NetworkNewsWire Editorial Coverage: The market for renewable energy enjoys considerable tailwinds due to growing concerns about climate change, energy security and global initiatives to reign in carbon emissions. The tailwinds turned into a tempest late in 2022 when the Inflation Reduction Act (“IRA”) was signed into law. The IRA is the largest investment ever by the U.S. government in renewable energies, earmarking $369 billion to accelerate efforts to reduce dependence on fossil fuels. According to some experts, the IRA is expected to more than triple America’s clean-energy production by 2030, resulting in about 40% of the nation’s energy coming from sources such as wind, solar and renewable natural gas (“RNG”). For this to happen, about 550 gigawatts of new energy supply from green sources will come online over the next seven years. Against the backdrop of this generational opportunity, EverGen Infrastructure Corp. (TSX.V: EVGN) (OTCQX: EVGIF) (Profile), a specialist in RNG, has positioned itself as an emerging leader in the booming renewables sector. Others in the space that are recognized as leaders include oil juggernaut BP plc (NYSE: BP), utility Fortis Inc. (NYSE: FTS), cleantech 374Water Inc. (NASDAQ: SCWO) and Anaergia Inc. (TSX: ANRG).
- To achieve net-zero carbon emissions by 2050, it is estimated that $100 trillion in capital investment is necessary, creating unprecedented upside for innovators.
- EverGen Infrastructure, which owns and operates the first grid-connected renewable natural gas facility in North America that has been producing RNG for more than a decade, has a growing portfolio of projects.
- Expansion at EVGN’s three flagship facilities will result in the generation of ~480,000 gigajoules of energy annually.
- The company expects to significantly grow its Adjusted EBITDA to $13M from its core portfolio versus ~$3M in existing adjusted EBITDA, placing it at an attractive EV/EBITDA ratio compared to peers.
The Global Green-Energy Transformation
According to a BNY Melon study, it will take investments of approximately $100 trillion to reduce the current 30 billion tons of carbon emissions to reach net zero by 2050, a figure that closely mirrors estimates from the International Energy Agency (“IEA”). While that figure may seem astronomical, it actually is not out of line with global fixed capital investments every year, which currently run around $20 trillion. More than $1 trillion annually is already being invested in clean energy pre-IRA, a figure the IEA says needs to rise to $4 trillion.
Former Bank of England Governor Mark Carney calls this the “greatest commercial opportunity of our age.” It is anticipated that additional capital will pour into the space, lending to pricing certainty for projects as well as supporting merger and acquisition activity across the RNG sector. In 2022, jockeying for green-energy market share was on full display in several high-profile acquisitions, including BlackRock buying Vanguard Renewables for $700 million, BP acquiring Archaea Energy for $4.1 billion and Shell paying $2 billion for Nature Energy Biogas.
RNG is a renewable clean energy derived from decomposing organic matter, such as wastewater, food waste, agriculture waste, etc. It is pipeline-quality refined biogas that is indistinguishable from and completely interchangeable with conventional natural gas extracted from the earth.
At the epicenter of the green-energy transformation, EverGen Infrastructure Corp. (TSX.V: EVGN) (OTCQX: EVGIF) is an emerging leader in the renewable energy space, owning and operating a portfolio of biogas and RNG projects across Canada. Joining the growing chorus of RNG projects planned or under construction in North America, EverGen’s subsidiary, Fraser Valley Biogas, was the first facility to produce renewable natural gas in Canada, running since 2011. EverGen’s initial operations consisted of its Fraser Valley Biogas, Net Zero Waste Abbotsford and Sea to Sky Soils businesses, all operating in British Colombia. In 2022, EverGen began to expand across Canada and acquired a majority position in GrowTEC in Alberta and a 50% stake in a large joint venture in Ontario comprised of three high-quality, on-farm RNG projects.
EverGen is Canada’s leading RNG platform capitalizing on strong decarbonization initiatives, while providing a solution to one of the main greenhouse gas (“GHG”) emitting sources for municipalities: organic waste. To capture these emissions and produce RNG from organic waste, there is a significant need for additional RNG projects and room for growth in the industry, with only about 27% of organic waste in Canada currently being diverted from landfill. Corporations, governments and utilities are supporting EverGen’s growth through attractive, low-risk, long-term, off-take agreements to purchase RNG and achieve greenhouse gas emission reduction goals.
At EverGen facilities, organic waste goes into an aerobic digester where it exits as digestate — where organic nutrients are recovered and recycled as fertilizer and soil amendments — and biogas, which is further refined into RNG and sold to utility partners. The company faces an abundance of feedstock supply considering that more than 144 million metric tons of food waste are produced annually and there are more than 19,000 large farms and dairies in North America.
EverGen’s flagship assets are in British Columbia. Fraser Valley Biogas (“FVB”) uses blended feedstock from agricultural and commercial organic waste, and the operation has a current capacity of 50,000 tonnes annually generating about 80,000 gigajoules of energy. Expansion is underway to increase capacity to 100,000 tonnes per year for 160,000 gigajoules output.
Net Zero Waste Abbotsford (“NZWA”) is an operational organics-processing facility utilizing agricultural, municipal and commercial organic waste. The plant has capacity of 40,000 tonnes per year, which is being expanded to 135,000 tonnes. At capacity, following the construction of an anerobic digestor, the plant will produce RNG equal to 180,000 gigajoules of energy. (Note: To lend some reference, consider one gigajoule is equivalent to about 277 kilowatt-hours of electricity. As a fuel, RNG is equivalent to 26 liters of gasoline.) FortisBC has a 20-year offtake agreement for the RNG produced at NZWA.
Also in British Columbia is EverGen’s Sea to Sky Soils, an organics-processing facility that produces up to 40,000 tonnes of municipal and agricultural waste annually, with expansion plans to increase to 60,000 tonnes.
Last year was a watershed year for EverGen as it expanded to cement its position as a market leader. The company acquired a 67% stake in GrowTEC, a multifaceted bioenergy venture of sustainable agriculture near Lethbridge, Alberta. The facility is a biogas operation with an anaerobic digester; additions are being made to upgrade the system to process the biogas into RNG. An agreement is already in place for FortisBC to buy the RNG, where it will be tied into the local natural gas pipeline.
In aggregate, these facilities will generate approximately 480,000 gigajoules of energy annually when expansion is complete. That’s about 133 million kilowatt-hours of electricity and compelling upside with the current spot price for RNG above $60 per gigajoule. According to the Energy Information Agency, the average annual electricity consumption for a U.S. residential utility customer was 10,632 kilowatt-hours, meaning the RNG from EverGen’s three plants could power an estimated 12,509 homes with clean energy.
Project Radius in Ontario is a model for growth at EverGen. The cluster of projects is a late-development-stage portfolio of three high-quality, agricultural RNG projects serving as the cornerstone of EverGen’s RNG presence in Ontario. Collectively, these projects are expected to produce about 1.7 million gigajoules of RNG per year. EverGen is expected to announce a final investment decision and notice-to-proceed early this year with construction targeted across 2023 and 2024. EverGen is a 50-50 partner on Project Radius with Northeast Renewables LP.
EverGen forecasts RNG production from portfolio projects collectively at more than 2 million gigajoules per year, with the potential to grow to 8 million gigajoules with consideration for the 25-plus projects it is evaluating in its pipeline. Some of those projects are abandoned plans in the fragmented industry that EverGen can scoop up at attractive prices and integrate into its ecosystem. The company has access to capital and the technical expertise to optimize projects at any stage or condition.
EBITDA on the Rise
In its latest quarterly report, covering the quarter and nine months ended Sept. 30, 2022, EverGen showed adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.7 million year to date. Management has guided EBITDA of ~$2 million for 2022, which it expects to grow to $13 million from its fully funded three core expansion projects.
A look at the EverGen corporate presentation is enlightening to the importance of its EBITDA estimate. The company’s RNG peers are trading at 13-times multiple of enterprise value to EBITDA. EverGen is trading at a substantial discount to peers at only three times 2023 analyst forecasts, despite its strong and funded growth profile.
Utility Partners Onboard
The $369 billion commitment by the U.S. government is catalyzing investments throughout the energy market, including gas utilities hustling to catch up with electric utilities. In North America, renewables currently comprise less than 1% of the gas market, a figure that is expected to change dramatically soon. This change is evidenced through legislation such as Oregon’s SB98 setting a volumetric goal of 30% RNG by 2030. Utilities are on board, including EverGen partner FortisBC, which is aiming for 15% of its volume to come from RNG by 2030.
FortisBC is not alone with its climate-friendly ambitions. Energir in Quebec has a similar sustainability goal, and American counterparts such as NW Natural and Vermont Gas are spearheading an energy transition in the United States. As governments and corporations strive for decarbonization targets, the shift to RNG is logical and cost effective, putting EverGen in a position to thrive.
Incredible Headroom for Growth
According to Rested Energy, the oil exploration and production industry generated $2.47 trillion in revenues worldwide in 2019. Fossil fuels (crude, coal, and natural gas) comprise the lion’s share of the industry, evidenced by renewable energy sources only accounting for approximately 12.4% of total U.S. energy consumption in 2021.
BP plc (NYSE: BP), one of the biggest oil companies in the world, is a pioneer in low-carbon energy. The company has a broad spectrum of initiatives centered on decarbonization, including bioenergy, EV charging, renewables, and hydrogen and carbon capture and storage. Its renewables pipeline has more than quadrupled in three years. In addition, the company added 5,000 EV charging points in 12 months, decreased its oil and gas production emissions by 16% while shrinking its overall operational emissions by 35%, growing its offshore wind energy from zero to 5.2 gigawatts, and kickstarting 10 different hydrogen projects, among other things.
Fortis Inc. (NYSE: FTS) is a pioneer in the RNG business, working with local farms, landfills, green-energy companies and municipalities for more than a decade to capture methane from waste and purify it to make RNG. In 2019, Fortis announced its first-ever emissions reduction goal, its “30BY30” target. This is an ambitious target to reduce Fortis customers’ GHG emissions by 30% overall by 2030. The company’s Clean Growth Pathway to 2050 sets out four key areas to help achieve substantial GHG emissions reductions, including supporting the growth of renewable gas.
374Water Inc. (NASDAQ: SCWO) is a global clean-tech, social-impact company whose mission is to preserve a clean and healthy environment. The company is pioneering a new era of sustainable waste management that supports a circular economy and enables organizations to achieve their environmental, social, and governance (“ESG”) and sustainability goals. 374Water was selected by the U.S. Navy to utilize 374Water’s AirSCWO(TM) technology to validate its efficacy in the destruction of “forever chemicals” for potential remediation efforts at military bases worldwide.
Anaergia Inc. (TSX: ANRG) was created to eliminate a major source of greenhouse gases by cost effectively turning organic waste into RNG, fertilizer and water, using proprietary technologies. With a proven track record from delivering world-leading projects on four continents, Anaergia is uniquely positioned to provide end-to-end solutions for extracting organics from waste, implementing high efficiency anaerobic digestion, upgrading biogas, producing fertilizer and cleaning water. Anaergia has built many successful plants, including some of the largest in the world.
A carbon time bomb is ticking, and the world can’t wait. A titanic energy shift has begun, and it’s time to recognize the opportunities at hand and the companies that are stewards of this change.
For more information about EverGen Infrastructure Corp., please visit EverGen Infrastructure Corp.
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