August 7, 2008

As Deadline Nears, N.J. Firm is Only Bidder for SPSA Plants

By Scott Harper, The Virginian-Pilot, Norfolk, Va.

Aug. 7--A week before a key deadline expires, a New Jersey company is the sole bidder so far for purchasing two big trash plants in Portsmouth that have been run for two decades by SPSA, the regional waste authority.

The Southeastern Public Service Authority has talked about selling off some of its public assets for more than a year, as a way of reforming itself into a leaner operation, but now that prospect is becoming increasingly real.

Covanta Energy Corp., based in Fairfield, N.J., would not reveal its offer for the two Portsmouth plants, only that it would pay SPSA "a significant lump sum" that would "go a long way" toward retiring its estimated $240 million in debts.

In an interview Wednesday, a senior vice president with Covanta, Paul Stauder, also said the company has no plans to import garbage to Portsmouth from New York City or any other East Coast city, but rather would handle only locally generated trash at the plants.

Covanta, he said, does not want to develop a garbage port in Hampton Roads, either, as the conglomerate tried to do two years ago in a proposed partnership with SPSA that fell apart amid much criticism.

"This is a completely different thing," Stauder said. "No barges, no New York City. There's plenty of waste here for us to handle."

The facilities in question straddle Victory Boulevard on the Portsmouth waterfront, near the historic Cradock neighborhood, and process about 43 percent of all trash generated in eight cities and counties served by SPSA in South Hampton Roads. The rest is buried in a landfill in Suffolk or recycled.

The plants have worked in tandem since 1988. Each day, as many as 2,000 tons of trash come into the Refuse Derived Fuel plant by truck and is sorted by hand along a series of loud, whirring conveyer belts.

The material is then ferried across the street to the Waste-to-Energy plant -- basically a big incinerator where the trash is burned and converted to steam and electricity. Most is sold to the Norfolk Naval Shipyard, the rest to AEP, a power company.

Covanta executives have met quietly with local officials to discuss their plans, but not yet with plant neighbors, who have long complained about noise, odors, blowing trash and truck traffic.

Stauder said the company is waiting to see what happens after a bidding deadline expires next Friday. He said he expects at least one other offer from another company, and as many as four, before the Aug. 15 deadline.

Rick Warren, a Cradock resident who heads a citizens advisory committee that meets with SPSA to air grievances, said the Covanta bid represents "a mixed-bag situation."

"They probably have a lot more expertise in running plants like these," Warren said Wednesday, "but they're not a public agency, and we might be stuck with living with whatever they decide, no questions asked."

Mike Dobson, local director of the Virginia Waste Industries Association, a trade group for private garbage companies, applauded the Covanta bid.

The Portsmouth plants "would be better managed, that's for sure," said Dobson, a longtime critic of SPSA. "I'd think it would be a good move for SPSA and for this region."

Covanta owns or operates 34 waste-to-energy plants in 15 states, including two in Virginia -- in Fairfax County and Alexandria. Nationally, it handles about 15 million tons of municipal solid waste a day, generating about 5 percent of the country's "renewable" electricity.

In its latest financial statement, Covanta lists its value at $4.3 billion, though the company only emerged from bankruptcy in 2004.

Its current chairman of the board is Sam Zell, a colorful and sometimes-controversial investor who recently purchased Tribune Co., its several newspapers, including the Daily Press in Newport News, and the Chicago Cubs baseball team.

In its bid for the Portsmouth plants, Covanta said it would own and operate the m until at least 2017 and would charge SPSA a disposal fee for a minimum tonnage of trash to be delivered each day to Portsmouth.

The company would "commit to retain all SPSA employees for at least 12 months at the same or better employment terms," according to the written bid package. After that, plant workers might be asked to stay on, leave or transferred to another Covanta facility.

A separate subsidiary would be set up to run the Portsmouth plants, to be named Covanta Hampton Roads LLC.

Stauder said Covanta would likely make improvements to the plants but would not expand their capacity right away.

"We see it as a way to do a little better," he said.

Scott Harper, (757) 446-2340, [email protected]


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