Covanta Holding Corporation's (CVA) CEO Steve Jones on Q1 2019 Results - Earnings Call Transcript

Covanta Holding Corporation (NYSE:CVA) Q1 2019 Earnings Conference Call April 26, 2019 8:30 AM ET

Company Participants

Dan Mannes - VP, IR

Steve Jones - President and CEO

Brad Helgeson - CFO

Conference Call Participants

Tyler Brown - Raymond James

Noah Kaye - Oppenheimer & Co.

Michael Hoffman - Stifel, Nicolaus & Company

Brian Lee - Goldman Sachs

Henry Chien - BMO Capital Markets

Operator

Good morning everyone, and welcome to Covanta Holding Corporation's First Quarter 2019 Financial Results Conference Call and Webcast. An archived webcast will be available two hours after the end of the conference call, and can be accessed through the Investor Relations section of the Covanta website at www.covanta.com. The transcript will also be archived on the company's website.

At this time, for opening remarks and introductions, I'd like to turn the call over to Dan Mannes, Covanta's Vice President of Investor Relations. Please go ahead.

Dan Mannes

Thank you, Melisa, and good morning, everyone. Welcome to Covanta's first quarter 2019 conference call. Joining me on the call today will be Steve Jones, our President and CEO; and Brad Helgeson, our CFO. We will provide an operational and business update, review our financial results, and then take your questions.

During their prepared comments, Steve and Brad will be referencing certain slides that we prepared to supplement the audio portion of this call. Those slides can be accessed now or after the call on the Investor Relations section of our website, www.covanta.com. These prepared remarks should be listened to in conjunction with the call -- with the slides.

Now, on to the Safe Harbor and other preliminary notes; 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, April 26, 2019. 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. Because these measures are not calculated in accordance with U.S. GAAP, they should not be considered in isolation from our financial statements, which have been prepared in accordance with GAAP. For more information regarding definitions of our non-GAAP measures and how we use them, as well as limitations as to their usefulness for comparative purposes, please see our press release which was issued last night and was furnished to the SEC on Form 8-K.

With that, I'd like now to turn the call over to our President and CEO, Steve Jones. Steve?

Steve Jones

Thanks, Dan, and good morning, everyone. For those of you using the web deck, our quarterly results are summarized on Slide 3. I will begin my discussion on Slide 4. We are executing well on our 2019 plan as we generated $84 million of adjusted EBITDA and $6 million of free cash flow during the first quarter. And our financial outlook for the year remains unchanged. We are affirming our previous expectations of adjusted EBITDA range in the range of $440 million to $465 million, and free cash flow of $120 million to $145 million.

We processed 5.2 million tons in the first quarter, a 7% increase over last year as a result of strong plant operations and the expansion of our portfolio. We expect to set another full-year production record in 2019. As you all know, the first quarter normally represents a heavy period of plant maintenance and this year was no different. In the first quarter we completed almost 30% of our expected maintenance for the year.

Overall, maintenance spend in the quarter was lower than last year with a mix slightly more to expense and CapEx. This was consistent with our plan for the quarter and our full-year expectations for maintenance expense and CapEx are unchanged. As we sit here today, market prices for energy and metals are in line with our previous comments and in aggregate the business is right on track.

From an end market perspective, our number one focus remains the waste markets. And we continue to benefit from a strong disposal price environment. Waste flows remain robust. Transportation infrastructure stretched and our attractively located assets have flexibility to capture price increases. In the past, we’ve discussed New England as a particular source of strength. But the pricing improvement is fairly broad-based throughout our footprint of merchant plants.

For the quarter, tip fees were up over 5% overall on a same-store basis. Recall that this growth rate is occurring even as nearly 80% of our tip fee waste is under contract. With contractual escalators running closer to 2%, our ability to see these types of increase -- increases is a function of stronger spot markets, improved pricing as we re-contract and the continued benefits of growing volumes of profile waste from a price mix perspective. While we do not expect to be at 5% every quarter, we still expect to see full-year same-store tip fee price improvement of over 3%.

On top of the strength in the municipal solid waste, we continue to increase integration of profile waste into our energy from waste plants with revenue up 9% in the quarter. This growth is a product of expanding market demand for sustainable non-landfill solutions, effective sales execution, and the increased internalization of volumes through our network of material processing facilities. I anticipate that we will continue to grow profile waste revenue at our energy from waste plants at around this rate for the full-year.

In March, we hit an important milestone as we began operations at the East 91st Street Marine Transfer Station or MTS in Manhattan. The facility is currently ramping volume and it's ultimately expected to deliver 170,000 tons annually for processing at our Delaware Valley and Niagara sites under a 20-year contract. Including the new MTS, Covanta will sustainably process roughly one-third of all the residential waste collected by New York City.

We extended another long-term client partnership in the quarter, signing a new 15-year waste disposal agreement with the town of Babylon New York. Long Island remains short of waste disposal options and we continue to work closely with our clients to provide solutions to this growing issue. The historical arrangement with Babylon was under a service fee contract structure. While the new agreement transitions to a tip fee structure, where we will benefit from a greater share of the energy revenue under our long-term power contract as well as opportunities with action metals management and merchant disposal capacity.

As I’ve discussed in recent quarters, we are focused on optimizing our fleet by exploring alternative options for some of our less profitable plants. The desired outcome in these situations is to make meaningfully -- meaningful changes to improve profitability or unlock upside opportunities. We’ve announced some of these in recent quarters. However, in some cases the right answer is to redeploy our resources and capital elsewhere.

This quarter we closed the Warren County, New Jersey facility as previously announced and reached an agreement to divest the Springfield and Pittsfield assets. While all three plants were well-run, they suffer from relatively small sizes and we saw limited opportunities for improved economics under our ownership. We are pleased to have found a new owner for Springfield and Pittsfield who will focus solely on their operations and will continue to support the local communities. We expect this transaction to close in the second quarter.

Given the small size and financial contribution of these three facilities, this will not have a material impact on our overall expectations for the year. But going forward, we believe that this will reduce the risk in our portfolio and allow management to sharpen its focus on more profitable opportunities. A few underperforming plants remained in our fleet and we will continue to look at all options either to improve their performance or exit operations.

Last, but certainly not least, I’m very pleased to note that alongside our partners Green Investment Group and Veolia, we reached financial close on the Rookery project late last month. It is the biggest of the four projects we’ve announced so far and we expect it to process around 545,000 metric tons of waste annually. I appreciate the hard work of our development team and our partners as well as the support of the project lenders to help us reach this critical milestone.

With financial close behind us, we are on full-scale construction. Our primary EPC contractor is Hitachi Zosen Inova who very successfully built our Dublin project. As is typical for these projects, construction is anticipated to take about three years, which puts commercial operations in 2022. Once operational, Covanta will be the operator of the plant under a long-term arrangement, while Veolia will supply the majority of the waste. In ownership split is as previously discussed, with Covanta and GIG each owning 40% of the project and Veolia owning the remaining 20%.

One of the many benefits of our partnership with GIG is the ability for the original developer to partially monetize their investment of financial close. For Rookery, Covanta received $44 million of consideration at financial close, highlighting the value of the project. In addition, as Brad will discuss in more detail, this is part of an overall strategy that is highly efficient for funding our equity stakes in these projects.

As I step back and look at our U.K development more holistically, things are moving along very well. We now have two of the four projects that we've announced in construction and on a combined basis, it will count for roughly half of the targeted annual free cash flow of $40 million to $50 million from this pipeline. We are now focused on bringing in next two projects, Protos and Newhurst to financial close and into construction.

With that, I will hand the call over to Brad to discuss our financial results in greater detail.

Brad Helgeson

Thanks, Steve. Good morning, everyone. I will begin my review of our financial performance with revenue on Slide 6. Total revenue for the quarter was $453 million, down $5 million from the first quarter of 2018. Organic growth excluding the impact of commodity prices was effectively flat year-over-year as waste price growth was offset by lower construction revenue in the quarter.

Commodity prices had a modestly negative impact as we saw a $4 million decline related to lower market prices for energy and metals. Transactions were net positive to revenue as the September 2018 acquisition of the Palm Beach operations added $15 million during the quarter, while the deconsolidation of Dublin during the middle of the first quarter of 2018 reduced revenue by $10 million year-over-year.

Long-term contract transitions reduced revenue by $4 million in the quarter, specifically the previously discussed transition of a client owned facility to another operator early last year and the end of project debt service payments received from our Babylon client under the service fee contract for that facility.

Moving on to Slide 7. Adjusted EBITDA was $84 million in the first quarter, a $16 million decline compared to the first quarter of 2018, which was expected given the known year-over-year headwinds for the quarter that I discussed on our last earnings call in February.

Excluding commodity prices, adjusted EBITDA declined by $7 million organically as a benefit of higher waste prices was offset by the unfavorable year-over-year comparison against $7 million of business interruption insurance proceeds received last year, as well as a slightly higher mix of expense versus CapEx within our maintenance spend this quarter.

Looking ahead to the balance of the year, the unfavorable comps will abate and we continue to expect organic growth and adjusted EBITDA to be in our target range of 3% to 5% for the full-year. The modest headwind from commodity prices, as I just discussed, translated directly from revenue to the adjusted EBITDA line. The net impact of transactions was immaterial in the quarter as the benefit of the Palm Beach acquisition was largely offset by the deconsolidation of Dublin.

Long-term contract transitions represented a $4 million headwind in the quarter in line with the impact on revenue. At the midpoint of our full-year adjusted EBITDA guidance range, we would come in roughly flat year-over-year. So it's fair to assume that for the balance of the year, and more specifically the second half will begin to see year-over-year improvement.

I would like to take a moment here to explain a few items in the quarter that did not impact adjusted EBITDA, but created some noise in our income statement. First, we booked a $50 million net gain on sales in the quarter. This reflect a $57 million gain related to the Rookery project, partially offset by write-downs associated with the plant divestiture of the Springfield and Pittsfield facilities. In addition, we accrued $4 million in other operating expenses related to the closure of the Warren facility. Again, these items are excluded from adjusted EBITDA.

Turning to Slide 8, free cash flow was $6 million for the quarter, a $58 million improvement compared to the first quarter of 2018. The primary driver as compared to last year was the normalization of working capital. Recall that we saw a significant outflow related to the adjustment of accounts payable last year. That did not reoccur this quarter as we’re now managing payables at a more consistent level.

At the same time, we continue to drive improved AR performance, which was $15 million better this quarter from a cash flow standpoint as compared to last year and follow the benefit of over $20 million from a 5-day reduction in DSO over the course of 2018.

Among other drivers, maintenance CapEx was lower by $14 million on a comparable year-over-year basis. As Steve noted earlier, both our overall maintenance spend and our relative mix of CapEx were lower in this year's first quarter. While we do expect modestly lower capital spend, maintenance capital spend for the full-year, as discussed on our last earnings call, much of the favorability in Q1 related to the timing of projects within our 2019 maintenance plan.

Q1 free cash flow was much stronger than in recent years. However, I will not extrapolate that to your outlook for the full-year. Our guidance remains a $120 million to $145 million and we’re confident in that range.

Now please turn to Slide 9, where I will review our growth investment activity. During the first quarter, we invested $3 billion in organic growth projects, primarily for increased metal recovery and opportunities in our Covanta environmental solutions business and a $11 million for transportation equipment required for commencing service at the Manhattan Marine Transfer Station.

Of course, the big news on the topic of growth investment this quarter was our progress at Rookery. I will walk you through the financing structure for the project as a whole in pound-sterling terms with Covanta’s anticipated cash flows in U.S dollar terms at current exchange rates.

The total capital cost of Rookery is expected to be £460 million with approximately 70% funded by attractive long-term nonrecourse project financing at a rate of under 5%. The remainder of the capital, approximately £145 million will be funded by the partners, ourselves, GIG and Veolia as equity in the project subsidiary. Covanta’s share of funding for our 40% stake will be approximately £60 million or US$80 million.

The partners put project level bridge financing in place for the equity funding, which will defer the funding requirement until commercial operations in 2022. In our case we collateralized this bridge financing for our equity commitment with a letter of credit under our corporate credit facility without impacting our balance sheet or credit ratios.

Under our partnership with GIG, we received $44 million in consideration at closing as the primary developer of the project -- of the Rookery project. This represents recovery of development costs incurred with a premium plus a further premium that GIG paid us for the right to invest in the project based on anticipated project returns.

Stepping back, looking at the amount that we monetized upfront versus the anticipated equity investment of approximately $80 million, we expect our net funding requirement in the Rookery project to be only about $40 million or less than 3x anticipated free cash flow from the project. And again, with no investment outflow required for another three years. This is a very efficient funding mechanism and demonstrates how we’re looking to fund these very attractive investments without significantly impacting our balance sheet deleveraging goals.

Overall, 2019 outlook for growth investments is unchanged. However, as a reminder, the amount shown here for U.K spend of $10 million represents only the remaining investment in Earls Gate and does not yet reflect commencement of full construction at Protos or Newhurst. Depending on the timing of those projects and the level of near-term funding requirements, this 2019 outlook may change as we move through the year.

Looking at the U.K pipeline as a whole over the next several years, our total planned investments across all four announced facilities remains $150 million to $200 million, which we expect will end up entirely funded by the proceeds from the sale of the 50% stake in Dublin to GIG last year and the premiums that we’re earning from the U.K projects that we developed as they reached financial close.

Please turn to Slide 10, where I will provide a brief update on our balance sheet. At March 31, net debt was $2.47 billion, up $32 million from December 31, 2018. At quarter end, our consolidated leverage ratio was 5.9x, up slightly from 5.6x at the end of 2018 and the senior credit facility ratio was 2.4x. Our available liquidity under our revolver was about $350 million.

As discussed in our last earnings call, given our current outlook for adjusted EBITDA, free cash flow and capital spend in 2019, it's likely that our year end credit ratios will be similar to where we exit 2018, if not touch higher. However, our longer term path for continued deleveraging in 2020 and beyond remains firmly intact.

Before we turn it over to Q&A, I would like to hand it back to Steve, for some concluding comments.

Steve Jones

Thanks, Brad. I want to take a moment and reiterate a few things. Our business is centered around providing sustainable waste disposal solutions. And the tightening disposal capacity many of our key markets combined with contracts coming up for renewal, the market has moved in our favor. This trend is not likely to abate anytime soon and we see positive pricing momentum continuing well into the future.

In light of this and coupled with positive macroeconomic factors such as stable GDP, strong population growth and upward trending housing starts we are beginning to see early signs of interest by a few of our clients in adding new domestic EfW capacity. We noted development cycles are long, but we see these early discussions as encouraging and we are uniquely positioned to participate in these opportunities.

At the same time, we continue to execute on our domestic organic growth opportunities, continuous improvement initiatives and U.K development. We are focused on growing the business and operational excellence with respect to our overall fleet of plant. This is an exciting time for Covanta and I’m proud of the team's accomplishments and look forward to the opportunities in front of us.

With that, let’s move on to Q&A. Operator?

Question-and-Answer Session

Operator

Great. Thank you. [Operator Instructions] Your first question comes from the line of Tyler Brown from Raymond James. Your line is open.

Tyler Brown

Hey, good morning guys.

Steve Jones

Good morning.

Brad Helgeson

Good morning.

Tyler Brown

Hey, nice start to the year. Real quick on Pittsfield and Springfield. So it seems that you sold through a strategic buyer who presumably will continue to run those plants, but also get the sense you didn't get much for them or won't get much for them. So how do you weigh sell versus shutter as presumably shuttering the facility would kind of permanently tightened the entire waste market, driving lasting value to your other plants or is my geography completely off, it's just not going to be a big deal from a size perspective?

Steve Jones

It is not a big deal from a size perspective. These are relatively small plants. If you look at Pittsfield, it processes 80,000 tons a year, Springfield 130,000 tons or so. So these are small plants. They’re actually central to Western Massachusetts, so not a big impact on the tighter market in Eastern Massachusetts. And then if you look overall, I mean, the way we looked at this, it's similar to -- Warren, we did a similar analysis. We kind of looked at the key case versus the sell or shutdown case and this -- in this particular divestment case, we’re getting -- we are not getting a material amount of proceeds. So we really looked at what it costs us to keep and continue to run these plants versus exiting or divesting the plant. Now it’s interesting the adjusted EBITDA from these facilities is less than 2%, so you’re not going to see a big impact from an adjusted EBITDA standpoint. And at the end of the day, it allows us from a management standpoint to focus on our bigger, more profitable plants because an issue at one of these smaller plants and these quickly go from free cash flow positive to free cash flow negative depending on if you have an issue at one of these plants, we have to go respond for the smaller plants. So this is an opportunity to really focus and one of the things I've been pushing is focusing on our bigger more profitable plants with our management talent.

Tyler Brown

Okay. Okay. Now that’s helpful. But Brad, I do want to come back to the mechanics of Rookery. So I just want to make sure I got this. So your total equity investment in the project is – maybe US$80 million, but you're getting some $40 million of premium and cost recovery considerations up front. So all set your net equity investment is a US$40 million for a 40% stake. Is that right?

Brad Helgeson

That’s correct, yes.

Tyler Brown

Okay. And then the international pipeline is expected to yield $40 million or $50 million from free cash. You mentioned that the first two facilities are half of that, but I thought Rookery is the largest of the four. So is the expected free cash flow contribution from Rookery, call it $15 million, $20 million or is that too high?

Brad Helgeson

Well, I mean, I won't comment on a specific number, but you’re thinking about it the right way based on the numbers we’ve put out for the pipeline as a whole and you’re right Rookery is the largest contributor to that $40 million to $50 million.

Tyler Brown

Okay. So – but to be clear, your cash on cash payback on Rookery is something like maybe 3 years, is that right?

Brad Helgeson

Yes, I mean, I alluded to that in the prepared remarks where effectively its less than 3x free cash.

Tyler Brown

Wow, okay. That's fantastic. And then just my last one here, quick shot at your waste team, obviously great pricing there. The 5% is on the whole book, right? So the contract piece was up maybe 1% or 2%. But any color on how much spot tons were up, or was all of the uncontracted benefit largely mix?

Steve Jones

Yes, the contracted piece, you’re right. The contracted piece, I mean, we’re running around 2% as a broad average at this point. It does -- to answer the first part of your question, it does apply to everything. Contracted piece of 2%. So really anything that’s not tied down is growing by double digits at this point.

Tyler Brown

Okay. All right, great. Thank you very much.

Operator

Your next question comes from the line of Noah Kaye from Oppenheimer. Your line is open.

Noah Kaye

Thanks for taking the questions. And to add to Tyler, that return on Rookery cash return is really compelling. You mentioned that you would have -- you would expect similar kind of mechanics in place for the other two projects. We will be expecting to see, I presume, a lower cash return because of your role as a developer in those projects, or would it be comparable? How do we think about that?

Brad Helgeson

Hey, Noah, it's Brad. It will be comparable structurally in terms of the arrangement we have with GIG. Though I will tell you that, Rookery is the largest of the four projects and given that size has very attractive returns on equity, which then translates into how the premium is calculated under our agreement with GIG. So we will expect something similar, but the dollars are not going to be at the same level.

Noah Kaye

Yes, that’s fair. And then, I believe we should be reaching pretty soon the end of the review of the operating permit at Protos kind of [indiscernible] there anything that would lead you to anticipate that you wouldn't be able to kind of get past that and get the financial close fairly soon?

Steve Jones

We are optimistic on Protos. It doesn't -- it didn’t have -- it doesn’t have the noise around that Rookery had. And, yes, we are within a week or so of getting to that 90-day judicial review period and then we will move fairly quickly to close. We are in discussions with the EPC provider, we are in discussions with the banks. So we expect, as we get through the second quarter here, we will get a few closing. June, July timeframe is my guess.

Noah Kaye

Excellent. And then, just turn to a different subject, TAPS. I see the investment in there, can you kind of give us an update on where you are at with standing of that facility?

Steve Jones

Sure. The equipment is under construction and we are testing it off site and expect it to be delivered and installed at the Fairless Hills facilities around midyear. So basically, we decided at the technology provider's site to do some testing and then we will move it on a modular basis to Fairless Hills. And then after that, we will move into commissioning. So we will use a good part of the second half of the year for commissioning and ensure that the operations are consistent and we are getting the throughput out of the facility that we expected. I mean we are pretty excited about this. You’ve heard us talk about it for a while. This has been something in the industry that’s been kind of talked about over many years. We are also in early stage discussions for developments at some of our other sites. And so -- and I think I’ve talked about this before. I want to get the Fairless Hills facility fairly well along and then we will look at deploying this technology at other sites. And we’ve talked to some of our clients and looked to some of our sights on what the next set of investments will be.

Noah Kaye

Great. Thank you very much.

Operator

Your next question comes from the line of Michael Hoffman from Stifel. Your line is open.

Michael Hoffman

Hey, gang. Thanks for taking the questions. Housekeeping, I’m sorry, if you said it on the call and I missed it. Are the asset sales being treated as disc ops or is it just all done already and it disappears?

Brad Helgeson

Hey, Michael. It's Brad. Not disc ops, we moved them to assets held-for-sale at quarter end technically.

Michael Hoffman

Okay. So in 2Q at the closing in that timeframe we will see that -- that's what we will see in the balance sheet?

Brad Helgeson

Yes, exactly.

Michael Hoffman

Okay, cool. And then in your contracted volume, could you help us with what the bell curve looks like from if today was zero and you went out five years, what’s the bell curve of the renewals so we can understand some of the cadence of taking advantage of this improving tip fee marketplace?

Steve Jones

So we have -- about 20% of our portfolio turns over every year, right? In that kind of that [indiscernible].

Michael Hoffman

So, it's pretty tight bell curve there?

Steve Jones

Yes. So, yes, because the average tenure -- if you look at the average tenor of our contracts, yes, it's about 20% turnover in the base every year. But then -- and as you are -- and what you are getting at is, that gives us the opportunity to kind of reprice at the higher pricing that we are seeing and we will continue to -- and we believe, continue to see in the future.

Brad Helgeson

And there is some lumpiness to that as you look out over a 5, 6-year period, but just as a rule of thumb, it's an average of 20% probably.

Michael Hoffman

Well -- and so some of this pricing that’s happening is very concentrated geographically. So is it reasonable to assume in the '20 that the geographic mix is balanced enough that I’m not going to have -- we are not going to see weird dips versus weird spikes either?

Brad Helgeson

I don't think you will see, and correct me if this isn't your question, but I don't think you are going to see spikes and dips or certainly not dips with regard to waste pricing. I think the trajectory is clearly …

Michael Hoffman

Ready to change?

Brad Helgeson

… sharp [ph] as we see it. Yes, the rate of changes is going to …

Michael Hoffman

Yes, more rate of changes, is what I was thinking. I mean 1-year it might be an 8%, and next year it's a 3%, because there is an odd mix issue of faster changing markets versus slower changing markets. That’s what I was really trying to get at.

Brad Helgeson

Exactly.

Steve Jones

Yes, you're right about that. The other thing too, and we were a little surprised by this is that, as you mentioned, New England market has been quite robust, but we are seeing pricing power across the Eastern Seaboard, which is where our fleet is primarily based. So we’ve been pleased by that. It's been more broad based than we originally anticipated.

Michael Hoffman

So to that end, I realized you wouldn't normally talk about any specific contract. But I think Boston has some unique aspects to it. So five years ago the disposal award came out at about $72 with approximately about a 2% escalator. So you finished the five years at $78, is it true that the pricing is coming in at a $90 handle and so that's a pretty steep step up and it's mostly about that's what I'm trying to get at as opposed to getting down to the roots of a single contract?

Steve Jones

Yes, it's hard to comment. We are right in the middle of that RFP process. So it's hard to comment on that. We will provide some additional color at some point in the future potentially.

Michael Hoffman

But are we directionally -- that the scale of this is kind of what that’s like without getting around a hard number?

Steve Jones

Sure.

Michael Hoffman

It's a much bigger increase than people were expecting?

Steve Jones

Yes, it's a healthy market, I will put it that way.

Michael Hoffman

Okay. And then on a -- you made an interesting comment that maybe once again there will be U.S development, Steve, which I have -- that would have been hard bet to make. Is there a geographic part of the country that’s more likely than not, like, is it going to be the East Coast, Mid-Atlantic, that kind of thing or is it coming from -- interest coming from multiple places?

Steve Jones

We are seeing it in multiple places, primarily on the East Coast. So population centers on the East Coast. And I think what -- what's happening is, people are looking -- municipalities are looking at their 10-year solid waste plan and starting to think about what they’re going to do over the next 10 years. And in some places and we talked about this, you look at the Northeast area in particular, it's getting pretty tight for disposal capacity and you are well aware of that.

Michael Hoffman

Yes. And then, lastly, just so I understand the U.K opportunity, I know there has been a lot of oohing and aahing about rates of return, but none of that’s new. The only thing that’s new is you’ve gotten the financial close, right? I mean the structure of this has always been the structure, you just -- we got the financial close. So now we are triggering more visibility.

Steve Jones

Yes, but it is a unique -- the premium part of it is unique. I'm not sure if we explained it in the level of detail that we explained it today because we effectively are able to monetize some of the hard work that we did. If you think about it in stages, you get through the business development into construction stage, usually you would monetize at that point, but we were able to monetize with this premium payment arrangement that we set up with the partners.

Brad Helgeson

Yes, Michael, your comment is correct, nothing changed. I mean, this is the structure that we had described. I think what’s new here is, now that we have a powerful example of how those numbers actually add up.

Steve Jones

Yes, we put numbers on it now.

Michael Hoffman

Got it. And then, just for my benefit, $150 million to $200 million, how I split it between approximately what the premiums will be out of that versus Dublin, I can -- just so I have a sense of how I'm thinking of that?

Brad Helgeson

Yes, well, Dublin, if you recall that sales price was a little over €130 million, so that's in U.S dollar terms and that's the bulk of it. We took another $44 million out of Rookery, as we just announced today. So between those two, you are pretty close to covering up to $200 million for the pipeline. So …

Michael Hoffman

So that -- and then the next two would have some contribution as well and that gets you close enough and anything that’s left over you just pull it off the credit line?

Brad Helgeson

Correct. That's correct.

Michael Hoffman

Got it. Okay, cool. Thank you very much.

Operator

Your next question comes from the line of Brian Lee from Goldman Sachs. Your line is open.

Brian Lee

Hey guys. Thanks for taking the questions. Maybe just a few housekeeping ones here. The gain on Rookery, can you elaborate, is that upfront monetization something you will see also on Protos or Newhurst, or just if you could remind us if you are the original developer on those facilities as well?

Brad Helgeson

Yes, it will be similar. As I mentioned a few minutes ago, the magnitude will be smaller we expect, but those are the same as Rookery with respect to our agreement with GIG. Of course, we are partnering with Biffa on Protos and Newhurst. We, Covanta, we are the original developer on Protos, Biffa is the original developer on Newhurst. But in the context of our partnership with GIG, we are bringing both projects to our combined partnership, so that work the same way as Rookery, again, structurally but not necessarily in terms of the magnitude that Rookery represented.

Brian Lee

Okay, fair enough. And then, I guess, structurally on Rookery you are talking about the roughly $40 million net investment through 2022. But really, if everything is according to the targeted timeline, your only outlay happens in 2022 and it's fairly de minimis if not zero in terms of outlays until that time frame, is that correct?

Brad Helgeson

Yes, that's correct. As I mentioned in my prepared remarks, the partners decided to bridge finance at the project level, the equity funding. So what you would typically see on a project like this is the equity would go in upfront or pro rata. So, for example, we expect for Protos, as an example, to be investing equity pro rata over the construction period. When I say, pro rata, I mean along with the debt being drawn down. But we bridge financed for various reasons, we bridge financed the equity so that really the only cash going in is effectively the repayment of the bridge loan at the conclusion of construction.

Brian Lee

Okay, great. That's helpful. And then maybe last one from me, and I will pass it on, here is, on the pricing strength in tip fee uncontracted volume specifically, I know, just looking historically, Q1 tends to be from an absolute dollar perspective, the weakest quarter of the year historically, but the mid-teens increase year-on-year pretty robust here. So just wondering anything unique in Q1 mix-wise or is it something from the comp from last year? Just any color there. And then how we should be thinking about pricing trends for that specific stream for your mix for the rest of the year? Thanks, guys.

Brad Helgeson

Yes, there a few a few drivers there. So of course the market overall is very strong. And as I mentioned, anything that’s not under contract, we are seeing very healthy double-digit type growth rates as an average across the portfolio. That's also the line where the mix shift to profile waste is benefiting us. You see that trend going back over a long period of time. So we grew profile waste revenue by 9% year-over-year in the quarter. So that's contributing to it. Also, on the margin, just based on where we had outages, as we are working through the outage schedule in the first quarter, we did have some mix benefits in terms of the impact on some of the prices just based on where some of the outages were. We look at -- we've talked about this on the earnings call in February, when we set guidance, our expectation is still that the overall tip fee will be growing 3% at a minimum. And so, maybe the way to think about this is, the contractual piece, we will get bumps as we re-contract, but for existing contracts those are growing at inflation type levels. So then with that -- then that implies what the uncontracted growth would be to end up with an overall 3% growth rate.

Brian Lee

Okay, makes sense. Thanks, guys.

Brad Helgeson

Sure.

Operator

Your next question comes from the line of Jeff Silber from BMO. Your line is open.

Henry Chien

Hey, good morning, guys. It's Henry Chien, calling for Jeff.

Steve Jones

Good morning.

Henry Chien

Just wanted to ask -- hey, I just wanted to ask if you’ve any update on the balance sheet and in terms of debt pay down and given the, I guess, the future equity needs or equity funding that you expect to have?

Brad Helgeson

Yes. Hey, Henry, it's Brad. As I mentioned, from a leverage ratio standpoint, we don't plan on any improvement in 2019. In fact, if anything, it may tick up slightly. And that's just based on the fact that we expect -- from a ratio standpoint, we expect EBITDA to be the midpoint of our guidance range, roughly flat year-over-year and we are investing in the business. Notwithstanding the cash that we pulled out of the Rookery project upfront, we are investing in some other areas. Of course, the organic growth initiatives that we continue to invest in, we had to prepare for the New York City MTS startup, in terms of buying some additional transportation equipment that we needed and then of course TAPS, which we expect in total to represent an investment of about $25 million. So, this is not a debt pay down year for us. These are investments that we think are going to bear a lot of fruit for us going forward. What we would expect is to pivot back towards the trajectory of deleveraging, starting in 2020.

Henry Chien

Got it. Okay, great. Thanks so much.

Operator

There are no further questions at this time. Mr. Jones, I turn the call back over to you.

Steve Jones

Thank you all again for your interest and participation. We’ve made a lot of progress already this year and look forward to more positives over the coming months. In addition, we’ve an active IR calendar this spring. And we look forward to seeing many of you on the road in May and June. Have a great day and thanks for participating.

Operator

This concludes today’s conference call. You may now disconnect.