sewage treatment plant with sunrise

Not all waste projects will succeed

This week I’d like to talk about failure. Or to put it another way, what ways do we have at AcuComm to analyse the likely success of any given waste sector investment, and what conclusions can be drawn from this analysis? It’s a worthwhile exercise for anyone interested in plotting the current and future shape of the global waste management sector.

Between 2014 and 2018, AcuComm reported on 5,161 waste investments around the world. Of these, 200 have since been confirmed as either cancelled, indefinitely postponed or no longer operating. This equals 3.9% of the total. But the true figure is likely to be a bit higher than that, as there is naturally a time lag between a project’s announcement and its cancellation. The confirmed failure rate for projects announced in 2014 is 7.2%, as of February 2019, while for projects recently-announced in 2018, it is only 0.7%.

graph1 Source: AcuComm database, February 2019

The AcuComm database shows a clear inverse correlation between the innovativeness of a project and its chances of success. By far the riskiest forms of investment in the 2014-18 period were projects involving gasification and related technologies. We reported on 151 of these, 22 of which have been confirmed cancelled; a failure rate of 14.6%, compared with the 3.9% average. Other above-average failure rates can be seen in the biofuels and AD/biogas sectors, at 6.9% and 4.3% respectively. In contrast, incineration projects had a failure rate of 3.1%.


Source: AcuComm database, February 2019

Over the 2014-18 period, three countries account for the highest level of failure rates. Among the major investment markets, Canada is the highest, with 18 failures out of 206, equal to 8.7%. Next is the USA with 69 out of 955, or 7.2%, and the UK with 34 from 516, or 6.6%. Failure rates in leading continental European markets appear to be far lower, as indeed they are also in Asian markets such as China or Japan.


Source: AcuComm database, February 2019

There are numerous factors in play here. On the face of it, it’s counterintuitive to expect Canada to be an inherently riskier market than France or China.

Richer, more developed markets have the money to invest in new technologies and are often home to those companies proposing more advanced technological solutions. Conversely, these markets often have the greatest pitfalls in the form of planning or environmental regulatory hurdles.

The greater the level of private sector involvement in the provision of waste management services, the ‘riskier’ projects will be put forward. Companies in these areas are, initially at least, more open to divulging and discussing their proposed activities, not least because they have a greater need to attract and retain backing from investors.

This is doubly true in markets where there is significant private involvement in the provision and management or waste services (as opposed to construction or equipment supply & maintenance). In this case, there is often far more openness about future planning. Where services are predominantly state-run, there is often less access to information about ongoing projects and, quite possibly, a greater degree of conservatism when deciding which solutions and technologies to opt for.

In summary, some markets are more likely to be profitable locations for more advanced technologies, and these can be expected to experience the highest failure rates. At the same time, some markets are more open to provision of data by suppliers and management corporations. Finally, the heartening news is that the great bulk of waste sector investments do eventually become operational. The AcuComm database is a great way to gauge the environment for a wide range of investments across the sector.

Written by Andy Crofts, Chief Data Analyst.

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