Two 1-megawatt generators were opened at the Whitford sanitary landfill in Auckland yesterday.
The company has similar facilities at Redvale on the North Shore.
A side-effect of the technology is that it reduces emissions of methane, a potent greenhouse gas, from the decomposing rubbish into the atmosphere.
The company expects to earn credits from those emission reductions, similar to the credits arising from forests, which can be sold to someone needing to cover emissions of greenhouse gases.
In this case, the Herald understands the other party is Canadian energy group TransAlta, but Waste Management would not confirm this.
The deal is what is known in derivatives markets as a zero-cost collar.
Waste Management has sold a call option and bought a put option.
It has a right to sell the credits at a given minimum price, and an obligation to sell at a maximum price if TransAlta exercises its call option.
The deal sets a floor and a ceiling price for the carbon credits from Waste Management's point of view.
Its managing director, Kim Ellis, would not disclose the prices but said they were "at the low end of the spectrum" because the counter-party was, after all, taking a gamble that the protocol would be ratified and there would be something to sell.
The value of the transaction was not large in dollar terms, he said, but it was a useful and fascinating learning exercise.
The agreement covers only the credits arising from 1MW of generation, from last year until 2012.
Eventually the company expects to increase its generating capacity from 4MW now to 20MW.
The transaction was brokered by New York firm Natsource and its Sydney affiliate, Tullett and Tokyo Liberty.
Waste Management said it was negotiating a second deal with another party.
nzherald.co.nz/climate
Intergovernmental Panel on Climate Change (IPCC)
United Nations Environment Program
World Meteorological Organisation
Framework Convention on Climate Change
Executive summary: Climate change impacts on NZ
IPCC Summary: Climate Change 2001
