First Reserve backs Dublin WTE facility

Covanta, a US firm specialising in energy-from-waste solutions, will begin construction of a new waste-to-energy facility it has agreed with Dublin City Council to build, own and operate over a 45-year term, the Morristown, New Jersey-based company said in a statement.

The facility will have the capacity to handle 600,000 metric tons of post-recycled waste from landfills per year, generating 58 net megawatts (MW) of clean energy to supply 80,000 homes. It will also be able to provide heat to more than 50,000 homes if a district heating system is implemented in the future. Construction is expected to take three years while operations are expected to commence in late 2017.

The project, which is expected to cost around €500 million, will be funded through a combination of third-party non-recourse project financing and equity invested by Covanta. The third-party project funding includes €300 million of project debt, representing approximately 60 percent leverage, while energy-focused private equity firm First Reserve will provide a €75 million convertible preferred investment, according to the statement.

“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,” Covanta’s chief financial officer Brad Helgeson said.

First Reserve invest in the project through First Reserve Energy Infrastructure Fund I, which closed in May 2011 on $1.23 billion.
Covanta’s total investment in the project is expected to be around €125 million, of which €30 million has already been invested in development and pre-construction costs. The majority of the remaining investment will be funded from cash currently held offshore.

In addition to its equity investment, Covanta will also provide working capital and other support to the project company, while its subsidiaries have contracted on a fixed-price basis with the project company for engineering, procurement and construction; and operations and maintenance services.

Under the terms of the agreement, Covanta will operate the facility for 45 years, after which time ownership of the facility will revert to Dublin City Council. In addition, Covanta will be responsible for sourcing waste supply for the facility, while Dublin – during the first 15 years – will share in any upside or downside in facility waste revenue relative to a baseline projection, according to the statement. Dublin will also share in energy revenue generated by the project for the full 45-year term of the contract.

Covanta expects over 50 percent of the electricity generated to qualify for preferential, inflation-escalated pricing under Ireland’s renewable feed-in tariff through 2031, while the remainder of the electricity generated will be sold at market rates, the company said.

Should Dublin develop a district heating system in the future, then the facility will also sell energy in the form of steam heat.

Covanta already has 45 energy-from-waste facilities located in various countries around the world. These facilities convert annually approximately 20 million tons of waste into clean, renewable electricity with the capacity to power 1 million homes and recycle over 440,000 tons of metal.

Based in Greenwich, Connecticut, First Reserve has raised more than $30 billion since its inception in 1983. The firm has completed more than 475 transactions, including platform investments and add-on acquisitions, across six continents.

In June, the firm closed on its second energy infrastructure fund – First Reserve Energy Infrastructure Fund II (FREIF II) – on its hard cap of $2.5 billion.

Like its predecessor, FREIF II focuses on contracted power, including conventional generation and renewable power; contracted midstream; contracted energy assets; and regulated transmission and distribution.