EverGen Infrastructure Corp EVGIF

RBC

[retiredcf]

April 22, 2022

Outperform

Speculative Risk

TSXV: EVGN; CAD 3.95

Price Target CAD 7.00

EverGen Infrastructure Corp.

First Glance: Q4 results negatively impacted by flooding, and RNG developments facing delays
Sentiment: Negative

Our view: We believe the market will negatively view the delays in both of the company’s advanced RNG developments. With respect to the Q4/21 results, although they were negatively impacted by flooding, the company has received insurance proceeds to offset most of the impact (will be recognized in Q1/22).

First impression

Insurance recoveries in Q1/22 should offset weak Q4/21 results that were negatively impacted by flooding in B.C. EverGen Infrastructure’s Q4/21 Adjusted EBITDA of $0.0 million was below our estimate of $0.5 million and consensus of $0.3 million. The main variance to our estimate stems from higher costs and downtime (FVB facility was offline from November 15, 2021 through March 2, 2022) due to the flooding events in the Abbotsford and Sumas Prairie regions. Partially offsetting this were higher volumes of incoming organic feedstock primarily related to post-flood processing. To date in 2022, the company has received $1.7 million of insurance proceeds (will be recognized in Q1/22) for lost revenues and incremental expenses and repairs, and management expects additional recoveries in 2022, which will increase Adjusted EBITDA that would otherwise have been recognized in Q4/21. Please refer to Exhibit 1 for additional details.

RNG developments facing delays. The company indicated that due to ongoing COVID implications and the flooding event in November 2021, management now expects the NZWA RNG development (~$35 million project) to be delayed after discussions with local and provincial regulatory authorities. Management highlighted that the flooding event will require significant repairs and investments in the region, causing an administrative backlog, including permitting delays. The FVB RNG expansion (~$10 million expansion) may also be delayed in the approval process, but since the expansion utilizes existing site infrastructure, management expects incremental RNG production and EBITDA contribution to begin by the end of 2022.

Management additions and changes. EverGen announced that Sean Mezie will transition from the COO role to a strategic RNG advisor role. Mischa Zajtmann, President of EverGen, will assume the COO role. In addition, Jamie Betts and Sean Hennessy joined the company as VP of Operations and VP of Finance, respectively.

Conference call Friday, April 22, at 10:00AM ET. On the Zoom conference call (details on the company website), we expect investors to focus on additional details regarding the delays in the RNG expansion developments in B.C., the RNG development in Alberta, and additional colour on the company’s development pipeline.