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From Eternity

Date: 18/02/2014 | Author: Paul Sanderson

Image for From EternitySpecialist waste and recycling firm Eternity Capital is helping businesses to develop

At its central London office, Eternity Capital is building a portfolio of investments in the recycling and waste sector and proving that raising finance for new technologies is possible.

“Eternity Capital is an investment firm with a core purpose to provide funding into companies and projects in the waste and environmental sector,” says investment director Alon Laniado.

“This helps us to understand what we are investing in because we have the knowledge and background in the sector. This helps the projects we are investing in, because we understand 

how the waste sector is transforming quickly from a logistics businesses to a treatment sector.

“There are always lots of questions that need to be asked with any project, and with us being a waste sector fund, with the knowledge of solving issues, then it helps when we come up with examples of how to solve a problem or what to do. For example, if we were investing in anaerobic digestion (AD), a generalist investor may want a 7-year feedstock contract, but we know that may not always be possible.”

Part of this knowledge comes from Paul Levett who held senior roles in both Cleanaway and Veolia and now serves in a non-executive function for a number of companies across the sector including Eternity Capital.

“New entrants in infrastructure in the waste sector are not always waste people. So we can also provide the knowledge and experience for new entrants, or indeed for a collection company that wants to move into treatment.” He adds that part of this could be helping companies to get contracts for feedstock, or vice versa.

Eternity Capital works by attracting investors to fund it, and then it uses this cash and its expertise to invest in companies that are looking to develop in the waste and recycling sector.

“We look to spend £5 million to £15 million on projects and will look to do several per year,” says Alon Laniado. “We have the cash capacity to do that.”

On some projects such as AD or materials recycling facilities, Eternity will be the sole investor, but anything above £20 million it will work in a consortium. A recent example of this, that was announced just before Christmas, was it working as part of a consortium on a proposed wood waste gasficiation plant in Birmingham. Funding for this £47.8 million facility that will divert 67,000 tonnes of waste wood from landfill per year and generate 10.3MW has come from Eternity, Green Investment Bank, Foresight Group, Balfour Beatty, GCP Infrastructure Fund and the developer Carbonarius.

“The Birmingham plant solves the problem of what to do with waste wood,” says Alon Laniado. "It is a classic example of a project that avoids landfill tax or sending the material for export, as well as meeting emissions targets. This project is attractive because it derives revenue from the sale of the electricity but also the subsidies that are available rather than from any value in charging for the waste to be processed. The key to it is the location as it is extremely well located because it enables wood to be sourced locally and therefore the economics and logistics of the haulage make sense. After a finite radius, the logistics then become expensive.”

One of the interesting things about this project is that gasification is still considered an ‘unproven’ technology in the UK.

“We have to make sure the technology is right,” he adds. “We can’t take it to the extremes of unproven technology. But this technology is proven outside of the UK, and the evidence that it works exists in Canada in particular.”

One of the key issues they note is a continued trend for gate fees to decline in value, and they suggest that output rather than input is more likely to be considered when they consider whether a business is viable for investment.

“AD is a sector we are actively looking at. But the key is to be innovative in the way you do it. Traditionally, it has been about food waste, electricity and the Feed-in Tariff. But gate fees are going down and gate fees are vulnerable models. We are now seeing models that address this such as gas which benefits from the Renewable Heat Incentive, which is way more attractive.

“There is more risk involved but that can be overcome. Gas to grid is well proven outside of the UK, and while it has not always been possible to transfer sucesses from elsewhere, this is an area where there is a lot of potential for the UK. Another model is a mix of farm and food waste. Using local material saves on haulage and has other benefits.”

Although it has typically invested in treatment plants so far, Eternity Capital is also interested in looking at businesses that have come up with new collection business models.

“If you look at small waste producers,” says Paul Levett, “most of them still have a single bin. If the new regulations in Scotland work and they separate materials, we could eventually see similar rules in England and this will provide opportunities for collection businesses with new models.”

But he warns that getting investment isn’t easy.

“It is a bit like Dragon’s Den. We see nine bad ideas for every good one we get. But it is that one good one where we will see if our knowledge can improve them.”

Eternity is interested in the opportunities in dealing with materials such as plastics, particularly collection and treatment of niche materials, as well as glass and WEEE. However, both Alon and Paul insist that any projects that come before them will need to have the right combination of logictics and technology.


Category: Interview
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