New Jersey base waste to energy firm, Covanta, is to commence construction of the controversial 600,000 tonne per year Poolbeg waste to energy facility in Dublin, Ireland.
The company (NYSE: CVA) said that it has now executed an agreement with the Dublin City Council to build, own and operate the 58 MW net waste facility, and has achieved financial close on a comprehensive project financing package and plans to commence construction of the project immediately.
Construction is expected to take approximately three years, with commencement of operations targeted for late 2017.
According to Covanta, the waste to energy facility will provide the Dublin region with a long-term sustainable and environmentally superior waste management solution, enabling it to divert post-recycled waste from landfill and become locally self-sufficient in managing waste, consistent with regional, national and EU waste policies.
The project agreement executed with Dublin will cover 45 years of facility operations, after which facility ownership will revert to Dublin.
Under the project agreement, Covanta said that it will be responsible for sourcing waste supply for the facility, which will consist of residential, commercial and industrial waste streams from Dublin and surrounding areas.
The company added that during the first 15 years of operations, Dublin will share in any upside or downside in facility waste revenue relative to a baseline projection. Dublin will also share in energy revenue generated by the project for the full 45 year term of the contract.
Over 50% of the facility’s electricity generation is expected to qualify for preferential, inflation-escalated pricing under Ireland’s renewable feed-in tariff through 2031, with the remainder of electricity sold at market rates.
If a district heating system is developed by Dublin, Covanta said that the facility will then also sell energy in the form of steam heat and receive an enhanced renewable incentive for a portion of the electricity sold.
The combustion technology used in the facility will be supplied by Swiss waste to energy technology firm, Hitachi Zosen Inova (HZI), following the close of a turnkey contract.
HZI explained that it has been contracted by Covanta to deliver the complete electro-mechanical portion in the value of over €200.
According to HZI the facility, which will treat up to 600,000 tonnes per year, consists of two treatment lines, each with a thermal capacity of 102.5 MW, while the plant as a whole will have a gross power production of 68.8 MW.
The technology supplier explained that due to its advantageous location in the port of Dublin, water-cooled condensers will support the achievement of a net efficiency of greater than 30%.
The facility is waste water free and the majority of process water supply will come from rain water and the neighbouring waste water treatment plant.
On top of that, HZI said that the design of the facility allows operation well below WID emissions standards achieved through the use of its SNCR system Dynor®, a lime based HZI semi-dry system, and a wet scrubber.
The company added that a further flue gas heat exchanger will also act as a booster to efficiency by re-heating condensate.
The total investment in the construction of the facility will be approximately €500 million, funded by a combination of third party non-recourse project financing (€375 million) and project equity invested by Covanta (approximately €125 million).
The third party project funding includes €300 million of project debt, representing approximately 60% leverage, and a €75 million convertible preferred investment by the energy infrastructure arm of First Reserve, one of the world’s leading private equity and infrastructure investment firms in the energy sector.
Of the approximately €125 million of total expected Covanta investment in the project, over €30 million has already been invested in development costs and pre-construction activities, and the majority of the remaining investment will be funded from cash currently held in Europe in anticipation of this investment.
“We are very happy with the financing structure of the project and the broad-based support from both leading Irish and international financial institutions that it represents, including the strategic investment made by First Reserve’s energy infrastructure business,” commented Covanta CFO Brad Helgeson.
“Raising approximately 75% of the required capital at the project level is the right structure for Covanta from a capital efficiency standpoint,” he continued.
“Given that we will use cash already held offshore to fund the majority of Covanta’s additional equity investment, this significant strategic investment can be made without impacting our other capital allocation priorities,” concluded Helgeson.
Macquarie Capital served as exclusive financial advisor to Covanta in connection with structuring and raising capital for the project.
When complete, the company said that the facility will supply enough energy to supply 80,000 homes, reducing Ireland’s reliance on imported fossil fuel. It has also been designed with technology and infrastructure to provide enough heat to meet the equivalent needs of over 50,000 homes if a district heating system is implemented in the future.
The project has been controversial, and originally received planning approval back in 2007 from An Bord Pleanála, which is responsible for the determination of appeals and certain other matters under the Planning and Development Acts, 2000 to 2011 and determination of applications for strategic infrastructure development.
It was then granted a waste license by the Environmental Protection Agency in December 2008, and received authorisations from the Commission for Energy Regulation in September 2009. Final outstanding approvals have been achieved in summer 2014.
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