- Growth outlook: Just under a year since it went public following the acquisition of Aria Energy, the leading renewable natural gas producer delivered a progress report during its Aug. 16 earnings call. “Everything that we thought was possible with the Aria portfolio in terms of capacity improvements, in terms of methane recovery improvements and uptime improvements are really on track and we're kind of more excited than we were when looking at Aria over a year ago,” said CEO Nick Stork.
- 2022 priorities: For the remainder of the year, executives said their primary focuses include ramping up the recently launched Assai project (which produces RNG from the Keystone and Alliance landfills in Pennsylvania) to full capacity, rolling out the first installation of its V1 RNG plants and optimizing its legacy assets. Capturing more gas from these sites, rather than flaring or combusting, could be worth $100 million in annual earnings before interest, taxes, depreciation, and amortization.
- Joint venture: Lightning Renewables, a joint venture with Republic Services to invest $1.1 billion in dozens of RNG projects, recently grew following Archaea’s acquisition of a landfill gas facility in Fort Wayne, Indiana, and the rights to build a large new plant at the location. Archaea contributed an initial $222.5 million to the venture in July, which covered the Fort Wayne purchase and capital needs for seven projects.
- Acquisition: In July, Archaea also completed the purchase of INGENCO. This includes 14 landfill gas-to-electricity facilities — which the company believes are still lucrative, even amid booming RNG demand — and the potential for 11 new RNG projects.
- Inflation Reduction Act: Chief Financial Officer Brian McCarthy said the newly signed climate bill will be a boon for Archaea through investment and production tax credits for biogas projects. The company has accelerated its work to prepare for geologic carbon sequestration — with Stork noting the IRA will “dramatically increase” the amount of viable projects — in parallel with efforts to monetize carbon dioxide for industrial uses. These projects could be worth $100 million in annual revenue. It has also identified four potential steam methane reforming projects for hydrogen, which are also incentivized under the law.
- RNG offtake: The company’s goal is to secure 70% of the RNG it produces under long-term contracts, versus 50% today. McCarthy pointed to a new 20-year contract with Énergir (the companies’ second together) and a five-year deal with UGI Utilities (Archaea’s first such contract with an interconnection partner) as positive developments that diversify its options beyond the short-term transportation fuel market.
- Looking ahead: Executives are confident they can deliver 20 new projects per year going forward, citing a workforce that has more than doubled to 400 employees since last year and other positive steps. Stork said the company is resilient to inflation and pushed back on a recent decline of its stock price. “We are uniquely recession-proof given our contracted cash flows and societal demand for renewable natural gas,” he said. “Price is not value and our intrinsic value has continued to improve.”
Archaea talks expanding RNG venture with Republic, significant implications of new federal tax credits
Executives shared insights on their growing joint venture with Republic Services and future potential for more landfill projects, plus newly attractive carbon sequestration and hydrogen projects.
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