- RNG currently comprises only 0.3% of the North American natural gas distribution network, with expectations for 5% penetration in the next 5 years
- EverGen Infrastructure is a first mover in the market, with established projects, RNG sales, and expansion ongoing throughout Canada.
- EverGen recently released Q3 results, a quarter that featured steady revenue, acquisition of majority stake in GrowTEC, fully funded on-time and on-budget construction, and CDN$12.8 million post capex spend
Renewable natural gas (“RNG”) is a niche market that is expected to transition into a mainstream replacement for conventional natural gas in response to demand for sustainable fuels and a minimalized carbon footprint. Converting waste into worth, EverGen Infrastructure (TSX.V: EVGN) (OTCQX: EVGIF) just posted another solid quarter as it emerges as a leader in the Canadian RNG space.
RNG is an infinite drop-in for liquid natural gas (“LNG”) without the need for any drilling. RNG is produced from biogas, which comes from decomposing organic waste collected at landfills, agricultural operations, and wastewater treatment facilities. EverGen’s process involves inputting feedstock, such as livestock waste, into an anaerobic digester. The output is biogas used for heat and electricity, and digestate, which is used for fertilizer, soil amendments, and livestock bedding. The biogas can be further refined into biomethane, which can be used to power vehicles or directly injected into the gas grid.
Currently, RNG makes up only 0.3% of the North American natural gas distribution network. That is expected to climb to 5% in the next five years with exponential upside going forward.
Methane is a potent greenhouse gas released from cow manure and urine, so turning the waste into energy during the management process can have a meaningful impact on climate change. According to Statista, there were 9.45 million milk cows in the U.S. in 2021. In Canada, it is estimated that there are 1.43 million dairy cows for a total of nearly 11 million in North America.
These figures are important considering one cow can produce enough manure in a year that can be converted into RNG (and CNG, or compressed natural gas) to drive a tractor trailer over 12,000 miles. Recycling the manure in North America, rather than washing it into lagoons or some other unfriendly collection/disposal process, provides enough RNG/CNG to power vehicles for 132 billion miles.
With diesel prices over $5.20 per gallon in the U.S., that’s music to trucker’s ears, without consideration for the positive impact on climate change. RNG is carbon negative, meaning that the process of generating RNG offsets more carbon – via carbon capture, sequestration, or avoidance – than is contributed to the environment. By comparison, LNG has a low carbon footprint, while wind and solar are considered carbon neutral.
Headquartered on the West Coast of Canada, EverGen is an established independent renewable energy producer which acquires, develops, builds, owns, and operates a portfolio of RNG, waste to energy, and related infrastructure projects. The company recently released results from the third quarter and the first nine months of 2022, which demonstrate the aggressive growth trajectory as EverGen fans out operations across Canada.
EverGen, which reports in Canadian dollars, posted Q3 revenue of $2.0 million, up from $1.9 million the year prior despite downtime related to floods that ravaged portions of the country. The company reported adjusted EBITDA of $0.7 million and a net loss of $1.8 million, which was influenced by several factors, ranging from flood-related expenses and subsequent insurance proceeds to higher G&A costs as the company made acquisitions and expanded.
During the third quarter, EverGen completed the acquisition of a 67% interest in Alberta’s Grow the Energy Circle Ltd. (GrowTEC), which is currently in the first phase of a core RNG expansion project designed to produce ~80,000 gigajoules (“GJ”)/year of RNG. Construction is 80% complete with commissioning expected prior to the end of the year. The facility will then move into the second phase of the project, which is expected to produce a total of 140,000 GJ/year of RNG.
In September, EverGen’s Frasier Valley Biogas (“FVB”) signed a term sheet for a long-term offtake RNG agreement for up to 190,000 GJ/year purchased from FVB, comprising existing and incremental RNG volumes expected from the facility post-expansion. This agreement will replace the existing RNG offtake agreement in an environment where current market pricing is significantly stronger. During Q3, EverGen broke ground on construction of an expansion project at FVB.
EverGen is fully funded for its expansion projects. The company ended September with cash and cash equivalents of $12.8 million post capex spend of $3.5 million and $1.5 million of insurance proceeds received. Management commented that all projects are on schedule and on budget. The expansion budget, including projects at GrowTEC, FVB and its Net Zero Waste Abbotsford facility, was backstopped in August when EverGen inked a term sheet with its existing lender, Scotiabank subsidiary Roynat Capital, and Export Development Canada for a $31 million syndicated senior term loan.
Against this industry and corporate backdrop, EverGen CEO Chase Edgelow is looking forward to what is to come. “It is an exciting time for EverGen with strong momentum in the RNG market and as one of the first movers in Canada in terms of consolidating assets across the country…We are thrilled with the progress at our core RNG expansion projects that once producing, will see us jump from C$3M to C$13M in run rate EBITDA and are fully funded. With our GrowTEC facility commissioning imminently and construction at Fraser Valley Biogas underway we are anticipating a strong start to 2023,” said Edgelow in a press release.
For more information, visit the company’s website at www.EverGenInfra.com.
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