Charah Solutions Inc. (NYSE:CHRA) is a Louisville, Kentucky-based provider of environmental services to the power generation industry, assisting utilities and independent power producers in the sustainable management and recycling of ash byproducts generated from the combustion of coal in the production of electricity.
Although the company is now celebrating its 35th anniversary, it currently finds itself in the proverbial right place at the right time. Last month, the U.S. Environmental Protection Agency announced it would begin placing a more aggressive oversight on toxic coal ash, including its first-ever enforcement of the Disposal of Coal Combustion Residuals from Electric Utilities (Final Rule) for coal ash and groundwater management from coal-fired power plants that was enacted in April 2015.
EPA Administrator Michael Regan emphasized that his agency was seeking to protect communities that have been disproportionately impacted by elevated levels of coal ash pollution and would hold the polluting companies accountable.
“I’ve seen firsthand how coal ash contamination can hurt people and communities,” Regan said in announcing this new initiative. “Coal ash surface impoundments and landfills must operate and close in a manner that protects public health and the environment.”
Benzinga recently spoke with Charah Solutions CEO Scott Sewell about his company’s distinctive place within this corner of the power generation industry.
Q: When was the company founded, and why did it begin?
Scott Sewell: Charah started in 1987 in Western Kentucky as a general contracting firm. In 1992, we became fully focused on all things ash – we did our first ash pond clean out in 1992 and never looked back from that point on. We've been completely focused for the last 30 years on nothing but ash and ash pond work – it's been critical to who we are.
We are the leading provider of environmental solutions and environmental risk transfer services to the power generation industry. We grew the business based on nothing other than our reputation and our focus on safety, quality and environment – all with a focus on customer service, above all.
We went public in 2018, and today we are in over 40 plants in 20-plus states coast-to-coast. As the needs of our customers have grown and regulation has changed, we've been there every step of the way to support our customers and grow the business, and we continue to learn and do whatever we can to support the environment. You hear a lot of people talk about ESG – environment, sustainability and governance – and doing the right thing for the environment. But that's at the end of the day, that's really who we are – we're an ESG business that does nothing but focus on supporting our customers’ needs to create a better environment.
Q; How do you determine which projects to pursue? And have there been projects where you decided that you were not the right company for the project?
Scott Sewell: We have a very rigorous business development process. As we vet opportunities, we have a matrix of how we evaluate risk.
Right now, we have $3 billion in pending opportunities. In our pipeline, we have another $7 billion right behind that, in approximate numbers. We’re very excited about those opportunities and the opportunities that continued to be presented to us.
Obviously, the EPA announcements that have come out over the last couple of weeks definitely provide additional opportunities. And we're going to continue to stand at the ready to support our customers as EPA rules, change and evolve.
Q: Your company was recently involved in a transaction involving the acquisition of three Pennsylvania operations — the Cheswick Generating Station, the Lefever Ash Landfill and the Monarch Wastewater Treatment Facility — from GenOn Holdings LLC, a Houston-based power producer. What is the story behind that transaction?
Scott Sewell: Like I said, we're in over 40 plants and in over 20 states, kind of coast-to-coast. The interesting thing is that we can't speak to the specifics in a lot of them. But if you look at our map and our footprint of where we operate, we have some very long-term projects in Virginia, North Carolina and Georgia, all multi-year projects.
Our core capabilities are ash pond remediation and then tying that into byproduct sales. The win-win that we try to achieve is to find opportunities where we can, excavate and clean up a legacy coal ash pond, and then help beneficially reuse that material, either as a replacement for Portland cement or as kiln feed in the process.
We also provide the day-to-day services where we have long-term contracts, and we manage the coal ash that is produced by the power plant every single day. If we are not disposing of that ash for the power plants, then they do not have it.
We’ve also continued to grow what we call our environmental risk transfer business, and that's the piece of our business with the three sites in Pennsylvania – where we eliminate the utilities’ environmental liabilities from their decommissioned generation assets. We essentially buy the power plants from the utility and take on their liability and then remediate and repurpose the land, which is what we'll do with the sites in Pennsylvania. We’ve already done that at one of our largest projects, the Gibbons Creek facility in Texas.
Q: There was news last month about how your company sold nearly 80% of the real property acreage it acquired one year ago from the Texas Municipal Power Agency at the former Gibbons Creek Steam Electric Station and Reservoir in Grimes County, Texas. Can you provide more insight on that transaction?
Scott Sewell: We repurchase those properties from the utility – we're not paying them money to buy it. Typically, they give us cash, either in escrow and or up front, but the way it is considered a purchase is that we'll assume their liability.
With Gibbons Creek, we assumed a $50 million asset retirement obligation, and they gave us $35 million in cash. So, there's a difference of $15 million on what we assumed versus the cash they gave us. They also gave us all that property.
In that example, we treated that property as a $15 million purchase – we put it on our balance sheet at $15 million, but the value of it is much, much higher than that. The way we make money is from remediating, decommissioning, repurposing, and then selling those properties.
Q: What differentiates your company from other companies in this space?
Scott Sewell: One thing that absolutely separates us is our broad scope of services – we are the only provider in the industry providing the full suite of mediation and compliance services, byproducts, sales, daily ash management and environmental restraints. We have competitors in each one of those areas, and some of them do two of those items. But we're the only one with that scope of services.
And then, there is our track record, our depth and knowledge in the industry and our huge advantage of having a very strong leadership and management team, all very tenured and not just with the company. If you look at our geographic reach and our national scale, there are not many in the industry with that broad reach.
Q: If we were to pick up this conversation a year from now, where do you see your company?
Scott Sewell: On a continued path of growth. We’ve been through every evolution of the coal ash movement, and we're going to continue to be performing on these long-term asset remediation contracts. I think the infrastructure bill is only going to continue to increase the demand for concrete, and that demand for concrete is only going to increase the demand for our fly ash and our other materials.
Photos courtesy of Charah Solutions
