50 high-quality RNG development projects added
to backlog through acquisition of INGENCO and formation of joint
venture with Republic Services
Increasing estimated long-term annual earnings
power by ~50% to ~$600 million
Archaea Energy Inc. (“Archaea,” “the Company,” or “we”) (NYSE:
LFG), an industry-leading renewable natural gas (“RNG”) company,
today announced preliminary1 financial and operating results for
the first quarter 2022.
FINANCIAL HIGHLIGHTS
- Revenue of $56.9 million and net equity investment income of
$1.4 million for the three months ended March 31, 2022.
- Net loss2 of $33.2 million for the three months ended March 31,
2022.
- Adjusted EBITDA3 of $20.6 million for the three months ended
March 31, 2022.
- Produced and sold 1.54 million MMBtu of RNG4 and 166 thousand
MWh of electricity4 for the three months ended March 31, 2022.
- Reaffirmed full year 2022 RNG production sold, electricity
production sold, and Adjusted EBITDA5 guidance.
- Increased estimated long-term annual earnings power6 (defined
below) to approximately $600 million, an increase of approximately
50% compared to estimated long-term annual earnings power provided
in March 2022, as a result of significant recent additions to the
Company’s RNG project development backlog.
RECENT STRATEGIC ACCOMPLISHMENTS
- Added 53 high-quality RNG development projects to the Company’s
peer-leading RNG development backlog year to date, which today
includes 88 RNG development projects for which gas rights
agreements are in place or are expected to be in place after
closing the transactions described below, in alignment with the
Company’s long-term growth strategy and goal to increase estimated
long-term annual earnings power:
- Greenfield Project Additions – In
the first quarter, entered into gas rights agreements to develop
RNG facilities at two landfill sites.
- Single-project Acquisition – In
the first quarter, acquired a landfill gas to electric (“LFGTE”)
project with RNG development rights.
- INGENCO Acquisition – In April
2022, announced the signing of a definitive purchase and sale
agreement to acquire NextGen Power Holdings LLC (together with its
subsidiaries, “INGENCO”) for $215 million in cash. The acquisition
includes 14 LFGTE plants and related gas rights at high-quality
landfill sites with strong growth potential and permitted waste
acceptance for over 40 years on average. The Company expects to
build RNG facilities on 11 sites which currently have cumulative
gross flows of over 5 million MMBtu per year7. The Company expects
to close the acquisition of INGENCO on or after July 1, 2022.
- Lightning Renewables Joint Venture with
Republic – In May 2022, announced the formation of a
landmark joint venture (“JV”), Lightning Renewables, LLC
(“Lightning Renewables”), with Republic Services, Inc. (“Republic”)
(NYSE: RSG), one of the largest providers of environmental services
in the United States, to jointly invest approximately $1.1 billion
to develop 39 RNG facilities at landfill locations owned or
operated by Republic across the United States, including
approximately $780 million to be invested by Archaea. Lightning
Renewables has signed a long-term master gas sale and development
agreement with Republic to develop the RNG facilities and is the
largest landfill gas to RNG development venture to date. Archaea
will hold a 60% ownership interest in Lightning Renewables and
expects to receive distributions made with respect to its ownership
interest in Lightning Renewables. Archaea will develop, engineer,
construct, and operate the RNG facilities within the JV. Archaea
will receive fees for engineering, procurement, and construction
management during development and construction and fees for
operation and maintenance services after completion. Development
and construction of certain projects within Lightning Renewables
are expected to begin in 2022, with completion and commissioning of
the projects planned through 2027. The development projects within
Lightning Renewables are located at high-quality landfill sites
with strong growth potential and current cumulative gross flows of
approximately 13 million MMBtu per year7.
- The RNG development projects associated with the INGENCO
acquisition and Lightning Renewables are expected to add a total of
approximately $200 million to the Company’s estimated long-term
annual earnings power, assuming $1.50 per gallon D3 RIN pricing on
uncontracted volumes, among other assumptions detailed below6.
- Archaea expects to fund the INGENCO acquisition and certain
near-term development capital for Archaea’s portion of investments
into Lightning Renewables and RNG development projects associated
with INGENCO with existing cash on hand, borrowing capacity, and
one or more capital markets transactions or private financing
transactions.
- Achieved development and operational milestones at key RNG
facilities, in alignment with the Company’s 2022 guidance and
development plan:
- Produced first pipeline-quality RNG and achieved commercial
operations at the Soares dairy digester facility in January 2022,
successfully completing the first of four dairy projects within its
50%-owned Mavrix, LLC joint venture with BP Products North America
Inc. and demonstrating that the Company’s capabilities extend to
anaerobic digestion projects.
- Completed maintenance activities including an electrical
overhaul and plant redundancy updates at the Assai RNG facility in
February, which has achieved over 99% uptime and over 95% methane
recovery since early March 2022. Assai also received approval to
utilize gas flows from the Alliance landfill in early May
2022.
- Completed a successful initial optimization at the Seneca RNG
facility, resulting in an approximate 10% increase in methane
recovery. CO 2 separation systems and NRU upgrades are key
components of the Archaea V1 plant design.
- Continued commercial success in obtaining long-term RNG sales
agreements with creditworthy partners, in alignment with the
Company’s goal of securing 70% of expected RNG production sold
under long-term fixed-price contracts:
- In January 2022, entered into a 20-year, fixed-price RNG
purchase and sale agreement with FortisBC Energy Inc., a subsidiary
of Fortis Inc. (NYSE: FTS), for the sale of up to approximately 7.6
million MMBtu of RNG annually, with sales expected to begin in 2022
and ramping up to the full annual quantity in 2025.
CEO COMMENTARY
“The financial and operating results we released today, coupled
with the recent announcements of our new joint venture with
Republic and acquisition of INGENCO, represent an important
inflection point for Archaea,” said Nick Stork, Archaea’s
Co-Founder and Chief Executive Officer. “We have now cemented our
runway to dramatically increase our estimated long-term annual RNG
production sold and earnings power. As we have said from the
beginning, we are committed to building a company that can generate
meaningful, predictable, and sustainable cash flows. We are proud
to be afforded the opportunity to do so while also providing
critical decarbonization solutions and driving positive
environmental change.”
“We are focused on executing on all prongs of our growth
strategy: optimizing the performance of our current operating
facilities, successfully and safely constructing facilities in our
current backlog, and expanding our backlog of high-quality
development projects. First, we are focused on ensuring our current
facilities perform to their maximum potential. We recently achieved
a significant increase in methane recovery at our Seneca RNG
facility after a membrane upgrade and NRU tuning. We are excited
for the second phase of optimization at Seneca later this year.
Additionally, we performed an electric overhaul and various
facility optimizations at our Assai RNG facility during the first
quarter. Although we experienced a brief outage while completing
our work, which impacted total RNG production sold for the quarter,
we believe this downtime has already proven worthwhile and will
continue to do so, as Assai has subsequently been operating at over
99% uptime and above target methane recovery levels. Our
optimization projects highlight our ability to enhance project
returns organically through durable engineering advances that help
not just Archaea, but our landfill partners as well.”
“We are continuing to build our backlog of high-quality
development projects to help meet the growing demand for RNG from
customers with decarbonization targets in a market that remains
incredibly supply-constrained. We have more than doubled the number
of projects in our backlog to 88 projects with the additions of the
Lightning Renewables JV with Republic and the pending acquisition
of INGENCO. These recent transactions underscore our commitment to
accomplishing our growth goals while upholding our commitment to
investing in projects that can generate strong cash-on-cash returns
even in a downside case. The INGENCO acquisition highlights our
ability to acquire existing electricity generation assets, along
with long-term gas rights, at scale and at attractive multiples,
while giving ourselves potential operating efficiencies and
economic upside from generating our own power on these sites after
RNG facilities are constructed. Meanwhile, Lightning Renewables
provides us an unprecedented opportunity to meaningfully extend our
greenfield RNG development runway, with the addition of 39 projects
to our backlog. Together, the incremental projects from these two
transactions materially increase our estimated long-term annual
earnings power.”
“I am excited about the future of Archaea given our exceptional
landfill and commercial partnerships, unparalleled gas processing
and operational expertise, standardized approach to project
development, and stability of cash flows. I am confident that we
have superior competitive advantages to successfully execute on our
development plans and further establish ourselves as an
industry-leading RNG producer. We have no intention of stopping
here, as we will continue to evaluate additional acquisition
opportunities while matching portfolio additions with long-term,
fixed-price contracts at favorable prices. Ultimately, we are
committed to positioning Archaea as a profitable, multi-decade
provider of decarbonization solutions that delivers value to our
shareholders, partners, and communities.”
FORMATION OF LIGHTNING RENEWABLES JOINT VENTURE WITH
REPUBLIC
In May 2022, the Company formed Lightning Renewables with
Republic, one of the largest providers of environmental services in
the United States, to jointly invest approximately $1.1 billion to
develop 39 RNG facilities at landfill locations owned or operated
by Republic across the United States, including approximately $780
million to be invested by Archaea. Lightning Renewables has signed
a long-term master gas sale and development agreement with Republic
to develop the RNG facilities and is the largest landfill gas to
RNG development venture to date. Archaea will hold a 60% ownership
interest in Lightning Renewables and expects to receive
distributions made with respect to its ownership interest in
Lightning Renewables.
Archaea will develop, engineer, construct, and operate the RNG
facilities within the JV. Archaea will receive fees for
engineering, procurement, and construction management services
during development and construction and fees for operation and
maintenance services after completion. Development and construction
of certain projects within Lightning Renewables are expected to
begin in 2022, with completion and commissioning of the projects
planned through 2027. The development projects within Lightning
Renewables are located at high-quality landfill sites with strong
growth potential and current cumulative gross flows of
approximately 13 million MMBtu per year7.
Archaea expects potential for the addition of incremental
projects into Lightning Renewables over time, as well as additional
potential upside through initiatives including wellfield
optimization, carbon intensity reduction initiatives, and
low-carbon hydrogen projects.
ACQUISITION OF INGENCO
In April 2022, Archaea announced that it entered into a
definitive purchase and sale agreement with Riverview Investment
Holdings LLC, an affiliate of Castleton Commodities International
LLC, to purchase INGENCO for $215 million in cash, subject to
customary adjustments at closing. The acquisition will add 14 LFGTE
plants to the Company’s asset platform and approximately 70
employees who will add valuable expertise to the Company’s highly
skilled and experienced team. The acquisition also includes gas
rights for the LFGTE sites, which have a number of long-term
agreements in place. The asset base is located on landfills with
strong growth potential and permitted waste acceptance for over 40
years on average across sites.
Archaea expects to build RNG facilities on 11 sites which
currently have gross cumulative flows of over 5 million MMBtu per
year7. The acquisition has an estimated multiple of approximately
6X total capital expenditures, including acquisition and RNG
development costs, to the estimated long-term annual earnings power
associated with the INGENCO assets. The acquisition of INGENCO is
expected to close on or after July 1, 2022.
SUMMARY AND REVIEW OF FINANCIAL RESULTS
The following results for the three months ended March 31, 2022
are presented on a consolidated basis.
($ in thousands)
Three Months Ended March 31,
2022
Revenue
$
56,900
Equity Investment Income, Net
$
1,429
Net Income (Loss)2
$
(33,172
)
Adjusted EBITDA3
$
20,579
RNG Production Sold (MMBtu)
1,540,371
Electricity Production Sold (MWh)
165,613
RNG production sold for the three months ended March 31, 2022
was positively impacted by incremental production from the Assai
and Soares RNG facilities which were completed in December 2021 and
January 2022, respectively, and negatively impacted by downtime at
certain facilities related to winter weather during the first
quarter and downtime at the Assai facility related to maintenance
activities. Electricity production sold for the three months ended
March 31, 2022 was positively impacted by efficiency improvements
across the asset portfolio and incremental production from our PEI
power facility and negatively impacted by winter seasonality.
Revenues for the three months ended March 31, 2022 were
positively impacted by strong market pricing of Environmental
Attributes8, natural gas, and electricity and negatively impacted
by the timing of monetization of Environmental Attributes, which
are typically sold and recognized in income in months subsequent to
the months in which RNG production occurs, related to production
from the Assai RNG facility. Net equity investment income for the
three months ended March 31, 2022 was negatively impacted by income
tax payments and by the timing of certain Low Carbon Fuel Standard
(“LCFS”) elections, partially offset by lower expenses.
Net loss for the three months ended March 31, 2022 was primarily
driven by losses from changes in fair value of warrant derivatives
as well as increased general and administrative expenses primarily
related to increased headcount and other growth-oriented overhead,
together with acquisition and other transaction costs and severance
costs, partially offset by strong market pricing of Environmental
Attributes, natural gas, and electricity. Items included in general
and administrative expenses for the three months ended March 31,
2022 which impact financial comparability included acquisition and
other transaction costs and severance costs, which totaled
approximately $8.3 million.
Adjusted EBITDA for the three months ended March 31, 2022 was
positively impacted by strong market pricing of Environmental
Attributes, natural gas, and electricity and, to a lesser extent,
negatively impacted by increased general and administrative
expenses as described above.
CAPITAL STRUCTURE AND LIQUIDITY
As of March 31, 2022, Archaea’s liquidity position was $269.8
million, consisting of cash and cash equivalents of $30.8 million,
restricted cash of $8.9 million, and $230.1 million of available
borrowing capacity under the revolving credit facility after taking
into consideration outstanding letters of credit.
As a result of significantly expanding and accelerating the pace
of developing its project backlog, Archaea expects to enter into
one or more capital markets or private financing transactions to
fund the acquisition of INGENCO, certain additional capital
expenditures related to incremental RNG development projects, and
potentially to fund a portion of its base development plan, to
provide additional capital for acquisitions or incremental
development projects, or for general corporate purposes.
Capital Investments
Total cash used in investing activities was $66.5 million for
the three months ended March 31, 2022. Archaea spent $61.4 million
on development activities and $7.0 million, net of cash acquired,
primarily related to the acquisition of landfill gas right assets.
Development activities in the three months ended March 31, 2022
related to construction and optimization across the Company’s
various plants and projects in development. The Company also made
contributions to equity method investments totaling $4.0 million
and received return of investment in equity method investments of
$4.1 million.
Secondary Offering of Class A Common Stock
In March 2022, the Company supported an underwritten public
offering in which Aria Renewable Energy Systems LLC sold
approximately 14.9 million shares of the Company’s Class A common
stock at a price to the public of $17.75 per share (the “Ares
secondary offering”). The transaction resulted in no proceeds to
the Company and a decrease of 14.9 million shares of the Company’s
Class B common stock and a corresponding increase of 14.9 million
shares of the Company’s Class A common stock.
2022 FULL YEAR GUIDANCE
Archaea is reaffirming RNG and electricity production sold and
Adjusted EBITDA guidance for full year 2022. All guidance is
current as of the published date and is subject to change.
($ millions, except production data)
Full Year 2022
RNG Production Sold4 (million MMBtu)
11.1
–
11.7
Electricity Production Sold4 (thousand
MWh)
850
–
950
Adjusted EBITDA5
$125
–
$145
Within the 2022 Adjusted EBITDA guidance range, the Company
continues to expect to sell approximately 5.5 million MMBtu, or
approximately 50% of expected 2022 RNG production sold, under its
existing long-term, fixed-price contracts. Taking into account
volumes expected to be sold under its existing long-term,
fixed-price contracts and fixed-price agreements to sell RINs
expected to be generated and monetized in 2022, the Company
continues to estimate that approximately 5 million MMBtu of its
expected 2022 RNG production sold will be subject to market
pricing. The Company continues to assume D3 RIN prices of $2.00 to
$2.50 per gallon ($23.45 to $29.32 per MMBtu) for volumes expected
to be subject to market pricing. The Company has increased expected
general and administrative expenses to approximately $55 million as
a result of further scaling for growth, as well as expected
headcount additions related to the acquisition of INGENCO.
Archaea continues to plan to complete 20 projects in 2022,
including 10 optimizations of existing RNG facilities and 10 new
build projects expected to be placed into service. The Company
expects capital investments of approximately $130 million during
2022 for projects expected to be placed into service in 2022. Once
all projects in its 2022 development plan are completed and ramped
to full flows, the Company expects its operating assets to have
estimated long-term annual earnings power of approximately $200
million, which does not include any estimated impact from projects
in its development backlog which are expected to be completed in
subsequent years.
The Company is in the process of optimizing the pace and timing
of its long-term project development backlog as a result of recent
additions to its backlog related to Lightning Renewables and the
acquisition of INGENCO. The Company also expects incremental
near-term capital expenditures as a result of these transactions,
including both acquisition and development capital and as a result,
prior guidance provided regarding 2022 capital expenditures should
no longer be relied upon. The Company expects to provide guidance
for expected capital expenditures at a later date.
INCREASED ESTIMATED LONG-TERM ANNUAL EARNINGS POWER
“Estimated long-term annual earnings power” refers to estimated
long-term annual Adjusted EBITDA after specified projects within
the Company’s RNG development backlog, for which gas rights
agreements are currently in place or are expected to be in place
after closing pending transactions, are completed and ramped up to
full flows. Associated metrics, including estimated long-term
annual RNG production sold and estimated build multiples, also
reflect estimates after completion and ramp-up of specified
projects in the Company’s backlog.
Archaea is increasing estimated long-term annual earnings power
and related metrics to reflect the impact of additions to the
Company’s development backlog. The following corporate-level
information reflects estimated long-term annual earnings power and
related metrics after all 88 projects in the Company’s RNG
development backlog, for which gas rights agreements are currently
in place or are expected to be in place after closing the INGENCO
acquisition, are completed and ramped up to full flows. All
guidance is current as of the published date and is subject to
change.
Estimated long-term annual earnings power
($ millions)
~$600
Estimated long-term annual RNG production
sold (million MMBtu)
~50
Estimated build multiples*
~4X
* Calculated as estimated development
capital divided by estimated long-term annual earnings power
The Company expects to scale its project design, development,
and construction capabilities such that it can complete all
projects in its current backlog in approximately 6 to 8 years.
Timing will be subject to change depending upon the pace of scaling
the Company’s project development capabilities.
Within the estimated long-term annual earnings power and related
metrics included in this release, Archaea assumes fixed-price
volumes are sold only under its existing long-term contracts and
assumes $1.50 per gallon D3 RINs, $140 per metric ton LCFS credits,
and $3.00 per MMBtu brown gas pricing for volumes subject to market
pricing. In addition, operating costs reflect management’s
expectations based on experience operating existing assets and with
adjustments for plant size, location, and royalty provisions under
gas rights agreements. Estimated long-term annual earnings power
does not include any impact from carbon capture and sequestration
or carbon intensity reduction initiatives. Additionally,
electricity production facilities are assumed to remain in
operation following construction of RNG plants on LFG to
electricity sites, with a natural gas fuel cost of $3.00 per
MMBtu.
FIRST QUARTER 2022 CONFERENCE CALL AND WEBCAST
Archaea will host a conference call to discuss financial and
operating results for first quarter 2022 and to provide an update
on strategic priorities and estimated long-term annual earnings
power on Tuesday, May 10, 2022 at 11 a.m. Eastern Time / 10 a.m.
Central Time. A listen-only webcast of the call and an accompanying
slide presentation may be accessed at www.archaeaenergy.com. After
completion of the webcast, a replay will be available for 12 months
on the Company’s website.
1. First quarter 2022 results as presented
herein are based on preliminary unaudited information and are
subject to revision. Archaea has not filed its Quarterly Report on
Form 10-Q for the quarter ended March 31, 2022. As a result, all
financial results described in this earnings release should be
considered preliminary and are subject to change to reflect any
necessary adjustments or changes that are identified prior to the
time the Company files its Form 10-Q. Accordingly, undue reliance
should not be placed upon these preliminary results.
2. Net income (loss) as shown herein is
before net income (loss) attributable to noncontrolling interest.
For information regarding net income (loss) attributable to Class A
common stock, please see the Preliminary Consolidated Statement of
Operations included in this release.
3. Non-GAAP financial measure. See “Use of
Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP
Measures” for further details.
4. Volumes produced and sold include
production from the Company’s wholly-owned facilities and its
proportionate share of production from its equity method investment
facilities.
5. A reconciliation of expected full year
2022 Adjusted EBITDA to net income (loss), the closest U.S. GAAP
financial measure, cannot be provided without unreasonable efforts
due to the inherent difficulty in quantifying certain amounts,
including share-based compensation expense, which is affected by
factors including future personnel needs and the future price of
our Class A common stock, and changes in fair value of warrant
derivatives, due to a variety of factors including the
unpredictability of underlying price movements, which may be
significant.
6. Please see “Increased Estimated
Long-Term Annual Earnings Power” section of this release for
additional information regarding estimated long-term annual
earnings power and underlying assumptions. Certain assumptions
regarding estimated long-term annual earnings power (which refers
to estimated long-term annual Adjusted EBITDA after specified
projects within the Company’s RNG development backlog, for which
gas rights agreements are currently in place or are expected to be
in place after closing pending transactions, are completed and
ramped up to full flows) are inherently uncertain, and, as a
result, our actual long-term annual earnings power (or estimated
long-term annual Adjusted EBITDA) may be different than the
estimate, and such differences may be material. A reconciliation of
estimated long-term annual earnings power (or estimated long-term
annual Adjusted EBITDA) to net income (loss), the closest U.S. GAAP
financial measure, cannot be provided without unreasonable efforts
due to the inherent difficulty in quantifying certain amounts (see
footnote 5 above).
7. Calculated using current landfill gas
flows into sites and assuming 50% methane content on average across
sites.
8. Environmental Attributes refer to
federal, state, and local government incentives in the United
States, provided in the form of Renewable Identification Numbers,
Renewable Energy Credits, Lower Carbon Fuel Standard credits,
renewable thermal certificates, rebates, tax credits, and other
incentives to end users, distributors, system integrators and
manufacturers of renewable energy projects, that promote the use of
renewable energy.
ABOUT ARCHAEA
Archaea Energy Inc. is one of the largest RNG producers in the
U.S., with an industry-leading platform and expertise in
developing, constructing, and operating RNG facilities to capture
waste emissions and convert them into low carbon fuel. Archaea’s
innovative, technology-driven approach is backed by significant gas
processing expertise, enabling Archaea to deliver RNG projects that
are expected to have higher uptime and efficiency, faster project
timelines, and lower development costs. Archaea partners with
landfill and farm owners to help them transform potential sources
of emissions into RNG, transforming their facilities into renewable
energy centers. Archaea’s differentiated commercial strategy is
focused on long-term contracts that provide commercial partners a
reliable, non-intermittent, sustainable decarbonizing solution to
displace fossil fuels.
Additional information is available at
www.archaeaenergy.com.
USE OF NON-GAAP FINANCIAL MEASURES
In addition to disclosing financial statements in accordance
with U.S. generally accepted accounting principles (“GAAP”), this
release contains non-GAAP financial measures. Adjusted EBITDA is a
non-GAAP financial measure that Archaea uses to facilitate
comparisons of operating performance across periods. Non-GAAP
measures should be viewed as a supplement to and not a substitute
for the Company’s U.S. GAAP measures of performance and the
financial results calculated in accordance with U.S. GAAP and
reconciliations from these results should be carefully
evaluated.
Non-GAAP measures have limitations as an analytical tool and
should not be considered in isolation or in lieu of an analysis of
the Company’s results as reported under U.S. GAAP and should be
evaluated only on a supplementary basis.
FORWARD-LOOKING STATEMENTS
This release contains certain statements that may include
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Statements that do not
relate strictly to historical or current facts are forward-looking
and usually identified by the use of words such as “anticipate,”
“estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,”
“approximate,” “expect,” “project,” “intend,” “plan,” “believe” and
other similar words. Forward-looking statements may relate to
expectations for future financial performance, business strategies
or expectations for Archaea’s business. Specifically,
forward-looking statements may include statements concerning market
conditions and trends, earnings, performance, strategies, prospects
and other aspects of Archaea’s business, including pending
acquisitions. Forward looking statements are based on current
expectations, estimates, projections, targets, opinions and/or
beliefs of Archaea, and such statements involve known and unknown
risks, uncertainties and other factors.
The risks and uncertainties that could cause those actual
results to differ materially from those expressed or implied by
these forward looking statements include, but are not limited to:
(a) Archaea’s ability to complete its acquisition of INGENCO and
the timing of closing; (b) Archaea’s ability to successfully
integrate INGENCO and other future acquisitions; (c) the
availability and timing of financings, including for the
acquisition of INGENCO, capital contributions to Lightning
Renewables and other future acquisitions and strategic
transactions; (d) the ability to recognize the anticipated
financial, strategic, and operational benefits of the business
combinations and any transactions contemplated thereby, the
acquisition of INGENCO, Lightning Renewables, and other future
acquisitions or strategic transactions, which may be affected by,
among other things, competition, the ability of Archaea to grow and
manage growth profitably and retain its management and key
employees; (e) the possibility that Archaea may be adversely
affected by other economic, business and/or competitive factors;
(f) Archaea’s ability to develop and operate new projects,
including the projects contemplated from the INGENCO assets and
Lightning Renewables; (g) the reduction or elimination of
government economic incentives to the renewable energy market; (h)
delays in acquisition, financing, construction and development of
new projects; (i) the length of development cycles for new
projects, including the design and construction processes for
Archaea’s projects; (j) Archaea’s ability to identify suitable
locations for new projects; (k) Archaea’s dependence on landfill
operators; (l) existing regulations and changes to regulations and
policies that affect Archaea’s operations; (m) decline in public
acceptance and support of renewable energy development and
projects; (n) demand for renewable energy not being sustained; (o)
impacts of climate change, changing weather patterns and
conditions, and natural disasters; (p) the ability to secure
necessary governmental and regulatory approvals; (q) Archaea’s
expansion into new business lines; and (r) other risks and
uncertainties indicated in Archaea’s Annual Report on Form 10-K for
the year ended December 31, 2021, including those under “Risk
Factors” therein, and other documents filed or to be filed by
Archaea with the Securities and Exchange Commission.
Accordingly, forward-looking statements should not be relied
upon as representing Archaea’s views as of any subsequent date.
Archaea does not undertake any obligation to update forward-looking
statements to reflect events or circumstances after the date they
were made, whether as a result of new information, future events,
or otherwise, except as may be required under applicable securities
laws.
(Financial Tables and Supplementary
Information Follow)
ARCHAEA ENERGY INC.
Preliminary Consolidated
Statements of Operations (Unaudited)
Three Months Ended March
31,
(in thousands, except shares and per share
data)
2022
2021
Revenues and Other Income
Energy revenue
$
52,917
$
—
Other revenue
1,214
1,654
Amortization of intangibles and
below-market contracts
2,769
—
Total Revenues and Other Income
56,900
1,654
Equity Investment Income, Net
1,429
—
Cost of Sales
Cost of energy
28,579
—
Cost of other revenues
1,623
1,161
Depreciation, amortization and
accretion
12,490
49
Total Cost of Sales
42,692
1,210
General and administrative expenses
26,355
3,158
Operating Income (Loss)
(10,718
)
(2,714
)
Other Income (Expense)
Interest expense, net
(2,653
)
(6
)
Gain (loss) on warrants and derivative
contracts
(19,915
)
—
Other income (expense)
114
221
Total Other Income (Expense)
(22,454
)
215
Income (Loss) Before Income
Taxes
(33,172
)
(2,499
)
Income tax expense (benefit)
—
—
Net Income (Loss)
(33,172
)
(2,499
)
Net income (loss) attributable to
nonredeemable noncontrolling interests
—
(86
)
Net income (loss) attributable to Legacy
Archaea
—
(2,413
)
Net income (loss) attributable to
redeemable noncontrolling interests
(14,745
)
—
Net Income (Loss) Attributable to Class
A Common Stock
$
(18,427
)
$
—
Net income (loss) per Class A common
share:
Net income (loss) – basic (1)
$
(0.28
)
$
—
Net income (loss) – diluted (1)
$
(0.28
)
$
—
Weighted average shares of Class A Common
Stock outstanding:
Basic (1)
66,376,216
—
Diluted (1)
66,376,216
—
(1) Class A Common Stock is outstanding
beginning September 15, 2021 due to the reverse recapitalization
transaction described in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021.
ARCHAEA ENERGY INC.
Preliminary Consolidated
Balance Sheets (Unaudited)
(in thousands, except shares and per share
data)
March 31, 2022
December 31,
2021
ASSETS
Current Assets
Cash and cash equivalents
$
30,816
$
77,860
Restricted cash
8,857
15,206
Accounts receivable, net
37,812
37,010
Inventory
10,565
9,164
Prepaid expenses and other current
assets
34,897
21,225
Total Current Assets
122,947
160,465
Property, plant and equipment, net
394,203
350,583
Intangible assets, net
637,233
638,471
Goodwill
29,137
29,211
Equity method investments
264,622
262,738
Operating lease right-of-use assets
4,742
—
Other non-current assets
12,140
9,721
Total Assets
$
1,465,024
$
1,451,189
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade
$
23,565
$
11,096
Current portion of long-term debt, net
12,606
11,378
Current portion of operating lease
liabilities
960
—
Accrued and other current liabilities
55,774
46,279
Total Current Liabilities
92,905
68,753
Long-term debt, net
327,768
331,396
Derivative liabilities
91,381
67,424
Below-market contracts
138,920
142,630
Asset retirement obligations
4,745
4,677
Long-term operating lease liabilities
3,913
—
Other long-term liabilities
2,604
5,316
Total Liabilities
662,236
620,196
Commitments and Contingencies
Redeemable Noncontrolling
Interests
861,448
993,301
Stockholders' Equity
Preferred stock, $0.0001 par value;
10,000,000 authorized; none issued and outstanding
—
—
Class A common stock, $0.0001 par value;
900,000,000 shares authorized; 80,281,754 shares issued and
outstanding as of March 31, 2022 and 65,122,200 shares issued and
outstanding as of December 31, 2021
8
7
Class B common stock, $0.0001 par value;
190,000,000 shares authorized; 39,281,735 shares issued and
outstanding as of March 31, 2022 and 54,338,114 shares issued and
outstanding as of December 31, 2021
4
5
Additional paid in capital
122,075
—
Accumulated deficit
(180,747
)
(162,320
)
Total Stockholders' Equity
(58,660
)
(162,308
)
Total Liabilities, Redeemable
Noncontrolling Interests and Stockholders’ Equity
$
1,465,024
$
1,451,189
Reconciliation of Non-GAAP Measures
Adjusted EBITDA
The following table reconciles Adjusted EBITDA to net loss for
the three months ended March 31, 2022:
(in thousands)
Three Months Ended March 31,
2022
Net Loss
$
(33,172
)
Adjustments:
Interest expense
2,653
Depreciation, amortization and
accretion
12,490
EBITDA
$
(18,029
)
Net derivative activity
19,915
Amortization of intangibles and
below-market contracts
(1,103
)
Amortization of equity method investments
basis difference
2,571
Depreciation and amortization adjustments
for equity method investments
1,594
Income tax expense for equity method
investments
1,543
Share-based compensation expense
5,753
Acquisition and other transaction costs(1)
and severance costs
8,335
Adjusted EBITDA
$
20,579
(1)
Other transaction costs include expenses
related to certain joint ventures and the Ares secondary
offering.
Adjusted EBITDA is commonly used as a supplemental financial
measure by Archaea’s management and external users of its
consolidated financial statements to assess the financial
performance of its assets without regard to financing methods,
capital structures, or historical cost basis. Adjusted EBITDA is
not intended to represent cash flows from operations or net income
(loss) as defined by U.S. GAAP and is not necessarily comparable to
similarly titled measures reported by other companies.
Archaea believes Adjusted EBITDA provides relevant and useful
information to management, investors, and other users of its
financial information in evaluating the effectiveness of its
operating performance in a manner that is consistent with
management’s evaluation of financial and operating performance.
Adjusted EBITDA is calculated by taking net income (loss),
before taxes, interest expense, and depreciation, amortization and
accretion, and adjusting for the effects of certain non-cash items,
other non-operating income or expense items, and other items not
otherwise predictive or indicative of ongoing operating
performance, including gains and losses on disposal of assets,
impairment charges, debt forbearance costs, net derivative
activity, non-cash share-based compensation expense, and
acquisition and other transaction costs, and severance costs.
Archaea believes the exclusion of these items enables investors and
other users of its financial information to assess its sequential
and year-over-year performance and operating trends on a more
comparable basis and is consistent with management’s own evaluation
of performance.
Adjusted EBITDA also includes adjustments for equity method
investment basis difference amortization and the depreciation and
amortization expense and income tax expense included in the
Company’s equity earnings from its equity method investments. These
adjustments should not be understood to imply that Archaea has
control over the related operations and resulting revenues and
expenses of its equity method investments. Archaea does not control
its equity method investments; therefore, it does not control the
earnings or cash flows of such equity method investments. The use
of Adjusted EBITDA, including adjustments related to equity method
investments, as an analytical tool should be limited
accordingly.
A reconciliation of expected full year 2022 Adjusted EBITDA to
net income (loss), the closest U.S. GAAP financial measure, cannot
be provided without unreasonable efforts due to the inherent
difficulty in quantifying certain amounts, including share-based
compensation expense, which is affected by factors including future
personnel needs and the future price of our Class A common stock,
and changes in fair value of warrant derivatives, due to a variety
of factors including the unpredictability of underlying price
movements, which may be significant.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220509006044/en/
ARCHAEA Megan Light mlight@archaea.energy
346-439-7589
Blake Schreiber bschreiber@archaea.energy 346-440-1627
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