The acquisition provides opportunity for synergies between the acquired assets and Suburban's existing investments in rDME, hydrogen and RNG.
Suburban Propane Partners will acquire a platform of two operational renewable natural gas assets from Equilibrium Capital Group for $190m, according to a press release.
The acquisition provides opportunity for synergies between the acquired assets and Suburban's existing investments in rDME, hydrogen and RNG, the release states.
The transaction will be funded with borrowings of approximately $120m under Suburban's revolving credit facility, and the assumption of approximately $80m of outstanding green bonds.
A large-scale RNG facility in Stanfield, Arizona is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline. An additional operating facility in Columbus, Ohio 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.
There are option rights for a third RNG facility in the Midwest currently being developed by Equilibrium.
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.
The development company will invest in and develop approximately $155m of future RNG projects, of which Suburban Renewables will own approximately 70% and Equilibrium will own approximately 30% once such projects are fully funded.
Wells Fargo Securities, LLC served as exclusive financial advisor to Suburban. Evercore served as the exclusive financial advisor to Equilibrium Capital Group.
It is expected to be accretive to Suburban's distributable cash flow in fiscal 2024 as earnings benefit from ongoing expansion and production efficiency efforts
"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,” Michael Stivala, President and Chief Executive Officer of Suburban Propane, said in the release. “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."
In early 2022 Suburban made a 25% stake sale in Independence Hydrogen for $30m. Independence Hydrogen, of Ashburn, Virginia, was advised by Energy & Industrial Advisory Partners. Suburban was assisted by Proskauer Rose.