New investment fund to help struggling AD plants

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Many anaerobic digestion plants are struggling to make a profit, but landowners, plant owners and operators can now turn to a specialist investment fund for help.

Aether Energy, which has the backing of institutional investors, is working with a leading anaerobic digestion operator to acquire and refinance struggling plants to boost their performance. “The AD sector is in a difficult place right now,” explains portfolio director Scott Hunt. “Many plants were set up at high capital cost, with unsustainable debt levels and sub-standard operational efficiencies. But these plants can still have a bright future, and we have both the technical know-how and the financial backing to help them achieve that.”

Given the relative infancy – and therefore risk – of the sector, many plants were very costly to install, and were financed on short-term loans with high interest rates. In addition, the physical construction and technical understanding of how they operate has advanced significantly in recent years, says Mr Hunt.

“According to the Anaerobic Digestion and Bioresources Association, [ADBA} which represents the sector in the UK, the average operational efficiency of plants is just 73%. Some are running at below 50% efficiency, and there’s no way you can make money at those levels in the short or long-term.”

This leaves landowners and operators in a difficult position. “The asset is unlikely to be worth what it cost, and owners may need to invest to improve operational efficiency, or refinance loans over a longer period. However, because the plant isn’t profitable, it’s almost impossible to do either.”

Fortunately, Aether Energy can help, by buying out under-performing plants or partnering with owners and existing operators to boost efficiencies. “Typically, we can restructure finance over the life of the Feed-in Tariff or Renewable Heat Incentive, backed by large, well-respected institutions,” explains Mr Hunt. “And we have arguably one of the best private AD operators to address the pre-existing practical difficulties, boosting operational efficiencies towards and beyond 90%.”

The firm is seeking sites of 0.5MW upwards across Great Britain, and is offering free long-term financial modelling and valuation, based on actual performance to interested parties.  Its initial funding is £50m but that can be extended to accommodate larger plants or portfolios depending on uptake. All investors have agreed to an open-ended fund structure.

“Whether you are an owner-operator or in partnership with a large investor, it is highly possible to negotiate new contracts,” adds Mr Hunt. “Many AD plants need to re-structure to become efficient in the medium to long term. It is exciting to be able to offer this lifeline to struggling plant owners and at the same time maximise the productivity of the nation’s AD plants.”

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