The GNR Québec Capital L.P. investment fund was created by Xebec Adsorption, Inc., a global provider of clean energy solutions that include biogas conditioning, and Fonds de solidarité (the Fonds), a capital development fund that channels the pension savings of Quebecers into investments. Xebec and the Fonds each invested $10 million initially into the partnership. Financing will be directed to the agricultural and municipal sectors, providing access to the capital and expertise needed to develop and operate efficient AD facilities to treat organic waste. Creation of a fund of this type for RNG projects is a first in Québec.
“This is a fund for equity investments into projects, in particular the early stage — similar to angel investing and venture capital — where the risk is higher and it is undetermined if a project will be viable or not,” explains Kurt Sorschak, Xebec’s President and CEO. “This stage presents the biggest barrier currently for projects to go to market and we see the investment fund helping to unlock new projects that otherwise wouldn’t have been able to progress. The fund has the capabilities to invest in all RNG projects, but the focus is on infrastructure for anaerobic digestion of source separated organics (SSO) due to the diversion of organic waste from landfills. The biogas conditioning/upgrading component to produce RNG represents approximately 25% of the total project value.”
Over time, GNR Québec Capital could receive an aggregate $100 million in equity capital from Xebec, the Fonds and other investors. The initiative could, with a 75:25 debt to equity ratio, fund 12 to 15 RNG projects in Québec with an aggregate investment of $400 million over the next decade, adds Sorschak. RNG project development is being encouraged by the Quebec government. Its 2020-2021 budget allocated $70 million to support RNG production and distribution up to 2022. This measure follows the passing, in March 2019, of regulations mandating the minimum quantity of RNG to be delivered by natural gas distributors at 1% in 2020, and 5% in 2025.
For its part, the Government of Canada announced on April 24, 2020 an updated timeline for introduction of the Clean Fuel Standard (CFS). The objective of this standard is to achieve an annual reduction in greenhouse gas emissions of 30 million tons by 2030 by stimulating investment and innovation in low-carbon-intensity fuels and enabling cost-effective compliance. “RNG can accelerate the decarbonization of sectors such as transportation, home heating and industry, by supporting the circular economy through organic waste responsive management activities,” noted the Fonds’ Dany Pelletier, Vice-President for investments. “This initiative also meets the Fonds’ objectives for a just energy transition by creating jobs and supporting local economies with additional revenue streams for farmers, municipalities, and industry.”