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Investors’ appetite for waste projects on the rise

More investors are being attracted to the waste industry, with anaerobic digestion (AD), ‘problem’ waste and glass projects presenting attractive opportunities, a specialist fund director has said.

Alon Laniado, director at Eternity Capital, a group that provides funding to recycling and energy from waste, told MRW that the UK AD sector had reached a level of maturity sufficient to attract a growing number of investors.  

Alon Laniado

He added that the UK AD market could be full sooner than expected, but overcapacity was not imminent.

According to Laniado, other sectors presenting significant investment opportunities included ‘problem’ wastes - materials naturally difficult to treat such hazardous waste and WEEE.

“More technology has been brought in the UK from overseas or developed here to start solving the problems posed by those waste,” said Laniado. “We are really excited about this because we see a lot of things happening.”

One of the drivers of the expansion in treatment solutions has been the landfill tax, as investing in processing technology has now become more economical than relying on landfill.

Glass reprocessing was also in focus, he added, especially in terms of developing more efficient colour sorting methods that would allow extra material to go to remelt, rather than aggregate.

Eternity Capital is hoping to sign at least one glass-related deal in 2014.

Laniado said an increasing amount of investment opportunities would come from small and new companies putting forward local projects.

Investors working in partnership with new companies have also become more proactive in shaping some of the features of waste deals, for example by helping the management teams to negotiate construction and feedstock contracts.

“We are not looking for a team that has everything ready, but a project that has the potential to be good and we can help them to deliver it,” he said.

The increased involvement of investors in earlier stages of projects partly resulted from the moving away from the Private Financial Investment model, in which several aspects of the deals were locked in over long periods.

“Today there are very few oven-ready deals, investors need to be proactive,” said Laniado.

Eternity Capital is looking at a number of projects, with one deal at an “advanced stage”.

What makes a project attractive to investors:

  • A site with a good location in terms of feedstock and competition
  • Reliable technology
  • A management team with operational experience

Meanwhile, the Renewable Energy Association has said it is ‘not surprising’ that the UK has slipped down a place in the EY Renewable Energy Country Attractiveness Indices because of the failure to set a binding 2030 renewable energy target.

Chief executive Dr Nina Skorupska said: “Investors are already looking at projects post-2020 but they have no clear steer from the EU or the UK Government that they see a major role for renewables once the existing 2020 targets are met.

“Setting binding renewables targets for member states will boost investor confidence, bring down capital costs faster and create jobs for British businesses.”

EY said: “Lobbying for the EC to reject calls for a binding 2030 renewable energy target, and yet another close defeat for a proposal to set a 2030 UK decarbonisation target in 2014 rather than 2016, has also knocked investor confidence in the Government‘s commitment to a low-carbon future.”

EY is part of the Ernest & Young Group.

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