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8-K - FORM 8-K - COVANTA HOLDING CORP | c09804e8vk.htm |
Exhibit 99.1
![(COVANTA ENERGY LOGO)](c09804c0980401.gif)
Covanta Enters Agreement to Sell its Interest in Quezon Project
MORRISTOWN, NJ, December 13, 2010 Covanta Holding Corporation (NYSE:CVA) (the Company or
Covanta), today announced that it has agreed to sell all of its interests in the Quezon
coal-fired electric generation facility located in the Philippines to Electricity Generating PCL
(EGCO) for a price of approximately $215 million in cash. EGCO is a current partner in the
Quezon project and we expect the transaction to close in the first quarter of 2011, subject to
customary approvals and closing conditions.
In June of this year, Covanta announced plans to sell its equity interests in four fossil fuel
facilities in the Philippines, India and Bangladesh. Quezon is the first sale from that effort and
represents a significant majority of the value of these non-core assets. Commenting on the
transaction, Anthony Orlando, Covantas President and CEO stated that, We are pleased to be
selling our interest in Quezon to our partner in the venture, EGCO. Quezon is a world-class asset
and the valuation reflects its strong potential going forward.
The Quezon assets being sold consist of the Companys entire interest in Covanta Philippines
Operating, Inc., which provides operation and maintenance services to the facility, as well as its
approximately 27% ownership interest in the project company, Quezon Power, Inc. (QPI). The sale
is expected to generate a one-time after tax book gain of approximately $140 million at closing.
For the twelve months ended September 30, 2010, Quezons contribution to Covantas consolidated
results was: $2.8 million of revenue, $19.5 million of Adjusted EBITDA, $15.9 million in Free Cash
Flow and $0.12 of diluted earnings per share1.
Speaking about intended uses of the proceeds, Sanjiv Khattri, Covantas EVP and CFO stated that,
Consistent with our June announcement regarding capital allocation and return of capital to
shareholders, we anticipate using all of the sale proceeds that can be repatriated tax efficiently
to return capital to our shareholders; we estimate this amount to be in excess of $100 million.
Discussions with prospective buyers for the three remaining assets in India and Bangladesh
continue. The Company is committed to achieving a fair valuation and plans to retain any or all of
them if fair value cannot be achieved in a timely manner.
Citi has been retained to assist in the sale of the non-core assets.
About Covanta
Covanta Holding Corporation (NYSE:CVA) is an internationally recognized owner and operator of
large-scale Energy-from-Waste and renewable energy projects
and a recipient of the Energy Innovator Award from the U.S. Department of Energys Office of Energy
Efficiency and Renewable Energy. Covantas 44 Energy-from-Waste facilities provide communities with
an environmentally sound solution to their solid waste disposal needs by using that municipal solid
waste to generate clean, renewable energy. Annually, Covantas modern Energy-from-Waste facilities
safely and securely convert approximately 20 million tons of waste into more than 9 million
megawatt hours of clean renewable electricity and create 10 billion pounds of steam that are sold
to a variety of industries. For more information, visit www.covantaholding.com.
About EGCO
Electricity Generating PCL (EGCO) was the first independent power producer in Thailand. EGCO is
currently considered to be one of the premier independent power companies in Southeast Asia with a
range of power generation facilities under management and extensive operation, maintenance and
related power plant services capabilities. The Companys portfolio is comprised of power generation
assets with gross capacity of 7,300 MW. These facilities are situated in Thailand, the Philippines,
and Laos PDR. EGCOs fleet has a fuel mix comprised of natural gas, coal, hydropower, biomass and
solar. For more information on the group, please visit our website at egco.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of Covanta and its
subsidiaries, or general industry or broader economic performance in global markets in which
Covanta operates or competes, to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Statements that are not
historical fact are forward-looking statements. Forward-looking statements can be identified by,
among other things, the use of forward-looking language, such as the words plan, believe,
expect, anticipate, intend, estimate, project, may, will, would, could, should,
seeks, or scheduled to, or other similar words, or the negative of these terms or other
variations of these terms or comparable language, or by discussion of strategy or intentions.
Covanta cautions investors that any forward-looking statements made by Covanta are not guarantees
or indicative of future performance. Important assumptions and other important factors that could
cause actual results to differ materially from those forward-looking statements with respect to
Covanta, include, but are not limited to, the risk that Covanta may not successfully close its
announced or planned acquisitions or projects in development and those factors, risks and
uncertainties that are described in securities filings by Covanta with the SEC. Although Covanta
believes that its plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, actual results could differ materially from a projection
or assumption in any forward-looking statements. Covantas future
financial condition and results of operations, as well as any forward-looking statements, are
subject to change and inherent risks and uncertainties. The forward-looking statements contained in
this press release are made only as of the date hereof and Covanta does not have or undertake any
obligation to update or revise any forward-looking statements whether as a result of new
information, subsequent events or otherwise, unless otherwise required by law.
Contacts
Marisa F. Jacobs
Vice President, Investor Relations
862-345-5285
Marisa F. Jacobs
Vice President, Investor Relations
862-345-5285
James Regan
Associate, Media Relations and Corporate Communications
862-345-5216
Associate, Media Relations and Corporate Communications
862-345-5216
Consolidated Quezon | Exhibit 1 | |
Reconciliation of Net Income to Adjusted EBITDA |
Twelve Months Ended | ||||
September 30, 2010 | ||||
(Unaudited, in millions) | ||||
Net Income |
$ | 18.8 | ||
Income Tax Expense |
1.0 | |||
Investment Income |
(0.3 | ) | ||
Total Adjustments |
0.7 | |||
Adjusted EBITDA |
$ | 19.5 | ||
Consolidated Quezon | Exhibit 2 | |
Reconciliation of Cash Flow Provided by Operating Activities to Adjusted EBITDA |
Twelve Months Ended | ||||
September 30, 2010 | ||||
(Unaudited, in millions) | ||||
Cash Flow Provided by
Operating Activities |
$ | 15.9 | ||
Non-Cash Equity Earnings |
5.1 | |||
All Other |
(1.5 | ) | ||
Total Adjustments |
3.6 | |||
Adjusted EBITDA |
$ | 19.5 | ||
Consolidated Quezon | Exhibit 3 | |
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow |
Twelve Months Ended | ||||
September 30, 2010 | ||||
(Unaudited, in millions) | ||||
Cash Flow Provided by
Operating Activities |
$ | 15.9 | ||
Total Adjustments |
0.0 | |||
Free Cash Flow |
$ | 15.9 | ||
Footnote 1
Discussion of Non-GAAP Financial Measures
We use a number of different financial measures, both United States generally accepted accounting
principles (GAAP) and non-GAAP, in assessing the overall performance of our business. To
supplement our results prepared in accordance with GAAP, we use the measures of Adjusted EBITDA and
Free Cash Flow, which are non-GAAP measures as defined by the Securities and Exchange Commission.
The non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow as described below, and used
in the tables above, are not intended as a substitute or as an alternative to net income or cash
flow provided by operating activities as indicators of our performance or liquidity or any other
measures of performance or liquidity derived in accordance with GAAP. In addition, our non-GAAP
financial measures may be different from non-GAAP measures used by other companies, limiting their
usefulness for comparison purposes.
The presentations of Adjusted EBITDA and Free Cash flow are intended to enhance the usefulness of
our financial information by providing measures which management internally use to assess and
evaluate the overall performance of its business and those of possible acquisition candidates, and
highlight trends in the overall business.
Adjusted EBITDA
We use Adjusted EBITDA to provide further information that is useful to an understanding of the
financial covenants contained in the credit facilities of our most significant subsidiary, Covanta
Energy, and as additional ways of viewing aspects of its operations that, when viewed with the GAAP
results and the accompanying reconciliations to corresponding GAAP financial measures, provide a
more complete understanding of our business. The calculation of Adjusted EBITDA is based on the
definition in Covanta Energys credit facilities, which we have guaranteed. Adjusted EBITDA is
defined as earnings before interest, taxes, depreciation and amortization, as adjusted for
additional items subtracted from or added to net income. Because our business is substantially
comprised of that of Covanta Energy, our financial performance is substantially similar to that of
Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which
are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures
presented herein are ours, measured on a consolidated basis.
In order to provide a meaningful basis for comparison, we are providing information with respect to
our Adjusted EBITDA for the twelve months ended September 30, 2010, reconciled to net income and
cash flow provided by
operating activities, which are believed to be the most directly comparable measures under GAAP.
Free Cash Flow
Free Cash Flow is defined as cash flow provided by operating activities less maintenance capital
expenditures, which are capital expenditures primarily to maintain our existing facilities. We use
the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components
of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we
can reinvest in our businesses, such as amounts available to make acquisitions, invest in
construction of new projects or make principal payments on debt.
In order to provide a meaningful basis for comparison, we are providing information with respect to
our Free Cash Flow for the twelve months ended September 30, 2010, reconciled to cash flow provided
by operating activities, which we believe to be the most directly comparable measure under GAAP.