Compelling project economics and a proven, scalable design make Northstar Clean Technologies (Northstar Clean Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:ROOF) one to watch for investors. That’s the news from Eight Capital analyst Sean Keaney who recently delivered one of its InnoVII Spotlight reports on the Delta, BC-based company. Founded in 2015 and first trading on the Venture Exchange in July of 2021 through a $12.2-million go-public financing, Northstar has a proprietary design process for repurposing used roofing shingles. The company’s Bitumen Extraction and Separation Technology (BEST) takes used shingles, separates them into their components of aggregate, fibre and “green” asphalt, with the products then going into making new shingles and asphalt for roads. Having proven the utility of its proprietary process at its Empower Pilot Facility in Delta over the first quarter 2022, Northstar is aiming on expansion through a Calgary facility which is set to be constructed this year, followed by designs on a Toronto plant and one for the Pacific Northwest. Northstar’s business model hinges on a build, own and operate approach to its modular facilities, where revenue comes from tipping fees from construction companies who bring in used shingles, output sales for the component products of asphalt, fibre and aggregate along with potential carbon credits. Keaney said the total addressable market for asphalt shingles is estimated at US$1.35 billion in Canada and US$7 billion in the United States, with almost six million homes re-roofed in the US every year, currently sending about 12 million tonnes of asphalt shingles to landfills. The environmental benefits of Northstar’s repurposing will likely mean government backing for its business, Keaney said. “Clean technology companies like Northstar can potentially tap into millions of dollars of government support at all levels (federal, provincial, and municipal), including non-repayable grants and low-to-no interest loans. Based on Northstar's emission reduction capabilities, we expect this to be a material option for funding, and the company has line of sight on a broad range of funds to support their growth strategy,” Keaney wrote in his June 2 report. Keaney said Northstar is aiming to add four to six new facilities per year across the continent, while the company could also license out its technology to select markets if demand outpaces the company’s growth. “While having a patent will eventually be important, we place significant value on the proof of concept provided by the Empower Pilot Facility where the company has already achieved steady state production,” Keaney wrote. “By having a proven, economic process for repurposing shingles, Northstar believes they have a meaningful head start over competition from start-ups similar to Northstar, or in-house technology developed by large roofing or construction materials firms.” As for competition in the space, Keaney said there are a number of companies dealing in recycled asphalt shingles (RAS), with the 13 million tpa of asphalt shingles generated yearly in the US currently but only one million tpa of shingles being diverted and ground up to be used as recycled shingles. Keaney said of the several competing companies out there, there’s only one that he is aware of that is developing similar technology to Northstar but they have yet to reach commercialization. “Northstar is confident that they have a considerable head start on any competition and haven't come across any technology with a comparable capital cost, capital efficiency, and commercial product,” Keaney wrote. As for Northstar’s ownership structure, Keaney said the company has significant insider and management ownership with limited institutional presence. “Based on the company's relatively small size from a market capitalization perspective, they have favourable liquidity with nearly $6 million of cash and negligible debt,” Keaney wrote. On the financials, Keaney says Northstar has forecasted about $12 million in construction costs per facility with $4 million in annual EBITDA coming out the other end, which makes for a short payback period and attractive rates of return for each facility, Keaney wrote. Disclosure: Northstar Clean Technologies is an annual sponsor of Cantech Letter.