WasteExpo 2015 got underway with a busy conference program on Monday. The third annual Investor Summit featured 16 sessions including company presentations and panel discussions. Education tracks on fleet & equipment technology, recycling/resource recovery, hauling, business development and concurrent tracks on composting and organics all filled the day.
Here are some key takeaways from the first day of WasteExpo.
Composting and organics recycling. Eric Herbert, CEO of Zero Waste Energy, talked about the future of organics management in the United States in general. The options are many with the goal of using organics to increase landfill diversion. Bioenergy is one option. There are different streams of organics to consider. And there are global market considerations.
Stu Buckner, Buckner Environmental Associates, said afterward about the first session: “The story is growing composting, anaerobic digestion and other organics approaches. A lot of things have to come together. But if you do it right, you can do it.”
A main takeaway of the WasteExpo Investor Summit was that the waste business is on solid footing. There are concerns—including the cost of recycling—but overall the companies reported strong operations and outlooks for growth.
There is a lot of experimentation in restructuring contracts. For example, Republic Services wants to move away from using the standard consumer price index to measure inflation in favor of a more waste-centric measure and then use this as the basis for contracts. But given that most contracts in place are for five years or longer, conversion to new structures will take time. Waste Management, meanwhile, would like to move to a “service fee” model to charge for recycling.
Waste Connections expects organic growth of $150 million to $200 million a year, meaning it will take another three to four years for the firm to reach $3 billion in annual revenues. The firm is also in the market for acquisitions, but current valuations are high, making it more difficult to close deals.
Market conditions in the Northeast are setting up nicely for Casella Waste Systems. There is 2.4 million tons coming out of the—1.5 million already out and about another 1 million coming out soon. Casella, meanwhile, has 100 million tons of disposal capacity and says it should benefit from this disposal supply contraction. The firm, meanwhile, is also dealing with activist investor JCP Investment Management, who has nominated directors for the firm’s board. The company’s nomination committee is reviewing candidates and Casella is open considering its options.
A panel of private company executives included Larry Henck, CEO, Premier Waste Services; Jim Wollschlager, COO, Randy’s Environmental Services; Ron Bergamini, CEO, Action Environmental Services; and Ben Harvey, President, E.L. Harvey & Sons. One concern they voiced included the state of recycling. Contamination is an issue in single-stream systems and costs need to be shared with customers to make the business manageable. When it comes to fleets, the firms are focused on maintaining existing fleets and not doing as much in terms of converting to CNG or automated fleets.
The drop in oil prices has led to big drops in exploration and production (E&P). Many rigs are not running. This, of course, has meant less volume of waste for E&P disposal firms. But the sentiment among firms in the space that presented at the Investor Summit is that the market may now be hitting its bottom and could begin to recover in the second half of the year. E&P operators are also increasingly looking to waste companies to help manage liabilities in the space. Lastly, there is increasing pressure from communities for pipelines in order to get trucks off roads. Use of pipelines could be a net benefit to the E&P disposal business.
Successes and challenges with labor were the subject of a session led by Edwin Foulke Jr., partner with Fisher & Phillips LLP. He discussed among other things the Temporary Workers Initiative, which the Occupational Safety & Health Administration (OSHA) issued in 2013 to protect the health and safety of temporary workers. Waste and recycling companies should expect OSHA to want to review their contracts and training procedures for temporary workers. “Provide detailed information about the job you are providing,” he said.
The Lunch & Learn session focused on corporate sustainability. One story was Zappos, which ships goods, and so packaging is critical. Sustainability Manager Brad Tomm. Zappos’ shipping boxes feature a label that tells customers to please reuse or recycle the box. In the company’s offices, there are no garbage cans. Employees have to walk to the recycling area for materials they no longer want.
At the plastics markets session, Lori Carson, director of commercial operations for plastics recycler Phoenix Technologies, said in 2013 31.2 percent of all polyethylene terephthalate (PET), or nearly 1.8 billion pounds. But challenges remain: There are many diverse types of packaging with many colors and labels that make processing more complex, and supply is not increasing fast enough.
Stephanie Baker, director of market development for KW Plastics, talked at the plastics markets session about the good news and bad news in the recycling of high-density polyethylene (HDPE) and polypropylene (PP). On the bad side: reclaimers are operating at only about 70-percent capacity, there’s been low virgin material pricing and the Green Fence policy of China has raised processing costs. On the good side, recycling is up to about 32 percent for both materials, and innovation is growing.
The final sessions of the day included a look at increasing food scrap recovery. Rod Muir of the Sierra Club Canada said keys to success are communication and providing all the necessary materials. The challenges are keeping animals out and getting people to pay attention.
Integrity Waste helps multifamily units in California add organics recycling. The company’s Ron Falcon said diversion in multifamily units is really low because it’s not simply rolling a bin out to the curb for residents, and property managers believe it’s going to be a hassle. The keys, again, is to keep it simple and to educate people.