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Renewable Energy M&A: Brookfield, CalBio form a $500mn investment partnership to develop RNG and waste-to-energy projects in the US

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Mohit Kaul's picture
Founder Enerdatics

Building Enerdatics. Leadership experience in a high growth SaaS company and secured a successful exit. A natural leader who cares about creating value for all stakeholders. Extensive experience...

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Founded in 2006, California Bioenergy (CalBio) has partnered with dairy farmers to capture fugitive dairy methane and convert it into renewable natural gas (RNG) using its 50+ operational manure digesters. The RNG is used to replace diesel and gasoline in mobility and power generation applications. The partnership with Brookfield will help CalBio more than double RNG production over the next five years with the continued expansion of its California digester projects and selective expansion into other states. Currently, CalBio is reducing emissions by over 1 million metric tons per annum (mmtpa) of CO2e, and with expanding state and federal carbon credit programs, it is targeting reductions of 2-3 mmtpa.
Brookfield is pursuing this investment through the Brookfield Global Transition Fund I, a $15bn fund that was closed in Jun’22. 

As per Enerdatics’ research, CalBio’s partnership with Brookfield marks its second major collaboration in the RNG space, the first being a joint venture with oil major Chevron. CalBio first partnered with Chevron in 2019 to secure funding for the development of RNG facilities, and for obtaining a route-to-market for the produced clean fuel. Since then, the partners have commercialized the first venture under the partnership, and in Oct’22 signed an MoU to expand the collaboration to a second venture. Under the second JV, Chevron will off-take 100% of the produced RNG to market in the California vehicle fuels segment. The moves will help the oil major reduce its Scope 3 emissions, and reach its target of producing 40,000 mmbtu/d of the RNG by 2030. 

The global RNG and waste-to-energy segments have seen a sharp spike in deal activity in 2022, driven by supported government policies and the demand for clean fuels to decarbonize the mobility segment. Oil majors including bp, Shell, and Chevron, along with major private equity firms such as BlackRock have made large-scale investments in RNG companies during the year. A senior bp executive had previously forecasted a 10-fold increase in US’s RNG production by 2030 and highlighted the importance of RNG in road-based transportation, as well as in non-vehicle markets such as maritime, rail, utilities, high-heat applications, and heavy industry. The executive also cited the country’s Renewable Fuel Standard and the potential of tax credits to be extended to biogas, a prediction that became true in Jul’22, when the Renewable Natural Gas Incentive Act provided for a $1/gallon tax credit for sellers of the RNG used for transportation. 
 

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

 

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