Top 3 SPAC Targets – Alternative Fuels

After a quiet stretch in the SPAC market, we pressed pause on this column. But with deal flow picking up, targets getting more creative, and sponsors back in hunting mode, it’s the right time to bring back one of our favorites: the Top 3 SPAC Targets. Read on to see who we picked for private targets among alternative fuel producers.

With the Strait of Hormuz still effectively blocked and oil prices hovering around $100, the near-term future of energy investment has to contend with a number of sometimes contradictory pressures at once.

On the one hand, the prolonged high gas prices could put some new wind under the sails of EV and battery makers. But, in the US, many of the subsidies that benefited electrification have been scrapped by the Trump administration and more EV-friendly jurisdictions still have to contend with an uncertain world of trade restrictions to get their own production to larger outside markets.

On the other hand, traditional oil and gas players are in line for a big payday for as long as commodity prices remain high, but SPACs that want to remain forward-looking may not want to dive too deep in to the energy sources of old. Plus, this current pricing crisis could also well be over by the time any fresh SPAC deal could close.

All of this makes it an interesting moment for producers of alternative fuels, who could be among the few positioned to have their cake and eat it too. Producers of renewable natural gas, biodiesel and ethanol typically charge the same or higher commodity prices to the traditional fuels they are replacing and supplementing.

So, they are getting the same price bump as the fossil fuel space, but they can also claim the additional value add of being secure domestic suppliers that can bring energy to the market independent of a country’s own oil and gas reserves. Their cleaner and renewable nature also leaves them open to investment from funds and individuals seeking green targets.

BTS Biogas

Should a SPAC target Italian renewable natural gas (RNG) producer BTS Biogas, it would be following in the footsteps of one of the most successful SPAC transactions in the fuel space since 2020.

Rice combined with two RNG producers in 2021 to form Archaea Energy in a $1.1 billion deal and that new company was acquired just over a year later by BP (NYSE:BP) at $26 per share for a swift +160% return. At the time that Rice struck the deal, Archaea had nine operating RNG projects drawing from landfills in the US that were already producing about $40 million in EBITDA while it had 16 more under development.

BTS Biogas has not shared its public financials, but its infrastructure has achieved significant scale with about 270 total plants across its global network and major offices in Italy, France, the UK, and the US. Most of these are designed to bring in agricultural waste from area farms, but others are co-located with large-scale food distribution centers and slaughterhouses, while others draw waste from municipalities and return RNG to the grid.

While the company’s Europe-based operations have received a fair amount of government support, it has taken on more private capital to accelerate the expansion of its US subsidiary. Its two Maryland facilities were funded in part by a $30 million investment by Hannon Armstrong Sustainable Infrastructure Capital.

A SPAC deal for either the Italian parent of a spinoff of its American operations would give both greater visibility and access to capital, with a clear investment case to make in the current moment.

POET Biorefining

SPACInsider’s last Top 3 focused on the agriculture sector and introduced the idea of SPACs getting into the agricultural ethanol game by looking at an emerging player in Amber Wave. But, if a team were to look at taking public an ethanol player of scale, it would be looking first to POET Biorefining.

POET has become the world’s largest producer of biofuel with 35 processing facilities that deliver about 3 billion gallons of bioethanol annually. Ethanol is not as highly priced in the market as biodiesel and it has not had the same meteoric rise as some other fuel types recently. But it is still up about +15% year-to-date to $1.91 per gallon today, which makes POET’s annual production worth about $5.7 billion.

One reason for this difference in prices is because that ethanol is frequently used as an additive to existing gasoline products to reduce their carbon footprint, but it is less often used as a pure product. The largest listed ethanol producer, Archer-Daniels-Midland (NYSE:ADM) trades at a relatively soft multiple of 0.5x revenue and 14x EBITDA.

This tepidness in the ethanol comps universe could be a benefit for mid-scale SPACs trying to make a move in this sector, while also seeing some higher upside in POET. POET has diversified beyond ethanol itself into distilled alcohol from grain, corn fermented proteins, cooking oils, and other chemical products.

That could keep the company nimble amid the shifting energy mix, while maintaining established infrastructure and revenue streams to build upon. A SPAC deal could meanwhile keep it flexible as it continues to grow both organically and inorganically. Last year it acquired a new bioprocessing facility while expanding others.

Diamond Green Diesel

Diamond Green Diesel was formed as a $1.5 billion renewable diesel project in Norco, Louisiana with funds from oil & gas firm Valero Energy (NYSE:VLO) and Darling Ingredients (NYSE:DAR) back in 2019.

The set-up allowed both companies to improve their sustainability bona fides, while also turning value out of what had previously been waste products. Darling Ingredients contributes unusable animal fats from its meat processing operations, while Valero has helped build the infrastructure to combine those with used cooking oil and other unusable grain oils for Diamond Green’s diesel feedstocks.

Not only does the renewable diesel produced at Diamond Green’s plants burn with an up to 80% reduction in emissions, but it is a competitively priced product on the market as well. In California, the price per gallon for renewable diesel crossed above $7 this week, according to Argus Media, up from about $4.50 per gallon in late December 2025. Traditional diesel is up as well, but without the renewable premium, it’s sold at about $5 per gallon on average today.

Since its launch, Diamond Green has scaled up its production from about 160 million gallons of renewable diesel per year initially to 1.2 billion annually. That would value Diamond Green’s annual production at more than $8 billion at the pump, which could make now the right time for its backers to let it fly on its own.

Valero has recently been refinancing its own debt load via a fresh notes offering, while Darling has shown its willingness to spin off assets as well, combining its collagen and gelatin segments with those of Tessenderlo Group (XBRU:TESB) in December. A SPAC deal would let both of these companies strike while the iron is hottest, while also maintaining liquidity options over the long term.

It would likely take a prominent SPAC to reel in a fish of Diamond Green’s size, but many of those carrying a “buy American” production angle like Chamath Palihapitiya’s $300 million SPAC American Exceptionalism A (NYSE:AEXA) could certainly build a strong narrative around it. Not only could the deal advance an innovative American energy producer, but it would further the country’s energy independence as the US has consumed more renewable diesel than it has produced domestically in every year since 2013, according to the Department of Energy.