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ACQUISITIONS IN THE SPOTLIGHT
WASTE MANAGEMENT REVIEW TALKS TO SOME OF AUSTRALIA’S LARGEST WASTE MANAGEMENT COMPANIES ABOUT THE ROLE OF SCALABILITY IN THE FUTURE OF THE WASTE SECTOR.
Bingo Industries, through the acquisition of Dial A Dump Industries, has set its sites on building a Resource Ecology Park in the middle of western Sydney.
Over the past few years, Australia’s waste management giants have looked to becoming vertically integrated businesses. One of Australia’s largest waste management companies, Cleanaway acquired health and waste disposal giant Toxfree in 2018.
Most recently, building and demolition (B&D) market leader Bingo Industries acquired Dial A Dump Industries (DADI) and set its sights on building a resource recovery park as part of the acquisition.
Cleanaway has also looked to potentially take on SKM Recycling after acquiring its debt for $60 million.
Waste Management Review explores the role of scalability and vertically integrated business models in the waste sector’s future.
BINGO TAKES IT TO THE NEXT LEVEL Daniel Tartak, Bingo Industries Managing Director, believes that further market consolidation will support the waste industry during a challenging phase.
“The industry is still very fragmented. We’ve seen consolidation in the last few years, but there still needs to be some more consolidation over the sector across the country,” Daniel tells Waste Management Review.
“It still remains very competitive, even following these acquisitions [DADI and Toxfree]. I don’t think much is changing in the industry.”
Daniel says Bingo’s DADI acquisition allows the company to compete with the multinationals on a greater scale with vertically integrated assets. He says it comes at a critical time for the sector where recycling infrastructure investment is needed at a greater level.
“There’s many small players who don’t invest into their business and the sector, and right now we need that,” he says.
“We’ve done it to a large extent over the last few years. We’ve poured almost $1 billion into acquisitions and key infrastructure so as some of the smaller players start getting amalgamated or consolidated you will see more investment.”
Bingo Industries agreed to divest its recycling facility in Banksmeadow, NSW to ease ACCC competition concerns regarding its $578 million acquisition of DADI. The ACCC required Bingo to divest the facility to maintain competition for B&D
processing in Sydney’s eastern suburbs.
Following this, the ACCC announced it would not oppose the acquisition after accepting a courtenforceable undertaking from Bingo to divest its Banksmeadow processing facility. CPE Capital was announced as the buyer for $50 million in September.
In announcing the company’s fullyear results in August, Daniel noted that the asset base secured through the acquisition would transform the business for many years to come. Some of its most recent redevelopments include Bingo’s first recycling centre in West Melbourne, Victoria, having first entered the market in 2017 through several strategic acquisitions.
Its total network capacity, including contribution from the DADI acquisition, increased from 2.2 million tonnes in financial year 2017-18 to 3.8 million tonnes in 2018-19. It will be closer to 4.4 million tonnes by the end of 2019-20 allowing for Patons Lane and Mortdale redevelopments.
In 2019, Bingo reconfigured its NSW network as part of the DADI integration by rationalising some sites and converting others into transfer stations in a move to attract and aggregate waste volumes for processing at its advanced recycling centres.
Bingo expects solid growth in 2019-20 underpinned by a full-year contribution from its Patons Lane Recycling Centre and Landfill, West Melbourne Recycling Centre and DADI. The business also expects to benefit from the Queensland waste levy and associated pricing increases.
Through Eastern Creek, Bingo is turning its attentions to building an 82-hectare Recycling Ecology Park in the middle of western Sydney to accept putrescible and non-putrescible waste at a large scale.
Strategically positioned near the Western Sydney Airport and the
Bingo Industries Managing Director Daniel Tartak says further consolidation of the waste sector is needed around the country.
Sydney CBD, it currently can handle two million tonnes per annum and in the future will comprise a new C&I processing facility, refuse-derived fuel, alternative waste treatment facility and new recycled product manufacturing facility.
Daniel says that the new $60 million C&I processing facility at Eastern Creek, comprising the most sophisticated equipment in the world, should be operational in about 12 months’ time.
He points to the importance of a vertically integrated business model to maintaining a chain of custody on the movement of waste. Likewise, he notes a vertically integrated company allows for scalability.
“When you become a large business, the fact that you have a large quantity of waste can sometimes work to your detriment, so controlling access to collections, transfers, recycling and landfill gives you control over your business,” he says.
On questions of whether one company owning multiple assets is reducing choice for customers, Daniel says that this would only potentially be the case in a duopoly structure.
“You have six large players so there is plenty of choice even if companies control those assets. Even with consolidation over the last few years, the market is very fragmented. There’s still six big players and hundreds of small players.
“Every time you tender, you are facing five big opponents and a heap of different small private companies.”
Daniel says that through Bingo’s five-year plan, the company plans to build multiple recycling facilities. He says these will be able to handle all waste streams in the market from putrescible MSW, C&I waste to nonputrescible, C&I and B&D waste, separating them and then turning most of those individual waste streams into products to sell back to market.
“It’s [Eastern Creek] a master integrated asset able to handle all waste streams, with a focus on landfill diversion. It will be one of Sydney’s key infrastructure assets, which the market will rely on to meet state recycling targets going forward,” he says.
As Bingo continues to grow, Daniel says the company intends to maintain its leading position in the B&D sector while at the same time expanding its C&I business.
“A company like Cleanaway cannot have a Footprint 2025 strategy flowing through without commingled assets in Victoria,” says Cleanaway CEO Vik Bansal.
“We’re five years old in the C&I sector and a relatively small player in NSW and Victoria, so we really want to grow that business in both states, but also geographically around the east coast of Australia,” Daniel says.
“We’ve (the waste sector) been out of sight, out of mind for too long and now is the time for industry to change and improve.”
CLEANAWAY GROWS ITS FOOTPRINT With more than 300 sites, 115 prized infrastructure assets and around 6000 employees and 4950 vehicles, Cleanaway is Australia’s largest waste management company.
At the heart of its approach to scaling up and supporting Australia’s recycling woes is Cleanaway’s Footprint 2025 strategy – a plan to significantly grow its infrastructure by 2025. Launched in 2015, Footprint 2025 continues to expand.
It’s already done so in 2019 with a new waste transfer station and resource recovery facility in Sydney licensed to process 300,000 tonnes of putrescible waste per annum. In addition, its recent infrastructure moves also include a new South East Melbourne Organics Facility, a 50 per cent stake in ResourceCo’s process engineered fuel facility in Sydney and a transfer station in Perth.
Official data on market share is difficult to come by, but CEO Vik Bansal estimates the company controls around the mid to high 20 per cent of the total waste management market.
Its annual report shows the integration of Toxfree is on track to achieve a $35 million synergy target by June 2020. Cleanaway’s acquisition of Toxfree in 2018 was unopposed by the ACCC and concluded that increased vertical integration would be unlikely to substantially lessen competition due to competitive constraints imposed by alternative suppliers.
The official review shows customers can and do disaggregate contracts if they are dissatisfied with pricing and/or service levels. Likewise, there are other large suppliers present in multiple waste streams and geographical areas throughout Australia.
Cleanaway’s net revenue, which represents gross revenue less landfill levies collected and passed through the customer, increased by 35 per cent in 2018-19 to $2.11 billion compared to the prior corresponding period. Its growth was driven by a combination of organic growth and the Toxfree acquisition.
“We have spent about $150 million building prized waste infrastructure across the country which includes transfer stations, resource recovery centres, used oil refinery and liquid, hazardous and non-hazardous waste processing facilities organically and via the acquisition of Toxfree,” Vik says.
Its earnings before interest, tax, depreciation and amortisation increased 34 per cent to $433.7 million in 2018-19 due to improved profit performances across solid waste services, industrial and waste services and liquid waste and health services. In its annual report, Cleanaway highlights itself as having an excellent balance sheet with debt ratios well within banking covenant requirements.
The annual report declares volatility in the commodities supply chain has led to increased sorting costs and instability in commodity pricing. Vik has often maintained Australia’s recycling crisis presents an opportunity rather than a threat to the viability of the sector.
“It is the right thing for the waste industry in Australia and in general. There is something not right about waste going to developing countries and them sorting it out. We just don’t want that to happen,” Vik says.
He says that being a publicly listed entity places additional pressure on Cleanaway as a company, but it’s a challenge it is pleased to take on.
“Because we are a listed entity and have to go to market every six months, our changes become a lot more visible than an international subsidiary or a company which is not listed,” he says.
The positive side effect of market fluctuations is that Cleanaway has fast-tracked much of its Footprint 2025 strategy to support
the local marketplace.
Following the collapse of SKM Recycling Group, Cleanaway Waste Management acquired the senior secured debt in the group for around $60 million with the exception of its glass recovery services business. This includes the property, plant and equipment from a network of five recycling sites, comprising three materials recovery facilities (MRFs), a transfer station in Victoria and a MRF in Tasmania. SKM also has two sites in South Australia.
KordaMentha have been appointed the receivers of the group. At the time of Waste Management Review’s interview with Vik, Cleanaway was looking to acquire the assets and return them to a sustainable footing as part of the sale process being undertaken by the receivers.
Prior to the publication date, Cleanaway was successful in its bid for SKM assets with completion of the process on track for the end of October. One of its sites in the network includes an advanced plastic sorting facility in Victoria.
Commenting on the acquisition, Vik said significant progress had been made in clearing waste stockpiles from the sites, repairing plant and equipment and bringing the sites to required safety, environmental and operational standards.
“We expect to gradually restore operations in Victoria over the coming months,” he said.
Speaking to Waste Management Review, Vik agrees some systematic changes are needed to support the future viability of the industry. However, he concedes collection will be difficult to consolidate due to the low barriers to entry.
“There is something fundamentally wrong about the industry structure. Aside from Visy, there is not even a single big waste management player which is upstream and vertically integrated. There is not even a single big waste management player in commingled recycling in Victoria.
“China’s National Sword has triggered the industry structure to go back on a balanced, even, long-term sustainable footing and hence our interest in SKM assets.”
“A company like Cleanaway cannot have a Footprint 2025 strategy flowing through without commingled assets in Victoria. That is part and parcel of a vertically integrated waste management company.”
It was speculated that Cleanaway was interested in buying SKM’s glass recycling business not covered by the receivership. Vik says that while Cleanaway was initially interested in this, the acquisition is now in doubt given the scale of glass stockpiles.
Instead, should Cleanaway acquire SKM’s assets, Vik says Cleanaway will look at building its own glass beneficiation plant.
He says that Cleanaway’s future focus will be to become a downstream processor.
“We see ourselves investing in plastic pelletising and going downstream on glass crushers,” Vik says.
Vik says that Cleanaway’s view is that Australia needs to move to a harmonised national four-bin system with mandatory FOGO and glass bins the key to improving commodity value.
“We are ready to invest a lot more in different parts of the country if we can see that certainty of policy and harmonisation,” he says, adding there is a fair amount of Footprint 2025 still to be revealed.
Likewise, he says that whenever Cleanaway invests, it looks at the entire value chain, including location, policy framework and its total market share.
Vik says that each state should have a container deposit scheme but recognises it might be difficult to harmonise all at a national level.
He says this system would then become best practice through better education, investment in infrastructure and manufacturer and consumer acceptance of recycled material as the final piece of the circular economy puzzle.
Footprint 2025 is going from strength to strength as Cleanaway in October announced a joint venture
Corio Waste Management CEO Mathew Dickens sees an opportunity from consolidation to compete with the major players.
with Macquarie Capital’s Green Investment Group to develop a wasteto-energy (WtE) project in Western Sydney. A site has been acquired for a potential facility in Eastern Creek and an environmental impact statement is being prepared and released for public consultation early next year. The site is expected to cut Western Sydney’s annual landfill volumes by 500,000 tonnes – almost a third of the red bin waste generated per year in the local area.
CONSOLIDATION DEBATE Trevor Thornton is a lecturer in hazardous materials management at Deakin University and has prior experience with the Environment Protection Authority Victoria.
He says the metropolitan areas certainly benefit, but one concern would be whether the same level of service is afforded to regional areas.
“I’ve heard some issues about large companies that get a statewide contract but just outsource a lot of the more distant rural areas under their banner, but they don’t get the same service to the client.
“But I think in the main, if you’ve got five or six companies offering the complete service, I think that’s a good thing.”
Likewise, he believes the purchase of ailing companies such as SKM can only be a good thing, and that if additional oversight is required, that would be a matter for the ACCC.
He says the trend towards consolidation in Australia would mirror that of other more populous nations such as the US, Canada and parts of Europe.
Mathew Dickens, CEO of Corio Waste Management, a family-owned business focused on waste collection and organic waste treatment based in Geelong, sees an opportunity from consolidation to compete with the major players.
“Consolidation does lead to less competition, but it can also mean the acquirer has more to lose as you have most of the market share and that can only go in one direction, but for companies my size it creates opportunity,” he says.
Mathew says with further consolidation, Corio can aim to compete on service standards, respond quickly to changing customer requirements and provide a point of difference as a family-owned business.
“From a customer perspective it [further consolidation] would mean less choice and higher prices, and that’s not a problem for us as we don’t compete on the basis of price. We know what our costs are because we measure and analyse them all the time,” he says. waste and owns around 207 transfer stations and 190 landfills, according to Superperformance SAS data.
He says there will still be room for niche, specialised operations that handle smaller volumes.
“If there is going to be a remanufacturing industry that’s developed onshore, you need to spread that risk,” he says.
Mathew says that Corio remains focused on growing its organic waste collections in Geelong and Melbourne treated at its composting facility based in Shepparton.
“We want to build tunnel composting facilities in other regions in Victoria. It relies on government contracts, but we’re confident we can make it happen,” he says.
Mathew Dickens Corio Waste Management
He says that Corio tends to focus on what it can offer in terms of variety and frequency of service, collection standards and customer service.
Mathew says the recent consolidations are nothing new but rather history repeating itself in an industry cycle where consolidation inspires new entrants into the industry.
In the US, integrated companies such as Waste Management Inc, Clean Harbors, Republic Services and Advanced Disposal dominate the market.
Mathew points out that Republic Services is an example of smaller operators merging to become a larger organisation, a trend that could always repeat itself locally.
Republic Services is one of the largest providers of non-hazardous solid
SUEZ LOOKS TO THE MISSING LINK SUEZ Australia and New Zealand has developed its own action plan internally. It focuses on circular economy and driving partnerships and innovation across new technologies.
CEO Mark Venhoek calls for a fundamental change in the market through new infrastructure with WtE one part of the bigger solution underpinning broader initiatives.
As part of this paradigm shift, he wants the packaging sector, federal government and state and territories to step up and show more leadership in taking responsibility for their material processing.
When it comes to the broader structure of the industry, Mark says it’s not for SUEZ to comment on the
SUEZ CEO Mark Venhoek says waste-to-energy is one part of the bigger solution to Australia’s recycling future.
specifics of others out there, but strong leadership is key.
“I do believe if you have a strong sector with various leaders it’s probably easier to make some changes.
“We have quite a bit of industry fragmentation around the industry but I guess the leadership for me is so not so much about market share or revenue, but what the changes we are going to make in terms of say, building new infrastructure and innovation.”
He says the fundamental changes required in the marketplace will not necessarily be supported by the size of one’s business, but strong leadership in areas such as safety and compliance.
Importantly, long-term visibility by the regulator and certainty of volumes is required to commit to sites and large-scale capital investments such as in WtE. In this vein, decisions such as the mixed waste organics ban in NSW are not helpful and undermine planning and confidence.
Mark says a WtE solution could support markets such as plastics that have fallen victim to the laws of supply and demand or don’t meet contamination standards.
“It would be a very good support and potential backup plan to ensure those volumes don’t end up in a landfill,” he says.
He says that SUEZ Australia and New Zealand is looking at a range of WtE projects. Some that have already been announced include the East Rockingham facility in WA as well as a joint venture with Australian Paper in Victoria.
With the growth of population and the fact that planning new facilities can take five to 10 years, SUEZ is also committed to expanding its Elizabeth Drive Landfill in NSW.
“In the interim, typically in the NSW, Sydney and greater region, we’ll still have a level of dependency on landfill I’m afraid, and a result of that we will have to expand that facility. It’s in the interest of the public to be able to secure a proper outlet.”
Mark says that resource recovery parks such as Lucas Heights are likewise only one part of the solution, covering only a small percentage of Sydney’s waste and not the residual stream.
“It will solve part of the problems that we might have but only on a small scale.
“Most of those facilities are capable of treating a small percentage of the waste that is being generated even if there are niches, so you need solutions for the mainstream volumes.”
Mark says that where relevant, SUEZ will partner with companies that have an appropriate site and permit and align with the company’s vision and strategy. In some cases it may also reduce investment uncertainty, he adds.
SUEZ is driving a number of unique projects overseas. The company has opened one of Europe’s most advanced packaging sorting facilities for lightweight packaging in Ölbronn, Germany with an annual processing capacity of 100,000 tonnes.
In this case, Mark says the commercial environment in Germany is conducive to building a facility on a long-term contractual basis.
“There’s nothing stopping us from opening these kinds of facilities.
“If I look at the one in southern Germany, it is the most modern across the globe but it is governed by a very special system around the Green Dot, meaning plastics, paper, cardboard and metal are collected separately and treated by these levels of infrastructure.”
In the Bang Phli district near Bangkok, the company plans on building a recycling plant that turns plastic waste into circular polymers, strengthening its presence in SouthEast Asia.
Mark says that in Bangkok, there is not nearly the level of scalability of Australia to support the conditions.
In terms of whether a four-bin system of food and glass could be the answer to Australia’s recycling concerns, he says that anything that can be done to support source separation at a higher level would make an impact on generating better quality raw materials.
“We are very supportive of the COAG initiative [waste ban] and planning they put ahead, but I do believe we can do it.
“There will be a bit of pain in the coming years, but I am also sure with collective passion and energy, we can see some magnificent outcomes.”
