Industrial decarbonization drove Ara Partners’ USD 500m equity investment in Sedron Technologies last month, said Cory Steffek, partner.

Ara, whose sole focus is investing in decarbonization, is deploying capital from its USD 3bn Fund III, raised in 2023.

Sedron transforms waste streams into reusable water and fertilizer products across two verticals: municipal wastewater treatment and dairy farm waste treatment.

In dairy operations, Sedron treats cow manure to produce fresh drinking water, dry fertilizer, and liquid ammonium nitrate, replacing the practice of farms collecting manure in ponds before spreading it on fields. That approach is problematic because of nitrogen runoff and methane as a byproduct, Steffek said. “We are changing how dairy farms are operated,” he said. By eliminating the problem of waste disposal, farms are better able to secure permits for expansion.

Ara identified Sedron as an emerging player while researching the sector and reached out to initiate discussions about two years ago. “New evolving infrastructure takes a long time. We wanted to make sure the platform was derisked enough for a very large investment,” Steffek said.

Sedron’s Indiana plant is fully operational, processing manure from 20,000 cows. It has 100% offtake agreements for organic ammonium nitrate fertilizer, he said. Steffek declined to disclose revenue.

A second facility with capacity for 10,000 cows in Wisconsin is also being commissioned and will be operational this year, he added. It also has 100% offtake agreements.

The second leg of Sedron’s business is municipal solid waste, which is spread on dedicated fields. The presence of PFAS “forever chemicals”, which can leach into the soil, has prompted a number of states, including Maine, to outlaw this practice, he said. As a result, municipalities often put the waste in landfills or ship it to other states, which has costly disposal or “tip fees,” he said.

“Sedron can process the material cost-effectively,” he said. Systems can be built regionally or on-site.

The company’s first municipal biosolids plant will be built in Indiantown, Florida, and is about to break ground in partnership with Synagro, Steffek said. The facility will process 200,000 wet tons per year, converting wastewater biosolids into purified water and a concentrated fuel used to produce carbon-negative electricity.

“We want to build out infrastructure as quickly as possible for both verticals using the USD 500m,” he said. The eventual goal is to take the company public or sell it to a private equity firm or strategic, he said, though Steffek declined to give a timeline.

Sedron has developed a system that processes and separates liquid waste streams into valuable products using 10 times less energy than conventional alternatives. Its patented Varcor technology is designed to recover water and nutrients while reducing the volume of material requiring disposal.

Intermediate capital source between VC and infrastructure

Ara positions itself as a bridge between venture capital and infrastructure investors, Steffek said.

Traditional infrastructure investors typically target derisked platforms focused on roads, bridges, cell towers, solar, offshore, and wind.

“You need a bridge between venture capital and infra. Ara serves as that bridge,” he said.

The firm invests thematically and the shortage of organic fertilizer, specifically liquid nitrogen, is one of the themes it has been exploring for some time, he said.

Sedron operates what Ara described in the deal announcement as the world’s largest organic nitrogen factory in Indiana.

“We are sitting on a lot of dry powder at a time when fundraising is difficult,” he said. Ara typically makes 12 to 15 platform investments per fund. The Houston-based firm also has offices in Boston, Washington DC and Dublin, Ireland.

“Infrastructure built 10, 20, or 50 years ago didn’t have sustainability as a focus,” Steffek said. About half of Ara’s deals focus on constructing new infrastructure. “Sedron is a great example.”