When we think of renewable energy, we tend to think of solar panels, wind turbines, nuclear, and damns.
But did you know there is another solution that reduces emissions and limits the effects of harmful greenhouse gasses?
Renewable natural gas (RNG) is the product of decomposing, capturing, and recycling energy from organic waste, and converting it into a valuable energy source capable of fueling our world.
With the threats of climate change growing more prevalent every day, and drastic shifts in the global energy supply due to the ongoing conflict in Ukraine, the key to building clean and more reliable energy sources is by maximizing the use of all these environmentally friendly products.
That being said, the RNG market is largely untapped at this time.
As a younger industry, RNG has been chiefly underestimated due to the unique infrastructure required to produce this alternative energy source.
But with improved technology and better incentives for businesses to use renewable energy, huge investments are flowing in and it is paying off massively for those willing to take the leap.
An example of this is Archaea Energy ($LFG) which achieved a gross profit (TTM) of $33.98 million and is now being acquired by British Petroleum ($BP) for $4.1 billion as of this week; Archaea is up 45.88% YoY upon the announcement.
While that is very exciting for $LFG investors, wouldn’t it be more valuable for you to build a stake in the next great RNG business?
Fortunately, there is one such company seizing this lucrative opportunity, and it is already well-established as the leader in RNG within Canada.
With a first-mover advantage and many of its RNG facilities already in place, you do not want to miss out on this incredible company.
Continue reading to learn more.
How does RNG work?
Renewable natural gas (RNG) is a combination of various organic resources that are digested and then converted into pipeline-quality gas.
The “feedstock”, or organic waste, comes from multiple sources including municipal waste management facilities, sewage treatment plants, agricultural hubs, and more.
After that, it is then transported and placed in an Anaerobic Digester, which essentially acts like a human stomach, and accelerates the decomposing process of biochemical materials.
From there, the biogases released from these organic sources are collected and upgraded to produce renewable natural gas that is fully interchangeable with conventional natural gas products.
As a bonus, any leftover materials, aka digestates, are gathered and used to create an additional revenue stream by selling them back to the community as fertilizers, soil amendments, and animal bedding.
These natural energy sources are very valuable in this way because they provide multiple avenues for generating capital without having to sacrifice the core business of RNG production.
Reasons to Invest in RNG in Canada
With pressures mounting over how to develop sustainable energy sources, RNG is an excellent alternative to conventional natural gas since it is available around the globe and offers additional benefits as well.
Here are just a few:
Major Cash Inflows
Investing in ESG projects is expanding rapidly with 24% of all institutional investment managers holding at least one ESG-aligned fund; this has grown 300% since 2016 and is expected to make up half of the professionally managed assets by 2024. (Deloitte)
In total, global investment in renewable energy set a new record totaling $226 billion in the first half of 2022, up 11% from last year.
Traditional landfills are a key contributor to producing methane gas, which is 25 times more potent than carbon dioxide and has 80 times the heating power; by capturing and harnessing this gas and converting it into RNG, methane’s effect on the environment is limited. (EPA)(EDF)
Furthermore, according to the California Air Resources Board, RNG sourced from landfill-diverted food can provide a 125 percent reduction in greenhouse gas emissions, and RNG from dairy manure can result in a 400 percent reduction in greenhouse gas emissions.
Strong Business Models
Unlike most businesses, some RNG companies are paid a tipping fee to collect organic waste meaning that they actually turn a profit on their desired supplies; for example, EverGen Infrastructure earned $2.88 million in tip fees in the first half of 2022 alone.
RNG is more reliable and efficient compared to other renewable energy sources like wind and solar because its production isn’t intermittent and is available 24 hours a day; wind turbines on average harness only 60% of the energy that passes through while solar panels capture only 18% to 22%.
How EverGen Infrastructure is capitalizing on RNG
RNG has proven to be very lucrative in recent years and EverGen Infrastructure (TSXV: EVGN)(OTCQX: EVGIF) is well underway to being the leader in RNG production within Canada and eventually North America.
With ample funding for all of its projects, including over $17 million in cash and cash equivalents, and $6 million in debt financing, the RNG company is expanding quickly and is expected to produce over 420,000 GJ per year from its core projects.
As a first-mover in the Canadian market, EverGen already owns and operates four RNG and/or organic processing facilities, and additionally owns a 50% interest in Project Radius, an Ontario-based RNG firm with three high-quality, on-farm RNG projects, collectively capable of producing around 1.7 million GJ of RNG per year.
Its four core projects include:
As you can see from the projects above, it is clear that EverGen is well-positioned to succeed in the Canadian market given the variety of highly productive RNG assets in its portfolio.
While this is certainly impressive on its own, what is even more valuable is that most of its projects have yet to reach full production capacity, meaning that as an investor, you will gain partial ownership of this company before it maximizes its return potential.
Upon completion of its three current expansion projects, EverGen forecasts that it will triple its EBITDA to C$13 million in 2023.
That being said, we understand that results in the present are just as important as those in the future, and fortunately, EverGen is already well underway with its production objectives.
As of right now, the company has signed multiple long-term offtake agreements with FortisBC, providing stable, predictable cash flows for EverGen and underpinning the company’s growth well into the future.
With all of its expansion projects fully funded and a sustainable cash flow model, investors can have confidence knowing that their
But it doesn’t stop there.
As RNG demand increases substantially over the next few years, other utility firms like Energir, SoCalGas, and NW Natural are setting RNG targets at 20% by 2030, 20% by 2030, and 5% by 2025 respectively, and EverGen is an excellent candidate to fulfill their needs.
It is important to note that this is only one example of its cash flow generating markets with others including high-volume energy-consuming companies, municipalities, agricultural facilities, and more.
By the time all of its projects are completed, EverGen anticipates that its facilities will generate over $30 million in EBITDA annually targeting projects with EBITDA margins in the range of 50% to 60%.
Since many of its production costs are limited to the facilities themselves and not the actual extraction of organic waste, the company is built to retain more of its earnings which makes it highly valuable for investors looking to grow their capital.
And that’s only their near-term plan.
With just over 16% insider ownership, this is a promising indication that they are properly aligned with their investors and are focused on delivering the best possible results for the company.
Since most of us will not have an opportunity to meet with the management team ourselves, knowing that their
As a first-mover and leader in this invaluable renewable energy market, EverGen Infrastructure (TSXV: EVGN)(OTCQX: EVGIF) is an RNG company every investor should have on their watchlist.
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