There is a lot of money to be made in the organic fertilizer market. Current projections by Markets and Markets forecast it to reach $11.16 billion (USD) by 2022. Another report published by research firm Technavio project a compound annual growth rate (CAGR) of more than 14% from now until 2023:
“A key factor driving the growth of the market is the increasing demand for food due to population growth. The rapid population growth worldwide is a significant factor that drives the global organic fertilizers market."
An emerging stock in this sector is already proving its value, collecting from a wide swath of revenue streams, but is still in the investment “sweet spot” before fully generating the bulk of its income.
From its coming commercial scale operation in Strathmore, Alberta, EarthRenew Inc. (CSE: ERTH) is a low-cost power generation agriculture Company with a unique offering - converting livestock waste into nutrient-rich, slow-release pelleted certified organic fertilizer.
Located on a 25,000 head cattle feedlot, the Strathmore Plant is capable of producing up to four megawatts (MW) per hour of low-cost electricity powered by a natural gas fired industrial size Rolls Royce turbine. The exhausted heat from the turbine is used to convert the manure into certified organic fertilizer.
This patented production process is key for the Company to capitalize on various revenue drivers. These include: selling surplus electricity to the province’s electrical grid and to cryptocurrency miners which can be co-located on site, and to convert manure feedstock into produce high value certified organic fertilizer. Once the engineering upgrades are complete, the Company plans to use about 1.5 MWh of the 4 MWh generated by the Strathmore Plant to produce pelleted organic fertilizers made from cattle manure waste.
The Company is also expanding its business, bringing project partners on board as its multiple revenue streams start coming online by January 2020. With proof of concept already established, the next stages involve taking this highly scalable model with straightforward replicability and establish similar operations over multiple locations across North America and Europe.
Organic fertilizer: a highly sought after product:
On the buying side of this product, farmers are looking for just this type of fertilizer as a solution to a major global problem, especially those in the organic growing space.
Manure generators in the livestock industry are also facing serious challenges. Dutch farmers are culling hundreds of thousands of cows to deal with phosphorous contamination. Many other industries also require this organic solution to get these valuable nutrients out of the land and into a crop, garden, or properly managed field.
In October 2019; EarthRenew received key US and Canadian approvals for its organic fertilizer products. These important product certifications mean that in future the Company will be permitted to sell its organic fertilizer products across sizeable markets.
The other side of EarthRenew’s product is the tech story. There are a great number of applications — especially with organic growers in food, cannabis, flower — that would be affected by everything EarthRenew touches. Any high value crop is challenged by a lack of good nutritional tools, especially where solid versus liquid fertilizer is concerned. When the best product is used, fertilizer can build up the soil, as opposed to depleting it of its nutrients, gradually reducing the farm’s productivity.
In an interview with Stockhouse Editorial, Company CEO Keith Driver explained that in this space, this organic product is far superior to the standard composted manure products found at major retailers. The market is full of these composted manures, where nutrients still have the hormones and antibiotics from the cows it came from. To get to organic status, the fertilizer must be thermally treated, which drives off the other components that are not wanted in the soil. This yields a higher quality product with a natural, slower release, as opposed to the common commercial compost, which is only useful for a short time, needing to be replenished annually.
The right product in the right place at the right time in the right format:
In terms of efficient delivery of nutrients, EarthRenew stands apart. Among the fertilizer market, there are two main types: solid (the Company’s product) and liquid. Liquid fertilizer is not seen as ideal from a sustainability standpoint since much of it can be lost in the rain and moves with water once it is sprayed onto crops.
However, when placing a drop of dry fertilizer onto a crop the grower sees the benefit of putting nutrients right where they are needed, not broadcast across the soil, which could lead to diminishing returns.
As CEO Driver puts it, targeting the 20% of the field where growing happens is a much healthier process than a wholesale spray onto everything, including the 80% that doesn't benefit from being fertilized.
This can lead to five times growing efficiency for the crop, since the nutrients are right where they need to be in the soil. It also means farmers don’t have to go back and do another pass of fertilizing to get compost down into the seed layer. If a farmer can get the nutrients into the soil when the seed needs it, they have the magic formula for growing.
Multiple revenue streams:
A serious bonus for the Company’s fertilizer production is its electricity generation . A major driver for the Company, it also serves as a major benefit for shareholders.
Its power plant is currently online and taking advantage of times when the electricity market spikes. Businesses in this space are constantly chasing the next peak, since no one knows what the price of power will be an hour from now, operators constantly find themselves turning on their facilities to try to catch a peak that will come in the next hour.
EarthRenew recently signed an off-take agreement to operate 24 hours a day. Since its power generation never sleeps, it can naturally capture the full peaks of the market. It will get to a more continuous operation, which is good from a revenue perspective, generating shareholder income 24/7. With the onset of Alberta’s winter fast approaching, this couldn’t come at a better time for the Company.
This power is flowing straight to Alberta’s electrical grid and also to cryptocurrency miners. EarthRenew has a power purchase agreement in place with BTF Blockchain Inc. for up to 3 MWh of power at its Strathmore facility. This allows EarthRenew to be profitable every hour as it generates power non-stop and continue to garner the revenue premiums during periods of peak pricing in the deregulated Alberta electricity market. Pricing peaked at $856 per MWh in September 2019.
The power generation arm of the Company will be a large part of the next wave of its upward scalability. The following wave will be when it starts fertilizer production allowing EarthRenew to generate even more meaningful amounts of revenue, leading up to spring 2021.
Facility:
This magic all happens at its facility, which also boasts another key advantage for the Company; the feedstock provider is on-site. Proximity of the facility to the feedlot reduces transportation costs and there are as many caveats to shipping fertilizer as there is to distributing food. Manure is very difficult to transport since it contains so much water.
For livestock producers, the manure produced throughout the year must be stored until either the spring and fall as the manure can only be applied at those two times of year. With EarthRenew operating on site, the host feedlot can manage its fertilizer year-round and the facility has a consistent source of fresh manure as feedstock.
This environmentally-friendly process creates a positive outcome for the farm, while the facility produces excess electricity, which can be used to contribute to the farm’s energy requirements.
Feasibility study assessment:
This assessment was used in the Company’s preliminary engineering to justify and back up the financial basis for its business. This assessment ensured that there were no gaps or assumptions left untested. In the new year, EarthRenew will kick off the final engineering for the selected equipment and advance its operation even further.
Nationwide replicability and distribution:
It’s just the beginning for EarthRenew Inc. In the second part of this series looking at the Company, we will take a deeper look into its commercialization strategy for 2020. This includes its off-take agreement with Sun Country Organic, which provides one avenue for the organic fertilizer produced at the Strathmore Plant to be purchased for wholesale and retail distribution in Canada and the US Midwest.
This is just one of several partnerships that EarthRenew Inc. is engaged in to replicate and scale its unique opportunity, while also delivering a desperately needed environmentally sustainable solution.
earthrenew.ca
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.