Cleanaway to enter into JV with ResourceCo

Cleanaway has entered into a binding joint venture agreement with ResourceCo to acquire a 50 per cent interest in ResourceCo’s Wetherill Park facility.

ResourceCo’s new Wetherill Park facility has the capability to divert 250,000 tonnes of waste per annum, reducing emissions and saving costs for businesses in the long-term – more information on that here. 

Located in western Sydney, the facility receives dry commercial and industrial waste. After extracting any commodities suitable for recycling, the balance of non-recyclable waste is converted into Process Engineered Fuel (PEF) that will be used as a substitute for fossil fuels in domestic and offshore cement kilns.

According to an ASX statement, the investment provides Cleanaway with a further waste disposal solution in NSW and forms an integral part of its Footprint 2025 strategy.

Waste processed by the facility includes residuals sourced from the Cleanaway Sydney transfer station, currently under construction, and other recycling facilities, in addition to commercial and industrial customers with source-separated collection systems.

The purchase price for the 50 per cent interest comprises a $25 million payment at completion plus an earn out of up to a further $25 million payable in two instalments over two years once the facility generates agreed earnings before interest, taxes, depreciation and amortisation targets.

The joint venture, to be branded “Cleanaway ResourceCo RRF” is part financed by a $10 million loan facility from the Clean Energy Finance Corporation, with additional funding from the New South Wales Environmental Trust.

The transaction is expected to be complete during the first quarter of financial year 2019, subject to satisfaction of customary conditions precedent and commissioning and performance standards.

Cleanaway Chief Executive Officer and Managing Director Vik Bansal said the investment plays a key role in the development of the company’s post collections footprint in NSW and its overall Footprint 2025 strategy, which encompasses the development of prized waste infrastructure assets across Australia.

“This facility is the only one of its kind on the East Cost of Australia and enables us to increase waste internalisation rates, and importantly, to offer an advanced resource recovery solution to our customers,” Mr Bansal said.

Cleanaway releases FY18 half year results

Cleanaway has released its FY18 half-year results, reporting “strong organic growth”, with revenue up 8.4 per cent.

In a statement, the company said all operating divisions have increased revenue and earnings, with a strong cash conversion, while ramp-up and mobilisation of new major contracts is in progress. The sale of another closed landfill site in Victoria has reduced the landfill remediation provision by $5.4 million, the company said.

Cleanaway also provided an update on the acquisition of Toxfree Solutions, which it said is anticipated to be completed during the second quarter of 2018.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) was reported to be $154.2 million, a 2.8 per cent increase on the 2017 half-year results. Net revenue sat at $722.2 million, a 7.4 per cent increase on 2017 half-year results, while gross revenue sat at $785.5 million, an 8.4 per cent increase. Net profit after tax rose by 60.7 per cent compared to the same period to $45 million.

“Each of our three operating divisions – solid collections, solids post collections and liquids and industrial services – increased revenue and earnings in the period,” Chief Executive Officer and Managing Director Vik Bansal said.

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“During 1H18 we started the roll-out of a number of major new contracts.

“Development of our resource recovery footprint continues. During the half we commenced construction of our Sydney post collection which we expect to have completed by the first half of FY19.”

In its underlying divisional performance, Cleanaway’s solids collections and solids collections division reported increased revenue and earnings.

Compared to the previous corresponding period, net revenue for solids collections increased 9.3 per cent to $441.7 million. Solid post collections saw net revenue increase by 15.3 per cent to $107.9 million.

The liquid and industrial services division had a net revenue increase of 3.2 per cent to $214.7 million.

Mr Bansal said the acquisition of Toxfree was a transaction unanimously recommended by the Toxfree board, in the absence of a superior proposal. He said it is a strategically compelling transaction that will enhance the company’s capabilities in solids, liquids and industrial services, accelerate the implementation of its Footprint 2025 strategy, and provide a leading position in the attractive medical waste sector.

“To support the acquisition, we also undertook an equity raising that raised approximately $590 and was completed in January,” Mr Bansal said.

“We remain optimistic of receiving all the necessary approvals for the acquisition to be completed sometime during the second quarter of CY2018.”

Integration of the Toxfree business is expected to deliver about $35 million in annual synergies, released over a two-year integration period. Cleanaway completed a 3.65 non-renouncable pro rata entitlement offer at $1.35 per new share in conjunction with the Toxfree announcement. About $590 million was raised and 437.3 million new shares issued.

Discussing the outlook for FY18, Mr Bansal said recent major contract wins have established a firm base for revenue growth in its solids business, adding that the company remains optimistic of continuous improvement in the liquids and industrial services business.

“The cost disciplines we have in place, along with the further initiatives being implemented across the company, should result in both the solids and liquids and industrial services segments further increasing operational earnings in FY18.”

Commenting on the recent changes to the Chinese importation of recycling material, Mr Bansal added:

“The major issue within the industry is the level of contamination from the recyclable material collected from the municipal councils. This is commingled waste and has a much higher level of contamination than the waste received from the commercial and industrial sector.

“Cleanway’s exposure to the sale of these municipal sourced materials is minimal. However, we are in discussions with relevant municipal customers to mitigate any issues.”