In the United States (US), Suburban Propane Partners, L.P. (Suburban Farms), a nationwide distributor of propane, renewable propane, and related products and services, as well as a marketer of natural gas and electricity and investor in low-carbon fuel alternatives has announced that its wholly-owned subsidiary, Suburban Renewable Energy, LLC (Suburban Renewables), has recently reached an agreement to acquire a platform of renewable natural gas (RNG) assets from Equilibrium Capital Group (Equilibrium), a leading sustainability-driven asset management firm.
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The RNG platform to be acquired 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 (NY).
While 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.
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. We are excited to be partnering with the Equilibrium team, which has a proven track record of sourcing, developing, and managing high-quality renewable natural gas-producing assets, said Michael Stivala, President and CEO of Suburban Propane.
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.
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; including an existing pipeline of identified RNG projects that are in various stages of development.
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 scalable platform complements our existing portfolio of renewable energy assets, either as a stand-alone RNG distributor or as a pathway to rDME and hydrogen production, Michael Stivala said.
Biofuels and renewable natural gas are now mainstream commodities in the transition to low-carbon energy and decarbonization of our economy. 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 toward these goals, said Dave Chen, CEO of Equilibrium Capital.
The purchase price of US$190.0 million for the two operating facilities, along with transaction fees and expenses, will be funded with borrowings of approximately US$120.0 million under Suburban’s revolving credit facility, and the assumption of approximately US$80.0 million of outstanding green bonds with an attractive interest rate.
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 (AZ) 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 (OH) that is currently receiving tipping fees from several large 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;
- The creation of a development company to invest in and develop approximately US$155.0 million of future RNG projects, of which Suburban Renewables will own approximately 70 percent and Equilibrium will own approximately 30 percent once such projects are fully funded.
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.