Investing in renewable energy from natural waste streams

A Dutch energy and technology company is developing a renewable energy project in West Africa in which organic waste from a large river is processed into biogas. This organic residue will be revenue-generating biogas through proven fermentation technology, which will then be used to generate about 2 megawatts (MW) of electricity. The power generated is supplied to the national grid, providing a stable and sustainable source of energy for the local market.

Risk profile
The project uses proven technologies and has a widely available and continuous supply of biomass. Major risks, including country risk and the default risk of the national electricity buyer, are insured through a Dutch export credit insurer.

In addition, carbon credits from carbon reduction provide important additional security. A public development financing scheme of the Dutch government is participating as a co-financier with a subordinated loan.

Business model
A large amount of invasive aquatic plants are present in the river in question. These plants cause several problems:

• blocking waterways
• Threaten hydropower plants as turbines jam
• disrupt ecosystems and biodiversity
• Increase health risks such as malaria mosquitoes

Harvesting and fermenting these plants turns them into energy. At the same time, it prevents the emission of about 2,000 tons of methane per year. Methane is about 30 times stronger as a greenhouse gas than CO₂, so this project has a significant climate impact.

Income sources
The project's income consists of several complementary streams:

• Selling electricity from a plant with approximately 2 MW of production capacity.
• Production and sale of NPK fertilizers as a by-product of the fermentation process.
• Carbon credits resulting from CO₂ reduction through renewable energy generation.

Unique features
The project offers an integrated solution to the global problem of invasive aquatic plants, particularly in (sub)tropical regions where these plants block waterways and disrupt ecosystems.

The approach combines:

• sustainable removal of aquatic plants
• biomass-to-energy conversion
• production of fertilizers
• income from CO₂ reduction

This combination allows the system to be self-financing through revenues from energy, fertilizer and carbon credits.

Investment requirement
The total project investment is approximately €4.95 million, divided between:

• project management and engineering
• biogas generator and electrification
• anaerobic digestion reactors
• civil works and construction
• harvesters for aquatic plants
• gas cleaning and storage
• Equipment for fertilizer production
• royalties, construction interest and contingencies.

Financing Structure
The capital structure consists of:

• equity of shareholders
• A subordinated standby loan from shareholders
• A subordinated loan through a Dutch government scheme
• A bond loan for external investors

This starts the project with about 41% solvency.

The bond offers an effective interest rate of approximately 12% (paid monthly) and also profit sharing after full repayment of principal.

Management and expertise
The project is led by a multidisciplinary management team with experience in:

• international project development
• energy and plant engineering
• infrastructure and civil engineering
• financing structures and risk management

The core team also works with specialized suppliers, engineering firms and international partners to ensure the plants meet international standards for safety, sustainability and efficiency.

Planning
The construction and start-up phase of the plant is expected to take approximately 9 to 12 months. After that, commercial operation and supply of renewable electricity will start.