cleaning waste management (ASX:CWY)Australia’s largest waste, recycling and environmental services provider, has entered into a joint venture with LMS Energy to monetize landfill gas (LFG) at CleanAway’s Lucas Heights Landfill in New South Wales. announced.

Convert waste to watts

Landfill gas is a natural byproduct of the decomposition of organic waste within landfills. It is mainly composed of methane and carbon dioxide.

Instead of letting the gas escape (which is harmful to the environment), it can be captured, filtered to remove impurities, and burned in an engine or turbine to generate electricity.

LMS specializes in LFG capture and conversion.

transaction

The joint venture will see LMS Energy invest $46 million in the construction of new biopower assets, including a 22MW power generation facility. This facility will replace existing power generation infrastructure that is currently owned and operated by a third party.

Under the agreement, Cleanaway will give LMS exclusive rights to this gas for 20 years.

Establishing a joint venture still requires approval from a number of third parties.

Return

Cleanaway and LMS Energy will both have equal ownership in the joint venture and each will earn 50% of the revenue.

The joint venture is expected to generate incremental EBIT of $5 million in FY25 and $10 million in FY26. Once the new assets are fully operational, the joint venture is expected to generate EBIT accretion of $15 million annually beyond FY26, subject to regulatory and operating conditions.

The financial benefits of this initiative are included in CleanAway’s existing guidance of $395 million to $425 million in FY25 EBIT.

Mark Schubert, Chief Executive Officer and Managing Director of Cleanaway, said: “Optimizing landfill gas opportunities is a key focus area of ​​our Blueprint 2030 strategy and our operational excellence work. This joint venture is consistent with our commitment to disciplined capital.” We leverage a capital-light approach to grow revenue and drive improved returns for our shareholders, while supporting our efforts to reduce greenhouse gas emissions. ”

CleanAway stock is trading 0.75% higher at $2.69.