Archaea Energy Inc. Reports Third Quarter 2021 Results and Provides Full Year 2021 Combined Guidance

Archaea Energy Inc. Reports Third Quarter 2021 Results and Provides

Full Year 2021 Combined Guidance

HOUSTON, TX–(BUSINESS WIRE)– Archaea Energy Inc. (“Archaea” or “the Company”) (NYSE: LFG),

an industry-leading renewable natural gas (“RNG”) company, today announced financial and operating

results for the third quarter 2021.

THIRD QUARTER AND RECENT HIGHLIGHTS

• Closed the previously announced business combinations with Archaea Energy LLC and Aria Energy

LLC (“Aria”) on September 15, 2021 (the “Closing Date”) and our Class A common stock began

trading on the NYSE under the symbol “LFG” on September 16, 2021.

• Produced a combined1 1.43 million and 4.19 million MMBtu of RNG for the three and nine months

ended September 30, 2021, respectively, and 175 thousand and 703 thousand2 MWh of electricity for

the three and nine months ended September 30, 2021, respectively.

• Generated a combined1 net loss3 of $21.9 million and net income3 of $52.7 million for the three and

nine months ended September 30, 2021, respectively. Generated combined Adjusted EBITDA4 of

$22.3 million and $59.8 million for the three and nine months ended September 30, 2021,

respectively.

• Announced full year 2021 combined RNG production guidance of approximately 5.4 million MMBtu

and full year 2021 combined Adjusted EBITDA guidance5 of $72.5–77.5 million, and expect to

announce full year 2022 guidance in the first quarter 2022.

• Construction at Project Assai, which is expected to be the largest RNG facility in the world when

completed, is progressing on schedule and within budget; late-stage commissioning activities are

underway and the facility is expected to become operational in the first quarter 2022.

• Entered into a 21-year, fixed-fee RNG purchase and sale agreement with NW Natural Gas Company

(“NW Natural”), a subsidiary of NW Natural Holdings (NYSE: NWN), for the sale of Environmental

Attributes6 related to up to one million MMBtu of RNG annually, beginning in 2022 and ramping up to

the full annual quantity in 2025.

• Added five new landfill sites to our extensive backlog of high-quality RNG development projects,

comprised of one greenfield RNG project and four landfill gas to electric conversion projects, bringing

our total portfolio of development opportunities to approximately 35, inclusive of new builds, electric

conversions, and optimization opportunities.

CEO COMMENTARY

“I am pleased to report Archaea’s inaugural quarterly results as a public company today,” said Nick Stork,

Archaea’s Chief Executive Officer and co-founder of Archaea Energy LLC. “In the short period of time

since the closing of our business combinations, we have made great strides integrating the teams and

assets, identifying opportunities for optimizing existing assets beyond our initial expectations, and

advancing our long-term strategic objectives.”

“On project development, the excellent progress on Project Assai reinforces our confidence in developing

our backlog of RNG projects on time and on budget. We recently added five new projects to our extensive

backlog and we’re in active discussions with leading landfill owners and operators about doing more. On

the commercial front, we continue to see great opportunities to add blue-chip customers that share our

commitment to the environment and the unique role that Archaea’s RNG serves in the low carbon future,

and we’re pleased to welcome NW Natural as one of our newest key customers with a 21-year, fixed-fee

RNG purchase agreement beginning in 2022 and ramping up to one million MMBtu per year in 2025.”

“On the technology side, we’ve made excellent progress finalizing the Archaea V1 plant design, which will

meaningfully improve upon our leading cost and development timelines by vertically integrating key

components and standardizing design specifications for different RNG plant sizes. We’ve already begun

procuring the key parts, materials, and infrastructure for the V1 modules and we expect to begin installing

these RNG units at our new sites beginning in the second half of 2022. The V1 design is expected to

unlock the development potential for lower flow sites and, when paired with our development success at

large-flow sites like Assai, firmly positions Archaea as the landfill developer of choice for landfills of all

sizes. We’re off to a great start as a public company, and we’re going to use this momentum to our

advantage.”

2021 FULL YEAR GUIDANCE

We have provided the following financial and operational guidance for full year 2021 on a combined basis.

All guidance is current as of the published date and is subject to change.

Full Year 2021

Combined RNG Production (million MMBtu) 5.4

Combined Adjusted EBITDA5 ($ millions) $ 72.5 – $ 77.5

We expect to provide guidance with respect to fiscal year 2022 in the first quarter of 2022.

SUMMARY AND REVIEW OF FINANCIAL RESULTS

The following results are presented on a combined1 basis. Please see the “Notes Regarding Financial

Statement Presentation” and “Reconciliation of Non-GAAP Measures” sections of this release and the

Archaea Energy Inc. Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and

Exchange Commission for additional details.

Combined Basis

($ in thousands)

Three Months Ended

September 30, 2021

Nine Months Ended

September 30, 2021

Revenue $ 46,974 $ 136,357

Equity Investment Income, Net $ 7,330 $ 20,656

Net Income (Loss)3 $ (21,875) $ 52,750

Adjusted EBITDA4 $ 22,291 $ 59,804

RNG Produced (MMBtu) 1,425,080 4,189,550

Electricity Produced (MWh)2 175,230 703,278

Combined RNG production for the three and nine months ended September 30, 2021 was positively

impacted by production from our Boyd County facility, which became operational in April 2021. Combined

electricity production for the three and nine months ended September 30, 2021 was positively impacted

by the acquisition of PEI Power LLC (“PEI”) in April 2021.

Combined revenues and equity investment income for the three and nine months ended September 30,

2021 were positively impacted by strong market pricing of Environmental Attributes, natural gas, and

power.

Combined net loss for the three months ended September 30, 2021 was primarily driven by non-recurring

costs, loss from change in fair value of derivatives, and increased general and administrative expenses

related to scaling headcount for the future growth of our business and as a result of operating as a public

company, partially offset by strong market pricing. Combined net income for the nine months ended

September 30, 2021 was positively impacted by non-recurring gains related to the sale of LES Project

Holdings LLC (“LESPH”), including a gain on the extinguishment of debt in the amount of $61.4 million

and a gain on the disposal of assets in the amount of $1.3 million, as well as strong market pricing,

partially offset by non-recurring costs, loss from change in fair value of derivatives, and increased general

and administrative expenses.

Combined non-recurring costs, which primarily consisted of transaction costs related to our business

combinations, totaled approximately $19.2 and $22.4 million for the three and nine months ended

September 30, 2021, respectively.

Adjusted EBITDA for the three and nine months ended September 30, 2021 was positively impacted by

strong market pricing and negatively impacted by increased general and administrative expenses as

described above. Adjusted EBITDA for the three and nine months ended September 30, 2021 was in line

with management expectations.

Capital Investments

Cash used in investing activities, excluding the acquisition of Aria, totaled $134.8 million on a combined

basis for the nine months ended September 30, 2021. We had combined purchases of property, plant and

equipment of $90.5 million, primarily related to the development of Project Assai and our Boyd County

RNG facility. We acquired PEI Power LLC for $31.5 million and contributed $12.5 million into our equity

method investments on a combined basis.

BUSINESS COMBINATIONS

We closed our previously announced business combinations with Archaea Energy LLC and Aria Energy

LLC on September 15, 2021, with more than 99% of the votes cast on the business combination

proposals at a special meeting of stockholders (the “Special Meeting”) in favor of approving the business

combinations. Stockholders also voted to approve all other proposals presented at the Special Meeting

and elected to redeem less than 0.2% of outstanding shares of Class A common stock at the time of the

Special Meeting. Concurrent with the completion of the business combinations, the Company changed its

name from Rice Acquisition Corp. (“RAC”) to Archaea Energy Inc., and our Class A common stock began

trading on the NYSE under the symbol “LFG” on September 16, 2021.

CAPITAL STRUCTURE AND LIQUIDITY

On the Closing Date, we received $236.9 million in gross cash proceeds from RAC.

On the Closing Date, we issued approximately 29.2 million shares of Class A common stock and 250,000

warrants (each warrant exercisable for one share of Class A common stock at a price of $11.50) for gross

consideration of $300 million under a PIPE financing. We also entered into a $470 million Revolving

Credit and Term Loan Agreement with a syndicate of lenders, providing for a senior secured revolving

credit facility with an initial commitment of $250 million and a senior secured term loan credit facility with

an initial commitment of $220 million. As of September 30, 2021, there were outstanding borrowings of

$220 million under the term loan credit facility, and letters of credit totaling $14.7 million issued and no

outstanding borrowings under the revolving credit facility.

On the Closing Date, we repaid certain Archaea Energy LLC and all Aria debt, including (i) a syndicated

senior secured term loan and revolving credit facility, (ii) a line of credit with Comerica Bank, (iii)

promissory notes with certain lenders, including related parties to the Company, (iv) loans related to the

Boyd County credit agreement with Comerica Bank, (v) a promissory note payable to Noble

Environmental, Inc. in connection with Noble’s guaranty of the Boyd County debt, and (vi) an equipment

financing loan.

On the Closing Date, cash of $377.1 million was paid to Aria holders, and Aria holders received

23.0 million Opco Class A units and 23.0 million shares of Class B common stock7. Archaea Energy LLC

holders received 33.4 million newly issued Opco Class A units and 33.4 million shares of newly issued

Class B common stock7.

As of September 30, 2021, our consolidated liquidity position was over $400 million, consisting of cash

and cash equivalents of $153.6 million, restricted cash of $17.2 million, and, after taking into

consideration our outstanding letters of credit, $235.3 million of available borrowing capacity under our

revolving credit facility.

In November 2021, we issued a notice to warrant holders to redeem the approximately 11.9 million

outstanding public warrants and 250 thousand warrants that were issued in a private placement

simultaneously with the consummation of the business combinations. Holders may exercise their warrants

to purchase shares of our Class A common stock on a cash or cashless basis through December 6, 2021.

To minimize dilution to our existing stockholders as a result of warrant exercises, we also entered into an

agreement to use any cash proceeds received from exercises of our warrants to repurchase shares of

Class A common stock from Aria Renewable Energy Systems LLC, which received shares on the Closing

Date related to its ownership interest in Aria, at a price of $17.65 per share. Additional details are

available in the Form 8-K filed by the Company with the SEC on November 4, 2021.

THIRD QUARTER 2021 CONFERENCE CALL AND WEBCAST

We will host a conference call to discuss our financial and operating results for third quarter 2021 on

Tuesday, November 16, 2021 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 through our website at

www.archaeaenergy.com. After completion of the webcast, a replay will be available for 12 months on our

website.

1. The Company’s results included elsewhere in this release include only the results of Archaea Energy LLC prior to the business combinations closing

on September 15, 2021 and the results of the combined Company for the period from September 15 to September 30, 2021, which includes the

operations of Archaea Energy LLC and Aria Energy LLC (“Aria”). Company results prior to the business combination date do not include Aria’s results.

Aria’s financial information through September 14, 2021 is also presented elsewhere in this release. The Company has presented certain specified

financial results on a “combined basis” as it believes it provides more meaningful information to investors. Financial information presented on a

“combined basis” is the sum of the historical financial results of the Company for the full period shown and Aria for periods prior to the business

combinations closing date, but only includes the impact of purchase accounting as of September 15, 2021. Please see the “Notes Regarding Financial

Statement Presentation” and “Reconciliation of Non-GAAP Measures” sections of this release and the Archaea Energy Inc. Form 10-Q for the quarter

ended September 30, 2021 filed with the Securities and Exchange Commission for additional details.

2. Electricity production for the nine months ended September 30, 2021 includes production of 203,276 MWh from LES Project Holdings, LLC

(“LESPH”) assets, which were sold by Aria on June 10, 2021.

3. Combined 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 Condensed Consolidated Statement of Operations included in this release.

4. Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for further details.

5. A reconciliation of expected full year 2021 combined 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 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. 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, 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.

7. The Company has retained its “Up-C” structure, whereby all of the equity interests in Aria and Archaea Energy LLC (together with its subsidiaries,

“Legacy Archaea”) are indirectly held by LFG Acquisition Holdings LLC (“Opco”) and the Company’s only assets are its equity interests in Opco. The

Up-C structure allows the Legacy Archaea holders, the Aria holders, and Rice Acquisition Sponsor LLC to retain their equity ownership through Opco,

an entity that is classified as a partnership for U.S. federal income tax purposes, in the form of Opco Class A Units, and provides potential future tax

benefits for the Company when those holders of Class A Opco Units ultimately exchange their Class A Opco Units and shares of the Company’s Class

B Common Stock for shares of Class A Common Stock in the Company. Opco is considered a variable interest entity for accounting purposes, and the

Company, as the sole managing member of Opco, is considered the primary beneficiary. As such, the Company consolidates Opco, and the unitholders

that hold economic interest directly at Opco are presented as noncontrolling interests in the Company’s financial statements.

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.

ARCHAEA CONTACTS

Investors and Media

Megan Light

mlight@archaea.energy

346-439-7589

USE OF NON-GAAP FINANCIAL MEASURES

In addition to disclosing financial statements in accordance with U.S. GAAP, this press release contains

non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure that we use to

facilitate comparisons of operating performance across periods. Non-GAAP measures should be viewed

as a supplement to and not a substitute for our 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 our results as reported under U.S. GAAP and should be evaluated only on a

supplementary basis.

FORWARD-LOOKING STATEMENTS

This press release contains certain statements that may include forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E

of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. 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) the ability to recognize

the anticipated benefits of the business combinations and any transactions contemplated thereby, 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; (b) the possibility that Archaea may be

adversely affected by other economic, business and/or competitive factors; (c) Archaea’s ability to

develop and operate new projects; (d) the reduction or elimination of government economic incentives to

the renewable energy market; (e) delays in acquisition, financing, construction and development of new

projects; (f) the length of development cycles for new projects, including the design and construction

processes for Archaea’s projects; (g) Archaea’s ability to identify suitable locations for new projects; (h)

Archaea’s dependence on landfill operators; (i) existing regulations and changes to regulations and

policies that affect Archaea’s operations; (j) decline in public acceptance and support of renewable energy

development and projects; (k) demand for renewable energy not being sustained; (l) impacts of climate

change, changing weather patterns and conditions, and natural disasters; (m) the ability to secure

necessary governmental and regulatory approvals; (n) the Company’s expansion into new business lines;

and (o) other risks and uncertainties indicated in the Registration Statement on Form S-1 (File No.

333-260094), originally filed by Archaea with the SEC on October 6, 2021, as subsequently amended on

October 18, 2021 and declared effective by the SEC on October 21, 2021, including those under “Risk

Factors” therein, and other documents filed or to be filed with the SEC by Archaea.

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.

Share This Post

Share on linkedin
Share on twitter
Share on email