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spk02: Good morning, and welcome to the Arkea Energy fourth quarter and full year 2021 earnings column webcast. This event is being recorded. If you'd like to ask a question after the company's presentation, please press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. I would now like to turn the call over to Megan Light, Vice President of Investor Relations, to begin. Please go ahead.
spk06: Thank you, and good morning, everyone. Welcome to Arkea Energy, Inc.' 's fourth quarter and full year 2021 earnings conference call. With me today are Nick Stork, Arkea's Chief Executive Officer, and Brian McCarthy, Arkea's Interim Chief Financial Officer and Chief Investment Officer. Arkea 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. 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 months. Before we begin, I'd like to remind you that our remarks on this call, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. 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 2 of our presentation. These forward-looking statements reflect our views as of the date of this call, and ARHIA 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. 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. 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. 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. And now, I will turn the call over to Nick Stork, Archaea's Chief Executive Officer.
spk11: Good morning, everyone, and thank you for being here for ARKIA's fourth quarter and full year 2021 earnings call. I'm proud of the results we've delivered, driven by the extraordinary efforts of the ARKIA team. We achieved strong results, a number of milestones across many facets of our business, and advanced our strategic priorities, while successfully merging two private companies, completing a complex D-SPAC transaction, and very quickly building on our public company functions to support our rapidly growing business. 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, Arkea's co-founder and chief investment officer, into an expanded role as interim chief financial officer. Brian previously served as Arkea'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 additional newly added talent. We also appointed Ed Tavey as General Counsel and EVP of Strategic Initiatives and Government Affairs. Edward has significant experience in corporate management, transaction structuring and execution, and public company governance and regulatory matters. We're excited to have him lead our legal function and support our strategic development efforts. I'd like to thank their respective predecessors, Eric Javity and Lindsay Ellis, for helping us successfully build key public company functions in a tightly compressed timeframe. And 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. First, we're proud to announce strong operating and financial results today. with the full-year pro forma RNG production sold of 5.72 million MMBTU, more than 5% above our guidance of 5.4 million MMBTU. 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. Our outperformance was largely driven by higher RNG production volumes, and higher market pricing of RNG, environmental attributes, and electricity. Operationally, in late December 2021, we achieved commercial operations at ASAI, which is now the highest capacity operational RNG facility in the U.S. 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 professionals. 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 Soares Dairy Digester Facility, within our 50% Mavericks LLC joint venture. 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 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 archaea version 1 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 averages. We expect this meaningful cost reduction to open up new development opportunities for low-flow landfill sites. 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 rights agreements. 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, high-quality backlog. Since the business combination was announced in April 2021, we have 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. 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 RNG. We achieved commercial operations at ASAI on December 30, 2021. We successfully constructed, commissioned, and completed the project in less than two years after obtaining gas rights, a monumental task and a timeline much shorter than industry averages for landfill gas at RNG facilities. ASSAI is located at the Keystone Sanitary Landfill in the Scranton, 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. ASSAI has been operating at full uptime in methane recovery since March 2nd, utilizing full flows from the Keystone Landfill. We expect to add gas flows from the nearby Alliance Landfill in the near future. We are very pleased with the performance of ASSAI so far and expect to continue to fine-tune the plan in the coming weeks. ASSAI is a very attractive return profile, with a billed multiple of around 3x capital expenditures to estimated adjusted EBITDA, including the impacts of the PEI power acquisition. Capital expenditures for the project were within budget and totaled approximately $145 million through December 31, 2021 for the ASSAI project, including the acquisition of PEI power. which included landfill gas rights for the Alliance Landfill, a network of pipelines, and a power generating facility with a combined capacity of approximately 85 megawatts. The expected adjusted EBITDA contribution from our ASSAI RNG 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 for uncontracted volumes. Landfill gas flows into ASSAI are expected to increase over the next several years. leading to higher expected production from the facility and therefore higher expected adjusted EBITDA and returns. 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. I'm thankful for our partners on this project, including the teams at Keystone Waste Management, UGI, and the Pennsylvania Department of Environmental Protection, and our long-term commercial partners, which include FortisBC, Energear, and the University of California, for their meaningful long-term commitments to decarbonization and to the success of the project. I'd also like to thank our team for working tirelessly to complete a site safely, under budget, and on a rapidly accelerated timeline. One of our key priorities for 2022 is the implementation of RQ Version 1, a standardized and modularized plant design We made great strides in its development in 2021. We are currently developing four standard plants to be built on skids with interchangeable subcomponents, and 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 implementation. 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. We currently have orders in place for the key components and major equipment for 22 plants, which covers most of the expected new builds in our current development plan for this year and next. Deliveries of components have begun, and we expect to install our first Version 1 plant in the second half of this year. These substantial preorders have significantly minimized our near-term supply chain and inflation risks. We expect ARCA version one to reduce project development and 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 the plants and therefore higher production because the plants are designed to handle a wide array of gas conditions. All new build projects in 2022 and four development plans will implement the ARCA version one design. 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 significant advantage in the marketplace and positions us to be the R&D developer of choice, enabling us to build on our market-leading position at a time when competition for attractive project opportunities is increasing. We've had continued success in adding to our backlog of high-quality development projects. 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 2021. In November 2021, on our last call, we announced the addition of five projects since April 2021. We acquired four operating landfill gas for electric facilities with the intention to build RNG plants on these sites over time. And we executed a gas rights agreement to develop a new RNG facility. In December, we entered into a new joint venture. This joint venture subsequently acquired gas rights at two locations to co-develop RNG facilities with expected combined flows of approximately 4,250 net SCFM. into the facilities after completion. In January 2022, we signed gas rights agreements to develop RNG facilities at two additional landfill sites, expanding an existing relationship with an independent landfill owner. And in February 2022, we acquired a landfill gas to electric asset with RNG development rights. Combined flows for the three projects added year to date in 2022 are expected to total approximately 4,500 net SCFM into the facilities after completion. Today, our total project development backlog includes 38 projects for which we have gas rights agreements in place, including 10 optimizations and 28 new builds. On the new builds, we include R&G plans to be built on existing electric sites and on greenfield sites. 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 rights 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 rights to our portfolio. The economics of these projects remain very attractive, and we expect to be able to acquire gas rights and or existing electric assets and develop R&G facilities on those sites at an estimated all-in pro forma multiple of about 3 to 5x, including estimated acquisition and development capital and estimated post-development EBITDA. In all cases, we plan to stick to our target return parameters, 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 contracted volumes only. While we're seeking to add development opportunities to our 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 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 and rates for us, and we may from time to time 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 established a business model that supports making additional acquisitions, which will enable us to build more RNG plans. 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 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 RNG production of approximately 35 million MBTU annually. That is potential production six times pro forma 2021 production and potential adjusted EBITDA five times pro forma 2021 adjusted EBITDA. 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 for more information on our modeling assumptions. We see this potential post-development adjusted EBITDA of approximately $400 million as only the beginning, and we believe we could ultimately achieve meaningfully more by capturing additional development opportunities. With that, I'll turn the call over to Brian, who will provide a commercial update and review our financial results.
spk09: Thank you, Nick, and good morning, all. I'm happy to be here today to discuss our recent commercial successes, our 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 financial fixed-price contracts with Northwest Natural and FortisBC. Both contracts highlight RKO's ability to tailor long-term agreements to meet the needs of our customers. In November, we signed a 21-year fixed-price contract with Northwest Natural for the environmental attributes related to 1 million MMBTU of our RNG production annually to be sold from across our portfolio. 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 and is our first long-term contract to separate environmental attributes from physical RNG. 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. In January 2022, 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 gigajoules, or approximately 7.6 million MMBTU of RNG per year, be sold from across our portfolio. For this contract, we will sell bundled RNG and environmental attributes. I am pleased to announce that this contract has received all necessary regulatory approvals and 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 RNG contract signed to date and and it highlights our ability to provide customers RNG volumes on a scale that cannot be replicated by many producers in the industry. Both new contracts will be serviced by our portfolio, an evolution from our early commercial strategy of tying volumes to a single site. This portfolio approach provides Archaea with operating flexibility while reducing site-specific execution risks for our customers. Northwest Natural and FortisBC are high-quality, credit-worthy counterparties, and we are excited about these multi-decade partnerships. We look forward to helping our partners achieve their decarbonization and sustainability goals while linking their customers the environmental and social good we do at our R&G projects for our local communities. 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 credit-worthy counterparties. Currently, for 2022, approximately 50% of our expected R&G production is contracted based on expected sales under existing long-term contracts. 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. 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. In many of our long-term contracts, volumes are specified as a range, with volumes nominated and sold at ARKEA's election. 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 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 off-take partnerships. 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 from utilities, with eventual broader expansion of our corporate and university customer base. Many of our current customers have RNG targets ranging from 5% to 20% of their supply, and 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. We expect voluntary targets and regulatory mandates for RNG to increase, and we are seeing increasing support at the state level for use of RNG by regulated utilities. In late February, the California Public Utilities Commission set biomethane targets for utilities that are expected to result in over 70 BCF of RNG demand by 2030. Since the announcement of our recent contracts, we have seen an uptick in demand for RNG. We also see potential for increased demand for diversified products of RNG, such as biomethanol, sustainable aviation fuel, and hydrogen, 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. 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. This locks in RIN value at an equivalent of $36.67 per MMBTU on approximately 1.4 million MMBTU of expected uncontracted production. With the agreements currently in place, we have locked in RIN prices for over 20% of our expected uncontracted RNG production for 2022, 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. Locking in RIN prices helps us further remove financial variability from our business and bolster our cash flow stability. and today's robust market prices will generate additional cash flows to use on our project development and acquisition strategies. 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 15, 2021, with Archaea Energy LLC, or Legacy Archaea, 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 14, 2021, 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. Financial information presented on a pro forma basis gives effect to the business combinations and the related financing and other transactions as if they had been completed on January 1, 2021. We believe this presentation of our results gives more meaningful information to the investment community. Our earnings release contains additional information about pro forma results, and our presentation of financial information for the three months and year ended December 31, 2021. For the fourth quarter, we produced and sold 1.53 million MMBTU of RNG and 168,000 megawatt hours of electricity. We generated net income of 3.7 million and adjusted EBITDA of 16.4 million for the quarter. 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. G&A costs for the fourth quarter totaled $20.9 million, which included increased costs from scaling our headcount to support the future growth of our business, increased public company professional service fees, 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. On a go-forward basis, we expect G&A costs to normalize and to be approximately $45 million for 2022. For full year 2021, We produced and sold 5.72 million MMBTU of RNG and 872,000 megawatt hours of electricity on a pro forma basis. Electricity produced and sold included approximately 203,000 megawatt hours from LESPH assets, which were sold by ARIA in June 2021. 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. Proforma net loss was primarily driven by a loss from changes in fair value of warrant derivatives in the amount of $110.2 million. Non-recurring transaction costs primarily related to our business combination transactions and increased general administrative expenses partially offset by non-recurring gains related to the LES-PH sale from ARIA including a gain on extinguishment of debt of $61.4 million and strong market pricing. Non-recurring transaction costs totaled $22.7 million for full year 2021, including $0.3 million in the fourth quarter and primarily related to costs of the business combinations. Proforma adjusted EBITDA for the full year 2021 was positively impacted by strong market pricing, partially offset by increased G&A expenses. Pro forma RNG produced and sold of 5.72 million MMBTU exceeded the guidance we previously provided for full year 2021, and pro forma adjusted EBITDA of 76.1 million exceeded the midpoint of our range for the year. 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 side project financing. Under our revolving credit facility, we had no borrowings outstanding and had issued letters of credit totaling $14.2 million. As of December 31, our liquidity position was $328.9 million, including $77.9 million of cash and cash equivalents, $15.2 million of restricted cash, and $235.8 million of undrawn capacity under a 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 V1 plant design, which has helped minimize supply chain and inflation risk. 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 an increasingly competitive market. 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 and related to our ASAI facility. 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 method investments. Proforma Cash used in investing activities totaled $242 million for full year 2021, including additions to PPE totaling $141.8 million. Primarily related to our ASAI and Boyd County R&G facilities, and purchases of equipment for future development projects. 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 a pro forma basis. 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. To minimize dilution to existing stockholders from this warrant redemption, 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. 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. And now, I will turn it back to Nick to discuss our 2022 Guidance and Development Plan. Thanks, Brian.
spk11: On the heels of those excellent results, we are also pleased to provide full year 2022 operational and financial guidance today. We expect RNG production sold of 11.1 to 11.7 million MMBTU, electricity production sold of 850 to 950,000 megawatt hours, adjusted EBITDA of 125 million to 145 million, and capital expenditures of 255 to 285 million. 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 build projects. From a pricing perspective, as Brian discussed, we expect to sell approximately 5.5 million MMBTU, or approximately 50% of our expected 2022 RNG production sold, under existing long-term fixed price contracts. 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 per MMBTU. That leaves approximately 4.5 million MMBTU of expected RNG production, subject to market pricing. And for our guidance range, we have assumed RIN prices of 2 to 250 per gallon, or 2345 to 2932 for MMBTU to be realized on these open volumes. Our 2022 development plan and our full year adjusted EBITDA guidance has been impacted by some permitting and zoning delays outside of our control, 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 approximately $20 million higher than Rice Acquisition Corp. estimated at the time of the DSPAC. We do not anticipate material increases in G&A going forward and consider the business to have substantial operating leverage. As a tailwind to 2022 results, we have been able to lock in strong rent 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. Despite the slight delays, our 2022 development plan is very robust, and we expect our investment in ARCA version 1 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&G facilities and 10 new build projects expected to be placed into service before the end of the year. 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 in projects expected to be completed in future years, approximately $40 million in acquisition capital, $25 million in development capital for initiatives including carbon sequestration and onsite solar projects, and $5 million in maintenance capital. 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, provide additional capital for acquisitions or incremental development projects, or for general corporate purposes. With our differentiated commercial strategy and focus on generating stable cash flows through long-term fixed price contracts, 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. In 2022, as I mentioned, our development plan includes a mix of optimization and new build projects. The expected returns on our optimization opportunities make them great investments, and we will be prioritizing these projects in 2022. We expect a wide range of scopes across our optimization projects. from upgrading membranes to adding nitrogen rejection units or NRUs, or even building RNG facilities adjacent to 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 of RNG sold increases our financial returns. Uptime measures how tolerant your equipment is and how good your operators are. Methane recovery measures how good you are at gas processing. 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 RNG production of over 1 million MMBtu 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 R&D production of over 2 million MMBTU and incremental annualized adjusted EBITDA of approximately 25 million. 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 our assumptions is included in our presentation. We also have 10 new-built projects in our development plan, with targeted completion dates weighted heavily toward the latter part of this year. These projects include greenfield sites and sites where there are currently landfill gas to electric assets. Our 2022 new-built projects will incorporate our Version 1 design. We expect total incremental RNG production of over 900,000 MMBTU in 2022 from these new-build projects and corresponding incremental adjusted EBITDA of 8 million. The long-term annualized impact is much higher because these projects are heavily weighted to be completed in the later part of the year. Once these new-build projects are completed and the facilities are ramped up to full flows, we estimate total incremental annual RNG production will be almost 5 million MMBTU, with corresponding annualized adjusted EBITDA of approximately $65 million. The combined impact of all projects in our development plan is expected to result in incremental RNG production of almost 2 million MMBTU in 2022 and almost 7 million MMBTU on 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. 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 ramped up. We are laser-focused on executing on our development plan 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 the operator for Q&A. Thank you for all your time and your interest in Archaea.
spk02: Thank you. We'll now be conducting the question and answer session. 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 question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, so we poll for questions. Once again, that's star one to ask a question.
spk04: Thank you.
spk02: Our first question is from the line of Derek Woodfield with Stifel. Please proceed with your questions.
spk03: Good morning, all, and congrats to your strong finish to 2021. Thanks, Derek. 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% lower. With the understanding that you're experiencing some impact as noted in the remarks, could you help us size up the degree of the timing impacts and the way that they affected your 2022 R&D guidance in light of the additions to your portfolio of development assets since last April?
spk04: Yeah, sure thing.
spk11: So really, we're doing exactly kind of 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 opportunities all the MMBTU and free cash flow potential from our current asset base, which is really considerable. But the real difference is about timing. So 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. So, a lot of that is really just around timing. So, if you move a COD date back from, you know, 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, you know, when we produced R&G, we go through a process of rent 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. 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 or sort of run rate basis, you know, there's over 3 million MMBQs annually that we're kind of adding to the production profile on a run rate basis. I'm getting very little impact of that in the fiscal year of 2022.
spk04: Great.
spk03: That makes perfect sense. And 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. In kind of thinking about that level of mismatch today in supply and demand, how should we think about the trajectory of long-term fixed price contracts in light of that backdrop? And if these customers would like to place a premium on the CCS and on-site solar developments you're pursuing today?
spk09: Yeah, thank you. We couldn't be more excited about how the market's coming together. And when taking a step back and thinking about being a natural gas utility, RNG 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. You know, RNG really becomes that solution. And with what we've been able to do with the recent announcements, especially with Fortis and Northwest Natural, and what you're seeing with what happened in California and other expansions on the regulatory front, folks are looking to archaea as being that source of renewable natural gas going forward. And so as we continue to 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 want to decarbonize, we want to do it at meaningful scale, and we don't want to take single project risk. So where's a platform we can go to that has lots of flowing volumes today And that also has a very compelling growth trajectory that we can grow with them. And so, you know, with Fortis, for example, they're true pioneers in the RNG space, and they view us as one, a 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 decarbonization 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.
spk03: 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?
spk09: 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'll 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 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.
spk04: That's great. Thanks for your time and thoughtful responses.
spk02: Thank you. Our next question is from the line of Hamsa Mazari with Jefferies. Please proceed with your question.
spk01: Hey, good morning. Thank you. My first question is just around how you guys think about the moat or barrier to entry around your business. I'm assuming... having the gas rights to the landfill, you know, clearly, obviously, winning the project is one. But maybe walk through sort of what are the others. And the reason I ask is that, 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?
spk11: Thanks, Hamza. This is Nick. Yeah, I'd say, you know, one is on competitive advantages, I'd point to just our incredible portfolio of assets that we have today, which include, You know, 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 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, you know, the 38, total 38 projects that we have under long-term development agreements. 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. 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 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 pressure and absorption or with membrane-based separation have been around for decades. Basis of nitrogen removal through pressure and adsorption, through cryogenic distillation, through membranes have been around for decades as well. 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 one-off, you know, custom projects, sourcing from vendors, and some components on an individual or project-based approach. 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. So speed comes into play. And then also cost. And cost is sort of twofold. Cost is also, cost is, you know, total capex per project, which, you know, we think we're going to be 40% lower than the industry standard approach to develop RNG, but cost is also kind of utilization. So industry standard approaches to RNG development look like 90% uptime, 85% uptime, 80% to 85% methane recovery. So if you apply our standards and what we're capable of achieving with RK Version 1 on a per plant basis, you get a 20% improvement right off the bat from our design goals of 95% uptime plus and 90% plus methane recovery. So that's really significant, especially when you apply scale to those metrics. And then Thirdly, 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 differentiator. So we are uniquely positioned towards 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 benefits on environmental attributes. We're going to continue to position the company to achieve our target rate of return thresholds, even in a downside case scenario over a long term. 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 ARCA 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.
spk01: Got it. That's very clear, very helpful. And then maybe if you could just talk about, you know, you referenced some of the recent management changes. You know, we see that in the release. But maybe just talk about, you know, the evolution of some of those management changes. Is that just sort of related to, you know, you're scaling up quickly and you sort of had changes or turnover there or anything else going on just given that, you know, they happen pretty quickly and you haven't been public that long?
spk11: No, we've discussed, you know, the management changes at length, I think, and pretty clearly. You know, 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, you know, generating a billion dollars in predictable free cash flow over a long period of time. And so you see, you know, recent changes across the board that are really positioned towards, you know, 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 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.
spk04: Got it. Makes sense. Thanks so much.
spk02: Our next question comes from the line of Matthew Blair with Tudor Pickering Hull. Please proceed with your questions.
spk05: Hey, good morning. Thanks for taking my questions here. I have a couple on RINs. So I guess first on the guidance, the question we're getting from investors is why you use the midpoint 225 D3 RIN assumption for the rest of this year. I think it's about 22% below RIN. current prices and then second, could you talk about your outlook for D3 RIMS in 2023? I guess there's some concern out there 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.
spk04: Yeah, I'll take that.
spk11: This is Nick. I'll take that first and then let Brian From a modeling perspective, 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 MVT basis. So that's really why we have a long-term assumption of $1.50. And in the shorter term, you know, we have 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, you know, through almost Q1, almost the end of Q1 2022. They've been above three down here recently. But it doesn't reflect any sort of 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 a $1.50 RIN in 2022 like we do in the outer years, just given where prices currently are. But 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. And I'll say as well, you know, it's important to note, too, that there's upside, you know, to those numbers. So, you know, if there's another 50 cents 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 modeling things.
spk09: And related to the second part of your question, this is Brian. 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. It's on a July through June basis. And so as we look at 2023 and gasoline prices where they're at, at CWC, it looks like it's going to fall. As we think about things, you know, we're modeling that $1.50 rent-and-out years. Right now, if you make an assumption of where D4 or D5 is, 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. 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. And so when we when we think about things, it's, we, we base everything based on that, but then above it comes with that's, that's the highest and best use that free upside that comes once you've underwritten your returns. And so, you know, similar to our conservative outlook on, on RINs for this year, you know, 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, you know, that those long-term, those long-term offtake pricing. And then if we have upside from there, you know, we will be able to put that to, to work and, uh, and high-growth projects.
spk05: 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?
spk11: Yeah, actually, I should clarify that point. We're not seeing timing lags per se. That's just a natural product 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's stored, and the portion that goes to environmental attributes 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 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 – You know, significant delays there either, but, you know, that process doesn't allow you, for example, to go back and generate LCFS credits from the point of interconnection. You can only generate LCFS credits from the point of CARB certification.
spk09: 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 Europe, if it's 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 you're in Canada, whether you're abroad, whether you're in California. And you could say, okay, 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.
spk04: Great. Thank you.
spk02: Our next question is from the line of Martin Malloy with Johnson Rice. Please proceed with your questions.
spk12: Good morning. Thank you for taking my questions. The first question I had is just in relation to that $400 million you referred 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.
spk11: 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. 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 doing what we've already done, which is build RNG plants at scale with increasing upside. So I wouldn't try to tie a specific timeline to that. I would put a range 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 RNG 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 RNG development.
spk09: 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 and tied to long-term gas rights, it's the true visibility of that cash flow. So once you have this, this, platform that's completely built out, you know, that's something that you can have confidence in in terms of where the gas is going and then rights related to the feedstock for years to come. And so I think in terms of we're going to come and try to pin down an exact number, I just want to take it one step further and say, you know, not only is that where we're getting to in terms of earnings power, but it's also confidence and visibility. I guess this is Nick.
spk11: I just point out one more thing, too. If you take... which we tried to allude to in the investor presentation, if you take 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 400 within the existing base of the assets that we have, which, again, is just the assets that are signed today under long-term development agreements.
spk12: Okay. And my next question is just, are there any key items to be concerned about regarding logistics or supply chains? with regards to the plants and 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 for landfill rights?
spk11: We think it's a huge competitive advantage. We think that it hasn't fully been appreciated yet. And so we've pre-ordered major equipment for 22 plants, thereabouts. 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 ARCA version 1 small plant, that subcomponent could also be used in ARCA version 1 extra large plant somewhere else around the country. So that gives us a lot of ability to flex our scale and to have that off-the-shelf approach. 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, you know, we are seeing vendors, not vendors for ARCHI version 1 subcomponents or major equipment, but we are seeing vendors that produce similar projects for other developers 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 project. lead time or for that same major equipment. And that's happened over the last nine months. So 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 development timeline. So we're going to keep pressing that advantage. And, you know, we did it because it was the right thing to do to preorder equipment and to get the benefits of scale. We didn't necessarily foresee a this kind of supply chain and inflationary environment, but we're certainly benefiting from that. And in terms of risks to development, you know, 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 construction timelines. So if there's labor shortages or if there's If there's inflationary pressures related to construction costs, we could see 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.
spk04: Great. Thank you very much. Our next question is from the line of Craig Shearer with TUI Brothers.
spk02: Please proceed with your questions.
spk10: Thanks for taking my questions. So two quick ones. On the carbon sequestration and solar, 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. 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 relates to the fixed price offtake, the institutional offtake. The original guidance I thought was about 14 and N, and then we had some indications, oh, it's tightening, it could be 16 to 18. Are we starting to think that perhaps that market could go over $20 and N this year?
spk04: Yeah, thanks, Craig.
spk11: 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. 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 45Q potential benefit or any other CO2-related benefit from lower carbon density. So excluding it in that $400 million of 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 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 on our geology team, on our carbon intensity reduction team. We have a number of projects. in kind of permitting phase and we're seeing, we internally expect permitting timelines to continue to go down as you see states take over permitting authority from the federal EPA and start competing with each other to attract carbon sequestration developers. 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. So very positive on that. We've kind of punted on including it 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.
spk09: So hopefully that helps. Craig, 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 and pricing. Since the beginning of ARKIA to where we are today and where we're going, we've seen incremental increases over time that have not been tied to what attribute pricing is doing. It's truly related to you know, the availability of RNG at scale and then more and more programs that are coming in that is making the supply and demand dynamic look very positive for Archaea and one that we're very, very constructive on. 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. They 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 the second piece in terms of when we think about those contracts is 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 players who are able to do that. And so as you go to California and California says, look, by 2030, we'd like to have over 70 billion cubic feet of RNG in our systems. I mean, that's a multiple of the entire RNG 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. And then we expect that supply-demand dynamic to continue to move in our favor but be independent of where RINs or LCFS pricing might be.
spk04: Thank you. Our last question comes from Paige Graff with U.S.
spk02: Capital Advisors. Please proceed with your question.
spk07: Good morning, everyone. 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 you could give would be great.
spk04: Yeah, great question.
spk11: So on 22 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 CapEx forecast. 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 of CapEx in which is a good chunk of the overall development CapEx budget for 2022, go towards projects that have a 2023 COD date. And so that's really just important to note. On a project-per-project basis, we're lower in almost all cases. 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 capital.
spk09: 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.
spk08: Okay, great. Thank you. That was really helpful.
spk04: Thank you. At this time, I'll turn the floor back to management for closing remarks. Thanks.
spk11: 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. We're determined to stand strong against the pressures of short-termism and 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 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. This type of cash flow stream is totally unique and deserving of a commensurate free cash flow yield. Thanks for your continued support and shared vision in the future.
spk02: This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.
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