EverGen Infrastructure Corp V.EVGN

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[retiredcf]

May 24, 2022

RBC Dominion Securities Inc.
Nelson Ng, CFA (Analyst)
[phone], [e-mail] Trevor Bryan, CFA (Senior Associate) [phone], [e-mail]

Outperform

Speculative Risk

TSXV: EVGN; CAD 2.72

Price Target CAD 6.00

All values in CAD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).

EverGen Infrastructure Corp.

Expands development footprint into Ontario with a $1.5 million acquisition
Sentiment - Neutral

Our view: Expanding the company's development activities into Ontario is consistent with management's strategy of developing a cluster of projects in several Canadian regions. We believe the $1.5 million acquisition in Ontario could create value for shareholders when the developments are further advanced, and long-term RNG offtake contracts are obtained. We expect management will provide additional details on its acquisition at the company's Q1/22 earnings call that is scheduled on May 25 (10:00AM ET).

First impression:

Acquires a 50% interest in three Ontario RNG developments. EverGen Infrastructure announced that it has entered into definitive agreements with Northeast Renewables on May 20, 2022, and acquired a 50% interest in a portfolio of Ontario RNG developments (Project Radius) for $1.5 million in cash, which is half of the initial development funding tranche for Project Radius.

Ontario developments could potentially generate ~1.7 million GJ/year of RNG. Project Radius consists of three on-farm RNG developments in Ontario that would each produce ~550,000 GJ/year of RNG, and management expects construction will take place in 2023/24. The projects are in late-state negotiations for feedstock supply as well as offtake agreements with utility-scale distribution companies, and management plans to advance the projects to the Notice-to-Proceed (NTP) phase of development within the next six months, at which time EverGen will have the right to participate in funding its proportionate 50% share of the capital.

We expect additional details at its upcoming earnings call on May 25.

EverGen is due to release Q1/22 financial results on May 24, after market close, and we expect management to provide additional details on Project Radius at its earnings call tomorrow (May 25 at 10:00AM ET), which may include management's anticipated total project cost and EBITDA contribution.