Water fund manager eyes second fundraise

Channels: Investors, Water

Companies: Cambrian Innovation, Generate Capital, SunEdison, Resonance Asset Management,

People: Matthew Silver, Jigar Shah,

A US-based wastewater treatment company has revealed that it is considering raising a second fund, just weeks after it announced the first investment from its inaugural investment vehicle.

Cambrian Innovation's technology, called EcoVolt, treats wastewater at industrial sites while simultaneously generating clean energy. The company's system can treat between 10,000 and 300,000 gallons of water per day and remove more than 99% of containments from it. It also produces biogas through heat and power cogeneration, which generates 30-200kW of net power.

Cambrian's existing fund was launched last year with $30 million of commitments. SunEdison co-founder Jigar Shah's Generate Capital is the lead investor in the fund. Through the fund Cambrian provides upfront financing for installing its wastewater treatment technology which it also operates. Cambrian then sells back clean energy and water to the company under what it calls a water-energy purchase agreement (WEPA). Cambrian plans to finance the installation of between five and eight EcoVolt systems, with further investments expected in 2017.

The business model of selling water and energy as a service is based on the power purchase agreement deployed in the renewables industry over the past decade. Earlier this year Resonance closed a $320 million fund specifically targeting industrial projects that treat wastewater, targeting Europe, south east Asia, China, Australia and New Zealand, while Cambrian will focus on the US.

"This is the first fund we've put together and we're absolutely looking at the next fund and the next approach and we're in discussion with some folks about that," said Matthew Silver, chief executive officer at Cambrian.

Cambrian recently completed the first deal from the first fund. The company will install one of its EcoVolt systems for an undisclosed amount at US-based brewery Lagunitas Brewing Company's Azusa brewery, which will open in 2018. Cambrian estimates Lagunitas will save $22.5 million over the lifecycle of the WEPA contract, which is 20 years. By using EcoVolt, the brewery will recycle 300,000 gallons of water per day, and produce 2,300MWh of renewable energy and 130,000 therms of heat per year.

Silver argues there is a substantial opportunity for investors in water infrastructure, which the Environmental Protection Agency (EPA) estimates in the US to have an investment gap of more than $500 billion over the next 10 years.

"The private markets are often looking for good investments in water and they're somewhat hard to come by," he says. "There are some subsidies around private activity bonds and things like that but most of the investments to date have been from municipal sources and have been lower return.

"So, this is a new class of assets and enables a substantial opportunity with high returns and, because it's diversified, the risks are relatively low," added Silver, though he wouldn't disclose what return on investment investors could expect.

"We're getting strong interest from customers about this. It's a way for them to basically get the benefits of what we can do with very little risk and very little cost down and, I think, [this business model is] increasingly the way things are going," said Silver.

Joe Walsh