Enbridge Extends Acquisition Streak With US$1.2 Billion RNG Deal
Enbridge Inc. (Enbridge) is acquiring seven renewable natural gas (RNG) facilities from Morrow Renewables for US$1.2 billion. According to Enbridge, all seven are in operation, with a commercial structure underpinned by long-term contracts with municipalities and offtake agreements with customers, so the portfolio will contribute to earnings before interest, taxes, depreciation, and amortization in 2024.
The deal comes less than two months after Enbridge announced the US$14 billion acquisition of three natural gas utilities from Dominion Energy. “Enbridge has entered into an agreement Morrow Renewables to acquire seven high-quality, operating, and fully contracted landfill gas-to-RNG assets located in Texas and Arkansas,” said Enbridge Chief Executive Officer Greg Ebel on the company’s Q3 2023 earnings call. “The facilities we are acquiring currently collect, compress, treat, and sell approximately 4.5 Bscf [127.4 × 106 m3] of pipeline-quality RNG each year. And as the landfills continue to grow, that production number will continue to grow at approximately 3% annually with minimal required capital investment. RNG fundamentals are strong in the United States and indicate continued growth in demand over the long term as gas utilities increasingly continue to set RNG blending targets. This was the perfect opportunity to meaningfully add to our earnings portfolio with an accretive Enbridge-like tuck-in, which has long-term, full-volume offtake agreements with Shell Energy North America and BP. Unique to this deal and in keeping with our commitment to protect our balance sheet, we’ve staggered the purchase price over 24 months. This transaction represents a uniquely de-risked portfolio of operating scalable RNG assets that add immediate accretive discounted cash flow [DCF] to Enbridge and accelerate progress toward our energy transition goals. Finally, both this transaction and the increased ownership in the HoheSee and Albatros operating wind power facilities were fully contemplated when we announced the acquisition of the three gas utilities.”
Enbridge believes that the RNG assets will help it achieve its ESG goals while also supporting reliable cash flows that will help it pay its high dividends. However, some analysts on the earnings call questioned Enbridge’s acquisition, if it was the right use of capital, and if it would do more harm than good to a balance sheet that is already stretched thin from the deal with Dominion Energy. However, Enbridge was confident that RNG could be a unique revenue stream that could delivery stable returns and growth over time. “We’re excited about this RNG opportunity because this is an opportunity for us to have a utility-like return,” said Cynthia Hansen, head of Enbridge Gas Transmission and Midstream on the Q3 earnings call. “These are unique assets and the market is fairly large and growing.”
Enbridge mentioned that it liked the fact that Morrow Renewables’ seven RNG assets were landfill-based as opposed to organic waste and that they were in growing geographic areas. The Morrow facilities deliver RNG from municipal landfills in six Texas locations — Edinburg, Hinton, Tyler, Melissa, Longview, and Alvarado — in addition to Fort Smith, Arkansas. Enbridge is adding about 86 full-time employees in plant and field operations from Morrow Renewables to its staff.
Landfill RNG facilities collect gas produced by waste decomposition in the landfill and treat and compress the gas to pipeline specifications. After it’s upgraded into pipeline-grade methane, RNG is easily blended into existing natural gas distribution and transmission networks. From there it can be used to fuel transit fleets, power industry facilities, and heat homes and businesses. Without these facilities, the gas would be released or flared.
Enbridge said that fundamentals for RNG are strong — with indications of continued demand growth over the long term as gas utilities increasingly continue to set RNG blending targets. The acquisition advances Enbridge’s commitment to energy transition leadership by advancing new low-carbon sources of energy — such as RNG.
Enbridge is also investing in hydrogen opportunities for its midstream assets but mentioned that it sees hydrogen as more of “late decade stuff.” “I think things like renewables, things like the RNG and carbon capture and storage [CCS], are more near-term opportunities,” said Ebel on the Q3 earnings call.
RNG is a key part of Enbridge’s commitment to achieving net-zero greenhouse gas emissions by 2050. The company announced a collaboration with Divert Inc. in March 2023 to turn food waste into RNG. The deal with Divert is part of the reason why the company wanted to diversify its RNG portfolio to include more landfill gas. Enbridge Gas is actively involved in seven Canadian RNG projects that are operating or under construction, with more than 50 additional projects in various stages of development.
Notable Existing Enbridge RNG Projects
| Project | Location | In-Service Date (ISD) | RNG Produced Annually (m3) | Scope 3 Emissions Avoided (tCO2e/year) |
| Hamilton Woodward WWTP | Hamilton, Ontario | 2011 | 1.6 million | 4500 |
| StormFisher | London, Ontario | 2020 | 3 million | 8000 |
| Dufferin | Toronto, Ontario | 2021 | 3.3 million | 9000 |
| Stanton Farms | Stratford, Ontario | 2022 | 4 million | 11,000 |
Data Source: Enbridge Inc.
