Thinking Green
Trash Talk
Does the headline sound as though this column is about the Sacramento hardcore band Trash Talk or maybe the recent verbal donnybrook between Tampa Bay’s Carl Crawford and Joe Madden and Ump Davidson at a Red Sox game? It’s not. But, read on. You are about to become the first in your neighborhood able to hold forth on where all the blue trash bags go, and what happens to them after they are dropped into the pit at the Duxbury Recycling Center.
Twice weekly Duxbury’s DPW (Department of Public Works) delivers a truckload of
our blue bagged MSW (Municipal Solid Waste) to a huge facility in West Wareham, Massachusetts known as SEMASS.
Here, believe it or not, a million tons of trash a year, including ours, is used as fuel to generate electricity. In the process our dependency on fossil fuels, greenhouse gas emissions and need for more landfills is reduced.
The Rube Goldberg-like Schematic Process Diagram below may help you visualize the process which goes like this:
The trash (MSW) which arrives by truck and railroad freight car is dumped on the floor of the Tipping Hall where it is bulldozed onto a conveyor and fed into a shredder. The shredder chops it into 4 x 4 inch chunks and dumps them onto a second conveyor. At the top of this conveyor a magnetic device removes all the ferrous metals which are then shunted via another conveyor to trucks to be sold and recycled. You would think there is not much iron or steel in trash, but the SEMASS facility recovers over 50,000 tons a year.
The chopped up trash (with iron and steel removed) is conveyed to one of three boilers. These are big babies housed in a building almost nine stories high. Burning trash chunks as fuel, these boilers produce steam, which turns steam turbines, which turn generators to produce electricity.
SEMASS generates 590,000 megawatts of electricity from the million tons of trash it processes yearly, enough to satisfy the electricity needs of all the households in Duxbury plus many in Kingston.
A byproduct is made by introducing water and lime into the boiler exhaust just before it enters the air pollution control equipment. The combination comes out as the major component of sheetrock. Another byproduct is fly ash, sometimes used in concrete. A scrubber removes most of the airborne pollutants, making the exhaust from SEMASS cleaner than that from either a coal or oil fueled electric generating plant.
While 51 towns use the SEMASS facility, it is neither municipally nor state owned. Along with 33 other EfW facilities and 6 biomass facilities in the U.S. SEMASS is operated by Covanta Energy Corporation, a Subsidiary of Covanta Holding Corporation.
Covanta has negotiated long term contracts with the towns which use SEMASS. Duxbury pays Covanta $98.50 a ton to dispose of its trash. Covanta sells the electricity produced from trash to NStar at 5¢ per kW. And, it sells recyclable recovered materials and byproducts at market prices.
As I write this I can almost see some of you environmentally responsible investors rushing to computers or phones to buy some Covanta Holding Corporation stock (NYSE: CVA) Without wanting to take wind out of your sails, I should point out that in spite of making and selling products from raw materials which they are paid to accept, this business, to date, has been less than a bonanza for stockholders. Total return over the past 5 fiscal years has been a measly 1.6%. With CVA stock selling recently at $15.43 a share and 2009 earnings of 66 cents a share the stock has a lofty P/E ratio of 25.2. The environmental dividends are worthwhile, to be sure, but, alas, no cash dividends are paid.
On the other hand, Charles Schwab forecasts a 10% annual growth rate for Covanta over the next 5 years, better than many other environmentally responsible enterprises.
As far as stock picking goes, though, you are on your own. As William Feather puts it, “One of the funny things about the stock market is that every time one person buys, another sells and both of them think they are astute.”
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