Understanding Waste to Energy Financing

When one thinks of Waste To Energy probably the mental image does not really match reality. Waste-to-energy projects involve the burning of waste to produce heat or electricity. A WTE power plant is actually a clean and well organized facility. The rising demands for renewable energy sources have fueled the rise of WTE facilities across the globe. These projects rely on trash disposal landfills for their raw materials, which means that they have an endless supply, truly natural and a sustainable energy sources. The thing is that the source of the waste can be almost anything from what you probably imagined: landfills to waste plastics, solid waste, scrap tires, wood waste, and even wood pellets to create power in the form of bio fuels, heat, or electricity.

Setting up a waste-to-energy plant, however, requires significant resources, which is where commercial lenders come in. Not all commercial lenders specialize in renewable energy or waste to energy (WTE) financing. Some financial institutions have products tailored specifically for waste to energy funding and some completely steer clear from any such projects. However, WTE financing is not the same as conventional loans as lenders have different loan program requirements.

For a company seeking funds for a WTE plant, it is necessary to understand the fundamentals of financing such as a project and how to approach lenders, more specifically which lender.

The Concept of Energy to Waste

A majority of WTE projects fail because entrepreneurs do not thoroughly investigate the risks involved in this business. Before looking for suitable business loans, an enterprise must brace itself for the obstacles associated with waste to energy projects. Loosely explained, WTE plants incinerate waste to come up with sustainable biomass energy.

The processes it takes to achieve this, however, are very complex. The waste must first be broken into its principle elements through heating. Then, there is the procedure to capture the energy and treating it to suit consumption. All these processes must adhere to strict environmental regulations and use expensive, high-tech equipment to generate the desired results.

Most entrepreneurs find it hard to meet the requirements of running WTE facilities, which is why they have a high failure rate and consequently, a poor perception by most lending institutions.

Considerations when Seeking WTE Financing

Entrepreneurs looking for bridge loans or other funding options should be aware of what lenders look at when evaluating WTE projects. Most small lenders will stay away from WTE projects because of the risk involved. Large lending institutions, on the other hand, invest in big projects run by well-established companies that already have existing relationships with industry players.

Presenting feasibility studies to WTE lenders will not prompt them to fund a project because institutions want proof that the technology can work on a large scale. Lenders want an EPC-based project that highlights the financial capabilities of the business to perform consistently. When seeking business loans, an operator must show that a WTE plant is capable of keeping its operations running. Lenders want to see more than just a technology provider. We however have options for all scenario types.

Lenders advise developers of WTE projects to have pre-development money for the early stages. The majority of investors will want to see a track record of a WTE plant before injecting capital.  A viable project will need off-take agreements and a long-term feedstock to keep it operational.

When it comes to investment tax credits, WTE is not the same as wind or solar because providers view it as riskier investments.  Operators should be careful of investment banks that tell them they can get funds for a highly leveraged project. Another cautionary measure when searching for WTE financing is not to trust term sheets from intermediaries. Only a direct lender can issue a term sheet.

Picking a WTE Lender

Due to the complexities involved in waste to energy projects, lenders prefer to deal with wind and commercial solar projects. A company delving into WTE should firsts decide which type of financial partner it wants for the project. Various entities offer security backed lending for WTE projects, but the requirements vary.

Some lenders provide 100% funding in exchange for assuming full control after a plant has completed building. In other instances, a lender can agree to co-own the asset. A lender can provide equity injection or debt validation, depending on the business model of the project. An entrepreneur should analyze the various kinds of loans options available to select one that corresponds to the demands of a project. Operators of WTE must work with people experienced in renewable energy and biomass projects. At “As Is” Loans we will evaluate which option are available for your renewable energy source project and provide you with the best capital solution.

One reason WTE financing for most lenders is difficult to fund is because of lack of experience and these projects may have little marketable assets. In conventional commercial loans, real estate and other assets offer investment recovery security for lenders in case a venture does not succeed. If a WTE plant failed, the lending institution would have to write it off completely.

If you are seeking to finance your renewable energy project, waste to energy project or any commercial project, we are your best solution. We service different types of commercial loans regardless of the situation or where the project is situated. Nationally or Internationally. Our products are designed for all any type of businesses. Get the capital you need today.  We don’t provide denials, only approvals. Call today for a free consultation. We even offer free energy consultation services.