Xebec Adsorption Inc.(Xebec), a Canada-headed provider of gas generation, purification, and filtration solutions for the industrial, energy, and renewables marketplace and Fonds de solidarité FTQ have announced the creation of the GNR Québec Capital L.P. investment fund. With an initial capitalization of CA$20 million, this new investment vehicle aims to increase renewable natural gas (RNG) production in Québec.
Partners, particularly from the agricultural and municipal sectors, will have access to the capital and expertise needed to develop and operate efficient facilities to treat organic waste. The creation of a fund of this type for renewable natural gas (RNG) projects is, according to Xebec, a first in Québec.
Xebec and the Fonds will each initially invest CA$10 million into the partnership. Over time, Xebec and the Fonds expect that the partnership could receive an aggregate CA$100 million in equity capital from Xebec, the Fonds, and other investors.
Our partnership with the Fonds de solidarité FTQ is a great demonstration of how local players can work together to foster the development of the renewable natural gas industry. When we launched this initiative a few years ago, we realized the need for new and better-adapted structures to co-invest, develop, and operate these facilities in a professional manner. Quebec has become a leading RNG province in Canada and currently has several RNG facilities in operation. Considering that new government regulations, such as the Clean Fuels Standard, will soon come into force and that the need for a higher renewable natural gas content will increase over the next few years, particularly in the utility sector, we are pleased to partner with the Fonds de solidarité FTQ to accelerate the deployment of renewable gas infrastructures. Going forward, Xebec will seek to create more of these valuable financial partnerships in the field of RNG waste-to-energy conversion in Canada and will continue its mission to bring leading-edge technologies to the sector, said Kurt Sorschak, President and CEO of Xebec.
Xebec and the Fonds’ initiative could, with a 75:25 debt to equity ratio, fund 12 to 15 RNG projects in Québec with an aggregate investment of CA$400 million over the next decade. The general partner, GNR Québec Capital Management Inc., overseen by a Board of Directors nominated by Xebec and the Fonds will be managing the partnership.
We’re proud to once again partner with Xebec to increase the Fonds de solidarité FTQ’s impact in the fight against climate change. Renewable natural gas can accelerate the decarbonization of sectors such as transportation, home heating, and industry, by supporting the circular economy through organic waste responsive management activities. This initiative also meets the Fonds’ objectives for a just energy transition by creating jobs and supporting local economies with additional revenue streams for farmers, municipalities, and industry. Xebec is a worldwide leader in renewable gases, and we are excited to have them as a partner in this project for the large-scale rollout of renewable natural gas facilities in Québec, said Dany Pelletier, Vice President for Investments – Structuring Capital, Energy, and Environment, Fonds de solidarité FTQ.
A first-of-its-kind investment vehicle for Canadian RNG projects
This partnership is an innovative initiative that brings together industry participants (waste management companies, gas utilities, farmers, municipalities) and major financial institutions with a clear mandate to invest in organic waste treatment facilities for the production of RNG.
The market for renewable natural gas in Canada is still in its infancy. In this context, Xebec and the Fonds de solidarité FTQ view this partnership as an essential step to develop and promote the expertise and efforts needed to accelerate the replacement of fossil fuels while supporting sustainable and responsible long-term investment in a waste-to-renewable gas economy in Canada.
GNR Québec Capital L.P. believes that it could play a significant catalyst role in helping to meet government objectives of reducing greenhouse gas emissions and increasing the use of RNG while supporting existing developers.
Last March, the Quebec government’s 2020-2021 budget allocated CA$70 million to support RNG production and distribution up to 2022. This measure follows the passing, in March 2019, of regulations mandating the minimum quantity of RNG to be delivered by natural gas distributors at 1 percent in 2020, and 5 percent in 2025.
For its part, the Government of Canada announced on April 24, 2020, an updated timeline for the introduction of the Clean Fuels Standard (CFS). The objective of this standard is to achieve an annual reduction in greenhouse gas emissions of 30 million tonnes by 2030.
It will do so by stimulating investment and innovation in low-carbon-intensity fuels while enabling cost-effective compliance. Xebec expects that the implementation of the ASC will create significant opportunities for the Canadian renewable gas industry over the next decade.
