1. No category

WHAT IS DRIVING
FINANCIAL INTEREST?
NY BIOGAS STUDY GROUP
MAY 2015
PRESENTER: BEN VITALE
Wastewater Capital Management (WCM)
A Global Leader in SustainabilityDriven Real Assets
• 
Equilibrium is a platform of investment funds exceeding $1.1B in
assets under management
• 
Equilibrium launched WCM to fill a market financing gap, and
has been researching and funding biogas and wastewater
facilities since 2009
• 
WCM manages the first U.S. investment fund solely focused on
providing biogas and wastewater project-level equity
Confidential
I 2
Market Snapshot: What Are Institutional Investors Seeing?
Investment Industry Trends
• 
Growing global population
• 
Increasing resource scarcity
• 
Volatile public and energy markets
• 
Threat of inflation and monetary
policy changes
• 
Illiquid assets are often slow to
return capital
• 
“Back to basics” definition of risk
• 
New systemic threats like weatherrelated events and climate change
Confidential
4 billion MORE people eating meat and driving cars
I 3
Market Snapshot: What Are Institutional Investors Seeing?
Real Assets Opportunities
• 
Investors are allocating more of their
portfolio to real assets
• 
Desire stable cash flows from
infrastructure, oil and gas, real estate,
agriculture …
• 
Attracted to long-term revenue agreements
that provide inflation protection and lower
correlation to public markets
• 
Interest in new investment portfolios to
address investment goals and anticipate
industry trends
Confidential
I 4
Why Should Institutional Investors Consider Our Sector?
• 
Large potential US biogas and wastewater
market poised for growth
• 
Favorable regulatory environment,
particularly at the state level
• 
Commercially-proven waste management
solutions (e.g. low technology risk)
• 
Diversified portfolio has attractive real
asset attributes such as stable cash flows,
inflation protection and important
liquidity options
• 
Capital constraints and market
fragmentation have been barriers to U.S.
market growth
Confidential
I 5
Institutional Investors Need Education On Our Industry
Confidential
I 6
Market Growth for Organics and Wastewater Processing
• 
Potential to reduce costs for transportation, landfill and wastewater disposal
for industrial, commercial, agricultural and municipal waste producers
• 
Market drivers include organic waste landfill diversion mandates, potential for
multi-year feedstock agreements, and food industry sustainability goals
• 
Long-term and consistent renewable electricity or renewable gas pricing
• 
Over $30 billion growth opportunity estimated within stable industries1
Confidential
1. 
Equilibrium Capital
I 7
Public Private Partnership – Example Project
Public Sector
Private Sector
• Inputs/Feedstock: Stable long-term supply contract
• Company: Private sector project development
• Land: Fuel cells on land owned by City and university
• Project Design: System design and integration
• Revenue: Long-term PPAs with City and university
• Development: Build, own and operate
• Enhancements: California SGIP, bonds, tax credits
• Financing: Equity and debt capital
• Support: Mayor’s Office, City Council, community
• Transaction: Structuring and closing coordination
WWTP
• Project: Biogas from WWTP purified & injected into
pipeline; used to power fuel cells
• Economic Impact: Long-term renewable biogas
contract; electricity costs savings
• Social Impact: Construction and permanent job creation
• Environmental Impact: Provides university with
electricity, and reduces greenhouse gas emissions.
Confidential
I 8
Disciplined Investment Process
•  Location and feedstock
evaluation
•  PPP partners, roles and
structure
•  Local waste diversion and
renewable energy/fuel
goals and mandates
•  Pricing and terms for energy
and tipping fees
•  Available cost-effective
debt alongside our equity
Confidential
•  “Headline” or political risk
•  PPP agreements, develop
lease, input and output
agreements
•  Financial risk analysis
•  Track record, expertise and
ability to execute on-time/
on-budget
•  Technical review of
production processes
•  Completion of approvals,
permits and discharge
•  Transaction structuring for the
potential investment
•  Technical feasibility study
•  Operational responsibilities
•  Full pro-forma financial
modeling and scenario analysis
•  Construction budget, EPC
contract and draw schedule
review
•  Social and environmental
impact analysis
I 9
Risk Management
Key Risks
Risk Management Strategies
•  Political
•  Cancellation payments but difficult to mitigate ‘headline’ risks
•  Construction
•  Clear roles of public partners and established approval processes
•  Technology
•  Milestone payments and guaranteed maximum price contracts
•  Inputs
•  Multiple sources, volume requirements, franchise agreements
•  Partners
•  Maximize stable, long-term contracts
•  Revenue
•  Align incentives particularly on downside risks and dependencies
•  Operations
•  Use commercially proven processes, delineate roles at linkages
•  Liquidity
•  Ensure several liquidity options to protect valuation including
potential sale option to WWTP host/partner
Confidential
I 10
Recognizing Investor and Project Development Needs
• 
• 
Investor Needs
• 
Diversified project portfolio (e.g. multiple
developers, sectors, geographies)
• 
Clear path to risk-adjusted financial returns
• 
Contracted and stable feedstocks
• 
Commercially-proven technologies
• 
Co-development partners with a proven track
record
Project Development Needs
• 
Type and timing of capital to meet project needs
• 
Specific financial structuring expertise and
options
• 
Partnership approach and alignment to enhance
operations, revenues and liquidity
Confidential
I 11
Summary
• 
Growth opportunity to develop institutionalgrade investments for variety of wastewater
solutions
• 
Requires commercial mindset and asset
management combined with long-term
feedstock and revenue agreements
• 
Municipalities can drive organics recycling/
reuse as well as provide stable base to attract
private capital
• 
States can provide clear pricing signal and
enabling environment for renewable
electricity and low-carbon transportation fuel
Confidential
I 12
Thank You!
Ben Vitale
Principal
Wastewater Capital Management
vitale@eq-cap.com
Phone: 503-889-7972
Confidential
I 13