Greentech Lead America: Recycled Energy Development (RED), which develops,
constructs, and operates recycled energy projects in industrial locations in
North America, has formed a strategic partnership with Tulum Trust, a private
equity firm that invests in low carbon energy businesses.
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.
Under this partnership, Tulum will provide RED with
development funding and project capital, with an initial commitment from Tulum
and RED Management of $26 million. Tulum also plans 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.
“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.”
Though energy recycling is well understood as a business
model, it 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.
“Our other work in industrial energy efficiency had
convinced us that waste heat to power is a fabulous opportunity,” said George
Polk, managing director of Tulum. “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.”