CVA - Earnings call transcript Q1 2022

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Operator

Good morning and welcome to the Covanta Holding Corporation’s First Quarter 2022 Conference Call. This call is being recorded and an archived recording will be available after the end of the conference call and can be accessed through the Debt Investor Information section of Covanta's Investor Relations website. At this time, I'd like to turn the call Jim Reilly, Covanta’s Treasurer. Please go ahead.

Jim Reilly

Thank you, and good morning. quarter results first call. Covanta's to XXXX conference financial Welcome

be call our we Joining questions. the will will Brad your comments, me on prepared today Helgeson, our CFO. take Afterwards

that will slides Those be website, Investor accessed the referencing we Relations the after can remarks, or on prepared to supplement the certain During slides call we now section prepared call. our be the of a the slides. should of for www.covanta.com. to these should listened of remarks usage measures. statements discussion with be non-GAAP Call These earnings also forward-looking see prepared conjunction in participations financial release our and

$XXX call lenders to the to Covanta increased pro credit who increase The the revolving hand I by $XXX and now note to rata their effective to agreement Brad. The I'd of commitment we commitment that liquidity on Before support. of activities. million. an maintain that, to its continued million want increase amendment our our supported off existing from was each Brad, the and like XXX% to revolving adequate significant yesterday support turn committed finalized facility for proactively their thank call to step the and efforts in increase business I'd risk our prudently share management to energy to to the With our and relationship like in the over a represents banks credit

Brad Helgeson

waste the Slide is In with were of quarter key some strongly volumes the markets. X. for up XXXX, business, favorable for than review and business explain, I'll the pricing I'll a well-established tip Jim. across a Good morning, on begin was reflecting Production growth everyone. board, Thanks, lower end quarter performance indicators the straightforward. the very the of the continuing waste-to-energy story commodity fee which bit first trend in while

a were to volume, out. factors waste-to-energy production point there few Regarding

XX% versus QX this reflected a heavier with already incurred maintenance of to last year-over-year. expense March maintenance First, through year. outage year XX% This scheduled point at schedule compared that this quarter in down anticipated plant year, last more little days nearly XX% over as a approximately resulted

We but consistent, year we in few years, for is this known should we basis, addressed business; a operating at on also mind variability seen and time. both plant our modest a as over heading outages, specific waste-to-energy again, where maintenance positive issues. quarter-to-quarter typical in experienced you've different additional XXXX. into for This no Keep over even overall consistent to be the unplanned production expect be results their in production downtime out these some plants negative, many as

given tip transportation generation company's a waste fees contracts, remains On output strengthening contracts, price at where Instead, in the not great mix new plant is face our prices capacity be to curve we power we which our time contracted benefit sustainable with in utilizing This across pricing overall escalators higher disposal when a and pricing revenue generator. our including for and don't price line, irreplaceable reflects portfolio waste mix over output, for contracts solution asset course long-term better and a biggest the including in is stronger more lower were avoided production priced on market on higher and waste as for pricing higher in year-over-year. higher and value and doubled available tons profiled hedged prices long Covanta shrinking waste long-term haul inflation-linked with prices costs of hedged waste year-over-year, again obvious a market capacity. year-over-year. we unique revenue volume. power side, time, But intuitively locked prioritize a waste and source. X% offsetting because Northeast increasing landfill is An forward of this credit. waste-to-energy favorable tailwind base our Energy over the higher and the secular higher at volume may the of prices were than over under up reflecting period meaningful Bottom looking prices, up market, well-positioned feedstock. cost, a average especially which environment fuel as XX% be is it's Strong

across now realized continued for prices refer XX% to up XX% strong drivers Slide and market prices, and compared a I non-ferrous strength non-ferrous, revenue discuss was Revenue over market to [REX], XX% while specifically, We the added very metal, energy have metals also $XXX growth, $XX quarter, revenue up see of XXXX Higher recycled more ferrous contributed scrap higher year-over-year. sales million. up to to first $X prices QX recycled including million ferrous with with both will board. over please for the in X. the average million

X% As over or terms. by noted, previously fee increased tip in year-over-year prices $X million revenue

revenue. In million increase contractual drove $X fee addition, escalators in service over

of solutions offering alternatives Revenue our nearly options year-over-year. for and menu or platform are by processing non-landfill waste. environmental who for material to grew sustainable facilities million XX% customers looking $X grow quarter rapidly, their the increasingly continues a Our industrial at for commercial in

comparable last outage flat adjusted related I to EBITDA Essentially strong was which discussed in on year. earlier, growth compared offset a waste-to-energy production quarter, and the EBITDA, higher X. to lower first to schedule $XX a plant to which on will I maintenance Turning Adjusted basis, refer price year-over-year volume the heavier was Slide million by was basis. expense

environment the line, in across cost We transportation, see energy waste, is on on But such by offset metal we overall. also the an business inflation revenue. top recycled the I've this that cost and as consumables. items side for and very multiples said before, inflation experienced as higher And inflationary wages, performs well

the year operating normalizes As EBITDA variability the adjusted growth on a trends solid in full point underlying of balance across basis. year, the to

in X, the CapEx maintenance XXXX, year-over-year basis on million to heavier $X first cash associated to free compared basis. through higher million capital the please Adjusted with year-over-year on with was down QX EQT new walk where turn flow and cash $XX structure. quarter, interest expense Now plant I'll negative acquisition flow free Slide a a

low first always represents typically year point cash heaviest the business, seasonal heavy. in the this quarter it reminder, was generation this And the particularly a As period. maintenance is outage as for

XX, XXXX as year syndication. in the compared Turning the sheet from with ended the billion first consistent in leverage notes was presented credit on We a X. ratio to November our to measure Slide with March and end, debt slightly total quarter the but at balance LTM in X.XXx On $X.X the September down basis, agreement the forma the as up pro defined indenture to during debt. corresponding

at both and had quarter debt unrestricted revolving net calculation $XXX this EBITDA as forma availability presented, exclude end. As pro in in adjusted credit our the million a under reminder, subsidiaries. We facility

discussed, Jim $XXX revolving our facility liquidity we million in As our from to million expanded bolster credit order position. recently $XXX to

support flexibility make financial hedge energy is provide increase seen this structurally credit Covanta, in the as world our great additional for greater to stronger. the Stepping to opportunistically, book. prices, results. higher back, In higher a and greater recent this business you've will is of of investments addition In energy prices are for value energy

of was in energy we need $XXX these as our fix our our to And The post in XX energy higher prices the above disciplined a mark-to-market losses. report which continue risk thresholds liquid XX% at for and to counterparties, form place under rise, program to quarterly continued security credit as you basis. morning often credit see up released as prices moved hedges letters have since Depending on we mark-to-market prices has month cash. with the rolling this then liability hedges of management against have million liabilities reflect of to market on XX these in or output collateral these rise. March arrangements we on can a non-cash However, agreed-upon

scenario, course, Of always but are cash they hedges require liabilities represent conjunction nonetheless. generation, collateral in settled in they with can never naked our physical so any

revolver now overall and With In the please upsize, to in and over the the book increasing have collateral $XXX requirements we million excess we're Operator, the the positive of business supportive means conclusion, call. we'll reducing questions? hedge of liquidity, and open strong focused very the adjusted a for but EBITDA delivering we’re further on of pursuing Covanta are environment. that, volatile this price available you the of conditions in of actively liquidity line year-over-year portion Q&A move XXXX. growth in would highly model, on With basis

Operator

will the begin question-and-answer Our Brian question We from comes now session. first Baird. DiRubbio [Operator Instructions] with

Brian DiRubbio

have guess terms the just terms questions a facility, Just rates fundamentally the starting new expanded for in changed of off, or few fees? credit interest me. with I

Jim Reilly

convert that in revolving the note the changes Brian. an to SOFR This No spread LIBOR, is, of from material The just It's the in is the agreement. same. we commitment. the really credit agreement, did credit Jim. is portion increase thing I'd only terms on but to No,

that see material. as wouldn't I So

Brian DiRubbio

did Got know, to $XXX revolver. it. what the some have million you we the those that over cash trust, had And then moved then some collateralization represent? this, because LP new funds of you about I last talked but LPs, of you in quarter, restricted

that million is, because Just wanted net to $XXX as are that using sense a your part get of calculation? what debt you of

Jim Reilly

Right.

short-term Term Brian remaining accounts, Loan candidly the million C across a on projects restricted both million restricted Term supporting $XX the activities. So the balance is at sheet. cash direct is offset well So million to accounts that The other as from C, of $XXX the right? the $XXX as Loan spread it's different domestic

Brian DiRubbio

equity flow are it to the But the cash represented was group? the was the -- longer into cash occurred decision and credit investment of part investments that going cut move Obviously, on going after were X/XX. financial European there made Just was affiliates. invested that The assets to that statements. that. through assets in there the $XX statement, million I'm was assuming no the these

Jim Reilly

that's correct. Brian,

Brian DiRubbio

be and LP but investments $XX the there's to per that clear, cash million, that reimbursement correct? capacity, those to just so were investments, went then for out removed no So the

Jim Reilly

correct. That's

Brian DiRubbio

benefit And what you benefit on had mentioned pricing? a because pricing, then that Can finally, you outages. plant there that was you was got you from the on quantify mix, that had just

Brad Helgeson

were of Helgeson. if just related of Brad the waste though, you there's it so to the on reason a the comments with different many each quantify it at at waste for caveat is the the of been north overall X%. theme. tied is biggest waste And would, average fee how to are tip on mix. environment much that's specifically And higher sort disposal time in we're at portfolio resetting This a plants. running us that for very on doing is It's as inflation hotter edges we're was very it prices much moving I course, look that assets. The was difficult indices. drivers clearly, has then growth parts across factor, contracts, at of it favorable which of And a it but of contractual the But memory. than really so was any in was that escalation, streams of to

I mix, -- factor wanted driver. isn't a the in just is as I it because there the highlight So, but main to really

Brian DiRubbio

last actually one do And one. I have

lot of volumes Just amount there? on non-ferrous, and sharply that the away to you tons of the take down more from sold ferrous Anything than a process.

Brad Helgeson

Yes.

and decreases recovered exactly or or So and move this would of The The what’s we increases sold. up how there's with correlate what's is both can actually period. report with sold waste inventory. in what a course, down -- we why process given pretty is much in closely, amount recovered

at comes facility time with you in associated So and have timing shipped a from waste-to-energy facility that facility the and it, recovered processing that then Pennsylvania, to because where it's sell -- the sold, we inventory our lags, timing real or metal more when the you the often is and the then process because lot and builds centralized then is upgrade less which have material. it of and basically

a fluctuation short, So period-to-period long that number. just story of it kind introduces around normal

Operator

Stanley. from Morgan comes Mike next question Our Turgel with

Michael Turgel

guys, for time. the the for question. holding call Appreciate and questions A I taking thanks guess. couple of the Hi,

guess that the and really and all fair in that sounded wrapped On cetera. reconciliation QX? I from X, the at But to pressures, or say XX XX there in materialize other. Slide from et -- X quarter? thought, Is the the like those sounded previous I pressures past up call, looking maybe in How decrement would the it and labor, the there it did characterize X on like, fuel be would that's maintenance margin not some were you

Brad Helgeson

Yes, it's Brad.

essentially did So pressure, with briefly the reconciliation. It as prepared reflected noted X, is in I factors some in that we feel that the absolutely in netted and remarks. other

that part that about. the up the So part bit, if a we -- essentially, what -- the me unpack medical let unpack I to had X talk isn't little pull first about higher benefit we're

quarter last had we benefit to in We're So, experience first on first the medical. higher self-insured year. quarter compared the medical

now out and to that are as back some people during that their procedures, period. us. of saw elective increasingly doctors decline and So in a getting the seeing COVID is significant coming expense expense having We

negative that projects the operate quarter do And purely based part on of of revenue the that with overall the other on would the into coming agreements And again, sometimes for will on big perspective. margin of is, an enter a a driver, them. we EBITDA energy we well. for construction just, we waste the that It's have and rolling we and that's construction was from not as construction expense, pull So -- make a that it a that on other business. some negative off, but in typically we’ll projects these out that profit timing that was is, own plant municipal clients I

those that price fees, flat, and the ongoing summary, of waste -- pull escalation now number were the are inflation, running offset hotter that price essentially cost fees in which have waste regular out the past. in than by tip course and our the of the which You costs, essentially is other and service they just growth, growth so means

Now well. is price the hotter growth as waste running

those way the the essentially fell in quarter, the just So out numbers offset.

Of what higher have isn't is that the commodity that in from elsewhere revenue based growth math price plus million course, of the we reconciliation. in XX

was made presentation items, multiples the what on by line was of you offset mentioned it across the cost we to up price saw we line remarks, waste items, in up these prepared on for there it how total in I in So, side. But as and revenue growth. the depending this want again, line

Michael Turgel

Got it.

growth the contract as assume Okay. renewals. of waste is year. roll That's based Is through that And rest I that continue, on to helpful. that will And price say? the they fair the

Brad Helgeson

lag Yes. is will much typically take where bit seeing we've all a there full That seen, a of will as recent in continue And we're It prints inflation to roll all through. of a obviously, higher for year calendars those contracts tend those we'll the the to those prints the have inflation resets. midyear in municipal actually annual fiscal of -- be on really and to typically based the where reset year. our later And in heaviest months. clients,

there's to we much last that the come that's rolled saw year. we through So year, through, of some but as more move

Michael Turgel

I've a yet not was Helpful. issue question previous million. revolver about, went reconciling had Got past, $XX cash the caller -- had presume that's down having calc, by up was it. I don't in trouble the And flow then in the $XX I quarter, think million The the the million. this for but on $XX that the EBITDA out, cash sheet by I and balance balance that

curious of -- lot in I’m something a is? imply would that difference something cash So I'm I'm there. just flow. missing the what

Brad Helgeson

Yes.

by a fly line. difficult exercise if suggest line statement the now the one, the through flow you we'll just on maybe could It's on call. I'll with right that up go For Jim. cash And follow probably

Operator

comes with with Financial. question next ahead your Genworth Nikhil Jain question. go Our Please from

Nikhil Jain

a the business, wanted to few actually have line clarify flow the just I just questions cash So and on items. also

maybe up off that on just So follow on hold I'll that. or

the actions of just on unsecured mean, one I'm can just taking on think of made So sense a color action get are on you're sort I the to that curious then with what some the and you business recent maybe collateral? my the just happened So of and in more I'm arms are just around can with obviously on what the kind sense, evaluating posting, I have note, you around Moody's growing, what kind you Moody’s? you comment collateral options the Moody’s evaluating? is -- conversations you in what you the give that trying

Jim Reilly

This Nikhil. Hi, is Jim.

first, the contact as with So been for years, agencies, To as closed, we we have company. a in second since regular and revolver cover been we the public piece, are So increased both noted. many the have right? right, perhaps, transaction

the initiative the working hedge sharing cash on the The letters where require traditional, package that risk is would security with credit to CSAs our is counterparty book some All right. banks. of been lean-based of structures energy from rely on that other primary transitioning and/or we've existing the

with as an So and and we're now counterparties, right well that's process, it, a adequate primary management. handful engaged the it's our just liquidity, but other support different right, to focus as initiatives ongoing risk on of business to maintain

beyond secured degree already I had I'm action, structure comment As deal was was it some I really can as to a what on sure would say not probably the tried that structured, far capital it is when Moody's think that we capacity, to the think debt tipping put secured that that could And it. right? I hit optimize I maximize them. speak I an context, context for as obviously But and would provide in the increase point, that's just that can't such a I in

Brad Helgeson

is -- will bit. on this a I I'll Yes, little Brad. add

-- here. the view our and commenting But are our is So, really Moody's certainly points there opinion two specifically. not on

first remarks, to good is power business. good everything. point, alluded are for good that the this prices which for the It's higher the for The credit, I in prepared unambiguously fact it's

the book debt and of and capacity the terms the the has lot of the of to notching our point required is collateral counterparty with pool. our solution hedged is into is, was this a -- to with second having versus supporting in the tap what The notching revolver obviously, us a secured. unsecured, in point, And additional further Moody's responding indirectly unsecured the hedge to secured reality share

it, sort it to what is. dismiss -- not that is of it So, but

Nikhil Jain

Okay.

be a of that moving like kind up that Like if up, the trying would what it? kind base, am you about towards -- that that just the maybe free forward would happens? structuring that see shared, they're free conceivably, of you changes to bank. how a them more? on as mean I cash because would think revolver share basically you're move understand I you, So, like does the like does your on should that it once what we with to with providing basically Is your lean new So, -- that going with

Brad Helgeson

simple. Yes. pretty It's

So back, of to counterparty cash on have reliance we're package get increase counterparty with today, our dollar-for-dollar the the that then and/or and would transition instead rely to that credit cash that collateral the agreement, posted and under to liquidity letters then our reduce LCs able if on extent the we'll we credit and revolver. that a

think always comment sort the counterparties overall of I would result every We ever positions I not that We're counterparties operation, have a the there's run not also understand. conversation us. just to trading make excess would our physical that for logic cash structure. we of activity assets that the our that I have and where own liability around And we generating just the XX/X. with level we are taking have physical we But in day hedged. we And think limit hedging a right? hour, a every generation, our

that's So electricity, we the the that hedges. when deliver settle as we

think it's to important just is So about. I what we're kind of talking restate it

are, to collateral So many these trying nonetheless, face. in really we deal with But posted, have I it's just belt arrangements structured where for been represents exposure it. way and and the and the past, that that that have suspenders the it's we we're the counterparty in think the that ways, does

Nikhil Jain

do quarter where have so So, Should do negotiation? liquidity still energy the you that that? the too, that squeezed able is need so get more I where have you up on with need to that point to on stand -- on -- right can a we some kind And collateral, them point, there approve side. So you banks that now, gone agreement? you're move essentially, this expect collateral the the sharing the will means of need you prices post to do to further unless that to just the mean,

Brad Helgeson

back quickly, I me me answer don't so And that last just first to let Yes. forget, come part. then I'll Well, question let the first.

the have essentially have credit credit secured the ability in hedged agreement to in we package counterparties the energy So as the agreement. parties covenant under

the seeking that have the flexibility everybody. avail in it So benefit original already to we're of lenders and agreed the is so ourselves of think to which agreement, I

the the liquidity million. potential I of As collateral so right far posted since moment to of The already this at on end collateral, is $XXX as additional are for -- post mentioned as additional we've based quarter, forward north as the prices, available mentioned collateral of now. had we I we've that they have

further the potentially to so collateral. extent forward see additional of could posting in the we require And curve, out prices that that increases

liquidity potentially goes but exactly we goes flow scenario up, up, underscore additional calls Of give cash collateral. position to seek the and against increase that's that than cushion for additional for in everything and to is company, cushion than wanted continue to adequate additional to ways course, direction ourselves more And is adequate EBITDA require right our collateral. in could potential more the moving that why

Nikhil Jain

all Thank you. very helpful. that's Okay,

take wrap or So expect to going you it's than longer the QX, up of to all that in essentially, that? --

Brad Helgeson

it's ongoing I Well, think process. an

as mentioned, completed the revolver, that Jim yesterday. So we

that So availability we additional have now.

I this other in I We going initiatives, those an put make liquidity the second restructuring fronts the in stages as significant ongoing counterparties hedge would think, are to be, said, quarter, across to in a the ourselves security then all of always there progress better quarter. discussions. look second beyond is the going to different And But like yes. position to different we're focus. of agreements, the including The

Nikhil Jain

restricted just thank European queue the of the get clarification of Great, subsidiaries you. back And -- kind and out group. just moving I'll on question, one into on now

should now? like where that P&I? debt Should cash kind restricted about -- debt those -- we How saw already we thinking maybe the should that? So Should items that listed kind been quarter. first and of that’s change of we tied that's line now be of now, project you to a right, concluded kind with see post project

Brad Helgeson

No.

project balance so domestic actually assets. to items domestic and those line So the relate debt, balances those on actually -- then sheet already

separation or a non-recourse actually European deconsolidated several so for debt from already has project happened. has been the Yes, perspective was years. always credit the So

subsidiaries So we've as designated unrestricted. already those

out close credit forma So month. pro separation over the the next example. of actually looking We're they're to ratio, the legally for

Operator

Our comes Ma Kevin from with Mutual. next question Nationwide

Kevin Ma

much so time. I the questions. for appreciate and taking Thanks hosting your call

a caller’s to term Are Just follow-up question target prior to on guys rating any leverage longer you like are or the targets there rating. of manage kind to? trying

Brad Helgeson

Brad. It's No, not specifically.

I the certainly over we've so to with communicated and flow. dividend look EQT a we very do and of time, think business. take very company is has generates explicit to what rating clearly I'll the over intention cash and to this again, delever broadly agencies will their out a free that of time the a lot cash been never business

So to the then growth, debt. the stay cash go we be then the company any certainly way either will delever the company, or absence all which will for period, opportunities generate that first our those reduce would the by delever That of investing particular during and that priority, business. in in

result sort that put has goal. constraints going same as the targets don't few And of be specific But or profile capital a a years. of the time. making We decisions next company will any thing. them to the haven't as we're stronger allocation far that artificial over We a ratings, in on credit have all over ratings

strengthens over and Our its the that expectation company credit ratings would that. will as reflect profile that the time, be

Kevin Ma

No, it. question. of appreciate I last it. just And Got then kind one

to are with agencies. trying expecting further more kind other rating of like action get Or negative outlook, and Moody’s color you just road? regarding on the still of kind With your down guys conversation the Moody’s rating

Jim Reilly

is this Kevin, Jim.

no. think continue do I so. to we'll short and steady the that we But to listen, dialogue is answer with maintain them,

the intent over to right, As time. credit Brad is noted, improve our

now, So I'd right? there's to point nothing

Brad Helgeson

Yes.

have rating in that to outlook specifically As becomes the short of need resolve or something then an time. the you they know, when a relatively that period agencies way one other

looking be do they'll that. to So

Operator

next question. Omar Please Our with Guardian. Jama with go from comes your question ahead

Omar Jama

the several is equity question on any item -- this next was we expect to the line payments quarters? in additional $XX over My Should payment. see affiliate million

Jim Reilly

answer Omar, Covanta longer The this fund is equity no that in to Jim. the European is no. the The platform. separation to that means continued in of step business, is investments required

earmarked million $XX that entirely out forward. expect into was project that came for I'd shouldn't more which that see we going So QX, almost of that the operation, in Rookery any went

Omar Jama

Okay. What for? And the balance from $XXX million are then funds restricted to million. trust declined held funds those in $XXX

Jim Reilly

Yes.

a had letters former So was, we at the or outstanding last when Term as our first that letters of transitioning the legacy credit year, revolver close -- Loan transaction agent closed the biggest to a it's the under those with we bank onto step credit of step there collateralized cash then C.

of -- that a counterparty million up posted $XXX cash So QX about we certain that amount balance with collateral of that represented shows and sheet the on that backstop. representing

first the Over transition of we of course revolver the quarter, letters did Term C. Loan the those credit to and/or the

and sheet to the unrestricted on balance right? used in cash was returned operations, our was us cash that and So

Omar Jama

better are seasonality the you seasonality? due in or even How just were higher two and do hedged. quarters then the month they power -- ago, now a XQ obviously, And but to you're Okay. than largely XQ business, have in prices lot a typically

Brad Helgeson

do. Brad. is we Yes, This

I and -- the mentioned think I this.

first of peak prices schedule. perspective, away, time from in year, the highest on the become the and gas. high and low -- good is you've be for power summer low the recent driven again, the primarily the far It prices in the by a seasonality that were lower quarter summer of power The used maintenance point In winter outage sort it's the is all demands but power, the periods. of two has years, season -- with really for winter. had still The the to

a quarter. basis cash seasonal and in but the X. of EBITDA maintenance which cash does X first outage actually Because in early driving of the factor of it much, the half more see up you're generation stronger the of early So stronger. generally is power specific from second But the Qs into outage is of quarter we're quarter, And of the the best quarter, in shoulder that, balance quarter, we'll The schedule. prices. -- is winter, X, we rank schedule second the second ordering a in over year, period a for then bit saw And late results, the course, moving the finishing little much overwhelmingly move some in around year-to-year. the on really and spring the

bit the have work still second that through in to of little you of kind So quarter. a

predicting really the is business So weighted, cash necessarily QX story half very is, an EBITDA basis. versus second long the short and on without QX

Omar Jama

payment. And -- around say would million questions is the last of lot then $XX I the thing the

understand to On occurred the scheduled think that's payments, of said that you But grandfathered made continue before kind kind the in. issue case are quite all That's so what That you before last payments under you which generous. had that though call, of these lot forward. the maybe you one payments. do potential comments or I be don't of I you baskets, there do to even no flexibility were said a course of going you be would those would your are equity make RP

Thank much So it's a of time. your you very for more comment.

Operator

with Kareem Our comes next Whitebox Advisors. from Mansur question

Kareem Mansur

margin drove the earlier, during insurance your much have the to the again, inflation -- essentially know period I you inflation-based line through ultimately Was see Or escalators. did higher costs? This the of you contracts kind stronger that costs. operating to than that your one quarter? shown of guys alluded items relates, drove operating like your medical progression the escalators simply that so

Brad Helgeson

ended numbers benefit more on line just saw items way quarter, -- a inflation the The we revenue waste the up the Essentially, the in or in Brad. the offset inflation the basis. same-store that this Yes. less is --

I at And it waste necessarily talking top-line tip -- and so Slide looking X fees essentially service is I'm isn't EBITDA where - simple largely for same-store reconciliation the the escalation basis. Inflation the But as costs. last the offset revenue, so on that category. on same-store this another there's am P&L. deck, offsetting in in that's bridge, And one the fees our other of call -- in as

saw. we what that's So

indices, contracts certainly of compression. earlier, get resets prices margin some our back will these as I and that think inflation forward to continue As mentioned move with get energy in we I that help higher

Operator

Vibrant Our Capital comes next from with Yana question Partners. Manoukian

Yana Manoukian

already been actually have questions you. Thank My answered.

Operator

PineBridge. with Goto Eric from comes question next Our

Eric Goto

a on you for have How hedges we LPs? your have collateral cash more use look can your questions lean capacity and at few I you that much, as do just as hedges. I guess,

Brad Helgeson

because issue. So you repeat -- your could technical we just if dealing a are with Could you question?

Eric Goto

capacity cash can have collateral I much credit? sure. to your in that how use you wondering hedges do you lieu pose of of just actually Yes, for lean letters was and

Brad Helgeson

Sorry. Yes. It's uncapped.

Eric Goto

Oh, it is uncapped.

Okay.

Brad Helgeson

Yes, it's right. in Correct, the uncapped agreement. credit

Eric Goto

it. Got

Okay.

instead guess curves preserve on forward continue if hedges you up into change that entering strategy secured debt to of with that that issue capitalize could new possibly your to I or here, liquidity so, would opportunity? some to move more And

Brad Helgeson

facts we'll think you decisions evolve. I to make those the -- have as

step You desire bring good a up take question back. a of bit about enter hedges. I'll new to little our a into

an have continues that well, as serve and energy us risk many to served program we very well. management So for has years

we're for typically significantly And XX actually hedges program in years take You over into curves good the higher. up in year, and is year two we from about first off time the basis take over forward strategy leg XX-month table. have a the less to to roll then a -- to that down, But way those time XX% risk operated When first three, with prices deciding deviated and the so going hedged. typically where a on that late bad. last horizon are We we've under the rolling as hedged continued months, we'll moving the time. you're or entering

energy anyone that Prices higher to With the an upcoming price the time risk basis and off perspective. EQT more at were transition, anticipated. a ownership had go decided take from than ever forward much ahead table on we

ahead And over that that as hedged more I we'll into locked I over suspect with now essentially take out what mentioned, years. in. gradual we're and in done, deal again, position what we where, a us we've those three a way. average we is always then it, approach do time back of XX% left it and which revert So went is to

have would So -- a book it hedge that's but the larger been. reality is, have ever we than

potential with, that's dealing would what to said we expect excess calls to right in excess of, and establish I with liquidity, we're in before, deal need of hedges. ever as that far with what to move collateral those for under terms those -- now trying dealing as periods we're continue create going those need potential now. we're forward, time And And forward so to prices are to

Eric Goto

And next cash year should we be expect, the this to after and of I guess, a released seasons? restricted summer good winter amount

Brad Helgeson

-- just restricted The balance primarily sheet, the that the The underpins clarify. synthetic to things. two on so C, The -- that's cash Term Loan the facility. LC

So on the against balance the Loan that'll always C be that nets sheet. there. And Term

works, returned. yes, so with generation, As we are collateral settled, they're is, the settled settled, and course, far way in then this as physical they're of as posted move gets hedges naturally counterparties, as with mean and I cash conjunction that the we forward, the that have

of extent preparing prices So in beyond forward today. down is collateral course, for. contemplate, the that collateral up have What time. where the prepared that's And for, additional needs normal that are we're over they move that winds doesn't course, what or to

Operator

Global question Instructions] [Operator Investments. Olivas with from comes Oscar Our Allspring next

Oscar Olivas

Good morning.

counterparties And Just questions on your on are Can crossover then agreements. you deal? some additional hedging many have? you your disclose of more how those many how lenders

Brad Helgeson

-- at at under I’ll XX agreement handful or look about operating lenders small banks similar is it's counterparties I'll Yes, in Brad, way. to a used are our and this look credit that also are a our Jim,

Oscar Olivas

collateral demand experiencing, Other higher And maybe in that of Can markets on Okay. as demand? higher have markets, touch one driving that you is the increased the terms then those you're NYISO, forward which segment PJM, then or is of maybe the hedging well. you

Brad Helgeson

PJM it's Yes, Sure. England. New and

Oscar Olivas

other you're And right? like the You're selling not of power, hedging taking types exposure? just

Brad Helgeson

vanilla very the of is This scheme We're exactly. selling in No, things. power.

As we're I buying mentioned, not fuel.

source. our fuel is Our revenue biggest

with into physical we which entering selling grid. just power. settle We're then the swaps to floating when we're counterparties, generation we fixed deliver So to then

Oscar Olivas

over might quarter? I your you switching any that Maybe have there in from other higher businesses shipping it. second had operators revenues metals benefit business, issues Was Got maybe would’ve that might where you times. the timing business. with different know experience impacted in experienced to kind or that of

Brad Helgeson

materially. Not

Oscar Olivas

free on first of had anything wasn't that fund that Okay. would just that books growth Or fourth be earlier for from there quarter? the terms in opportunities, you overall when on And quarter? call your final question cash the flow, books but maybe is

Brad Helgeson

sure the mean you book. not on by exactly I'm what

Oscar Olivas

you had as construct your that or you a to your to Like growth that segments call maybe project in one when on something year? new quarter projects this fourth earlier you add have signed of -- didn't well,

Brad Helgeson

No, Okay. nothing material.

Operator

Next question is a follow Genworth up question with with Nikhil Financial. Jain

Nikhil Jain

you. thank Hi, Yes.

on there contract, So that something the in about? Is thinking the market else question just escalation the be the just What clauses should it we growth the the tipping or drives fee. is in tipping a in fee? typically

Brad Helgeson

for the that's tied the into contract So that's it's escalator. a existing, typically built course, to of inflation escalation an contract

years, in our waste unique a now For specifically tip which Covanta, over the solution. in our disposal in supply trend assets overwhelming driver many Northeast. and have sustainable is the demand we Essentially, dynamics as case of provide shifting higher fees, the a market,

assets our in competition and waste metropolitan located uniquely and major have relative is generated, We the in the the very the areas around where around to areas.

customers run as Washington. Boston company, to down from line Our a biggest Amtrak you the just

waste have D.C., And and and of had less Long capacity, you less of City butter only from City capacity. it in of Island, ever almost that landfill our anything So Boston, you bread less markets less not and Philadelphia, Connecticut, less landfill municipal those have but Jersey, York, Washington solid perspective. New City of a landfill less would inconceivable is capacity, New City have and you and that's

imposes landfill those out of costs only is are which a costs So that is transportation transportation more obviously, competition getting and increasingly our expensive. state

And the drives about pricing in of scarce which increasingly that That's economic negotiating that doing we with as the our customers the for as we're is and of significant contracts. us. disposal on think the long competitive against fundamentals of have And that backdrop disposal you term contracts, market, wedge reality a So we're capacity. these markets.

So us. really the driver for been that's

Nikhil Jain

just it. Thank a production recession? may there tied of I impacted you. in has a are muni get is how or like waste, in recession? mean to clarification. the manufacturing one that kind -- Is components Got And The which impacted that in there industrial

Brad Helgeson

what in So hard a what in those but also the you'd periods is see as time But expect, we mean, a goes you a and But then last the to in it's modestly. It you it down recession. generation in down -- residential. goes to remember very bit. I and see primarily industrial had go goes waste down -- degree, little does sectors, it time commercial

waste is more and we’re overall is, crisis, But small capacity it of outlet for where with that waste waste at priority point us look waste financial markets. chart is fraction the blip a in global important in customers talking of first If the waste our market. capacity was generation, overall generation, And for a you the generally positioned the in think the our our our I'm through generation. I

on So plants otherwise a an particular even they we may recession, less through are we're overall, basis bring waste see -- our But individual may would customers have. than full.

getting that a to miles capacity fixed anything on we that's that traveling Our with ends never can't of been landfill. available capacity. the market waste in our because waste we plants up but hundreds have of take, the multiples have full a And truck and

Operator

the over question-and-answer closing our I any Brad back conference concludes remarks. like to to turn session. This would for

Brad Helgeson

weren't appreciate arise, we or questions questions. to us thanks interest that directly on joining long out other the and healthy and everyone, operator, clear most And And you. please to Thank all everyone please a the We Thanks, Jim is anything for all efficient. the the extent call. safe to have weekend. reach and the about

Operator

for now concluded. conference attending has The Thank today's presentation. you

disconnect. You may now

Covanta Holding (CVA) 27 May 222022 Q1 Earnings call transcript