BURLINGTON, Ontario--(BUSINESS WIRE)-- Anaergia Inc. (“Anaergia” or the “Company”) (TSX: ANRG) notes several developments that are having a positive impact on the company’s European operations.
Key developments affecting Anaergia are:
- Materially higher European gas prices. Tight natural gas markets in Europe, already evident prior to the start of the European military conflict last month, resulted in record high prices in that region. In the fourth quarter of 2021, natural gas prices in Europe were close to five times higher than where they were trading during 2020, and the International Energy Agency (IEA) was already forecasting an all-time high average price of US$26 /MMBTU (source: International Energy Agency: Gas Market Report Q1 2022).
- The current security concerns have accelerated the European Union’s resolve to restructure its energy sector. Last week, the European Commission proposed an outline of a plan to make European countries more energy self-sufficient. This strategy will “seek to diversify gas supplies, speed up the roll-out of renewable gases” to produce “larger volumes of biomethane” (renewable natural gas or “RNG”) and thereby reduce reliance on Russian gas by two thirds in 2022 and completely phase out its use by 2030. This plan specifically mentions increasing supplies of RNG and sets a target for the EU to produce 1,260,000,000 MMTBU (35 billion cubic meters) of biomethane (RNG) by 2030, double the previously proposed target (source: REPowerEU: Joint European action for more affordable, secure and sustainable energy).
- Individual countries already announced plans to dramatically increase RNG in their gas networks. Denmark, for example, plans to increase the share of renewable gas in its network from the current 25% to 100% within the next seven years. All major western European nations have significant programs for supporting the roll out of more RNG plants following the RED II directive from Brussels, with Germany set to become a major and newly strengthened market.
Anaergia is a leading player in the European market with well-established offices in five significant countries and references in many European countries. The above listed developments mean that the number of opportunities for sales or investment will increase significantly and the profitability of the seven plants currently under construction, and owned by Anaergia, will be much higher than previously expected.
As an illustration of the growth trend, Anaergia’s Italian office has just closed the sale of capital equipment for two significant projects for which Anaergia will supply $45 million in technology.
Financial conditions are improving on two fronts: first, the projects we own get the wholesale price of gas, which as pointed out above, has increased dramatically; second, there are green certificates that are guaranteed by governments, which are being traded at a higher price than the guaranteed base. Assuming an RNG price of US$26 /MMBTU, as previously forecasted for 2022 by the IEA, which is well below the average market price of the last six months, and the green certificate price guaranteed by the government, the estimated annualized EBITDA for the seven plants would increase from an initially forecasted total of approximately $58 million to approximately $97 million. These plants are starting their ramp-ups during the second quarter of this year with the last one to come on stream during the third quarter of 2023.
“Anaergia’s companies have been engaged in building renewable energy infrastructure in Europe for decades,” noted Andrew Benedek, Anaergia’s Chairman and CEO. “At this time, there is more widespread recognition of the need for RNG infrastructure in Europe, and there are more lucrative financial incentives to build, than ever before. Already about half of our revenue originates in Europe. Given the market conditions, our growth in Europe is likely to accelerate. During the next several years, we will continue to expand our presence in Europe by providing our world-leading technological solutions for projects and we will continue to increase the number of facilities owned and operated by us.”