A publication of Work On Waste USA, Inc., 82 Judson, Canton, NY 13617 315-379-9200 SEPTEMBER 1993
Excerpts from WSJs front page report: Fading Garbage Crisis Leaves Incinerators Competing for Trash... Waste-to-Energy Fever Burns Local Taxpayers.
The stuff that goes up the [incinerator] stack affects more people than [leachate from garbage landfills] going into the groundwater, says Bruce Weddle, EPAs trash chief.
Municipal officials made the plunge into trash burning with the best advice money could buy, hiring engineering consultants, Wall Street investment bankers and bond lawyers, all of whom have profited handsomely from fees connected to bond underwritings to finance incinerators...An incinerator, went the logic, allowed a city to lock in a disposal price for 20 years or more. So why not build it big? With the extra capacity, an incinerator could reap hefty profits by taking trash from elsewhere at escalating market rates...In truth, trash companies, led by WMX Technologies Inc. (formerly Waste Management Inc.) and Browning-Ferris Industries Inc., along with municipalities, created huge amounts of disposal capacity in recent years. As with office buildings and airlines, a space glut has led to fierce price-cutting as dump and incinerator owners compete for refuse. Incinerators werent designed to be economic, contends Douglas R. Augenthaler, a trash stock analyst at Oppenheimer & Co. in New York. They were designed to replace a disappearing asset (dumps) that didnt disappear....In hindsight, the public sector got most of the risks and the private sector most of the rewards in building waste-to-energy facilities. Moreover, many municipalities and their consultants overestimated the amount of trash they would be generating, failing to foresee sharp reductions from recycling and the recession; a slower economy generates less waste. Incinerators need to operate at full capacity to make the most of electricity production, which also brings in revenue, and to service debt of as much as $300 million per plant. Cities therefore have been forced to bid for trash on the open market, often at disposal fees far below what their own residents must pay. Nearly all the incinerators are operated -and many owned- by companies such as WMX Technologies, Ogden Corp., and Westinghouse Electric Corp. Typically, the municipality provided financing; the company guaranteed the thing would work; the municipality guaranteed a certain amount of trash at a set price. Then the market price for disposal plunged...At its worst, a shortfall of trash begets a higher local dump fee to cover fixed costs, which chases away local haulers and begets a bigger shortfall: the death spiral, waste officials call it. A Claremont, N.H., plant is in full spin... [See Waste Not #244.]
The trash-incinerator industry is heading into what promises to be a severe shakeout, as weaker competitors give up on a business in which growth has stalled and the two dominant players pursue radically different strategies.
Ogden Corp./Ogden Projects controls 26% of the market
WMX Technologies/Wheelabrator controls 20% of the market
Asea Brown Boveri AB: Sold its U.S. trash burners for $47 million to Ogden Projects.
Foster Wheeler Corp. and Montenay SA disappointed in the slowdown.
Westinghouse Electric Corp. confirms that it offered its incineration plants to WMX Technologies [formerly Waste Management Inc.], but that no agreement was reached.
Incinerator Communities cited in the August 11, 1993,WSJ article:
La Crosse, Wisconsin: Northern States Power is the owner/operator of this 400 tpd Refuse Derived Fuel incinerator: cant fill half the capacity of an incinerator built there in 1988.
Bay County, Florida: Westinghouse is the incinerator operator while the owner is the Ford Motor Credit Corp., 510 tpd, on line June 1987: resorted to buying wood chips to stoke its incinerator.
Broward County, Fl: Wheelabrator, owner/operator of two 2,250 tpd incinerators. Officials there are literally rummaging around the rest of South Florida to find garbage to feed their $500 million pair of incinerators. Its killing us, [says Lori Parish, a commissioner in Broward County, Fla.]...Broward County burns for $55 a ton at its two big incinerators, but waste from elsewhere is welcomed as cheaply as $42...The incinerators are suffering a shortfall that could hit 100,000 tons this year. Under a so-called put-or-pay deal, the county pays for at least 1,095,000 tons even if it incinerates, or puts, less. WMX Technologies also owns a big dump in the county, and accepts trash that could be burned. WMX took more than two million tons of trash to the dump during the eight months ended March 31, most of it from the Hurricane Andrew cleanup. The company says the hurricane trash was too wet to burn. Steve Alexander, a Broward County official, observes, One of the partners in this deal is making a whole lot of money...
Pinellas County, Florida: Wheelabrator is the operator of this 3,150 tpd incinerator, while Pinellas County is the owner. The incinerator went on line in May 1983 and expects retrofitting its 3,000-ton-a-day burner to comply with air standards will cost anywhere from $100 million to $200 million, including lost electricity revenue and disposal fees while the plant is down. That could force the county to double its disposal fee from $37.50 a ton, says the countys trash chief, Bob Van Deman.
Montgomery County, PA: Montenay Power is the owner/operator of this 1,200 tpd incinerator that went on line in January 1992: locals pay $63.50 [per ton] while outsiders can dump for $41 [per ton]. It was supposed to work the other way around, says Donald Silverson, Montgomery Countys trash chief...
Claremont, New Hampshire: Wheelabrator is the owner/operator of this 200 tpd incinerator that went on line in March 1987: a $96.50-a-ton fee for local trash, a $40-a-ton fee to attract outside waste, and every indication the disparity will worsen. -- See also Waste Not #244.
Montgomery County, Maryland: Ogden Martin is vendor, designer and operator. A proposed 1,800-ton-a-day, $325 million incineration project...The affluent county, just north of Washington D.C., is surrounded by relatively cheap and very abundant disposal in Virginia, West Virginia and southeastern Pennsylvania...Annual trash-collection fees, which also fund a zealous recycling program, are expected to rise from $146 a household next year to $246 by 1999.
Delaware County, Pennsylvania: Westinghouse is the operator of this 2,688 tpd incinerator that went on line in June 1991. Westinghouse owns a huge $300 million plant in Delaware County, Pa., part of the glutted Philadelphia market. The facility is losing money...
The Public subsidizes the electric rates paid to incinerator owners:
Utilities are required to buy electricity from so-called nonutility generators, or NUGs, at prices often based on early 1980s projections that oil prices would skyrocket. So, while electricity changes hands these days between utilities at 1 cent to 3 cents a kilowatt hour, some incinerators can get as much as 11 cents. (A ton of trash burned yields about 600 kilowatts, so 2 cents a kilowatt equals $12 a ton, 4 cents $24 a ton and so forth.) Utilities are trying to limit new NUGs and renegotiate such high priced contracts. Niagara Mohawk Power Corp. [N.Y.], which has a glut of power, is forced to buy NUG electricity at 6 cents a kilowatt and then sell it at 1 or 2 cents, a $400 million annual cost. Southern California Edison Co. spends $750 million a year above market rates to buy NUG power, a spokesman says. Thats why are rates are so high. WSJ, 8-11-93.
According to another Wall Street Journal article published on Sept. 20, 1993, titled Westinghouse Sees 3rd-Quarter Profit Falling 50% on Cleanup Unit Weakness: Nicholas P. Heymann, an analyst with NatWest Securities Corp., said Westinghouses waste incinerators are running at far less than capacity...The industry also is suffering from too many incinerators and too little trash, which is pushing down prices. And incinerators carry high fixed costs, making it easy for them to fall into the red when their operating rates decline, Mr. Heymann said.
WMX TECHNOLOGIES INC. & CHEMICAL WASTE MANAGEMENT DEBTS PLACE STOCK ON CREDIT-WATCH. Standard & Poors Corp. put about $5 billion in debt of WMX Technologies Inc. and Chemical Waste Management Inc. under review, with negative implications, citing prospects of lower profits. S&P said the stocks went on its Credit-Watch list because of less attractive industry fundamentals, resulting in lower-than-expected profitability. Moreover, the companies borrowings have risen to what S&P called higher-than-expected levels because of increased capital spending and acquisitions. The solid and hazardous-waste-service businesses of Oak Brook, Ill.-based WMX are being adversely affected by greater than anticipated cyclicality, ongoing waste minimization efforts, increasing levels of recycling and an inability to pass on increasing costs because of competition, the rating service said. It also said the performance of WMXs majority-owned hazardous waste services unit, Chemical Waste, is being hurt by a decline in waste volumes from environmental cleanup projects and softness in the commercial hazardous-waste incineration market. Debt under review includes WMXs senior and subordinated debt, including commercial paper and shelf-registration debt. A WMX official had no comment on S&Ps views but said the company would meet with the rating concern soon. Wall Street Journal, Sept. 7, 1993, S&P Places Debt Of Waste Management Firms Under Review.
CHEMICAL WASTE MANAGEMENT, A 77% OWNED SUBSIDIARY OF WMX TECHNOLOGIES, TO CUT 1,200 JOBS. The downsizing hammer landed hard Thursday on Chemical Waste Management Inc., which announced cuts of 1,200 jobs and a writedown of $363 million, much of it for reevaluation of assets, especially in the companys ailing hazardous waste incineration operations...The jobs will be phased out by the end of 1994...The companys asset value for its controversial Chicago incinerator...closed since Feb. 13, 1991, because of an explosion, dropped to zero....About 70 percent of the writedown is in the incineration and fuels-blending area, underscoring a national overcapacity problem... Chicago Tribune, Oct. 1, 1993.