Macquarie Capital’s social license in Kwinana

Macquarie Capital’s social license in Kwinana

With major contracts awarded for Australia’s first large-scale waste to energy facility, a Macquarie Capital executive director explains the key to transitioning the project from development to construction. 

When new forms of resource recovery arrive in Australia, it is critical for the project’s proponents to obtain a social license to operate – not just with the community, but also across all project stakeholders. 

One project that has, and continues to, develop that social license is Australia’s first-large scale waste to energy (WtE) facility to be built in Kwinana, WA. This was demonstrated by the variety of stakeholders, including governments, that have backed the plan. 

October this year saw the landmark announcement of financial close on the project, meaning it can move from development to construction. Macquarie Capital and Phoenix Energy Australia are co-developing the Kwinana plant, with co-investment by the Dutch Infrastructure Fund. Infrastructure company Acciona has been appointed to engineer, procure and construct the facility, with the 36-month construction period commencing in October. Veolia will operate and maintain the facility under a 25-year agreement. 

Notably, the $698 million project was approved by the WA Environmental Protection Authority (EPA) and received $90 million from Federal Government specialist financier the Clean Energy Finance Corporation. A further $23 million in grant funding has been provided by the Australian Renewable Energy Agency. 

The facility will be able to process 400,000 tonnes of household, commercial and industrial residual waste per year. It is expected to produce cost-competitive base load power and contribute to grid stability in WA’s South West Interconnected System. Operations and maintenance of the facility will commence by the end of 2021. 

Christopher Voyce, an Executive Director in Macquarie Capital, says the relationship between government, stakeholders and the community was integral to securing EPA approval and contracts.

“We’re conscious that WtE technology of this type is new to Australia. What we’ve found is that it’s vital to bring all of the relevant stakeholders along on the journey to understand the new technology, including all levels of government, residents and the community,” Chris says. 

Keppel Seghers moving grate technology used extensively in Europe will be implemented in the plant, which is expected to reduce carbon dioxide emissions by 400,000 tonnes per year.

Macquarie has a longstanding international track record in energy, including renewable energy, as an adviser, financier and developer. Chris says WtE is a sector in which Macquarie has substantial expertise. For example, in Korea, Macquarie established ReClean, which treats 540 tons (490 tonnes) a day of food waste to produce compost, animal feed and bio-diesel.

This expertise has been applied to the Kwinana project with an eye for the nuances of the Australian market. Having invested debt and equity in more than 20 waste and biomass projects across the globe, Macquarie has developed relationships worldwide with financiers, engineering, procurement and construction contractors, technology providers and operators.

Chris says Macquarie is able to work through any technical and commercial issues to reach consensus, all while satisfying the requirements of its partners, including lenders and equity. 

He says that one of the attractive qualities of the Kwinana project was that the councils involved saw WtE as the most appropriate strategy to achieve landfill diversion in a location that had received widespread community support. 

“From a stakeholder standpoint, we entered this project at about year five of an eight-year development process, so part of our due diligence was to make sure the proper community consultation and environmental approvals had been sought and obtained,” Chris says.

“We felt Phoenix [Energy] had done a good job of generating community support, working with the state to obtain the right environmental approvals and councils to ensure the project was meeting their needs as well.”  

As a key investor in the project, Chris says Macquarie’s aim is to set the project up for success in the construction period through to commissioning and operations.  

“It is a long process. You have to really start with building the social license to operate and then maintaining it through construction and into operations. To that end, as part of the project, we are planning for an education centre to educate local communities and schools on what the project is doing and its benefits,” Chris says.

While building stakeholder and community support is vital, Chris stresses the next important factor to a project’s success is working with high quality delivery, technology supply and operating partners, praising the reputation of all stakeholders involved in the development process. 

Chris adds that the technology and plant design was chosen as it was flexible enough to withstand potential changes in the waste stream as state and local government policies may evolve over the life of the project. He says this has been demonstrated in Europe over several decades as WtE plants using the technology can adjust their processes in line with contemporary environmental legislation. 

Chris says the Keppel Seghers moving grate technology has been deployed more than 100 times globally and with an established supply chain in the Asian region is well placed to supply into Australia.

“Moving grate technology is able to deal with variability in the composition of waste, while being able to operate reliably. 

“This is particularly important given the municipal solid waste and commercial and industrial waste the project is targeting and the changes in waste composition that will inevitably occur as recycling practices improve over time,” he says. 

Furthermore, Chris says when the project is operating at capacity it will prevent more than 400,000 tonnes of carbon dioxide being emitted each year, the equivalent of taking 85,000 cars off the road. It will do so by capturing energy from waste in a controlled environment, while crowding out higher carbon emitting sources of electricity generation. 

He notes that the WA Government established Kwinana as a strategic industrial area to ensure industrial land close to the Perth metropolitan area with access to road, rail and port infrastructure and suitably buffered from residential areas was available for projects such as the Kwinana WtE project. 

With its first major investment in Australian WtE making swift progress, Macquarie Capital is now looking to expand on its capabilities across other innovative projects. 

Chris says the team will continue to keep a close eye on upcoming projects that are economically viable and follow the waste hierarchy, seeing potential in organics and further WtE projects. 

“We’re looking for investment opportunities that provide strong and sustainable long-term cash flows. So that’s the lens through which we will view future opportunities,”
Chris says. 

X