EQT Infrastructure Acquires Covanta, Aims to Expand Sustainable Waste Management Solutions

(Credit: EQT Group)

by | Dec 2, 2021

(Credit: EQT Group)

The infrastructure arm of investment firm EQT Group announced Tuesday the completion of its $5.3 billion acquisition of Covanta Holding Corporation, a world leader in providing sustainable waste and energy solutions. 

Alex Darden, Partner and Head of EQT’s US Infrastructure platform said, “Under EQT’s ownership, Covanta will continue to differentiate its service offerings, with a focus on innovation and sustainable energy.”

EQT plans to to increase investments across Covanta’s business, including upgrading equipment, investing in host communities, and integrating into more sustainable aspects of waste disposal. Specific actions include:

  • Leveraging its existing asset base to move higher up the waste value chain by further incorporating recycling, beneficial reuse, and other forms of sustainable waste disposal into its service offering (including building materials and energy feedstocks).
  • Upgrading equipment at existing plants to reduce emissions (including baghouses and advanced NOx and SOx control).
  • Furthering investments in host communities (including vocational training programs and environmental undertakings).

Covanta has tapped Azeez Mohammed, who brings decades of industrial and energy transition expertise, to oversee the process as President and Chief Executive Officer. Commenting on his new position, Mohammad said:

“I am excited to lead Covanta during this very transformational time.Covanta has been a mainstay in the industry due to its talented team with deep domain experience in the sustainable waste disposal space, robust portfolio of sustainable negative-carbon Waste-to-Energy assets, and growth platform in Covanta Environmental Solutions that provides premium disposal and recycling solutions to broader industrial wastes. Coupled with society’s growing momentum toward decarbonization and pursuit of circular alternatives for managing waste, this creates a compelling value creation story.”

In keeping with its environmental commitment, EQT completed the deal with the first ever sustainability-linked leveraged buyout financing in the U.S., featuring environmentally focused Key Performance Indicators with financial incentives attached to drive meaningful progress. Under the framework, Covanta pledges to increase the total waste-to-energy processed, as well as waste recycled to reused materials, by 40% by 2030. These goals are accompanied by two KPIs, which must be met by year-end 2025 compared to a 2020 baseline, with significant penalties for non-compliance:

  • Demonstrating a cumulative growth of 2.5% of sustainably processed waste, which diverts more waste from landfills, therefore avoiding significant methane emissions.
  • Showing a 25% cumulative growth in waste recycled or reused, which also avoids emissions, as well as supports the development of the circular economy.

A mergers and acquisitions survey published last month found that environment, social, and governance criteria are playing an increasingly central role in M&A decision-making.

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