PI Financial has highlighted EverGen Infrastructure Corp (TSX-V:EVGN) as its top pick in the rapidly-developing renewable natural gas (RNG) sector, saying the company is well-positioned to benefit from the brisk pace of investment.
In a note this week, the research firm, which has a ‘Buy’ rating and C$8 price target on EverGen, says opportunities include strategic partnerships and acquisitions, as well as government grant activity. The company's shares are currently trading at C$3.56.
Analysts at PI Financial said the RNG industry continues to experience positive momentum, driven by a steady pace of acquisitions as well as new investment into the sector.
Most recently, they said that Green Impact Partners (TSXV-GIP) announced it has selected Amber Infrastructure Group as a strategic partner on its GreenGas Colorado, Iowa RNG and Future Energy Park projects, representing up to C$545 million in total investment for a 50% project-level equity interest in each facility.
At the time of the announcement, the analysts noted that Green Impact Partners had an enterprise value of just over C$200 million, highlighting the current disconnect between public and private market valuations.
“We are seeing remarkable interest in the sector by a growing roster of traditional energy companies, utilities, and asset managers that are expanding their footprint into renewable fuels due to robust economics and strong government support to lower emissions,” the analysts wrote.
The analysts listed over US$12 billion worth of transactions in the sector over the last year alone. Apart from the Green Impact Partners announcement, other key transactions that have been announced in the sector over the last year include:
- March 2023: Enbridge Inc (TSX:ENB) signed US$1 billion RNG infrastructure development agreement with Divert Inc;
- December 2022: bp (NYSE:BP) completes US$4.1 billion purchase of Archaea Energy (NYSE-LFG);
- November 2022: Shell PLC (LSE:SHEL, NYSE:SHEL) reached an agreement to acquire Nature Energy Biogas for US$2 billion;
- October 2022: NextEra Energy (NYSE:NEE) expanded its RNG assets through a US$1.1 billion agreement with Energy Power Partners Fund I LP and North American Sustainable Energy Fund LP;
- July 2022: BlackRock Inc (NYSE:BLK) acquired Vanguard Renewables for US$700 million; and
- Feb. 2022: Chevron Corporation (NYSE:CVX) acquired Renewable Energy Group (NASDAQ:REGI) for US$3.15 billion.
“We believe that the RNG industry remains ripe for further investment and consolidation and highlight EverGen Infrastructure Corp (TSX-V:EVGN). from our renewable’s coverage universe as our top way to play this rapidly developing sector,” the analysts concluded.
Contact the author at stephen.gunnion@proactiveinvestors.com