Renewable energy got its closeup in a new report from iA Securities analyst Elias Foscolos, who picked out six names across the space for investors to consider.
The renewable energy sector covers a lot of territory but the overall theme is in the search for alternative energy sources where the current industrial, cultural and governmental emphasis has been placed on reducing our consumption and reliance on fossil fuels in aid of meeting climate objectives.
In that vein, investors the world over are turning more acutely towards ESG (environmental, social and governance) criteria as integral to their approaches. And thus, both the climate and ESG credentials of renewable energy have now become a highlight of the sector, says Foscolos.
“Investors are increasingly integrating ESG analysis into their investment selection processes, both to mitigate risk and to enhance long-term value for shareholders and other stakeholders,” Foscolos wrote in his report, Renewable Fuels 101, delivered to clients on Tuesday.
“Part of the solution is expected to come from renewable fuels, including renewable diesel, RNG, hydrogen, as well as carbon capture, utilization and storage (CCUS) technology,” Foscolos said.
The six companies Foscolos profiles in his report are not currently covered by iA Securities but the analyst said they nevertheless “may represent intriguing opportunities” for investors.
“Based on the market growth outlook and increasing relevance within the investment landscape for companies that are addressing climate change through these clean energy solutions, we have added several newly listed companies to our watch list,” he wrote.
The list begins with Vancouver-based EverGen Infrastructure (EverGen Infrastructure Stock Quote, Charts, News, Analysts, Financials TSXV:EVGN) whose assets currently consist of three waste management and RNG facilities operated through wholly-owned subsidiaries. Foscolos said the majority of EverGen’s revenues from its facilities are billed under long-term contracts with municipalities, with one of the operations, Net Zero Waste Abbotsford having entered a conditional 20-year offtake agreement with FortisBC. Foscolos noted that EverGen has six projects in total in its development pipeline and another 14 identified projects.
“EVGN is advancing/evaluating several projects, including the brownfield expansion to support the offtake agreement with FortisBC, other expansions/optimizations, and other projects under evaluation. These projects have the potential to add ~1.0 million GJ/year of RNG output. EVGN has identified more projects that are under initial review, which could add an additional ~2.6 million GJ/year,” Foscolos wrote.
Next up is Green Impact Partners (Green Impact Partners Stock Quote, Charts, News, Analysts, Financials TSXV:GIP), a mineral exploration company with recently (May 2021) transitioned renewables through the acquisition of clean energy assets. The company currently has eight water and solids treatment and recycling facilities in Canada and the US, operating under both fee-for-service and area dedication arrangements. Foscolos said the company’s revenues are cyclical due to the nature of operations which has resulted in variability due to the pandemic.
According to Foscolos, Green Impact’s project pipeline is north of $1 billion, with over 12 shovel-ready or near shovel-ready projects on the go ranging from about $15 million to $500 million.
“GIP is focused on late-stage and proven technologies including RNG capture, waste heat recovery, and agrivoltaics, and intends to pursue growth through a combination of greenfield developments, acquisitions, and strategic partnerships. GIP’s most near-term project is an on-farm RNG project in Colorado that will convert cow manure into pipeline-quality natural gas,” Foscolos wrote.
Mississauga-based Next Hydrogen Solutions (Next Hydrogen Solutions Stock Quote, Charts, News, Analysts, Financials TSXV:NXH) is also on iA Securities’ radar, a company which is commercializing its patented electrolyser for the large-scale production of hydrogen. Foscolos said Next Hydrogen is targeting its product line towards industrial and transportation end markets, with fuel cell power systems being a clear focus.
“NXH intends to dedicate a significant portion of its recent financing to product development and commercialization, including performance upgrades to its existing product line, and further expansion of its product line as part of its technology development roadmap,” Foscolos wrote.
Newly IPO’d company Tidewater Renewables (Tidewater Renewables Stock Quote, Charts, News, Analysts, Financials TSX:LCFS) is on the list, with the company, a carve-out from Tidewater Midstream and Infrastructure, currently developing Canada’s first hydrogen-derived renewable diesel facility in Prince George, BC, at Tidewater Midstream’s refinery.
“In conjunction with the carve-out and through the use of the proceeds and shares issued to TWM, LCFS acquired certain operating assets from TWM that are expected to generate annualized EBITDA of ~$40 million,” Foscolos wrote.
Burlington, Ontario-based Anaergia (Anaergia Stock Quote, Charts, News, Analysts, Financials TSX:ANRG) operates an integrated “waste-to-value” platform for turning organic waste into RNG, clean water and natural fertilizer through proprietary technologies. Getting its revenue from capital sales, services and build-to-own-operate (BOO) facilities, Anaergia has up until now deployed technologies into 17 countries worldwide, with Foscolos noting that the company has over 50 BOO opportunities inits pipeline.
“One of ANRG’s flagship assets is the Rialto Bioenergy Facility (RBF), which is the largest organic waste diversion and energy recovery facility in North America. ANRG also acquired the Rhode Island Bioenergy Facility in August, which is the largest industrial anaerobic digester for food and other solid organic waste recycling in the state of New England,” Foscolos said.
Finally, there’s biogas upgrading company Greenlane Renewables (Greenlane Renewables Stock Quote, Charts, News, Analysts, Financials TSX:GRN) whose three technologies (water wash, pressure swing absorption and membrane separation) produce clean, low-carbon RNG from organic waste sources. So far, Greenlane has sold 125 systems globally in 19 countries with contracts for its biogas systems typically ranging between $2 and $8 million for single systems.
Foscolos said Greelane’s development pipeline included a sales order backlog of about $42 million and an additional roughly $19 million of new contracts over the third quarter of 2021.
“GRN also maintains a pipeline of prospective projects around the world that it believes have the potential to be converted into orders within an ~24-month rolling time horizon. GRN estimates its sales pipeline at >$800 million,” Foscolos said.