Greenlane Renewables (Greenlane Renewables Stock Quote, Chart, News, Analysts, Financials TSX:GRN) was a TSX star last year, delivering a massive 460 per cent in 2020, but the stock has pulled back considerably in recent months. A sector-wide slowdown in the red-hot cleantech and renewables is partly to blame but there’s more to Greenlane’s story, according to portfolio manager Bruce Campbell.
“Greenlane is one that we have used as a past Top Pick and it’s one that we used to own in our portfolio. We did get stopped out of it,” said Campbell, president of StoneCastle Investment Management, speaking on BNN Bloomberg on Tuesday.
“GreenLane is obviously in a sector that we think is going to have tremendous growth over the next decade. They’re in the renewable natural gas business, and the thing that differentiates them is that they have multiple technologies to produce renewable natural gas for their customers,” he said.
Vancouver-based Greenlane, which reports its first quarter 2020 results on Wednesday after market close, provides biogas upgrading systems for waste producers, gas utilities and other project developers, delivering natural gas from organic waste sources such as landfills, wastewater treatment plants, dairy farms and food waste.
The company has continued to pick up contract wins even through the pandemic, in its fourth quarter 2020 gaining $18 million in new contracts including a $7.7-million supply contract for a multi-site dairy farm renewable natural gas (RNG) project in Florida and a $10-million RNG project in the United States for an international energy company.
The company has a lot of business ahead of it, too, showing a sales order backlog up 180 per cent year-over-year by the end of 2020, with a sales pipeline of over $720 million. Meanwhile, last year, Greenlane signed a joint venture agreement with SWEN Capital Partners in Paris, France, for developing RNG projects in Europe. That project is part of Greenlane’s ‘Build, Own and Operate’ initiative to develop a recurring revenue base.
For 2020, Greenlane hit $22.5 million in revenue, up 147 per cent, with an adjusted EBITDA loss of $1.7 million.
“Our record revenue in 2020 and continued positive outlook for the business in 2021 is backed by a marked increase in sales activity and the emergence and increased scale of market participants in the RNG sector,” said Brad Douville, President and CEO, in the company’s fourth quarter 2020 press release in March.
“We continue to see large energy companies entering the sector seeking to secure supplies of RNG and, as a result, investing in new projects and buying biogas upgrading equipment,” Douville said.
But even with all that good mojo, GRN is still down plenty for 2021, going from $2.31 at the start of the year to $1.50 and change, a drop of about 35 per cent.
Part of this has to do with a pullback across cleantech, which even with governments worldwide continuing to back renewables in a quest to meet their climate change commitments seemed to be getting ahead of itself by Q1 2021. The pattern showed up in the iShares Global Clean Energy ETF, for example, which shot up like a rocket in 2020 but is now down 26 per cent year-to-date.
But Campbell says there’s another factor, related to another name in the Canadian renewables space, Xebec Adsorption.
“What we think ended up happening is that one of their competitors, Xebec, which was also one of our past Top Picks, was doing well in the space and then in their most recent quarter they missed their numbers,” Campbell said.
“The stock was at a fairly significant multiple and it pulled back significantly. And as a result it tended to take down some of the others in the sector and Greenlane was one of those,” he said.
“While we don’t own [Greenlane] right now we certainly want to be back there and we’re just watching to see what happens with numbers and what happens with the stock price and overall markets and at some point in time we will return to Greenlane because we think there’s going to be really high growth in that sector over the next decade as governments move to having more renewable natural gas in the system,” Campbell said.
Last month, Greenlane announced contracts in Colombia for its pressure swing adsorption biogas upgrading system and in Spain for a water wash biogas upgrading system. Greenlane said the upgrader for a Colombian municipality represents the first such commercial-scale biogas upgrading system deployed in the country.
“Supplying biogas upgrading equipment for the first time into Columbia is further evidence that RNG continues to be globally recognized as a key component of the overall decarbonization solution,” said Douville in a press release. “We see a significant opportunity in South America and continue to be seen as a market leader with multiple technologies, allowing us to be competitive on a global scale.”