WM sale suggests sees end of organics in landfills
anderson recycleworlds.net
Until this business-news story below first suggested otherwise, Waste Management has always run high on its plans to optimize profits by exploiting growing federal incentives for so-called “renewable” natural gas.
The fact that the article indicates MW has suddenly reversed course and is now shopping its RNG landfill potential to private equity and energy firms strong suggests – though does not yet prove – it sees the hand writing on the wall that will wind down the obsolete practice of sending discarded organics to landfills.
That hand writing is the imminent launch of a Carbon Mapper satellite that will, twice each day, document the volume of methane escaping from their landfills. Just the limited data from drone flyovers during the past two years already has shown emissions are about three times the levels that they report, and I anticipate the final number will be closer to four times the fugitive emissions they have historically admitted to. That will show landfills to be the fourth largest source of greenhouse emissions and an urgent, high priority target for climate action plans. With last year having posted the highest temperatures in, likely, millions of years, the urgency to act, combined with the fact that hundreds of communities in North America have shown the way by already moved aggressively to divert organics away from landfills, means the door is rapidly closing for landfill RNG projects, too short to recover buyout premiums.
Only a fool would bite at WM’s offer, and private equity is no one’s fool.
Peter
REUTERS
Waste manager WM explores $3 billion sale of renewable natural gas unit, sources say
By David French and Isla Binnie
May 16, 20242:28 PM CDTUpdated 2 days ago
May 16 (Reuters) - Waste management firm WM (WM.N)
, opens new tab is exploring a sale of its renewable natural gas business that could be worth about $3 billion, according to people familiar with the matter.
The Houston-based company is working with JPMorgan Chase & Co (JPM.N)
, opens new tab to gauge interest from potential buyers, which could include energy companies and private equity firms, the sources said, requesting anonymity as the discussions are confidential.
WM is planning to offload the rights to develop RNG operations on 115 landfills that it owns, the sources said, adding the company would retain ownership of the landfills. RNG is methane captured from biological waste and converted into electricity or fuel.
If the deal talks conclude successfully, it would mark one of the biggest-ever asset sales in the nascent U.S. RNG industry. The largest sale was BP's (BP.L)
, opens new tab $4.1 billion takeover of Archaea Energy in 2022.
"We are always looking for ways to maximize the value of our renewable energy business for our shareholders, which may range from organic growth initiatives to partnerships or monetization through a sale," WM said in a statement.
JPMorgan declined to comment.
WM had planned to invest about $1.2 billion between 2022 and 2025 to grow the RNG business. The firm now wants to spend that capital in other areas, the sources said.
The company had forecast the RNG unit would contribute more than $500 million of adjusted earnings before interest, tax, depreciation and amortization (EBITDA) by 2026. It currently generates about $150 million of EBITDA, according to the sources.
WM is hoping the unit's valuation would be comparable to, or exceed, the earnings multiple at which Morrow Renewables sold RNG operations at landfills to Enbridge (ENB.TO)
, opens new tab in late 2023, the sources added. Should it meet that valuation, WM will get in the ballpark of $3 billion, the sources said.
RNG's environmental benefits include the reduction of natural gas usage and capturing climate-warming emissions that would otherwise escape into the atmosphere. However, it is more expensive than natural gas, which is also experiencing a period of prolonged low prices.
WM, whose shares have risen by about 25% over the past year, is one of the largest U.S. trash and recycling collection companies. The firm's fleet includes more than 12,000 trucks running on compressed natural gas and it recently signed a sustainability partnership with Major League Baseball.
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Reporting by David French and Isla Binnie in New York; Editing by Anirban Sen and Lisa Shumaker
Our Standards: The Thomson Reuters Trust Principles.