NOVA Infrastructure eyes additional investments in biofuels, RNG: interview
SUMMARY
Recently, NOVA has formed a strategic partnership with Nopetro Energy to establish a renewable energy platform called Nopetro Renewables.
By Shardul SharmaNew York-based NOVA Infrastructure is an infrastructure investment firm that focuses on middle-market opportunities in transportation, environmental services, energy and energy transition, communications, and other infrastructure sectors primarily in North America.
Recently, NOVA has formed a strategic partnership with Nopetro Energy to establish a renewable energy platform called Nopetro Renewables. The platform's main focus will be on renewable natural gas (RNG) and biofuels. As part of this collaboration, Nopetro Renewables will be involved in constructing one of Florida's landfill-gas-to-RNG facilities in Vero Beach.
Nopetro, founded in 2007, currently operates 16 compressed natural gas (CNG) fuelling facilities in the southeast, catering to government, waste, and industrial customers.
During a conversation with GasPathways, Stephen Denis, senior vice president at NOVA, discussed the compnay's interest in the biofuels and RNG industry in the US, as well as the plans to make further investments in this sector.
Q: NOVA recently announced its acquisition of Nopetro. Can you provide information on NOVA's previous investments in the biofuels/renewable gas (RNG) space?
A: Nopetro is NOVA’s first investment in the biofuels/RNG space – however, NOVA’s founders and senior advisors have prior investment experience in the biofuels space, and we look forward to leveraging that wealth of experience as we grow Nopetro. For example, Charlie Appleby (senior advisor) was formerly the CEO of Advanced Disposal (the 4th largest solid waste disposal company in the US before being acquired by Waste Management), where the company owned and operated numerous landfill-gas-to-power and landfill-gas-to-RNG facilities. Chris Beall (founder) was an investor in Advanced Disposal and a board member during its period of rapid growth.
Q: With NOVA's investment in Nopetro marking its seventh platform investment, is the company actively seeking additional investments in the biofuels/RNG sector in the near future? What kind of companies/businesses are you looking at?
A: NOVA and Nopetro are actively looking to make additional investments in the biofuels and RNG sector through our RNG partnership, Nopetro Renewables. We plan to focus on both new construction of RNG/biofuels facilities and opportunistic acquisitions of projects and operating assets. While Nopetro Renewables’ initial RNG facility will be located on a landfill, the partnership is evaluating a variety of RNG feedstocks for future investment.
Q: What factors attract NOVA to the biofuels/RNG space, and where is the expected growth in this industry? Who are the potential consumers or off-takers of biofuels/RNG? Is the utilisation of CNG for transportation the primary focus for RNG usage?
A: We saw this investment as a great opportunity to make a positive environmental impact. Emitted methane, including from landfills and dairies, trap heat in the atmosphere more effectively than CO2, meaning that these methane emissions, if not captured, can have a negative environmental impact. RNG facilities provide an infrastructure-based solution to capture this methane and refine it for use as a clean energy source. That certainly made Nopetro an attractive investment vehicle for us.
Demand for RNG is growing rapidly, driven by transportation demand for CNG, supportive regulatory frameworks, and a trend towards ESG for both investors and corporations. As a result, energy companies, gas utilities, and power-consuming corporates are seeking to decarbonize their fuel supplies, and RNG is an effective path towards decarbonization. The universe of RNG offtakers and consumers is expanding with this demand growth, and includes the transportation market (RIN or LCFS-linked), gas utilities (often fixed-price, long-term contracts), and ESG-focused corporation (additional potential for long-term contracts).
Q: Considering Nopetro's focus on the southeastern US, is NOVA currently exclusively interested in the US market or open to global investments in the biofuels/RNG sector? Is there significant government or state policy support for RNG in the US?
A: NOVA’s strategy is focused in North America, and Nopetro’s focus is primarily in the US. We also believe that the US, and North America as a whole, benefits from both federal and state / provincial support. The Renewable Fuel Standard offers RIN tax credits for biofuels production, but many states and provinces have introduced or are introducing RNG procurement requirements and targets, as well as voluntary tariffs applicable to biogas. NOVA expects these underlying trends to continue and increase in the future.
Q: How would you describe the industry structure in the RNG space in the US? Is it fragmented with multiple players, or are there dominant players or significant partnerships?
A: The RNG space in the US today is highly fragmented, with no major incumbents and an expanding universe of feedstocks – which are not just limited to landfills but also include agricultural sources (dairies, cattle feed lots), food waste, and wastewater treatment plants / other waste facilities. NOVA believes that these characteristics offer significant opportunity for Nopetro Renewables to deploy capital into the space.
