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Good morning, everyone. Thanks for joining us today. We have an update with EverGen Infrastructure who just reported their Q2 numbers, This webinar will review those numbers and have a Q&A section. For anyone that's brand new to the story, I'd recommend checking out some of the previous webinars on the Adelaide Capital YouTube channel because this really will be about the quarterly numbers and as always, this session will contain forward-looking statements. If you'd like to know more about those, you can find them on the presentation on the website.
With that out of the way, I'd like to introduce the EverGen management team. So Chase Edgelow, CEO; Mischa Zatjmann, President and COO; and Sean Hennessy, CFO. Thanks for joining me today, guys.
Thanks, Deborah. Thanks for hosting us, and thank you, everybody, for tuning in to our Q2 earnings call here.
Sounds good. So why don't you walk us through some of the numbers, and then we'll do Q&A at the end.
Great. Thanks. I'll kick off and then pass it on to Sean. I think if you take a look back at Q2, what you'll see is we really delivered on a number of our key milestones that we've set out for our core expansion projects. And that's what really excites us.
As we head into Q3 and the end of the year here, what we'll be doing is ramping up our production at GrowTEC and as well as bringing on our newly expanded Fraser Valley Biogas infrastructure. So I think -- with both of those two key projects under our belts, we're set to deliver $8 million to $10 million of EBITDA from bought and paid for assets, and that's really the crux of this exciting time for EverGen.
If we take a look back at the key milestones that we have to get to 420,000 gigajoules, really the construction projects were the main ones and I think a testament to our team's hard work and determination. We've been able to deliver both of those projects, keeping them within budget in a really challenging environment when we've seen a number of other RNG projects see 30%, 40% cost expansion. We've kept ours under control. That's coupled with an award that we received for a grant at our PCR project, really, I think, sets the stage for EverGen's growth in the coming months.
As we look forward to the back half of the year, we've got a couple of key milestones for investors to look out for. The execution of the long-term offtake at Fraser Valley Biogas. You'll see that come in connection with bringing the expanded facility on as well as with our Project Radius. We'll touch on that at the end of call here and moving into the development phase of PCR post the award of the grant funding that we received, the $10.5 million grant from NRCan.
I think with that, we'll jump into the quarterly results. We'll give a brief recap at the end and then leave a bit of time for questions.
Yes. Thanks for that, Chase, and welcome, everyone, to the Q2 results call. So as Chase has touched on during Q2, we were -- we continued to progress on the delivery of our projects and we're extremely excited with the successful injection of RNG at our GrowTEC facility in Alberta as well as continuing to move forward with our Fraser Valley Biogas projects worth approximately $2.8 million of CapEx additions during the quarter. Our Q2 2023 cash position of $9.5 million was bolstered through the drawdown of the previously announced debt facility, and those funds are being used to partially finance the Fraser Valley Biogas projects.
Looking at the P&L results. Revenues were down slightly relative to Q2, mainly due to lower R&D production associated with downtime at Fraser Valley Biogas during the course of construction. However, revenues year-to-date remained consistent with last year. A real highlight for the quarter was we're seeing the benefits of cost management through significant reductions in both our direct operating costs as well as our G&A costs.
These are being driven by lower disposal costs through operational improvements taken throughout the course of the prior year and lower consulting fees through in-sourcing. Overall, net income decreased by $270,000 and that was mainly driven by $700,000 of insurance proceeds received recorded during last year. And adjusted EBITDA was relatively consistent with last year, with the decrease in insurance proceeds offset by the reduction in expenses.
So in summary, Q2 2023 continues to pave the way for EverGen with first gas at GrowTEC and the progression on the Fraser Valley Biogas projects, which when complete and coupled with the already implemented cost management is expected to generate a significant uptick in net income and EBITDA from our RNG production operating segment.
I'll pass it back to Chase to continue the remainder of our presentation.
Great. So I think if everyone is familiar with our company or if you're not, if you're a new shareholder, investor joining this call. Certainly, we've got a full presentation. We talk about our balance sheet, we look at our peer comparables on that presentation available on our website and we'll have an investor update call shortly coming in the fall.
Just for a quick recap, we are a relatively clean capital structure, our 13.8 million shares outstanding drives our market cap and you can look at our options and warrants. But for the most part, those are -- there's no significant options or dilutives in our capital structure. We have some warrants left over from the IPO that we're at a [ $10.50 ] strike price.
If we look at our cash position and balance sheet, this is really what allows us to execute on our core growth projects plus add additional expansion projects and pipeline projects to our portfolio. Our debt position is $15.4 million with the drawdown on the first tranche, as Sean mentioned on the Roynat facility with EDC. I think what that shows in this market that we've been able to access additional forms of capital, and we really haven't tapped the leverage that our assets can withstand -- what we're seeing on similar projects is 50%, 60% leverage. And when we look at our capital structure, we're well below 30% leverage in terms of equity and debt invested.
And then finally, I think our research coverage universe and obviously, we've got a few of these analysts on the call, and thank you to them for their coverage. They go into detail. If you need access to those reports, please reach out to us, and we can set that up. But overall, we're looking at an average target price of just south of $6 and 128% return to current share price.
Just taking a step back from the quarterly, I think really what we used Q2 to do was to set the stage for growth in the back half of this year. When Sean talks about downtime at Fraser Valley Biogas due to construction, just a little bit more context on that, we took the opportunity during construction to go into both of our producing digesters at Fraser Valley Biogas. And without getting too technical, if you look at the production impact of what we were dealing with, which was a facility that was 10 years old, there is about -- we were operating on one of 6 agitators and these are giant propellers that stir the organics in our digesters at Fraser Valley Biogas and that agitation causes gas production or is correlated to gas production.
We're operating on one of 6 due to wear and tear and events of the last few months taking out electrical systems or last few years taking out electrical systems. We've now gone into both digesters, clean them out. So we've increased the productive capacity by removing sentiments and we now are operating on 6 of 6 agitators. So we should be able to really increase our gas production from digesters 1 and 2, and then with completion of construction, we bring on digester 3, and that really drives our RNG production at Fraser Valley Biogas.
With GrowTEC, we're about halfway through ramping up gas production there and one of the nuances at GrowTEC is our productive capacity increases in the wintertime. So there is some seasonality to our annualized gas production [ there ] and July and August are the months where we've got the lowest gas production due to pipeline capacity this year. We're looking at ways to continue to optimize so that we could push Phase 1 capacity beyond our design. But currently, that's the operational reality that we're dealing with.
We need to go back a slide, Sean. So I think I just -- just to cap off, wanted to leave with a bit of color on what we're seeing in terms of the market. And again, there's more information in our investor deck. But what we've seen in the past three years since inception of EverGen is a real boom in the RNG sector, a lot of excess capital, particularly in the U.S. chasing assets and bidding those assets up. And platforms like EverGen that, in some cases, have taken on more than they could chew. And ultimately, what that means is we're seeing a number of assets out there that are available to us. So -- and we see ample opportunity for additional growth outside of our existing portfolio.
So we will continue to evaluate those opportunities, look to do accretive transactions. But I think just within our own portfolio, we're laser-focused on delivering Fraser Valley biogas, GrowTEC, ramping those projects up, ramping up gas production into the end of the year, and then we're shifting focus to PCR, our expansion at PCR and delivering Project Radius. I think that's a project where we've gone out and sought external debt and equity capital. It's -- Phase 1 is a $80 million to $100 million build depending on exactly how we tackle Phase I. We've identified a partner there, we're working closely with them on diligence, and we'd expect to have news before the end of the year on the next phase of Project Radius, which is moving into construction.
So with that, I think we'll turn it back over to Deb and answer any questions that came up through the call.
Sure. I've got a couple of audience questions.
So can you talk through your unannounced project pipeline in detail, timing, magnitude, type of project, geography?
Sure. I think in typical fashion the project pipeline is going to change. In some cases, it involves working with smaller developers. So there's only so much that we want to disclose for competitive purposes or that we would disclose based on the status of those projects and evaluation that we've been doing.
Ultimately, if we look at it, there are around 8 to 10 projects at any given time that we're evaluating closely. These could be projects that look like Fraser Valley Biogas when we acquired it, facilities -- existing legacy facilities in need of optimization where our team can come in and evaluate expansion capabilities of that facility and look to provide capital as well as RNG expertise to owners that may be smaller or farm-based owners that may not have that expertise in-house. There are projects like Project Radius, which are greenfield projects that we're working with smaller developers that, again, don't have specific RNG expertise and/or access to development capital.
And then thirdly, I think there are assets that others have held that they're not able to pursue, and we're sifting through those for good projects. So for context, for size and scale, I think there are projects in our pipeline that look like Project Radius and are very repeatable large-scale projects that we would likely bring in a co-investor to accelerate those. We will continue to own and operate projects like that with the minority interest and bring in a larger partner to provide funding. And there are things that we can take on with our existing means and those look like more like project or projects at Fraser Valley Biogas and GrowTEC.
Can you provide updated thoughts on what you're seeing for tipping fees, both high level and by project?
Yes. Mischa, do you want to touch on that?
Yes, sure. So the tipping fee environment remains constructive. What we're seeing is more waste being diverted from landfill, more organic waste being diverted from landfill, and less facilities available and permitted to take that waste in. And that's definitely the dynamic in the region in British Columbia, and that's translated to across Canada as well as more municipalities are implementing an organic waste collection program and diversion program.
So we're also seeing more stringent requirements to get these facilities permitted by the Ministry of Environment. We're in the fortunate position to have facilities that are permitted, that are able to take these types of feedstocks in and what that's translating to ultimately is a constructive tipping fee environment for us, and we think that we'll be in a position to translate that into higher tipping fees for EverGen in the near term.
And can you provide updated thoughts on what you're seeing for offtake arrangements, both high level and by project?
Yes, sure. I think the offtake market continues to be the bright spot in terms of tailwinds or the brightest spot. What we've seen is a transition. And I think we talked about this when we went public is FortisBC was out buying gas early. They had the first program 10 years ago, to pay for RNG because of the carbon negative attributes that it brings their entire portfolio. So paying a premium for gas on a 20-year fixed price contract due to localized BC goals. And then what we saw at the time of our IPO was a number of other utilities that had similar mandates to have 15%, 20% or 30% RNG in their portfolio by a certain date.
And the difference between now and the time of the IPO is they had aspirations to do that. Now they're off signing contracts. I think we've talked about [ Energeo ] in the past and their program where they can pay up to $45 a gigajoule. So they're paying a premium to what we're seeing from other utilities although the volumes are a little bit smaller than what we're seeing for demand from the U.S. that's the utility side of it, and that's sticky and it's long-term contracts, and it's driven by percentage mandates for them to have RNG in their system.
Then beside that, what we're seeing is the credit markets driving value. So that is either the California LCFS market and the U.S. RIN market where any buyer of RNG is seeing value and attributes that allow them to pay an overall R&D price that is somewhere between $30 and $90 a gigajoule depending on the attributes in the gas. I think the newest iteration or the newest set of buyers on the market are strategics that have exposure to global markets that are also looking to RNG to be that transition fuel that gives them a lower carbon intensity for their emissions, whether it's shipping emissions, manufacturing or otherwise, and that's really brought a new set of strategic buyers to the market. So ultimately, we're seeing continued strength, continued price appreciation on a long-term fixed price basis. And the more -- the spot market continues to fluctuate based on carbon credit pricing. So that spot market really is referring to the California and U.S. RIN market. Those are bouncing around strengthening at the moment. But ultimately, it's the long-term offtake agreements that we're seeing get stronger and stronger.
And at what point do you increase leverage to peer average? How do you expect to utilize this capital?
Sean, do you want to touch on that one?
Yes, sure. So as most people will probably be aware, some of our -- all of our assets are quite under leveraged. We're actively looking at new opportunities to raise debt against those underleveraged assets to utilize that capital for expansion within those existing assets and to be able to optimize the production capacity of those assets as well as utilizing that capital to expand on pipeline projects as well.
Okay. And I had another question on funding. The federal grant fully funds the PCR project for growth beyond that, such as GrowTEC Phase 2, Project Radius, et cetera. Can you provide some color on levers available to the company to boost liquidity upon these projects? I guess you already touched on debt. So any others that you have available that you're thinking of?
Yes. I mean specific to GrowTEC, there's no debt in that subsidiary. So with Phase 2, we would be looking to put in a loan debt to be able to fund the majority of the CapEx expansion for Phase 2 to optimize the RNG production and we also have the opportunity to draw on a debt facility for the existing asset as well because, as I touched on, this zero debt at the operating asset at the moment, which just came online the end of June.
I think as we look at larger projects like Project Radius, I think that would be a good example of what's available in the market. Certainly, we continue to have inbound interest on co-investing in projects and leaving EverGen in an operating position with a carried interest or the types of deals that we're seeing. We want to be -- we won't be selective on that because ultimately, our goal is to grow the platform and the best way to grow our platform is to have 100% working interest exposure to as many projects as possible. But if there's an opportunity to bring in external capital and conserve our capital for future projects that have a higher rate of return, certainly, we're open to co-investment opportunities. And that has been sort of continued interest and inbound interest. We haven't run a process on anything other than Project Radius and we've been pleasantly surprised with the access to capital that we have, even in the current market with interest rate pressure where it is and what we're seeing from other industries.
And is the potential for additional federal grants, what were the key terms and requirements that were required to secure the $10.5 million federal grant?
Do you want to touch on that, Sean. I think just maybe -- overall the grant funding that we've applied for and then what pushed us over the edge on EverGen, I can talk to.
Yes, sure. So, I mean, we actively monitor all of the grounds available. And I believe we have somewhere and a round of 10 grants outstanding with -- if we are successful with all of those, we'll be looking at somewhere between $40 million and $50 million of ground proceeds. So it's really making sure that the grants that are released are applicable to our projects. We're seeing more and more of those grounds come into the space and more and more government support on our projects. So whenever there's a grant available, we're actively monitoring that. And if it's applicable to either our current projects or future projects where we're actively applying for those.
Okay. Moving on from funding. GrowTEC, when should we expect the project to ramp to full production? And how should we expect electricity sales to decline now that Phase 1 is complete. Is this mainly due to pipeline capacity for Phase 2? When should we expect a final investment decision and more detail on the project economics? Is it possible to provide ballpark cost estimate. It's a bit of a run on question. It's the first one, if anyone needs to revisit it and answering it.
Yes, I can take the first part of that question. So Phase 1, we're ramping up right now. And as Chase touched on, the timing of going of the project coming online was probably the worst timing in terms of pipeline capacity. We're seeing production volumes in line with our expectations, and this we've been able to tweak operations at both our end and with the pipeline as well to open up additional capacity. In terms of electricity sales, no electricity sales will continue throughout the project. That's something that's unique with GrowTEC. The unit that produces electricity is required at the facility to provide the heat for the digesters. So we will still be producing electricity at that facility as well, and I expect that the level of electricity sales in terms of the volumes would remain consistent. Obviously, we're subject to the spot market there, so pricing can change.
And then in terms of Phase 2, we're actively evaluating our opportunities to expand GrowTEC and want to do that with data that we get from production coming on in Phase 1. Our goal is to have a detailed design for Phase 2 in place towards the end of this year and be ready to move into construction next year depending on where we land on that design, that's going to fluctuate our CapEx. So I don't want to comment on exactly how we see that CapEx playing out, but I would say it hasn't changed from our expectations at acquisition.
And what would the EBITDA run rate be post ramp up at Fraser Valley and GrowTEC by year-end?
So post ramp-up, I think if we look at Fraser Valley, the ramp-up period post completion of construction for projects. It's typically in the realm of 3 to 6 months. At Fraser Valley, its going to be shorter than that because we're already ramped up, we're already producing out of that facility, about half of our expansion volumes, and we're continuing to ramp up through the month of August from bringing our digesters back online in June so we're already on that ramp curve. Once we're fully ramped up at Fraser Valley Biogas and GrowTEC and with our existing assets contribution, we are expecting $8 million to $10 million of EBITDA and the majority of that is on fixed price contracts -- long-term fixed-price contracts. So really that is driving, from our perspective, our underlying valuation of our core assets that are in production. That's where we think we're heavily discounted given what we've delivered to date relative to, say, 12 months ago, we've eliminated almost all of the construction risk, and we're in that ramp period. The ramp-up timing, we think we're going to be largely complete ramp-up at GrowTEC by the end of the year and then Fraser Valley Biogas will be midway through ramp-up, expecting to fully ramp up in Q1 but certainly, from a plan perspective, we're executing on the plan. We're going to see those -- that ramp-up in our production volumes reflected in the next couple of quarters, and we're going to be moving as close as we can towards that $8 million to $10 million run rate EBITDA.
Sorry, I was still on mute. There's one more question that I had related to that. Sorry, there's a few in the chat. What is the expected timing on the remaining $2.5 million contingent consideration for GrowTEC? Is the $2.5 million number, correct, given $3.5 million on the balance sheet and post quarter payment of $1 million?
Yes, I can touch on this. So the -- for GrowTEC, there's two contingent consideration payments required of $2 million each. In our financial statements, we disclosed as a subsequent event that we paid $1 million of this post June 30. We're working on -- there's some nuances in the settlement of the second half of that, so we're working on being able to release those funds and those funds are currently tied up in our restricted cash balance. In terms of the second payment of an additional $2 million, that's tied to the successful integration of Phase 2 of the project.
Okay. And moving on to Project Radius. Do you expect to be in a position to move forward with construction shortly after an announcement? Can you touch on how the deal would be structured and whether there would be further equity contributions from EverGen?
Sure. I think with Project Radius, the timing of construction really is working around seasons. I think we're -- we look at -- there is a time of year on Ontario where it's not ideal to start construction, given breaking ground and pouring concrete costs can be avoided later in the year. So where we're looking at and I think where we've been for a while here is construction would begin in 2024. The structure of the deal, I don't want to say anything that's confidential at the moment. But what we're seeing in terms of offers in the first phase was certainly what we had expected in terms of EverGen continuing as operator of the assets, receiving a developer fee upfront and then it carried interest in the project. So goal being that we've got flexibility if we want to increase that working interest and contribute more capital. But our goal is that there's no further funding required for Radius Phase I. That said, we're really excited for what Project Radius means to the RNG space. It is a project that uses about 5% of the feedstock in any given area. So it's different than a lot of the projects that we see in the sector. It's using proven technology and with look-a-like facilities in Europe, but first of its kind in North America. And what we like about that is it leaves us a fairly open fairway to template that design across jurisdictions that mirror Ontario, and there's quite a number that we've been looking at. In particular, in the U.S., I think with the ITC credits available, the returns are significantly greater than without ITC credits. And right now, that's a real advantage for us is taking projects that we've templated and then -- and looking at places that we might be competitive in the U.S. and then activating that and that certainly is a portion of our pipeline.
I did have a question about that, which you just answered. Just to answer the second part. are there other tax incentives or incentives from the U.S. government on the IRA program other than ITC?
So we've seen an evolving market in terms of what those credits look like. We're certainly active looking at assets. And what it looks like is there are also production credits and that some assets are available. There's some additional credits available. So I think the answer is yes, I think the longevity of those programs, I think, is the question -- so what we're looking at is assets that can be brought into production quickly or where we can leverage off of design work that we've done in Canada. I think the other important note on that is what's happening north of the border. I think we want to -- we want to stay focused on our core. And one of the key incentives that has been discussed and is, I think, tabled for evaluation is a similar program in Canada. So we're looking at -- we're looking towards the full economic statement to see if RNG projects are included in the tax credit schemes that the federal government has announced. And I know our industry group is lobbying hard in that respect. And so we're expecting to see -- we're hopeful to see some inclusion there that would significantly increase the economics on our existing portfolio.
Makes sense. And then moving on to PCR. Any updates on PCR, how is permitting going?
Yes. I can take that. So the permitting process is ongoing with PCR. As you know, we've upgraded that facility significantly and mostly adding [ retake ] capture systems and bunkering -- concrete bunkering in place. That's really put us in a strong position with the Ministry of Environment who are now hopefully going to be in a position to deliver a permit on that facility for the expanded RNG project. Once that's in place, that should fast track us with our other permitting avenues that we're working on concurrently with both with the City of Abbotsford and the Agricultural Land Commission. So we're making progress there. It's slow going, as I'm sure you are aware, in this regulatory environment in Canada at least and BC permitting has definitely been -- a time lines on permitting and being a headwind as they taken longer than anyone in the industry would like them to. But that's certainly -- we're certainly making progress, and we're happy with where that's moving in at the moment.
And then on the construction time line, I think what we've seen is if we look at Fraser Valley Biogas as an example, our strategy has shifted as we're trailblazer in the RNG space in Canada in terms of how we want to deliver projects. And so as Mischa talks about, permitting is the first step. Once that is clear, we can move into a much tighter construction time line than we've seen on our previous projects. So that's really the goal, I think from a construction standpoint, we believe we can get construction down to almost 6 months if we've got the right conditions and everything is fully permitted.
And you've invested $5 million in PCR versus total cost of $32 million to $35 million. Just to make sure, does that mean you have $25 million to $38 million left to spend on that project?
Yes, that's right. I think if you look at the grant funding of $10.5 million, that's an endorsement for the project that, along with a source of funding, that plus the $16 million credit facility that we have with Roynat and EDC is about $26 million. So we expect the additional equity contribution to be minor based on the design of the facility and that $35 million CapEx is total CapEx and certainly, we have spent $7 million -- $5 million to $7 million in total on that facility.
And then moving on to Fraser Valley, it appears that roughly half the spending is still required post Q2 to reach COD. Can you provide some color on what is still required and the timing of the remaining CapEx spend, how quickly could the project ramp to full capacity?
Sure. I think if you look at our construction, I think we press released that we were 75% complete. We've made steady progress over July and the first couple of weeks of August here. The remaining construction is relatively minimal in terms of what hasn't been done to date. There's some utility connections and there is the implementation of our compressor skid and tying that into the existing piping that has been installed. So Sean can touch on additional details in terms of how invoicing typically works, but we're well ahead of that as we've got good line of sight to what the total cost of that project will be. And the reality is that the majority of the work has been completed. The second part of the question, can you repeat that, Deb?
Yes, for sure. So it was how quickly can the project ramp to full capacity or timing the remaining CapEx spend.
Yes. So I think the timing of the remaining CapEx, most of that CapEx has been spent. It will probably be straddled over Q3 and Q4, Sean, just in terms of invoicing.
Yes.
And then in terms of ramp-up, we're -- historically, the facility is down about 80,000 gigajoules of production. We're surpassing that now with daily production numbers that we're seeing post digester cleanout? and our budgeted production post completion of the expansion is 160,000 gigajoules. We're going to continue to ramp up beyond 80,000 gigajoules here as we move into September and October. As we complete construction, we're then limited by the timing of bringing on our thermal oxidizer, which is a new piece of equipment that is designed to lower our emissions. But ultimately, that is expected to come online in October, November, and then we're ramping up to that 160,000 gigajoule level. So months, I think, is the answer to that, whether it's 3 months or 6 months will depend on just the timing of bringing on those additional pieces of equipment. And I will be a [ steady ] and when I say 3 to 6 months, when are we going to hit that peak, 160,000 gigajoules, I think, is the biggest question. I think we'll be well north of 120,000 gigajoules in the short term.
And when do you expect to have the new offtake in place? Will it be easier since you just finalized the GrowTEC offtake?
Yes. We're in advanced discussions on the final version of an offtake agreement there and guidance that we've got is that we're going to have an execution-ready document here in September in advance of construction completion.
Okay. And then nonrecurring G&A was $614,000 in first half of '23 but was the same amount in the first half of 2022? Why do you classify it as nonrecurring?
Yes. So I mean why do we classify it as nonrecurring? Because they're typically only recurring during that quarter, it's a one-off expense. The biggest driver of the nonrecurring expenses this year was the diversion costs that we had to pay from transferring our organics from -- between our facilities, while PCR was under construction. As I recall, I think we're seeing a drop-off in those nonrecurring G&A costs in Q2, and we expect those to continue to drop off in Q3.
And then going back to the tax incentive question. We had a follow-up. Do you expect an ITC and RNG in the fall economic statement would apply to GrowTEC and Fraser Valley?
That's a good question. I think certainly to future expansion phases that we haven't constructed yet. Typically, we're not seeing these being backward looking in the U.S. The ITC is applied to anything that was pre-COD or basically preproduction for those that are not familiar with the term. So there's a possibility that it will apply to some of the historical CapEx if it is included in the follow-on economic statement. I think what we've seen historically is this legislation has been relatively slow to turn into programs that you can actually write a check against whether that -- so whether that fall economic statement means that we're waiting for the budget for details and whether that we can argue that CapEx that was spent in 2023 applies when the program doesn't begin until March 2024 in earnest, would be what we'd be looking at and certainly trying to thread that needle and hopeful that we could.
And a follow-up question for Fraser Valley. How much would the additional digestate storage costs?
It's a question that it depends on a number of factors. I think when we look at digestate storage the optimal outcome for us is that the manure that we bring in from the farmers can go back as digestate and the challenge that we have at Fraser Valley is just a seasonal challenge. So manure comes in throughout the year, the spreading of digestate is only allowed during certain months or the spreading of manure is only allowed during certain months outside of the rainy season. So we've historically dealt with digestate storage as an operating cost, and that's the way we've built it into our models.
Additional digestate storage depends on whether or not we're taking that digestate off-site or dealing with an on-site, I think that whatever we're investing there in CapEx would be offsetting existing operating costs. So -- but I mean, this is an accretive expansion if we did it, and it would be in the context of $1 million or $2 million with that type of equipment, and we would be looking for a 3- to 4-year payback versus OpEx.
And final question. Do you have enough organics for your RNG projects? I guess, [ Energeo ] was mentioning that they're having feedstock issues at multiple sites.
Yes, I think that's something that we've thought about and as we get compared to others in the space. And I think when we look at our organics, first of all, the majority of the organics that we've got coming to our facilities today are under long-term contracts. The market that we're going after in the Lower Mainland of BC, is organics that are already diverted, they are going to either composting or landfill, multi -- multifamily homes, industrial and commercial organics. And that product is already being diverted. I think where -- we've seen issues in the U.S. California as an example, has talked about putting those programs in place and having mandatory diversion of those organics from landfill. In BC, we already have that diversion happening. So we're not waiting on legislature to see feedstock come our way. It's currently bypassing our facility and we're looking to bring it in at a competitive cost to the alternative. So the answer is that we see more than enough organics in the market. We think our pricing is competitive, and these are a spot market. So we're hoping that we can transition that to a longer-term contracted market, but ultimately, we're looking at the flows of organics, the pricing that we can provide and the abundance of that as mitigation for any [ feedstock ] risk. The flip side of that is Project Radius where all of the feedstock will be spoken for and under contracts with local aggregators for organics in terms of crop residuals and manure. So it really depends on which projects. And when I talk about the market here, I'm really comparing the market in BC to the market in California.
Okay. I don't see any other audience questions. Is there anything you wanted to talk about today that we didn't touch on?
No, I think that was just about everything in a comprehensive update, just to leave our shareholders and investors with the excitement that we have, moving into this period of growth that has been a long time coming, and it's really a testament to the hard work and dedication of our team. And certainly, Jamie, our VP of Ops who's not on the call here, has been watching pennies at Fraser Valley Biogas and ensuring we deliver those projects on budget. I think that sets us apart in the space. It gives our platform tremendous value. I think outside of just our core project expansions and the EBITDA growth there, we have a pipeline of projects, and we're seeing platforms continue to attract significant valuations from strategics that are looking for the only carbon negative energy source that we have right now in market and that's RNG. And that's why we focused here the returns, the abundance of capital and the lack of platforms that are able to deliver. I think that's really what's going to set us apart in the next few months.
Okay. And maybe just for investors, maybe you could give us what you anticipate in terms of catalysts over the next 3 to 6 months?
Yes. To focus on the key catalyst for us that is it's bringing on Fraser Valley Biogas, completing construction there. In connection with that, signing a new long-term offtake agreement at Fraser Valley Biogas, continuing to ramp up gas production at GrowTEC and Fraser Value Biogas on the back of construction completion. And then I think we're going to continue to evaluate opportunities and grow the projects in our pipeline towards entering our core in terms of new development projects. So we're very active there, and it's a really interesting time where we're seeing less competition on the smaller end projects than we had in the past. And I think that's going to be a very good thing for EverGen.
Awesome. Well, I appreciate the update. Thanks to everyone that participated and for your questions and thanks to you guys for taking the time to update everyone.
Yes. Thank you, everybody. Thanks for your support.
Thanks.