IPO Watch: This renewable energy play has growing revenues on the table
Link copied to
The march towards net zero will require significant investment in both renewable energy and carbon abatement, yet companies operating in these two spaces on the ASX are few and far between.
With renewable energy and carbon abatement forming two of the three industries which it operates in, LGI Limited is keen to address this shortcoming with its initial public offering to raise $25m through an issue of 16.67 million shares priced at $1.50 each.
However, unlike many ASX hopefuls, the company already has significant revenues and earnings from the 26 projects that it developed and operates on landfill sites owned by local councils across Queensland, New South Wales and the ACT.
These include seven renewable energy generation facilities – with an eighth to be commissioned in October this year, which generate biogas from landfills to in turn generate renewable energy while abating carbon emissions and managing waste.
Proceeds from the offer, which opens today and closes on September 23, will be used to install more power capacity and battery storage on its existing power generation projects, build more biogas flares for abatement projects and to pay down debt.
“We operate in the sweet spot where waste management converges with renewable energy and carbon abatement,” LGI managing director Adam Bloomer said.
“We benefit from strong tailwinds in each of these markets because our operations are end-to-end, capturing biogas and using it to generate renewable energy and carbon credits.
“There’s an increasing need for decentralised, dispatchable generation, rapid growth in demand for renewables, and a heightened focus on decarbonisation.”
LGI has three streams of revenue. Renewable electricity, greenhouse gas abatement, and site infrastructure and management.
Its renewable power stream involves the installation of power generation systems on landfills.
These feature long-term agreements of 15 years or more with governments that give the company rights to recover and beneficially reuse biogas as well as building and operating power facilities.
Seven plants are currently in operation with an eighth to be commissioned at Toowoomba in October and another to be built in Nowra next year.
Carbon abatement involves the installation of flaring systems on landfills.
By burning biogas – typically methane that has many times the global warming potential of carbon dioxide – the company has the option to generate Australian Carbon Credit Units, which it does at 15 of its 26 sites.
LGI’s remaining revenue stream involves the installation, operation and management of biogas extraction infrastructure and flaring systems for landfill owners to reduce emissions.
Highlighting the value of having multiple revenue streams, the company has forecast revenue of $31.3m and earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $13.3m.
And the company isn’t stopping there.
It has estimated that there are more than 200 landfill sites in Australia that could support commercially viable carbon abatement or renewable energy generation projects.
These provide the company with plenty of room to build a range of generation assets across the country which leverage its proprietary technological solutions, innovative contracting approach and highly efficient operating model.
LGI also intends to design, install, and maintain hybrid renewable power hubs using a combination of biogas from landfill, energy storage and other renewable sources such as solar power.