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Renewable Energy M&A: Shell enters the RNG sector through the acquisition of Denmark-based Nature Energy for ~$2bn

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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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Based in Denmark, Nature Energy is a producer of renewable natural gas (RNG) from agricultural, industrial, and household waste. The company operates 14 biogas plants at home and in the Netherlands, that currently produce ~6.5 million MMBtu/yr. The company also has a development pipeline of ~30 projects in Europe and North America, with a potential of generating 9.2 million MMBtu/yr by 2030. JP Morgan acted as the sole financial advisor to Nature Energy in the transaction. While the company’s portfolio is currently concentrated around Western Europe, it announced plans to expand its operations into North America with up to 15 projects developed by 2026, representing a total CAPEX of $1.5bn. Enerdatics has calculated the enterprise value ($M)/EBITDA metric for the deal as ~62, marking the highest-valued deal in the biofuels space globally, since 2017. The high valuation is believed to be driven by Nature Energy’s revenue, which doubled year-on-year to $266mn in 2021 and has increased to more than 4X the value since 2018. The second largest deal in the space by EBITDA metric - bp’s acquisition of US-based Archaea Energy for $4.1bn - was announced last month and represented a multiple of ~46.

Interestingly, BP was reportedly among the companies bidding to acquire Nature Energy since Mar’22, along with Repsol, ENGIE, Global Infrastructure Partners, EQT, and KKR. Antin Infrastructure Partners, Macquarie, and Partners Group were also believed to be involved in the bidding process, according to sources.

Nature Energy, established in 1979 as a gas distributor, was privatized in Mar’18, through a takeover by a consortium of PE firms, Pioneer Point Partners, Davidson Kempner Capital Management (DKCM), and Sampension, for $182.2mn. Since then, the company has expanded its portfolio from 4 projects to 14 projects and increased its RNG production capacity by 500%, mainly through its design-build-own-operate model. Nature Energy also announced plans to invest ~$5.4bn by 2030 and develop 10-15 new plants annually, starting in 2024, with a majority of the funds deployed towards international expansion. While a large share of the company’s RNG production is supplied to domestic gas grids, it also has a long-term  RNG supply agreement with Shell, signed in 2020. Information on the financial terms and contracted volumes were not disclosed, however, the deal was touted to be the largest of its kind.

Oil & gas majors, pushing for decarbonization of their activities, have been heavily investing in the biofuels sector in recent times, mainly due to easier interoperability of existing infrastructure and synergies with their legacy retailing and marketing businesses. The current transaction represents the third multi-billion dollar corporate acquisition of a biofuel firm by an oil & gas major in 2022, following the bp-Archaea Energy deal and Chevron’s acquisition of biodiesel producer Renewable Energy Group for an EV of $2.75bn, in Feb’22. Enerdatics research shows that 2022 has seen the highest number of corporate consolidations and billion-dollar deals in the biofuels space, globally, driven primarily by increasing interest from O&G majors and private equity (PE) firms. KKR’s acquisition of French waste-to-energy company Albioma for $2.6bn and Norwegian investment firms Hafslund Eco, Infranode, and HitecVision’s takeover of a 50% stake in energy-from-fuels provider Fortum, for $1.1bn are other major deals announced this year. Going forward, Enerdatics expects M&A activity in the sector to be centered around large corporate consolidations, with O&G majors and PE firms driving deal value and volume.

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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