Covanta

Covanta CEO Stephen Jones Talks Growth, Challenges and Opportunities

Waste360 recently spoke with Jones about the state of Covanta’s U.S. and international WTE operations, the potential for new WTE facilities and expansions and what we can expect to see from the company in 2017 and 2018.

Standing out from the crowd is a good thing for waste-to-energy (WTE) firm Covanta Holding Corp. It’s the only publicly-traded solid waste firm in the U.S. with extensive WTE operations. (Waste Management sold its Wheelabrator WTE division in 2014.) It also has the distinction of being an international operator, with active and potential projects that dot the globe. And although it is known primarily for its WTE operations, it also has two other main lines of business: recycled metals and environmental solutions.

Leading the company that embraces its unique place in the waste and recycling industry is CEO Stephen Jones, who joined Covanta in 2015.

Before joining Covanta, Jones practiced corporate law at Dechert LLP in Philadelphia and worked for Air Products and Chemicals Inc. as senior vice president and general manager of tonnage gases, equipment and energy. There, he gained knowledge and experience about the chemical processing and energy industries as well as extensive management experience.

Now, Jones works to lead Covanta in its mission to provide sustainable waste management and renewable energy services to communities and clients globally.

“We view ourselves very differently than other companies in the industry because we operate large equipment versus picking up waste via trucks to bring it to a landfill,” Jones says. “But that really is an advantage for us because many companies are launching zero waste to landfill programs and seeking alternatives to landfills, and we can provide services to accommodate their needs.”

Waste360 recently spoke with Jones about the state of Covanta’s U.S. and international WTE operations, the potential for new WTE facilities and expansions, what we can expect to see from the company in 2017 and 2018 and how the next generation of industry workers can get involved with a company like Covanta.

Waste360: Can you provide a brief overview of Covanta and its multiple areas of business?

Stephen Jones: We are a world leader in WTE, and we run 42 WTE facilities and process approximately 20 million tons of waste annually, which is about 5 percent of the U.S. waste generation. We also generate enough electricity to power 1 million homes, and we recycle approximately 500,000 tons of metal annually, which is enough to build five Golden Gate Bridges every year.

These facilities are critical infrastructure assets because we provide central services like sustainable waste management and renewable energy to communities. In our customers’ minds, our solutions are superior alternatives to landfills because they reduce greenhouse gases and help divert waste from landfill.

Our environmental solutions business, which generates about $200 million in annual revenue, has been growing because more and more companies and government entities are setting zero waste to landfill goals. In the fourth quarter of 2016, we had a record growth of profile waste (15 percent year-over-year growth in the number of profile waste that we took into our facilities). We recently acquired a few companies that provide environmental solutions, and we have been integrating those solutions into our overall business.

In addition to companies that have zero waste to landfill goals, there are a number of companies that are seeking secure destruction for items like clinical trial drugs and expired prescriptions, which should be kept out of the landfill. We work closely with companies seeking that service to ensure that they have safe and quick destruction of that waste.

Waste360: Is there any prospect for growing feedstocks, expanding existing facilities and/or building new ones both in the U.S. and internationally?

Stephen Jones: The U.S. WTE market remains challenging, and with our footprint primarily in the U.S. and the lack of policy changes driving folks away from landfills, I don’t see us building new facilities in the U.S. anytime soon. We will, however, expand our existing facilities as needed.

The U.S. economy has been doing pretty well, and a lot of our clients are developing plans for waste disposal for the next 10 years. Internationally, we are seeing a lot more policies in favor of WTE. For example, island nations have limited land capacity so they are more likely to put policies in place to utilize their land for something other than landfills, such as WTE.

We are beginning to tap into the Asia and U.K. markets because landfill capacities are starting to hit their peak and Asia and the U.K. would rather use their land for WTE facilities than landfills.

Waste360: Can you talk about the overall tenor of contract negotiations with municipalities in existing facilities and/or procuring new feedstocks for the company’s WTE plants?

Stephen Jones: With all of our clients, we try to understand what they need as they progress forward. If you look at last year, for example, we saw a number of new client agreements, all of which are different. I don’t want to get into specific terms and conditions, but our WTE plants are often close to population centers and viewed as critical infrastructure assets.

The ability to sign both existing and new clients onto long-term agreements to supply waste disposal is important to us, the client and the residents in those communities because it gives everyone assurance that the waste is handled in an environmentally friendly way.

In 2017, we have a number of clients that we hope to extend agreements with. We recently announced an extended agreement with the Southeastern Connecticut Regional Resource Recovery Authority for waste disposal at the Southeastern Connecticut Resource Recovery Facility located in Preston, Conn., and that’s just one example of a successful relationship with a client.

Waste360: Explain how the recycled metals side of the business works and how you are keeping it afloat during the fluctuation of commodities prices.

Stephen Jones: Commodities prices affect our business on both the metals side and the energy side. It has been challenging, but we are seeing some signs of improvement on the metals side. While we don’t control the prices in the scrap metal market, we are able to control the quantity and the quality of the metal that we reclaim.

We have been reclaiming more and more metal in our facilities, and last year, we reclaimed between 10 and 15 percent more metal from the waste that we handle. To keep up with that increase, we developed a central processing facility in Pennsylvania to clean the ferrous metal and make it a better quality metal to sell to the metals market. This year, we are adding a processing unit for non-ferrous metal to that facility.

On the energy side, the U.S. has been blessed with a lot of natural gas, but as a power producer, that means that natural gas prices and power prices are lower. To work with those low prices, we are looking at new ways to sell our electricity and steam directly to customers without going through the grid process.

Waste360: Can you provide an update on the New York City contract and how the operations at the two marine transfer stations are going?

Stephen Jones: With NYC, we have signed a 20-year waste transport and disposal contract, which has a couple potential expansions tied to it. Between the two transfer stations, one in Queens and one in the Upper East Side, approximately 800,000 tons is transported and disposed of each year. Both of these stations are part of NYC’s zero waste goal. And the first step in that zero waste process is to take the city’s 800,000 tons of waste a year and dispose of it via a non-landfill option.

We have been running at least one of the two marine transfer stations and that has been going well. The Queens marine transfer station is the larger of the two, and we have been managing a large portion of the total 800,000 tons at that station. Both Covanta and NYC are very pleased with the startup of that station, and we are working on getting the second marine transfer station at 91st Street up and running. We expect to get a notice to proceed from the City of New York Department of Sanitation later this year, and once we receive that, it will take us about a year to get some of the equipment necessary to handle the waste at that station. Right now, we are anticipating a startup date at the 91st St. station in late 2018.

Managing that many tons of waste a year is a logistics challenge because the waste goes onto a barge, then a rail line and in some cases a truck. We have learned over the past year or so how to tighten up that supply chain and eliminate inefficiencies. We plan on taking those lessons learned with us as we open the second marine transfer station.

For continuous improvements, we use Lean Six Sigma to take inefficiencies and waste out of our logistic systems. We also apply some of those tools to our transportation system around the waste leaving NYC to improve efficiency.

Waste360: How is the progress going on the Dublin, Ireland, WTE facility and when do you anticipate the opening of that facility?

Stephen Jones: The construction of the Dublin facility is more than 90 percent complete, and we expect commercial operation to begin in the fourth quarter. The facility will process 600,000 metric tons annually, and we are excited to finally bring that facility online later this year.

Waste360: Covanta posted a total revenue increase of $54 million in 2016. Can you highlight some of the company’s top initiatives in 2016 that helped lead to that increase?

Stephen Jones: 2016 was an interesting year for us because we hit our mid-range (approximately $400 million adjusted EBITDA) of our guidance provided to our investors exactly. I was very pleased with the fact that we told investors that we were going to do something and that we followed through.

Some of the things that drove our total revenue increase are strong municipal solid waste revenues and the fact that our profile waste business grew by 15 percent. Additionally, we used Lean Six Sigma to get better performance from our operations and energy from our waste plants, and we hit our $10 million savings target with continuous improvement.

Waste360: Technology is changing the industry at a rapid pace. How are you keeping up with the latest technologies and how are you ensuring that you are making all the right moves needed to prepare for the future of the company?

Stephen Jones: There are a number of new technologies out there, and we follow all of them closely to stay informed on what’s happening in the marketplace. We often get asked to partner with technology providers, and we try to invest in technologies when we can to improve our services and operations.

Currently, there isn’t really a technology for gasification that has been fully adopted yet from a commercial standpoint. We have our own gasification technology called CLEERGAS that we developed over the last five years, and we are currently looking for applications to put that technology to work.

Waste360: Do you think the Trump presidency will have an impact on how Covanta runs its operations?

Stephen Jones: At this point, it’s hard to tell what’s going to happen. Some of the tax ideas out there are in favor of us and some are against us, but it’s really too early to tell what’s going to happen.

Some of the broader things that President Trump has talked about like infrastructure will help us because of assets are critical infrastructure assets, and if municipalities are looking at infrastructure assets to handle waste, we can participate in that. President Trump has also talked about building more bridges and roads, and I think that is one of the reasons why metals prices have been up as of late.

From an environmental standpoint, we are going to continue to do what we think is right. We have strict permits and regulations around our facilities, and we tend to run 60 to 90 percent below those levels. I don’t see us changing our focus because we feel that it’s the right thing to do and it’s good for the communities in which we operate.

Waste360: What is the firm’s outlook for 2017-18?

Stephen Jones: 2017 will be a bit of a transition year for us, and one of the biggest drivers for us for 2017-18 is the new Dublin facility coming online. On the waste side, we expect to continue to see strong performance in both municipal solid waste and profile waste. On the energy side, prices have been down a bit due to warm weather, but we hope to see that improve as the year goes on. And lastly, on the metals side, we are optimistic about metals prices since we have seen improvement in the last couple of months.

Waste360: Before coming to Covanta, you practiced corporate law at Dechert LLP in Philadelphia and worked for Air Products and Chemicals, Inc. as senior vice president and general manager of tonnage gases, equipment and energy. What did you learn in those positions that have helped you in your current role at Covanta?

Stephen Jones: Air Products actually built, owned and operated several of the plants that Covanta currently owns and operates. Early on in my career, I was involved in WTE and the type of businesses I ran are very similar to the businesses that I run at Covanta.

When it comes to corporate law, having some familiarity with mergers and acquisitions is just another tool in my toolkit to further grow the company.

Waste360: What are some of the biggest challenges that you deal with in your role and how do you overcome them?

Stephen Jones: When I first started at Covanta, I was surprised to learn that the company didn’t have continuous improvement efforts underway. One of the first things I did when I came on board was implement Lean Six Sigma to improve operations and business processes and reduce inefficiencies. 

Since we hit our $10 million savings target in 2016, we will increase that target this year and continue to use Lean Six Sigma and other tools to get more assets on the ground and to continue to grow.

Waste360: If you weren’t in the waste and recycling industry, what do you think you would be doing career wise?

Stephen Jones: I was in the telecommunications industry right out of college, and then I was in the chemical processing industry for a number of years. Every industry has its good and bad points, but the waste industry has an entrepreneurial vibe that’s very appealing. If I didn’t find a place for myself in this industry, I would likely still be in the chemical processing industry because I know a lot about large plant operations and processes.

Waste360: What advice would you give to the next generation of waste and recycling workers?

Stephen Jones: This industry is very fascinating, and the average citizen doesn’t think about what happens to their waste after collection. There is a whole other world out there for people who have great ideas for sustainably and responsibly handling waste, and that’s our industry.

As the concept of a circular economy becomes more popular, the average citizen is starting to appreciate companies that have sustainability goals and goals for diverting waste from landfill.

This year, Covanta is launching a career development program in addition to our internship program, where we will bring in people who just graduated and allow them to experience what it’s like to work in sales, communications, engineering, finance, etc. This program will allow recent graduates to gain real-world experience so that they can find their place in our industry.

I actually participated in the former AT&T management development program before I landed my first job, and that program gave me the chance to test out the telecommunications industry to see if it was a good fit for me. I think that career development programs are important because it introduces people to the field that they are interested in and it gives them a chance to test out a range of positions before making a commitment.

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