Good morning, everyone. This is Victoria from Adelaide Capital, thank you for joining the EverGen Infrastructure Q1 earnings call today. With me, I have CEO, Chase Edgelow, and COO and President, Misha Zajtmann, as well as Chief Financial Officer, Sean Hennessy. I do want to remind everyone that there could be forward-looking information, as well as non-IFRS financial measures, in the presentation, so I would just advise everyone to refer to the disclaimer at the end of the investor presentation. With that, I'm going to pass it over to Chase to walk us through the deck. I'll be back at the end, and if you have a question, just put it in the Q&A box, and we'll get to it at the end of the verbal presentation.
Great. Thanks, Victoria. Welcome everyone. We'll keep it relatively short and sweet today, given that we just went through our broader corporate updates at year-end in May. We are excited to be here in front of investors again, talking about our Q1 results, which really represent a turning point for EverGen, where we transition from our historical core production out of our existing four assets that are online today, and we start ramping up that production with expanded capacity that we're building out, that we built out at GrowTEC, and then we're building out at Fraser Valley Biogas.
With that, I think in terms of the results themselves, just, you know, what that demonstrates, having that built-out capacity provides opportunities for us to maximize our EBITDA from both taking in organic feedstock on the front end of our facilities and selling additional gas on the back end. With that, I'll turn it over to Sean Hennessy to walk through our Q1 results.
Yeah, thanks for that, Chase, welcome everyone to the Q1 update call. Similar to Q4, Q1 2023 was another quarter where our primary focus was on the delivery of our projects while managing our existing cash flows from our operations. We continued to progress our investments into Fraser Valley Biogas, Pacific Coast Renewables, and GrowTEC, with approximately CAD 1.7 million of CapEx additions at each facility. We ended Q1 with a cash position of just shy of CAD 6 million, with an additional CAD 25 million of debt available from our previously announced debt facility. Which we drew CAD 2 million on subsequent to quarter end in early May to partially fund the Fraser Valley Biogas project, and we expect to draw an additional CAD 7.5 million from that facility before the end of Q2.
Moving on to revenues. Our revenues increased 18% year-over-year. This was mainly driven by increased organic feedstock and additional RNG production, combined with higher pricing, as well as the electricity revenue generated from the acquisition of GrowTEC in mid-2022. Net income, EBITDA and adjusted EBITDA, all decreased slightly between CAD 600,000 and CAD 800,000, and this was mainly due to CAD 600,000 of insurance proceeds recorded in the prior year. Overall, Q1 2023 was a successful quarter for EverGen, as we see our organic feedstock levels start to increase, and we look forward to continuing to grow both of our RNG and organic waste production operating segments. I'll turn it back to Chase.
Great, thanks. I think if we take a look at where we're at today, obviously, this is at the front end of our ramp up on our core assets in terms of both RNG production, but also incoming feedstock processing, where we receive tip fees. We believe EverGen's very well positioned to, you know, continue to, you know, re-rate and revalue closer to where we, you know, we see research price targets based on our existing market cap of CAD 42 million, with CAD 13.8 million shares outstanding.
You know, if we look at a 10 x EBITDA multiple on what will be a built-out CAD 8 million, you know, base EBITDA production from our core assets as we complete Fraser Valley Biogas, you know, that's a CAD 80 million valuation right there. We're seeing assets in this space transact in the teens, we're seeing companies with the growth profile of EverGen or even less of a growth profile, trade anywhere between 12x and 20x EBITDA. That's, that's really the opportunity that we're seeing at the moment. The debt position, as Sean mentioned, is bolstered by the credit facility that we have with Roynat and EDC that funds our growth from here on out. Next slide.
Really, what is, you know, continues to be our drive and focus is to continue to expand our profile across Canada. In addition to Fraser Valley Biogas, Pacific Coast Renewables, and Sea to Sky Soils in BC, growth out of GrowTEC, bringing that facility on line, increasing RNG production out of GrowTEC is a major focus for the upcoming quarter. As well as the completion of the Fraser Valley Biogas Construction Project, which we'll have updates on in the coming weeks. As we look across the country, really our, you know, our value as a platform or a renewable natural gas platform is driven off of the projects that we have in our pipeline.
Project Radius is one of those projects, and we've been looking at both debt and equity funding options at the project level. We expect to continue to move forward with that process. We've seen a lot of strong interest and some really attractive partnership options. With that, in terms of timing on Project Radius, we expect to firm up that funding in the next quarter or two, and then move forward thereafter.
I think what Radius represents is the opportunity that we see to get in early to RNG projects, act as that last-mile developer, partners with existing developers, and really bring a project from concept to FID or to a shovel-ready point, then work into construction with a partner if that makes sense, or do it on balance sheet if that is appropriate. Filling in the rest of the country, we've got, you know, interests in project as well as Quebec, and we've started to border. That's really expanding our pipeline, expanding our growth profile long term.
From a, you know, from a funding perspective, we talk about our debt facility, we talk about our cash position. We've also, you know, that we expect to have some positive news to share in the coming months as well, with respect to grant funding. We've applied for over CAD 20 million of grants at the Pacific Coast Renewables project and across other projects in our pipeline. Historically, projects in this space have received 30% grant funding on average from our calculations, and we've applied for those levels on various projects across our portfolio. The first of which is about a CAD 10 million grant that we expect to have news on in the coming months as well.
I think what that represents is just additional tailwinds that, you know, make our projects, which are already on their, on a, on a standalone basis, without grant funding, you know, economic and fit within our risk return profile, that much more economic and free up funding for future growth. I think the NRCan program is great in Canada for that. We've been waiting for quite a while for there to be a conclusion to their initial tranche of funding and expect to have some news shortly to share there.
The Inflation Reduction Act in the U.S. is really bolstering projects south of the border, and Canada has introduced measures in the last budget that continue to push towards a similar profile for funding that we see in the U.S. in terms of capital reimbursement for projects in this space. We're not quite there yet in terms of having the same level of tax credits that they have south of the border, but we're starting to see similar trends. That I think will only continue to make the space more attractive. Maybe just talking about upcoming catalysts and milestones, I'll turn it over to Mischa. Maybe we'll go back to the second slide, if that works, Sean.
Yeah, thanks, Chase. We've achieved two of our major milestones that we set out at the beginning of this year, and we've got a lot of catalysts coming in down the pipe as well. We're close to executing our definitive offtake agreement at Fraser Valley Biogas, which is essentially an extension of our existing facility offtake in place at that facility. Obviously, Biogas facility or facility... expected to come online early Q3. From there, we can focus our attention towards the GrowTEC facility and the expansion that we're undertaking at GrowTEC as well.
Great. Thank you. I think that's it for the quarterly update. As mentioned, you know, a very brief window since our year-end results, why don't we turn it over, Victoria, to any questions? Then, as Misha mentioned, we'll have some interesting news coming up in the coming months, and we'll certainly keep everyone posted.
I just wanna remind everyone, there's a Q&A box at the bottom of the screen. I guess I was just gonna start, you know, Chase, you guys mentioned, you know, higher revenue and EBITDA numbers based on, you know, incoming organic material, as well as, you know, selling more gas on the back end. How much more organic growth do you guys think you can squeeze out of the existing portfolio before some of these growth projects come online?
Yeah, I think that's our, been our thesis from the start, is to build facilities with contracted volumes, have additional upside in terms of being able to take additional waste into the front end of our facilities and sell additional gas. I think this last quarter, we saw that the benefits of having additional capacity at Sea to Sky Soils, getting additional volumes there. When you think about the organic waste market as a, you know, as a market, there are events that cause, you know, a near-term, you know, demand constraint. You've got waste that needs a place to go that was unexpected, whether it's a heat wave or a flood, or spoiled food, or that type of thing.
We have spare capacity now at our facilities, we'll continue to build out that capacity to take advantage of that, those short-term spot tonnages. I think when we look at that from a capacity perspective, from a volume of production, you know, what we're looking at building at Fraser Valley Biogas, Phase 1 is 160,000 GJ, and at GrowTEC, 80,000 GJ. Together, that's 240,000 GJ. It could additional. On a monthly basis, additional volume would be capacity that we look at processing through those facilities would be in the range of, you know, 10%-30%, depending on how we optimize the facility for additional gas production. Then on the processing side, we're really limited by our permitted tonnage.
When we look at what that growth looks like, we're growing from around 100,000 tons to about 300,000 tons of processing capacity across our facility. That's really the bought and paid for or built infrastructure that we'll have post Fraser Valley Biogas coming online and be able to take advantage of both spot tonnage and then produce additional gas from our facilities.
Okay, thank you. Sean, maybe this is a question for you, but just an update on receiving any further insurance proceeds over the next coming quarters. Just that's been a part of the story. Also building onto that, just any visibility into, like, the flooding season this year or mitigating factors that you can take to prevent something like that from happening again?
Sorry, what was the second part of that question, Victoria?
Well, the second part might be more Misha. I'm kind of combining them together.
Okay.
Just any mitigating factors to prevent such damage from flooding in any upcoming flooding seasons that happen just due to seasonality?
Sure. In terms of the insurance proceeds, we have about CAD 400,000 outstanding on our books, and we, currently, and we are hoping to settle that within the coming months. In terms of the policies, we have a two-year window to submit and settle all of our claims, so obviously everything will be wrapped up before the end of this year. We're definitely coming to a close in terms of the costs that are coming in. We're hoping to, we're hoping by the end of Q2, early Q3, that the flood is, the insurance related to the flood is done with and it's behind us.
In terms of mitigating the impacts of the flood, again, as part of the project at Fraser Valley Biogas, we're building all of the critical components of the facility above the flood line. Everything is being built four to six feet in the air. What that really does is that if there's another one in a 100-year or our insurer has pointed out it was a 200-year event, our critical components wouldn't be impacted, and we should still be able to operate effectively.
Okay, thank you. Sorry, I'm just reading some audience questions here. A few people just asking, moving over to GrowTEC, when do you expect GrowTEC Phase 2 construction to begin, or just what's the timeline for GrowTEC Phase 2?
I can take that one. Right now we're bringing GrowTEC Phase 1 online. As soon as that gets online, we're gonna start going full steam ahead and turning our attention to the feedstock side of getting GrowTEC Phase 2 sufficiently sourced from a feedstock perspective, such that we can proceed on a sort of to essentially double the capacity of that facility. We've done quite a bit of work to sort of assess the feedstock opportunities in that market, and we feel confident that it justifies sort of proceeding with Phase 2. I think as soon as we get Phase 1 online, we're gonna be moving ahead aggressively to achieve that Phase 2 production. I think we can expect Phase 2 to, you know, some type of FID on Phase 2 within, you know, 6 months from getting Phase 1 online.
Okay. Then can you share any updates on permits or timelines for Pacific Coast Renewables? Also any clarity in 2024 when this project should hit construction?
I think, yeah, I can start on that. I think one of the major catalysts for us on that project is receipt of some federal grant funding. I think that's a, you know, great endorsement, if and when we receive that funding for the project, and allows us to increase the profile, and it changes the time horizon on the project as well. As it stands, maybe just in-
Yeah, so we add some resources to sort of upgrade the facility, to upgrade the bunkering and the concrete work there, and the leachate capturing system to essentially make it sort of a world-class compost facility that's fully compliant with environmental regulations and city standards. I think the regulatory authorities, as well as the municipality or the City of Abbotsford, have taken note of these upgrades. On that basis, they've indicated a willingness to sort of expedite some of our building permits and some of the environmental permits that we require in order to start construction. I think it's we've got a firm sort of firm visibility into commencing construction kind of in 2024. I think right now we, you know, are.
We don't we're not probably in a position to give you a sort of a detailed sort of any further clarity other than, you know, it's progressing. We expect to commence construction kinda mid-2024. We're receiving a lot of positive indications from both the Ministry of Environment and the various the Agricultural Land Commission, as well as the City of Abbotsford as well.
Maybe just an update on where the CAD 6 million that you've spent on, Pacific Coast Renewables has been spent?
Sure, I can take that one. As Mischa Zajtmann just touched on, we've upgraded some of the existing composting infrastructure there. That makes up around a third that spend. The rest was really acquiring long-lead equipment relating to the RNG project, around 2/3 of that spend relates to the RNG project there.
Okay, then another question just asking about the scalability of the projects, asking, "Is it more efficient to build larger projects rather than building these out in phases?
I think it really depends on the project. I think we've always, as a platform, EverGen is focused on mixed-waste projects, so we're tackling facilities that are a little bit different than what you're seeing in the U.S. in terms of landfill gas projects or dairy projects predominantly ruling the day. That's done is put us in a position where we've, you know, we've got a formula for building out projects in municipal areas, where we're taking green bin waste, you know, commercial food waste, and agricultural waste, and we're doing it in stages that match the feedstock that we have on the front end. You know, others, other industry peers have facilities that are, you know, 5% or 10% full. That's not a position that we wanna be in, mostly because it's not economic to build that way.
In other projects, like Project Radius, where we're a very, very small part of the feedstock potential in the area, taking corn waste, agricultural crop waste, and manure, that, you know, that facility is scaled a lot larger. That's Phase 1 will be a CAD 80 million-CAD 100 million Phase 1, built out at scale because of economies of scale. We're comfortable in that project doing it that way because of the feedstock impact that our project will make on the surrounding area. That's being very small. That's, you know, that's kind of a convoluted answer, but we'll, you know, we'll tailor that to whichever operating environment that we're in.
I think that's where we've, you know, we've really specialized, and ultimately, the, you know, the size of the projects that we're seeing that make sense economically and make sense as a first-phase build-out are in that CAD 30 million-CAD 50 million size, with additional phases beyond that.
Any update on your business development initiatives, any plans to announce, you know, new projects or a timeline for new projects? Also, any thoughts on establishing operations in the United States?
I'll touch on that, then, Mischa Zajtmann, feel free to add. The, you know, the development pipeline that we've got, you know, there are six projects that are, you know, sit in our near-term development bucket. You know, any one of those, you know, could move into a core project for us. You know, like Project Radius, you know, move into, you know, a phase where it's very near, shovel-ready. You know, all competing with each other for, you know, you know, pole position in terms of which, you know, which one we think we'll go after first or in parallel. Those projects are in Eastern Canada. They're in the prairies, they're in Western Canada, and there are projects in the U.S. that are in that bucket as well that we're actively pursuing.
You know, again, our strategy has been to go after projects that are different than what others have chased and bid up in terms of cost. I think that also means there's a little bit more development work that we need to do to get them to a point where we're ready to move into construction. That's where those stand, and certainly we hope to be able to talk about multiple projects before the end of the year.
Would you be able to elaborate more on expected timelines for Project Radius?
I think, and I think from a timing perspective, we're, you know, we're focused today on finding the best partner for the project. With the large volume, the large scale, and the RNG production coming out of that project, there's a few different paths that we could go down. We're running those to ground, and when we look at other processes that have been run in the space, you know, I don't wanna overpromise on how quickly that can come to a conclusion. We're expecting, you know, towards the end of Q3 to be able to announce a partnership there and move forward on construction thereafter.
Do you have an estimated CapEx number in mind for GrowTEC Phase 2?
Yeah, I think, you know, I think previously we had talked about that being in the CAD 5 million-CAD 7 million range on a gross basis. I think when we look at, we look at that, there's still some work to be done in terms of the scale of what we're building. Then on the feedstock side, you know, the market currently for RNG production is really interesting. I think when we look at, you know, a Phase 2 at GrowTEC, you know, there's things like the CFR credits that are important to think about. You know, that's a long-term driver of RNG value, and the way those credits are attributed depends on the feedstock coming into the front end of the facility.
We will look to scale the CapEx depending on the feedstock mix that we decide to target that gives us the highest offtake price, long term. That's really our focus.
Have you seen any impact of inflationary pressures on RNG equipment?
Sean, if you wanna take that one or Mischa Zajtmann, but I think we've, like, what we've said previously is probably, you know, consistent, but we're starting to see it scale back. You know, I think the packaging, the packaged equipment out of Europe certainly has come up in price, or had come up in price significantly. Doing things with North American packagers was, you know, our workaround for that, and ultimately I think a really good result. You know, things like the concrete costs last year was a real challenge in British Columbia for sure. That, you know, that has come off as well. some of the short-term supply issues I would say have gotten better, but feel free to add.
Yeah, nothing really further to add. We touched on that at the last call, but we're not seeing anything substantial in terms of inflationary pressures on the cost of equipment. There is a bit on the labor side, which is impacting every industry and market. Obviously, we're all seeing that.
I guess then just that you guys are working on and have been forecasting for, they all still remain on budget and on track?
That's right.
Correct. A few more questions here. Any update on pricing for tipping fees?
Yeah, Mischa, do you want to take that one?
I think the dynamics in the market still remain in place, in that there's more waste and more organic waste out there, and less places that are permitted, and facilities like ours that can take it, which works favorably in terms of tipping fees for facilities like ours. The permitting barriers to establishing new facilities, at least in British Columbia and in most of Canada, are significant. As a result, you know, the facilities like PCR and Fraser Valley Biogas are gonna continue to get the benefit of that, as the alternative really is to ship the waste south of the border.
We have our contract in Abbotsford that is coming due. We hope and expect to recontract that contract at significantly higher tipping fees than what we're currently getting there. I think you're just seeing that dynamic continue, where landfill diversion of organic waste, that trend is continuing to trend upwards, and the amount of facilities that can take that waste just aren't keeping up.
Okay, last question. I just wanna remind anyone, if they do have any further questions, just put them in the Q&A box. What do you guys see as your competitive advantage?
Really, you know, important develop, owns, and operates projects, is to be able to develop and move those projects into operation. I think when we look at the way that we develop projects, you know, there's a lot of reliance in this industry on third parties. I think what we've, you know, what we've done in building out our team, you know, our, our operations team and our technical team allows us to, you know, do a lot of, you know, a lot of the early stage feasibility work in-house, to partner where, you know, where it makes sense with equipment providers and engineering firms on larger projects, you know, to get them to a point where those projects are shovel-ready, and then ultimately move them into, you know, the bucket that is ready for construction.
I think having that pipeline of projects and being able to develop them from, you know, a greenfield project into a shovel-ready project, typically takes about three years. You know, our approach has always been to partner with smaller developers and that have already started some of that work, come in and, you know, provide technical expertise to accelerate the conclusion, but also to make the project more economic long-term and more resilient. I think it's really that delivery model, being able to source projects, but then also bring them from concept to a true shovel-ready, you know, project that's been de-risked.
Sorry, one last question came in, and you guys already did touch on this in the slide deck, but just, maybe just reiterating, you know, how does the U.S. Inflation Reduction Act help EverGen?
Yeah, so it's that, you know, it's that project delivery model gives us a mechanism to take, you know, a large pipeline of projects and then execute them in a templated way. We're doing that, and we're showcasing that with GrowTEC and with Fraser Valley, and then, you know, with the next projects that are up for construction beyond that. I think, you know, that those projects, in particular, are mixed waste facilities, where we take both municipal and agricultural waste. The reason that that works in Canada is there's always or there's been a large offtaker willing to take gas from mixed waste projects, versus in the U.S., people are selling RNG into compliance-driven markets, so that have favored landfill gas and favored dairy projects.
That what our competitive advantage in the US is having expertise with mixed waste projects because of the Canadian offtakes that we see, and being able to link those two, you know, skills, if you will, you know, the relationships that we have with Canadian offtakers and the engineering capacity that we have for mixed waste projects. To target those types of projects in the US that are outside of the traditional, two buckets, and develop those in-house, get them, and get them to a point where they've been de-risked, we've got an offtake agreement, you know, we understand the feedstock market, and we're ready to move forward and break ground.
The 2023 budget in Canada left the door open for additional support for biogas. Any thought on what this could look like?
Yeah, I think that's, you know, for anybody watching this space, there, you know, there's a very strong hydrogen lobby that, you know, has done a great job of making hydrogen front and center with the Government of Canada. That's, you know, that's great. I think it's part of the future, but what is here and now is, and what it, you know, is a true transition fuel, that can be built out across Canada today is our Renewable Natural Gas projects. The Canadian Biogas Association has been pushing hard to raise, you know, raise that profile, and the door was left open in the sense that the budget mentions, biomass and biofuels projects as something that the government is considering for future tax credits.
I think really the opportunity is in this next six months to get in front of those bodies and make the case for why RNG and why now, with hope for inclusion in the Fall Economic Statement. I think it's, you know, I think there's work to be done, but I think it's, you know, it's a real upside in the sense that it makes sense. These are the types of projects that should be incentivized, that provide an immediate impact.
Okay, that concludes the Q&A. Chase, any last words?
No, I think that's, you know, that's all we had for today. Again, short, relatively short and sweet, but look forward to being in front of everybody. Thanks, thank you for the support, and thanks for joining, and being in front of everyone in the coming months on some of the key milestones that we have coming up.
Okay. Thanks, everyone. That concludes today's call.