Phase 3 · Step 2 — Risk Note

Brief risk note for the USD 40M raise. Revised 2026-05-16.

1. CBG offtake price risk

The CBG offtake price is the single most universal driver of project returns across the platform. At USD 15 per MMBTU the price sits at the prevailing CBG market benchmark, denominated in US dollars. Sensitivity testing at USD 9 / 11 / 13 / 15 per MMBTU shows the portfolio Project IRR moves from 10.2 to 26.2 percent across that band; portfolio minimum DSCR remains above the 1.30 covenant floor at every price (1.49 to 3.60 times). Carbon credit revenue is sized at 10 percent of CBG sales (kept as a separate revenue line for transparency), so both lines move together with the gas price.

The mitigation runs through two layers. First, the counterparty stack: PGN is a publicly listed state-owned gas utility carrying Indonesia's sovereign-grade credit; Pertamina is the integrated state oil and gas major operating both pipeline and off-grid truck-mounted CBG distribution. Beyond the state-owned channels, alternative qualified industrial gas buyers and CBG distributors provide further offtake flexibility at prevailing market pricing. Indonesia's gas-import-substitution policy supports structural demand: domestic gas demand outpaces conventional production, and CBG counts as domestic supply under the country's energy-security agenda. Second, the deal structure: a contractual price floor at USD 11 per MMBTU in the PGN or Pertamina offtake agreement keeps every SPV's DSCR above the covenant floor and portfolio Project IRR at or above the 15 percent target. Negotiating a contractual floor remains a meaningful structural item pre-close.

2. Construction execution risk

Construction runs across a staggered build window — one approvals year followed by two construction years at each of the three plants, six months apart. The design draws directly on the Penang Bio-Methane plant in Malaysia, which has been operating for years on the same Covered Lagoon Anaerobic Digestion configuration. The technology is mature; the construction sequence is not first-of-kind.

The EPCC contracting structure splits scope to keep specialist expertise concentrated where it matters most. Samaiden, Citaglobal, or an agreed EPCC contractor with capabilities and funding interest handles overall scope at each plant — civils, mechanical, electrical, balance of plant. Orec delivers the anaerobic-digestion-specific scope as either an engineering package within the overall delivery or as a dedicated AD-only EPCC sub-package. The split avoids concentration risk on any single contractor while preserving AD-specific technical depth.

The staggered award timing produces a natural cross-cover. PD Pasarjaya commissions in October 2029, generating CBG offtake revenue and distributable cash while Bandung and Lamsel are still in their construction year two. That early operating cashflow can be applied against the later SPVs' equity calls, reducing the Limited Partner's net cash exposure through the back half of the deployment.

3. Feedstock supply risk

Each plant has a named, locatable feedstock source with a defined commercial arrangement. All three SPVs now include animal co-digestion alongside MSW — 75 tpd at Pasarjaya and Bandung, 100 tpd at Lamsel.

Pasarjaya draws MSW from Jakarta's traditional markets aggregated under PD Pasarjaya — the regional state-owned market authority that runs 153 markets across the city. The Top-48 markets are routed to the project, with PD Pasarjaya bearing feeder-truck logistics from market to transfer station. The Memorandum of Understanding with PD Pasarjaya was signed in October 2025 and has been extended to October 2026 to align with the project award. Animal feedstock supply (75 tpd) comes from peri-urban West Java — poultry and slaughterhouse operations within trucking range of the Mega AD plant (Bekasi, Karawang, Subang).

Bandung's MSW arrives from Kota Bandung's existing municipal collection routed to the Sarimukti site on Perhutani forestry land, with access via an IPPKH forestry-use license under the Omnibus Law and OSS one-stop permitting framework. Animal feedstock supply contracts (75 tpd) cover the West Java livestock catchment — Bandung Regency, Garut, Subang, and Cianjur. The Bandung MoU is signed and the Feasibility Study has been presented, with award steps proceeding.

Lamsel's MSW arrives aggregated at TPA Lubuk Kamal, an active municipal landfill in Kecamatan Natar. Animal feedstock supply contracts (100 tpd, the largest animal stream in the portfolio) cover the Lampung Selatan dairy and poultry catchment near Kec. Natar — the regency's established livestock supply chain supports the larger animal feedstock target. The regency government provides road infrastructure as in-kind support. The Lamsel MoU is ready, with the investment partner and awarding entity in final confirmation.

4. Single-counterparty concentration risk

Two specific arrangements concentrate risk on individual local-government counterparties.

The Bandung tipping-fee share — 20 percent of the Kota Bandung municipal disposal rate (USD 5 per tonne to the SPV; 80 percent retained by Kota Bandung to fund the in-kind MRF and program oversight) — is a negotiated split that aligns city and project economics. Removing it moves Bandung Project IRR by 5.8 percentage points (from 25.1 to 19.4 percent) and Equity IRR by 13.6 percentage points (from 52.7 to 39.1 percent). Bandung remains above the 15 percent Project IRR target and well above the DSCR floor even without the tipping fee, so the arrangement is not bankability-load-bearing — but it warrants explicit contract reference in the data room.

The Pasarjaya in-kind feedstock-logistics arrangement provides operational uplift but is no longer the binding constraint on Pasarjaya bankability under the v02 final structure. PD Pasarjaya bears feeder-truck logistics from the 153 markets to the two transfer stations; the project pays only for bulk-haul from transfer stations to the Mega AD plant plus plant-gate processing. Under the base case (Pasarjaya feedstock handling at USD 2 per tonne effective rate), Pasarjaya minimum DSCR is 4.74 times. At a fully commercial USD 5 per tonne rate, Pasarjaya minimum DSCR holds at 4.30 times — still well above the covenant floor. The arrangement sits in the active MoU 454 with PD Pasarjaya and remains a meaningful operational commitment, but the animal co-digestion addition (75 tpd) provides structural cushion that absorbs the feedstock-handling sensitivity.

5. VAT working-capital and PMK 115/2021 upside

Indonesian VAT (PPN) at 11 percent applies to equipment CAPEX and is modeled as a working-capital line in the base case — input VAT paid during construction is recovered from the Indonesian DJP with a ~12-month refund lag. This lifts the equity contribution at the portfolio level from USD 12.0 million to USD 13.2 million and raises peak equity outstanding by approximately USD 1.2 million. The drag releases in Year 4 (first operating year) as the final VAT refund clears and flows back through dividend distributions.

PMK 115/2021 grants a Strategic Goods VAT exemption for qualifying renewable-energy equipment. If confirmed by Indonesian tax counsel pre-close, the exemption removes the input VAT entirely — adding approximately 1 percentage point to portfolio Equity IRR and reducing peak equity outstanding by USD 1.2 million across the portfolio. This is the highest-value pre-close optimisation item and warrants early tax-counsel engagement.