While these types of businesses do provide essential services, given the front-and-centre focus on decarbonisation and the transition towards a circular economy, do they come with the high barriers to entry, predictable cashflows and adequate capital protection characteristics that define infrastructure-like assets?

The more traditional fully-integrated waste management service providers of collections, transfer station, materials recovery, waste treatment and landfill-type businesses have historically come with:

High barriers to entry through their local government term-based contracts, commercial collections geographic customer grids along with their transfer station, materials recovery and landfill locations and the associated EPA licencing and approvals

Predictable cashflows given their long tenure, stable business model and established metrics in the market

Capital protection through their environmental compliance, replacement investment in fleet, plant and equipment, site and landfill along with known operating costs for these types of assets and operations

Businesses that pioneered the circular economy path, like organics recyclers, have established sustainable resource recovery models around green waste, biosolids, bark and timber streams with:

Strong barriers to entry through EPA licenced and approved composting sites as well as geographic logistics models and value chain positioning

Predictable cashflows through their long tenure, stable business models and established metrics in the market

Capital protection through their environmental compliance, site ownership, replacement investment in plant and equipment, front and back-end reoccurring revenue streams as well as known operating costs for these types of assets and operations

Decarbonisation and circular economy transition, for either business model, brings in a high level of uncertainty around:

Regulation and approvals

New treatment, resource recovery and energy recovery technologies

Waste stream availability and quality

Operating costs

The impacts of the associated high-paced and unchartered growth

People, capability and culture requirements

Landfill diversion/resource recovery rates

Front and backend customer revenue models

Risk allocation

For the more traditional fully-integrated waste management service providers, the future viability of landfill also comes into question.

So are they infra-like or not, given the early-stage decarbonisation and circular economy market lifecycle positioning, or might these types of assets be better suited to private equity or industry player buyers?