Cleanaway Waste Management (ASX:JCM)Australia’s largest provider of waste management, recycling and environmental services, has announced a joint venture with LMS Energy to monetize landfill gas (LFG) at Cleanaway’s Lucas Heights landfill in New South Wales.
Waste in Watts
Landfill gas is a natural byproduct of the decomposition of organic waste in landfills. It consists mainly of methane and carbon dioxide.
Instead of letting the gas escape (which would be harmful to the environment), it can be captured, filtered to remove impurities, and then burned in an engine or turbine to produce electricity.
LMS specializes in LFG capture and conversion.
The agreement
The joint venture will see LMS Energy invest $46 million in the construction of new bioelectricity generation assets, including a 22MW power generation facility. This facility will replace existing power generation infrastructure, which is currently owned and operated by a third party.
Under the terms of the agreement, Cleanaway will grant LMS exclusive rights to the gas for 20 years.
The creation of the joint venture is still subject to a number of third-party approvals.
Returns
Cleanaway and LMS Energy will have an equal stake in the joint venture, each deriving 50% of the revenue.
The JV is expected to generate incremental EBIT of $5 million in FY25 and $10 million in FY26. Once the new assets are fully commissioned, the joint venture is expected to generate incremental EBIT of $15 million per year beyond FY26, subject to regulatory and operational conditions.
The financial benefits of this initiative are included in Cleanaway’s existing guidance for FY25 EBIT of $395 million to $425 million.
Mark Schubert, Chief Executive Officer and Managing Director of Cleanaway, commented: “Optimizing our landfill gas opportunities is a key focus area of our Blueprint 2030 strategy and is part of our ongoing work program. operational excellence. The joint venture aligns with our commitment to disciplined capital. management, and using capital-lite approaches to increase profits and generate better shareholder returns while supporting our commitment to reducing greenhouse gas emissions.
Cleanaway shares are trading up 0.75% at $2.69.
