Greenlane Renewables (TSE:GRN) is repositioning its business around higher-margin recurring revenue, technology licensing and a next-generation landfill gas upgrading platform, Chief Executive Officer Brad Douville said during a company update.
The Vancouver-based company supplies biogas desulfurization and upgrading technologies that convert biogas from decomposing organic material into pipeline-quality renewable natural gas, also known as RNG or biomethane. Greenlane said its customers are primarily project developers.
Douville said approximately 90% of renewable natural gas in North America is currently used in transportation, where it can displace diesel fuel. Other applications include gas utilities seeking to decarbonize supply, industrial users pursuing sustainability goals and an emerging marine fuel market.
Financial foundation and business shift
Greenlane reported CAD$44 million in revenue last year, positive adjusted EBITDA of 5%, CAD$12 million in cash, no debt and a sales backlog of CAD$25 million, according to Douville. The company has operated for about 35 years, has approximately 125 employees and has sold roughly 500 systems in 32 countries.
Douville said the company has shifted away from a primarily engineer-to-order business model in biogas upgrading, which he said was difficult to scale profitably. The company instead plans to emphasize configurable products and a model that generates more recurring revenue and licensing income.
“Growing revenue without profits wasn’t really where we wanted to head,” Douville said.
Greenlane identified parts and service, biogas desulfurization and royalty revenue as foundational business areas. Over a three-year period, the company said its parts and service revenue posted a 34% compound annual growth rate with 40% gross margins, while biogas desulfurization revenue grew at a 27% compound annual rate with 50% gross margins. Royalty revenue has generated gross margins of about 80%, the company said.
Panasonic partnership and landfill opportunity
The company is targeting a CAD$1.3 billion market opportunity for new products in Brazil, the United States and Canada. Douville said the estimate is based on International Energy Agency forecasts and Greenlane assumptions regarding equipment costs.
A central component of the strategy is Greenlane’s technology license agreement with Panasonic in Brazil. Panasonic is refitting one of its facilities to manufacture Greenlane equipment, while Greenlane retains responsibility for the technology, supply chain, sales, service, marketing and on-site commissioning.
Under the planned model, third-party suppliers would sell equipment directly to customers, with Greenlane integrating the full system. Douville said the approach is designed to reduce contract risk and potentially produce gross margins closer to 80%, compared with roughly 20% to 25% under the company’s traditional equipment contracting model.
Greenlane expects supply-chain and fabrication readiness for its Brazilian launch market to be completed by the end of the year, followed by readiness efforts for the U.S. and Canadian markets next year.
Product portfolio and market outlook
Greenlane has four principal product lines. Its Cascade H2O water-scrubbing technology has been part of the company’s portfolio since the late 1980s and has been licensed to a local partner in Brazil for sugar mill applications. The Cascade H2S desulfurization product line came from Greenlane’s acquisition of Italy-based Airdep in 2022.
Douville said the company has sold more than 350 Cascade H2S systems globally since 2012. He said the technology has gained traction in Italy, which he described as Europe’s fastest-growing biomethane market, and that Greenlane is bringing the product to the Americas.
The company is also developing Cascade LF, a landfill gas upgrading platform, in partnership with Panasonic. Landfill gas is more complicated to process than gas from anaerobic digesters because it contains more contaminants, Douville said. Greenlane said the new platform demonstrated methane recovery of 99.5% earlier this year, compared with competitor recovery rates the company characterized as around 95% or, in some cases, below 90%.
Brazil represents a particular growth market, according to Douville. The country has more than 400 sugar mills, while landfills currently account for about 80% of its biomethane supply. Brazil’s Future of Fuels legislation introduced a natural-gas decarbonization mandate beginning at 0.5% in mid-year and allowing the requirement to rise to 10% over time, he said.
Douville cited International Energy Agency projections indicating biomethane could be the fastest-growing bioenergy source over the next decade, with global growth of 15% annually. Greenlane expects growth in Brazil to reach 21%, he said.
About Greenlane Renewables (TSE:GRN)
Greenlane is driving change: accelerating the energy transition. We are cleaning up two of the largest and most difficult to decarbonize sectors of the global energy system: the natural gas grid and commercial transportation. As a pioneer and leading global specialist in biogas desulfurization and upgrading, we have been actively contributing to the decarbonization of our planet for over 35 years with more than 355 systems supplied into 28 countries. We transform biogas generated from organic waste into high-value grid-ready renewable natural gas (‘RNG’) from a wide range of sources such as landfills, sugar mills, dairy farms, wastewater, and food waste.
