Q4 2021 Archaea Energy Inc Earnings Call
[music].
Good morning, and welcome to the Archea energy fourth quarter, and full year 2021 earnings call and webcast.
Good morning and welcome to the Arcea Energy fourth quarter and full year 2021 earnings column webcast.
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I would now like to turn the call over to Meghan Light Vice President of Investor Relations to begin.
I would now like to turn the call over to Megan Light, Vice President of Investor Relations, to begin.
Please go ahead.
Thank you and good morning, everyone welcome to Archea Energy, Inc. Fourth quarter and full year 2021 earnings Conference call with me today are next door Archaea, Chief Executive Officer, and Brian Mccarthy, Archaeas interim Chief Financial Officer, and Chief Investment Officer.
Megan Light: Thank you, and good morning, everyone. Welcome to ARCEA Energy, Inc.'s fourth quarter and full year 2021 earnings conference call. With me today are Nick Stork, ARCEA's Chief Executive Officer, and Brian McCarthy, ARCEA's Interim Chief Financial Officer and Chief Investment Officer.
Megan Light: Archaea released preliminary financial and operating results for the fourth quarter and full year 2021 this morning, and those results are available on the investor relations portion of our website at archaeaenergy.com.
Archie you released preliminary financial and operating results for the fourth quarter and full year 2021. This morning, and those results are available on the Investor Relations portion of our website at Archea energy Dotcom.
Presentation and access to the webcast for this call are also available on our website and after completion of this call a replay will be available for 12 months.
Megan Light: The presentation and access to the webcast for this call are also available on our website, and after completion of this call, a replay will be available for 12 minutes.
Before we begin I'd like to remind you that our remarks on this call including answers to your questions contain forward looking statements.
Megan Light: Before we begin, I'd like to remind you that our remarks on this call, including answers to your questions, contain four looking statements, which involve risks, uncertainties, and assumptions.
Risks uncertainties and assumptions forward.
Forward looking statements are not a guarantee of performance and actual results could differ materially from what is contained in such statements.
Megan Light: Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements.
Several factors that could cause or contribute to such differences are described on slide two of our presentation.
Megan Light: Several factors that could cause or contribute to such differences are described on slide two of our presentation.
Megan Light: These forward-looking statements reflect our views as of the date of this call, and ARCEA does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of the call.
These forward looking statements reflect our views as of the date of this call and argue does not undertake any obligation to update forward looking statements to reflect events or circumstances. After the date of this call.
Additionally, this call will contain discussion of certain non-GAAP measures, including but not limited to adjusted EBITDA.
Megan Light: Additionally, this call will contain discussion of certain non- GAAP measures , including but not limited to adjusted EBIT documents.
A definition of non-GAAP measures used and a reconciliation of these measures to the nearest GAAP measure is included in the appendix to the presentation.
Megan Light: A definition of non- GAAP measures used and a reconciliation of these measures to the nearest gap measure is included in the appendix to the present
We believe the non-GAAP measures presented provide relevant and useful information and evaluating the effectiveness of our operating performance in a manner that is consistent with management's evaluation of financial and operating performance.
Megan Light: We believe the non-GAAP measures presented provide relevant and useful information in evaluating the effectiveness of our operating performance in a manner that is consistent with management's evaluation of financial and operating performance.
non-GAAP financial measures should be considered in addition to the results reported in accordance with GAAP and should not be considered in isolation or as a substitute for GAAP results.
Megan Light: non-GAAP financial measures should be considered in addition to the results reported in accordance with GAAP and should not be considered in isolation or as a substitute for GAAP.
Nick will begin today's call by providing an overview of fourth quarter results recent highlights and an update on our strategic priorities.
Speaker Change: Nick will begin today's call by providing an overview of fourth quarter results, recent highlights, and an update on our strategic priorities.
Brian will highlight commercial developments and review financial results and then Nick will discuss our 2022 guidance and development plan. We will then open the call for questions.
Speaker Change: Brian will highlight commercial developments and review financial results, and then Nick will discuss our 2022 guidance and development plan. We will then open the call.
And now I will turn the call over to next door Archaeas Chief Executive Officer.
Megan Light: And now I will turn the call over to Nick Stork, Arceus Chief Executive Officer.
Good morning, everyone and thank you for being here for arc is fourth quarter and full year 2021 earnings call.
Nick Stork: Morning everyone, and thank you for being here for ARCEA's fourth quarter and full year 2021.
Nick Stork: Proud of the results we've delivered, driven by the extraordinary efforts of the RQ.
Now to the results we've delivered driven by the extraordinary efforts of the argue team.
Nick Stork: We achieved strong results, a number of milestones across many facets of our business.
We achieved strong results a number of milestones across many facets of our business and advanced our strategic priorities, while successfully emerging two private companies completing a complex. These back transaction and very quickly building out our public company functions to support our rapidly growing business.
Nick Stork: and advance your strategic priorities. While successfully merging two private companies.
Nick Stork: completing a complex D-SPAC transaction, and very quickly building on our public company functions to support our rapidly growing business.
Nick Stork: I appreciate the hard work and dedication of our team throughout the past year.
I appreciate the hard work and dedication of our team throughout the past year.
This morning, we also announced several key additions to our leadership and management teams, we appointed Brian Mccarthy <unk> co founder and Chief investment Officer, and do an expanded role as interim Chief Financial Officer.
Nick Stork: This morning, we also announced several key additions to our leadership and management
Nick Stork: We appointed Brian McCarthy, ARCEA's co-founder and chief investment officer, into an expanded role as interim chief financial officer.
Nick Stork: Brian previously served as ARCEA's Chief Financial Officer and is the architect of our long-term commercial partnerships, and we're excited to have him resume his participation in our finance division. With the support of a
Brian previously served as <unk>, Chief Financial Officer, and as the architect of our long term commercial partnerships and we're excited to have them resume his participation in our finance division.
With the support of additional newly added talent.
We also appointed Ed TV as general counsel, and EVP of strategic initiatives and government Affairs.
Nick Stork: We also appointed Ed Tavey as General Counsel and EVP of Strategic Initiatives and Government.
Nick Stork: Edward has significant experience in corporate management, transaction structuring and execution, and public company governance and regulation.
Edward has significant experience in corporate management transaction, structuring and execution and public company governance and regulatory matters.
Nick Stork: We're excited to have him lead our legal function and support our strategic development.
We're excited to have him lead our legal function and support our strategic development efforts.
Nick Stork: I'd like to thank their respective predecessors, Eric Javiti and Lindsay Ellis, for helping us successfully build key public company functions in a tightly compressed environment.
I'd like to thank their respective predecessors, Eric Java D and Lindsay Ellis for helping US successfully built public company functions and its highly compressed time frame.
And I look forward to working with Brian and Edward as they help lead the next phase and argues evolution.
Nick Stork: I look forward to working with Brian and Edward as they help lead the next phase in archaea's evolution.
Since our last call, we've made meaningful progress across many aspects of our business I'd like to highlight several of them briefly before diving deeper.
Nick Stork: Since our last call, we've made meaningful progress across many aspects of our business.
Nick Stork: I'd like to highlight several of them briefly before diving.
First we're proud to announce strong operating and financial results today with the full year pro forma R&D production sold a $5 seven 2 million btu more than 5% above our guidance of $5 4 million of it would be to you.
Nick Stork: First, we're proud to announce strong operating and financial results today, with the full year pro forma R&G production sold of 5.72 million MMBTU, more than 5% above our guidance of 5.4 million.
Full year pro forma revenues of $205 8 million full year pro forma net loss of 77 4 million and full year pro forma adjusted EBITDA of $76 1 million.
Nick Stork: Full-year pro forma revenues of $205.8 million, full-year pro forma net loss of $77.4 million, and full-year pro forma adjusted EBITDA of $76.1 million.
Above the midpoint of our guidance range.
Nick Stork: Our outperformance was largely driven by higher R&G production volumes and higher market pricing of R&G environmental attributes and electronics.
Our outperformance was largely driven by higher R&D production volumes and higher market pricing of R&D environmental attributes and electricity.
Operationally in late December 2021, we achieved commercial operations at Assai, which is now the highest capacity operational R&D facility in the U S.
Nick Stork: Operationally, in late December 2021, we achieved commercial operations at Assai, which is now the highest capacity operational R&G facility.
Commercial operations were achieved ahead of schedule and under two years.
Nick Stork: Commercial operations were achieved ahead of schedule in under two years, a momentous accomplishment for the industry and a testament to the strength of our in-house technical and project development profession.
This accomplishment for the industry and a testament to the strength of our in house technical and project development professionals.
We continued this momentum into early January and showcase the breadth of our teams' capabilities across biogas versus we achieved commercial operations at our first dairy facility the source dairy digester facility within our 50% Mavericks LLC joint venture.
Nick Stork: We continued this momentum into early January and showcased the breadth of our team's capabilities across biogas sources. We achieved commercial operations at our first dairy facility, the SOARS Dairy Digester Facility.
Nick Stork: Commercially, we entered into two new long-term fixed-price contracts with Northwest Natural and FortisBC for a total of up to approximately $1.5 million.
Commercially we entered into two new long term fixed price contracts with northwest natural and Fortis BC for a total of up to approximately $8 6 million Btu of R&D annually once volumes under these contracts ramp up that's almost 25% of our estimated long term annual production.
Nick Stork: 8.6 million MMBTU of RNG annually once volumes under these contracts ramp up. That's almost 25% of our estimated long-term annual production.
Brian will tell you more about those agreements in a few minutes.
With respect to technology development, we are on track to deploy Archie version, one plant design and the second half of the year would you expect it to deliver improved project economics by reducing planned capital expenditures by approximately 40% compared to industry averages.
Nick Stork: With respect to technology development, we are on track to deploy RQV1 plant design in the second half of the year, which is expected to deliver improved project economics by reducing plant capital expenditures by approximately 40% compared to industry average.
Nick Stork: We expect this meaningful cost reduction to open up new development opportunities for low-flow landfills.
We expect this meaningful cost reduction to open up new development opportunities for low flow landfill sites.
Nick Stork: Strategically, we added five additional projects to our development backlog since our last quarter of the call, bringing our total development backlog to 38 projects secured by gas rates
Strategically we added five additional projects to our development backlog since our last quarterly call, bringing our total development backlog to 38 projects secured by gas rich agreements and our team is working to capture as many economically attractive development opportunities as possible and increasingly competitive market to build upon our large high quality backlog.
Nick Stork: And our team is working to capture as many economically attractive development opportunities as possible in an increasingly competitive market to build upon our large
Since the business combination was announced in April 2021, we've added 10 total projects to our development backlog, which has expanded our estimated long term earnings power to approximately $400 million in annual adjusted EBITDA potential once all projects in our backlog today are completed and ramped up.
Nick Stork: Since the business combination was announced in April 2021, we have added 10 total projects to our development backlog.
Nick Stork: which has expanded our estimated long-term earnings power to approximately $400 million in annual adjusted EBITDA potential.
Nick Stork: once all projects in our backlog today are completed and ramped up.
Nick Stork: We have substantially de-risked the path to achieving that long-term earnings power by executing on our commercial strategy and entering into long-term sales agreements for our customers.
We have substantially de risked the path to achieving that long term earnings power by executing on our commercial strategy and entering into long term sales agreements for R&D.
We achieved commercial operations at Assai on December 32021, we successfully constructed commissioned and completed the project in less than two years after obtaining gas rates, a monumental task and a timeline much shorter than industry averages for landfill guest R&D facilities.
Nick Stork: We achieved commercial operations at Assai on December 30th, 2021.
Nick Stork: successfully constructed, commissioned, and completed the project in less than two years after obtaining gas rights.
Nick Stork: A monumental task and a timeline much shorter than industry averages for landfill gas starting.
The site is located at the Keystone century landfill in the Scranton, Pennsylvania area and has an inlet capacity of 22500 standard cubic feet per day, whereas CFM, making it the highest capacity operational facility in the United States. The site has been operating at full uptime and methane recovery since March 2nd utilizing full flows from the Keystone landfill.
Nick Stork: SCI is located at the Keystone Sanitary Landfill in the Scrin, Pennsylvania area, and has an inlet capacity of 22,500 standard cubic feet per minute, or SCFM, making it the highest capacity operational facility in the United States.
Nick Stork: The site has been operating at full uptime in methrin recovery since March 2nd, utilizing full flows from the Keystone.
Nick Stork: We expect to add gas flows from the nearby Alliance Landfill in the near future.
We expect to add gas flows from the nearby alliance landfill in the near future.
We're very pleased with the performance of the size, so far and expect to continue to fine tune the plant in the coming weeks.
Nick Stork: We are very pleased with the performance of the slides so far and expect to continue to fine-tune the plan.
<unk> is a very attractive return profile with a build multiple of around three X capital expenditures to estimated adjusted EBITDA, including the impacts of the PDI power acquisition.
Nick Stork: PSI is a very attractive return profile, with a billed multiple of around 3x capital expenditures to estimated adjusted EBITDA, including the impacts of the PII.
Capital expenditures for the project within budget and totaled approximately $145 million through December 31, 2021 for these high project, including the acquisition of PDI power, which included landfill gas rich the alliance landfill.
Nick Stork: Capital expenditures for the project were within budget and totaled approximately $145 million through December 31, 2021 for the ASI project, including the acquisition of PEI power.
Our network of pipelines and our power generating facility with a combined capacity of approximately 85 megawatts do.
Nick Stork: a network of pipelines, and a power-generating facility with a combined capacity of approximately 85,000.
Nick Stork: The expected adjusted EBITDA contribution from our Assai R&G facility is expected to be approximately $40 million on an annualized long-term basis at full production based on long-term contracts currently in place and assuming a $1.50 rent pricing for uncontracted volume.
We expected adjusted EBITDA contribution from our <unk> facility is expected to be approximately $40 million on an annualized long term basis at full production based on long term contracts currently in place and assuming $1.50 RIN pricing on contracted volumes.
Until gas flows into assai are expected to increase over the next several years, leading to higher expected production from that facility and therefore higher expected adjusted EBITDA returns project stands to benefit from long term gas rights agreements with the Keystone and alliance landfills, which have decades of capacity in our strategically located within growing waste markets.
Nick Stork: Landfill gas flows into Assire are expected to increase over the next several years, leading to higher expected production from the facility and therefore higher expected adjusted EBITDA in returns. The project stands to benefit from long-term gas rights agreements with the Keystone and Alliance Landfills, which have decades of capacity and are strategically located within growing waste markets.
In June 2021, the Keystone landfill was awarded a significant expansion by the Pennsylvania Department of Environmental protection.
Nick Stork: June 2021, the Keystone landfill was awarded a significant expansion by the Pennsylvania Department of Environmental Protection.
I'm thankful for our partners on this project, including the teams at Keystone waste management, UGI, and the Pennsylvania Department of Environmental protection.
Nick Stork: I'm thankful for our partners on this project, including the teams at Keystone Waste Management, UGI, and the Pennsylvania Department of Environmental Protection.
Our long term commercial partners conclude Fortis BC energy <unk> and the University of California for their meaningful long term commitments to de carbonization and to the success of the project.
Nick Stork: and our long-term commercial partners, which include FortisBC, Energear, and the University of California.
Nick Stork: for their meaningful long-term commitments to decarbonization and to the success of the project.
Nick Stork: I'd also like to thank our team for working tirelessly to complete a size safely under budget and on a rapidly accelerated timeline.
I'd also like to thank our team for working tirelessly to complete a size safely under budget and are rapidly accelerated timeline.
One of our key priorities for 2022 is the implementation of marquee version, one standardized Modularized plant design we.
Nick Stork: One of our key priorities for 2022 is the implementation of RQV1, a standardized and modularized plant design.
We made great strides in its development in 2021, we are currently developing for standard plants to be built on skids with interchangeable sub components and sizing ranges from 2000 to 9600 <unk> see them capacity.
Nick Stork: We are currently developing four standard plants to be built on skids with interchangeable substrates.
Nick Stork: sizing ranges from 2,000 to 9,600 SCFM capacity.
Throughout 2021, our focus was primarily on system design and procurement and our focus this year will be on implementations.
Nick Stork: Throughout 2021, our focus was primarily on system design and procurement, and our focus this year will be on implementation.
Our end goal is to build our supply chain and fabrication capabilities to allow us to pull argued version one plants off the shelf and.
Nick Stork: Our end goal is to build our supply chain and fabrication capabilities to allow us to pull Archaea version 1 plants off the shelf in the future, which should enable us to construct projects in record time.
In the future, which should enable us to construct projects in record time.
We currently have orders in place for the key components and major equipment for 'twenty, two plants, which covers most of the expected new builds in our current development plan for this year and next day.
Nick Stork: covers most of the expected new builds in our current development plan for this year and next.
Nick Stork: Deliveries of components have begun and we expect to install our first version 1 plant in the second half of this year.
Deliveries of components have begun and we expect to and solar first version one plant in the second half of this year.
Nick Stork: These substantial pre-orders have significantly minimized our near-term supply chain inflation.
You substantial peers have significantly minimized, our near term supply chain inflation risks.
Nick Stork: We expect RFEA Version 1 to reduce project development and construction timelines to 18 months and to reduce capital costs per project by about 40% compared to industry average.
We expect Turkey version, one to reduce project development construction timelines to 18 months and to reduce capital costs per project by about 40% compared to industry averages.
We also expect increased uptime and methane recovery from our plants and therefore higher production because the plants are designed to handle a wide array of gas conditions.
Nick Stork: We also expect increased uptime in methane recovery from the plants, and therefore, higher production because the plants are designed to handle a wide array of gas.
All newbuild projects in 2022 and forward development plans will implement Thearchy version one design we're.
Nick Stork: All new build projects in 2022 and forward development plans will implement the RQA version
Nick Stork: We're excited to validate and reap the many benefits of this design over the course of the year. We think version 1 gives us a significant advantage in the marketplace and positions us to be the R&D developer of choice.
We're excited to validate and reap the many benefits of this design over the course of the year. We think version one gives us a significant advantage in the marketplace and positions us to be the R&D developer of choice.
Nick Stork: Enabling us to build on our market-leading position at a time when competition for attractive project opportunities is increasing.
Enabling us to build on our market leading position at a time when competition for attractive project opportunities is increasing.
That continued success in adding to our backlog of high quality development projects.
Nick Stork: We've had continued success in adding to our backlog of high quality development projects.
Nick Stork: We've added five development projects to our backlog since our last quarterly call, bringing the total to 10 projects since our business combination was announced in April .
Is that a five development projects to our backlog since our last quarterly call, bringing the total to 10 projects since our business combination was announced in April 2021.
In November 2021 on our last call we announced the addition of five projects since April 2021 required for operating landfill gas to electric facilities with the intention to build R&D plans on these sites overtime and we executed gastro agreement to develop a new R&D facility.
Nick Stork: In November 2021, on our last call, we announced the addition of five projects since April 2021. We acquired four operating landfill gastroelectric facilities with the intention to build R&G plants on these sites.
In December we entered into a new joint venture. This joint venture subsequently acquired gas rates at two locations to co develop R&D facilities with expected combined flows of approximately 4250 net S. CFM into facilities. After completion in January 2022, we signed gas rates agreements to develop R&D facilities at two additional land.
Nick Stork: In December , we entered into a new joint venture. This joint venture subsequently acquired gas rights at two locations to co-develop R&G facilities. With expected combined flows of approximately...
Nick Stork: into facilities after completion. In January 2022, we signed gas rights agreements to develop R&G facilities at two additional landfill sites, expanding existing relationship with an independent landfill.
<unk> sites, expanding an existing relationship with an independent landfill owner in.
Nick Stork: And in February 2022, we acquired a landfill gas to electric asset with R&D development.
And in February 2022, we acquired a landfill gas to electric asset with R&D development rights combined flows for the three projects added year to date in 2022 are expected to total approximately 4500 net CFM into the facilities after completion.
Nick Stork: Combined flows for the three projects added year-to-date in 2022 are expected to total approximately 4,500 net SCFM into the facility.
Today, our total project development backlog includes 38 projects for which we have gas rights agreements in place, including 10 optimizations in 2008 new builds.
Nick Stork: Today, our total project development backlog includes 38 projects for which we have gas rights agreements in place, including 10 optimizations and 28...
On the new builds we include R&D plants to be built on existing electric sites and on Greenfield sites.
Nick Stork: On the new builds, we include R&G plants to be built on existing electric sites and on site.
Nick Stork: We are aggressively striving to procure additional development sites within our return parameters, and we are seeing some shift in an increasingly competitive market to a focus on modest up-front payments for gas rights and acquisitions of existing landfill gas-to-electric assets. We spend a total of $1.2 billion on this project.
We are aggressively striving to procure additional development sites within our return parameters and we are seeing some shift in an increasingly competitive market to a focus on modest upfront payments for gas rates and acquisitions of existing landfill gas to electric assets.
We spent a total of approximately $50 million in 2021 and year to date 2022 to add electric assets and gas rates to our portfolio.
Nick Stork: 2021 and year-to-date 2022 to add electric assets and gas rights to our portfolio.
Nick Stork: The economics of these projects remain very attractive, and we expect to be able to acquire gas rights and or existing electric assets.
The economics of these projects remain very attractive and we expect to be able to acquire gas rates <unk> existing electric assets and develop R&D facilities on those sites at an estimated all in pro forma multiple was about three years to buybacks, including estimated acquisition and development capital and estimated post development EBITDA.
Nick Stork: and develop R&D facilities on those sites at an estimated all-in pro forma multiple of about ?
Nick Stork: including estimated acquisition and development capital and estimated post-development EBITDA. In all cases, we plan to
In all cases, we plan to stick to our target return parameters, which as a reminder include a minimum 10% cash on cash Unlevered return in a downside case scenario that.
Nick Stork: which, as a reminder, include a minimum 10% cash-on-cash on levered return in a downside case scenario. That is based on the long-term...
That is based on the long term contracted volumes only.
Nick Stork: While we're seeking to add development opportunities to our backlog as quickly as possible, we plan to stick to our capital return parameters.
Well, we are seeking to add development opportunities toward backlog as quickly as possible, we plan to stick to our capital return parameters.
And we won't win them all.
We do believe there is a massive opportunity sets are economically attractive sites for us to procure and our cash flow profile supported by long term fixed price contracts with credit worthy counterparties can support a certain level of growth through.
Nick Stork: We do believe there is a massive opportunity set of economically attractive sites for us to procure, and our cash flow profile, supported by long-term fixed-price contracts with credit-worthy counterparties, can support a certain level of growth.
Through debt finance acquisitions, the quality of our cash flows combined with the environmental benefits of our product should enable the attractive debt opportunities in rates for us and we may from time to time to access the debt capital markets to provide dry powder to execute on acquisition opportunities to fund a portion of our development plan and for general capital purposes, we've been.
Nick Stork: The quality of our cash flows, combined with the environmental benefits of our product, should enable the attractive debt opportunities in rates.
Nick Stork: And we may, from time to time, access the debt capital markets to provide dry powder to execute an on-acquisition effort.
Nick Stork: fund a portion of our development plan, and for general capital purposes.
<unk> business model that supports making additional acquisitions, which will enable us to build more R&D plans.
Nick Stork: establish a business model that supports making additional acquisitions, which will enable us to build more on.
The ultimate goal of our growth strategy is to increase the earnings power of our business and to do so at attractive returns on capital investment with a 38 projects in our backlog for which we have gas rates today, we now estimate our long term earnings power or estimated adjusted EBITDA could be approximately $400 million annually. Once all projects are completed and ramped up.
Nick Stork: The ultimate goal of our growth strategy is to increase the earnings power of our business and to do so at attractive returns on capital.
Nick Stork: With the 38 projects in our backlog for which we have gas rights today, we now estimate our long-term earnings power, or estimated adjusted EBITDA, could be approximately $400 million annually once all projects are completed and ramped up. With estimated R&G production of approximately
With estimated LNG production of approximately $35 million of Btu annually.
Potential production six times pro forma 2021 production and potential adjusted EBITDA five times pro forma 2021 adjusted EBITA.
Nick Stork: That is potential production six times pro forma 2021 production and potential adjusted EBITDA five times pro forma 2021.
This potential earnings power includes what we believe is a conservative assumption set including only projects that we have rights for today. The express volumes only under long term contracts in place today and $1 50 per gallon RIN pricing on contracted volumes with no impacts from carbon sequestration carbon intensity reduction initiatives or high power.
Nick Stork: This potential earnings power includes what we believe is a conservative assumption set, including only projects that we have rights for today, fixed price volumes only under long-term contracts in place today, and $1.50 per gallon RIN pricing on uncontracted volumes with no impacts from carbon sequestration, carbon intensity reduction initiatives, or high probability opportunities in our development pipeline. Please refer to our presentation.
Ability opportunities in our development pipeline.
Please refer to our presentation for more information on our modeling assumptions.
We see this potential post development adjusted EBITDA of approximately $400 million is only the beginning.
Nick Stork: We see this potential post-development adjusted EBIDTA of approximately $400 million as only the beginning.
And we believe we could ultimately achieve meaningfully more by capturing additional development opportunities.
Nick Stork: believe we could ultimately achieve meaningfully more by capturing additional development.
Nick Stork: With that, I'll turn the call over to Brian who will provide a commercial update and review our financial results.
With that I'll turn the call over to Brian will provide a commercial update and review our financial results.
Thank you Nick and good morning all.
I'm happy to be here today to discuss our recent commercial successes.
Brian McCarthy: I'm happy to be here today to discuss our recent commercial successes.
Brian McCarthy: commercial priorities heading into 2022, and our fourth quarter and full year 2021 financial results.
Commercial priorities heading into 2022, and our fourth quarter and full year 2021 financial results.
As Nick mentioned, we have had two huge commercial wins recently, signing up new long term fixed price contracts with northwest natural and Fortis BC.
Brian McCarthy: As Nick mentioned, we have had two huge commercial winds recently.
Brian McCarthy: Signing up new, long-term, fixed price contracts with Northwest Natural and FortisBC.
Brian McCarthy: Both contracts highlight RKO's ability to tailor long-term agreements to meet the needs of our customers.
Both contracts highlight arc usability tailored long term agreements to meet the needs of our customers.
In November we signed a 21 year fixed price contract with northwest natural.
Brian McCarthy: In November , we signed a 21-year fixed price contract with Northwest Natural for the environmental attributes related to 1 million MMBTU of our R&G production annually to be sold from a
The environmental attributes related to 1 million Btu of our RMG production annually to.
It can be sold from across our portfolio.
Brian McCarthy: The contract began early this year and will ramp up to the full annual quantity in 2025.
The contract began early this year and will ramp up to the full annual quantity in 2025.
This is the first contract in our portfolio with a U S. Utility is our first long term contract to separate environmental attributes for physical R&D.
Brian McCarthy: This is the first contract in our portfolio with a U.S. utility and is our first long-term contract to separate environmental attributes from physical R&D.
Selling environmental attributes OE to northwest natural enables them to achieve their de carbonization goals by pairing the environmental benefits of our products with physical gas obligations from elsewhere in their portfolio.
Brian McCarthy: Selling environmental attributes only to Northwest Natural enables them to achieve their decarbonization goals by pairing the environmental benefits of our product with physical gas obligations from elsewhere in their portfolio.
While enabling us to lock in stable long term economics on our production.
Brian McCarthy: while enabling us to lock in stable, long-term economics on our production.
In January 2022.
We signed a 20 year fixed price contract with Fortis BC, expanding our partnership with Fortis. It started with the initial contract we signed in 2020 for volumes from our site facility.
Brian McCarthy: We signed a 20-year, fixed-price contract with FortisBC, expanding our partnership with Fortis that started with the initial contract we signed in 2020 for volumes from our Assai facility.
This new contract is for up to $8 million Giga jewels were approximately $7 6 million btu of R&D per year to be sold from across our portfolio.
Brian McCarthy: This new contract is for up to 8 million gigajoules, or approximately 7.6 million mmBtu of RNG per year to be sold from across our portfolio.
For this contract we will sell bundled RMG and environmental attributes.
Brian McCarthy: For this contract, we will sell bundled R&G and environmental attributes.
Brian McCarthy: I am pleased to announce that this contract has received all necessary regulatory approvals. We expect the contract to commence later this year and ramp up to the full annual quantity by 2025.
I am pleased to announce that this contracted received all necessary regulatory approvals, we expect the contract to commence later this year and ramp up to the full annual quantity by 2025.
We believe this contract is the largest R&D contracts signed to date and it highlights our ability to provide customers R&D volumes on a scale that cannot be replicated by many producers in the industry.
Brian McCarthy: We believe this contract is the largest R&G contract signed to date.
Brian McCarthy: and it highlights our ability to provide customers R&G volumes on a scale that cannot be replicated by many producers in the industry.
Both new contracts will be serviced by our portfolio and evolution from our early commercial strategy of time volumes to a single site.
Brian McCarthy: an evolution from our early commercial strategy of tying volumes to a single site.
Brian McCarthy: Portfolio Approach provides ARCEA with operating flexibility while reducing site-specific execution risk for our customers.
This portfolio approach provides argue with operating flexibility, while reducing site specific execution risks for our customers.
Northwest natural and Fortis BC, our high quality Creditworthy Counterparties. We are excited about these multi decade partnerships.
Brian McCarthy: Northwest Natural and FortisBC are high-quality, credit-worthy counterparties. We are excited about these multi-decade partnerships.
We look forward to helping our partners achieve their de carbonization and sustainability goals, while linking their customers the environmental and social good we do at our R&D projects for our local communities.
Brian McCarthy: We look forward to helping our partners achieve their decarbonization and sustainability goals while linking their customers to the environmental and social good we do at our R&G projects for our local communities.
Our recent commercial wins and move us much closer to our target of selling 70% of our expected production under long term fixed price agreements with creditworthy counterparties.
Brian McCarthy: Our recent commercial wins have moved us much closer to our target of selling 70% of our expected production under long-term fixed price agreements with creditworthy counterparties.
Currently for 2022 <unk>.
Brian McCarthy: Approximately 50% of our expected R&G production is contracted based on expected sales under existing long-term contracts.
Approximately 50% of our expected R&D production is contracted based on expected sales under existing long term contracts.
Brian McCarthy: Moreover, once volumes under these contracts ramp up to full volumes in the mid-2020s, we are approximately 45% contracted on an estimated long-term basis.
Moreover, once volumes under these contracts ramp up to full volumes in the mid 2000, Twenty's, where approximately 45% contracted on an estimated long term basis.
That is once we built out the products in our development backlog and based on maximum volumes under contracts in hand today.
Brian McCarthy: That is, once we've built out the projects in our development backlog and based on maximum volumes under contracts in hand today.
Our two most recent contracts alone added about 25% to our estimated long term contracted base.
Brian McCarthy: Our two most recent contracts alone added about 25% to our estimated long-term contract
Brian McCarthy: At many of our long-term contracts, volumes are specified as a range, with volumes nominated and sold at ARCEA's election.
And many of our long term contracts volumes are specified as a range with volumes nominated and sold at Archaeas election.
Brian McCarthy: This range gives us additional operating flexibility and an opportunity to capture upsides while also protecting our downside case and a higher proportion of our volume.
This range gives us additional operating flexibility and an opportunity to capture upside while also protecting our downside case and a higher proportion of our volumes.
We think and talk about contracted volumes based on the maximum under the contract as we've locked in economics for all of those volumes.
Brian McCarthy: think and talk about contracted volumes based on the maximums under the contract as we've locked in economics for all those volumes.
As we look towards achieving our 70% target we will continue to be selective with our long term offtake partnerships.
Brian McCarthy: As we look towards achieving our 70% target, we will continue to be selective with our long-term off-state partnerships.
Brian McCarthy: We've had a lot of success with natural gas utilities who have been first movers due to both voluntary and regulatory directives, and we expect sustained and increased demand
We've had a lot of success with natural gas utilities, who have been first movers due to both voluntary and regulatory directives and.
And we expect sustained and increased demand from utilities with virtual broader expansion of our corporate and University customer base.
Brian McCarthy: eventual broader expansion of our corporate and university customer base.
Many of our current customers have orangey targets, ranging from 5% to 20% of their supply.
Brian McCarthy: Many of our current customers have R&G targets ranging from 5% to 20% of their supply.
Brian McCarthy: Current targets from Fortis, Northwest Natural, and EnerGer alone add up to about 55 billion cubic feet, or BCF, per year of implied demand, which is over 1.5 times our estimated long-term production.
Current targets from Fortis northwest natural and energy are alone add up to about 55 billion cubic feet or bcf per year of implied demand, which has over one five times, our estimated long term production.
We expect voluntary targets and regulatory mandates for R&D to increase and we are seeing increasing support at the state level for use of RMG by regulated utilities.
Brian McCarthy: We expect voluntary targets and regulatory mandates for R&G to increase.
Brian McCarthy: we are seeing increasing support at the state level for use of RNG by regulated utilities.
In late February the California, Public Utilities Commission that Biomethane targets for utilities that are expected to result in over 70 Bcf of R&D demand by 2030.
Brian McCarthy: In late February , the California Public Utilities Commission set biomethane targets for utilities that are expected to result in over 70 BCF of R&G demand by 2030.
Since the announcement of our recent contracts, we have seen an uptick in demand for RMG.
Brian McCarthy: Since the announcement of our recent contracts, we have seen an uptick in demand for R&G.
Brian McCarthy: We also see potential for increased demand for diversified products of RNG, such as biomethanol, sustainable aviation fuel, and hydrogen.
And we also see potential for increased demand for diversified products of R&D, such as biomass at all sustainable aviation fuel and hydrogen with multiple parties seeking large volumes in the middle of this decade.
Brian McCarthy: with multiple parties seeking large volumes in the middle of this decade.
Beyond our long term contracts, we are seeking to further minimize pricing risk by locking in some economics on a portion of our short term volumes.
Brian McCarthy: Beyond our long-term contracts, we are seeking to further minimize pricing risk by locking in some economics on a portion of our short-term volume.
Brian McCarthy: Through March 15th, we have entered into agreements to forward sell 15.9 million RINs expected to be generated in 2022 at an average fixed price of $3.13 per gallon.
Through March 15th we have entered into agreements to forward sell 15 9 million rins expected to be generated in 2022 at an average fixed price of $3 13 per gallon.
Brian McCarthy: This locks in risk value at an equivalent of $36.67 per MMBTU on approximately 1.4 million MMBTU of expected uncontracted production.
This locks in value and an equivalent of $36 67 per <unk> on approximately $1 4 million Btu.
Btu of expected on contracted production.
With the agreements currently in place we have locked in RIN prices for over 20% of our expected uncontrolled RMG production for 2022, and we expect to Opportunistically fix.
Brian McCarthy: With the agreements currently in place, we have locked in rent prices for over 20% of our expected uncontracted R&G production for 2022.
Brian McCarthy: And we expect to opportunistically fix RIN value through additional forward sales related to up to approximately 350,000 additional MMBTU in the near term.
<unk> value through additional forward sales related to up to approximately 350000 additional <unk> in the near term.
Brian McCarthy: Locking in rent prices helps us further remove financial variability from our business and bolster our capital.
Locking in RIN prices helps us further removed financial variability from our business and bolster our cash flow stability.
In today's robust market prices will generate additional cash flows to use on our project development and acquisition strategies.
Brian McCarthy: Today's robust market prices will generate additional cash flows to use on our project development and acquisition strategy.
Before I get into our fourth quarter and full year results I would like to give a quick note regarding our presentation of financial information.
Speaker Change: Before I get into our fourth quarter and full year results, I'd like to give a quick note regarding our presentation of financial information.
As we discussed on our last quarterly call. We closed our business combinations on September 15th 2021, with Archea energy LLC, where legacy archaea deemed the accounting acquirer of Rice acquisition Corp, and ARIA Energy LLC.
Speaker Change: As we discussed on our last quarterly call, we closed our business combinations on September 15, 2021, with Arkea Energy LLC, or Legacy Arkea, deemed the accounting acquirer of Rice Acquisition Corp. and Aria Energy LLC.
Our consolidated financial results include the results of legacy archaea prior to the closing date for up through September 14th 2021 with.
Speaker Change: Our consolidated financial results include the results of Legacy Archaea prior to the closing date for up through September 14, 2021.
With already a results included beginning on the closing date for the period September 15 through December 31 2021.
Speaker Change: With ARIA results included beginning on the closing date for the period September 15 through December 31, 2021.
We have presented certain full year 2021 financial and operating metrics on a pro forma basis as we believe it will assist in your assessment of the results of the full asset base of the company today.
Speaker Change: We have presented certain full year 2021 financial and operating metrics on a proforma basis.
Speaker Change: we believe it will assist in your assessment of the results of the full asset base of the company today. Financial information presented on a pro forma basis gives
Financial information presented on a pro forma basis gives effect to the business combinations and the related financing and other transactions.
Speaker Change: related financing and other transactions as if they have been completed on January 1, 2021.
They had been completed on January one 2021.
We believe this presentation of our results.
Speaker Change: We believe this presentation of our results gives more meaningful information to the investor.
More meaningful information to the investment community.
Our earnings release contains additional information about pro forma results in our presentation of financial information for the three months and year ended December 31 2021.
Speaker Change: Our earnings release contains additional information about pro-forma results.
Speaker Change: And our presentation of financial information for the three months and year ended December 31, 2021.
For the fourth quarter, we produced and sold one $5 3 million Mmm Btu of R&D and 168000 megawatt hours of electricity.
Speaker Change: For the fourth quarter, we produced and sold 1.53 million MMBTU of RNG in 168,000 megawatt hours of electricity.
Speaker Change: We generated net income of $3.7 million and adjusted EBITDA of $16.4 million for the quarter.
We generated net income of $3 7 billion and adjusted EBITDA of $16 4 million for the quarter.
Speaker Change: Net income and adjusted EBITDA were driven primarily by strong market pricing environmental attributes, natural gas, and electricity, as well as strong production.
Net income and adjusted EBITDA were driven primarily by strong market pricing of environmental attributes natural gas and electricity as well as strong production, partially offset by increased G&A costs.
Speaker Change: G&A costs for the fourth quarter totaled $20.9 million.
G&A costs for the fourth quarter totaled $20 9 million, which included increased cost from scaling our head count to support the future growth of our business.
Speaker Change: which included increased costs from scaling our headcount to support the future growth of our business, increased public company professional service fees.
Increased public company professional service fees.
And due to the shortened timeline, which we have to set up public company functions certain audit legal and other fees, we incurred in the second half of 2021 would have been expected to be spread over a multiyear period. If we had gone public via traditional IPO as compared to us back.
Speaker Change: And due to the shortened timeline in which we have to set up public company functions, certain audit, legal, and other fees we incurred in the second half of 2021 would have been expected to be spread over a multi-year period if we had gone public via traditional IPO as compared to a SPAC.
Speaker Change: On a go-forward basis, we expect G&A costs to normalize and to be approximately $45 million for 2020.
On a go forward basis, we expect G&A cost to normalize and to be approximately $45 million for 2022.
For full year 2021, we produced and sold 572 million MN Btu of R&D and 872000 megawatt hours of electricity on a pro forma basis.
Speaker Change: For the full year 2021, we produced and sold 5.72 million MMBTU of orange juice.
Speaker Change: 872,000 megawatt hours of electricity on a Proforma basis.
Speaker Change: Electricity produced and sold included approximately 203,000 megawatt hours from LESPH assets, which were sold by ARRI in June 2021.
Electricity produced and sold included approximately 203000 megawatt hours from early FPH assets, which were sold by Ari in June 2021.
Speaker Change: We reported a pro forma net loss of $77.4 million and a pro forma adjusted EBITDA of $76.1 million for full year 2021.
We reported a pro forma net loss of $77 4 million and our pro forma adjusted EBITDA of $76 1 million for full year 2021.
Speaker Change: Pro forma net loss was primarily driven by a loss from changes in fair value of warrant derivatives in the amount of $110.2 million.
Pro forma net loss was primarily driven by a loss from changes in fair value of warrant derivatives in the amount of $110 2 million non.
Speaker Change: Non-recurring transaction costs, primarily related to our business combination transactions. An increased general and administrative costs.
<unk> nonrecurring transaction costs, primarily related to our business combination transactions and increased general and administrative expenses, partially offset by nonrecurring gains related to the LDS ph sale from Oreo, including a gain on extinguishment of debt of $61 4 million and strong market pricing.
Speaker Change: Partially offset by non-recurring gains related to the LEFPH sale from ARIA, including a gain on extinguishment of debt of $61.4 million and strong market prices.
Nonrecurring transaction cost totaled $22 7 million for full year 2021, including <unk> 3 million in the fourth quarter and primarily related to costs of the business combinations.
Speaker Change: Non-recurring transaction costs total $22.7 million for full year 2021 including $0.3 million in the fourth quarter and primarily related to costs of the business combination.
Pro forma adjusted EBITDA for the full year 2021 was positively impacted by strong market pricing.
Speaker Change: Proforma-adjusted EBITDA for the full year 2021 was positively impacted by strong market pricing, partially offset by...
Partially offset by increased G&A expenses.
Speaker Change: Proforma RNG produced and sold a 5.72 million MMBTU, exceeded the guidance we previously provided for full year 2021. And Proforma adjusted EBITDA of 76.1 million, exceeded the midpoint of our range for the year.
Pro forma RMG produced and sold a 572 million Btu exceeded the guidance. We previously provided for full year 2021, and pro forma adjusted EBITDA $76 $1 million exceeded the midpoint of our range for the year.
Speaker Change: As of December 31, we had $352 million of outstanding borrowing.
As of December 31, we had $352 million of outstanding borrowings, including $218 6 million of outstanding borrowings under our term loan and $133 4 million of outstanding borrowings related to our site project financing.
Speaker Change: including $218.6 million of outstanding borrowings under our term loan and $133.4 million of outstanding borrowings related to our side project financing.
Under our revolving credit facility, we had no borrowings outstanding and has issued letters of credit totaling $14 2 million.
Speaker Change: Under a revolving credit facility, we had no borrowings outstanding, and it issued letters of credit totaling 14.2%.
As of December 31, our liquidity position was $328 9 million, including $77 9 million of cash and cash equivalents.
Speaker Change: As of December 31, our liquidity position was $328.9 million, including $77.9 million of cash and cash equivalents.
Speaker Change: $15.2 million of restricted cash and $235.8 million of undrawn capacity under a revolving credit fund.
$15 2 million of restricted cash and $235 8 million of Undrawn capacity under our revolving credit facility.
As Nick discussed earlier, we have made significant investments into our development projects to ramp our pace of development and prepare for deployment of our <unk> plant design, which has helped minimize supply chain inflation risk.
Speaker Change: As Nick discussed earlier, we have made significant investments into our development projects to ramp our pace of development and prepare for deployment of our V1 plant design, which has helped minimize supply chains.
We've also made significant investments to acquire additional development opportunities as part of our strategy to maximize our backlog of economically attractive development projects and capture market share and increasingly competitive market.
Speaker Change: We've also made significant investments to acquire additional development opportunities as part of our strategy to maximize our backlog of economically attractive development projects and capture market share in increasingly competitive markets.
During the fourth quarter cash used in investing activities totaled $107 2 million, we had additions to property plant and equipment of $51 3 million primarily related to the procurement of equipment for projects under development are related to our <unk> facility.
Speaker Change: During the fourth quarter, cash used in investing activities totaled $107.2 million.
Speaker Change: We had additions to property, plant, and equipment of $51.3 million, primarily related to the procurement of equipment for projects under development and related to our ASCII facility.
Speaker Change: We also acquired certain assets for $30.3 million, acquired certain biogas rights for $7.6 million, and contributed $18.1 million into our equity methods investment.
We also acquired certain assets were $30 3 million acquired certain biogas rights for $7 6 million contributed $18 1 million into our equity method investments.
Pro forma cash used in investing activities totaled $242 million for full year 2021, including additions to PPE totaling $141 8 million.
Speaker Change: Pro forma cash used in investing activities totaled $242 million for full year 2021, including additions to PPE totaling $141.8 million.
Speaker Change: primarily related to RSVI and Boyd County RNG facilities, and purchases of equipment for future
Primarily related to our Si and <unk> County, R&D facilities and purchases of equipment for future development projects. Additionally.
Additionally, we acquired certain assets were $61 8 million acquired certain biogas rights were $7 8 million contributed $36 million into our equity method investments on a pro forma basis.
Speaker Change: Additionally, we acquired certain assets for $61.8 million, acquired certain biogas rights for $7.8 million, and contributed $30.6 million into our equity method investments on our pro forma.
In early November we issued a redemption notice for all $12 1 million redeemable warrants and important steps to simplify our structure and reduce any potential stock price overhang related to share dilution, resulting from exercises of these warrants.
Speaker Change: In early November , we issued a redemption notice for all 12.1 million redeemable warrants, an important step to simplify our structure and reduce any potential stock price overhang related to share dilution resulting from exercises of these warrants.
Minimize dilution to existing stockholders from this warrant redemption.
Speaker Change: Minimize dilution to existing stockholders from this warrant redemption.
Speaker Change: We entered into an agreement to use any cash proceeds received from the exercise of warrants to buy shares from ARIA Renewable Energy Systems, LLC at $17.65 per share.
We entered into an agreement to use any cash proceeds received from the exercise of warrants to buy shares from ARIA renewable energy systems LLC at $17 65 per share.
A total of $10 4 million shares of our class a common stock were issued as a result of warrant exercises and we received cash proceeds of $107 7 million, which we used to repurchase $6 1 million shares.
Speaker Change: A total of 10.4 million shares of our Class A common stock were issued as a result of warrant exercises.
Speaker Change: And we received cash proceeds of $107.7 million, which we used to repurchase 6.1 million shares.
Resulting in a net class a and class b share count increase of $4 2 million shares and the elimination of the $12 1 million redeemable warrants.
Speaker Change: resulting in a net Class A and Class B share count increase.
Speaker Change: 4.2 million shares and the elimination of the 12.1 million redeemable warrants.
Speaker Change: And now, I will turn it back to Nick to discuss our 2022 guidance and development plan.
And now I will turn it back to Nick to discuss our 2022 guidance and development plan.
Thanks, Brian .
On the heels of those excellent results. We're also pleased to provide full year 2022 operational and financial guidance today.
Nick Stork: heels of those excellent results, we are also pleased to provide full year 2022 operational and financial guidance today.
We expect R&D production sold of 11, one to $11 $7 million of Btu electricity production sold of $850 to 950000 megawatt hours adjusted EBITDA of $125 million to $145 million and capital expenditures of $255 million to $285 million.
Nick Stork: We expect RNG production sold of 11.1 to 11.7 million MMBTU, electricity production sold of 850 to 950,000 megawatt hours.
Nick Stork: adjusted EBITDA of $125 million to $145 million, and capital expenditures of $255.
Our production guidance is based on the current operating performance of our combined assets operating efficiency improvements expected to be achieved in 2022 and incremental production expected from the projects in our 2022 development plan, including both optimization and Newbuild projects.
Nick Stork: Our production guidance is based on the current operating performance of our combined assets, operating efficiency improvements expected to be achieved in 2022, and incremental production expected from the projects in our 2022 development plan, including both optimization and new building.
From a pricing perspective, as Brian discussed, we expect to sell approximately $5 5 million Btu approximately 50% of our expected 2022 Orange production sold under our existing long term fixed price contracts. We have also locked in RIN economics related to approximately $1 4 million in the Btu of expected production.
Nick Stork: From a pricing perspective, as Brian discussed, we expect to sell approximately 5.5 million M&S.
Nick Stork: approximately 50% of our expected 2022 R&G production sold under our existing long-term fixed price contract.
Nick Stork: We have also locked in RIN economics related to approximately 1.4 million MMBTU of expected production, over 20% of our expected uncontracted volumes for 2022, at an average price of $3.13 a gallon, or $36.67 a gallon.
Over 20% of our expected Uncontacted volumes for 2022 at an average price of $3.13, a gallon or $36 67 per <unk>.
Nick Stork: That leaves approximately 4.5 million MMBq of expected RNG production, subject to market pricing.
That leaves approximately $4 $5 million of MBT as expected R&D production subject to market pricing and for our guidance range. We have assumed RIN prices of two to $2 50 per gallon or.
Nick Stork: And for our guidance range, we have assumed RIN prices of $2 to $2.50 per gallon.
We're 23, 45% to $29 32 for one btu can be realized on these open volumes.
Nick Stork: 2345 to 2932 for MNBTU to be realized on these.
Our 2022 development plan and our full year adjusted EBITDA guidance has been impacted by some permitting and zoning delays outside of our control.
Nick Stork: The 2022 development plan and our full-year adjusted EBIDTA guidance has been impacted by some permitting and zoning delays outside of our
Nick Stork: pushing back the expected completion dates on a few projects by several
Pushing back the expected completion dates on a few projects by several months.
In addition, we have significantly scaled our organization in the last six months and now expect G&A to be $45 million per year.
Nick Stork: In addition, we have significantly scaled our organization in the last six months and now expect G&A to
$20 million higher than Rice acquisition Corp estimated at the time of the destock.
Nick Stork: approximately $20 million higher than Rice Acquisition Corp. estimated at the time of
Nick Stork: We do not anticipate material increases in GNA going forward and consider the business to have substantial operating leverage.
We do not anticipate material increases in G&A going forward and consider the business has substantial operating leverage as.
As a tailwind to 2022 results, we have been able to lock in strong RIN pricing for a portion of our expected sales and we may lock in more in the near term to offset some of the timing impact to full year 2022.
Nick Stork: Tailwind to 2022 results, we have been able to lock in strong rent pricing for a portion of our expected sales.
Nick Stork: We may lock in more in the near term to offset some of the timing impact to full year 2020.
Despite the slight delays our 2022 development plan is very robust and we expect our investment in Archie version, one plant designed to begin to pay dividends in the second half of the year.
Nick Stork: Despite the slight delays, our 2022 development plan is very robust.
Nick Stork: And we expect our investment in RQV1 plant design to begin to pay dividends in the second half of the year.
We plan to complete 20 projects in 2022, including 10 optimizations of existing R&D facilities, and 10 Newbuild projects expected to be placed into service before the end of the year.
Nick Stork: We plan to complete 20 projects in 2022, including 10 optimizations of existing R&G facilities and 10 new-build projects expected to be placed in the service.
At the midpoint of our guidance range, we expect total capital investment of $130 million for these expected 2022 completions. We also expect at the midpoint to invest approximately $70 million and projects expected to be completed in future years, approximately $40 million in acquisition capital.
Nick Stork: At the midpoint of our guidance range, we expect total capital investment of $130 million for these expenses.
Nick Stork: We also expect, at the midpoint, to invest approximately $70 million.
Nick Stork: projects expected to be completed in future years, approximately $40 million in acquisition capital.
Nick Stork: $25 million in development capital for initiatives, including carbon sequestration and onsite solar projects.
$25 million in development capital for initiatives, including carbon sequestration, and onsite solar projects and $5 million in maintenance capital.
Nick Stork: We expect our capital program to be funded with our existing sources of liquidity and expected cash flow from operations throughout the year.
We expect our capital program to be funded with our existing sources of liquidity and expected cash flow from operations throughout the year. We may also from time to time Opportunistically access the debt capital markets to fund a portion of our development plan and related capital expenditures.
Nick Stork: We may also, from time to time, opportunistically access the debt capital markets to fund a portion of our development plan and related capital expenditures.
Additional capital for acquisitions or incremental development projects or for general corporate purposes.
Nick Stork: Provide additional capital for acquisitions or incremental development projects or for general
With our differentiated commercial strategy and focus on generating stable cash flows through long term fixed price contracts we.
Nick Stork: With our differentiated commercial strategy and focus on generating stable cash flows through long-term fixes.
Nick Stork: We believe we should have ample attractive opportunities to obtain outside capital in both public and private markets.
We believe we should have ample attractive opportunities to obtain outside capital in both public and private markets to support further growth of the company and enable us to continue to act quickly and decisively to capture as many economically accretive development opportunities as we can.
Nick Stork: support further growth of the company and enable us to continue to act quickly and decisively to capture as many economically creative development opportunities as possible.
In 2022 as I mentioned, our development plan includes a mix of optimization and Newbuild projects.
Nick Stork: In 2022, as I mentioned, our development plan includes a mix of optimization and new buildings.
Nick Stork: The expected returns on our optimization opportunities make them great investments, and we will be proud to support them.
The expected returns on our optimization opportunities, making great investments and we will be prioritizing these projects in 2022.
Nick Stork: expect a wide range of scopes across our optimization process.
<unk> a wide range of scopes across our optimization projects.
Nick Stork: From upgrading membranes to adding nitrogen rejection units or NRUs, we're even building RNG facilities adjacent to existing plants to accommodate higher flows and improve uptime and methane recovery.
From upgrading membranes to adding nexium injection units or interviews or even building R&D facilities adjacent to the existing plants to accommodate higher flows and improve uptime and methane recovery.
We expect our optimization projects to be completed through the course of the year.
Our optimization projects are focused on increasing uptime and methane recovery at our plants, both of which are critical factors in profitability as each additional molecule R&D sold increases our financial returns.
Nick Stork: Our optimization projects are focused on increasing uptime and methane recovery at our plants, both of which are critical factors in profitability as each additional molecule of RNG sold increases our financial returns. Uptime measures how tolerant your equipment is and how...
I'll kind of measures have tolerant your equipment is and how good your operators are methane recovery measures. How good you are at gas processing.
Nick Stork: We believe we are capable of being the best in the industry at both, and in 2022, we expect to make significant progress towards our ultimate targets of 95% uptime and 90% methane recovery, well above industry averages for both metrics. We expect total incremental R&G production of over 1 million tons per year.
We believe we are capable of being the best in the industry at both and in 2022, we expect to make significant progress towards our ultimate targets of 95% uptime, and 90% methane recovery well above industry averages for both metrics.
We expect total incremental LNG production of over $1 million of <unk> in 2022 from our optimization projects and corresponding incremental adjusted EBITDA of $13 million.
The long term annualized impact is higher once these optimization projects are completed and the facilities are ramped up to full flows we estimate total incremental annualized RMG production of over $2 million of Btu and incremental annualized adjusted EBITDA of approximately $25 million.
Nick Stork: The long-term annualized impact is higher once these optimization projects are completed and the facilities are ramped up to full flow.
Nick Stork: We estimate total incremental annualized R&D production of over 2 million.
Nick Stork: an incremental annualized adjusted EBITDA of approximately $25,000.
These projections, we assume fixed price volumes only under contracts in place today and what we believe is conservative market price assumption of $1 50 per room for.
Nick Stork: For these projections, we assume fixed price volumes only under contracts in place today and what we believe is a conservative market price assumption of $1.50 per RIN for uncontracted volumes post-2022. Additional information about
And contracted volumes post 2022 additional information about our assumptions is included in our presentation.
You also have 10 newbuild projects in our development plan with targeted completion dates weighted heavily towards the latter part of this year.
Nick Stork: Targeted completion dates weighted heavily toward the latter part of
Nick Stork: These projects include greenfield sites and sites where there are currently landfill gas to electric assets.
These projects include Greenfield sites and sites, where they're currently landfill gas to electric assets.
Our 2022 Newbuild projects will incorporate our version one design.
We expect total incremental LNG production of over 900000 of <unk> in 2022 from the Newbuild projects and corresponding incremental adjusted EBITDA of $8 million.
Nick Stork: We expect total incremental R&G production of over 900,000 MMBTU in 2022 from these new build projects.
Nick Stork: The long-term annualized impact is much higher because these projects are heavily weighted to be completed.
The long term annualized impact is much higher because the projects are heavily weighted to be completed in the later part of the year.
Once these newbuild projects are completed and the facilities are ramped up to full flows we estimate total incremental annual R&D production.
Nick Stork: Once these new build projects are completed and the facilities are ramped up to full flows, we estimate total incremental annual R&G production will be almost...
Almost $5 million in Btu.
With corresponding annualized adjusted EBITDA of approximately $65 million.
Nick Stork: corresponding annualized adjusted EBITDA of approximately 65%.
The combined impact of all projects in our development plan is expected to result in incremental LNG production of almost $2 million in <unk> in 2022.
Nick Stork: The combined impact of all projects in our development plan is expected to result in incremental R&G production of almost 2 million MMBTU in 2022.
Almost $7 million and Btu and an estimated long term basis with expected incremental adjusted EBITDA of $21 million in 2022, and approximately $90 million on an estimated long term basis.
Nick Stork: with expected incremental adjusted EBITDA of $21 million in 2022, and approximately $90 million.
Nick Stork: Combined with our base of operations today and expected contribution from ASSAI, we estimate long-term annualized adjusted EBITDA of approximately $200 million annually once all projects in this year's development plan are completed and fully rounded out.
Combined with our base of operations today and expected contribution from our side, we estimate long term annualized adjusted EBITDA of approximately $200 million annually. Once all projects in this years development plan are completed and fully ramped up.
We are laser focused on executing on our development plan.
Nick Stork: and are looking forward to implementing RQV1 and seeing its benefits in the second half of this year. The opportunities in front of us are remarkable, and we intend to capture them and cement our industry-leading position. With that, I'll turn the call over to
We're looking forward to implementing RP version, one and seeing its benefits in the second half of this year.
The opportunities in front of us a remarkable we.
We intend to capture them and cement our industry leading position.
And with that I'll turn the call over to the operator for Q&A. Thank you for all your time and your interest in argue.
Thank you.
I'll now be conducting a question and answer session.
Just wanted to ask a question today. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Speaker Change: If you'd like to ask a question today, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your
The press star two if you'd like to remove your question from the queue.
Speaker Change: For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please so we pull for questions.
Thats Star one to ask a question.
Thank you.
Our first question is from the line of Derrick Whitfield with Stifel. Please proceed with your questions.
Speaker Change: Our first question is from the line of Derek Whitfield with CIFL. Please proceed with your question.
Good morning on congrats to your strong finish to 2021.
Derek Whitfield: Good morning, all, and congrats to your strong finish to 2021.
Thanks Jerry.
With my first question I wanted to focus on 2020 to argue production guidance relative to the previously disclosed guidance last April the current guide.
Derek Whitfield: With my first question, I wanted to focus on 2022 R&D production guidance. Relative to the previously disclosed guidance last April , the current guidance of 11.4 million MMBTU at the midpoint is approximately 7 percent lower.
$11 1 million Btu.
Is 7% lower.
Derek Whitfield: With the understanding that you're experiencing some of the impacts, as noted in the remarks, could you help us size up the degree of the time impact?
I know that you're experiencing some kind of impact is that a good remarks could you help us.
A degree of autonomy.
Thank you for your time today.
Derek Whitfield: Do you agree that they affected your 2022 R&D guidance in light of the additions to your portfolio of development assets since last April ?
On guidance in light of your portfolio.
Development assets since last summer.
Yes sure thing.
So.
Really we're doing exactly kind of what we said we're going to do originally back in back in April and the pipe presentation. The overall development plan at least for 2022 is very similar.
Derek Whitfield: Really, we're doing exactly what we said we were going to do originally back in April in the PIPE presentation. The overall development plan, at least for 2022, is very similar, with differences being we're seeing increasing opportunities on the optimization side, so you'll see the number of optimization projects go up from when we previously discussed it, and we're very excited about sort of unlocking the...
With differences being we're seeing increasing opportunities on the optimization side. So you'll see the number of optimization projects go up from when we previously discussed it and we're very excited about sort of unlocking.
The.
All the <unk> and free cash flow potential from from our current asset base, which is really considerable.
Derek Whitfield: all the MMBTU and free gas flow potential from our current asset base, which is really considerable.
Derek Whitfield: But the real difference is about timing. So if you, there's a slide in the deck that talks about the incremental volume improvement and EBITDA improvement in 2022 from projects that we're spending money on in 2022. And that's actually very small.
But the real difference is about timing, so if theres a slide in the deck.
It talks about the incremental <unk>.
Volume improvement.
And an EBITDA improvement in 2022 for projects that we're spending money on in 2022 and that is actually very small.
A lot of that is really just around timing. So if you move a CDK back from $630 or 731 to let's call. It $10 30, or $11 30, you're really not capturing a lot of the <unk> production potential from that project in the year and even less on an EBITDA basis, just because the way that the revenue is recognized.
Derek Whitfield: So a lot of that is really just around timing. So if you move a CUD date back from 630 or 731 to what's called 1030 or 1130, you're really not capturing a lot of the MMVTU production potential from that project in the year, and even less on an EBITDA basis just because of the way that the revenue is recognized. So just recall that...
Recall that.
Derek Whitfield: When we produce R&G, we go through a process of ring certification that takes several weeks or months. And so we're not recognizing revenue, although we're producing MMBTUs, until that EPA registration comes through, at least on the uncontracted volume side.
When we when we produce R&D would go through a process of RIN certification that takes several weeks or months and so we're not recognizing revenue. Although we are producing them in beta use until that EPA registration comes through at least on the contracted volume side.
So that cash flows there it's stored but its not realized for several months so.
Derek Whitfield: So that cash flow is there, it's stored, but it's not realized for several months. So that's sort of one driver, but particularly on the production side, you know, there's several really meaningful projects that are coming online towards the end of the year. And if you see the full impact of that on an annualized sort of run rate basis,
That's sort of one one driver, but particularly on the production side.
There are several really meaningful projects that are coming online towards the end of the year and if you see the full impact of that on an annualized run rate basis.
Derek Whitfield: There's over 3 million MMBQs annually that we're adding to the production profile on a run rate basis. I'm getting very little impact of that in the fiscal year of 2022.
There's over $3 million <unk> annually that we're kind of adding.
Two the production profile on a run rate basis on getting very little impact of that.
In the in the fiscal year of 2022.
Great that makes perfect sense and then.
Speaker Change: Great. That makes perfect sense. Then perhaps for Brian with my follow-up, referencing slides 38 and 39, we similarly forecast a strong backdrop for voluntary and non-transport demand in general relative to the current supply base.
Perhaps for Brian with my follow up referencing slides 38, 39, we similarly forecast a strong backdrop for voluntary.
Transport demand in general relative to the current supply base.
Brian McCarthy: In kind of thinking about that level of mismatch today in supply-demand, how should we think about the trajectory of long-term fixed-price contracts in light of that backdrop, and if these customers would likely place a premium on the CCS and onsite solar development you're pursuing today?
And kind of.
Thinking about.
That level of mismatched, two day and supply demand how should we think about.
Which you actually have long term fixed price contracts in light of that backdrop and if these customers would likely place a premium on the Ccs on site solar developments you're pursuing today.
Speaker Change: Yeah, thank you. We we couldn't be more excited about how the.
Thank you Ed.
We couldnt be more excited about how the.
Speaker Change: the markets coming together, and taking a step back and thinking about being a natural gas utility, R&G is one of the key ways of decarbonization and natural gas grid, and that's really important when regulators and also the leaders of these utilities are looking out and trying to think about their growth trajectory and how they're going to decarbonize what they do. R&G really becomes that solution.
The market is coming together and we're taking a step back and thinking about being a natural gas utility R&D is one of the key ways of de carbonization and natural gas grid, and that's really important when regulators and also the leaders of these utilities were looking out and trying to think about their growth trajectory now theyre going to decarbonize, what they do.
No R&D really becomes that solution and with what we've been able to do with the recent announcements, especially with Fortis northwest natural and what Youre seeing with what happened in California, and other other expansions on the regulatory front folks are looking to Archie as being that source of renewable natural gas going forward and so as we.
Speaker Change: And with what we've been able to do with the recent announcements, especially with forests, Northwest Natural.
Speaker Change: and what you're seeing with what happened in California and other expansions on the regulatory front.
Speaker Change: folks are looking to Archaea as being that source of renewable natural gas going forward. And so as we as we continue to.
As we continue to.
Speaker Change: look forward and march towards that 70% target. We're letting the market continue to mature and we're experiencing more and more inbound as folks say, okay.
We look forward in March towards the 70% target. We're letting this relating to market continue to mature and we're experiencing more and more inbound as folks say, okay. We want to we want to Decarbonize, we want to do it at meaningful scale and we don't want to take single project risk. So where's the platform. We can go to that has lots of.
Speaker Change: We want to decarbonize. We want to do it at meaningful scale. And we don't want to take single project risk.
Speaker Change: So where's a platform we can go to that has lots of flowing volumes today?
Growing volumes today and that also has a very compelling growth trajectory that we can grow with them and so with Florida. For example, they are true pioneers in the R&D space and they view us as one of their trusted partner to grow with their goals and it lines up well as we grow into the middle of this decade. That's when you start to really see some of these de carbonization.
Speaker Change: and that also has a very compelling growth trajectory that we can grow with them.
Speaker Change: And so, you know, with Fortis, for example, they're true pioneers in the R&D space, and they view us as one, a trusted partner to grow with their goals.
Speaker Change: And it lines up well as we grow into the middle of this decade, that's when you start to really see some of these decarbonization goals out there, whether it's 2025 2030, it really lines well with our growth trajectory. And it's a really unique opportunity to to build on those partnerships.
Goals out there, whether it's 2025 2030, it really aligns well with our growth trajectory and it's a really unique opportunity to build on those partnerships.
Okay.
Speaker Change: And, Brian , maybe just one add to your response. Do you foresee a market where these customers would likely place a premium on the CCS and on-site solar developments you guys are pursuing today?
Ryan maybe just one add to your response do you foresee a market where these customers would likely place a premium on the Ccs on site solar developments you guys are pursuing today.
Absolutely I think ultimately carbon intensity matters and with the amount of work we're doing the ability to not only point to a portfolio that has a certain average carbon intensity today, but one that as we grow we will continue to improve on carbon intensity that is a very unique and compelling.
Brian McCarthy: Absolutely. I think ultimately carbon intensity matters, and with the amount of work we're doing, the ability to not only point to a portfolio that has a certain average carbon intensity today, but one that as we grow will continue to improve on carbon intensity, that's a very unique and compelling upside that comes with archaea growth. And second, as you see different regulatory programs come through,
Upside that comes with Archea growth and second as you see different regulatory programs.
Brian McCarthy: come forward, a number of them do have a carbon intensity component. And so when they think about, okay, how am I going to meet my goals in the most efficient way? Obviously, being able to point to scale and also being able to point to a carbon intensity value at a portfolio level that's continuing to decrease, it's really unique. And that's something that we're laser focused on at Archea.
Forward, a number of them do have a carbon intensity component and and so when they think about okay. How am I going to meet my my goals in the most efficient way, obviously being able to point to scale and also being able to point to a carbon intensity value at a portfolio level. That's continuing to decrease it's really unique and that's something that we're laser focused on that.
Yes.
That's great. Thanks for your time and thoughtful responses.
Thank you.
Speaker Change: Thank you. Our next question is from the line of Hamsa Masari with Jeffries. Please proceed with your question.
Our next question is from the line of Hamzah <unk> with Jefferies. Please proceed with your question.
Hamsa Masari: Hey, good morning. Thank you. My my first question is just around
Hey, good morning, Thank you my.
First question is just around <unk>.
Hamsa Masari: How you guys think about the moat or barrier to entry around your business? You know, I'm assuming having the gas rights to the landfill, you know, clearly obviously winning the project is one.
How you guys think about the moat or barrier to entry around your business.
I'm assuming.
Having the gas rights to the landfill.
Clearly, obviously, winning the project is one, but but maybe walk through sort of what are the others and the reason I ask is that.
Hamsa Masari: But maybe walk through sort of what are the others, and the reason I ask is that.
Hamsa Masari: You know, the equipment has been around for a while from multiple vendors. The technology for landfill to gas has also been around for a while. So, maybe just talk about, you know, some of the scale benefits and maybe some of the other, you know, lesser sort of well-known items that, you know, you consider competitive advantage aside from, you know, the gas rights.
Mark has been around for a while from multiple vendors the technology for landfill to gas has also been around for a while.
So maybe just talk about some of the scale benefits and maybe some of the other.
Lesser sort of well known items that you consider competitive advantage aside from the gas rates.
Okay. Thanks. Thanks Hamzah this is Nick.
Speaker Change: Yeah, I'd say on competitive advantages, I'd point to just our incredible portfolio of assets that we have today, which include this production profile that generated 5.7 million MMBTUs annually last year and has the capability to do much more than that, that we're starting to realize with our optimization opportunities. And that's an incredible kind of free cash flow.
Yes.
One is on competitive advantages.
Point to just are incredible.
Portfolio of assets that we have today, which include.
This production profile that generated $5 7 million of it would be to use annually last year and has the capabilities to much more than that that we are starting to realize with our optimization opportunities and thats incredible kind of free cash flow.
Base of operations.
Speaker Change: base of operations to build a strategic and competitive advantage beyond that. And then the second piece of that, which I include in the kind of existing portfolio, is the total 38 projects that we have under long-term development agreement, which is really unparalleled in the market. So before going out and competing and winning new additional projects, we have a business that can generate $400 million of predictable EBITDA without doing a single thing on growth.
Build a strategic and competitive advantage beyond that and then the second piece of that which I included in the kind of existing portfolio is the 38 total 38 projects that we have under long term development agreement, which is really unparalleled in the market, so before going out and competing and winning New addition.
Projects, we have a business that can generate $400 million of a predictor.
Predictable EBITDA without doing a single thing on growth.
Speaker Change: And that's just a really unique starting point. No one really has that kind of free cash flow profile, or similar free cash flow profile, that's truly kind of predictable and de-risked.
And that's just a really unique starting point.
No one really has that kind of free cash flow profile.
Or similar free cash flow profile, that's truly kind of predictable and.
And de risked.
Speaker Change: And then on the other competitive advantages, so if we go beyond that base of operations and go try to compete for additional projects or try to compete for additional acquisitions, we have a couple of really compelling and increasingly deep competitive advantages. One you pointed on is the technology. So the technologies have been around for a long time. The basics of CO2 separation, either with pressuring absorption or with.
And then on the other competitive advantages. So if we go beyond that base of operations and go try to compete for additional projects or try to.
For additional acquisitions, we have a couple of really compelling and increasingly deep competitive advantages. One you pointed out and as the technology. So the technologies have been around for a long time.
The basics of <unk> separation.
With pressuring absorption or with.
Speaker Change: membrane-based separation have been around for decades.
Membrane based separation had been around for decades.
Speaker Change: Bases of nitrogen removal through pressure and adsorption, through cryogenic distillation, through membranes have been around for decades as well.
Basis of nitrogen removal through pressuring absorption through project installation through membranes have been around for decades as well.
Speaker Change: What our team has done is really thought about scale and thought about developing an off-the-shelf approach to R&D development. So going from the historical state of the market, which was
Our team has done is really thought about scale.
And thought about developing an off the shelf approach to R&D development, so going from.
The historical state of the market, which was one off.
Custom projects sourcing from vendors.
Speaker Change: you know, custom projects sourcing from vendors and some components on an individual or project-based
And some components on a on an individual project base.
Approach and then going to the approach where everything is modular.
Speaker Change: And then going to the approach where everything is modular, where you have a true small, medium, large, extra large approach to R&D development. And that is radically different. So we think we're the only company that can truly, because of that approach, because of taking proven technologies and modularizing it and packaging it and standardizing it, we're the only company that can realistically do over 10 projects per year.
True small medium large extra large.
Approach to R&D development.
And that is radically radically different so we think we're the only company that can truly.
Cause of that approach because of taking proven technologies and modular rising in packages and packaging it and standardizing. It. We're the only company that can realistically do over 10 projects per year.
So speed comes into play and then also cost and cost is sort of twofold cost is also cost is no total capex for projects, which we think we're going to be 40% lower than the industry standard approach.
Speaker Change: So speed comes into play and then also cost and cost is sort of twofold cost is also cost is No total capex for projects, which you know, we think we're going to be 40% lower than the industry standard approach
To develop RMG, but cost is also kind of utilization.
Speaker Change: to develop RNG, but cost is also kind of utilization.
So industry standard approaches too.
Speaker Change: So industry standard approaches to R&D development look like.
R&D development look like.
Speaker Change: 90 percent uptime, 85 percent uptime, 80 to 85 percent methane recovery. So if you apply our standards and what we're capable of achieving with RKV1, on a per plant basis, you get a 20 percent improvement right off the bat from our design goals of 95 percent uptime plus and 90 percent plus methane recovery. So that's really significant, especially when you apply scale to those metrics.
90% up time, 85% uptime.
285% methane recovery. So if you play our standards and what we're capable of achieving with Archie version one on a per client basis, you get a 20% improvement right off the bat from our design goals.
95% uptime, plus 90% plus methane recovery, so that's really significant, especially when you apply scale to those metrics.
And then.
Speaker Change: You know, thirdly, I'd just say that we have a psychological advantage, which it's it doesn't sound like much of a note, but it continues to be a differentiator. So we are uniquely positioned towards.
Certainly I'd, just say that we have a psychological advantage.
Which.
It doesn't sound like much of a moat, but it continues to be a.
A differentiator so we are uniquely positioned.
Towards long term predictable cash flow and in our commercial strategy that really underpins those long term predictable returns even in a downside case scenario, so youre not going to see us.
Speaker Change: long-term predictable cash flow and a commercial strategy that really underpins those long-term predictable returns, even in a downside case scenario. So you are not going to see us shifting that business plan because of momentary pricing.
Shifting that business plan because of momentary pricing.
Benefits on environmental Atrophies, we're going to continue to position the company to achieve.
Speaker Change: benefits on environmental attributes. We're going to continue to position the company to achieve
Speaker Change: our target rate of return threshold is even a downside case scenario over a long term.
Our our target rate of return thresholds, even in a downside case scenario over a long term and.
Speaker Change: And so, what I think that means is that if we see rent price volatility, whether that be real volatility or just a decline, maybe like we saw in the end of 2018 or going into 2019, you'll see RKF being increasingly well-positioned. We'll have a business strategy and a competitive advantage that's really unparalleled, and that goes to greenfield development opportunities and also applies to acquisitions as well.
And so I think that means is that if we see RIN price volatility.
Whether that'd be real volatility or just decline maybe like we saw in the end of 2018 or going into 2019, you'll see <unk> being increasingly well positioned.
We will have a business strategy and competitive advantage, that's really unparalleled and that goes to Greenfield development opportunities and also applies to acquisitions as well.
Got it.
Speaker Change: Got got it. That's a very, very clear, very, very helpful. And then maybe if you could just talk about.
Very very clear very very helpful.
And then maybe if you could just talk about.
Speaker Change: You referenced some of the recent management changes, we see that in the release.
You referenced some of the recent management changes.
We see that in the release, but maybe just talk about.
Speaker Change: But maybe just talk about the evolution of some of those management changes. Is that just sort of related to your scaling up quickly and you sort of had changes or turnover there or anything else going on just given that they happen pretty quickly and you haven't been public that long?
The evolution of some of those manage management changes.
Is that just sort of related to that.
Youre scaling up quickly and you sort of hard.
Changes, our turnover, there or anything else going on just given that.
The happened pretty quickly.
And you haven't been public about lung.
No.
Speaker Change: No, we've discussed the management changes at length, I think, and pretty clearly. All I can say is that we're really excited about the future and everything that we're doing is built towards building a business that's capable of generating a billion dollars in predictable free cash flow over a long period of time.
We've discussed.
The management changes.
At length, I think and pretty clearly.
All I can say is that we're really excited about the future and everything that we're doing is build towards.
Building, a business, that's capable of generating $1 billion and predictable free cash flow.
Over over a long period of time.
Speaker Change: And so you see, you know, recent changes across the board that are really positioned towards getting there. And that's why you're seeing us making investments in SG&A sort of across the board. We've grown personnel really rapidly. And, you know, we have some departments where we can't hire fast enough to support that growth. And that should be a sign that management is increasingly confident in the future. And that's really how we're trying to build our team. Thank you.
And so you see recent changes across the board that are really positioned towards.
Towards towards getting there and Thats, why youre seeing us making investments in SG&A sort of across the board.
We've grown personnel really rapidly.
And.
We have some departments, where we can't hire fast enough to support that growth and that should be this should be a sign that management is increasingly confident in the future.
And.
And that's really how we're trying to build our team.
Got it makes sense. Thanks, so much.
Okay.
Our next question comes from the line of Matthew Blair with Tudor Pickering Holt. Please proceed with your question.
Speaker Change: Our next question comes from the line of Matthew Blair with Tudor Pickering Hall. Please proceed with your question.
Matthew Blair: Hey, good morning. Thanks for taking my questions here. Um, I have a couple on on rims. Um, so
Hey, good morning, Thanks for taking my questions here.
I have a couple on <unk> so.
Matthew Blair: I guess first on the guidance, the question we're getting from investors is why you use the midpoint.
I guess first on the guidance. The question, we're getting from investors is why do you use the midpoint to $2.
Matthew Blair: 225 D3 RIN assumption for the rest of this year. I think it's about 22% below.
Five Q3 rent assumption for for the rest of this year I think it's about 22% below current prices and then and then second could you talk about your outlook for DC room in 2023.
Matthew Blair: current prices, and then second, could you talk about your outlook for DC RIMS in 2023? I guess there's some concern out there that.
I guess, there's some concern out there that.
Matthew Blair: that if these high commodity prices hold, the CWC would be set lower for 2023 and investors are wondering what kind of impact that might have on D3 pricing. Thanks.
Dave.
Higher commodity prices, coupled with TWC would be lower for 2023 and investors are wondering what kind of impact that might have on <unk> pricing.
Yes, I'll take that this is Nick I'll take that first and then let Brian .
Matthew Blair: Yeah, I'll take that. This is Nick. I'll take that first and then let Brian weigh in. From a modeling perspective, you know, our
From a modeling perspective.
Art.
Really.
Nick Stork: really, we're trying to model the business over the long term first, which is really pointed towards our fixed price contract. That's how we think about deploying capital, and that's how we think about the business. And in the outer years, the $1.50 RIN really approximates that fixed price contract amount on a dollar per MBT basis.
We're trying to model the business over the long term first which is really pointed towards our fixed price contract. That's how we think about deploying capital and that's how we think about the business and in the outer years of $1 50 ran really approximates that fixed price contract amount on a dollar per <unk> basis. So so that's really why we have.
Nick Stork: So that's really why we have a long-term assumption of $1.50. And in the shorter term, in 2022, we have a higher assumption, as you noted, that we point out in the model detail. And that's just really reflective of the fact that RINs have been high through almost Q1, almost the end of Q1 2022. They've been above 3 down here recently. But it doesn't reflect any sort of.
Our long term assumption of $1 50, and in the shorter term we have in 2022, we have.
A higher assumption as you noted.
We pointed out in the.
In the model detail.
And that's just really reflective of the fact that brings our had been high through almost Q1, almost the end of Q1 2022, they've been above three down down here recently and but it doesn't reflect any sort of specific view on 2022. Its really just a recognition that we want to still be conservative.
Nick Stork: specific view on 2022. It's really just a recognition that we want to still be conservative in our environmental attribute outlook. That's just kind of how we think about things in 2022, but it doesn't really make sense to use $1.50 RIN in 2022 like we do in the outer years, just given where prices currently are. But I wouldn't read into
In our environmental attribute outlook Thats, just kind of how we think about things in 2022, but it doesn't really make sense to use of $1 50 ran in 2022 like we do in the outer years, just given where prices currently are but.
I wouldn't read into it.
Nick Stork: I wouldn't read into that thinking that management has a particular view on the RVO or RIN price or LCFS prices, for that matter, going beyond that in 2022 or beyond outside of the way we traditionally approach things.
I wouldn't read into that thinking that management has a particular view on the RVO or or RIN price.
<unk> prices for that matter going beyond that in.
In 2022 or beyond outside of the way, we traditionally approach things.
I will say as well.
Nick Stork: And I'll say as well, you know, it's important to note, too, that there's upside, you know, to those numbers, so.
<unk>.
We.
It's important to note too that there is upside.
Do those numbers so.
Nick Stork: You know, if there's another $0.50 a gallon on a RIN, that'll translate to somewhere close to $20 million of EBITDA versus the numbers that we put in so far and kind of how we're
If there is another 50 cents a gallon on a rent that will translate to somewhere close to $20 million of EBITDA.
Versus the.
The.
Versus the numbers that we put in.
So far and kind of how we're our modeling thanks.
Speaker Change: And related to the second part of your question, this is Brian .
And related to the second part of your question. This is Brian .
Brian McCarthy: You know, as you mentioned on the CWC, that's going to be inversely related to wholesale gasoline pricing. And we're seeing gasoline pricing rise on a July through June basis. And so as we look at 2023 and gasoline prices where they're at, at CWC looks like it's going to fall. As we think about things, you know, we're we're modeling that dollar 50 rent and out years right now. If you make an assumption of where D4, D5 is.
As you mentioned on the CWC, that's going to be inversely related to wholesale gasoline pricing and we are seeing gasoline pricing rise. It's on a July through June basis, and so as we look at 2023 and gasoline prices, where they're at at CWC looks like it's going to fall.
As we think about things we're modeling that dollars 50 ran in out years right. Now if you make an assumption on where D. 45 is with the nested structure you are in the high $2 range in the mid 2023 range right now, we'll see what happens with gasoline pricing as we move through but just taking a step back I mean.
Brian McCarthy: With the nested structure, you're in the high $2 range in the 2023 range right now. We'll see what happens with gasoline pricing as we move through.
Brian McCarthy: But just taking a step back, I mean, you know, we take a conservative approach and we really are tied to our long-term offtake and that demand and that pricing is how we make those decisions.
We take a conservative approach and we really are we really are tied to our long term offtake in that that demand and that pricing is how we make those decisions and so when we when we think about things we base everything based on that but then bump it comes with that that's the highest and best use that free upside that comes once you've underwritten your returns and so similar to ours.
Brian McCarthy: When we think about things, we base everything based on that, but then above it comes with – that's the highest and best use, that free upside that comes once you've underwritten your returns. And so, similar to our conservative outlook on RINs for this year, we'll welcome people to put the assumptions in that they'd like, but as we look forward, we're going to continue to tie our production to and our forecasting to those long-term off-take pricing. And then, if we have upside from there, we'll be able to put that to work in high-growth
Conservative outlook on on rents for this year will can people to put the assumptions in that they'd like but as we look forward, we're going to continue to tie our production too and are forecasting to those long term long term off take pricing and then if we have upside from there we will be able to put that to work.
The high growth projects.
Great and then one follow.
Speaker Change: Great. And then one follow-up, please. I think, Nick, you mentioned that you're seeing some timing lag on getting the RIN approval after you start up the landfill gas projects. Are you also seeking to get LCFS approval, like a pathway from CARB, on these landfill projects? And if so, how's the timing looking on that process?
A follow up please.
Nick you mentioned that Youre seeing some timing lag on getting the <unk> approval. After you start up the landfill gas projects are you also seeking to get CFS approval like a pathway from carb.
On the Greenfield projects and if so how is the.
What's the timing looking on that process.
Yes, actually I want to clear I should clarify that point, we're not seeing timing lags per se, that's just a natural product.
Speaker Change: I should clarify that point. We're not seeing timing lags per se. That's just a natural product of how we generate revenue in EBITDA. I think that's just an important point that we wanted to clarify with investors is that when we bring a project online, we don't immediately produce RIN revenue that's recognized.
Of how we generate revenue and EBITDA. So I think that's just an important point that we wanted to clarify with investors is that when we bring a project online. We don't immediately produce RIN revenue that's recognized we produce gas renewable natural gas that stored.
Speaker Change: We produce gas, renewable natural gas that's stored, and the portion that goes to environmental attributes.
<unk>.
A portion that goes to environmental attributes.
At least on the RIN side has the ability to then generate rins after.
Speaker Change: at least on the RIN side, has the ability to then generate RINs after certification and then qualification, which is another step we do to maximize the price.
Certification and then qualification, which is another step we do to maximize the price of the Rins. So that is that's a normal process, we're actually not seeing timing delays in that.
Speaker Change: of the RINs. So that's a normal process. We're actually not seeing timing delays in that. I'd say we've been pleasantly surprised on some projects about how quickly the EPA has gone back to us and how quickly the qualification process has been. On the LCFS side, it's a different process with CARB, and I'm not seeing significant delays there either, but
We've been pleasantly surprised on some projects about how quickly the EPA has gone back to us and how quickly. The qualification process has been on the <unk> side, it's a different process with carbon im not seeing significant delays there either but.
That process doesn't allow you for example to go back and generate.
Speaker Change: That process doesn't allow you, for example, to go back and generate LCFS credits from the point of interconnection.
<unk> credits from the point of interconnection you can only generate you will see the best credits from the point of.
Speaker Change: you can only generate LCA-BEST credits from the point of CARB certification.
Of Carb certification.
I would say this is Bryan just our approach is we want to get registered and every program. So whether it's <unk>. So we could deliver it to Europe .
Speaker Change: I would say, this is Brian , just our approach is we want to get registered in every program. So whether it's ISCC, so we could deliver to
Brian McCarthy: to Europe , if it's Canada, if it's California, Oregon. And we have an approach that we want to have registered CI scores everywhere, which gives us a lot of optionality as we think about that. And then it's important for our long-term offtake partners, they can point to a program that's related to their jurisdiction, whether you're in Canada, whether you're abroad, whether you're in California. And you could say, OK, now I know what this carbon intensity of this RNG is. So from a strategic perspective, we're going to continue to register in all those programs.
Canada, if it's California, Oregon, and we have an approach that we want to have registered Ci scores everywhere. It gives us a lot of optionality as we think about that and then it's important for our long term offtake partners. They can point to a program that's related to their jurisdiction, whether youre in Canada, whether youre abroad, whether whether youre in.
<unk> you could say, okay now I know what this carbon intensity of this orange is so from a strategic perspective, we're going to continue to register and all the programs.
Great. Thank you.
Our next question is from the line of Martin Malloy with Johnson Rice. Please proceed with your question.
Speaker Change: Our next question is from the line of Martin Malloy with Johnson Rice. Pleased to see you with your questions.
Good morning, Thank you for taking my questions.
Martin Malloy: The first question I had, in relation to that $400 million you refer to on slide 9 in terms of long-term earnings power from existing projects, is that kind of an exit rate for 2025? I'm just looking at the projections on slide 12.
The first question I had just in relation to that 400 million you referred to on slide nine in terms of long term earnings power from existing projects is that kind of an exit rate for 2025, I'm just looking at the projections on.
On slide 12.
Yes, we try to we try to do away with with with with timing on that so we're going to try to achieve that as fast as we possibly can.
Speaker Change: Yeah, we try to do away with timing on that, so we're going to try to achieve that as fast as we possibly can.
Speaker Change: and that's the right decision from a number of perspectives. That could happen in 2024, it could happen in 2025, it could happen in 2027. What we're trying to point out is that, that is sort of a run rate, full ramp potential of.
And that's the right decision from a number of perspectives.
That could happen in 2024, good afternoon 2025, it could happen in 2007.
We're trying to point out is that that is sort of a run rate full ramp potential of.
Of doing what we've already done.
Speaker Change: of doing what we've already done, which is build R&G plants at scale with increasing upsides.
As build R&D plants at scale with increasing upside.
Speaker Change: So I wouldn't try to tie a specific timeline to that. I would put a range of, you know, in the outer years, but we're really trying to achieve that as quickly as possible. And that's why we're trying to build, you know, a business that's capable of executing R&D in a very different way, which is 10 plus projects a year with a dedicated supply chain with standardization and a modular approach across just about every aspect of R&D development.
So.
I wouldn't I wouldn't try to tie specific.
Timeline to that I would put a put a range of.
And in the outer years, but we're really trying to achieve that as quickly as possible and that's why we're trying to build.
A business that's capable of.
Executing R&D in a very different way, which is 10 plus projects a year with a dedicated supply chain with standardization and a modular approach across just about every aspect of R&D development.
And this is Brian I would just add also.
Speaker Change: And this is Brian , I would just add also it's like the key thing to think about that because there's conservative assumptions tied to long-term offtake.
The key thing to think about that because there is conservative assumptions tied to long term offtake and kind of long term gas rates. It's the true visibility of that cash flow. So once you have this platform that's completely built out.
Brian McCarthy: tied to long-term gas rights, it's the true visibility of that cash flow. So once you have this platform that's completely built out, that's something that you can have confidence in, in terms of where the gas is going and then rights related to the feedstock.
Something that you can you can have confidence in in terms of where the gas is going and the rights related to the feedstock for years to come and so I think in terms of.
Brian McCarthy: for years to come. And so I think in terms of, we're gonna come and try to pin down an exact number, just wanna take it one step further and say, not only is that where we're getting to in terms of earnings power, but it's also confidence and visibility.
To come try to pin down exact number just wanted to take it one step further and say not only is that where we're getting to in terms of earnings power, but it's also confidence and visibility.
Brian McCarthy: I guess this is Nick. I just point out one more thing too. If you take, which we tried to allude to in the investor presentation, if you, if you take.
This is Nick I'll, just point out one more thing too is if you take which we tried to allude to in the Investor presentation. If you take.
Nick Stork: know, all the projects that we're doing in 2022 and run rate those and add them to our existing EBITDA, you're getting to an EBITDA that's close to or over $200 million of annual EBITDA. So that's just from the work that's been done to date and that's being done in 2022 at a full ramp. So that gives you some sense of timing potential, I think, towards that ultimate goal of kind of within the existing base.
All the projects that we're doing in 2022 and run rate those and add them to our existing EBITDA youre getting too.
But in EBITDA.
Close to or over $200 million of annual EBITDA. So that's just from the work that's been done to date and and that's being done in 2022 to full ramp. So that gives you some sense of timing potential.
I think towards that ultimate goal.
400 within the existing base.
Nick Stork: of the assets that we have, which again is just the assets that are signed today under long-term development agreements.
<unk>.
Of the assets that we have which again is just the assets that are signed today under long term development agreements.
Okay.
Speaker Change: My next question is just, are there any key items to be concerned about regarding logistics or supply chain with regards to the plants? In relation to that, when you're able to bring on an RNG plant in 18 months, how much of a competitive advantage is that when you're competing?
And our next question is just.
Or is there any.
Are there any.
Key items to be concerned about regarding logistics or supply chain.
With regards to the plants and in relation to that when you are when you are able to bring on an R&D plant in 18 months, how much of the competitive advantages that when Youre Hum.
Competing too for landfill rates.
Speaker Change: We think it's a huge competitive advantage. We think that it hasn't fully been appreciated yet. And so we pre-ordered major equipment for 22 plants, thereabouts.
We think it's a huge competitive advantage, we think that it hasn't fully been appreciated yet.
And so we've we preordered a major equipment for 'twenty two plants thereabouts.
Speaker Change: And that's really significant, but that's consistent with how we're thinking about this off-the-shelf approach to R&D development, and that's one of the benefits of this modular approach. If I buy a subcomponent for RQV1 small plant, that subcomponent could also be used in RQV1 extra large plant somewhere else around the country.
And that's really significant but thats consistent with how we're thinking about this off the shelf approach R&D development and Thats one of the benefits of this modular approach if I buy a sub component for Archie version, one small plant. That's a component but also be used an archive version one extra large plant somewhere else around the country.
Speaker Change: So that gives us a lot of ability to flex our scale and to have that off-the-shelf approach.
So that gives us a lot of a lot of ability to flex our scale.
And to have that off the shelf approach.
And I think other competitors may be seeing that they can develop projects in 18 months and that may be possible I'll say that.
Speaker Change: And I think other competitors may be saying that they can develop projects in 18 months and that may be possible. I'll say that.
We are seeing.
Speaker Change: You know, we are seeing vendors.
Vendors.
Yes.
Speaker Change: not vendors for RQV1 subcomponents or major equipment, but we're seeing vendors that produce similar projects for other developers.
Not vendors or argue for as one sub components of major equipment, but we are seeing vendors that produce similar projects for other developers.
Speaker Change: change their lead times from, you know, in some cases, 35 weeks of an historical lead time for a major equipment item to over 90 weeks for that same lead time or for that same major equipment. And that's happened over the last nine
Their lead times from in some cases 35 weeks of historical lead time for a major equipment items to over 90 weeks for that same lead time to that same major equipment and that's happened over the last nine months. So if you have major equipment that comes in with 90 week lead times its really difficult.
Speaker Change: If you have major equipment that comes in, you know, with 90 week lead times, it's really difficult to have or impossible to have an 18 month.
Where possible to have an 18 months.
Speaker Change: development timeline. So, we're going to keep pressing that advantage and, you know,
Development timeline, so we're going to keep pressing that advantage.
And we did it because it was the right thing to do to preorder equipment into to get the benefits of scale, we didn't necessarily foresee.
Speaker Change: We did it because it was the right thing to do to pre-order equipment and to get the benefit to scale. We didn't necessarily foresee.
Speaker Change: this kind of supply chain and inflationary environment, but we're certainly benefiting from that. And in terms of risks to development, we don't see a lot of risk because of that to major equipment or subcomponent items on the R&D development side. There's risks related to
This kind of supply chain inflationary environment.
But we are certainly benefiting from that and.
And on the in terms of risk to development.
Don't see a lot of risk because of that two major equipment or sub component items on the R&D development side Theres risks related to.
Speaker Change: construction timelines. So if there's if there's labor shortages or if there's if there's inflationary pressures related to construction costs, we could we could see the the negative consequences of that. We try to be very conservative in how we're modeling the non-major equipment components of RK version 1 just given that potential.
Construction timelines so if there's if there's labor shortages or if there is.
If there is inflationary.
Pressures related to construction costs.
We could we could see.
Negative consequence of that we tried to be very conservative in how we're modeling the non major equipment components of arcade version one.
Yes, just given that potential.
Great. Thank you very much.
Speaker Change: Our next question is from the line of Craig Shearer with Tui Brothers. Please proceed with your question.
Our next.
<unk> is from the line of Craig Shere with Tuohy Brothers. Please proceed with your questions.
Craig Shearer: Thanks for taking my questions. So two quick ones on the carbon sequestration and solar.
Thanks for taking my questions.
Two quick ones.
On the carbon sequestration in solar.
Craig Shearer: I don't think that was ever baked into your original plan that pegged that 400 million EBITDA. I assume that's not included in what you've talked about this morning.
I don't think that was baked into your original plan.
$400 million EBITDA.
Assume that's not included.
You talked about this morning.
Craig Shearer: To the degree that works, are we looking at maybe six to eight times CAPEX to EBITDA multiples on that? What kind of timeline can we look for to actually get FID on some projects? And then my second question...
The degree that works, we're looking at maybe six to eight times.
Capex to EBITDA multiples on that.
What kind of timeline can we look forward to actually get.
On some projects and then my second question.
It relates to the fixed price offtake institutional offtake. The original guidance I thought was about 14, and then and then we've had some indications of tightening could be 16 to 18.
Craig Shearer: relates to the fixed price offtake, the institutional offtake. The original guidance I thought was about $14.00 and then we had some indications, oh, it's tightening, it could be $16.00 to $18.00. Are we starting to think that perhaps that market could go over $20.00 and end this year?
Are we starting to think that perhaps that market can go over $20 and then this year.
Yes, Thanks, Greg I'll take the first question and second.
Speaker Change: Yeah, thanks, Greg. I'll take the first question and leave the second question for Brian . So, on the first point, actually, the numbers in the PIPE presentation did include the benefit of CO2 sequestration from a 45Q perspective. We didn't include the benefit that we might achieve in LCFS markets from reduced carbon intensity scores.
Second question for Brian So on the on the first point.
Actually the.
The numbers in the pipe presentation did include.
The benefit of Cit's sequestration from 45, two perspective, we didnt include the.
The benefit.
That we might achieve in El CFS markets from reduced carbon intensity scores.
Brian McCarthy: So, that being said, we are not including any CO2 related benefit in that $400 million number today, which is an important difference. So that $400 million number is really stronger because it does not include any 45 Q potential benefit or any other CO2 related benefit from lower carbon intensity. So, that that's.
That being said, we are not including any <unk> related benefit in that $400 million number today, which is an important difference to that $400 million number is really stronger.
Because it does not include any.
45, <unk> potential benefit or any other <unk> related benefit from lower carbon intensity.
So thats.
Brian McCarthy: That excluding it in that $400 million earnings power doesn't reflect our lack of confidence in those projects. I think it reflects an environment where we're trying to pin down.
Excluding it and then $400 million earnings power it doesn't reflect our lack of confidence in those projects I think it reflects an environment, where we're trying to pin down exactly what the qualifying thresholds for 45, you are going to be and what the dollar per metric ton pricing are going to be as well and thats something were actively involved in and.
Brian McCarthy: exactly what the qualifying thresholds for 45Q are going to be and what the dollar per metric ton pricing are going to be as well. And that's something we're actively involved in and internally very bullish on. So from a company perspective, we continue to invest.
<unk> very bullish on so from a company perspective, we continue to invest on our geology team on our carbon intensity reduction team.
Brian McCarthy: on our geology team, on our carbon intensity reduction team. We have a number of projects.
We have a number of projects.
Brian McCarthy: in kind of permitting phase and we're seeing we internally expect permitting timelines to continue to go down as you see states
In kind of permitting phase and we are seeing we internally expect permitting timelines to continue to go down as you see states.
Brian McCarthy: take over permitting authority from the federal EPA and start competing with each other to attract carbon sequestration developers.
Takeover permitting authority from.
From the federal EPA and start competing with each other to attract carbs.
Carbon sequestration developers.
Brian McCarthy: So all those things are really bullish elements and that potentially adds to the EBITDA potential of that business and to potentially improving returns on capital of that business before any carbon intensity upside to lower CI scores from LCFS or LCFS-like markets.
All of those things are really bullish elements.
That potentially adds to the EBITDA potential.
That business.
And to potentially improving returns on capital of that business before any carbon intensity upside to lower Ci scores <unk> saved us like markets. So very positive on that we kind of pointed on including in the model.
Brian McCarthy: So very positive on that. We've kind of punted on including in the model. I would imagine that as we get more clarity and more confidence in permitting timelines in 45Q qualifying thresholds and dollar per metric ton pricing, we will start including it in future guidance. So.
Imagine that as we get more clarity and more confidence in permitting timelines in 45, new qualifying thresholds and dollar per metric ton pricing, we will start including it in future guidance.
So hopefully that helps.
Brian McCarthy: Craig, this is Brian on the second part of your question. You know, in terms of the long-term fixed price offtake in that mid-teens, you know, we continue to see.
Greg. This is this is Brian on the second part of your question in terms of the long term fixed price offtake in the mid teens, we continue to see improvement in direction in pricing since the beginning of archaea to where we are today and where we're going we've seen kind of incremental increases over time that have not been tied to what.
Brian McCarthy: improvement in direction and pricing, you know, since the beginning of ARCEA to
Brian McCarthy: Where we are today and where we're going, we've seen kind of incremental increases over time that have not been tied to what attribute pricing is doing. It's truly related to.
Attribute pricing is doing its truly related to the availability of R&D at scale, and then more and more programs that are coming in that is making the supply and demand dynamic look very positive for <unk> and one that we're very very constructive on.
Brian McCarthy: You know, the availability of R&G at scale and then more and more programs that are coming in that is making the supply dynamic look very positive for Archaea and one that we're very, very constructive on.
Brian McCarthy: I think just taking a step back, you know, numbers get thrown around. I think the one really important point, especially for when we talk about long-term offtake, is that we don't have any RFS or CARB outs. So if RINs went away, if LCFS went away, there's no outs in our contracts, and I think that's really important. These are buyers that want to be green, that want to be green for a very long time and want to partner with somebody that's able to provide that volume for term.
I think just taking a step back.
Numbers get thrown around I think one really important point, especially for when we talk about long term offtake. So we don't have any RFS or carve outs. So if rins went away. It's L. CFS went away there is no out in in our contracts and I think thats really important these are buyers that want to be.
Green they want to be green for a very long time and want to partner with somebody that is able to provide that volume for term I think the other the second piece in terms of when we when we think about those contracts specifically that when they are entering into the contracts. They're also thinking about who can grow with them and theres only a few.
Brian McCarthy: I think the other, the second piece in terms of when we, when we think about.
Brian McCarthy: those contracts, it's specifically that when they are entering into the contracts, they're also thinking about who can grow with them. And there's only a few few players are able to do that. And so as you as you go to California and California says, look, we by 2030, we'd like to have over 70.
Few players who are able to do that and so as you go to California, and California says look we by 2030, we'd like to have over 70 million cubic feet of R&D and are in our systems.
Brian McCarthy: billion cubic feet of RNG, you know, in our in our systems. I mean, that's that's.
As a multiple of the entire R&D production in the market today. So we continue to be focused on signing contracts with folks that really want to be green. It don't have regulatory out and then we expect that supply demand dynamic to continue to.
Brian McCarthy: a multiple of the entire R&G production in the market today. So we continue to be focused on signing contracts with folks that really want to be green, that don't have regulatory outs.
Brian McCarthy: And then we expect that supply demand dynamic to continue to move in our favor.
Move in our favor, but b b.
Brian McCarthy: be independent of where, you know, RINs or LCFS pricing might be.
Independent of where <unk> CFS pricing might be.
Thank you.
Our last question comes from page graph with U S Capital Advisors. Please proceed with your question.
Speaker Change: Our last question comes from Paige Graf with U.S. Capital Advisors.
Good morning, everyone.
Paige Graf: Good morning, everyone. Just wanted to get some clarification on 22 CAPEX. It looks like it came in a bit higher than.
Just wanted to get some clarification on 22 Capex it looks like it came in a bit higher than the street was expecting so I was wondering if that was inflationary pressure timing any color.
Paige Graf: was expecting. So I was wondering if that was inflationary pressure, timing, any color you could give would be great.
Color you could give would be great.
Speaker Change: Yeah, great question. So on 2022 CapEx, those figures on a project for project comparison are actually lower than what we were originally assuming. And what you're seeing in the increase in numbers is the inclusion of acquisition CapEx, which we previously didn't include in our
Yes, great Great question, So on 2019 Capex.
Those figures on a.
On a project for project comparison are actually lower.
And then what were originally assuming.
And what Youre seeing in the increase in numbers is the inclusion of acquisition Capex, which we previously.
Didn't include in our Capex forecast.
Speaker Change: You also see the inclusion of R&D, you see the inclusion of carbon intensity reduction investments to some level, and you also see just more projects. So I mean, that's the key point. You're seeing a tremendous amount of, I think, $70 million at CapEx in R&D.
You also see the inclusion of of R&D, you see inclusion of carbon intensity reduction investments.
To some level and you also see just more projects. So I mean, that's the key point.
You are seeing a tremendous amount of.
Alright, thank $70 million of Capex in.
Speaker Change: which is a good chunk of the overall development CapEx budget for 2022, go towards projects that have a 2023 COD date. So that's really important to note. It's on a project per project basis, we're lower in almost all cases.
Which is a good chunk of the overall development Capex budget for 2020 to go towards projects that have a 2023 <unk> date and so that's really just important to note. It's on a project for project basis, we were lower in almost all cases.
Speaker Change: If you did a real apples-to-apples comparison on CapEx per project, but we're doing more and we're including more categories that make sense from a rate-of-return perspective like acquisition.
If you did a real apples to apples comparison on Capex for project, but we're doing more and were including more categories that makes sense from a rate of return perspective like acquisition capital.
Speaker Change: And Paige, I would just add as well that it just points to growth. When you look at the maintenance CapEx line at only $5 million, it just shows the confidence we have to continue to take advantage of what we think are high return opportunities in our portfolio. Okay, great. Thank you. That was really helpful.
Yes page I would just add as well that we just.
Points of growth when you look at the maintenance Capex line at only $5 million. It just shows the confidence we have to continue to take advantage of what we think are high return opportunities in our portfolio.
Okay, great. Thank you that was really helpful.
Thank you.
At this time I will turn the floor back to management for closing remarks.
Thanks.
Speaker Change: I'd like to thank the shareholders. It's an incredible and often overlooked competitive advantage to have like-minded investors focus on building truly long-term cash flows with unparalleled upside.
I would like to thank the shareholders. It's an incredible an often overlooked competitive advantage to have likeminded investors focus on building truly long term cash flows with unparalleled upside.
Speaker Change: We're determined to stand strong against the pressures of short-termism and the institutional imperative to build meaningful value for all shareholders.
We're determined to stand strong against the pressures are short term ism in the institutional imperative to build meaningful value for all shareholders. After all the co founders and managers of the company are significant owners of the company and we take an ownership mindset as owners nothing gets us more excited and increasingly cheap oil prospect of building a business that can generate one bill.
Speaker Change: After all, the co-founders and managers of the company are significant owners of the company, and we take an ownership mindset. As owners, nothing gets us more excited than the increasingly achievable prospect of building a business that can generate a billion dollars of annual long-term cash flows with underlying growth from both inflation escalators in our contracts and landfill gas growth curves.
<unk> of annual long term cash flows with underlying growth from both inflation escalators in our contracts and landfill gas growth curves. This type of cash flow stream is totally unique and deserving of a commensurate free cash flow yield.
Speaker Change: This type of cash flow stream is totally unique and deserving of a commensurate free cash flow yield. Thanks for your continued support.
Thanks for your continued support and shared vision and future.
This concludes today's conference you may now disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.