May 16 (Reuters) - Waste management firm WM is

exploring a sale of its renewable natural gas business that

could be worth about $3 billion, according to people familiar

with the matter.

The Houston-based company is working with JPMorgan Chase &

Co ( JPM ) to gauge interest from potential buyers, which could

include energy companies and private equity firms, the sources

said, requesting anonymity as the discussions are confidential.

WM is planning to offload the rights to develop RNG

operations on 115 landfills that it owns, the sources said,

adding the company would retain ownership of the landfills. RNG

is methane captured from biological waste and converted into

electricity or fuel.

If the deal talks conclude successfully, it would mark one

of the biggest-ever asset sales in the nascent U.S. RNG

industry. The largest sale was BP's $4.1 billion takeover

of Archaea Energy in 2022.

"We are always looking for ways to maximize the value of our

renewable energy business for our shareholders, which may range

from organic growth initiatives to partnerships or monetization

through a sale," WM said in a statement.

JPMorgan ( JPM ) declined to comment.

WM had planned to invest about $1.2 billion between 2022 and

2025 to grow the RNG business. The firm now wants to spend that

capital in other areas, the sources said.

The company had forecast the RNG unit would contribute more

than $500 million of adjusted earnings before interest, tax,

depreciation and amortization (EBITDA) by 2026. It currently

generates about $150 million of EBITDA, according to the

sources.

WM is hoping the unit's valuation would be comparable to, or

exceed, the earnings multiple at which Morrow Renewables sold

RNG operations at landfills to Enbridge ( ENB ) in late 2023,

the sources added. Should it meet that valuation, WM will get in

the ballpark of $3 billion, the sources said.

RNG's environmental benefits include the reduction of

natural gas usage and capturing climate-warming emissions that

would otherwise escape into the atmosphere. However, it is more

expensive than natural gas, which is also experiencing a period

of prolonged low prices.

WM, whose shares have risen by about 25% over the past year,

is one of the largest U.S. trash and recycling collection

companies. The firm's fleet includes more than 12,000 trucks

running on compressed natural gas and it recently signed a

sustainability partnership with Major League Baseball.