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Suburban Propane Partners, a distributor of propane and other energy products and investor in low-carbon energy alternatives based in Whippany, New Jersey, announced its subsidiary, Suburban Renewable Energy, has acquired a platform of renewable natural gas (RNG) assets from Equilibrium Capital Group, a sustainability-driven asset management firm located in Portland, Oregon.
"This investment meaningfully advances our strategic goal of building out a renewable energy platform to help drive the energy transition to a low carbon economy,” says Michael Stivala, president and CEO of Suburban Propane. "We look forward to building upon and advancing this opportunity as we seek to leverage Equilibrium's seasoned management team with a well-established network of operators, engineering and construction providers and off-takers and a strong commitment to sustainable investments."
The purchase price of $190 million for the two operating facilities, with transaction fees and expenses, will be funded with borrowings of approximately $120 million under Suburban's revolving credit facility and the assumption of about $80 million of outstanding green bonds with interest.
In addition to the purchase of two operational biogas facilities, the parties have formed a partnership to serve as a long-term growth platform for the identification, development and operation of additional RNG projects. This includes the existing pipeline of identified RNG projects that are in various stages of development.
According to a news release from Suburban Propane, the partnership aligns with its ongoing strategic initiatives to invest in the energy transition to cleaner alternatives. It also provides immediate and meaningful scale to Suburban's existing renewable energy investments and assets portfolio. It also includes RNG projects that are currently operating and a pipeline of RNG projects to be developed.
The partnership also expands Suburban's operational expertise in RNG through the ongoing involvement and partnership with the Equilibrium team and provides a platform for accelerated growth in the renewable fuels sector. It also enhances Suburban's position in the RNG market as a drop-in replacement for traditional natural gas, which will benefit from tax credits under several state low carbon fuel standards and the Inflation Reduction Act of 2022.
Suburban says it expects the partnership to be accretive to its distributable cash flow in fiscal year 2024 as earnings benefit from ongoing expansion and production efficiency efforts.
The RNG platform will include the following assets and the formation of an RNG development company with Equilibrium, as follows:
large-scale RNG facility in Stanfield, Arizona, that is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline,
an operating facility in Columbus, Ohio, that is currently receiving tipping fees from several food and beverage providers for processing food waste into fertilizer and biogas and has an active development project to upgrade the biogas into RNG for use in the transportation sector
option rights for a third RNG facility in the Midwest that is currently being developed by Equilibrium, and
the creation of a development company to invest in and develop roughly $155 million of future RNG projects, of which Suburban Renewables will own about 70 percent and Equilibrium will own 30 percent once such projects are funded fully.
The platform is diversified across feedstocks, geographies and revenue streams and complements Suburban Renewables' ongoing activity to construct, own and operate an RNG facility at Adirondack Farms in Peru, New York. While the company says the acquisition will immediately enhance and increase Suburban Renewables' presence in RNG production and distribution, the partnership with Equilibrium through the joint venture arrangement will provide visible growth and experienced management in the rapidly developing waste-to-energy economy.
RNG can be produced from multiple organic waste streams, including agricultural and food waste, helping to reduce methane emissions while offering a low-carbon solution as a drop-in replacement for traditional natural gas.
"Bio-fuels and renewable natural gas are now mainstream commodities in the transition to low carbon energy and decarbonization of our economy,” says Dave Chen, CEO of Equilibrium Capital. “The major challenge will be scaling cost-effective production supplies to meet market demand. Equilibrium is taking our experience investing in, developing and operating scalable RNG production infrastructure and partnering with Suburban's market leadership and expertise in gas logistics, trading and user applications, to build assets that drive towards these goals."
The parties have cleared the necessary regulatory approvals for a simultaneous signing and closing of the transactions. Wells Fargo Securities, LLC served as the exclusive financial advisor to Suburban. Evercore served as the exclusive financial advisor to Equilibrium Capital Group.
For more information on this partnership and acquisition, click here.