Convertus has primarily been expanding in Canada since it was formed via a private-equity-backed merger. Now it’s eyeing several U.S. markets for expansion.

Dive Brief:

• Canadian organics company Convertus acquired a Manassas, Virginia, composting facility from Freestate Farms last week. It’s the buyer’s first composting facility in the United States. 
• Convertus was formed through the combination of Renewi Canada and Waste Treatment Technologies in 2019, and it has since acquired more companies with the backing of Convent Capital. 
• Convertus has plans to add anaerobic digestion to the Manassas facility and continue accepting food waste. The company ultimately aims to become “the largest and most advanced organic waste treatment company in North America,” CFO Jamie Jongsma said in an email.

Dive Insight:

The market for organics processing facilities continues to expand in the U.S. thanks to organics diversion requirements in several states, including California’s SB 1383 and other regulations in Maryland, New York, Washington, and Oregon.

But financing, building, and operating the infrastructure necessary to process those organics has proven tricky. Convertus believes it can answer the market need through its economies of scale and capital partners.

The company currently has 14 sites that collectively process more than 500,000 metric tons of organic waste. The facilities generate about 100,000 gigajoules of renewable natural gas and more than 200,000 metric tons of compost and fertilizer, Jongsma said in emailed comments. Those facilities utilize a variety of systems, including in-vessel composting and wet and dry anaerobic digestion.

Convent Capital is a family office based in The Netherlands. The origins of Convertus begin with Dutch company Orgaworld earning a 10-year contract for source-separated organics in London, Ontario. The company grew to host three facilities before being acquired by Convent but remains headquartered in London.

In Canada, organics processing is primarily contracted out by municipalities in long-term deals, like with the London facility. But processors in the U.S. typically need to contract with haulers, often on shorter deals, Mike Leopold, president and CEO of Convertus, said in an interview.

“The haulers, they’re not long-term commitment people,” Leopold said, which creates problems for capital-intensive organics processing facilities that need stable revenue. But Convertus saw a unique opportunity in Manassas, which is one of six major U.S. markets that Convertus has prioritized for expansion. 

Leopold said the structure of that facility’s contracts with its customers, which also include Washington, D.C., suburbs Fairfax and Arlington counties, made it a good fit for an acquisition. The facility has an exclusive 20-year contract for yard waste from Prince William County, which recently implemented a diversion mandate for the material. The county is also in the early stages of diverting food waste to the site, which Leopold said could expand in the coming years.

“The biggest question [Prince William County] had was, ‘Are you accustomed to working with municipalities?’ And I said I’ve got 12 references for you in Canada,” Leopold said. “It put them at ease when we were coming in to acquire this asset.”

The Manassas site can currently process 80,000 to 100,000 tons of organic waste annually, per a release announcing the deal. Leopold said the county had already planned to add anaerobic digestion to the site. He expects Convertus will spend the next 18 to 24 months bringing the existing advanced aerated static pile facility up to standard and then will add AD capabilities later on.

While Manassas is Convertus’ first U.S. composting facility, it’s the company’s second asset in the country. Convertus in 2022 acquired Canadian company Envirem and its assets, which include a bagging and warehouse facility in Maine for compost and organics products.

Convertus has a goal to process over 1 million tons of organics annually. But Leopold also said the organics business requires caution, and he wants Convertus’ growth to be sustainable. With what he described as patient capital backing the company, he plans to be deliberate about acquiring or building new facilities moving forward.

“There are plenty of companies in this space that I think have grown too quickly,” Leopold said. “We have a good handle on how many of these we can do at a given time, and we’re not going to overpromise.”

https://www.wastedive.com/news/convertus-manassas-acquisition-compost-ad-canada-convent-capital/713542/