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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Victoria, will you kick us off?
Yes. I'm just letting the attendees load here. So good morning, everyone. This is Victoria from Adelaide Capital and thank you for joining the EverGen Infrastructure Q1 earnings call today.
So with me, I have CEO, Chase Edgelow; COO and President, Mischa Zatjmann; as well as the 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.
And with that, I'm going to pass it over to Chase to walk us through the deck. I'll be back at the end. [Operator Instructions]
Great. Thanks, Victoria, and welcome, everyone. And we'll keep it relatively short and sweet today given that we just went through our broader corporate updates at year-end in May. But 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've got -- we transitioned from our historical core production out of our existing 4 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. So with that, I think in terms of the results themselves, just 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. And with that, I'll turn it over to Sean Hennessy to walk through our Q1 results.
Yes. Thanks for that, Chase, and welcome, everyone, to the Q1 update call. So 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 continue to progress our investments into Fraser Valley Biogas, Pacific Coast Renewables and GrowTEC with approximately $1.7 million of CapEx additions at each facility, and we ended Q1 with a cash position of just shy of $6 million with an additional $25 million of debt available from our previously announced debt facility, which we drew $2 million on subsequent to quarter end and early May to partially fund the Fraser Valley Biogas projects, and we expect to draw an additional $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 $600,000 and $800,000, and this was mainly due to $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 continue to grow both of our RNG and organic waste production operating segments. I'll turn it back to Chase.
Great. Thanks. So 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 received tip fees. We believe EverGen is very well positioned to continue to re-rate and re-value closer to where we see research price targets based on our existing market cap of $42 million with 13.8 million shares outstanding.
If we look at a 10x EBITDA multiple on what will be a built-out $8 million base EBITDA production from our core assets as we complete Fraser Valley Biogas, that's an $80 million valuation right there, and we're seeing assets in this space transact in the teens, and we're seeing companies with the growth profile of EverGen, or even less of a growth profile, trade anywhere between 12 and 20x EBITDA. So 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. And really what is -- continues to be our drive and focus is to continue to expand our profile across Canada. So in addition to Fraser Valley Biogas, Pacific Coast Renewables and Sea to Sky Soils in BC, growth out of GrowTEC, bringing that facility online, 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.
Then as we look across the country, really our value as a platform or a renewable natural gas platform is driven off of the projects that we have in our pipeline. So Project Radius is one of those projects, and we've been looking at both debt and equity funding options at the project level. So we expect to continue to move forward with that process. We've seen a lot of strong interest and some really attractive partnership options. So with that, in terms of timing on Project Radius, we expect to firm up that funding in the next quarter or 2 and then move forward thereafter.
I think what Radius represents is the opportunity that we see to get an early sort of RNG project, act as that last mile developer, partner with existing developers and really bring a project from concept to FID or to a shovel-ready point and then work into construction with a partner, if that makes sense, or do it on balance sheet, if that is appropriate. So filling in the rest of the country, we've got interests in projects that we're developing in the Prairies as well as Quebec. And we've started to see some really interesting projects south of the border. And so that's really expanding our pipeline, expanding our growth profile long term.
From a funding perspective, we talked about our debt facility, we talked about our cash position, but we've also got a third source of funding 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 $20 million of grants at the Pacific Coast Renewables project and across other projects in our pipeline. Historically, projects in the 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 $10 million grant that we expect to have news on in the coming months as well. So I think what that represents is just additional tailwinds that make our projects, which are already on their -- on a stand-alone basis, without grant funding, economic and fit within our risk return profile, that much more economic and free up funding for future growth. So I think the NRCan program is great in Canada for that. It's -- 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 the 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. And that, I think, will only continue to make the space more attractive.
And then maybe just talking about upcoming catalysts and milestones, we can -- I'll just turn it over to Mischa. Maybe we'll go back to the second slide, if that works.
Yes. Thanks, Chase. So we've achieved 2 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, the big one that we're really ramping up towards is the completion of our Fraser Valley Biogas facility or our facility upgrade there, which is expected to come online early Q3. And 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. So I think that's it for the quarterly update, as mentioned, a very brief window since our year-end results. But why don't we turn it over, Victoria, to any questions. And then as Mischa mentioned, we'll have some interesting news coming up in the coming months, and we'll certainly keep everyone posted.
Yes. So I just want to remind everyone, there's a Q&A box at the bottom of the screen.
So I guess I'm just going to start. Chase, you guys mentioned higher revenue and EBITDA numbers based on incoming organic material as well as selling more gas on the back end. So 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?
Yes, I think that have been -- our thesis from the start is to build facilities with contracted volumes but have additional upside in terms of being able to take additional waste into the front end of our facilities and sell the additional gas.
And I think this last quarter, we saw 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 market, there are events that cause a near-term demand constraint. So you've got waste that has -- needs a place to go that was unexpected, whether it's a heatwave or a flood or spoiled food or that type of thing. We have spare capacity now at our facilities, and 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, what we're looking at building at Fraser Valley Biogas Phase 1 is 160,000 gigajoules and at GrowTEC, 80,000 gigajoules. So together, that's 240,000 gigajoules. 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 10% to 30%, depending on how we optimize the facility for additional gas production.
And then on the processing side, we're really limited by our permitted tonnage, but 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 facilities. So that's really the [ buttoned baby ] 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. And then, 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. And then also building on to 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 Mischa. We kind of combined them together. But just any mitigating factors to prevent such damage from flooding in any upcoming flooding seasons that happen just due to seasonality.
Sure. So in terms of the insurance proceeds, we have about $400,000 outstanding on our books, and we -- at the current -- currently, and we are hoping to settle that within the coming months. In terms of the policies, we have a 2-year window to submit and settle all of our claims. So obviously, everything will be wrapped up before the end of this year.
But we're coming -- we're definitely coming to a close in terms of the costs that are coming in. So 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. So everything is being built 4 to 6 feet in the air. So what that really does is that if there's another 1 in 100 year or our insurance pointed out it was a 200-year event, we would -- our critical components wouldn't be impacted, and we should still be able to operate effectively.
Okay. Sorry, I'm just reading some audience questions here. So 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?
Yes. I can take that one. So right now, we're bringing GrowTEC Phase 1 online. As soon as that gets online, we're going to 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.
So we're -- 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. And I think as soon as we get Phase 1 online, we're going to be moving ahead aggressively to achieve that Phase 2 production. So I think we can expect Phase 2 to -- some type of FID on Phase 2 within 6 months from getting Phase 1 online.
Okay. And then can you share any updates on permits or timelines for Pacific Coast Renewables? And also any clarity in 2024 when this project should hit construction.
I think -- yes, I can start on that. I think one of the major catalysts for us on that project is the receipt of some federal grant funding, I think that's a great endorsement if and when we receive that funding for the project and allows us to increase the profile and changes the time horizon on the project as well. As it stands, maybe just in terms of what we've done to expedite the permitting, maybe, Mischa, do you want to touch on the upgrades that we've done in the project and the capital that we've spent?
Yes. So we've spent 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.
So I think the regulatory authorities as well as the municipality -- or the city of Abbotsford have taken note of these upgrades and 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. So I think it's -- we've got a firm -- sort of firm visibility into commencing construction kind of in 2024.
And I think right now, we don't -- we're not probably in a position to give you a sort of detailed sort of -- any further clarity other than it's progressing. We expect to commence construction kind of mid-2024. And we're receiving a lot of positive indications from both the Minister of Environment and the various -- the Agriculture Land Commission as well as the city of Abbotsford as well.
And then maybe just an update on where the $6 million that you've spent on Pacific Coast Renewables has been spent?
Yes. Sure, I can take that one. So as Mischa just touched on, we've upgraded some of the existing composting infrastructure there that makes up around 1/3 of that spend. The rest was really acquiring long lead equipment relating to the RNG projects. So around 2/3 of that spend relates to the RNG project there.
Okay. And then another question just asking about the scalability of the projects and 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.
What that's done is it's put us in a position where we've got a formula for building out projects in municipal areas where we're taking green bin waste, commercial food waste and agricultural waste, and we're doing it in stages that match the feedstock that we have on the front end. So other industry peers have facilities that are 5% or 10% full. That's not a position that we want to 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 facility has scaled a lot larger. So that's a -- Phase 1 will be an $80 million to $100 million Phase 1 built out at scale because of economies of scale. And we're comfortable in that project, doing it that way, because of the feedstock impact that our project will make on the surrounding area. So that's been very small.
So that's kind of a convoluted answer, but we'll tailor that to whichever operating environment that we're in. I think we're -- that's where we've really specialized. And ultimately, 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 $30 million to $50 million size with additional phases beyond that.
And then any update on your business development initiatives? Any plans to announce new projects or a timeline for new projects? And then also any thoughts on establishing operations in the United States?
I'll touch on that, and then Mischa feel free to add. But the development pipeline that we've got, there are 6 projects that are -- sit in our near-term development bucket. Any one of those could move into a core project for us, so -- like Project Radius, it'll move into a phase where it's very near shovel-ready or will break ground in the next 6 to 12 months.
So those projects are all competing with each other for pole position in terms of 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. I think -- again, our strategy has been to go after projects that are different than what others have chased and bid up in terms of cost.
And 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. So that's where those stand. And certainly, we hope to be able to talk about multiple projects before the end of the year.
And then would you be able to elaborate more on expected timelines for project Radius?
Yes. I think from a timing perspective, we're focused today on finding the best partner for the project. So 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, I don't want to overpromise on how quickly that can come to a conclusion. But we're expecting towards the end of Q3 to be able to announce a partnership there and move forward on construction thereafter.
And then, do you have an estimated CapEx number in mind for GrowTEC Phase 2?
Yes. I think previously, we had talked about that being in the $5 million to $7 million range on a gross basis. I think when we look at that, there's still some work to be done in terms of the scale of what we're building.
And then on the feedstock side, the market currently for RNG production is really interesting. I think when we look at Phase 2 at GrowTEC, there's things like the CFR credits that are important to think about. 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. So we'll look to scale the CapEx depending on the feedstock mix that we decide to target that gives us the highest offtake price long term. So that's really our focus.
And then have you seen any impact of inflationary pressures on RNG equipment?
Sean, if you want to take that one or Mischa, but I think we've -- like what we've said previously is probably it's consistent, but we're starting to see it scale back. I think the packaging -- 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 our workaround for that. And ultimately, I think, it really was a good result. Things like the concrete cost last year was a real challenge in British Columbia, for sure. That has come off as well. So some of the short-term supply, as you say, I would say, have gotten better, but feel free to add.
Yes, nothing really further to add. We touched on that on the last call, but we're not seeing anything substantial in terms of inflationary pressures on the cost of equipment. It's -- there is a bit on the labor side, which is impacting every industry and market. So obviously, we're all seeing that. But there's nothing -- we're not -- my point is that we're not really being hit with any surprises.
So I guess then, just with all of that, the projects that you guys are working on and have been forecasting for, they all still remain on budget and on track?
That's right.
Right. A few more questions here. Any update on pricing for tipping fees.
Yes, I think I...
Mischa, go ahead. Take that one.
Yes. Yes, so I think the dynamics in the markets still remain in place and 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. It's -- the permitting barriers to establishing new facilities, at least in British Columbia and in most of Canada, are significant.
And as a result, facilities like PCR and Fraser Valley Biogas are going to continue to get the benefit of that. The alternative really is to shift the waste south of the border. We have our contract in Abbotsford that is coming due, and we hope and expect to re-contract that contract at significantly higher tipping fees than what we're currently getting there.
So 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. And then so last question. [Operator Instructions] But what do you guys see as your competitive advantage or intellectual property that EverGen offers?
Yes. I think it's really important for an infrastructure platform that 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, there's a lot of reliance in this industry on third parties.
I think what we've done in building out our team, our operations team and our technical team allows us to do a lot of the early-stage feasibility work in-house, to partner where it makes sense with equipment providers and engineering firms on larger projects to get them to a point where those projects are shovel-ready and then ultimately move them into the bucket that is ready for construction.
And I think having that pipeline of projects and being able to develop them from a greenfield project into a shovel-ready project, typically takes about 3 years. Our approach has always been to partner with smaller developers and that have already started some of that work come in and provide technical expertise to accelerate the conclusion, but also to make the project more economic long term and more resilient. So I think our -- it's really that delivery model, being able to source projects, but then also bring them from concept to a true shovel-ready project that's been derisked.
And then -- sorry, one last question came in, and you guys already did touch on this in the slide deck, but just -- maybe just reiterating how does the U.S. Inflation Reduction Act help EverGen?
Yes. So it's -- that project delivery model gives us a mechanism to take a large pipeline of projects and then execute them in a templated way, and we're doing that and we're showcasing that with GrowTEC and with Fraser Valley, and then with the next projects that are up for construction beyond that. I think that those projects, in particular, are mixed waste facilities where we take both municipal and agricultural waste. And the reason that, that works in Canada is there's always -- 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.
So that's what our competitive advantage in the U.S. is, is having expertise with mixed waste projects because of the Canadian offtakes that we see and being able to link those 2 skills, if you will, the relationships that we have with Canadian offtakers and the engineering capacity that we have for mixed waste projects.
And so to target those types of projects in the U.S. that are outside of the traditional 2 buckets and develop those in-house and get them to a point where they've been derisked, we've got an offtake agreement, we understand the feedstock market and we're ready to move forward and break ground.
And the 2023 budget in Canada left the door open for additional support for biogas. Any thought on what this could look like?
Yes. I think that's -- for anybody watching the space, there -- there's a very strong hydrogen lobby that has done a great job of making hydrogen front and center with Government of Canada. And that's great. I think it's part of the future.
But what is here and now is -- and what is a true transition fuel that can be built out across Canada today is our renewable natural gas projects. And the Canadian Biogas Association has been pushing hard to 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 6 months to get in front of those bodies and make the case for why RNG and why now, would hope for inclusion in the fall economic statement. So I think it's -- I think there's work to be done, but I think 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.
I think that concludes the Q&A. Chase, any last words?
No, I think that's all we had for today. Again, short -- relatively short and sweet, but I look forward to being in front of everybody. And 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.