Shell agrees $2bn Nature Energy deal

February 2023 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

February 2023 Issue

Shell has agreed to acquire Danish biogas producer Nature Energy Biogas A/S from Davidson Kempner Capital Management, Pioneer Point Partners and Sampension, a group known as the NGF Partnership, in a deal worth nearly $2bn.

The transaction is subject to regulatory approvals and is expected to close in the first quarter of 2023. Nature Energy is cash generative, and the acquisition is expected to be both accretive to Shell’s earnings from completion and deliver double-digit returns.

Nature Energy was founded in 1979 as a natural gas distributor. The company established its first biogas plant in Denmark in 2015 and now has 14 operating plants with associated infrastructure, feedstock arrangements, and current 2022 production of around 6.5 MMBtu/yr (3000 boe/d). The company is a producer of renewable natural gas (RNG) from agricultural, industrial and household wastes. It has a pipeline of around 30 new plant projects in Europe and North America. More than a third of these projects are in medium to late development stage in Denmark, the Netherlands and France and could deliver up to 9.2 MMBtu/yr (4400 boe/d) by 2030, subject to future final investment decisions and regulatory approvals. According to Shell, Nature Energy is the largest RNG producer in Europe.

The deal will help Shell expand its existing RNG production business. The company has an RNG foothold in North America, with one operational site and four under construction. Shell is also a trader of RNG and has a wide range of RNG and bioLNG customers, including large corporate, road hauliers and marine customers. For Shell, the acquisition further increases its ability to work with its established customer base across multiple sectors to accelerate the company’s transition to net-zero emissions. It will also support Shell’s ambition to profitably grow its low carbon fuels production and customer offering in its world-leading, customer-facing marketing business.

The transaction is part of Shell’s ‘Powering Progress’ strategy to accelerate the energy transition. The company has set a goal of achieving net-zero emissions by 2050. The acquisition will be part of Shell’s current capital mix. In addition, Nature Energy and its 420 employees located in Europe and North America will operate as a wholly owned subsidiary of Shell, initially under its current brand.

“Under the stewardship of the NGF Partnership, Nature Energy has grown into a leading producer of biomethane from organic waste and has pioneered a standardized large-scale commercial production process in Denmark that creates higher on-farm crop yields,” said Jesper Lok, chair of the board of Nature Energy. “Under the new ownership of Shell, our team will continue to advance its unique vision of unlocking additional valuable resources from waste materials while offering secure and affordable energy to customers and promoting a circular economy.”

“This transaction would not be possible without the entire Nature Energy organization, our talented and dedicated employees, our industry partners, as well as our investors — who always believed in our mission and have made invaluable contributions to Nature Energy’s growth and success,” said Ole Hvelplund, chief executive of Nature Energy. “We look forward to the next phase of growth, and we remain excited about our near-term prospects to help address both the current energy insecurity, as well as the longer-term potential for biomethane capacity set out in the REPowerEU plan.”

“Shell’s competitiveness in low carbon fuels derives from capabilities across the value chain, combining a world-class Trading and Supply organisation with access to differentiated technology and production assets,” said Huibert Vigeveno, downstream director at Shell. “Acquiring Nature Energy will add a European production platform and growth pipeline to Shell’s existing RNG projects in the United States. 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 signalling strong growth in demand in the years ahead.”

Richard Summerfield