Waste Management to Divest Electricity Unit for $1.9 Billion

Jul 29, 2014 4:09 pm ET

(Updates with closing share price in sixth paragraph.)

July 29 (Bloomberg) -- Waste Management Inc., North America’s largest trash hauler, agreed to sell its Wheelabrator Technologies Inc. unit for $1.94 billion to reduce its exposure to electricity prices.

The sale to Energy Capital Partners is subject to regulatory approval and is expected to be completed in late 2014, Houston-based Waste Management said today in a statement.

Waste Management is shedding the power-generation unit to reduce earnings volatility related to electricity prices and focus on hauling trash, according to the statement. It plans to use proceeds from the sale to repurchase shares and repay debt, which may increase 2015 earnings per share by 2 cents.

Wheelabrator owns or operates 21 plants in the U.S. that process more than 7.5 million tons of waste and have a combined generating capacity of 853 megawatts. The business had about $845 million in sales last year.

For comparison, Covanta Holding Corp., a waste-to-energy plant operator based in Morristown, New Jersey, supplies more than 1,500 megawatts of electricity from more than 40 plants in the U.S. and has a market capitalization of $2.68 billion. It had sales of $1.63 billion last year.

Energy Capital will continue to buy waste from Waste Management under long-term contracts, said Tyler Reeder, a partner in the private equity firm.

Waste Management rose 3.9 percent to $45.59 at 4 p.m. in New York.

Barclays Plc and Centerview Partners LLC are financial advisers to Waste Management on the deal.