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Covanta to commence TAPS in the second half +4

10:11 07-Jan-19


In the outlook also sent this morning, I've referenced bifurcating incomes and investment opportunities.  Covanta typifies this very well as it transitions toward global operations.  Thus, I think this morning's press release deserves to stand alone from other news.  It documents the much-delayed start of construction on the first Total Ash Processing System, "TAPS", and projects operation in the second half of 2019.

This is new technology that I've been tracking from the beginning.  The Fairless Hills facility will process ash from many other sites around the country, but it is still envisioned as the first many.  If it can work in America, I expect it to have global appeal, and for the technology to gradually increase operational cash flow to the bottom line by a percentage in the mid to high single digits.  That in turn should also increase the possibility of new development deals. 

It's been a roller-coaster ride with CVA, largely due to blatantly incorrect analysis in the media, and the stock recently declined back to lows around the levels seen at each of the referenced entry points.  Despite the recent OMIB, it is still over 15% below my current fair value estimate of $16.67 and sports 7% yield.  While it may not have as much immediate upside as other names I cover, I think it is now one of the safest, with a clear plan for further growth.