Covanta Turns Waste-to-Energy-to-Profit

| About: Covanta Holding (CVA)

During September, Covanta Holding Corporation (NYSE:CVA) has been pulling the tap in Irish hotspots in both the Old and New World. Earlier in the month, the company announced a new waste-to-energy venture in the white-hot Dublin market. The deal has three core drivers for SmartGuyStocks' pick CVA:

1) Responsibility for the design and construction of the project, which is estimated to cost approximately 300 million Euros and require 36 months to complete;
2) Operation and maintenance of the facility for the project, which has a 25-year “tip fee” type contract with the Dublin City Council to provide disposal service for approximately 320,000 metric tons of waste annually; and,
3) Sales of electricity into the local grid under short-term arrangements.

I love this deal for two reasons: Covanta is executing during a bull market for waste-to-energy and payment in Euros is another way to benefit from the falling dollar. This project should also help Covanta continue garnering more clients in the lucrative European market.

Back on U.S. soil, Covanta gobbled up smaller waste services company EnergyAnswers for $61 million in cash and assumed debt. The acquired assets include energy-from-waste facilities in Springfield and Pittsfield, Mass., a landfill operation, two transfer stations, a waste transportation and small collections business, and a wood and yard waste recycling operation. The new assets add strength to CVA’s portfolio and continue to increase economies of scale in the high cash flow waste services industry.

Both new deals confirm CVA’s ability to execute in the opportune environment I discussed in my previous article - and this is only the top of the mornin’.

Disclosure: SmartGuyDH is long CVA.

CVA 1-yr chart: