Wastewater fund manager plans capital deployment

Wastewater Capital Management, the US-based fund manager, will enter into partnerships with farmers and food manufacturers to produce a variety of revenue streams.

Wastewater Capital Management, the US-based fund manager and part of Equilibrium Capital’s real assets platform, is planning to start deploying capital this year as the growth potential for wastewater treatment in the US becomes clear.

The firm, which has a fund that is still open, will acquire existing operations and expand them, enter into partnerships with existing wastewater industry players, and invest into greenfield projects. The projects will cost between $10 million and $15 million each, according to Damon Yuzon, principal at the firm.

Anaerobic biodigesters are the main infrastructure for wastewater treatment and will be built on farms or co-located at food and beverage facilities. They take organic waste from farms, food and beverage manufacturers and large scale caterers such as hospitals, and convert it into other usable organic matter such as natural gas and fertiliser.

Wastewater Capital will enter into partnerships with the various counterparts and share the revenues from the multiple end products, according to Damon Yuzon, principal at Wastewater Capital Management.

“Wastewater systems are similar to real estate investments because you have long-term power purchase agreements with energy providers providing a regular income stream,” he said. “But they also have a very varied revenue stream from waste disposal, energy, carbon credits, renewable energy credits and fertiliser.”

A similar initiative has been built in Germany, where there are now 7,500 anaerobic biodigesters linked to the agriculture sector; in the US there are just 210, pointing to the growth potential in the US market.

Furthermore, increasing numbers of states in the US are starting to legislate on the need for food waste diversion away from landfills; this is already mandatory in Massachusetts, Connecticut and Vermont, while in municipalities such as California and New York City it is voluntary.

“We believe that several states can grow this market and are now recognising the need to deal with the wastewater problem,” said Ben Vitale, principal at the firm. “This business is very scalable and predicted to be a $30 billion market, so it fits very well with Equilibrium’s general ethos of sustainability-driven investment strategies that generate institutional-quality returns and scale to investors.”

The initiative is also very environmentally friendly because it will reduce the amount of organic waste going into landfills — organic matter can even be separated from packaging as a pre-processing step before digestion, according to Yuzon.

“The US population does not eat between 15 and 40 percent of their food, and food is 70 percent water, so our systems provide an alternative to composting, which is one method of avoiding landfill deposits,” he told Agri Investor.

“Composting is at a disadvantage because it does not capture energy from the waste and can be very unappealing and inconvenient due to its inefficient use of land and the smell.”

Wastewater Capital is hoping to raise up to $2 billion for these projects, but it would not disclose the timeline for this fundraising or what stage it is at, due to regulatory restraints on marketing.

The firm will use leverage of up to 50 percent for each project.