Recycled Energy Development and Tulum Trust Announce New Financing to Develop Waste Energy Recycling Projects
CHICAGO--(BUSINESS WIRE)-- Recycled Energy Development (RED) announced today a strategic partnership with Tulum Trust, a private equity firm that invests in low carbon energy businesses.
Under the terms of the deal, Tulum will provide RED with development funding and project capital, with an initial commitment from Tulum and RED Management of $26 million. In addition, Tulum intends to deploy up to $300 million in projects that RED will develop across North America in the next few years. Moelis & Company acted as an advisor to RED on the transaction.
RED develops, constructs, and operates recycled energy projects in industrial locations in North America. Recycled energy is generated through the reuse of waste energy from industrial processes, combined heat and power (CHP), waste heat/pressure recovery, and the beneficial re-use of manufacturing wastes. Energy recycling is one of the lowest-cost but large-scale opportunities to reduce CO2. The potential is huge; the U.S. Department of Energy estimates recycled energy systems could generate more than 20 percent of all U.S. electric power requirements by the decade’s end.
Energy recycling uses off-the-shelf technology and is well understood as a business model, but has been under-deployed due to a combination of regulatory barriers and lack of financing options. To overcome these hurdles, RED enters into agreements with industrial site owners where RED takes on important capital and operating risks, using the waste heat and pressure to generate usable energy and earning a return from providing low-cost energy back to the host (or from selling power into the grid and sharing the proceeds). The host improves its profitability, RED’s investors earn a good and stable return, and society benefits from reduced carbon and other emissions.
“Capturing and reusing waste energy is a complex but very exciting market,” said Tom Casten, Chairman of RED. “As a team, we have been doing this profitably for 25 years, deploying $2 billion of capital into 250 projects, and saving our industrial partners significant amounts of money. At a time when everyone is under pressure to reduce costs and increase margins, the best way to earn money is to stop wasting it.”
George Polk, Managing Director of Tulum, commented, “Our other work in industrial energy efficiency had convinced us that waste heat to power is a fabulous opportunity. We searched for the best-in-class operator and are thrilled to have found RED. RED has a long history of profitably and effectively deploying and managing these projects, consistently earning cash on cash returns for their investors and partners. We hope this investment is the first of many we will make together.”
“We’re pleased about the partnership with Tulum,” noted Sean Casten, CEO of RED. “This business requires capital that is patient enough to accommodate its development and construction times. Moreover, our industrial partners are rarely comfortable making a long-term energy commitment to a company with five-year exit expectations. Tulum’s model provides us with access to capital that is uniquely suited to this space, giving us a way to build small and large projects, while still pursuing opportunistic acquisitions of existing industrial energy islands.”
Tulum Trust is a private equity firm that works with large family offices and institutions, deploying capital into investments that generate impact and compelling returns from the low carbon economy. Tulum generally seeks to deliver high annual yields to its investors by investing in projects where long-term contracts underwrite stable, strong cash flows. While it may exit investments, Tulum has the flexibility to hold projects to their maturity and harvest returns over a project’s full life.
“Tulum focuses on companies and projects that are profitable without subsidy or government intervention and is proving that you can make excellent money by putting capital where it will make a real difference,” said Polk. “We believe that trading return for impact is a false compromise. Deploying the infrastructure that will take us into a low carbon world will require trillions of dollars of investment, and that much capital will only flow if the low carbon world can meet the return expectations of the global investment community. Many analyses, most recently Reinventing Fire from the Rocky Mountain Institute, show that the low carbon world can be far more profitable than the high carbon world, and our investors understand this opportunity.”
Tulum’s investors include Capricorn Investment Management, the investment arm of Jeff Skoll, which is also the investment manager for the Skoll Foundation and an affiliate of Participant Productions, whose films include “An Inconvenient Truth.” Ion Yadigaroglu, Managing Principal of Capricorn, noted. “We seek to combine strong returns with important positive impacts. We appreciate that investing in real assets can generate excellent long term cash flows which match our long term perspective as an investment manager for high net worth individuals, and can align our capital with the philanthropic intentions of our stakeholders.”
RED also owns Turbosteam, a manufacturer of back-pressure recovery systems that take the excess steam pressure generated in many university, hospital, and light and heavy industrial locations and generate emissions free, very low cost electricity that can then be used onsite or sold into the grid. Turbosteam systems are deployed in hundreds of locations.
“We are also optimistic about the potential of applying this build, own, and operate model to RED’s Turbosteam subsidiary,” continued Polk. “We hope to use our capital to install Turbosteam systems into a much broader array of locations, with us investing and operating and earning our return from supplying customers with discounted electricity. Turbosteam has done the site surveys and planning necessary to deploy profitable systems into hundreds of locations, but customers have been stalled by capital shortages or regulatory impediments to local power generation. We hope that by doing our part to remove the capital bottleneck, regulators will increasingly support a shift to low emission, on site generation, helping to speed deployment into many more customer sites.”
For More Information:
Recycled Energy Development, see www.recycled-energy.com.
Tulum Trust, see www.TulumTrust.com.
Moelis & Company, see www.moelis.com.
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