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Shell to Buy Danish Biogas Firm for $2 Billion

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Shell said on Monday it will acquire Denmark-based renewable natural gas (RNG) producer Nature Energy for almost $2 billion in a deal that it expects to deliver "double-digit returns."

The UK major said it will buy 100% of the company from its current owners — hedge fund Davidson Kempner Capital Management, London-based private equity firm Pioneer Point Partners and Danish pension fund Sampension.

The purchase — funded from within Shell's previous 2022 capital spending guidance of $23 billion-$27 billion — continues a trend of majors buying biofuel assets this year to advance their transition agendas.

BP said last month it would buy US landfill gas specialist Archaea Energy in a $4.1 billion deal, while Chevron announced in February that it would acquire biodiesel producer Renewable Energy Group (REG) for $3.15 billion.

Natural Energy is Europe's largest producer of RNG, a purified form of biogas that is chemically identical to conventional fossil natural gas and can be carried by existing pipelines and distribution networks.

The Danish company has 420 employees and derives its RNG from agricultural, industrial and household waste. It has 14 plants in operation and is on course to produce around 3,000 barrels of oil equivalent per day of RNG in 2022.

Competitive Option

Shell said it will also acquire Nature Energy's infrastructure, feedstock supply and its portfolio of development projects, which consists of around 30 new plants to be built in Europe and North America.

More than one-third of them are in the medium-to-late stage of development in Denmark, the Netherlands and France, and they could deliver as much as 4,400 boe/d of additional production by 2030, Shell said.

The UK energy major has an existing animal waste-based RNG production business in North America, with one site already operating and four under construction.

It also trades RNG, selling it to trucking companies and marine customers, Shell said, noting that the fuel is a competitive option in sectors of the economy where it is otherwise difficult to reduce carbon emissions.

"Acquiring Nature Energy will add a European production platform and growth pipeline to Shell's existing RNG projects in the United States," said Shell's downstream director, Huibert Vigeveno.

"We will use this acquisition to build an integrated RNG value chain at global scale, at a time when energy transition policies and customer preferences are signaling strong growth in demand in the years ahead."

The transaction, which is still subject to regulatory approvals, is likely to be one of CEO Ben van Beurden's last M&A deals before he steps down at the end of the year.

The deal is expected to close in the first quarter of 2023, by which time Van Beurden's successor, Wael Sawan, will be in charge at Shell.

Nature Energy will continue to operate under its current name at first. The acquisition is "expected to be both accretive to Shell's earnings from completion and deliver double-digit returns," the UK major said.

Topics:
M&A, Corporate Strategy , Biofuels (incl. SAF), Majors
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