Progressive EnergyCo LLC (Progressive Energy) is a developer of renewable natural gas projects that turn cow manure into green natural gas and reduce methane greenhouse gas and generate a new source of revenue for dairy farmers. Progressive's first project is built and operating commercially and we are seeking funds to help us accelerate our next six projects. Renewable Natural gas reduction projects are both a very powerful reduction in greenhouse gases / a major focus of the Inflation Reduction Act (more on that in a bit) and a major source of new revenue and profits for dairy farmers / ag in general across the U.S. with particular emphasis on the Midwest. Renewable Natural Gas projects also promise expanded profits for ethanol producers in particular and agricultural operations in general. Our business is going nicely but we wish to ramp it faster and the likelihood of a very profitable exit in three to five years is very real based off of recent transactions (by Shell, BlackRock and BP) in the market. We are seeking a minimum of $600,000 to $1,000,000 in funding to help us expand out of Wisconsin to selected other states in the U.S. We would be open to a larger raise (perhaps $5 to $10 million or more) if an investor wanted to really ramp our model nationally. We could ramp very fast as Macquarie Capital, which we will talk about below, is willing to invest over $1 billion in equity into our projects and we have good sources of tax-free debt to also support projects.
Here is a copy of our pitch deck:
Slide 1) Progressive EnergyCo LLC (Progressive) is a Developer of Renewable Natural Gas Projects (RNG)
•Project revenue generated through the Low Carbon Fuel Credits in California’s (CARB) Low Carbon Fuel Standard (LCFS)market and EPA Advanced RINs
•Progressive’s first project is fully funded, built, and commercially operating at Zahn’s Farms in Northeast Wisconsin (more on that project on a coming slide)
•Capital cost of the project at Zahn’s was $58 million
•A large portion of the capital cost included design to expand capacity up to 200%, expansion is currently underway. In addition, the design and build are repeatable
•Progressive was paid a $650,000 Development Fee at financial close
•RW Baird issued $38 million in tax-free bonds to the Nuveen and Franklin Funds
•Nuveen has indicated they have an appetite for all future bond flow we generate
•$20 million in equity from Macquarie Capital (coming slide) and the host dairy
•Progressive holds a 30% interest subordinate to the equity interest in the project
•Progressive has developed a pipeline of additional projects (Coming Slide)
•Future projects have estimated capital costs of $35 to $40 million each
Slide 2) The Importance of the Inflation Reduction Act Regarding Renewable Natural Gas Projects
•RNG Projects are a major focus of the Inflation Reduction Act (IRA)
•Why RNG Projects:
•Methane is 25 times worse than CO2 as a Greenhouse GAS (GHG)
•Methane has a half-life of 10 years whereas CO2 has a half-life of 200 years
•It is imperative that methane be reduced by 2030 to meet Greenhouse Gas reduction targets. Animal manure represents 1/2 of those GHG emissions
•Incentives for RNG projects under the IRA are very generous
•Clean Fuel Production Credits (section 45z)
•Up to 45% Investment Tax Credit (section 48) (50% if we don’t sell tax-free bonds)
•Macquarie can monetize ITCs internally to other investments inside Macquarie
•There is no cap on amount of funding under the IRA for qualified RNG projects
•Section 45Q carbon capture incentives for sequestration of CO2 are $60+ / ton
•We are able to capture CO2 produced in the digesters (we will file a patent soon)
Slide 3) Who is Macquarie Capital and Progressive’s Deal with Macquarie
•Macquarie Capital (Macquarie) is a wholly-owned subsidiary of Macquarie Group
•Macquarie Group is a subsidiary of Macquarie Bank of Australia and is Publicly Traded
•Macquarie Group is similar to Goldman Sachs with a market cap of ½ of Goldman
•Macquarie Group is 50% in the U.S. & is the largest infrastructure investor in the world
•Macquarie Energy is #1 and #2 in wholesale electric and natural gas in the U.S.
•Progressive’s deal with Macquarie includes a $650,000 to $1,000,000 development fee for EVERY RNG project signed that is paid at financial close
•Macquarie pays directly for all engineering, permitting, lawyers, and other development costs freeing Progressive to ramp up development efforts without distraction
•In addition, Progressive earns a 30% profits interest on every project which is paid after Macquarie earns a minimum return
•Progressive’s deal with Macquarie will allow Progressive to “piggyback” Macquarie’s stated exit strategy to sell in 3-5 years (See the Next Slide for Comparable Sales)
•Expected value is both strategic to buyers and affected by LCFS and RIN Pricing
Slice 4) Recent Comparable Acquisitions in the Market Have Had Very High Valuations
•In November 2022, Shell announced they were buying (it has since closed) RNG producer Nature Energy for $2 billion. Nature Energy had 14 RNG facilities operating in Europe from animal manure and a pipeline of roughly 20 projects
•In July 2022 BlackRock acquired Massachusetts based Vanguard Renewables for $700 million. Vanguard Renewable had 6 RNG facilities (all cow manure) operating in the U.S., all which are smaller than those Progressive is developing. Vanguard also had a pipeline of 10-20 additional possible projects
•In October 2022, BP acquired Archaea Energy for $4.1 billion. Archaea is one of the leaders in RNG in the U.S., making RNG from landfill gas. What is startling about this deal is that BP paid approximately 20X 2025 projected EBITDA.
•In June 2022, Chevron acquired the Renewable Energy Group for $3.15 billion. While much more diversified in renewables than the prior three examples, again the acquirer paid a well over a 10X multiple of future forecasted earnings.
•More markets coming on: Oregon (now), British Columbia (now), Washington State (now), Balance of Canada (2023), Colorado (in feasibility study), Midwest (MN, IA, SD, NE) (being discussed/studied), Northeast (incrementally expanding)
Slide 5) Progressive’s Pipeline of Projects
•As previously discussed, Progressive’s first project, Zahn’s Farms, is fully operational and commercially producing RNG
•Zahn’s Cost $58 million to build and is fully funded
•Zahn currently has about 7,000 lactating dairy cows and is expected to expand by 200% by bringing in manure from nearby farms and RNG from additional projects
•Progressive has fully signed 2 additional dairies and is working with Macquarie on engineering, permitting and bond financing. Expected financial close and payment of development fees in Q1 2024
•Progressive has a third dairy project expected to sign in 3-6 Weeks
•Further, Progressive has three additional dairies expected to sign by year end
•All of these dairy projects are located in Wisconsin
•Progressive is working on a number of additional prospects in Wisconsin and expects significant deal flow in coming years. Macquarie has the appetite to fund all of these.
•Progressive has begun work on prospects in TX, KS, NE, IA, and CA and will ramp up these efforts with the requested funding or as other deals close
Slide 6) Potential Value of Progressive On Exit
•NOTE - Progressive IS NOT making predictions on the exit value of the company, as that depends on a number of difficult to predict market factors
•With that said, the healthy valuations from similar comparable transactions are a strong indicator of the Progressive value even in the midst of current low LCFS Prices
•The values in the LCFS market have gone from over $200 per ton of carbon to under $100 in recent years largely due to the flood of Renewable Diesel projects that have come on line (about 5 billion gallons).CARB has proposed a number of market rule changes to get the LCFS values back up. Most analysts expect an LCFS Price of $125 to $150 or better (Progressive has a separate evaluation of the CARB efforts available for the ask)
•RIN values have been strong since the EPA won a Supreme Court Decision overturning the Trump Executive Order exempting small oil refineries from the RFS
•Progressive also has a firm offtake (on Volume not Price) deal in place with BP
•Progressive and Macquarie use highly proven technology eliminating technology risk
•Investors will need to review our Risk Factors prior to making an investment
Slide 7) Brief Background on Progressive’s Key Personnel
•R. Nick Cioll
•CEO and acting President in Energy Companies for 6 years
•CFO of major (over $ a billion in revenue) and lesser companies for over 15 years including a division of Freeport McMoran, TriEagle Energy, and Sperian Energy
•Chief Risk Officer of TXU (a $36 billion energy company at the time)
•Completed $10 billion of M&A deals during career and over $10 billion of financings
•BS in Economics, MBA in Finance, MS in Financial Economics, CPA - LSU and Loyola
•Bernie Hoffman
•Lead engineer at ICM (built half of the Ethanol Plants in the U.S.) for nearly 20 years
•Chief Operating Officer at Babcock & Brown Biofuels
•Petroleum Engineer and middle management in energy and banking for 15+ years
•BS in Petroleum Engineering and MBA University of Kansas
•Steve Spensley
•Founder and former owner of Spensley Grains
•Former top salesperson for Archer Daniels Midland
•Deep ag sales connections in the State of Wisconsin
Slide 8) The Investment Opportunity / What we are Asking
•We believe that the current valuation of the company is at least $15 million using very conservative metrics; recent public RNG transactions and particularly our 30% profits interest in the funded and operating Zahn project with total capital cost of $58 million
•We have also fully signed two new projects and are moving forward to finance and begin construction
•We have 4 more projects that we expect to sign (minimum 2-3 but likely all 4)
•We have a large pipeline of potential projects
•We plan to expand into multiple states
Slide 9) The Ask
•We are seeking to secure financing for between 4% of the company ($600,000) to 7% of the company ($1,050,000)
•This will allow us to expand into our target markets outside of Wisconsin
•We are very open to a bigger deal to expand nationally across the U.S. and this could involve an investment of $5 to $10 million
Slide 10) Use of Proceeds / Summary
•We plan to use the proceeds to accelerate the grow of the Progressive
•Without additional funding, we will have to hit the “pause button” on future projects beyond the current six high priority projects (two of which are signed and a third about to sign) and would slow the development of the last three of the current six
•Without additional funding, we will also have to delay our planned expansion into TX, KS, NE, IA and CA
•With this additional funding we can move forward in this favorable market that is developing and in time to capitalize on the Inflation Reduction Act benefits
•If we do a bigger deal, we can quickly expand into the top ten dairy states as well as few niche markets and we have very good business development people wanting and ready to go
Contact Info:
Nick Cioll
CEO
Progressive Energy
[email protected]469-951-3264
Bernie Hoffman
COO
Progressive Energy
[email protected] 316-833-6474