NetworkNewsWire Editorial Coverage: It may seem hard to believe, but the first solar panels were readily available to homeowners who could afford them in the early 1980’s. Back then, the U.S. government was providing incentives to try and encourage consumer adoption. That focus on sustainability has continued — and grown. Most recently, renewable natural gas (“RNG”), a carbon neutral alternative to traditional natural gas derived from organic waste, has been gaining substantial momentum. The honor for the first RNG facility in North America goes to EverGen Infrastructure Corp. (TSX.V: EVGN) (OTCQX: EVGIF) (Profile), which opened its first facility in British Columbia, Canada, more than a decade ago. Whether investors are interested in solar, RNG, wind, green hydrogen or any other type of renewable energy that can reduce reliance on fossil fuels, now is a time to be excited. In part, that enthusiasm can be directly tied to the recent passage of the Inflation Reduction Act (“IRA”), which earmarked $369 billion for infrastructure and incentives to accelerate the use of renewable energies in a bid to combat climate change. That’s big news for companies such as EverGen, Brookfield Renewable Partners L.P. (NYSE: BEP), Clean Energy Fuels Corp. (NASDAQ: CLNE), Aemetis Inc. (NASDAQ: AMTX), Enphase Energy Inc. (NASDAQ: ENPH), and others emerging as stewards to slashing carbon emissions with innovation.
- If the world is going to reach net zero carbon emissions in the next 27 years, it is going to take about $100 trillion in capital investment.
- EverGen Infrastructure is a pioneer in the renewable gas industry, owning and operating the continent’s first grid-connected RNG facility with a growing portfolio of RNG projects.
- At EVGN’s three flagship facilities in British Columbia, expansion plans will boost production to 480,000 gigajoules of energy per year, with broader potential for the company to reach 8 million gigajoules in coming years.
- EverGen expects 2023 to be financially transformational as it continues on its growth path to adjusted EBITDA rising to $13 million for its core portfolio, which equates to a highly attractive EV/EBITDA ratio compared to industry peers.
The Greatest Commercial Opportunity of Our Age
It took some wrangling to get the IRA through Congress, sealing the deal for President Joseph Biden’s landmark legislation that cemented his legacy as the most proactive president on the matter of climate action. The IRA is the largest investment ever by the U.S. government in renewable energies, designating $369 billion to support renewable energies.
If the world is going to meet its carbon-reduction targets, BNY Melon estimates that about $100 trillion in investments is necessary to eliminate the 30 billion tons of carbon emissions which are currently released to achieve net zero by 2050. On its face, that figure may seem unobtainable, but a closer look shows it is not out of the realm of possibility.
Presently, more than $1 trillion is invested annually in clean energy as part of an estimated $20 trillion in in global fixed capital investments made each year. The International Energy Agency, whose estimates are aligned with BNY Melon, says green energy investments will need to climb to $4 trillion per annum, which is possible now that the massive government incentives are starting to take effect.
Mark Carney, the former Bank of England Governor, shared his opinion on what the push for green energy means on full display, calling it the “greatest commercial opportunity of our age.” Carney, like most other experts, foresees capital pouring into the renewable energy market as the transition away from finite fossil fuels gains steam. The capital flow will lend to pricing certainty for project and likely trigger additional merger and acquisition activity in the RNG sector. Several high-profile buyouts already occurred pre-IRA, 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 produced 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 through drilling. RNG is a win-win considering it takes waste that typically is expensive and pollutive to dispose of and turns it into useful products that can power cars, create electricity, be used in fertilizers and much more.
EverGen Infrastructure Corp. (TSX.V: EVGN) (OTCQX: EVGIF) is at the epicenter of the shift to renewables. The Vancouver-based company owns and operates a portfolio of biogas and RNG projects across Canada. After acquiring the first Canadian RNG plant in its home province to add to its portfolio of two other facilities in British Columbia, the company started expanding east. EverGen’s BC assets include Fraser Valley Biogas (“FVB”), which has been producing RNG since 2011; Net Zero Waste Abbotsford; and Sea to Sky Soils. During 2022, EverGen widened its Canadian footprint with investments to establish a 67% stake in GrowTEC in Alberta and 50% ownership in a large joint venture consisting of three high-quality, on-farm RNG projects in Ontario dubbed Project Radius.
While capitalizing on a number of strong decarbonization efforts, EverGen is also providing a solution to one of Canada’s municipalities biggest greenhouse gas (“GHG”) emitting sources: organic waste. Productive organic waste disposal is a tremendous opportunity for EverGen, with roughly 73% of the country’s organic waste ending up in landfills where it rots and releases GHGs. As such, corporations, governments and utilities are supporting EverGen’s expansion through low-risk, long-term, off-take agreements to purchase RNG produced at EverGen facilities while effectively working toward carbon targets.
At EverGen facilities, organic waste is used as feedstock, entering an anaerobic digester, which is an oxygen-less tank where microbes break down organic matter into biogas and digestate. Digestate is recovered as useful farm products, including soil amendments, fertilizer and animal bedding, while the biogas is refined into RNG and piped into existing natural gas pipelines of EverGen off-take partners. EverGen is likely never going to need to look for any alternative feedstock considering 19,000-plus large farms and dairies in North America generate more than 144 million metric tons of waste every year.
The Name Brand and Growing
EverGen’s flagship projects in BC are cornerstones for a growing franchise. FVB uses blended feedstock from agricultural and commercial organic waste. FVB’s current capacity sits at 50,000 tonnes of feedstock per annum 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 EverGen’s organics-processing facility using a combination of agricultural, municipal and commercial organic waste as feedstock. Current capacity is 40,000 tonnes per year, which is being expanded to 135,000 tonnes. The renovation includes construction of an anaerobic digester and boosting capacity to produce RNG equal to 180,000 gigajoules of energy. For reference, one gigajoule is equivalent to approximately 277 kilowatt-hours of electricity. As a fuel, it is equal to 26 liters of gasoline.
FortisBC, a unit of NYSE- and TSX-listed utility giant Fortis Inc., has a 20-year offtake agreement for the RNG produced at NZWA. Finally, the Sea to Sky Soils is an organics processing facility the processes up to 40,000 metric tons of municipal and agricultural waste every year. Expansion plans will increase that to 60,000 tonnes.
With a firm grasp on the BC markets, EverGen made two significant investments to capitalize on opportunities nationwide. The company holds a two-thirds interest in GrowTEC, a multifaceted bioenergy venture of sustainable agriculture near Lethbridge, Alberta. GrowTEC’s facility produces biogas via an anaerobic digester presently. The system is being upgraded to further process the biogas into RNG, with an agreement already in place pursuant to which Fortis is buying the RNG where it will be tied into the local pipeline.
When the expansion is completed at the three B.C. facilities, EverGen operations will generate about 480,000 gigajoules of energy combined. That translates to 133 million kilowatt-hours of electricity and a formidable revenue stream with RNG commanding more than $60 per gigajoule. As for practicality, the RNG output would provide enough clean electricity for more than 12,500 homes based upon stats from the Energy Information Administration indicating an average American home consumes 10,632 kilowatt-hours of electricity per year.
While impressive on its own, the JV in Ontario with 50-50 partner Northeast Renewables LP has the potential for multiple-fold growth while serving as a model for EverGen as an aggregator of projects into clusters. Project Radius is three late-development-stage agricultural RNG projects. Each of the projects is theorized to generated about 550,000 gigajoules of RNG per year. EverGen is expected to make a final investment decision on the project this year with construction planned for 2023 and 2024.
Executing on this strategy, EverGen will have RNG production in excess of 2 million gigajoules in its portfolio, with the potential to expand that to 8 million gigajoules as the company makes decisions on the more than 25 projects it is evaluating for its pipeline. The company has a diverse group of projects to pick from, including some that were started and abandoned that are looking for a suitor to acquire at discounted prices. These are ideal candidates for EverGen, which has access to capital and the technical expertise to revive and optimize regardless of condition.
EverGen’s last quarterly report covered the three-month and nine-month periods ended Sept. 30, 2022. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the year to date was $1.7 million, which is in line with management’s guidance to exit 2022 with EBITDA about $2.0 million. Looking ahead, EverGen’s presentation indicates intentions to grow EBITDA to $13 million from its fully funded three core expansion projects.
The presentation is informative as to the importance of its EBITDA estimate as it relates to industry valuations. EverGen’s RNG peers are trading at a multiple of 13 times enterprise value to EBITDA. Looking at its guidance, EverGen is trading at a notable discount (~3 times) compared to peers despite its current operations and funded growth pipeline.
Major Utilities Want EverGen’s RNG
The U.S. government committing $369 billion to catalyze investments in renewable energy has utilities highly motivated to capitalize on this once-in-a-generation opportunity. Renewables constitute less than 1% of the gas market in North America, a paltry figure that speaks to the incredible upside. A real-world example of the desire to move quickly at all levels is Oregon’s legislation SB98 calling for a volumetric goal of 30% RNG by 2030. Utilities are setting aggressive targets for themselves too, such as EverGen partner FortisBC aiming for 15% of its volume to come from RNG by 2030.
Quebec-based Energir has a similar target, while American peers NW Natural and Vermont Gas are shepherding change in the United States. In a nutshell, the self-imposed mandates by governments and companies throughout North America to make the logical shift away from conventional natural gas to Earth-friendly RNG puts EverGen in an optimal position to thrive.
Incredible Headroom for Growth
A look at the oil E&P (exploration and production) market is mind numbing regarding size. Rested Energy estimates the industry generated a stunning $2.47 trillion in revenues globally in 2019. Almost all of that revenue comes from crude oil, coal, and natural gas, with renewable energy sources such as solar, wind, RNG and other zero carbon energies only accounting for approximately 12.4% of total U.S. energy consumption in 2021.
Brookfield Renewable Partners L.P. (NYSE: BEP) is a portfolio asset of Brookfield Renewable, the operator of one of the world’s largest publicly traded, pure-play renewable power platforms. Brookfield’s portfolio consists of hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia. In December, California Bioenergy LLC announced a funding partnership, of up to $500 million, with Brookfield Renewable and its institutional partners to scale CalBio’s growth in RNG and other waste-to-energy opportunities.
Clean Energy Fuels Corp. (NASDAQ: CLNE) is the U.S.’s largest provider of the cleanest fuel for the transportation market. The California-based company’s mission is to decarbonize transportation through the development and delivery of RGN. Clean Energy allows thousands of vehicles, from airport shuttles to city buses to waste and heavy-duty trucks, to reduce their levels of climate-harming greenhouse gas, operating a vast network of fueling stations across the U.S. and Canada. This month, Clean Energy was awarded a contract by San Diego Metropolitan Transit System to provide an expected 86 million gallons of RNG to operate its bus fleet.
Aemetis Inc. (NASDAQ: AMTX) is an RNG, renewable fuel and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace petroleum-based products and reduce greenhouse gas emissions. Aemetis has launched the Carbon Zero production process to decarbonize the transportation sector using today’s infrastructure. Aemetis Carbon Zero products include zero-carbon fuels that can “drop-in” to be used in airplanes, truck, and ship fleets.
Enphase Energy Inc. (NASDAQ: ENPH) is the world’s leading supplier of microinverter-based solar and battery systems that enable people to harness the sun to make, use, save and sell their own power—and control it all with a smart mobile app. The company revolutionized the solar industry with its microinverter-based technology and builds all-in-one solar, battery, and software solutions. Enphase has shipped more than 52 million microinverters, and more than 2.7 million Enphase-based systems have been deployed in more than 145 countries.
The carbon fuse is running short, and it is only a matter of time before something has to give. Governments and corporations know it and are moving with a purpose to make changes before it is too late. Luckily for investors, these aggressive actions are providing growth opportunities that may never be seen again in the energy space.
For more information about EverGen Infrastructure Corp., please visit EverGen Infrastructure Corp.
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