EDITOR: | August 26th, 2021

Making the case to use garbage to produce renewable fuel, ESG investors look to Cielo to lead the way

| August 26, 2021 | No Comments
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“Just because people throw it out and don’t have any use for it, doesn’t mean it’s garbage.” ― Andy Warhol

Waste to fuel is one of the hottest sectors right now as the world moves towards greener solutions for both waste and energy. The global waste to fuel energy industry is forecast to grow from US$35.1 billion in 2019 to US$50.1 billion by 2027. One company is leading the way with their game changing proprietary technology (license) that turns municipal garbage and other waste into renewable fuels.

The Company is Cielo Waste Solutions Corp. (TSXV: CMC | OTCQB: CWSFF | FSE: C36) (“Cielo”).

Cielo manufacturers highgrade renewable diesel, kerosene (aviation jet and marine fuel) and naphtha from all types of garbage waste. Cielo has an exclusive global license from a related party to a technology that can convert multiple different waste streams into renewable diesel at a considerably lower cost than other biofuel companies, all with no harmful emissions.

Cielo’s process is referred to as Thermal Catalytic Depolymerization (TCD). Waste materials are liquified in the reactor with green power and blended with Cielo’s proprietary catalyst. The catalyst causes an instant reaction and forms a distillate which is then distilled further into renewable transportation diesel, kerosene (jet/marine fuel) and naphtha. The process utilizes atmospheric pressure and low heat, thereby resulting in no harmful emissions.

Almost every developed country in the world has a mandate to blend renewable fuels, and Cielo will be selling into this growing market.

Global waste is growing, as is the demand for ‘renewable’ diesel fuel

Source: Cielo investor presentation

Cielo already has their 100% owned first facility operating in Aldersyde Canada and has a second 100% owned facility in the early stages. Announced on August 24, Cielo has now finalized the purchase of the Fort Saskatchewan (Edmonton, Alberta) industrial site/building and the C$12 million loan (at a 6%pa rate to fund its purchase) for their second facility. You can read an update on Aldersyde and Fort Saskatchewan/Edmonton here.

Cielo’s first waste to fuel facility at Aldersyde is currently in production

Source: Cielo investor presentation

Cielo has more planned waste to energy facilities on the way

In total Cielo has plans to rapidly grow to have a total of 11 facilities in the next few years. Two will be Cielo 100% owned projects and 9 will be JV funded projects. The two 100% owned ones I have already discussed above (Aldersyde & Fort Saskatchewan/Edmonton).

The 9 JV facilities (MOU JV with Renewable U Medicine Hat Inc.) are planned for locations in Canada and the U.S., all to be funded by the JV partner. The nine facilities to be built are planned as Grande Prairie, Calgary, Medicine Hat (Dunmore), Lethbridge, Kamloops, Winnipeg, Toronto, Halifax and a location in the USA (to be determined).

After this Cielo plans to grow to 40 locations in the next 57 years. This would act to divert annually approximately 3.9 million tonnes of waste, creating approximately 1.3 billion liters of renewable fuel, making Cielo one of the fastest growing ESG companies in the world.

Cielo’s business model including details for Joint Ventures (JVs)

Cielo has developed a simple modular plant/facility manufacturing system. Each plant can produce 4,000 liters per hour or 32 million liters pa. This format allows for multiple plants to be built based on feedstock supply at each facility site. This also allows Cielo to build in more remote locations and eliminate many transportation issues and/or costs. Each plant costs approximately $50 million to build. Payback on the capital investment is approximately $28 million annually based on EBITDA.

When there is a JV, the JV partner is responsible for 100% of the financing of each project. Cielo, as contractor, will execute the planning, construction, commissioning and operation of the JV facilities, and overall manage the joint ventures and receive a 7% fee.

Details of the JV model (MOU with Renewable U Medicine Hat Inc. for 9 facilities) and revenues that potentially go to Cielo

Source: Cielo investor presentation

Analysts forecast Cielo’s revenue to grow rapidly from roughly zero in 2020 to C$26 million in 2023. After 2023 Cielo forecasts C$125 million in revenue once three facilities are fully operational. Once at 5-7 facilities running at full capacity Cielo expects to realize in excess of C$350 million pa in revenue and almost C$200 million pa in profits.

Closing remarks

Given that the world produces over 3.5 million tons of garbage a day (over 2 billion tons a year) there is a compelling case to make use of this garbage to produce renewable fuels. The best thing about Cielo is that they do all this with no harmful emissions and at a lower cost than other biofuel companies.

The other best thing is they have a very sound business plan where JV partners pay for the initial refinery capital expenditure thereby minimizing dilution for Cielo stock investors. Also, the Board and Management are highly experienced.

Cielo Waste Solutions trades on a market cap of C$652 million. Definitely, one to watch the next few years as they look to be moving rapidly with their rollout.


Editor:

Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>


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