A reader glancing at the share price for JSE- and Nasdaq-listed alternative energy company Montauk Renewables would see a roller-coaster price action.
Instead of renewable natural gas (RNG) you might be reaching for laughing gas to calm the nerves. IM’s last review was in May 2024 at R76.06 and set a price target of R105 — which was attained. But investing in Montauk is certainly not for the faint-hearted, especially in the new Trump era.
The anti-renewables mantra of MAGA, especially on a stock such as Montauk — which relies on government assistance and subsidies — was always going to lead to unpredictable and volatile share price action.
Year to date Montauk is down 53% on the JSE. The trading range has been eye-watering, from a low of R33.70 to a high of R87.50. Montauk plummeted in late February and bottomed out in early April, and has trended mostly sideways since, despite a leap in US natural gas prices.
One key area of profit for Montauk, given its green energy credentials, is the production of environmental attribute tokens called D3 RINs, which have tradable monetary value. These are sold to entities that need greenwashing of their carbon-intensive industries, such as oil refineries or fuel importers, under the renewable fuel standard programme, initiated by the US Environmental Protection Agency (EPA). Sounds complex? It is — and with US President Donald Trump clamping down on the alternative energy sector, the RIN value has dropped by a third.
This has had a profound effect on Montauk and the alternative energy sector. The impact was evident in the recent first quarter 2025 results, characterised by revenue growth but declining profitability. This followed disappointing financial 2024 results. The company continues to navigate challenging market conditions, particularly around RIN pricing, while advancing several development projects aimed at future growth.
Montauk posted first-quarter revenue of $42.6m, which was up 10% on the comparative quarter. However, it reported an operating profit loss of $500,000, a material slip from the $1.9m profit recorded in the first quarter of 2024. Reported earnings were at breakeven compared with the $0.01 a share the previous year.
The decline was largely due to flat production levels of RNG. Despite the 25.3% increase to 9.9-million RINs sold in the quarter, the 24.3% decline in the token price from $3.25 to $2.46 hit overall earnings. Rapid expansion of Montauk’s facilities and new operating locations have resulted in a surge in capex, with an estimate of between $80m and $110m. Operating costs also rose 16% to $16m due to enhanced maintenance and facility upgrades.
Montauk has several projects and alternative business streams under way
Montauk is investing for the long term and kept its guidance for the year at revenue of $150m-$170m, a slide on FY2024, with RNG production volumes of 5.8-million to 6-million. The RIN price has continued to slip since the results, indicating a challenging second quarter. In the results, Montauk also detailed a dispute on its Blue Granite RNG facility, which gave notice that it would no longer accept RNG, causing an asset impairment.
However, Montauk has several projects and alternative business streams under way. A new site in Tulsa, Oklahoma, has opened access to a smaller RNG electricity generation facility with expansionary plans possible. Many of the states Montauk operates in are seemingly supportive of renewable energy, despite the federal government’s perceived hostility.
In 2024, the company pivoted towards biogenic carbon dioxide capture. Under a 15-year agreement, Montauk will deliver 140,000t a year of carbon dioxide, which will be liquefied, sold and converted into e-methanol. E-methanol and its derivatives are clean and cost-effective liquid fuels which can be used in marine, aviation and road transport with existing infrastructure.
Montauk is not a simple company to understand given the transition towards green energy. With the stock having slumped year to date, IM was concerned by the mixed set of recent results, though it holds hope that long-term investment will eventually provide rewards.
However, much depends on the legislative environment under the Trump administration. This remains a risk as the EPA standards expire in 2026.
IM believes Montauk is oversold and can see a bounce in the stock, but cautions that the counter, despite its market value, is speculative — not one for widows, orphans or those afraid of wild rides.
* The writer holds shares in Montauk
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