GSAM invests in converting waste into renewable natural gas with Synthica

Ara Partners, EQT and Quinbrook Infrastructure Partners are some of the firms finding deals in this sector.

The desire to find alternatives to landfills, coupled with growing opportunities to turn waste into renewable natural gas (RNG), drove Goldman Sachs Asset Management to invest in Synthica Energy earlier this week, Cedric Lucas, managing director in GSAM’s infrastructure business, told PE Hub in an interview. The deal marks the first waste-to-energy investment in North America for GSAM.

Based in Blue Ash, Ohio, Synthica specializes in facilities that use bacteria to break down organic waste produced in manufacturing processes and convert it into RNG.

“We conducted a multi-year evaluation of circular economy trends and infrastructure solutions and identified anaerobic digestion of pre-consumer organic waste as an attractive opportunity,” Lucas explained.

“In Synthica, we saw strong tailwinds and an infrastructure business model based on sustainable and contracted revenue streams at both the feedstock and offtake stages of their operation, which made them strongly attractive to infrastructure capital.”

Many businesses are looking for new ways to dispose of waste other than dumping it in a landfill. Landfills are the third-largest source of human-related methane emissions in the US, according to the US Environmental Protection Agency. In 2022, there were 82 landfill RNG projects in the US, as compared with 11 in 2005, according to EPA.

There is a “substantial opportunity” to help customers find circular solutions that turn pre-consumer food and beverage waste, as well as other organic manufacturing byproducts, into something that is reusable, such as RNG, Lucas added.

“Synthica’s anaerobic digestion process is expected to create pipeline-ready RNG that will meet already strong demand from blue-chip utility and industrial customers,” he said. “As these customers look for ways to decarbonize and make their operations sustainable, several are looking to enter into long-term RNG contracts with Synthica.”

GSAM’s investment aims to grow Synthica’s infrastructure projects and accelerate the development of its facilities in key target markets across the country, including Ohio, Texas, Georgia, Kentucky and Louisiana, in the near term, and develop other facilities in Florida, Illinois, Missouri, New York and Pennsylvania in the longer term.

Synthica is focused on growing its pipeline organically for now, Lucas said.

In Europe, the infrastructure business within GSAM has a biomethane business called Verdalia Bioenergy.

Other firms, such as Ara Partners, EQT, and Quinbrook Infrastructure Partners are also investing in companies that turn waste into energy, as PE Hub has reported.