How do financiers assess anaerobic digestion projects? This presentation from Iona Capital is full of tips to ensure your business model succeeds.

1. Getting AD Projects to Financial Close
Michael Dunn
Partner at Iona Capital
Environmentally Focussed Investment

2. Contents
• Overview:
• DECC Report June 2011
• Political Direction & Financial Incentives
• Key Areas / Issues
• Appropriate Waste Volumes
• Site Selection
• Technology Selection
• JV Partnering
• Financing
• Sources of Finance
• Summary of Issues
Environmentally Focussed Investment

3. Overview: DECC Report June 2011
• Supply Chain – components such as CHP available,
civils low risk, perhaps FX issues.
• Planning/ Licence – low risk vehicle movements?
• UK Grid – perhaps mitigate through site selection
• Technical – Application to food and farm waste still new
in UK
• Financing – difficult little senior debt
Environmentally Focussed Investment

4. UK Anaerobic Digestion Annual Build Rate (MW/yr)
The Maximum Build Rate Plot is taken from the Study Report “Review of the generation
costs and deployment potential of renewable electricity technologies in the UK “ published
in June 2011
Environmentally Focussed Investment

5. Overview: Political Directions & Financial Incentives
• The Government has set out its commitment to an
expansion of the energy from waste through AD*
• Government is working to ensure that the financial
incentives available for AD, under the Renewables
Obligation (RO), the Feed-in Tariffs (FITs) scheme, the
renewable Heat Incentive (RHI) and the Renewable
Transport Fuel Obligation (RTFO), will provide revenue
support for investors*
*AD Strategy and Action Plan Published 14th June 2011
Environmentally Focussed Investment

6. Key Areas/Issues
• Appropriate Waste Volumes / Contracts
• Site which works for ROC’s / FITs and RHI’s?
• Suitable Technology
• Business Plan
• Securing Funding Lines
Environmentally Focussed Investment

7. Appropriate Waste Volumes
• Food
• ADS estimates 5 Mtpa available for AD
• Local Authorities , supper markets, food processing.
• Key is COUNTER PARTY risk – possible JV?
• Procurement time scales
• Key is homogeneity of feed stock or at least matched to technology
selection
• Agricultural
• Order of magnitude bigger
• Closed loop systems
• Technology simpler more robust with track records
• Funding a lot easier
Environmentally Focussed Investment

8. Site Selection
• Planning risk should be low
• Grid connection critical – may vary from £100k - £1m
plus
• Ability to capture RHI scheme is a bonus
• Option on land:
• 15 – 25 year lease
• Ground Conditions
• Existing Use
Environmentally Focussed Investment

9. Technology Selection
• Its not necessarily the technology with the best
performance that is the most fundable.
• Look to reference sites – vital with any local authority
procurements.
• Quality of , and willingness to provide, the technology
guarantee.
• Does the guarantee extend into processing say 2years
post hot commissioning?
Environmentally Focussed Investment

10. JV Partnering
• May be expensive and difficult
• Can align with complementary skill sets / experiencing to
increase deal flow/ market credibility:
• Technology provider looking for routes to market
• Constructor looking for Projects
• Operator with market knowledge looking for assets
Environmentally Focussed Investment

11. Financing
• Security of supply agreement
• Convincing on contamination through robustness of process
• Input guarantees
• Both
• Turn Key Contracts
• Parent company Guarantees – EPC and Operator,
Quality
• Track record management and process
Environmentally Focussed Investment

12. Summary Issues
• Judicious Site Selection
• Choice of Partners – Technology, Turn Key Contractor
or sub contractors and Operator
• Securing Waste volumes which can be processed
• Raising the Finance – PCG’s and Business Case
Environmentally Focussed Investment

13. Useful Links
• Slides will be on the www.ionacapital.co.uk site.
• DECC report
• Defra report
• WRAP
Environmentally Focussed Investment

14. About Myself
• Partner Iona Capital a specialist renewables PE house
• Formerly MD of Shanks PFI investments and chairman of ELWA Ltd
– Board Director responsible for Cumbria PFI ( Ecodeco MBT soln).
• Previously Partner PKF LLP – responsible for waste and
renewables service line. Advised on Cambridgeshire PFI (
Donarbon), other clients include Veoila, Viridor, Global Renewables
various start up AD co’s
• Group Strategy Director Amey Plc and Director Veoila
Environmental (closed Hampshire Waste Services)