Covanta writes off Poolbeg investment

(H/T to Joe & Valerie)

Covanta has written off its entire investment on the Poolbeg project in its 3Q results, citing the “political and regulatory environment” in Ireland. That’s just the sort of language we want in a SEC filing.

According to RTE, Covanta still intends to build the incinerator but does not feel bound to do so.

I’m not sure whether this is more bluff by Covanta, prudent accounting on their part, or a sign that Minister Gormley will after all waste a substantial sum of money, raise waste charges for everyone, and condemn the country’s waste to landfill for years to come.

17 thoughts on “Covanta writes off Poolbeg investment”

  1. It is hard to make any judgment as to Covanta’s motivations or intentions while the commercial aspects of the contract with Dublin City Council remains confidential.

    As for wasting money, you have already said yourself that it is never the wrong time to make the right decision.

    In any event, anybody who enters into a contracts that is conditional on statutury consents or third party consents issuing is fully aware that the money they expend prior to such consents issuing is at risk. That goes for Covanta and the Dublin local authorities.

  2. Why on earth can the Danes recycle more than us and incinerate cleanly right in the heart of their cities and have a much lower proportion
    going to landfill . Do our Green ministers have blinkers on when this subject is discussed . I’ve never had a satisfactory reply from a member of the green Party of FF .

  3. As Zhou said, it’s difficult to know why they are doing this. Could just be an accounting issue – maybe they can’t capitalise their due dilligence etc if the investment is not certain to proceed?

  4. The USA engages in extra-territorial legislation in all sorts of areas and the US ambassador is currently lobbying in favour of a secret deal signed by unelected bureaucrats. Is it seriously suggested we sacrifice our sovereignty in favour of regulatory agencies abroad?

    The USA has frequently proven capable of offending more than foreign regulators in pursuit of its interests. We’d be fools to act otherwise.

  5. @Richard

    I’m sure they love cracks like that in the Laotian highlands or central Vietnam! What an amusing war it was!

    The write off is € 16.5m net…

    The sort of figure that sets chins wagging in Wall Street alright. When will the storm ever pass over, I wonder?

  6. Ask Dublin City Council for a copy of the contract so.

    If the award of the Poolbeg contract _was_ indded ‘corrupt’ then the bulk of the corruption involved was entirely localised in Dublin itself…the very city that made George Redmond assistant city manager.

    Blaming the Murkans for our own weaknesses is a tad bumptious 🙂

  7. @2Pack

    Nobody is saying the contract was ‘corrupt’. If anybody did think that for any reason then they should tell the Gardai and not say it here. People have said the contract may not be a good deal for Dublin and have asked for it to be made public including all commercial terms thereof.

  8. @Michael Leonard
    Take a look for this document on the danish EPA web site Affaldsstatistik2007og2008.pdf The danes only mange to get 41% of household waste recycled without incineration. The EU target is 50%. They publish a higher figure overall for waste as they include C&D wastes etc to get over 65%. Also the Danes have being investing for the last 40 years in district heating and have massive district heating systems that require this energy. We do not need to do this as cement kilns (already built) want the RDF to replace coal that they import. So while we might need some incineration we do not need this much and my bet is that at a cost of over €50 million to get steam to Spencer Dock – it doesn’t make sense.

    @ Richard
    Covanta are obviouslly being smart about this, ‘don’t put out all your bad news at one time’. Take the write down now, pull out whan you don’t get what you want that would maximise your return or profits. But certainly looks like a deal on the brink. As for the waste of money to date, why not just expand the waste water treatment plant onto the land as it needs to be expanded anyway.

  9. This was our comment from last night on the previous thread:

    Covanta writes off its entire investment on the Poolbeg project in its 3Q results released today.

    See the 8-K filing listed on this page: http://investors.covantaholding.com/phoenix.zhtml?c=115220&p=irol-sec

    Covanta CEO Tony Orlando said today in a conference call with investors: “At this point we intend to move forward only after project financing is secured, and given the uncertainty created by the environment, we have determined it is appropriate from an accounting perspective to write off our entire investment, net of recoverable amounts.”

    The write off is € 16.5m net after € 5.3m recoverable by way of project insurance.

    Mr Orlando also said because all contractual conditions had not been reached by last month’s deadline: ‘that means we have no obligation to proceed with the project on the original terms.’

    Interesting that Covanta chooses to write off the project despite DCC getting ABP approval for their compulsory purchase of the foreshore.

    The cost of walking away therefore is less than € 20m.

    The expensive site can now be used to provide a proper tertiary treatment expansion of the Ringsend Waste Water Treatment plant instead of pumping secondary effluent out into Dublin Bay.


    J&V

  10. The manner in which the US Ambassador – remember a political appointee not a civil servant as our man in Washington is – has behaved comes off as quite offside. That said, can we in Ireland say with hand on heart that the predilection for ministers to jump on a plane at a moment’s notice to visit the likes of Intel, Apple etc. or the White House on Paddy’s Day has always been seen by others as appropriate/above board?

    As for the filing – sure it doesn’t look good but I agree that it doesn’t commit Covanta either way – they’re preparing their investors for the worst but doing it in a public way which might still get them a result. It will only mean something if people tie it to the shrinkage of other multinationals. Pfizer and Intel have ageing plant and in Pfizer’s case about to lose patent coverage on drugs that have been part of the Celtic Tiger narrative almost from day one. What price will they ask from our regulatory agencies – planning, environmental and others – in exchange for continued presence?

  11. Possibly of interest is that Covanta has at least one other similar situation. If you search on covanta+harrisburg you will find another incinerator project, this time in Pennsylvania, USA. If I understand correctly the town of Harrisburg (also the state capital) is not making payments on debt it owes Covanta for rebuilding the town’s incinerator.

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