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Covanta Holding Corporation (NYSE:CVA)

Q3 2011 Earnings Conference Call

October 20, 2011 8:30 AM ET

Executives

Alan Katz – VP, IR

Tony Orlando – President and CEO

Sanjiv Khattri – CFO

Analysts

Michael Hoffman Wunderlich Securites

Michael Horwitz – Baird & Company

Hamzah Mazari – Credit Suisse

Brian Shore – Avondale Partners

Paul Clegg – Mizuho Securities

JinMing Liu – Ardour Capital

Navi Tejer [ph] Royale Capital

Edward Okine – Basso Capital

Mark Anderson – Axial Capital

Operator

Good morning, everyone, and welcome to the Coventa Holding Corporation’s Third Quarter 2011 Financial Results Conference Call and Webcast.

This call is being taped and a replay will be available to listen to later this morning. The playback number is 800-585-8367 for callers in the US, and 404-537-3406 for those of you calling from outside of the country. The replay pass code is 115-209-54. The webcast will also be archived on www.coventaenergy.com and can be replayed or downloaded as an MP3 file.

At this time, for opening remarks and introduction, I would like to turn the call over to Alan Katz, Covanta’s Vice President of Investor Relations. Please go ahead.

Alan Katz

Thank you, Charice, and good morning.

Welcome to Covanta’s third quarter 2011 conference call. It’s been a busy three months since our last call. The market volatility has definitely forced me to hit the ground running. Luckily, I’ve rounded up quickly on this exciting story and I’m already met with a large number of you.

Conference season is just about starting. So I’m looking forward to meeting many more of you over the next few months. As always, we appreciate your continued support of Covanta.

Joining me today on the call will be Tony Orlando, our President and CEO; Sanjiv Khattri, our CFO; Tom Bucks, our Chief Accounting Officer; and Brad Helgelson, our Treasurer.

We will provide an operational and business update, review of our financial results and take your questions. During their prepared remarks, Tony and Sanjiv will be referencing certain slides that we prepared to supplement the audio portion of this call. These slides can be accessed now or after the call in the Investor Relations section of covantaenergy.com.

The following discussion may contain forward-looking statements and our actual results may differ materially from those expectations. Information regarding factors that could cause such differences can be found in the company’s reports and registration statements filed with the SEC.

The content of this conference call contains time sensitive information that is only accurate as of the date of this live broadcast, October 20th, 2011. We do not assume any obligation to update our forward-looking information unless required by law. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Covanta is prohibited.

The information presented includes non-GAAP financial measures. Reconciliation to the most directly comparable GAAP measure and management’s reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on our website. Because these measures are not calculated in accordance with US GAAP, they should not be considered in isolation from our financial statements prepared in accordance with GAAP. It should also be noted that our computations of free cash flow, adjusted EBITDA and adjusted EPS may differ from similarly titled computations used by other companies.

With that, I’d like to turn the call over to our president and CEO, Tony Orlando. Tony?

Tony Orlando

Thanks, Alan, and good morning, everyone.

Let’s begin with a quick summary of the third quarter. For those of you using the Web deck, please turn to slide three. It was another solid quarter and our results were in line with expectations. Compared to the third quarter of 2010, operating revenue was up 7%, adjusted EBITDA was up 1%, free cash flow was up 12%, and adjusted EPS was flat.

I’m quite pleased with these results, which Sanjiv will discuss in detail. Our energy-from-waste business continues to perform well even in the face of a sluggish economy. We continue to generate predictable cash flow which we’re utilizing to deliver on our commitment to return capital to shareholders. In addition to the regular dividend during the third quarter, we used $81 million to buy back stock. Since the program began last summer, we have now repurchased 12% of our shares.

Before I go on, I want to pause for a moment to highlight our team’s outstanding work in dealing with Hurricane Irene, which swept through the Northeast in late August. Its path affected half of our facilities. It even hit our corporate office, taking out power for several days, but we didn’t miss a beat.

We had no (inaudible) recordable accidents, we provided uninterrupted services and we accepted all contracted waste delivered to us. This is really phenomenal and it exemplifies the operating expertise that clients expect of us and that we deliver day in and day out.

From our financial perspective, the net impact was insignificant. As you can imagine, we had a lot of wet waste delivered to our facilities, which increased the tons we processed, but also lowered energy production. Also, due to safety precautions and downed power lines, utilities weren’t able to accept all the electricity we could have produced. Therefore, we had to curtail and, in some cases, suspend energy sales. So the net impact of Hurricane Irene was slightly higher waste revenue offset by slightly lower energy revenue, and operations continued right on track. Again, this points to the quality of our team and the predictability of our business.

Let me now turn to each of our markets and our initiatives to grow the business. Let’s start with waste on slide four. We had our third quarter in a row of improved year-over-year tip fee pricing. We’re also leveraging our internal capabilities to manage spot market exposure. We believe that we’ll be able to continue to do so throughout the rest of the year and into next year. We’re forecasting a full year tip fee price improvement of 1% to 2%.

Looking ahead to next year, and assuming the economy doesn’t slip back into recession, we anticipate our waste pricing will grow at inflationary rates supported contact escalators, relatively high diesel fuel cost and our growing special waste business.

We’re excited by the opportunities to add new customers who are committed to implementing a zero landfill solution. We had a small but public wind just the other day. A local hauler that contracts with us want to bid in Washington D.C. to convert Capitol Hill’s non-recycled waste into clean energy. In its press release, the architect of the Capitol stated, quote, “Under this new contract, instead of being placed in landfills, the waste will be burned, generating enough electricity to power an office building the size of the Dirksen or Longworth Building for several months.

They also cited energy from waste as the most recent example of their continuing partnership with Congress to reduce energy consumptions, conserve natural resources and protect the environment. We see this as more evidence of a favorable trend that will help us grow the business.

Moving on to metals on slide five. Our metal revenue was up $7 million to $20 million compared to same quarter last year. Recycled metal pricing was strong in Q3 for both ferrous and non-ferrous. We’ve seen some recent pull back in the non-ferrous metal pricing, although, so far, metal pricing is holding up.

Moving forward, we are working to improve both the quantity and quality of the metal we recover for recycling. As I’ve mentioned before, we recover over 400,000 tons of metal per year. The modest capital investments that we have made to date are delivering very nice returns and we have a number of small capital projects in the pipeline that will begin to deliver incremental metal recovery next year.

Of course, our metal revenue will be driven predominantly by market pricing for the underlying commodity. The year-to-date average price for the number one HMS Index, which is what we use as a proxy for directional movement in ferrous metal pricing, is running more than double the average price of the full year of 2009. If we see continued demand from emerging economies and global growth, pricing in this market should remain strong.

For our commentary on energy, please turn to slide six. Since our last discussion, we’ve seen expectations of future power prices move a bit lower causing a modest reduction to our expected full-year results. However, with only a few months left in the year, and the hedges we’ve previously put in place, our exposure to the market is quite small. At this point, even a dramatic price change would have less than a couple million dollar impact, plus or minus, for the rest of the year.

I want to pause here to review our biomass facility operations. We’ve said before that when the bark spread goes to zero, we will economically dispatch these facilities offline. We’ve had two of our facilities offline for most of the year. It does take time and cost money to take units down. And, in light of the recent weakness in energy prices, we are now in the process of taking another facility offline. Furthermore, where we continued to operate our biomass facilities, the bark spread is being squeezed by a combination of lower electricity prices, fewer subsidies, lower prices for renewable energy credits, and wood fuel prices that have inched up.

Let me recap the biomass. In total, of the seven biomass facilities we own and operate, two have fixed price contracts and are generating positive cash and adjusted EBITDA. Of the five others, two have been offline for the better part of the year. One is coming offline now and the other two are running at very thin margins.

Overall, these plants have a fairly small impact on results but they were positive contributors in 2010 and that has not been the case so far this year. We’re proactively addressing that and expect our biomass will produce some benefit next year. More importantly, in the context of a business with our adjusted EBITDA and free cash flow, the biomass facilities don’t have a meaningful impact, unless, we see energy prices move up dramatically, in which case, we’ll have a nice upside.

In terms of our total energy portfolio, looking ahead to 2012, we have 1.5 million megawatt hours of energy from waste output exposed to the market which should limit our market price volatility utility next year to about plus or minus $20 million.

That’s about the same position we started this year. We believe this provides us with an acceptable level of volatility while preserving some upside should the market move in our favor. In addition, we have about 700,000 megawatt hours of biomass production available to run if it’s profitable.

Moving on to slide seven, I’d like to spend a few minutes discussing our energy outlook and exposure over the next five years. As previously noted, our current average contract price is in the low $70 per megawatt hour. Clearly, that’s above the national average market electricity price and that sounds like it could be a meaningful headwind but it’s not.

Let me tell you why we don’t expect to see a significant impact of marking to market our energy contracts. First, we need to consider the average price includes the two biomass facilities I just mentioned, which are generating positive adjusted EBITDA and cash flow. They command a premium renewable price in California and we expect to be able to re-contract at prices similar to our current pricing when these contracts roll off mid decade.

Second, many of our energy from waste facilities sell steam and that commands a better price than electricity. Remember, when I’m discussing these numbers, we have converted our steam sales into megawatt hours to make it easier to understand. Our average contracted steam price is quite a bit higher than our electricity price and we expect to be able to re-contract at similar prices to our current levels.

As an example, we just entered a new steam contract that will kick in in 2013. It will flow with natural gas and other indices, but it has a floor and a ceiling price. The floor is only slightly below our current average steam price.

So if we just focus on the contracted and hedged electricity at our energy from waste facilities, we have an average price that’s in the low $60 including capacity. During the next five years, we have about 2 million megawatt hours of contracts and hedges rolling off. Based on our current market outlook, these contract rollovers are expected to cause some very modest headwinds, less than you would expect for two reasons. Let me give you an example of one of the reasons.

One of our facilities has a service agreement and a power sale agreement that ends concurrently a couple of years from now. The current power sale agreement has a fixed price of $83 per megawatt hour, which is clearly above the market, but we currently share only 10% of the energy revenue.

When the service agreement ends, we expect it will convert to a tip fee facility. So all kinds of things will change including our share of energy revenue. The price per megawatt hour and our waste disposal fees will also change. So we don’t look at just the energy price, we look at the entire transition.

Taking this facility’s example, the electricity price in isolation is irrelevant, and that’s not unusual. We also have excellent locations and that tends to increase the energy price as well. So I also want to note that when our service agreement transitions to a tip fee, our share of total energy production will move up.

Remember, with our service B contracts, we typically get 10% of the energy revenues and in our tip fee contracts, that number is typically 100%. Therefore, during the next five years, while our contracted energy from waste generation is expected to decline by 2 million megawatt hours per year, during that same period, we expect our exposed energy generation will grow by about 3 million megawatt hours per year for a net increase of 1 million. I know these service contract changes continue to make it difficult for analysts to model our business long term.

Of course, we’ll continue working to provide shareholders with information to understand and evaluate this aspect of our business. But perhaps the simplest way to explain it is this. When we look at our energy contracts, we foresee a very modest headwind and, more importantly, when we look at the entire business, assuming current market condition persists, we are confident in our ability to sustain growth even if we don’t add any new facilities to our portfolio.

Furthermore, we see potential upside to our increased power market exposure and are comfortable with our position for three reasons. We have hard to replicate assets and good locations, many of which have already paid off their project debt. We don’t pay for our fuel and, in fact, we get paid to take it. And finally, as policymakers seek to find alternatives to fossil fuel, we believe our energy output will become more highly valued.

Let me now turn the construction initiatives on slide eight. First, our current construction activities remain on track. Our biggest project, the expansion of Honolulu Energy from waste facility, was about 70% complete at the end of the quarter right on schedule and on budget. We still expect this project to move into operational phase in mid-2012 at which point our operating contracts will begin.

Our two China construction projects are now both processing waste. While we aren’t focusing on China as a growth opportunity right now, our plans there are sell funding and these new facilities will be net positive to our adjusted EBITDA and free cash flow moving forward. As you have all likely seen, we received our notice to proceed on the Durham-York project in Ontario, Canada this past quarter. We’re very excited we have broken ground on this 250 million Canadian-dollar project that should take about three years to build.

The timing works well and that our construction revenue from this project will be ramping up, at the same time construction from our Honolulu Project is ramping down. And similar to the Honolulu Project, we will receive a fee to operate and maintain the facility for 20 years after the construction is complete. This will be a state-of-the-art showcase facility, which will be important in highlighting future opportunities, to build new plants in North America.

Moving onto our development pipeline which can be found on slide nine. As many of you know, we received a decision on the Leeds opportunity in the UK. Unfortunately, Leeds city council did not select us as a preferred bidder. We’ll learn more about the reason for their selection before the end of the year and certainly look to learn from this experience.

We do know that we and our joint venture partners submitted a quality bid while maintaining a disciplined approach given our investment return thresholds. I should also point out that Leeds was the smallest facility on our UK pipeline and, therefore, did not have the economy to scale we expect to enjoy at our other opportunities.

On a more positive note, we receive good news on one of our larger development opportunities the other day. We were granted planning consent at the Rookery South Facility in Bedfordshire. There’s still much work to be done before this project can move forward, but this is a big step in the right direction.

It’s also important to note this was the first facility to receive consent from UK’s Infrastructure Planning Commission. We also remained focused on our opportunity at Ince, which is outside of Liverpool, which is a priority development project in the UK. We’re awarded two final bids for the Merseyside contract, which would be our anchor tenant for this project. Our bid is due in December and we anticipate Merseyside will make a decision in mid-2012.

We are closely plugged into the situation in the UK and I assure you we’ll maintain our discipline and focus as we (inaudible) to leverage our experience and capitalize on the UK market opportunity to create value for both clients and shareholders.

I’ve covered a lot of ground. So, let me turn to slide 10 and summarize our outlook.

First, we’re on track to finish this year consistent with our guidance, which we just narrated. Looking ahead to next year, we’re mindful of the economic uncertainty as European leaders seek a positive way forward. Of course, if the economy slips back into recession, we’ll face hurdles like everyone else. We’re not immune, but we are in better position than most to weather the storm if it comes.

Most of our revenue is under contract and we’re providing essential service at competitive prices. Furthermore, we’re maintaining balance sheet with ample liquidity. But we’re not satisfied with just holding our own. We intend on growing our adjusted EBITDA again next year.

Yes, we have challenges such as contract transitions that were reduced, our debt service pass through revenue, but we’re also doing many things which will more than offset this reduction.

We’ve got new EFW projects coming online that will boost profitability next year. We’re also implementing a number of organic growth initiatives that will improve results. I’ve already talked about increased recycling metal revenue recovery as well as growing our special waste business. But that’s not all we’re doing.

We’re also employing new technologies to drive down cost. For example, we’re deploying a technology which we developed to reduce our asset [ph] disposal cost. In short, we’re innovating and aggressively managing the things that we can control to grow the bottom line.

So, even though the economy feels worse than it did three months ago, I’m still cautiously optimistic about our markets. The waste market tends to react slowly to economic change, plus our special waste growth will mitigate spot exposure. And therefore, we expect to see waste disposal prices moving up with inflation next year. The recycled metal market is where I see the biggest potential for volatility.

Prices will react to the global economic activity and that could impact our top and bottom line. Notwithstanding the recent economic slowdown, pricing continues to be strong. And that’s certainly a good sign. And our metal revenue is now on pace to be over $70 million this year.

As previously noted, we are working to increase the quantity and quality of metal we recover, which should shield us somewhat if a downturn does occur. But it will also accelerate our revenue if pricing moves in our favor.

And finally, energy pricing is also expected to see modest improvement next year. Obviously, pricing will be affected by natural gas supply and weather conditions, as well as the overall economy, but it’s worth noting that we’ve already locked in some year-over-year price improvement with our hedges.

Again, I feel good about our overall position. In particular, I’m excited about our organic growth initiatives. We’re working to create value no matter what the economy brings and I’m confident in our team’s ability to get the job done.

Now, I’ll turn the call over to Sanjiv for his remarks.

Sanjiv Khattri

Thanks, Tony, and good morning again.

It’s good to speak with all of you again. 2011 is nearly over. We have three quarters in the bank. This is my fifth earnings call as your CFO. It’s hard to believe. Time flies when you’re having fun.

Let’s get to some numbers now. As you heard Tony’s remark, our third quarter is also right in line with our expectations and consistent with our full year guidance. Our core business continued its solid operating performance and we are positioned to finish the year strong, with broad year-over-year improvements consistent with the guidance that we updated yesterday.

Let’s start with slide 12 Q3 financial highlights. We had a good solid quarter with all of our key metrics up year-over-year. Revenue was $422 million versus $403 million last year. Adjusted EBITDA was about $152 million versus $150 million last year.

Free cash flow of $106 million versus $95 million, and adjusted EPS was flat. For the nine months, year-to-date revenue is $102 billion, free cash flow is $215 million and adjusted EBITDA is $346 million. All in all, a good solid year so far. In addition, please refer to page 25 of the supplemental material for a more detailed traditional P&L walk.

Rather than going through the variances here, let’s move right to the next slide. But I’ll take you through what’s behind the numbers of our Q3 year-over-year performance using the waterfalls similar to what we’ve referenced in prior quarters and that I know many of you find very useful.

Starting with revenue on slide 13, our total revenue is up about 7% or $29 million year-over-year to $432 million. The most significant driver was a higher construction revenue related to our successful Honolulu expansion project.

However, we also saw contributions from strong recycled metals pricing and improved risk revenues from both contractual escalations and higher volumes. These were somewhat offset by lower contributions from biomass facilities and lower energy pricing.

Tony took you through what’s happening with energy in general and biomass in particular, so I won’t belabor the factors driving this deterioration [ph].

Going on slide 14, adjusted EBITDA was up $2 million year-over-year to $152 million. Again, we saw an increase in this quarter in organic growth, which we define as growth in our core business. This includes contributions from our aggressive asset management and contract escalations as well as reduced goods spending.

Another positive driver for adjusted EBITDA was the impact of strong metal pricing. This more than offsets the $4 million impact that our biomass facilities had in our adjusted EBITDA and the impact of the lower debt service pass through billings.

As you know, we’ve been experiencing a reduction in debt service pass through revenue and billings as we’ve paid off more and more project debt. We will continue to see this impact moving forward. However, this is only one piece of the overall picture. This will be a $20 million impact to adjusted EBITDA next year, but will not have any impact to our net cash flow. In addition, we also expect to more than offset the impact to adjusted EBITDA with some of the growth initiatives we’ve discussed.

As Tony mentioned, metal has been a big driver of our adjusted EBITDA this year. We are making some great size in metal and we see good opportunity in improving our recovery rate. However, this is a volatile market and this number (inaudible) dramatically in a relatively short time due to pricing changes.

Moving on to slide 15, Q2 free cash flow was $106 million up $11 million from Q3 last year, which was driven primarily by working capital in the quarter offset by higher maintenance capital spending. Free cash flow along with adjusted EBITDA is our financial metrics and drive how we manage and measure our business internally.

We are using free cash flow for three primary uses – to fund project debt amortization, which in turn creates long-term debt capacity; discretionary capital spending; and aggressive shareholder. As the amount of debt amortization goes down, the amount of free cash flow available for both growth and shareholder actions goes up. This will become a meaningful driver of value over the next several years.

Now turning to slide 16. Our adjusted EPS is flat compared to 2010. The benefit of higher operating income and a much lower share count as a result of our buyback program was offset by a higher effective tax rate for the quarter. There’s a lot going on with our booked tax rate, caused primarily by the fact that in both (inaudible) quarters we had a couple of non-cash expenses that were non-deductible.

What is notable is that our cash taxes remained flat versus expectations, between $10 million to $15 million for the full year. As you all commented over the last several quarters, we have increased the amount of disclosure both in the press release and in the Web deck in order to better enable you to recognize the robustness of our business model.

Last quarter, we spent a fair amount of time discussing why our modest net income generates a very high adjusted EBITDA and a high free cash flow. For your benefit in the supplemental material, I believe it’s like 26. We have included the same chart with updated third quarter results.

This quarter, I would like to dwell into the major components of our revenue. This should enable you to both appreciate the stability of the majority of our revenue and help model the position that is exposed.

Let’s move to slide 17. You’re probably not used to seeing such a colorful slide with so few numbers on it from me, but hopefully, you’ll find it useful. We will plan on including this every quarter with updated data.

We spent a lot of time discussing the contracted nature of our business. While we have approximately 75% based in service revenues under long-term contracts, we see some good opportunities in the uncommitted 25% as well.

I’ll start off by saying that the waste business is naturally stable and somewhat slow moving, especially when compared to spot energy or spot metal. So even with exposure to the waste spot market, we see relative stability in that area of our business. Said another way, typically the spot based market moves are not volatile either on the upside or on the downside.

Moreover, our increased focus on special waste normally priced at a premium two spot is a nice offset to any other downside pressure in spot. With respect to overall levels of spot exposure, we also like to keep some bandwidth to opportunistically seek incremental long-term municipal waste contracts and we need spot capacity to do that. In addition, we need to maintain a minimum level of spot capacity in order to manage deliveries through scheduled and unscheduled plant maintenance activity.

Overall, we are very comfortable with our current mix, but could look to decrease our spot exposure if good opportunities present themselves. Metals revenue is now a growing component of our waste and services revenue, with 7% in the last 12 months. While still small, it represents an important component of revenue that flows mostly to the bottom line. During times of strong pricing, like 2011, this allows for some nice upside.

In terms of energy revenue, Tony covered this, this is very robust this year. Currently, 25% of our energy revenue is exposed, 20% in EFW and 5% is biomass. We manage our near-term exposure conservatively by hedging. Longer term, even as the absolute level of this exposure increases, we view that as actually as potential upside given our global view of energy.

Overall, the revenue mix provides us stability and allows us to have good short-term and medium-term visibility on our cash flow and adjusted EBITDA, while providing the opportunity to take advantage of the markets moving over time.

Turning to slide 18, I wanted to spend a couple of minutes, if I could, going to the sustainable nature of our free cash flow. This is a very important slide and we believe is at the core of the pieces that should drive a long-term investment in Covanta.

First, many of you noted the free cash flow yield last quarter. Our free cash flow yield as of September 30th, using the midpoint of our updated 2011 guidance range, was 13%, which we don’t believe at all reflects a stable and strong nature of our business. As you know, a big portion of that free cash flow was distributed to our shareholders. There are also several points that I made last quarter which I’d like to reiterate.

First, as you saw on the last slide, our baseline business is highly contracted and predictable. We have about three quarters of our total revenue contracted. Second, looking at the medium term we see a number of growth opportunities in our core business. This should offset the decline in debt service pass through revenues and higher corporate interest as we leave (inaudible) some of our debt.

Third, our NOL will be fully utilized sometime in the mid-decade. We have other tax attributes which would keep us from being a full tax payer until much later in the decade. When absent to other changes, our cash taxes are expected to increase. This will be more than offset by tailwind from contract traditions and continued organic growth opportunities.

Lastly, we see potential for upside from our development projects and over the long-term energy prices. However, as Leeds has shown, we will be prudent with capital and only seek profitable, high return on investment development.

Even as we have focused on growth, we have remained committed to our effort to return capital to shareholders, as you can see on slide set 19. During the quarter, we were able to take advantage of the current valuation of our stock and repurchased 5.2 million shares at a total cost of $81 million. We also paid out the prior quarter’s dividend and declared another one this quarter.

Since we paid out special cash dividend and we can now repurchase program in the fourth quarter of last year, we have reduced our shares outstanding by 12% and returned a total of $565 million of capital to shareholders. This is an impressive tally anyway you look at it. Further, our board increased our buyback operation in September by another $100 million.

And this time, I would be remiss in not repeating our capital allocation policy. We have sustainable cash generation that allows us to reinvest in the business wherever we see the best use of our capital, including our current development pipeline. We still believe that investing in the business for long-term growth is the best use of capital, but we remained disciplined when it comes to our return thresholds.

However, as we have also said in the past, we believe in the value of returning capital to shareholders through cash dividends and share repurchases and we plan to continue aggressively returning amounts not invested in our growth initiatives. The next take away from this table should be that we remain serious about returning capital to our shareholders. In June of last year, Sam and Tony laid out the strategy in this regard and so far, we have executed it flawlessly.

Turning to our balance sheet for a quick comment. Let’s move to slide 20, which we have been showing for awhile now. Our net debt to adjusted EBITDA versus year-end 2010 has improved. You do continue debt pay down, as well as proceeds from the Asia assets sales. Net debt to our balance sheet remains in very solid shape. It should be noted that our consolidated (inaudible) metrics are mostly unchanged from year-end 2009, a period during which we distributed $565 million to the shareholders, and paid down project debt.

A quick update on asset sales. Earlier this month, we closed on the sale of our third Asia based IPP asset in Madurai, India. We’ve realized total net proceeds of approximately 256 million net of transaction cost from our asset sales so far this year. Aside from the 137 million that was already repatriated tax efficiently, the rest of these proceeds will sit overseas for now. We look to investors in our overseas development projects as they come to fruition.

We had good news on our last Asia IPP sale Haripur Bangladesh just a few hours ago. We signed a contract and hope to close over the next several months, subject to the usual approvals. If successful, total gross proceeds from all four assets will be in the range of $270 million to $290 million, the same range we gave you when we embarked on the asset sales. The team did a good job in the tough M&A environment.

A quick comment on liquidity. Despite our strong balance sheet and excess to significant lines of credit in these volatile times, we remained very focused on near-term and medium-term liquidity despite our obvious focus on both growth and shareholder actions.

Let me now provide a quick few comments on the outlook for the next quarter. Turning to slide 21. We expect the adjusted EBITDA and adjusted EPS to be up significantly compared to the prior year mainly due to shifting maintenance activity out of Q4 and into Q2, but also as a result of improved performance. Lastly, we expect free cash flow to be somewhat down with the increase in adjusted EBITDA offset by the high yield interest payment, which is bi-annual and lower working capital.

Net free cash flow should be quite strong once you adjust for these expected changes in working capital. We are also cognizant that there could be a downside in the short term. If the economy goes back into a recession or if Europe faces more significant setbacks, like everyone else, we will face some challenges in metal revenue and spot energy. But the business is fairly stable and very resilient.

The contracts that we have, the role we play in the infrastructure and our strong relationships with our municipal clients would be an enormous asset in that situation and we would be much better positioned than most other organizations. Remember, this is a positive cash flow business under any economic scenario.

Let’s move on to slide 22 for the guidance update. Our third quarter results and our, in fact, 2011 year-to-date total has been well in line with our expectations and given the visibility that we have for the fourth quarter, we narrow 2011 guidance radius. We now have adjusted EBITDA to be in the range of $485 million to $505 million, free cash flow to be in the range of $260 million to $290 and adjusted EPS to be between $0.45 and $0.55 per share.

We tighten the range on our outlook for both adjusted EBITDA and free cash flow but generally kept these numbers with our new guidance. The midpoint of our adjusted EBITDA is down just 1% due to our biomass facilities, which Tony addressed earlier, but it’s still meaningfully up from the prior year.

Adjusted EPS will narrow towards the higher end of the range largely due to the benefits of the lower share count and our improved operating performance. Let me wrap up with a quick comment before we take Q&A on our singular focus as a management team to create shareholder value.

On slide 23, we will outline the three pillars that underline this focus. As Tony said earlier, we have a phenomenal operating team that runs our business on a day-to-day business. Our trailing 12-month vulnerability remains above 90% and we have an impressive track record based on key operating and financial metrics.

We are continually improving our operating processes by focusing on the safety of people, the environment, and our overall productivity. This is what drives us strong financial results and our stable cash generation.

Growth is a priority. Organic growth opportunities ahead of us are very exciting and we are running full steam ahead to make those happen. And longer term, we will benefit from development. And finally, our track record on shareholder action speaks for itself.

We look forward to a solid year-end to the year and are focused on prudently managing our business in these interesting but challenging times.

With that, I’ll conclude my remarks and now let’s move on to some Q&A. Charice, please open up the phone lines.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Your first question comes from Michael Hoffman with Wunderlich.

Michael Hoffman Wunderlich Securites

Hi, good morning and nice job on the numbers.

Tony Orlando

Good morning.

Michael Hoffman Wunderlich Securites

And thank you for the transparency too. It’s been very helpful. Clearly – and you’ve acknowledge it – metals could be a point of volatility in the business model. At this phase of the sort of economic cycle, if you will, and if we sort of frame it as summer of 2009 with the bottom and then whatever level of activity we’re in, we’ve been normalizing around that since that bottom. Would you look at the metals dip at this juncture more of a seasonal pattern that has typically happen prior to the Great Recession than a (inaudible) event in the economy going off of a cliff?

Tony Orlando

Well, let me take this. This is Tony, Michael. There’s a couple things. What did dip in October was non-ferrous metal pricing, not ferrous metal pricing. So let’s start with that. And in non-ferrous metal pricing, it represents roughly 20% of our metal revenue and the digit is pretty modest. It was about 10%.

So I think actually what we’ve seen throughout these last four months since the equity market started to get particularly volatile was actually pretty stable metal markets. They’ve been relatively consistent. Clearly, the big drivers here are going to be emerging markets and the demand from both China and Eastern Europe, but it’s also what’s going on here in the US economy and what we’re seeing up to this point is that it’s still staying strong.

Now, it’s hard to predict kind of what might play out next year particularly with all the uncertainty in Europe. But right now, we feel pretty good about where the metal prices are just kind of an overall supply and demand.

Michael Hoffman – Wunderlich Securites

Okay. The other question in that, which regards to economy, you made a comment that it feels like it’s weakening. But that’s more of a feeling than actually what the underlying data would suggest, I think, I’m hearing, because if you look at your waste stream, you’re not necessarily seeing sort of a constituency the waste stream change in a matter that would say, “Gees, I’m starting to see this economic pressure.”

Tony Orlando

Yeah. No, that’s exactly right, Michael. I mean, the feeling and the sense is just – from reading the newspaper every day, when we look at our actual numbers on the business, we’re seeing good, consistent, steady performance and really no indication of what the headlines read translating into our business numbers.

Michael Hoffman – Wunderlich Securites

Okay. And then, just so I’m clear on the construction side, if I understood correctly, we should look for at least a full-year basis. Durham offsets Honolulu, so year-to-date, we’ve done about 38 million. I’m assuming we’ll finish the year somewhere and around at 50 or 55 kind of number. And next year, we kind of will have a 50 to 60 million kind of from Durham and that’s the way to think about it?

Tony Orlando

The numbers this year are higher than the number you’ve cited. I don’t have them, but Honolulu project is now about 70% complete re-recorded revenue on a percent complete basis. I think it started the year – I don’t remember the exact number, but it’s closer to 150 million on a full year basis. And it will be – we expected to be relatively closer.

The one is ramping down and the other is ramping up next year. But it’s not going to be a big driver on the bottom line either way, although it could move around the revenue line a little bit.

Michael Hoffman – Wunderlich Securites

Question, slide 17 was a great slide. This showing sort of fixed versus variable on your revenues between the two business sources of revenues. If I looked out five years, would that mix still be about 75, 25?

Tony Orlando

Well, obviously, we have a lot of contracts rolling off. I mean, I specifically talked about the energy side, right? We have currently, of our contracted base, which we’re entering this year with our contracted energy base entering 2012, with about 3.8 million megawatt hours contracted, we’ve got about 2 million megawatts rolling off to that number in the next five years.

Now, having said that, we will undoubtedly hedge as we’re going into years – we potentially will contract if we think it makes sense. So, I think we’ve got one thing. We’ve got contracts roiling off, but, then, we expect them to be replaced with either hedges or other contracts on the energy side.

On the waste side, we also have contracts rolling off there as well. But again, we would expect similarly that we will replace those and, typically, we would expect to replace on the waste side with five-year, two-year, three-year, or maybe even 10 to 20-year contracts.

So, we would expect to replace the energy contracts. So, as we get closer to each year, we’re going to renew and we’d like to go into each year with contracted percentage kind of similar to the levels that we have now on the waste side. But it will be – there definitely will be contracts rolling off and the question, of course, is how do you re-price those. And overall, we feel good about our ability to continue growing the businesses. We look at all those transitions.

Sanjiv Khattri

Yeah. And I think, if I could just add one thing, Michael, as you sort of looked to model this. I think the key point we wanted to make – and I want to repeat it as sort of in black and white – is that to do a simplistic spot analysis of our transitions in energy would be misleading. And so, it’s much more subtle than that. I think ultimately (inaudible) due facilities are all our spot waste and service buy would only grow to the extent that metals does better and we’re able to squeeze more metal out. Otherwise, it’s going to stay.

Obviously, pricing will bring it up, but the percentages will change as Tony pointed out. Energy, the buy will grow as we get a bigger share, but depending on what else we do in the contract transition. So, net-net, I think, the trajectory is positive any way you look at it.

Michael Hoffman – Wunderlich Securites

Okay. And asking that slightly differently, as you think about looking out over that time and those roll-offs, where are you comfortable as far as the mix of sort of the fixed versus variable in your revenue stream?

Tony Orlando

I think, again, on the waste side of the business, we believe that the market like stability that our municipal clients like stability, and, therefore, we will have the opportunity to enter into long-term five-year type contract that both we and municipal clients are happy with.

On the energy side, there’s not as much of a market for the long-term contract. And so, I think there will be some opportunities. Again, as an example, I pointed out, we entered into a new steam contract, and steam is obviously different than electricity. It’s a dedicated supply. We can get long-term contracts there.

And I think that the way those contracts will likely play out is what happened on this deal that we just recently signed where it has floor and a ceiling so that both parties get a reasonable amount of certainty and then it kind of floats in between.

But on electricity, it’s not all that likely we’re going to sign long-term electricity contract. So I think what we’ll do there is we’ll be looking at the hedge. And the market is liquid enough that we can hedge. Really, that’s kind of whatever term we think makes sense. Currently, we’ve been hedging one year out. We might think about hedging a little bit of longer term as some of our contracts are rolling off. But that’s something that we’ll decide as we move forward.

So, I think the short version of that is we expect a similar 75-25 split on the waste side. Absent to hedging, we’d expect the energy to have more market exposure and then we’ll dampen that down with hedging.

Michael Hoffman – Wunderlich Securites

Okay. Thank you very much.

Sanjiv Khattri

Thanks, Michael.

Operator

Thank you. Your next question comes from Hamzah Mazari with Credit Suisse.

Sanjiv Khattri

Hi, Hamzah, how are you?

Hamzah Mazari – Credit Suisse

I’m doing well. Thank you. How are you, guys?

Tony Orlando

Good. Good morning.

Hamzah Mazari – Credit Suisse

Good morning. The first question is just around our transitioning or how you think about switching from a service fee to a tip fee contract. Is that something you initiate or the customer does? How does that process work? And do you feel comfortable with the added risk exposure with going towards tip fees?

Tony Orlando

We’ve got a lot of contracts that are rolling off in the next few years. We’ve already gone through a period with a lot of contracts that rolled off. And what we tried to do is respond to what our municipal clients want us in terms of the service that we can provide and offer.

Some of those clients would prefer to move to a tipping fee arrangement where it’s simpler and they just agreed to a waste disposal price. Some of our clients want to stay more engaged and move to a service fee. So, what we’ve really done is work to respond to our client’s needs.

As an example, our Huntington contract, which we renegotiated a couple of years ago and it rolls over in 2012, that contract was extended on a service fee basis. Whereas a bunch of our other contracts like Indianapolis, it was a service fee. The client there wanted to simplify and move to a tip fee. So, we move to a tip fee.

We’re really responding to our clients that we can handle kind of either approach. Clearly, there is some more risk in a tip fee structure but there’s also potentially more rewards. And so, with that potential volatility, we think we can capitalize on that. But, again, we’re really trying to respond to what our client need and we feel very comfortable with either of those approaches.

Hamzah Mazari – Credit Suisse

That’s fair enough. And second question is just on your development pipeline in Europe, could you maybe talk about the project financing environment given the macro uncertainty there and how that impacts your business? If that gets worse, can we expect projects to get pushed out? And then what’s your thinking on capital allocation strategy if that does happen? Do you just buy back or done a stock or how do you think about that?

Sanjiv Khattri

Well, Hamzah, obviously, we are mindful of what’s going on there. And Tony mentioned, even the risk of some spillover from Europe line into even the US economy. So, we are mindful of it. But these are long-term investments we are making.

Long term, it’s hard not to be bullish about the UK economy and the UK risk policy and the UK infrastructures. So, we are going to be mindful of that. Clearly, if there are significant dips near-term or there’s a slowdown in banking by a couple of quarters that could potentially impact the projects.

But right now, we have to have a long-term view, and we are focused on it. The one thing we will not compromise, and while there are many negative takeaways from these, we are disappointed. The one very positive takeaway is how prudent we have been with our capital. So, we will continue to be vigilant that we only pour capital onto growth.

What we will define as access capital we will give back to shareholders. So I actually feel pretty comfortable with our strategy right now and we plan to be transparent with you. Some capital will go into organic growth, some will go into long-term development, and some will come back to you as for shareholder actions.

Hamzah Mazari – Credit Suisse

That’s great. And just the last question on your biomass facilities. Is that a business that’s an encore for you now? Or how do you think about that given the bark spread and your outlook on electricity pricing?

Unidentified Speaker

Well, yeah, at this point, as I said, it’s a relatively modest contributor in any event. And it was a small dip. We mentioned as really we’re kind of one of the bigger reasons why we took the midpoint of our guidance range down by $5 million.

But having said, as we look forward, it is something that we bring an operating expertise to. And at this point, there’s upside if the energy prices move up and there’s virtually no downside if the energy prices move down. So I think there’s a long-term upside there and we’ll continue to assess how to try to maximize value out of those assets.

Operator

Thank you. And before we take our next question, I would like to ask each of the participants in consideration of time, please limit your questions to two.

Your next question comes from Michael Horwitz with Baird.

Michael Horwitz – Baird & Company

Great. Thank you. Good morning.

Sanjiv Khattri

Good morning, Michael. A very early good morning to you.

Michael Horwitz – Baird & Company

Yes, it is. Such is my life. And I appreciate – I’ll echo the comments. The transparency is phenomenal and having covered the company now for seven years, this is very helpful.

So, in talking with some other folks around the company, there seems to be a bit of, I would say, modest excitement around some of your new organic growth initiatives. And maybe I’ll press you on it a bit more to dig in a little deeper there and to give us some idea on what those things are.

I mean you’ve outlined some investments in metals. Of course, special ways could be an opportunity, but just more detailed there, Tony, would be helpful, because, clearly, the capital allocation strategy is very good for shareholders, but the stock price doesn’t seem to care much about some of the things you’re saying. So if you could dig in a little bit more on how you can grow the business, that would be helpful. Thanks.

Tony Orlando

Sure. Well, as we said, I think we’re grossly optimistic about 2012. More importantly, we’re looking at sustained growth. We do have some contract transition headwinds. We’ve talked about those, I think, multiple times, in particular, with respect to reduced debt service revenue.

But we are working on a number of initiatives that allow us to grow the business irrespective of if or when our big development projects come online. And we think that those will create tremendous amount of value. And again, we’ve talked about them. It’s really in three categories. One is metal recovery both quantity and quality.

The project that we did with the acquisition at Dade was focused on quality of metals, and that’s really worked out quite nicely. It’s still in the early stages, but we’re five, six months into owning that asset and so far so good. And we’re learning a lot also in how to apply those same lessons at other locations.

We’re looking at recovering more metals. There’s been some new technologies and the technologies on the magnets and the eddy currents which recover the non-ferrous metal continue to improve, and we’re looking at ways that we can try to squeeze a little bit more metal out of the waste that’s coming in.

So we think that there’s a real nice opportunity. They are small capital investments, typically a few million. So they’re not big capital investments, but we think that we can really leverage the size of our portfolio to create some value there.

On the special waste, we’ve got a number of different fronts, but we see that as an opportunity to grow that business. And I don’t also want to neglect some of the other things we’re doing, which are really trying to apply innovations to drive down cost. And some of them are things that we’ve developed. Some of them are just more purchasing techniques that can be utilized, whether it’s doing a reverse auction purchasing technique to try to get the best price or those types of things that I think are just typical blocking attach with what any business does.

But I think where we continue to find ways improve the margins of the business, that’s going to create value. So we feel good about our ability to continue growing. I think we’re doing it this year and we feel good about our ability to continue doing that.

Operator

Thank you. Your next question comes from Brian Shore with Avondale Partners.

Brian Shore – Avondale Partners

Hey, good morning, guys. Thanks for taking my questions, and again, thanks for the increased visibility and disclosure. I really appreciate it.

Most of our questions have been answered. Just a couple of quick ones. When you’re looking out at 2012, given what appears to be a limited developmental spending overseas on the capital side, how are you looking at the framework for increasing the buyback through 2012 with the increased authorization recently?

Sanjiv Khattri

Well, thanks, Brian. I guess Dan has got you working hard this morning. I think we lay out when we talked to you in January, when we laid out our earnings for next year, for this year and our guidance. We will take you through what our capital allocation plan will be, sort of, the overall philosophy is unchanged.

We will look at what our needs are for development, for growth and then offset them and compare that to a free cash flow and what is left will be definitely focused on shareholder action.

So, I think we’re getting the authorization as a very important of cost because it publicly conforms the board to support our policy. That’s sort of governance issue rather than a major issue. The major issue should be how much cash are we generating and what are we doing with it. That sort of drive and then hopefully the board supports that and we get the authorization.

Brian Shore – Avondale Partners

Okay. And then specifically on Leeds, looking at some of the commentary, it appears that the size of the facility there may have been one factor in why you guys didn’t win that. Looking forward to some of the other UK projects you’re pursuing, in particular, I know that that’s a size or a facility that’s somewhat a larger size. Are you at all worried that the UK Waste Energy Environment may be a little bit different than the US and it sizes more of a factor there and that could be a risk going forward?

Tony Orlando

This is Tony. Let me take that, Brian.

Each municipal client kind of have, again, their own perspective very similar to the way things work in other parts of the world including here in the US. The Leeds community went out for bid and had some requirements including a requirement to locate the facility within their community and to not import more than 1% of the waste from outside the community.

So, basically, they wanted a facility that was dedicated for their community. We look at the commercial waste within the boundaries of the community, the size of facility. As it turned out in hindsight based on their commentary that came out, they were a bit concerned that we might be importing more waste than they would like, even though we were comfortable that we wouldn’t have had to.

But I think that we still really don’t – other than that press release, we haven’t kind of gotten a full debrief from the client as to kind of the rationale for the selection. So, I think we’ll have to wait to see. But the size there was really focused on their desire for the facility to be dedicated to their community.

When we look at our facility, there are two remaining bidders from Merseyside. Both of those bidders have facilities that are outside Merseyside. And they’re much more looking for the ability to send their waste to a facility. And we believe that by going with a larger facility that that gives us a competitive advantage because it’s going to drive economies of scale.

So, it’s really this different thinking by different communities. I don’t think that the Leeds’ decision-making necessarily will have an influence on the Merseyside decision-making. But we still feel good about where we stand on the Merseyside bid, but undoubtedly it’s a competitive situation. I’m sure our competitors are going to aggressive as we will be, and we’ll have to wait to see how that one plays out.

Operator

Thank you. You next question comes from the Paul Clegg with Mizuho.

Paul Clegg – Mizuho Securities

Hi, guys. Thanks.

Sanjiv Khattri

How are you?

Paul Clegg – Mizuho Securities

It’s good, guys. How are you?

Sanjiv Khattri

Very good.

Paul Clegg – Mizuho Securities

Thanks for the detail on the power price breakdown. I thought that was really helpful. I’m just wondering if you could go on to a little bit more detail there though and talk about how many megawatt hours are actually steam and then maybe how many megawatt hours are actually from those service agreements where you’re only getting 10% and not the 100?

Sanjiv Khattri

Maybe that’s something that we’ll look at to try to break down. I think if we get into our fourth quarter, I think perhaps providing some type of chart so you can better understand what the roll-off looks like. It’s something that we can certainly develop.

It is, again, something we’ve looked at, kind of on a contract by contract basis and where do we think we stand. We’re comfortable that very modest headwinds and that’s based on today’s forward curves. A very small uptick in the forwards curve will eliminate those headwinds. So we still feel pretty good about that.

And I think the other point we were really trying to make is that, while we’ve got about 2 million megawatt hours rolling off contract in the next five years, that will be replaced with 3 million of new capacity for a net increase. So that’s helpful.

I would give you maybe a little bit of color in terms of the timing of how that 2 million rolls off. In 2013, the majority of what’s rolling off are the hedges that we haven’t placed for 2012. So that’s really kind of not that big a deal. And then it tends to be a little bit more backend loaded in 2015 and ’16 where the contracts are really rolling.

Paul Clegg – Mizuho Securities

Okay. And then you got a question already on the Merseyside that you mentioned to other bidders. Can you say who the bidders are? And; is there any concern here about – I think price was also mentioned as a factor in Leeds, and I congratulate you guys for any time you walk away from something that doesn’t make sense from a return on capital standpoint, I congratulate you for that.

I mean I think you were doing that in China and I think that makes sense. But are you at all concerned about bidding against larger companies that have potentially lower cost of capital? And why do you have a higher level of comfort that that won’t be an issue in the upcoming bids like Merseyside?

Tony Orlando

Let me take the first question. If I said there were three bidders left, I misspoke. There’s two bidders left, us and one other. I think its public information who the other bidder. It’s SITA.

So we’re bidding against SITA on that project. And again, look, we both, I’m sure, feel like we have a good chance to win or we wouldn’t be there. We feel confident in our ability to win and we’ll have to see how time plays out. And I think we probably both have strengths and weaknesses in terms of the overall bid package.

Maybe, Sanjiv, you can address the question on the cost at capital.

Sanjiv Khattri

Yeah. Clearly, on the margin, you could argue it’s a slight disadvantage but I think a lot of things are in our favor obviously. We are the world’s leading player in this space even though we are new in the UK. The analysis is much more complex.

We feel good that we have to put our best foot forward and as long as we have a good focus on return, we’ll make the right calls. And so, I think that is an advantage on the margin, no question. I’m not sure how meaningful that is if you look at how comprehensive and complete our proposal is likely to be at Merseyside.

Operator

Thank you. Your next question comes from JinMing Liu with Ardour Capital.

JinMing Liu – Ardour Capital

Good morning, gentlemen.

Tony Orlando

Good morning.

JinMing Liu – Ardour Capital

My first question, you relate to the size of the Rookery Facility, the 65 megawatts. I remember that the Dublin project met resistance from the local people seeing that the facility proposal was too big and whether you may face a similar situation on this project.

Tony Orlando

Well, again, it is a relatively large facility. We have sized it in a way that we think is appropriate to handle the region’s waste and also to provide communities with cost competitive solutions. Having said that, I’m sure that there will be folks that would prefer to see a smaller plant or in fact, some that would prefer to see no facility.

But we’re going to work closely with the community there. We have been doing that in terms of providing information throughout the planning process and I’m sure we’ll continue to do that as we move forward.

The planning approval is a big important step but there are still many other steps still ahead of us to bring that project to fruition. So we’ll take them one step at a time. We’re happy that we got the planning approval and we continue to move forward.

JinMing Liu – Ardour Capital

Okay, thanks. My next question is to Sanjiv. What kind of annualize EBITDA contribution we should expect from the two Chinese facilities?

Sanjiv Khattri

We don’t like to disclose our profitability by projects but one of the objective Tony set out for us, when we focused our development was that China should be self funding, not only from an earnings point of view but also from a cash flow point of view. And based on how well the commissioning is going so far, I expect there to be no issue at all.

So the contribution will be modest but more than enough to focus us there and decent return so it shows up. If you are looking for trends where it is on the disclosures, we do disclose other category segments and that’s where the profit would show up.

Remember, the two new developments, one is fully consolidated, so it affects the full P&L and one is a minority JV, so it shows up in other income, so good.

Operator

Thank you. Your next question comes from Navi Tejer [ph] with Royale Capital

Navi Tejer Royale Capital

Hey, guys, I know it’s been a long call, so we’ll keep it quick. Just had a question about your guidance at the start of the year. You said that EBITDA would be a $30 million improvement at the midpoint based on just a broad set of efficiencies. Noticed in metal revenue is up about $15 million. Was that part of your $30 million forecast or are we still on pace for a $30 million in cost savings or what have you?

Sanjiv Khattri

Life is ups and downs. Some things have gone much better that we thought. Some things have gone not as well. The good news is, we have a good handle on our business and if you had told me nine months out that we would zero in and only have a 1% variance from our overall number, I would take that.

So metals was an up; energy, biomass was a down. So there were doing more or less on plan, even though at the very end of the year, some of the work we are doing on special waste will start adding up. So I would say net-net there were gives and takes. Cost control is on track.

Navi Tejer Royale Capital

Okay, that’s all I want to ask. Thanks.

Sanjiv Khattri

Well, thanks, Navi.

Operator

Thank you. Your next question comes from Edward Okine with Basso Capital.

Edward Okine – Basso Capital

Hello, yes. Just going back to the return of capital issues. You did mention that I believe you have some (inaudible) completed and I’m just trying to figure out on what over the years of process from days asset sales and the future asset sales of? Are you looking at special dividends at all in the cards?

Sanjiv Khattri

Well, this isn’t like special dividends. Dividends and stock buyback are made by the board, so I would be speculating. Having said that, I believe that we looked at our portfolio very closely a year ago and we decided these fossil fuel assets were not consistent with where our focus was.

We have closed three of them and the fourth one, we just signed a few hours ago. So that’s behind us. And we’ll continue to look at our balance sheet to see if there are any other assets, but I don’t expect anything in that scale or anything in that zip code in the foreseeable future. We feel good about our portfolio. And so, again, I don’t want to rule anything out.

It’s hard to see a scenario under which we would have a special dividend.

Edward Okine – Basso Capital

Okay, thank you.

Operator

Thank you. Your next question comes from a Mark Anderson with Axial Capital.

Mark Anderson – Axial Capital

Actually my questions have been answered. Thank you.

Sanjiv Khattri

Hi, Mark. How are you doing?

Mark Anderson – Axial Capital

Great. I just want to say my question had been answered. Thank you.

Operator

Thank you and at this time, there are no further questions.

Anthony J. Orlando

Okay, terrific. Well, thank you everybody. Look forward to talking again at the year-end. Have a great day. Bye.

Sanjiv Khattri

Thanks, everybody.

Operator

Ladies and gentlemen, thank you for joining today’s conference. Thank you for your participation. You may now disconnect.

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