Montauk’s green strategy slips into the red

Montauk Renewables is the sort of share that once looked tailor-made for the green energy era.

Five years later, the enthusiasm has evaporated. The Nasdaq- and JSE-listed renewable natural gas producer has lost roughly 85% of its value since listing, turning what was once sold as a decarbonisation growth story into a more complicated investment case shaped by volatile environmental credits, project development risks and governance concerns.

Montauk’s core business is the capture and processing of biogas. The company collects methane-rich gas from landfills and agricultural waste sites, cleans and upgrades it into renewable natural gas (RNG), then sells that gas into the energy market or uses it to generate renewable electricity. At year-end 2025, it owned and operated 11 RNG projects and two renewable electricity projects across seven US states. Its portfolio capacity was 35,522 metric million British thermal units (MMBtu) of RNG and 26.8MW of electricity generation. In plain English, Montauk takes methane that would otherwise be wasted or potentially released into the atmosphere and turns it into a saleable energy product.

But the physical energy sale is only one part of the revenue model. The more important layer is the monetisation of environmental credits attached to that energy. In Montauk’s RNG business, the key credits are renewable identification numbers (RINs) and low-carbon fuel standard (LCFS) credits. RINs are generated under the US Renewable Fuel Standard and sold to refiners and fuel companies that need to meet renewable fuel obligations. LCFS credits come from low-carbon fuel programmes, most notably California’s LCFS. Renewable energy certificates relate mainly to Montauk’s smaller renewable electricity portfolio.

That second layer is crucial. In 2025, environmental credits accounted for more than 60% of Montauk’s operating revenue, making the company less a conventional gas producer than a monetiser of decarbonisation and environmental policies. The drawback is that revenue and profitability are heavily exposed to factors outside management’s direct control.

The historic numbers show the risk. Montauk produced 5.644-million MMBtu of RNG in 2025 and sold 44.1-million RINs, but its average realised RIN price fell 29% to $2.33 from $3.28 in 2024. Management has indicated that a 10% fall in realised RIN prices would reduce annual operating profit by about $8.5m. That sensitivity goes a long way towards explaining why investors have stopped treating the company as a simple long-term beneficiary of decarbonisation.

Profitability has deteriorated much faster than revenue

Profitability has deteriorated much faster than revenue. Net income fell from $14.9m in 2023 to $9.7m in 2024 and just $1.7m in 2025. Adjusted ebitda declined from $46.5m to $42.6m and $35.6m over the same period. Renewable gas operating expenses rose to $90.1m in 2025, while operating expense per MMBtu increased to $15.96 from $14.84. That is not the profile investors want from an infrastructure-style clean energy platform.

This brings us to Donald Trump’s second term as US president. The political backdrop since 2025 has clearly hurt sentiment towards clean energy shares. Trump’s “Unleashing American Energy” executive order paused certain disbursements linked to the Inflation Reduction Act and Infrastructure Investment and Jobs Act pending review and signalled a broader shift away from Biden-era climate policies. That matters for a company like Montauk because investors place a lower multiple on businesses where cash flows depend on policy architecture that can change with elections.

Yet the story is more nuanced than “Trump bad, green energy bad”. Biofuels were not simply written out of the policy framework. The 45Z clean fuel production credit was extended to 2029, although with new constraints. More importantly for Montauk’s landfill RNG business, the Renewable Fuel Standard remains intact, and the Environmental Protection Agency’s 2026 and 2027 standards include supportive biofuel volumes. That is constructive for D3 RIN demand, which is central to Montauk’s economics. Trump-era policy has been negative for sentiment and planning certainty, but not fatal to Montauk’s revenue engine.

The larger concern is whether Montauk’s growing development pipeline will generate adequate returns on the capital being committed. Capex rose sharply from $63.1m in 2023 and $62.3m in 2024 to $116.5m in 2025, with further spending planned on projects such as Bowerman RNG, the Rumpke relocation, Tulsa’s conversion from electricity to RNG and the EE North America carbon dioxide project. These investments could add meaningful future cash flow, but delays, impairments and execution setbacks have made some investors sceptical.

Montauk is listed on the JSE because it was spun out of Hosken Consolidated Investments, the South African investment group long associated with Johnny Copelyn, who remains Montauk’s chair and largest shareholder. Another significant shareholder, Cape Town-based Aktiv Investment Management, has been pushing for stronger corporate governance and greater transparency, with the dispute still unresolved.

Montauk still has strategic value. It owns real assets in a niche that remains supported by policy, and successful commissioning of its pipeline could improve the earnings base. But as a capital-intensive, credit-dependent infrastructure developer with thin earnings, there’s limited margin for disappointment.