What this document is
The commercial structure of one Circular Supply Agreement sized against the HERC stream, with the two payment flows set out separately and the condition precedent stated up front.
- Phase Initial takes 400 TPD — 146,000 tons a year, 40% of the HERC stream — and reaches commercial operation 24 months after engagement authorisation.
- One CSA, no elections: the County pays a Beneficiation Fee and receives a Circular Royalty™, as two independent gross transactions that are never netted.
- The agreement carries a condition precedent requiring an operating facility that meets our stated claims and standards. The County is not held to performance until it is satisfied.
Hennepin County
Circular Supply Proposal — Hennepin County
One Circular Supply Agreement — 30-year minimum, zero County capital, and a condition precedent that puts the proof obligation on us.
What this proposal is, in five points
- One agreement. A Circular Supply Agreement (CSA) between Hennepin County and Carbotura, 30-year minimum term, continuing perpetually unless a 24-month Non-Renewal Notice is served. There are no elections and no alternative structures to choose between.
- A condition precedent on an operating facility. The CSA requires an operating facility meeting our stated claims and standards. Until that is satisfied, the County is not held to performance. We have no plant in commercial operation today and have not asked anyone to proceed as though we do.
- Two payment flows, never netted. The County pays a Beneficiation Fee on delivered tonnage; Carbotura pays a Circular Royalty™ on the same tonnage. Independent transactions, reported separately and in full.
- Zero County capital. Carbotura finances, owns and operates at every phase, and carries all permitting and classification work at its own cost.
- Neither combustion nor disposal. This is a manufacturing operation. No stack, no ash, no landfill.
The gap this addresses
Hennepin County’s published goal is to divert more than 90% of its material from landfills and incinerators. Minnesota statute separately requires metro counties to reach a 75% recycling rate by 2030.
Against those: the County generated about 1.3 million tons in 2024, recycled 43%, and land disposed 51% — 12% of it out of state. HERC processes 365,000 tons a year, and its non-hazardous ash is landfilled at Rosemount.
Retiring HERC addresses the incinerator half of the goal. In the absence of a third destination, it moves that 365,000 tons into the landfill half. We are not arguing that the region is short of landfill capacity — the published analysis is that it is not, for decades. We are arguing that burying the stream is contrary to the County’s own stated objective, and that a manufacturing destination is the only route on the table that is neither burning nor burying.
Siting — not yet identified, and we will not pretend otherwise
No candidate site has been identified or assessed. Siting is a Joint Working Group item and would follow authorisation, not precede it.
What the requirement looks like: Phase Initial at 400 TPD needs a single industrial-zoned site of approximately 5–8 acres. Phase Medium at 1,000 TPD — the HERC stream whole — needs roughly 12–20 acres and a building footprint on the order of 150,000–250,000 sq ft, within a single building; our per-building ceiling is 2,000 TPD. Proximity to the point where the stream already aggregates is the dominant siting criterion.
The commercial structure
One structure. The County executes a Circular Supply Agreement and delivers its stream. Ownership of and liability for the material transfer to Carbotura on delivery. Carbotura does not purchase the material; the CSA transfers it, and Carbotura pays a royalty on what is delivered and processed.
| Element | Term |
|---|---|
| Agreement | Circular Supply Agreement (CSA), 30-year minimum |
| Continuation | Perpetual unless a 24-month Non-Renewal Notice is served |
| Condition precedent | An operating facility meeting Carbotura’s stated claims and standards. The County is not held to performance until satisfied. |
| Beneficiation Fee | $100–150/ton range; modelled at the $100/ton floor, escalating 2.5%/yr |
| Circular Royalty™ | 120% of the current-year Beneficiation Fee in Year 1, +1 percentage point per year, uncapped |
| Royalty commencement | 13 months after Carbotura’s receipt of the first Beneficiation Fee payment |
| County capital | None, at any phase |
| Regulatory work | Carbotura’s, at its own cost and risk. No commercial term is contingent on the outcome |
| Credit floor | BBB– / Baa3 |
The Beneficiation Fee and the Circular Royalty™ are independent transactions, reported separately and in full, and never netted. No table in this package carries a combined or net column.
Deployment phases
Deployment is modular, in 100 TPD units. Phase Initial is the Standard Deployment at 400 TPD, taking 40% of the HERC stream and leaving the existing arrangements to carry the balance during ramp. Phase Medium takes the stream whole.
| Phase | TPD | Annual TPY | Share of county generation | Beneficiation Fee · Year 1 | Circular Royalty™ · Year 1 |
|---|---|---|---|---|---|
| Phase Initial | 400 | 146,000 | 11% | $14.60M | $17.52M |
| Phase Medium | 1,000 | 365,000 | 28% | $36.50M | $43.80M |
| Phase Expanded | 2,000 | 730,000 | 56% | $73.00M | $87.60M |
Phase Expanded sits at the 2,000 TPD per-building ceiling and reaches beyond the HERC stream into the currently landfilled fraction. Shown for completeness. Figures ILLUSTRATIVE.
Timeline
| Milestone | Indicative timing | Notes |
|---|---|---|
| LOI / MOU EXECUTION | Earliest available | Required to open all subsequent steps |
| Joint Working Group phase | ~9–12 months | Stream characterisation; siting; commercial terms scoped |
| Term Sheet phase | Following | Beneficiation Fee confirmed; royalty formula locked |
| CSA negotiation and execution | Following | Subject to the operating-facility condition precedent |
| Construction — Phase Initial | Following permit issuance | Carbotura capital |
| Phase Initial COD | 12–24 months from permit issuance | First feedstock delivered; Beneficiation Fee begins |
| First Circular Royalty™ payment | 13 months after the first Beneficiation Fee payment |
No dates are offered against the HERC closure timeline because that timeline is contested — placed by different County and City actors anywhere between December 2027 and 2040. The relevant point is relative, not absolute: a manufacturing destination takes 12 to 24 months from permit issuance, and a landfill contract does not.
Regulatory path — ours to carry
Permitting and classification are Carbotura’s work, at our cost and our risk. In Minnesota that means a processing authorisation from the MPCA under the solid waste rules, together with a beneficial use determination for the material under Minn. R. 7035.2860 — the existing pathway for establishing that a material classified as solid waste has a beneficial use.
We are straightforward in those filings: material arrives as solid waste under current classification, is processed, and nothing leaves as residual waste, ash or sludge for disposal. We do not claim to receive no waste.
There is nothing in that process for the County to file, fund, defend or co-apply on, and no commercial term is contingent on its outcome. Manufacturing classification under NAICS 31–33 is what we assert and pursue; we hold no classification instrument today and nothing here depends on obtaining one.
What we are asking the County to do
One thing: authorise an LOI/MOU and open a Joint Working Group.
That is not a commitment to deploy, a procurement award, or an exclusivity grant. It opens a working phase in which the stream is characterised, a site is identified, and commercial terms are scoped — so that when the County decides where the HERC stream goes, this option is specified rather than hypothetical.
The sequence from there is LOI/MOU execution → Term Sheet phase → CSA, with the operating-facility condition precedent sitting across it. Nothing binds either party before CSA execution.
Appendix A — Basis of presentation
All financial figures USD, ILLUSTRATIVE until Term Sheet execution. Tonnage, recycling rate and disposal split are VERIFIED from Hennepin County 2024 reporting. HERC gate rates ($77 current, $85 for 2026, $88 for 2027) are VERIFIED from the City of Minneapolis disposal services contract. The Beneficiation Fee is modelled at $100/ton, a programme specification at the floor of the $100–150/ton range, not a quoted price. The Circular Royalty™ is computed as Mₙ × BFₙ, where Mₙ = 120% + (n−1) percentage points and BFₙ = $100 × 1.025^(n−1). Accounting standard: US GAAP / GASB.
ESTIMATED: composition split, employment figures, site requirements. NOT ESTABLISHED and not asserted: any post-closure landfill-plus-haul per-ton cost. NOT IDENTIFIED: any candidate site.
Carbotura has no facility at or past Commercial Operation Date anywhere. The first-of-a-kind plant is in York County, Pennsylvania, in permitting and civil engineering, targeted for commercial operation late 2027 to early 2028.
Appendix B — Definitions
- Advanced Circular Manufacturing (ACM)
- Industrial manufacturing that uses post-use material streams as feedstock, converting them into specification-grade manufactured commodities. A manufacturing operation, not a waste-management operation, and not combustion in any form.
- Circular Supply Agreement (CSA)
- The agreement under which ownership of and liability for the material transfer to Carbotura on delivery. The CSA transfers material; it is not a purchase.
- Beneficiation Fee
- The per-ton fee the Feedstock Provider pays for Total Material Conversion. Quoted range $100–150/ton; escalates 2.5% a year.
- Circular Royalty™
- The per-ton royalty Carbotura pays the Feedstock Provider on delivered tonnage, beginning 13 months after Carbotura’s receipt of the first Beneficiation Fee payment. Year 1 is 120% of that year’s Beneficiation Fee, rising one percentage point a year, uncapped.
- Condition precedent
- An operating facility meeting Carbotura’s stated claims and standards. Until satisfied, the Feedstock Provider is not held to performance under the agreement.
- FWDC
- Fully-loaded cost of disposal — the counterparty’s own all-in cost of its current system.