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10 questions with Ultra Capital, infrastructure financiers greasing the circular economy’s wheels

Time Into Pixels Photography
Erica Landsburg, right, reflects during a plenary session at Circularity 19. Also pictured, Erika Karp with Cornerstone Capital.

Emily Landsburg knows all too well how challenging it can be to convince investors to take a chance on a new technology. A serial entrepreneur in her former life, she founded several businesses at the intersection of waste, energy and water, including Blackgold Biofuels, a company that converted sewer greases and oils in other wastewater into biodiesel.

These days she sits on the other side of the table, as a director at Ultra Capital, a private equity fund that finances infrastructure projects in the United States and Canada that have a positive environmental impact. The projects Ultra invests in are small — in the $10 million and $100 million range — by the standards of an asset class that typically funds toll roads, airports and stadiums, along with infrastructure for sectors such as oil and gas, mining and petrochemicals.

If these sectors represent traditional project finance, and wind and solar represent project finance 2.0, think of Ultra as next-generation infrastructure financiers. Less than five years old itself, the firm invests across the waste, energy, water and agriculture sectors in projects that use resources more efficiently. Ultra’s first fund deployed $200 million, and it’s currently raising a second fund.

After she participated in the "Financing Circularity" panel at GreenBiz’s Circularity 2019 event, we had more questions for Landsburg, about the types of projects that interest Ultra, what the firm can offer the project managers it works with, where she thinks the circular economy is headed, and how a Green New Deal might affect the infrastructure projects of the future. The text has been edited for clarity and length.

Carol J. Clouse: What do you look for in a potential project investment?

Emily Landsburg: They all share the characteristic of using a proven technology, which may not be widely deployed or adopted but has at least some commercial operating examples out there. We look for projects that have long-term, predictable cash flows, which is a hallmark of project finance. This predictability is typically created by long-term contracts with creditworthy customers for the products or services generated by the project. With new technologies, and the increased value of resources, you’ve got opportunities that make economic sense on a much smaller scale, which is great. But if you don’t have the financial instruments to finance these projects, they’re going to sit on the shelf.

Clouse: Can you give me some examples of the types of projects Ultra Capital is interest in?

Landsburg: Frequently, they’re what we call "waste-to-value" projects. Examples might include converting organic wastes to renewable natural gas (methane from biogenic sources) in an anaerobic digester; recycling the nutrients in organic waste into fertilizer or feed; mechanically or chemically recycling plastics; or recovering fiber from post-consumer textiles for reuse. We do waste treatment, such as treating high-strength wastewater from an industrial manufacturer so it can be reused or safely discharged. We provide the infrastructure needed to transition to cleaner energy, such as microgrids, EV charging infrastructure or fleet conversion to renewable natural gas.

In our first fund, for example, we invested in a facility taking sugar beet tailings, an agricultural residual leftover from processing sugar beets, to make ethanol. This will be one of the lowest carbon intensity ethanols in the United States.

Clouse: I understand you also invested in an advanced waste processing facility up in Maine, run by Fiberight. Can you tell me about that project?

Landsburg: That facility is taking household trash from approximately 100 towns and cities and putting it through a very advanced sorting system. The conventional recyclables are sorted out, and the organics go through an anaerobic digestor, which turns the materials into renewable natural gas. Then most of the mixed paper is sent to a pulper that produces a really clean, uniform pulp that can be used as a raw material for paper and packaging.

A lot of these communities are very rural, and they can’t afford to do two collection routes, one for recycling and one for black bag trash, so everything goes in one bin and gets sorted at the facility. And the consumer doesn’t have to figure out which bin things go in. That way we’re able to divert more than twice as much waste from landfills as conventional recycling. 

Clouse: Haven’t these types of recycling facilities that take in everything mixed together run into trouble in the past with contamination and odor?

Landsburg: The dirty MRF [material recovery facility], as we call them in general, has been a challenging model historically. But because the technology Fiberight uses can sort the waste into so many different streams that can then be monetized, this project is economically stable in a way most dirty MRFs aren’t.

Clouse: Have you seen an increase in opportunities in the recycling sector since China stopped buying used materials from the United States? Have people begun to develop and build more recycling infrastructure here? 

Landsburg: Yes, definitely. We’ve seen a lot more projects that have a pulp-and-paper component, where they’re recycling materials and making packaging here. And there’s a lot more attention now on finding ways to recycle the hard-to-recycle plastics domestically.

Clouse: Since you’re investing in infrastructure projects that reduce carbon emissions and waste, I wanted to ask you about the New Green Deal. If that sort of legislation gets passed, how might it play into what you do? Can you see it creating more opportunities? 

Landsburg: Broadly, yes, those types of policies would be a tailwind for a lot of projects we and our colleagues are working on, and for the space in general. But we’re investing in these projects based on market fundamentals, on resource and material flows that make economic sense today as is. So those sorts of policies are certainly supportive of our work, but our work is by no means dependent on them.

Clouse: Could you walk me through how you make your return?

Landsburg: Each of these infrastructure projects functions like a standalone business. For example, if it’s a waste-to-value or circular-economy project, there would be a profit that’s generated by converting the input into a product. That operating profit is where we make the return on our investment. This gives us a strong alignment with the project developer, who’s also an owner in the project with us, as well as the customers who are buying the materials or service. They also want to be sure the facility is operated and maintained in a responsible, sustainable way so those products and services are there and meeting specifications not just next quarter, but five or 10 years down the road.

Clouse: Who are the end customers typically?

Landsburg: Generally, the buyers of the products and services generated from these projects are private industry, a few household names but more often large corporations farther up the supply chain. Occasionally, the contracts are with government entities, such as the municipalities paying to have their waste recycled at the Maine project. There’s a myth that green is more expensive, and sometimes that is the case. But a lot of our projects are producing materials at a lower cost, so these brands are able to lock in a favorable price fixed over a long-term contract.

Clouse: Other than the financial investment, what do you offer the project developers you work with?

Landsburg: Our model is to work with project developers over time, to get that first project done and then replicate it. We’re already working with some developers on their second projects now. In the past, they would have to go out and find all these different potential sources of capital, which is hugely inefficient for everyone involved. We sometimes joke around and call it Franken-capital, because they had to stitch together all these oddball sources.

So to have a firm such as Ultra Capital come in and say we understand the space, we know how to diligence these projects, we close on these projects on a regular basis, and we have the capital to do a lot of them with you, it’s transformative. A lot of us come out of industry as opposed to finance, so we know what’s it like because we’ve done it. And we’re able to bring ideas and resources and connections and best practices to help these developers be successful.

Clouse: So you’re somewhat of a hands-on type of fund then?

Landsburg: I would characterize us as value-added rather than hands-on. I know sometimes entrepreneurs bristle at the idea of a hands-on investor. They worry that the investor’s going to come in and take over, and suddenly they’re just an employee. And that’s not our intention. We have a lot of respect for our developers and operating partners; we rely on them to develop and run these projects. We’re here to support them.