Waste to Energy Financing for Conversion and Resource Recovery Plants

Waste to Energy Financing

Waste-to-energy is the hardest part of the clean-energy market to fund and the part Klean knows best. A conversion plant earns from two directions at once, and a capital structure that recognises only one of them will misprice the asset.

The dual revenue line

An energy-from-waste or gasification facility is paid a gate fee to accept material and is paid again for what it produces: electricity, heat, steam, biomethane or recovered commodities. Underwriting therefore starts with the feedstock agreement — tonnage, composition, calorific value and term — before it reaches the energy offtake. Where feedstock is secured under a long municipal or industrial contract, the plant can carry debt that merchant generation never could.

Proven configurations

Klean's solid-waste portfolio shows the range this covers. An energy-from-waste facility in Germany and a biomethane plant at Schuby demonstrate contracted European waste conversion; a gasification plant treating municipal trash in Japan shows thermal conversion under one of the world's strictest emissions regimes; and an MSW energy project in Italy shows municipal waste handled in a southern European market. Funders take comfort from configurations that have already been built and operated rather than from process flow diagrams.

How Klean Capital structures the money

Private equity, senior and subordinated debt, mezzanine capital and PPP funding are combined case by case. Development and construction are typically carried by equity and mezzanine tranches; once the plant is commissioned and performing against its contracts, it can support long-dated senior debt or Private Placement Investment Grade Bonds placed with institutional investors. PPP funding applies where a municipality supplies the waste, and projects can be taken on a joint venture basis with developers.

Technical evidence and ownership routes

Klean Capital Inc. is wholly owned by Klean Industries, which provides feasibility studies, design and engineering, due diligence, energy and waste audits, and turn-key EPC (DBC) delivery. Mass balances, availability assumptions and emissions compliance are tested by the people who build these plants. Klean Capital also purchases existing operational cleantech and waste-conversion projects through succession plans, and since 1998 has raised funding for over a hundred different transactions.

What slows a waste-to-energy raise

Three issues account for most delays: a feedstock agreement that is shorter or less binding than the debt it is meant to support, an emissions permit still in process, and an energy offtake priced on merchant assumptions. Resolving them before approaching institutional investors is almost always faster than attempting to negotiate around them later, and it materially changes the cost of the capital on offer.

Klean Capital will say plainly which of these a project still has to close before it is fundable.