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Aaron Ratner WCEF2019: Investing in distributed infrastructure projects in the circular economy

The World Circular Economy Forum presents the world’s best circular economy solutions and gathers together the most recognised experts and decision makers in the field. The event is organised by the Finnish Innovation Fund Sitra. Read more: www.wcef2019.com

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Investing in Distributed Infrastructure Projects in the Circular Economy
Ultra Capital, LLC
World Circular Economy Forum
Helsinki, Finland
3-5 June, 2019
Sustainable Infrastructure & Real Assets
CONFIDENTIAL - NOT FOR FURTHER DISTRIBUTION
Pressure on fundamental resources
• $100B per year in capital required in Ultra
Capital’s target sectors
There is a trend moving from large scale
infrastructure to small scale, distributed infrastructure
• ~15-20% of projects ($15-20B) are under $100M
Three main factors driving the Circular Economy investment thesis
THE CIRCULAR ECONOMY INVESTMENT OPPORTUNITY
1ASCE Infrastructure Report Card, 2017; Stanford University, Project Center 2015; McKinsey Center for Business and Environment 2016; Preqin Infrastructure Report 2017
Traditional infrastructure investors are less
focused on sub $100M projects which
creates a funding gap
THE CIRCULAR ECONOMY OPPORTUNITY IN THE UNITED STATES
2
Three important trends in the US are converging
1. Electricity is becoming less expensive
• Solar, storage, natural gas, oil
2. Waste disposal is becoming more expensive
• Landfills banning organic waste
• Livestock manure in waterways
• Electronics, industrial waste increasingly toxic
• Plastic, everywhere
3. Waste is becoming more valuable
• Technology is enabling a transition from Waste-to-Energy (combustion) to
Waste-to-Value, in which materials, minerals, energy are upcycled for
reuse
• x/ Renewable Natural Gas (landfills, livestock manure)
• x/ Agriculture and food waste to livestock feed, pulp/paper,
construction materials
• x/ Lithium and cobalt recycling
Underwriting long-term predictable cash flows using a rigorous diligence process and data-driven approach
Project Developer
Standardized Contracts
Construction Contracts
Supply Agreements
Long-term contracts with
creditworthy institutions or
robust markets
Offtake Agreements
Long-term contracts with
creditworthy institutions or
robust markets
Real Asset Project
LLC Structure
Experienced Developer
Proven Technology
Construction Ready
PROJECT FINANCE STRUCTURE
3
Standardized Contracts
Construction Contracts
Standardized Contracts
Operations & Maintenance
Contracts
Technologies like Anaerobic Digestion and Advanced Recycling are gaining traction in the United States
First Commercial
Facility
Conventional
Technology
Project IRR
Solar 2012, mid-to-high teens % IRR
70-80% construction advance rate
Solar 2018, <10% IRR
85-90% construction advance rate
Ultra Capital Investment Focus
Technology Risk
Perceived Technology Risk Pricing
PROVEN TECHNOLOGIES IN INEFFICIENTLY PRICED SECTORS
4
Months
Fund at start of construction
IRR/RISK
10%
15%
5%
Engage early
ConstructionConstruction OperationsOperations LiquidityLiquidity
1818 120
DevelopmentDevelopment
Project Pipeline
• Lock in terms
• Work to optimize contracts
• Complete diligence and close
• Commence funding
• Construction monitoring
• Ownership of Project LLC
• Active oversight of project LLC manager
• Operation and financial controls
Signs term sheet in a project’s development phase locking in better economics and exclusivity
DEVELOPERS NEED SUPPORT ON THEIR DEVELOPMENT CURVE
5
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Aaron Ratner WCEF2019: Investing in distributed infrastructure projects in the circular economy

  • 1. Investing in Distributed Infrastructure Projects in the Circular Economy Ultra Capital, LLC World Circular Economy Forum Helsinki, Finland 3-5 June, 2019 Sustainable Infrastructure & Real Assets CONFIDENTIAL - NOT FOR FURTHER DISTRIBUTION
  • 2. Pressure on fundamental resources • $100B per year in capital required in Ultra Capital’s target sectors There is a trend moving from large scale infrastructure to small scale, distributed infrastructure • ~15-20% of projects ($15-20B) are under $100M Three main factors driving the Circular Economy investment thesis THE CIRCULAR ECONOMY INVESTMENT OPPORTUNITY 1ASCE Infrastructure Report Card, 2017; Stanford University, Project Center 2015; McKinsey Center for Business and Environment 2016; Preqin Infrastructure Report 2017 Traditional infrastructure investors are less focused on sub $100M projects which creates a funding gap
  • 3. THE CIRCULAR ECONOMY OPPORTUNITY IN THE UNITED STATES 2 Three important trends in the US are converging 1. Electricity is becoming less expensive • Solar, storage, natural gas, oil 2. Waste disposal is becoming more expensive • Landfills banning organic waste • Livestock manure in waterways • Electronics, industrial waste increasingly toxic • Plastic, everywhere 3. Waste is becoming more valuable • Technology is enabling a transition from Waste-to-Energy (combustion) to Waste-to-Value, in which materials, minerals, energy are upcycled for reuse • x/ Renewable Natural Gas (landfills, livestock manure) • x/ Agriculture and food waste to livestock feed, pulp/paper, construction materials • x/ Lithium and cobalt recycling
  • 4. Underwriting long-term predictable cash flows using a rigorous diligence process and data-driven approach Project Developer Standardized Contracts Construction Contracts Supply Agreements Long-term contracts with creditworthy institutions or robust markets Offtake Agreements Long-term contracts with creditworthy institutions or robust markets Real Asset Project LLC Structure Experienced Developer Proven Technology Construction Ready PROJECT FINANCE STRUCTURE 3 Standardized Contracts Construction Contracts Standardized Contracts Operations & Maintenance Contracts
  • 5. Technologies like Anaerobic Digestion and Advanced Recycling are gaining traction in the United States First Commercial Facility Conventional Technology Project IRR Solar 2012, mid-to-high teens % IRR 70-80% construction advance rate Solar 2018, <10% IRR 85-90% construction advance rate Ultra Capital Investment Focus Technology Risk Perceived Technology Risk Pricing PROVEN TECHNOLOGIES IN INEFFICIENTLY PRICED SECTORS 4
  • 6. Months Fund at start of construction IRR/RISK 10% 15% 5% Engage early ConstructionConstruction OperationsOperations LiquidityLiquidity 1818 120 DevelopmentDevelopment Project Pipeline • Lock in terms • Work to optimize contracts • Complete diligence and close • Commence funding • Construction monitoring • Ownership of Project LLC • Active oversight of project LLC manager • Operation and financial controls Signs term sheet in a project’s development phase locking in better economics and exclusivity DEVELOPERS NEED SUPPORT ON THEIR DEVELOPMENT CURVE 5
  • 7. RED RIVER BIOREFINERY – AGRICULTURE WASTE TO BIOFUEL Located in Grand Forks, North Dakota, the Red River BioRefinery is a waste-to-biofuels facility capable of producing up to 16.5 million gallons of fuel- grade ethanol per year from multiple agriculture and food processing waste streams, including sugar beets, potatoes, and other biomass waste. The project is anchored by long-term feedstock contracts with leading food processing companies. Red River BioRefinery Status: Fund I Funded Agricultural Waste to Biofuel Investment Size:~$85.0M 6 Projected Return Scenarios Gross IRR% / ROI Base Case – Hold to Maturity (20 years) --.-% / -.-x Year 5 sale at $--.-M --.-% / -.-x Project Summary Site Site owned by the Project and located adjacent to two significant, contracted feedstock sources. Developer Developer has biofuel sector and technology/engineering experience, has been developing the Project for 3+ years- Several additional projects have already been identified via existing counterparties in this Project. Offtake Contract in place to sell 100% of ethanol produced, RINs and LCFS credits at market prices. Low CI score from waste stream utilization and minimal transportation carbon footprint supports significant LCFS value. Input 20-year anchor feedstock contract for sugar beet waste from large sugar co-op in the US, with $/ton linked to ethanol price. Additional feedstock opportunities to emerge once the Project is under construction Q1 2017 Term Sheet Signed Q1 2018 Equity Closing Q2 2018 Debt Closing Q3 2018 Construction Q3 2018 Fund I Final Close Q4 2019 Commercial Operations Date Q1 2020 Operations Q2 2020 Ramped Operations
  • 8. COASTAL RESOURCES – ADVANCED RECYCLING Located in Hampden, ME, the project is an advanced recycling facility designed to accept 180,000 tons per year of municipal solid waste. The Project was awarded a 15-year put-or-pay waste supply agreement with the Maine Municipal Review Committee, an organization that manages the waste disposal activities for 187 towns in Northern Maine. Coastal Resources Status: Fund I Funded Municipal Solid Waste Recycling Facility Investment Size: ~$65.0M 7 Projected Return Scenarios Gross IRR% / ROI Base Case – Hold to Maturity (15 years) --.-% / -.-x Year 5 sale at $--.-M --.-% / -.-x Project Summary Site Site owned by municipal entities located in Maine supplying waste to project and subleased to developer. Developer Management has decades of domestic experience developing, building, commissioning, and operating similar plants of equal or larger scale. We have a priority right to invest $200M in future projects. Offtake Diversified offtake commodity revenues from recovered metals, plastics, cardboard, and other recyclable materials and engineered fuel. Recyclables are subject to price volatility. Input 68% of supply under 15 yr, put-or-pay contract with $70/ton tip fee, CPI escalator, and shortfall penalties in addition to tip fee. Remaining 32% of supply is currently merchant (unlikely to contract until COD). MRF Construction: 95% Phase I & 40% Phase II Q4 2016 Term Sheet Signed Q3 2017 Equity Closing Q4 2017 Debt Closing Q1 2018 Construction Q3 2018 Fund I Final Close Q2 2019 Commercial Operations Date Q3 2019 Operations Q2 2020 Ramped Operations
  • 9. CONTACT Aaron T Ratner Managing Director aratner@ultracapital.com www.ultracapital.com 8
  • 10. This presentation (the “Presentation”) is provided for informational purposes and reference only and is not intended to be, and must not be, taken as the basis for an investment decision. By acceptance hereof, you agree that (i) the information contained herein may not be used, reproduced or distributed to others, in whole or in part for any other purpose without the prior written consent of Ultra Capital; (ii) you will keep confidential all information contained herein not already in the public domain; and (iii) the information contains highly confidential and proprietary “trade secrets” (some which may constitute material non-public information). The contents hereof should not be construed as investment, legal, tax or other advice. You should consult your own advisors as to legal, business, tax and other related matters concerning an investment. Unless otherwise noted, the information contained herein has been compiled as of October 2018 and Ultra Capital has no obligation to update the information. The delivery of this Presentation will under no circumstances create any implication that the information herein has been updated or corrected as of anytime subsequent to such date. This Presentation does not constitute an offer to sell or solicitation of an offer to buy any securities and may not be used or relied upon in evaluating the merits of an investment, nor does receipt of this presentation guarantee an investment opportunity in any vehicle.. Offers and sales will be made only pursuant to the PPM, as amended or supplemented from time to time, the constitutional documents of the Fund, the subscription agreements and other definitive documentation of the Fund (collectively, including the PPM, the “Fund Documents”) and in accordance with applicable securities laws. The information set forth herein does not purport to be complete and is qualified in its entirety by reference to the Fund Documents. This Presentation is not a part of or supplemental to the Fund Documents and is superseded in its entirety by the Fund Documents. Ultra Capital launched its first private investment vehicle (“Vehicle") in February 2017. Ultra Capital has no operating history managing Vehicles. This presentation includes a summary of Ultra Capital’s anticipated investment strategies with respect to Funds or potential separately managed accounts (a "SMA.") Risks referenced herein with respect to Funds also relate to SMAs. Ultra Capital may make changes to its business plan in its discretion, and investors should read the final Confidential Private Placement Memorandum (“PPM”) of the Fund (or similar document for a SMA) (the "Memorandum") prior to investment. IMPORTANT DISCLOSURES 9
  • 11. Fund Documents will be made available and must be received prior to subscribing for an interest in any Ultra Capital Fund. The PPM contains additional information about the investment objectives, terms and conditions of an investment in the Fund and risk disclosures that are important to any investment decision regarding the Fund. You should read the Fund Documents in their entirety before making an investment in the Fund. An investment in the Fund is speculative and involves significant risks and potential conflicts of interest, including that there will be no public or private market for the interests in the Fund and such interests will not be transferable without the consent of Ultra Capital. Prospective investors should carefully consider the additional risk disclosures in the Fund Documents. The market analysis, estimates and similar information, including all statements of opinion and/or belief, contained herein are subject to inherent uncertainties and qualifications and are based on a number of assumptions. All statements in this Presentation (and oral statements made regarding the subjects of this Presentation) other than historical facts are forward-looking statements, which rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors outside Ultra Capital’s control which could cause actual results to differ materially from such statements. No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained herein, and nothing shall be relied as a promise or representation as to the future performance of the Fund. Differences between past performance and actual results may be material and adverse. Information in this Presentation is believed to be reliable but has not been independently verified and Ultra Capital cannot guarantee its accuracy. Past performance is not indicative of future results. This Presentation has been prepared for investors who are legally eligible and are suitable to invest in the type of investment described herein. Generally, they would include investors who are “accredited investors” under the U.S. Securities Act of 1933 (the “Securities Act”) and “qualified purchasers” under the U.S. Investment Company Act of 1940. It is the responsibility of any prospective investor to satisfy itself as to full compliance with applicable laws and regulations of any relevant jurisdiction. Interests in the Fund have not been and will not be registered under the Securities Act or the securities laws of any U.S. state or non-U.S. jurisdiction. The interests have not been recommended or approved by any U.S. federal or state or any non-U.S. securities commission or regulatory authority. Furthermore, the foregoing authorities have not passed upon the accuracy or determined the adequacy of the information contained herein. Any representation to the contrary is a criminal offense. Additional information is available from Ultra Capital upon request. IMPORTANT DISCLOSURES 10