Ben Vitale - NY Biogas Study Group

MAY 2015
Wastewater Capital Management (WCM)
A Global Leader in SustainabilityDriven Real Assets
Equilibrium is a platform of investment funds exceeding $1.1B in
assets under management
Equilibrium launched WCM to fill a market financing gap, and
has been researching and funding biogas and wastewater
facilities since 2009
WCM manages the first U.S. investment fund solely focused on
providing biogas and wastewater project-level equity
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Market Snapshot: What Are Institutional Investors Seeing?
Investment Industry Trends
Growing global population
Increasing resource scarcity
Volatile public and energy markets
Threat of inflation and monetary
policy changes
Illiquid assets are often slow to
return capital
“Back to basics” definition of risk
New systemic threats like weatherrelated events and climate change
4 billion MORE people eating meat and driving cars
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Market Snapshot: What Are Institutional Investors Seeing?
Real Assets Opportunities
Investors are allocating more of their
portfolio to real assets
Desire stable cash flows from
infrastructure, oil and gas, real estate,
agriculture …
Attracted to long-term revenue agreements
that provide inflation protection and lower
correlation to public markets
Interest in new investment portfolios to
address investment goals and anticipate
industry trends
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Why Should Institutional Investors Consider Our Sector?
Large potential US biogas and wastewater
market poised for growth
Favorable regulatory environment,
particularly at the state level
Commercially-proven waste management
solutions (e.g. low technology risk)
Diversified portfolio has attractive real
asset attributes such as stable cash flows,
inflation protection and important
liquidity options
Capital constraints and market
fragmentation have been barriers to U.S.
market growth
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Institutional Investors Need Education On Our Industry
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Market Growth for Organics and Wastewater Processing
Potential to reduce costs for transportation, landfill and wastewater disposal
for industrial, commercial, agricultural and municipal waste producers
Market drivers include organic waste landfill diversion mandates, potential for
multi-year feedstock agreements, and food industry sustainability goals
Long-term and consistent renewable electricity or renewable gas pricing
Over $30 billion growth opportunity estimated within stable industries1
Equilibrium Capital
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Public Private Partnership – Example Project
Public Sector
Private Sector
• Inputs/Feedstock: Stable long-term supply contract
• Company: Private sector project development
• Land: Fuel cells on land owned by City and university
• Project Design: System design and integration
• Revenue: Long-term PPAs with City and university
• Development: Build, own and operate
• Enhancements: California SGIP, bonds, tax credits
• Financing: Equity and debt capital
• Support: Mayor’s Office, City Council, community
• Transaction: Structuring and closing coordination
• Project: Biogas from WWTP purified & injected into
pipeline; used to power fuel cells
• Economic Impact: Long-term renewable biogas
contract; electricity costs savings
• Social Impact: Construction and permanent job creation
• Environmental Impact: Provides university with
electricity, and reduces greenhouse gas emissions.
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Disciplined Investment Process
•  Location and feedstock
•  PPP partners, roles and
•  Local waste diversion and
renewable energy/fuel
goals and mandates
•  Pricing and terms for energy
and tipping fees
•  Available cost-effective
debt alongside our equity
•  “Headline” or political risk
•  PPP agreements, develop
lease, input and output
•  Financial risk analysis
•  Track record, expertise and
ability to execute on-time/
•  Technical review of
production processes
•  Completion of approvals,
permits and discharge
•  Transaction structuring for the
potential investment
•  Technical feasibility study
•  Operational responsibilities
•  Full pro-forma financial
modeling and scenario analysis
•  Construction budget, EPC
contract and draw schedule
•  Social and environmental
impact analysis
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Risk Management
Key Risks
Risk Management Strategies
•  Political
•  Cancellation payments but difficult to mitigate ‘headline’ risks
•  Construction
•  Clear roles of public partners and established approval processes
•  Technology
•  Milestone payments and guaranteed maximum price contracts
•  Inputs
•  Multiple sources, volume requirements, franchise agreements
•  Partners
•  Maximize stable, long-term contracts
•  Revenue
•  Align incentives particularly on downside risks and dependencies
•  Operations
•  Use commercially proven processes, delineate roles at linkages
•  Liquidity
•  Ensure several liquidity options to protect valuation including
potential sale option to WWTP host/partner
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Recognizing Investor and Project Development Needs
Investor Needs
Diversified project portfolio (e.g. multiple
developers, sectors, geographies)
Clear path to risk-adjusted financial returns
Contracted and stable feedstocks
Commercially-proven technologies
Co-development partners with a proven track
Project Development Needs
Type and timing of capital to meet project needs
Specific financial structuring expertise and
Partnership approach and alignment to enhance
operations, revenues and liquidity
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Growth opportunity to develop institutionalgrade investments for variety of wastewater
Requires commercial mindset and asset
management combined with long-term
feedstock and revenue agreements
Municipalities can drive organics recycling/
reuse as well as provide stable base to attract
private capital
States can provide clear pricing signal and
enabling environment for renewable
electricity and low-carbon transportation fuel
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Thank You!
Ben Vitale
Wastewater Capital Management
[email protected]
Phone: 503-889-7972
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