Our view: We expect the in-line Q1/22 results and updates to have a neutral impact on EverGen shares. On the conference call, we expect investors to focus on the progress on the RNG expansions in B.C. and additional details on the agreement to acquire a 50% interest in three RNG developments in Ontario.
First impression
Q1/22 results in line after recognizing insurance proceeds. EverGen Infrastructure’s Q1/22 Adjusted EBITDA of $0.6 million was in line with our estimate of $0.8 million and consensus of $0.6 million. During the quarter, the company recognized $1.7 million of insurance progress payments related to the November 2021 flood in the Abbotsford region, covering all of the lost revenues and flood-related expenses to date at the FVB facility (offline for almost the entire quarter) and ~60% of the flood- related expenses through March 31, 2022 at the NZWA facility. EverGen expects to receive further proceeds through the remainder of 2022 to cover additional flood-related expenses (management expects full financial recovery). Please refer to Exhibit 1 for additional details on the quarter.
Expanding the development footprint east. After establishing a hub of three facilities in B.C., the company previously announced in March 2022 that it has signed an LOI to acquire a 67% interest in a biogas facility in Alberta (Phase 1 to be completed by year-end 2022). Earlier today, the company announced that it has entered an agreement to acquire a 50% interest in three Ontario RNG development projects for $1.5 million in cash (half the initial development funding). We expect management to provide additional details on the conference call, which may include total project cost and EBITDA expectations.
Focusing on executing near-term development pipeline. EverGen ended the quarter with ~$17.5 million of cash and equivalents, ~$2.7 million of restricted cash, and ~$6.3 million of loans outstanding. The company has pending acquisitions with initial cash commitments of ~$4.8 million, and two RNG expansion projects (FVB and NZWA) that will cost ~$45 million over the next ~18 months (we expect the company to raise project financing).
We don’t expect material buybacks under the NCIB. On May 17, 2022, the company announced an NCIB for 5% of the shares outstanding (up to 668,370 common shares). As we previously highlighted, we expect buybacks to be limited due to the near-term capital expansion plans in place.
Conference call Wednesday, May 25, at 10:00AM ET (link).