$
|
606
|
|
|
Senior Notes
|
|
|
1,200
|
|
|
1,200
|
|
|||
Less: deferred financing costs related to senior notes
|
|
|
(14
|
)
|
|
(16
|
)
|
|||
Senior Notes Sub-total
|
|
|
$
|
1,186
|
|
|
$
|
1,184
|
|
|
Tax-exempt bonds
|
|
|
$
|
544
|
|
|
$
|
494
|
|
|
Less: deferred financing costs related to tax-exempt bonds
|
|
|
(5
|
)
|
|
(6
|
)
|
|||
Tax-Exempt Bonds Sub-total
|
|
|
$
|
539
|
|
|
$
|
488
|
|
|
Equipment financing arrangements due 2020 through 2031
|
|
|
85
|
|
|
59
|
|
|||
Finance Leases (2)
|
|
|
6
|
|
|
5
|
|
|||
Total long-term debt
|
|
|
$
|
2,383
|
|
|
$
|
2,342
|
|
|
Less: current portion
|
|
|
(17
|
)
|
|
(15
|
)
|
|||
Noncurrent long-term debt
|
|
|
$
|
2,366
|
|
|
$
|
2,327
|
|
|
PROJECT DEBT:
|
|
|
|
|
|
|||||
Project debt related to service fee structures
|
|
|
$
|
47
|
|
|
$
|
58
|
|
|
Union County EfW facility finance lease (tip fee structure)
|
|
|
84
|
|
|
89
|
|
|||
Project debt related to tip fee structures
|
|
|
—
|
|
|
3
|
|
|||
Unamortized debt premium, net
|
|
|
2
|
|
|
3
|
|
|||
Less: deferred financing costs
|
|
|
—
|
|
|
(1
|
)
|
|||
Total project debt
|
|
|
$
|
133
|
|
|
$
|
152
|
|
|
Less: Current portion
|
|
|
(8
|
)
|
|
(19
|
)
|
|||
Noncurrent project debt
|
|
|
$
|
125
|
|
|
$
|
133
|
|
|
TOTAL CONSOLIDATED DEBT
|
|
|
$
|
2,516
|
|
|
$
|
2,494
|
|
|
Less: Current debt
|
|
|
(25
|
)
|
|
(34
|
)
|
|||
TOTAL NONCURRENT CONSOLIDATED DEBT
|
|
|
$
|
2,491
|
|
|
$
|
2,460
|
|
(1)
|
During the year ended December 31, 2019 we entered into pay-fixed, receive-variable swap agreements on $150 million notional amount of our variable rate debt under the Credit Facilities. See Note 13. Derivative Instruments for further information.
|
(2)
|
Excludes Union County EfW facility finance lease which is presented within project debt in our consolidated balance sheets.
|
|
Total
Facility Commitment
|
|
Expiring
|
|
Direct Borrowings
|
|
Outstanding Letters of Credit
|
|
Unutilized Capacity
|
||||||||
Revolving Credit Facility
|
$
|
900
|
|
|
2023
|
|
$
|
183
|
|
|
$
|
228
|
|
|
$
|
489
|
|
•
|
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 and may incorporate certain pro forma adjustments.
|
•
|
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.
|
Maturity
|
|
Rate
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
2027
|
|
6.000%
|
|
$
|
400
|
|
|
$
|
400
|
|
2025
|
|
5.875%
|
|
400
|
|
|
400
|
|
||
2024
|
|
5.875%
|
|
400
|
|
|
400
|
|
||
|
|
|
|
$
|
1,200
|
|
|
$
|
1,200
|
|
•
|
general unsecured obligations of Covanta and are not guaranteed by any of our subsidiaries;
|
•
|
rank equally in right of payment with all of our existing and future senior unsecured indebtedness that is not subordinated in right of payment to the Senior Notes;
|
•
|
are effectively subordinated in right of payment to any of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness;
|
•
|
are structurally subordinated to any existing and future liabilities of any of our subsidiaries, including Covanta Energy, including their guarantees under certain of our Tax-Exempt Bonds;
|
•
|
governed by the Base Indenture as supplemented by the supplemental indentures;
|
•
|
are subject to redemption at our option, in whole or in part, subject to the terms of their respective supplemental indentures;
|
•
|
are redeemable at our option using the proceeds of certain equity offerings subject to the terms of their respective supplemental indentures.
|
Series
|
|
Maturity
|
|
Coupon
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Pennsylvania Series 2019A
|
|
2039
|
|
3.250%
|
|
$
|
50
|
|
|
$
|
—
|
|
New Hampshire Series 2018A
|
|
2027
|
|
4.000%
|
|
20
|
|
|
20
|
|
||
New Hampshire Series 2018B
|
|
2042
|
|
4.625%
|
|
67
|
|
|
67
|
|
||
New Hampshire Series 2018C
|
|
2042
|
|
4.875%
|
|
82
|
|
|
82
|
|
||
New York Series 2018A
|
|
2042
|
|
4.750%
|
|
130
|
|
|
130
|
|
||
New York Series 2018B
|
|
2024
|
|
3.500%
|
|
35
|
|
|
35
|
|
||
Virginia Series 2018A-1
|
|
2038
|
|
5.000%
|
|
30
|
|
|
30
|
|
||
New Jersey Series 2015A
|
|
2045
|
|
5.250%
|
|
90
|
|
|
90
|
|
||
Pennsylvania Series 2015A
|
|
2043
|
|
5.000%
|
|
40
|
|
|
40
|
|
||
|
|
|
|
|
|
$
|
544
|
|
|
$
|
494
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
||||||||||||
Future minimum payments
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
49
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
||||||||||||
Project debt (1)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
37
|
|
|
|
Minimum
|
|
Maximum
|
||
Project debt related to service fee structures due through 2035
|
|
5.00
|
%
|
|
5.00
|
%
|
Project debt related to tip fee structures due through 2053(1)
|
|
5.00
|
%
|
|
5.25
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Capitalized interest
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
For the Year Ended
|
||
|
December 31, 2019
|
||
Finance lease:
|
|
||
Amortization of assets, included in Depreciation and amortization expense
|
$
|
7
|
|
Interest on lease liabilities, included in Interest expense
|
4
|
|
|
Operating lease:
|
|
||
Amortization of assets, included in Total operating expense
|
8
|
|
|
Interest on lease liabilities, included in Total operating expense
|
2
|
|
|
Total net lease cost
|
$
|
21
|
|
|
|
December 31, 2019
|
||
Operating leases:
|
|
|
||
Operating lease ROU assets, included in Other assets
|
|
$
|
46
|
|
|
|
|
||
Current operating lease liabilities, included in Accrued expenses and other current liabilities
|
|
$
|
6
|
|
Noncurrent operating lease liabilities, included in Other liabilities
|
|
46
|
|
|
Total operating lease liabilities
|
|
$
|
52
|
|
|
|
|
||
Finance leases:
|
|
|
||
Property and equipment, at cost
|
|
$
|
168
|
|
Accumulated amortization
|
|
(25
|
)
|
|
Property and equipment, net
|
|
$
|
143
|
|
|
|
|
||
Current obligations of finance leases, included in Current portion of long-term debt
|
|
$
|
6
|
|
Finance leases, net of current obligations, included in Long-term debt
|
|
84
|
|
|
Total finance lease liabilities
|
|
$
|
90
|
|
|
|
For the Year Ended
|
||
|
|
December 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
||
Operating cash flows related to operating leases
|
|
$
|
10
|
|
Financing cash flows related to finance leases
|
|
$
|
6
|
|
|
|
|
||
Weighted average remaining lease term (in years):
|
|
|
||
Operating leases
|
|
11.9
|
|
|
Finance leases
|
|
32.3
|
|
|
|
|
|
||
Weighted average discount rate:
|
|
|
||
Operating leases
|
|
4.64
|
%
|
|
Finance leases
|
|
5.05
|
%
|
|
December 31, 2019
|
||||||
|
Operating Leases
|
|
Finance Leases
|
||||
2020
|
$
|
8
|
|
|
$
|
8
|
|
2021
|
8
|
|
|
12
|
|
||
2022
|
7
|
|
|
12
|
|
||
2023
|
6
|
|
|
11
|
|
||
2024
|
6
|
|
|
11
|
|
||
2025 and thereafter
|
33
|
|
|
104
|
|
||
Total lease payments
|
68
|
|
|
158
|
|
||
Less: Amounts representing interest
|
(16
|
)
|
|
(68
|
)
|
||
Total lease obligations
|
$
|
52
|
|
|
$
|
90
|
|
Letters of credit issued under the Revolving Credit Facility
|
|
$
|
228
|
|
Letters of credit - other
|
|
40
|
|
|
Surety bonds
|
|
137
|
|
|
Total other commitments — net
|
|
$
|
405
|
|
|
|
Quarter Ended
|
||||||||||||||||||||||||||||||
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
||||||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
Operating revenue
|
|
$
|
453
|
|
|
$
|
458
|
|
|
$
|
467
|
|
|
$
|
454
|
|
|
$
|
465
|
|
|
$
|
456
|
|
|
$
|
485
|
|
|
$
|
500
|
|
Operating (loss) income
|
|
$
|
(8
|
)
|
|
$
|
20
|
|
|
$
|
10
|
|
|
$
|
(18
|
)
|
|
$
|
44
|
|
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
59
|
|
Net income (loss)
|
|
$
|
5
|
|
|
$
|
201
|
|
|
$
|
(21
|
)
|
|
$
|
(31
|
)
|
|
$
|
14
|
|
|
$
|
(27
|
)
|
|
$
|
12
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
$
|
0.04
|
|
|
$
|
1.55
|
|
|
$
|
(0.16
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.21
|
)
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
1.53
|
|
|
$
|
(0.16
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.21
|
)
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
|
|
|
Additions
|
|
|
|
|
||||||||||||
Description
|
|
Balance
Beginning
of Year
|
|
Charged to
Costs and
Expense
|
|
Charged to
Other
Accounts
|
|
Deductions
|
|
Balance at
End of
Period
|
||||||||||
|
|
(In millions)
|
||||||||||||||||||
Reserves for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year ended December 31, 2019
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
Year ended December 31, 2018
|
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
8
|
|
Year ended December 31, 2017
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Deferred tax valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year ended December 31, 2019
|
|
$
|
73
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
(13
|
)
|
|
$
|
65
|
|
Year ended December 31, 2018
|
|
$
|
77
|
|
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
$
|
73
|
|
Year ended December 31, 2017
|
|
$
|
71
|
|
|
$
|
16
|
|
|
$
|
(2
|
)
|
|
$
|
(8
|
)
|
|
$
|
77
|
|
|
|
|
/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:
|
Material Contracts.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
Other.
|
||
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
|
|
|
|
104
|
|
Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)
|
†
|
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/ STEPHEN J. JONES
|
|
|
Stephen J. Jones
|
|
|
President and Chief Executive Officer
|
Name
|
|
Title
|
|
Date
|
|
|
|
||
/S/ STEPHEN J. JONES
|
|
President and Chief Executive Officer and Director (Principal Executive Officer)
|
|
February 25, 2020
|
Stephen J. Jones
|
|
|
||
|
|
|
||
/S/ BRADFORD J. HELGESON
|
|
Executive Vice President, Chief Financial Officer (Principal Financial Officer)
|
|
February 25, 2020
|
Bradford J. Helgeson
|
|
|
||
|
|
|
||
/S/ MANPREET S. GREWAL
|
|
Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
February 25, 2020
|
Manpreet S. Grewal
|
|
|
||
|
|
|
|
|
/S/ SAMUEL ZELL
|
|
Chairman of the Board
|
|
February 25, 2020
|
Samuel Zell
|
|
|
||
|
|
|
||
/S/ DAVID M. BARSE
|
|
Director
|
|
February 25, 2020
|
David M. Barse
|
|
|
||
|
|
|
|
|
/S/ RONALD J. BROGLIO
|
|
Director
|
|
February 25, 2020
|
Ronald J. Broglio
|
|
|
||
|
|
|
||
/S/ PETER C. B. BYNOE
|
|
Director
|
|
February 25, 2020
|
Peter C. B. Bynoe
|
|
|
||
|
|
|
||
/S/ LINDA J. FISHER
|
|
Director
|
|
February 25, 2020
|
Linda J. Fisher
|
|
|
||
|
|
|
|
|
/S/ JOSEPH M. HOLSTEN
|
|
Director
|
|
February 25, 2020
|
Joseph M. Holsten
|
|
|
||
|
|
|
|
|
/S/ OWEN MICHAELSON
|
|
Director
|
|
February 25, 2020
|
Owen Michaelson
|
|
|
||
|
|
|
|
|
/S/ DANIELLE PLETKA
|
|
Director
|
|
February 25, 2020
|
Danielle Pletka
|
|
|
||
|
|
|
|
|
/S/ MICHAEL W. RANGER
|
|
Director
|
|
February 25, 2020
|
Michael W. Ranger
|
|
|
||
|
|
|
||
/S/ ROBERT S. SILBERMAN
|
|
Director
|
|
February 25, 2020
|
Robert S. Silberman
|
|
|
||
|
|
|
|
|
/S/ JEAN SMITH
|
|
Director
|
|
February 25, 2020
|
Jean Smith
|
|
|
||
|
|
|
|
|
Company Name
|
|
Jurisdiction of
Incorporation
|
35 Industrial, Inc.
|
|
Canada
|
Advanced Waste Services of Indiana, LLC
|
|
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 Babylon, Inc.
|
|
New York
|
Covanta Bondi, LLC
|
|
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 Corporation
|
|
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 Asia Pacific Limited
|
|
Hong Kong
|
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 Environmental Solutions, Inc. f/k/a Sorinco, Inc.
|
|
Canada
|
Covanta Environmental Solutions, LLC
|
|
Delaware
|
Covanta Environmental Solutions Carriers II, LLC
|
|
Wisconsin
|
Covanta Environmental Solutions Ontario, Inc. f/k/a Quantex Environmental Inc.
|
|
Canada
|
Covanta Energy Philippine Holdings, Inc.
|
|
Philippines
|
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 Green Earls Gate Holding Limited
|
|
Jersey
|
Covanta Green Jersey Assets Limited
|
|
Jersey
|
Covanta Green Newhurst Holding Limited
|
|
United Kingdom
|
Covanta Green Protos Holding Limited
|
|
United Kingdom
|
Covanta Green UK Limited
|
|
United Kingdom
|
Covanta Green Rookery Holding Limited
|
|
United Kingdom
|
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 Insurance Holdings, LLC
|
|
Delaware
|
Covanta Ireland International Holdings Limited
|
|
Ireland
|
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 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 Palm Beach Resource Recovery LLC
|
|
Florida
|
Covanta Pasco, Inc.
|
|
Florida
|
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 SECONN LLC
|
|
Delaware
|
Covanta Southeastern Connecticut Company
|
|
Connecticut
|
Covanta Southeastern Connecticut, L.P.
|
|
Delaware
|
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.
|
|
Delaware
|
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
|
CVA Finance 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
|
Earls Gate Energy Centre Limited
|
|
Scotland
|
Earls Gate Gridco Limited
|
|
Scotland
|
ECOvanta, LLC
|
|
Delaware
|
Edison (Bataan) Cogeneration Corporation
|
|
Philippines
|
Enereurope Holdings III, B.V.
|
|
Netherlands
|
EGEC Holdings Limited
|
|
Scotland
|
Environmental Pharmaceuticals, LLC
|
|
Arizona
|
GARCO, Inc.
|
|
North Carolina
|
Hidro Operaciones Don Pedro S.A.
|
|
Costa Rica
|
Industrial Oil Tank Services Corp.
|
|
New York
|
MSW Energy Finance Co. II, Inc.
|
|
Delaware
|
OLMEC Insurance Ltd.
|
|
Bermuda
|
Peabody Monofill Associates, Inc.
|
|
Massachusetts
|
Protos ERF Limited
|
|
United Kingdom
|
Protos Holding Limited
|
|
United Kingdom
|
Recoil, LLC
|
|
Pennsylvania
|
Return-Tech, Inc.
|
|
Canada
|
Rookery South Holding Limited
|
|
United Kingdom
|
Rookery South Limited
|
|
United Kingdom
|
SEMASS Partnership
|
|
Massachusetts
|
TransRiver Canada Incorporated
|
|
Canada
|
Waste Recovery Solutions, LLC
|
|
Florida
|
(1)
|
Registration Statement (Form S-8 No. 333-2315774) pertaining to the Covanta Holding Corporation 2014 Equity Award Plan, as amended,
|
(2)
|
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,
|
(3)
|
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,
|
(4)
|
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,
|
(5)
|
Registration Statement (Form S-8 No. 333-195793) pertaining to the Covanta Holding Corporation 2014 Equity Award Plan, and
|
(6)
|
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 of Covanta Holding Corporation
|
(1)
|
Registration Statement (Form S-8 No. 333-2315774) pertaining to the Covanta Holding Corporation 2014 Equity Award Plan, as amended,
|
(2)
|
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,
|
(3)
|
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,
|
(4)
|
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,
|
(5)
|
Registration Statement (Form S-8 No. 333-195793) pertaining to the Covanta Holding Corporation 2014 Equity Award Plan, and
|
(6)
|
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 of Covanta Holding Corporation
|
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/ STEPHEN J. JONES
|
|
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/ BRADFORD J. HELGESON
|
|
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/ 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
|
|
|
|
|
|
|
Page
|
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
|
|
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
OPERATING REVENUE:
|
|
|
|
|
||||
Waste revenue
|
|
$
|
66,104
|
|
|
$
|
59,047
|
|
Energy revenue
|
|
43,391
|
|
|
40,928
|
|
||
Total operating revenue
|
|
109,495
|
|
|
99,975
|
|
||
OPERATING EXPENSE:
|
|
|
|
|
||||
Operating expense
|
|
(50,131
|
)
|
|
(44,972
|
)
|
||
Other operating income, net
|
|
282
|
|
|
318
|
|
||
Depreciation expense
|
|
(28,591
|
)
|
|
(26,104
|
)
|
||
Total operating expense, net
|
|
(78,440
|
)
|
|
(70,758
|
)
|
||
Operating income
|
|
31,055
|
|
|
29,217
|
|
||
OTHER EXPENSES:
|
|
|
|
|
||||
Interest expenses, net
|
|
(16,151
|
)
|
|
(16,259
|
)
|
||
Total other expense
|
|
(16,151
|
)
|
|
(16,259
|
)
|
||
Income before income tax expense
|
|
14,904
|
|
|
12,958
|
|
||
Income tax expense (Note 6)
|
|
(185
|
)
|
|
(1,591
|
)
|
||
NET INCOME
|
|
$
|
14,719
|
|
|
$
|
11,367
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
Net income
|
|
$
|
14,719
|
|
|
$
|
11,367
|
|
Foreign currency translation
|
|
(6,095
|
)
|
|
(22,543
|
)
|
||
Net unrealized loss on derivative instruments, net of deferred tax credit of $592 and $545 thousand
|
|
(4,143
|
)
|
|
(3,915
|
)
|
||
Other comprehensive loss
|
|
(10,238
|
)
|
|
(26,458
|
)
|
||
Comprehensive income (loss)
|
|
$
|
4,481
|
|
|
$
|
(15,091
|
)
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
|
||||
Current:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
196
|
|
|
$
|
534
|
|
Restricted funds held in trust
|
|
64,964
|
|
|
64,828
|
|
||
Receivables
|
|
9,924
|
|
|
8,561
|
|
||
Prepaid expenses and other current assets
|
|
2,228
|
|
|
1,018
|
|
||
Total Current Assets
|
|
77,312
|
|
|
74,941
|
|
||
Property, plant and equipment, net
|
|
709,035
|
|
|
752,667
|
|
||
Goodwill
|
|
27,521
|
|
|
28,083
|
|
||
Other assets
|
|
3,098
|
|
|
3,161
|
|
||
Total Assets
|
|
$
|
816,966
|
|
|
$
|
858,852
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
||||
Current:
|
|
|
|
|
||||
Current portion of long-term debt
|
|
$
|
26,963
|
|
|
$
|
25,568
|
|
Current portion of derivative financial liabilities
|
|
2,741
|
|
|
3,178
|
|
||
Accounts payable
|
|
34
|
|
|
10
|
|
||
Deferred revenue
|
|
17,270
|
|
|
16,047
|
|
||
Accrued expenses and other current liabilities
|
|
21,737
|
|
|
21,069
|
|
||
Total Current Liabilities
|
|
68,745
|
|
|
65,872
|
|
||
Noncurrent:
|
|
|
|
|
||||
Long-term portion of debt
|
|
412,854
|
|
|
448,944
|
|
||
Long-term portion of derivative financial liabilities
|
|
10,675
|
|
|
5,653
|
|
||
Deferred income taxes
|
|
35,046
|
|
|
36,175
|
|
||
Other liabilities
|
|
4,492
|
|
|
4,456
|
|
||
Total Liabilities
|
|
531,812
|
|
|
561,100
|
|
||
|
|
|
|
|
||||
Shareholders' Equity:
|
|
|
|
|
||||
Common stock
|
|
30,621
|
|
|
30,621
|
|
||
Additional paid-in capital
|
|
2,986
|
|
|
2,986
|
|
||
Accumulated other comprehensive loss
|
|
(36,696
|
)
|
|
(26,458
|
)
|
||
Accumulated surplus
|
|
288,243
|
|
|
290,603
|
|
||
Total Shareholders' Equity
|
|
285,154
|
|
|
297,752
|
|
||
Total Liabilities and Shareholders' Equity
|
|
$
|
816,966
|
|
|
$
|
858,852
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
|
||||
OPERATING ACTIVITIES:
|
|
(In thousands)
|
||||||
Net income
|
|
$
|
14,719
|
|
|
$
|
11,367
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation expense
|
|
28,591
|
|
|
26,104
|
|
||
Deferred income taxes
|
|
185
|
|
|
1,591
|
|
||
Change in working capital
|
|
|
|
|
||||
Receivables
|
|
(1,527
|
)
|
|
(4,062
|
)
|
||
Prepaid expenses and other current assets
|
|
(1,225
|
)
|
|
648
|
|
||
Deferred revenue
|
|
1,538
|
|
|
9,976
|
|
||
Accounts payable and other accrued expenses
|
|
4,274
|
|
|
5,274
|
|
||
Net cash provided by operating activities
|
|
46,555
|
|
|
50,898
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
||||
Purchase of property, plant and equipment
|
|
(1,797
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
|
(1,797
|
)
|
|
—
|
|
||
FINANCING ACTIVITIES:
|
|
|
|
|
||||
Proceeds from issuing equity instruments
|
|
—
|
|
|
169,565
|
|
||
Principal payments on debt
|
|
(26,302
|
)
|
|
(28,829
|
)
|
||
Dividends paid
|
|
(17,079
|
)
|
|
(189,878
|
)
|
||
Net cash used in financing activities
|
|
(43,381
|
)
|
|
(49,142
|
)
|
||
|
|
|
|
|
||||
Effect of exchange rate changes on cash, cash equivalents and restricted funds
|
|
(1,579
|
)
|
|
(4,422
|
)
|
||
Net decrease in cash, cash equivalents and restricted funds
|
|
(202
|
)
|
|
(2,666
|
)
|
||
Cash, cash equivalents and restricted funds at beginning of period
|
|
65,362
|
|
|
68,028
|
|
||
Cash, cash equivalents and restricted funds at end of period
|
|
$
|
65,160
|
|
|
$
|
65,362
|
|
|
|
|
|
|
||||
Reconciliation of cash, cash equivalents and restricted funds:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
196
|
|
|
$
|
534
|
|
Restricted funds held in trust- short term
|
|
64,964
|
|
|
64,828
|
|
||
Total cash, cash equivalents and restricted funds
|
|
$
|
65,160
|
|
|
$
|
65,362
|
|
|
|
|
|
|
||||
Cash Paid for Interest and Income Taxes:
|
|
|
|
|
||||
Interest
|
|
$
|
(15,633
|
)
|
|
$
|
(14,782
|
)
|
Income taxes, net of refunds
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated
Surplus
|
|
Total Shareholders' Equity
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Balance at February 12, 2018 (Joint Venture formation)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Contributions from issue of share capital
|
|
30,621
|
|
|
472,100
|
|
|
—
|
|
|
—
|
|
|
502,721
|
|
|||||
Distributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(189,878
|
)
|
|
(189,878
|
)
|
|||||
Capital reduction
|
|
—
|
|
|
(469,114
|
)
|
|
—
|
|
|
469,114
|
|
|
—
|
|
|||||
Net income for the period
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,367
|
|
|
11,367
|
|
|||||
Other comprehensive loss, net of income taxes
|
|
—
|
|
|
—
|
|
|
(26,458
|
)
|
|
—
|
|
|
(26,458
|
)
|
|||||
Balance at December 31, 2018
|
|
$
|
30,621
|
|
|
$
|
2,986
|
|
|
$
|
(26,458
|
)
|
|
$
|
290,603
|
|
|
$
|
297,752
|
|
Distributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,079
|
)
|
|
(17,079
|
)
|
|||||
Net income for the year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,719
|
|
|
14,719
|
|
|||||
Other comprehensive loss, net of income taxes
|
|
—
|
|
|
—
|
|
|
(10,238
|
)
|
|
—
|
|
|
(10,238
|
)
|
|||||
Balance at December 31, 2019
|
|
$
|
30,621
|
|
|
$
|
2,986
|
|
|
$
|
(36,696
|
)
|
|
$
|
288,243
|
|
|
$
|
285,154
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Land
|
|
$
|
280,770
|
|
|
$
|
286,505
|
|
Plant and machinery
|
|
481,838
|
|
|
491,600
|
|
||
Total
|
|
762,608
|
|
|
778,105
|
|
||
Less: accumulated depreciation
|
|
(54,695
|
)
|
|
(26,104
|
)
|
||
Effect of currency translation
|
|
1,121
|
|
|
666
|
|
||
Property, plant, and equipment — net
|
|
$
|
709,034
|
|
|
$
|
752,667
|
|
Buildings
|
|
2.2
|
%
|
|
over 45 years
|
Plant and machinery
|
|
3.5
|
%
|
|
over 28 years
|
Balance at February 12, 2018
|
|
|
|
$
|
2,225
|
|
Accretion expense
|
|
|
|
267
|
|
|
Net currency translation
|
|
|
|
(145
|
)
|
|
Balance at December 31, 2018
|
|
|
|
$
|
2,347
|
|
Accretion expense
|
|
|
|
164
|
|
|
Net currency translation
|
|
|
|
(46
|
)
|
|
Balance at December 31, 2019
|
|
|
|
$
|
2,465
|
|
|
|
Foreign Currency Translation
|
|
Net Unrealized Loss on Derivatives
|
|
Total
|
||||||
Balance at February 12, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net current period comprehensive loss
|
|
(22,543
|
)
|
|
(3,915
|
)
|
|
(26,458
|
)
|
|||
Balance at December 31, 2018
|
|
(22,543
|
)
|
|
(3,915
|
)
|
|
(26,458
|
)
|
|||
Net current period comprehensive loss
|
|
(6,095
|
)
|
|
(4,143
|
)
|
|
(10,238
|
)
|
|||
Balance at December 31, 2019
|
|
$
|
(28,638
|
)
|
|
$
|
(8,058
|
)
|
|
$
|
(36,696
|
)
|
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Company
|
|
Good/Services
|
|
(In thousands)
|
||||||
Covanta Europe Operations Limited
|
|
Plant Services
|
|
$
|
29,916
|
|
|
$
|
26,786
|
|
Covanta Europe Operations Limited
|
|
Fixed Assets
|
|
$
|
—
|
|
|
$
|
1,716
|
|
Covanta Holding Corporation
|
|
Management services
|
|
$
|
34
|
|
|
$
|
29
|
|
Macquarie Bank International Limited
|
|
Energy hedge swaps
|
|
$
|
(730
|
)
|
|
$
|
889
|
|
Revenue Type
|
|
Timing
|
|
Performance Obligations
|
|
Measure of Progress
|
|
Type
|
|
Practical Expedients
|
Waste Revenues
|
|
Over time
|
|
Waste recovery
|
|
Units received
|
|
Fixed & Variable
|
|
Right to invoice
|
Energy Revenues
|
|
Over time
|
|
Availability to provide energy capacity and energy exported
|
|
Units generated and units exported to the market
|
|
Fixed & Variable
|
|
Right to invoice & Series (1)
|
(1)
|
Waste and Energy contracts have been determined to have an annual and monthly series, respectively.
|
1.
|
The performance obligation is part of a contract that has an original expected duration of one year or less.
|
2.
|
Revenue is recognized from the satisfaction of the performance obligations in the amount billable to our customer that corresponds directly with the value to the customer of our performance completed to date (i.e. “right-to-invoice” practical expedient).
|
3.
|
The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service or a series of distinct services that are substantially the same and that have the same pattern of transfer to our customer (i.e. “series practical expedient”).
|
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Unbilled receivables
|
|
$
|
350
|
|
|
$
|
543
|
|
Deferred revenue
|
|
$
|
17,270
|
|
|
$
|
16,047
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
||||||||||||
Future minimum payments
|
|
$
|
571
|
|
|
$
|
571
|
|
|
$
|
571
|
|
|
$
|
568
|
|
|
$
|
561
|
|
|
$
|
20,747
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
Deferred:
|
|
|
|
|
||||
Irish deferred tax
|
|
$
|
185
|
|
|
$
|
1,591
|
|
Total deferred
|
|
185
|
|
|
1,591
|
|
||
Total income tax expense
|
|
$
|
185
|
|
|
$
|
1,591
|
|
|
|
For the year ended
|
|
For the period from February 12, 2018 (Joint Venture Formation) through
|
||||
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Income tax expense at the Irish statutory rate
|
|
$
|
1,863
|
|
|
$
|
1,620
|
|
Tax losses
|
|
(1,537
|
)
|
|
(1,052
|
)
|
||
Accelerated capital allowances / depreciation
|
|
(53
|
)
|
|
950
|
|
||
Transactions not subject to corporation tax
|
|
(88
|
)
|
|
73
|
|
||
Total income tax expense
|
|
$
|
185
|
|
|
$
|
1,591
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Deferred tax components:
|
|
|
|
|
||||
Tax losses
|
|
$
|
14,555
|
|
|
$
|
13,289
|
|
Derivatives
|
|
1,677
|
|
|
426
|
|
||
Deferred financing costs
|
|
(2,163
|
)
|
|
(2,509
|
)
|
||
Accelerated capital allowances
|
|
(22,724
|
)
|
|
(19,564
|
)
|
||
Asset retirement obligations
|
|
(242
|
)
|
|
(266
|
)
|
||
Fair value adjustments arising on the application of purchase accounting
|
|
(26,149
|
)
|
|
(27,551
|
)
|
||
Net deferred tax liability
|
|
$
|
(35,046
|
)
|
|
$
|
(36,175
|
)
|
•
|
The fair value of our interest rate swaps is determined by applying the EURIBOR forward curve observable in the market to the contractual terms of our floating to fixed rate swap agreements. 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.
|
|
|
|
|
As of December 31,
|
||||||
Financial Instruments Recorded at Fair Value on a Recurring Basis:
|
|
Fair Value Measurement Level
|
|
2019
|
|
2018
|
||||
|
|
|
|
(In thousands)
|
||||||
Liabilities:
|
|
|
|
|
|
|
||||
Derivative liability — energy hedges (1)
|
|
2
|
|
$
|
1,832
|
|
|
$
|
1,472
|
|
Derivative liability — interest rate swaps (1)
|
|
2
|
|
11,584
|
|
|
7,359
|
|
||
Total liabilities:
|
|
|
|
$
|
13,416
|
|
|
$
|
8,831
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Senior loan due 2032
|
|
$
|
395,517
|
|
|
$
|
428,073
|
|
Junior loan due 2032
|
|
51,387
|
|
|
54,954
|
|
||
Deferred financing costs
|
|
(7,086
|
)
|
|
(8,515
|
)
|
||
Total debt
|
|
$
|
439,818
|
|
|
$
|
474,512
|
|
Less: current portion
|
|
(26,964
|
)
|
|
(25,568
|
)
|
||
Noncurrent debt
|
|
$
|
412,854
|
|
|
$
|
448,944
|
|
•
|
Final maturity on November 24, 2032 (approximately 15 years after the operational commencement date of the facility).
|
•
|
Scheduled repayments are made semi-annually according to a 15-year amortization profile, beginning in 2018. The Senior Loan is pre-payable at our option, subject to potential prepayment costs under Tranche A and B.
|
•
|
Borrowings bear interest as follows:
|
▪
|
Tranche A: At a fixed rate equal to 3.00% per annum
|
▪
|
Tranche B: At a fixed rate equal to 2.77% per annum
|
▪
|
Tranche C: At the 6-month Euro Interbank Offered Rate ("EURIBOR") plus 2.15% per annum. We entered into interest rate swap agreements in order to hedge our exposure to adverse variable interest rate fluctuations under Tranche C.
|
•
|
The Senior Loan is a senior obligation of Dublin Waste to Energy Limited and certain other related subsidiaries, all of which are wholly-owned, and is secured by a first priority lien on substantially all of the Dublin Waste to Energy Limited assets. The Senior Term Loan is non-recourse.
|
•
|
The 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 Senior 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 Senior Loan.
|
•
|
Final maturity on December 24, 2032 (one month after the maturity of the Senior Loan).
|
•
|
Scheduled repayments are 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 Cash flow, 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 Cash flow thereafter.
|
•
|
Tranche A borrowings will bear interest at the 6-month Euro Interbank Offered Rate ("EURIBOR") plus 4.50% per annum. The interest on this tranche is not hedged.
|
•
|
Tranche B borrowings will bear interest at a fixed rate equal to 5.358% per annum.
|
•
|
The Junior Loan is a junior obligation of Dublin Waste to Energy Limited and certain other related subsidiaries, all of which are wholly-owned, and is secured by a first priority lien on substantially all of the Dublin Waste to Energy Limited assets. The Junior Term Loan is non-recourse.
|
•
|
Under the 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 Junior Loan.
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
||||||||||||
Future minimum payments
|
|
$
|
27,219
|
|
|
$
|
28,165
|
|
|
$
|
28,418
|
|
|
$
|
30,877
|
|
|
$
|
32,738
|
|
|
$
|
299,487
|
|
|
|
|
|
Total
|
||
Balance at January 1, 2018
|
|
|
|
$
|
—
|
|
Goodwill related to joint venture formation
|
|
|
|
28,083
|
|
|
Balance at December 31, 2018
|
|
|
|
28,083
|
|
|
Effect of currency translation
|
|
|
|
(562
|
)
|
|
Balance at December 31, 2019
|
|
|
|
$
|
27,521
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Prepaid expenses
|
|
$
|
2,066
|
|
|
$
|
781
|
|
Amounts from associated company
|
|
162
|
|
|
—
|
|
||
Other
|
|
—
|
|
|
237
|
|
||
Total prepaid expenses and other current assets
|
|
$
|
2,228
|
|
|
$
|
1,018
|
|
|
|
|
|
|
||||
Operating expenses, payroll and related expenses
|
|
$
|
90
|
|
|
$
|
156
|
|
Accrued liabilities to client communities
|
|
15,812
|
|
|
11,921
|
|
||
Interest payable
|
|
2,907
|
|
|
3,790
|
|
||
Amounts owing to associated companies
|
|
2,928
|
|
|
5,202
|
|
||
Total accrued expenses and other current liabilities
|
|
$
|
21,737
|
|
|
$
|
21,069
|
|
|
|
As of December 31,
|
||||
|
|
2019
|
|
2018
|
||
Ordinary shares at €0.10 each
|
|
250,000,000
|
|
|
250,000,000
|
|
A shares at €0.10 each
|
|
1
|
|
|
1
|
|
B shares at €0.10 each
|
|
1
|
|
|
1
|
|
Deferred shares at €0.10 each
|
|
2,000
|
|
|
2,000
|
|
Total share capital issued
|
|
250,002,002
|
|
|
250,002,002
|
|