Small Caps | Nov 26 2025
This story features LGI LIMITED.
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New research shows a strong growth outlook for renewable energy business LGI which provides exposure to the decarbonisation theme.
-Morgans nominates LGI for ASX exposure to decarbonisation theme
-Revenues from biogas output, pricing of electricity, LGCs, and ACCUs
-Capital raise to accelerate high-priority projects
-Analysts see upside risks to consensus earnings
By Mark Woodruff
Australian renewable energy business LGI Ltd ((LGI)) is considered well placed to benefit from multi-decade megatrends spanning the energy transition, tightening emissions regulation, and rising demand for sustainable power solutions.
The company is highlighted as one of the most effective ways to gain exposure to the decarbonisation thematic on the ASX by broker Morgans.
Founded in 2009, as Landfill Gas Industries Pty Ltd, LGI is now an established leader in the recovery of biogas from landfill, and subsequent conversion into renewable electricity and saleable environmental products.
Unlike weather-dependent wind and solar, the company’s generation is dispatchable, enabling management to control production as required.
LGI operates 25 landfill gas (LFG) sites in Australia, comprising eight biogas power stations and 17 carbon credit (flaring) sites that combust methane, a potent greenhouse gas, to carbon dioxide (CO2) and generate Australian Carbon Credit Units (ACCUs).
Note: Methane’s impact is roughly 25 times greater than CO2 over a 100-year timeframe.
On a further nine sites, LGI operates biogas flares on behalf of local councils, without owning the full project economics.
The company commissioned its first power station in 2012 and has steadily expanded the portfolio since then, both in power and flaring-only projects.
Growth opportunities are abound, including expanding power generation capacity, battery energy storage systems (BESS), and biogas infrastructure at contracted sites, along with identifying project developments and partnerships to expand the network of landfill project sites and synergistic technologies.
LGI has previously forged strategic partnerships with government agencies and industry players and secured long-term contracts.
Pricing and volume play
New research by Ord Minnett predicts electricity prices will remain elevated for the foreseeable future, having increased by around 90% since FY22 in both New South Wales and Queensland, as intermittent renewable generation has displaced baseload coal-fired generation.
Bell Potter describes LGI as both a volume and pricing story, with revenue driven by biogas output and the pricing of electricity, large scale generation certificates (LGCs), and ACCUs.
The integration of Diesel-Avoidance and Curtailment Solutions (DACS) and batteries across LGI sites enables the company to realise prices around 77% above average the Australian Energy Market Operator (AEMO) levels, materially enhancing revenue growth.
Over time, management has rolled-out new biogas extraction and flaring systems at sites in Somerset (Esk), Clarence Valley (Grafton), and Snowy Valleys (Tumut), as well as upgrades at Gympie and Toowoomba in Queensland.
Each new site contract not only generates immediate carbon credit and service revenue, but often paves the way for future power generation projects (as landfills produce more gas over time).
In a key selling point, LGI has been leveraging its battery-integrated generation model (pioneered at its Bunya site in QLD) to win business. The company demonstrates to partners that coupling batteries with landfill gas engines can raise the value of electricity sold.
For example, in FY25 at the Bunya site a 0.6MW generator paired with a 1MW/2MWh battery achieved prices 70% above market prices by timing battery discharges at peak rates.
By growing carbon credit production and expanding its generation fleet with batteries, management at LGI can grow earnings organically by 120% by FY30, forecasts Ord Minnett.
The analyst believes ACCU prices will rise 16% to $44/tCO2 by FY30, driven by increased purchasing from large emitters seeking to meet legislated reduction targets under the Safeguard Mechanism.
Each ACCU represents one tonne of CO2-equivalent emissions avoided or removed.
ACCUs are issued by the Australian government and can be sold to companies needing to meet emissions-reduction obligations, including those covered by the Safeguard Mechanism, a federal policy designed to limit emissions from the country’s largest industrial facilities.
Should a facility emit above its baseline, it must either reduce its emissions, or buy ACCUs, or purchase Safeguard Mechanism Credits (SMCs) from other facilities that emit below their baseline.
LGI produced 109,000 MWh of renewable electricity across its fleet in FY25, representing 13% annual growth. Generator uptime remained at 98% availability, exceeding the company’s 95% target.
At the time, Canaccord Genuity estimated electricity pricing at around $121/MWh, -13% lower year-on-year, but still a notably strong result.
Management delivered record biogas, power, and ACCUs with the Belrose 12MW battery anchoring the contracted pipeline lift to 56 MW from 47MW.
Canaccord notes ongoing price volatility in Queensland and NSW, two core markets for LGI.
As the spread between high and low electricity prices widens, the economics of batteries improves, given their ability to charge during low or negative solar-driven midday prices and discharge into peak-price periods.
October capital raise
Demand for a capital raise last month launched in late-October was “overwhelming,” according to management. A $51.2m institutional placement and a $5m Share Purchase Plan for existing shareholders raised funds at $3.85 per share.
Proceeds will support the acceleration of high-priority projects and strengthen balance sheet flexibility.
In particular, the development of the Nowra project will be brought forward with management now expecting commissioning to commence in FY27. Canaccord had previously assumed FY29 for this asset.
The key update to LGI’s 56MW base plan, suggests the broker, was clarifying the 11MW previously labelled “other projects,” now identified as 3MW of generation at Nowra and 8MW of batteries.
Management noted the new capital will also fast-track expansions at Mugga Lane and at the Belrose site in NSW, while also initiating the next wave of power station and battery developments in its pipeline.
Bell Potter now expects this scheduled pipeline to translate into significant earnings growth for LGI through FY26 and beyond.
With the balance sheet now strengthened, Morgans also expects meaningful operating leverage across the portfolio as management accelerates its battery rollout at both new and existing sites.
This broker also flags several risks, including volatility in electricity, LGC and ACCU prices, higher-than-expected capital investment, execution on growth projects, and potential changes to regulatory or tax settings.
Recent history
Over the past 18 months, several new projects were commissioned including the Eastern Creek 4MW Power Station, the Mugga Lane Expansion, and Regional Project Commissioning, which brought several smaller-scale projects online to extend LGI’s carbon abatement reach.
Historically focused on Queensland, the company has expanded into New South Wales and the ACT, capturing opportunities in major population centres. The Eastern Creek and Belrose projects firmly plant LGI in the Sydney region, while the Mugga Lane partnership extends its footprint in the ACT.
In addition to new sites, LGI has expanded capacity at existing facilities. Notably, the Canberra power station was upgraded by 2 MW in FY25, boosting its output. Combined with Eastern Creek’s 4 MW coming online, LGI’s total generation capacity reached around 21.1 MW as of June 30, 2025, a 43% increase from 14.7 MW a year prior.
A cornerstone partnership was the agreement with Bingo Industries in 2024 to develop the Eastern Creek project. This 15-year landfill gas management contract allows LGI to install, own, and operate the 4MW power plant on Bingo’s flagship landfill.
Another major strategic move was LGI’s entrance into grid-scale battery storage through a partnership with the New South Wales government’s Waste Asset Management Corporation (WAMC). In August 2025, a long-term contract was announced with WAMC to develop a 12 MW/24 MWh BESS at the Belrose closed landfill site.
Providing a hedge against power price volatility for its generation portfolio, LGI will build, own, and operate the battery for an initial 15-year term (with options to extend), re-purposing the former landfill into a state-of-the-art energy storage facility.
The project is subject to regulatory and grid-connection approvals, but upon satisfaction of these conditions management expects to begin construction, targeting installation and commissioning by early 2027.
Shaw and Partners can see strategic optionality, noting Belrose sits within a broader NSW government landfill portfolio, positioning LGI favourably for future landfill-gas tenders despite the current contract being battery-only.
At the time of FY25 results in August, this broker anticipated rolling upgrades to MW capacity from investing in existing sites and winning new sites as they come to market.
As of mid-2025, management’s near-term project pipeline was raised to 56 MW of capacity (generation and storage), up from 47 MW outlined in April 2024.
This pipeline includes both approved and in-development projects that, when executed, will roughly triple LGI’s installed generation capacity (which stood at circa 21 MW in mid-2025.
Management estimates there are over 200 landfills in Australia potentially suitable for its technology, providing ample room for continued expansion.
Outlook
Back in August, Shaw and Partners could see upside risks to consensus earnings from electricity price realisation post battery deployment and metropolitan tender wins.
Beginning with an Accumulate rating this month, Ord Minnett highlights LGI’s strong growth outlook, lower operational risk profile, de-risked balance sheet and solid ESG credentials.
This broker adds LGI shares still offer reasonable value at 0.9x price-to-net-asset-value (P/NAV).
There are four daily monitored brokers in the FNArena database conducting research on LGI with an average target price of $4.78, implying 15.2% upside to the $4.15 closing price on November 24.
Shaw and Partners and Bell Potter have Buy ratings while Ord Minnett (in new coverage this month) and Morgans are at Accumulate, midway between Buy and Hold.
Outside of daily coverage, Canaccord Genuity (Buy) yesterday raised its target to $4.80 from $4.30 after the analysts revised forecasts to incorporate the strongly backed equity issuance, the earlier-than-planned project rollout, and the launch of a fresh growth phase.
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