Shanks and Viridor have been shortlisted for a long-term food and green waste deal across three councils in Wales.
The two firms will submit final bids over the next couple of weeks for the Heads of the Valleys Organics Project.
A preferred bidder will be selected by Torfaen, Caerphilly and Blaenau Gwent councils in September.
Caerphilly councillor Colin Mann said: “The project has undertaken a broad evaluation of the solutions received.
“This included the technical solution, service delivery, environmental impacts and planning and permitting of their solution.
“It is important that we ensure the remaining participants are able to meet the requirements of the authorities, achieve the relevant Environment Agency standards and assist in meeting the targets set out by the Welsh Government.”