Quantitative and Qualitative Disclosures about Market Risk.
−Removed: In the normal course of business, we are exposed to market risks, including changes in interest rates, certain commodity prices and Canadian currency rates.
+Added: In the normal course of business, we are exposed to market risks, including changes in interest rates, certain commodity prices and currency rates.
From time to time, we use derivatives to manage some portion of these risks.
−Removed: The Company had no derivatives outstanding as of December 31, 2023.
+Added: As of December 31, 2024, our outstanding derivatives were immaterial.
Interest Rate Exposure — Our exposure to market risk for changes in interest rates relates primarily to our financing activities.
As of December 31, 2024, we had $24.1 billion of long-term debt, excluding the impacts of accounting for debt issuance costs, discounts and fair value adjustments attributable to terminated interest rate derivatives.
−Removed: We have $2.5 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised primarily of (i) $860 million of short-term borrowings under our commercial paper program and (ii) $1.6 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months.
+Added: We have $2.7 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised primarily of (i) $1.3 billion of short-term borrowings under our commercial paper program and (ii) $1.4 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months.
We currently estimate that a 100-basis point increase in the interest rates of our outstanding variable-rate debt obligations would increase our 2024 interest expense by $19 million.
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Actual market movements may vary significantly from our assumptions.
−Removed: An instantaneous, 100-basis point increase in interest rates across all maturities attributable to these instruments would have decreased the fair value of our debt by approximately $900 million as of December 31, 2023.
+Added: An instantaneous, 100-basis point increase in interest rates across all maturities attributable to these instruments would have decreased the fair value of our debt by approximately $1.3 billion as of December 31, 2024.
We are also exposed to interest rate market risk from our cash and cash equivalent balances, as well as assets held in restricted trust fund accounts.
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Accordingly, as the market prices for these commodities increase or decrease, our revenues, operating costs and margins may also increase or decrease.
−Removed: Recycling revenues attributable to yield decreased $308 million and increased $19 million in 2023 and 2022, respectively, as compared with the prior year periods.
−Removed: With the significant decline in commodity prices that started in the second half of 2022 from their all-time highs and has continued into 2023, we are currently experiencing margin pressures from our commodity-driven businesses.
−Removed: Average market prices for single-stream recycled commodities were down 40% and 10% in 2023 and 2022, respectively, as compared to the prior year periods.
+Added: Recycling revenues attributable to yield increased $245 million and decreased $308 million in 2024 and 2023, respectively, as compared with the prior year periods.
+Added: While recycling commodity prices have recovered in 2024 from the low levels experienced in 2023, commodity values are still below prices seen at the beginning of 2022.
+Added: Average market prices for single-stream recycled commodities were up 50% and down 40% in 2024 and 2023, respectively, as compared to the prior year periods.
Variability in commodity prices can also impact the margins of our business as certain components of our revenue are structured as a pass through of costs, including recycling brokerage and fuel surcharges.
−Removed: We have invested, and continue to invest, in facilities to capture methane produced from the Company’s landfills and convert it into renewable natural gas (“RNG”) and electricity.
−Removed: RNG produced from our landfills, as well as dairy biogas, constitute a significant source of fuel allocated to our natural gas collection vehicles.
−Removed: The Company’s investment in renewable energy production is guided partly by the EPA’s implementation of the Renewable Fuel Standard (“RFS”) program, which promotes the production and use of renewable transportation fuels.
−Removed: Many of our facilities are EPA-registered producers of transportation fuel making compressed and RNG from landfill biogas, which qualifies as a cellulosic biofuel under the RFS program.
−Removed: Oil refiners and importers are required through the RFS program to blend specified volumes of various categories of renewable transportation fuels with gasoline or buy credits, referred to as renewable identification numbers (“RINs”), from renewable fuel producers.
−Removed: RIN prices generally respond to regulations enacted by the EPA, as well as fluctuations in supply and demand.
−Removed: The value of the RINs associated with RNG is set through a market established by the RFS program.
−Removed: Prior to 2022, the EPA had promulgated rules on an annual basis establishing refiners’ obligations to purchase RNG and other cellulosic biofuels under the RFS program, which introduced uncertainty and volatility into the renewable fuels and RINs market.
+Added: In recent years, we have discussed our sustainability growth strategy that includes significant planned and ongoing investments in our WM Renewable Energy segment.
+Added: We have invested, and continue to invest, in facilities to capture methane produced from the Company’s landfills and process it into RNG and electricity.
+Added: RNG produced from our landfills constitutes a significant source of fuel allocated to our natural gas collection vehicles.
+Added: The primary drivers of renewable fuel development at our landfills are tax policies, such as the federal tax credits for RNG production and renewable electricity generation under the IRA, and federal and state incentive programs, such as the federal Renewable Fuel Standard (“RFS”) program, California Low Carbon Fuel Standard and similar state programs that promote the production and use of renewable transportation fuels.
+Added: At the federal level, oil refiners and importers are required through the RFS program to blend specified volumes of various categories of renewable transportation fuels with gasoline or buy credits, referred to as Renewable Identification Numbers (“RINs”), from renewable fuel producers.
+Added: Many of our facilities are EPA-registered producers of transportation fuel making compressed and liquefied RNG from landfill biogas, which qualifies as a cellulosic biofuel under the RFS program.
+Added: The Company has invested, and continues to invest, in facilities that capture and process landfill gas into RNG so that we can participate in the RFS program, and the Company has grown and stated its intention to continue to grow its asset base to increase its RNG production.
+Added: RINs prices generally respond to regulations enacted by the EPA, as well as fluctuations in supply and demand.
+Added: The value of the RINs is set through a market established by the RFS program, which market has historically been very volatile.
+Added: Prior to 2022, the EPA had promulgated rules on an annual basis establishing refiners’ obligations to purchase RNG and other cellulosic biofuels under the RFS program, which introduced a level of uncertainty into the renewable fuels and RINs market.
However, in 2023, the EPA issued a highly anticipated rule establishing biofuel blending volumes under the RFS program for compliance years 2023 through 2025.
The rule reflected the outsized role of biogas under the program, delivered on many reforms that benefit the solid waste sector, and recognized the continued growth of the market for RNG in vehicle applications.
−Removed: However, we cannot be certain that these changes, or the outcome of litigation challenging various aspects of the rule, will ultimately reduce volatility in the RINs market or that future rulemakings will be similarly favorable to our business.
−Removed: We continue to advocate for the current federal administration to implement policies that could reduce the potential for volatility in the RINs market and ensure long-term stability for renewable transportation fuels, as changes in the RFS market or the structure of the RFS program can and has impacted the financial performance of the facilities constructed to capture and treat the gas.
+Added: However, we cannot be certain that these changes, or the outcome of pending litigation challenging various aspects of the rule, will ultimately reduce volatility in the RINs market or that future rulemakings will be similarly favorable to our business.
+Added: presidential administration could seek to reduce existing renewable fuel targets in a new rulemaking or otherwise set reduced targets for renewable fuels under the RFS program in future rulemakings.
+Added: Moreover, consistent with its prior approach, the new administration may also increase the frequency with which it grants small refinery exemptions from RFS program requirements.
+Added: While we cannot predict what actions the new administration may take with respect to the RFS program, any changes to existing or future renewable fuel targets or more frequent approval of requests for small refinery exemptions could have a significant negative impact on demand for renewable fuels and the value of RINs.
+Added: In an effort to mitigate against such risk and stabilize our RNG portfolio, we are pursuing long-term sales transactions in the voluntary market.
+Added: We continue to advocate for policies that could reduce the potential for volatility in the RINs market and ensure long-term stability for renewable transportation fuels, as changes in the RINs market or the structure of the RFS program can and has impacted the financial performance of our facilities.
Such changes could impact or alter our projected future investments, and such investments may not yield the results anticipated.
−Removed: Revenue in our WM Renewable Energy segment declined $73 million and increased $48 million in 2023 and 2022, respectively, as compared to the prior year periods, primarily driven by the fluctuations in energy and RIN market prices.
+Added: Revenue in our WM Renewable Energy segment attributable to yield increased $26 million and decreased $73 million in 2024 and 2023, respectively, as compared to the prior year periods, primarily driven by the fluctuations in energy and RIN market prices.
The Company’s sustainability growth strategy also is informed by the increased adoption of state and Canadian clean fuel standard programs, utility policies, and voluntary market demand for RNG in transportation and industrial applications.
−Removed: Clean fuel standard programs, originally developed in California and subsequently adopted in Oregon and Washington, establish annual carbon intensity benchmarks for transportation fuels that decrease over time.
+Added: Clean fuel standard programs, originally developed in California and subsequently adopted in Oregon, Washington, and New Mexico, establish annual carbon intensity benchmarks for transportation fuels that decrease over time.
These programs operate similar to the RFS program in that certain regulated parties purchase credits from fuel producers, including RNG producers, to meet their carbon intensity obligations.
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As such, we are advocating for existing programs to adopt measures to promote stability in credit pricing and for other states to adopt similar programs that incentivize the growth in RNG.
−Removed: We also are working closely with stakeholders to encourage the voluntary market for RNG demand, including utility RNG procurement programs, and sustainability protocols, as companies and other customers increasingly look to reduce their greenhouse gas emissions profiles.
+Added: We also are working closely with stakeholders to encourage the voluntary market for RNG demand, including utility RNG procurement programs, and sustainability protocols, as companies and other customers increasingly look to reduce their GHG emissions profiles.
+Added: However, these state and voluntary programs may be altered, paused, or otherwise revoked by the applicable governmental authorities or as result of legal challenges.
Currency Rate Exposure — Our operations are primarily in the U.S.
−Removed: but we also have significant operations in Canada.
+Added: but we also have significant operations in Canada and certain countries in Europe.
Additionally, we have certain support functions in India.
−Removed: Where significant, we have quantified and described the impact of foreign currency translation on components of income, including operating revenue and operating expenses.
+Added: Where significant, we have quantified and described the impact of foreign currency translation on components of income, including operating revenues and operating expenses.
However, the impact of foreign currency has not materially affected our results of operations.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.