A single facility burns 190,000 tonnes of waste a year on a 25-year contract. For GCP Infrastructure Investments (LSE:GCP), the appeal was never the furnace. It was the debt sitting above it.
The oldest known landfill sits in ancient Greece, but dumping only became the default in the 20th century. Now sites worldwide are filling up, and they emit more CO2 than most daily activities combined. Energy-from-waste is one answer, and Katia Brisson, Associate Director at Gravis Capital Management, makes the investment case for it.
GCP Infrastructure Investments (LSE:GCP) first committed £48 million to the Gloucester Energy-from-Waste facility in 2017, backing the plant through its debt rather than its equity.
What the plant actually does
Once Gloucestershire households have separated out recycling and green waste, some rubbish always remains. Rather than going to landfill, it feeds the facility, which combusts up to 190,000 tonnes a year. Around 75% of that comes from Gloucestershire County Council. Heat from combustion drives a steam turbine, generating more than 14.6MW, enough to power roughly 25,000 homes a year. The plant is largely automated. Construction ran from August 2016 to October 2019.
Why the debt appealed
The facility carries several defensive traits. Barriers to construction are high, it is a real asset providing an essential service, and GCP sits in the debt, which brings capital structure protection.
The £48 million came via senior secured debt, amortising, priced at 7.92%, with final repayment due in 2042. Sitting above equity in the structure, that position absorbs losses last.
Where the money comes from
Revenue is contracted and diversified. A large share comes from gate fees for processing waste, fixed and index-linked through a Contract for Difference with Gloucestershire County Council across a 25-year concession. Spare capacity, once the council's residual household waste is handled, is sold to nearby commercial and industrial waste producers, earning further gate fees. Electricity generated by the plant is sold into the grid at a fixed price under a Power Purchase Agreement.
Where the sector goes next
In the waste hierarchy, after reduce, reuse and recycle, recovering value from waste ranks as the most sustainable option left. It diverts waste from landfill and the gas that follows, handles material that cannot be recycled, and generates electricity and heat. That adds indigenous supply, supporting energy security and renewable targets.
The catch is emissions. Because these plants burn both organic and non-organic waste, they still release some carbon, within set thresholds. The industry is now looking at carbon capture and storage to decarbonise fully. That remains confined to certain industrial clusters today, but the opening widens from here.
Burning rubbish will never sound clean. The contracts wrapped around it are what make the investment work.
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