Only a decade ago the industry was dominated by a couple of publicly-traded continental companies that gobbled up numerous small and medium-size enterprises to offer customers a wide range of waste management and related services. The status quo evaporated almost overnight when these former stock market stars collapsed amid allegations of accounting irregularities and inventory scandals; class-action lawsuits, securities commission enforcement actions and even criminal charges followed.
As the dust settled, smaller play divvied up the remnants of the former conglomerates, but for waste generators and other customers it was a confusing time. It was difficult to figure out which company owned what facility or who to contact for environmental services.
However, leaders are beginning to emerge in a revitalized industry. The answer to the question 'Who ya gonna call?' is becoming less nebulous for such services as hazardous waste treatment, contaminated site cleanup, industrial cleaning, emergency response and other environmental services.
Let's take a look.
Dominating the pack of previous market behemoths were Laidlaw Environmental Services (LES) and Philip Services Corp. (PSC), both of which went bankrupt amid scandals that included overly-aggressive accounting practices that inflated their value to investors. (See sidebars, pages 16 & 18.) At their zenith, both companies vied for control of Plano, Texas-based Safety-Kleen, a leading parts cleaning and used oil/solvent recycler that serves customers in the United States, Canada and Puerto Rico. The bidding drove up the price for Safety-Kleen by $2 billion, with LES eventually winning. Industry observers later concluded that Safety-Kleen was appealing to both bidders even at inflated prices because such a large acquisition was useful in papering over dubious accounting and management practices.
Quantum Murray demolished this former Kodak facility (now owned by Metris Developments) in Toronto, Ontario. Abatement of the 56-acre site included removal of asbestos, PCBs and other contaminants from 11 buildings and structures. The job was completed more than three months ahead of schedule; all concrete was recycled onsite and 86 per cent of the C&D materials were recycled with the remainder (roofing, insulation and other debris) sent to approved landfills.
After being embroiled for a few years in the LES fiasco, Safety-Kleen re-emerged with its brand and customer base and is growing once again. On May 1 of this year, the now-private company announced plans to go public. It has registered for a proposed initial public share offering with help from Merrill Lynch and JPMorgan.
The move caps a series of acquisitions and divestitures designed to refocus the approximately 4,500-employee-strong company on its core business.
In December 2006, Safety-Kleen acquired Jacobus Environmental Services, a major collector of used oil, oil filters and antifreeze in the Upper Midwest. Safety-Kleen acquired Cansol Services Inc. in February 2008 as part of its growth strategy in Canada. Cansol was a privately held service business in the Greater Toronto Area focusing on parts cleaning equipment and services, oil filter and containerized waste collection and industrial vacuum services. On March 24 of this year, the company sold its solvent recycling facilities in Chicago, Illinois, and Hebron, Ohio, to Clean Harbors for $12.5 million in cash, and the assumption of $3 million in environmental liabilities. (See more on Clean Harbors below.)
The move flows naturally from a strategic realignment of the company's organization, announced in January 2007, designed to meet customer needs on a geographic basis and focus accountability on the company's front-line staff. Safety-Kleen now has an East Group based in Atlanta, Georgia headed by Executive VP Dave Sprinkle, and a West Group based in Plano, Texas headed by Executive VP Steve Grimshaw. Each group oversees the facilities and operations within its area, with the exception of the company's oil re-refineries in East Chicago, Indiana and Breslau, Ontario which continue to report to Sprinkle, and the National Accounts Group and International (including Canada), which report to Grimshaw.
Interestingly, like certain other environmental service providers, Safety-Kleen now also offers emergency response services in a 24/7 program that caters to big waste generators and also its large network of small customers. ER staff are specifically trained in chemical emergency response. It can be said that the merging of ER and environmental services is a major industry trend.
A SAFE HARBOR
A beneficiary of recent industry reshuffling is Clean Harbors Environmental Services, Inc. of Norwell, Massachusetts. Since its inception in 1980, Clean Harbors has grown to become one of the largest environmental service and haz-waste treatment companies in North America, on a scale rivaling that of LES and PSC in their heyday. Like them, Clean Harbors' growth has been through new company formation and a string of acquisitions. The company was founded by Alan McKim as a small four-person tank cleaning business, and McKim remains the company's President and CEO. Services today include hazardous and non- hazardous waste transportation and disposal, laboratory chemical packing, emergency response, field services, and industrial maintenance.
The first major acquisition was Braintree and Natick's Massachusetts facilities in the early 1980s, followed (in 1989) with the purchase of Chem Clear, Inc., (a company with industrial aqueous waste treatment facilities in Chicago, Cleveland, and Baltimore). Further acquisitions followed with facilities in Connecticut and Ohio, and an incinerator in Kimball, Nebraska in 1995. Lab pack and industrial/cleaning service lines were created in 1986 and 1998 respectively. In 2002, Clean Harbors acquired the assets of the chemical services division of Safety-Kleen -- a network of 55 service centers, 33 waste management facilities and 4,400 employees that were principle components of the old LES. Further acquisitions followed in the western United States; this year, the company acquired Safety-Kleen's solvent recycling facilities in Chicago, Illinois and Hebron, Ohio.
The company had over US$947 million in revenues in 2007. The Canadian division turned over CDN$123 million from 16 service locations in six provinces. The Canadian operation includes two incineration facilities, two landfills for hazardous and non-hazardous waste, and eight waste processing and transfer facilities. Perhaps its most well-known acquisition in Canada has been LES's former Lambton facility near Sarnia, which includes a haz-waste incinerator and secure landfill. Because Ontario's land disposal restriction (LDR) now requires haz-waste pretreatment, in September of last year the company completed construction of a $2.5 million inorganic pre-treatment plant.
Newalta Income Fund calls itself the largest Canadian industrial waste management and environmental services provider -- with over 85 locations and 2000 people, the claim that may well be true. The Calgary, Alberta-based company started as a Western Canadian oilfield waste and used oil/solvent recycler, but has since expanded east to serve customers across the country in a wide range of industries, including (among others) automotive, forestry, manufacturing, mining, oil and gas, and pulp and paper. The company also washes 'frac sand' generated from steam-assisted gravity drainage operations in Alberta's Oil Sands. Between its wastewater treatment centres and onsite services, Newalta also processes enough water each year to fill 600 Olympic-sized swimming pools.
The company says that since 1993 it has generated compound annual revenue growth of 30 per cent.
The first major eastward incursion was its acquisition of PSC Industrial Services Canada Inc. in a $118 million deal that closed in January 2006. The deal came on top of internal growth capital and acquisitions of a similar amount in the prior year. The acquired business was renamed Newalta Industrial Services Inc., and the Ontario operations form the Central Division managed by Vice President Craig Wilkie. The division integrates PSC Canada's former network that includes: two industrial solid waste pre-treatment facilities in Hamilton; the Taro industrial nonhazardous waste landfill near Stoney Creek; industrial waste transfer and processing facilities in Windsor, Barrie, Toronto, Brantford and Fort Erie, Ontario, and a waste transfer facility in Delta, British Columbia; a complete transport and on-site fleet of specialized vehicles; an emergency response service; and, an industrial cleaning service.
With the PSC purchase, in one swoop Newalta became a national presence. The Taro landfill alone handles approximately 500,000 tonnes of waste per year and has 17 years of remaining life at the current fill rate. The acquisition of an emergency response network puts the company on a competitive footing with other multi-service companies in this area.
In June 2006, Newalta acquired Calgary-based Treeline -- an environmental projects and well abandonment/reclamation company -- for $18.7 million, that complements earlier oil and gas service acquisitions GLP and WasteCo.
In August 2006 the company expanded into Quebec with the purchase of Norama Industries Inc. for $9.6 million cash. Norama has a network of three facilities with 100 people in Quebec delivering industrial cleaning and environmental services to industrial, refinery, petrochemical and manufacturing companies. Its specialized transportation fleet includes 45 high-and low-pressure cleaning trucks, vacuum trucks and trailers. In October 2006, Newalta bought the haz-waste and industrial cleaning division of another Quebec company, Services Matrec Inc., from TransForce Income Fund for $31.8 million. Matrec's operations deal with industrial wastes as well as services for soil and water treatment, and on-site industrial cleaning.
Newalta expanded in the same year into Atlantic Canada with the acquisition in August 2006 of Island Waste Management Inc. (IWM) for $5.6 million. IWM operates a waste transfer facility in St. John's, Newfoundland that serves various local industries, including offshore oil and gas companies. In December 2006 the company bought Dartmouth, Nova Scotia-based Matrix Environmental Inc. -- a provider of oil recovery, industrial waste management and other environmental services. Matrix operates a fleet of 13 centrifuges that extends Newalta's existing centrifuge operations and possesses an innovative robotic tank cleaning process that Newalta is now applying throughout its national network.
In September of last year, Newalta acquired Montreal, Quebec-based Nova Pb Inc. for $55 million. Nova operates Canada's largest integrated lead battery recycling facility located on a 20-hectare site in Ville Ste-Catherine, on the south shore of Montreal and 12 kilometres from the company's new transfer station in Chateauguay. This facility has two long-body rotary kilns that can process up to 200,000 tonnes of used batteries and generate 100,000 tonnes of recycled lead per year.
In short, like Safety-Kleen, Newalta is now an environmental service provider on a scale that rivals that of the old LES and PSC conglomerates, integrating many of their old assets in a better managed company.
This year, another merger and acquisition underscored the trend toward consolidation, the marriage of environmental and emergency response services, and the unification of western and eastern companies. Hazco Environmental Services is a CCS company with its head office in Calgary, Alberta. Like Newalta, Hazco is a Western Canadian company with a lot of bench strength in the oil and gas industry and other industrial services. In addition to lab packs and environmental waste treatment and disposal, the company builds landfills and operates a range of remediation technologies including the construction of bioremediation cells and bentonite slurry walls. Like Quantum Murray (see below), Hazco is in the demolition and site restoration business, including asbestos removal. It cleans industrial tanks and manages or disposes of drilling wastes.
On April 2, 2008 Hazco acquired Team- 1 Environmental Services Inc. based in Hamilton, Ontario. Going forward the group will remain in Hamilton and be known as 'Team Hazco.' With its catch phrase, 'Miles Ahead and only Minutes Away,' Team-1 had become a leader in the provision of emergency support services to government, transportation and industry. (See Cover Story by John Hosty, Spring 2008 edition.) Team-1 also has an academy that offers industrial safety training courses. The acquisition was orchestrated by Hazco's VP for Ontario, Dan Forsyth.
'I want to integrate the ER and training expertise at Team-1 with our excellence in site remediation services,' stated Forsyth.
Hazco's Ontario Region has offices in Kitchener, Pickering, Thunder Bay and now Hamilton. The company plans to expand its presence in Ontario with an aggressive acquisitions team. Mitchell Gibbs, the Director of National Emergency Services, states the partnership is a perfect strategic fit.
'Hazco has multiple office locations, waste transfer stations, industrial landfills and equipment,' states Gibbs. 'Now it's the leader in emergency response services in Ontario.'
Another entity spawned indirectly from the collapse of PSC is Murray Demolition -- now known as Quantum Murray. This company was founded by Shawn Murray, the current president and a veteran employee of several demolition companies, including the Delsan group -- a major PSC acquisition in the 1990s.
Murray learned the technical and deal-making side of the business at Delsan/PSC before striking out on his own, and benefited from the savviness of his previous employers.
'I remember the Delsan guys were working on a job in downtown Toronto,' Murray recalls. 'The site was where Allen Fracassi passed each day on his way to work and, knowing PSC was in acquisitions mode, they plastered additional signs on the hoarding to attract attention.'
A few months later PSC bought the company.
Forty-seven-year-old Murray recently sold a controlling interest in his company, but Murray can't be accused of building a business just to flip it. Murray Demolition, which specializes in demolition, remediation and abatement work, was recently voted one of the Canada's 50 best-managed companies and its fun open-office workplace has been featured on TV. The company competes with other multi-faceted remediation leaders such as Toronto-based Terrasan.
The company has been well-enough managed, in fact, to attract the interest of Newport Partners Income Fund which, on March 16, 2006, announced it was investing $30.5 million to partner with the company. These funds bought an 80 per cent stake in Murray Demolition, with Shawn Murray controlling the remainder. Then in December, 2006, Newport announced that it was investing $50 million for the assets of the Vancouver-based Quantum Environmental Group, a privately-owned firm that also rehabilitates commercial and industrial sites and facilities. The renamed Quantum Murray LP was born, with $140 million in 12-month trailing revenues.
Quantum was founded in 1992 by Jeff Westeinde and Doug Wynn -- president of the HazMat division -- who, along with Brian Stuckert, were the main shareholders. Westeinde serves as CEO of the new company, with Murray acting as president. With 75 per cent of Quantum's projects based in Alberta and B. C., and 85 per cent of Murray's business in Ontario, there was little overlap and the combined companies create a national presence.
On May 30, 2007, the company announced another acquisition -- Thomson Metals and Disposal -- that it bought for $21.5 million from company President Gary Thomson, who founded the business in 1980. The synergies were obvious between the demolition companies and Thomson's waste transfer stations, 30-truck fleet and 1,000 containers, and the opportunity for Quantum Murray to internalize the margins from scrap metal previously brokered and processed by third parties. Quantum Murray is well positioned to compete with environmental service companies as well as more traditional demolition companies like 50-year-old Brampton-Ontario based Greenspoon.
Not every player in this revitalized market is home-grown. An important -- even intimidating -- entrant is Veolia Environmental Services (VES). If Veolia wants to expand its industrial and environmental services across Canada and North America, it certainly has the financial resources to do so. The Paris, France-based multinational parent company, Veolia Environnement (formed from a former French waterworks giant) has $48 billion in revenue (yes, that's billion with a 'b'), operates in 68 countries, and has over 320,000 employees.
VES has become a major player in the waste-to-energy business, with high-tech thermal treatment plants for municipal waste in various countries and an expanding network of landfill gas-to-energy projects in North America. VES has an industrial cleaning division in Quebec, and Hamilton, Ontario-based Veolia ES Canada Industrial Services, Inc. is expanding. From on-site pick-up to final treatment and disposal, VES channels customers' wastes through a network of more than 350 company-owned or company-certified service centres.
In 2007, Veolia treated 3.9 million tonnes of hazardous waste, of which 1.08 million tonnes were incinerated in 22 incineration units for special industrial waste, 759,000 tonnes were landfilled in 14 Class One landfills, and 1.71 million tonnes were treated in 61 units by physical-chemical or stabilization methods. The remaining 480,000 tonnes were treated and recovered in 35 specialized recycling centers. This is definitely a company to watch.
POWERHOUSES IN QUEBEC
The Province of Quebec is home to several environmental service companies that could grow into larger national businesses or be ripe for merging or acquisition. Varennes, Quebec-based Sanexen Environmental Services has operated since 1985 and specializes in the fields of PCB management, site remediation and risk assessment. Like Quantum Murray and Terrasan, Sanexen helps companies reduce the financial risks associated with redeveloping industrial areas and brownfield sites.
Another business, Stablex, operates a secure landfill north of Montreal that accepts hazardous wastes for treatment and disposal. The facility was ahead of its time pre-treating such wastes, which is now required in Quebec and Ontario. Stablex uses a proprietary technology to characterize, treat and stabilize inorganic industrial wastes and contaminated soil before disposing the benign product in secure placement cells. Stablex is owned by Toronto-based Marsulex -- a company that provides environmental services for air quality control in the energy industry, as well as processing and handling of industrial by-products and wastes. The company also produces and markets sulphur-based industrial chemicals.
Another facility-based company worth mentioning is Horizon Environment Inc., founded in 1995. This company owns and operates a contaminated soil treatment and confinement centre located in Grandes- Piles, near Grand-Mère, Quebec. The company has an additional sales office in Niagara Falls, Ontario manned by Tony Pingue, a former PSC executive and Ontario environment ministry staff person.
No single article can describe or even list every environmental service company in Canada, but any discussion would be incompletely without mentioning Bennett Environmental Inc. Under the leadership of its current President & CEO Jack Shaw, the company is emerging slowly from the shadow of lawsuits and charges of insider trading that, like LES and PSC, saw the company falter and certain former executives fined and banned by the securities commission.
Bennett was founded by John Bennett, an engineer who designed and built a thermal oxidation unit after more than fifteen years of research and testing. The equipment consists of a rotary kiln primary combustion chamber, a secondary combustion chamber (afterburner) and an air emission control unit consisting of an evaporative cooling tower, a dry scrubber system, a fabric filter and an emission stack. The main unit was permitted to operate in Saint Ambroise, Quebec -- a plant that has treated many thousands of tonnes of contaminated soil and waste. The process is particularly effective for organic and hydrocarbon wastes. The company bought subsidiaries Trans-Cycle Industries (TCI) and Material Resource Recovery (MRR) with facilities in Cornwall Kirkland Lake, Ontario.
As the company has dealt one by one with various legal challenges in the past three years, it has operated its treatment equipment on an intermittent, as-needed basis that it calls 'campaigns.' One included a contract to treat dioxin-contaminated soils originating from Louisiana and Illinois in 2007. Shaw continues to try and source adequate volume at appropriate prices for each facility, and hopes to return the company to profitability soon. Bennett could be a major beneficiary of an upcoming federal requirement -- due in the second quarter of 2008 -- for companies and institutions to remove all PCB materials currently in storage and send them for destruction. Shaw sees such things as the Ontario government's provision of $56 million to fund a major site remediation project in London, Ontario as a positive sign for increased remediation activity.
So there you have it -- by no means a complete description of the environmental services industry in Canada, but at least an overview of what's going on and names of some of the prominent players. It will be interesting to follow and report on the future expansions and acquisitions of these and other companies as the industry grows in the years ahead.