Rice Acquisition Corporation 3 · NYSE:KRSP
Rice Acquisition Corporation 3 — Archaea Energy — SPAC Merger (April 2021)
45 slides from Rice Acquisition Corporation 3's SPAC merger presentation, April 2021
Slide 1: Archaea Energy Investor Presentation
ARCHAEA INVESTOR PRESENTATION ENERGY APRIL 2021 Renewable Energy. Redefined. 1
Slide 2: Disclaimer
Disclaimer This investor presentation (the “Investor Presentation”) is for informational purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any equity, debt or other financial instruments of Rice Acquisition Corp. (the “SPAC”),
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) Any financial projections in this Investor Presentation are forward-looking statements that are based on assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond the SPAC’s and the Companies’ control. While all projections a
Slide 4: Transaction Summary and Today's Presenters
Transaction Summary and Today’s Presenters • The proposed transaction would involve the simultaneous acquisition of Aria Energy and Archaea Energy by Rice Acquisition Corporation (NYSE: RICE), a publicly listed SPAC with $238 million of cash held Danny Rice in trust to form the industry-leading rene
Slide 5: Indicative Transaction Overview
Indicative Transaction Overview Sources & Uses Illustrative Pro Forma Valuation Sources ($ millions) ($ millions) RAC SPAC Cash in Trust(1) $238 Share Price $10.00 New Corporate Debt(2) $220 (x) Pro Forma FDSO (mm)(8) 116 Assai Project Financing(3) $133 Pro Forma Equity Value $1,159 PIPE $300 Plus:
Slide 6: What We Like About the Company
What We Like About the Company Proven, Durable Predictable, Best in Class Solving Global Business Model Economic Growth Management Team Climate Problems • Combination creates the • Expect to generate ~$395mm • Entrepreneurial management • Capturing landfill gas (“LFG”) industry-leading RNG developer
Slide 7: Archaea Energy At A Glance
Archaea Energy At A Glance One of the Largest and Fastest Growing RNG Producers in the World WA ND VT ME NYSE Ticker LFG MT OR MN NY NH ID SD WI EBITDA ($mm) MA WY MI RI CA PA CT NE IA NV IN OH NJ UT IL DE CO WV VA MD KS MO KY NC OK TN AZ $327 NM AR SC AL GA LA MS TX AK FL $40 HI 2020 (1) 2024E High
Slide 8: RNG Overview
RNG Overview Favorable Macro for Long-Term Success Company Highlights Premiere RNG Producer with Deep Inventory of High-Return Growth RNG Overview Financial Summary Cash Flow + Growth + Value Benchmarking & Valuation 8
Slide 9: The Basics of RNG
The Basics of RNG Where Does Biogas Can Generate RNG Has RNG Come From? Electricity Or Be Multiple Uses Upgraded to RNG CNG H2 Vehicle Fuel • When organic material decomposes • Using proven technology, biogas is • RNG can be used for many in anaerobic conditions a gas is processed onsite to remove p
Slide 10: Why is RNG an Attractive Source of Energy?
Why is RNG an Attractive Source of Energy? 1 2 3 4 5 Sustainability Certainty Deliverability Demand Optionality Perpetual feedstock Proven assets with Growing demand Lowest emission Offers optionality to sources, expected to immediate access to all from blue-chip baseload fuel evolve with the grow a
Slide 11: Why RNG Has Massive Sustainability Impacts
Sustainability 1 Why RNG Has Massive Sustainability Impacts Emissions into Energy …While Replacing Carbon Intensive Fuels Potential sources of organics used to produce RNG include: Using Using 100% RNG 20% RNG- RNG blend Food Waste Wastewater Agriculture Landfill Gas from some sources Waste are carb
Slide 12: RNG is the Lowest-Emission Transportation Fuel
Sustainability 1 RNG is the Lowest-Emission Transportation Fuel Carbon Intensity Ranges of Transportation Fuels What is a Carbon Intensity (CI) score? (gCO2e/MJ) • CI Score measures the life cycle GHG emissions of CO2e per unit of fuel (CO2e grams per megajoule) 150 Archaea expects to achieve CI • T
Slide 13: Landfill Growth Provides 40Y+ of Feedstock Security for LFG Development
Certainty 2 Landfill Growth Provides 40Y+ of Feedstock Security for LFG Development U.S. landfill waste continues to grow and is expected to surpass 13 billion tons by 2050 (60% increase from 2020), causing robust growth in LFG (our feedstock), which is expected to exceed 2.7 Bcf/d by 2050 (44% incr
Slide 14: RNG Utilizes Existing Gas Infrastructure to Reach Customers Nationwide
Deliverability 3 RNG Utilizes Existing Gas Infrastructure to Reach Customers Nationwide Map of LFG Projects & Pipeline Infrastructure Benefits of Existing Infrastructure • Lower transportation cost + lower emissions • Enables Archaea to physically deliver to strategic customers from coast-to-coast a
Slide 15: Strong Regulatory Environment and Corporate Support Driving RNG Growth
Demand 4 Strong Regulatory Environment and Corporate Support Driving RNG Growth Select Corporate Announcements Growth in RNG Mandates “Amazon is excited about introducing new sustainable solutions “With more than 700 public stations across the U.S., the Organization Geography Target or Mandate for f
Slide 16: RNG Demand Is Expected to Exceed Supply For the Foreseeable Future
Demand 4 RNG Demand Is Expected to Exceed Supply For the Foreseeable Future Estimated Fixed Price RNG Demand From IG • Archaea already has more indicated demand in the Counterparties & Projected Archaea Supply 100 form of long-term fixed price contracts than its (Millions of MMBtu/year) 2025E RNG vo
Slide 17: LFG Creates Seven Potential Revenue Sources
Optionality 5 LFG Creates Seven Potential Revenue Sources Product Rationale Anaerobic Direct-Use On-Site Electricity Sequestration Dairy (Waste Heat • Low-cost, baseload $$ Digesters Recovery) cash flows 99% Methane $ • RNG conversion opportunities • Attractive REC pricing Landfill Gas Green Hydroge
Slide 18: Company Highlights
RNG Overview Favorable Macro for Long-Term Success Company Highlights Premiere RNG Producer with Deep Inventory of High-Return Growth Company Highlights Financial Summary Cash Flow + Growth + Value Benchmarking & Valuation 8
Slide 19: The Industry-Leading RNG Platform
The Industry-Leading RNG Platform 1 2 3 4 Team Assets / Growth Commercial Capital Allocation • Led by an • Industry-leading RNG • Expect to have 60-70% • High bar to capital entrepreneurial platform today ($40mm of revenues locked-in deployment management team and of 2020E EBITDA)(1) through long-te
Slide 20: Best-In-Class Management Team Aligned to Create Shareholder Value
Team 1 Best-In-Class Management Team Aligned to Create Shareholder Value ARCHAEA ENERGY • Entrepreneurial management team • Highly accomplished, seasoned industry • Track record of building energy disrupting the RNG space veterans businesses from scratch into $10bn+ • Best LFG gas processing minds i
Slide 21: Project Backlog Generates Unmatched Risk-Adjusted Economic Returns
Assets & Growth 2 Project Backlog Generates Unmatched Risk-Adjusted Economic Returns RNG Upgrade / WA ME Conversion Projects MT ND VT OR MN • $250mm CapEx WI NH ID SD MI NY MA • $110mm EBITDA(1) WY RI CA PA CT • 2.3x Build Multiple NE IA NV OH NJ UT IL IN DE CO WV MD Organic KS VA MO KY RNG Developm
Slide 22: RNG Development Spotlight: Project Assai
Assets & 2 RNG Development Spotlight: Project Assai Will Be the World’s Largest Growth LFG to RNG Plant “Partnering with Archaea to bring these RNG volumes into our distribution system Long-Term Fixed IG-Rated Project provides us with the opportunity to Project Overview continue growing in an enviro
Slide 23: Commercial Strategy: Meeting Growth of Voluntary RNG Market with Fixed Price Contracts
3 Commercial Strategy: Meeting the Significant Growth of the Voluntary RNG Commercial Market with Long-Term Fixed Price Contracts Volatile D-3 RIN Pricing vs. Current Partners Representative Archaea Contract(2) $3.50 Current Price as of 3/8/21: $3.00 $2.88 $2.50 $2.00 $1.50 $1.00 Budget Assumption:
Slide 24: Archaea's Commercial Strategy Generates Attractive Risk Adjusted Returns
Commercial & Cap Allocation 3/4 Archaea’s Commercial Strategy Generates Attractive Risk Adjusted Returns Contracted RNG volumes • At budgeted prices (below spot), Summary 65% under long-term fixed price blended realized price of Projects expected to generate a >10x ROI of RNG contracts $20.43/MMBtu
Slide 25: Archaea is Pursuing Multiple Avenues to Expand & Capitalize on Growing TAM
Archaea is Pursuing Multiple Avenues to Expand & Capitalize on Growing TAM 1 Reducing RNG Reducing RNG 1 Development Development Costs by 40% Costs by 40% • Archaea’s version 1 (v1) Archaea v1 Plant RNG Plant (2022), will lower development costs 40% (not modeled) • Reductions are driven by decades o
Slide 26: Archaea is Pursuing Multiple Avenues to Expand & Capitalize on Growing TAM (cont'd)
Archaea is Pursuing Multiple Avenues to Expand & Capitalize on Growing TAM (cont’d) 2 3 Lower CI Scores to Green Maximize Revenue Hydrogen • CO2 sequestration and onsite solar significantly reduce carbon • Opportunity to achieve $40 per mmbtu+ effective pricing (long-term intensity and increase the
Slide 27: Near-Term and Actionable Growth Opportunities in a Highly Fragmented Market
Near-Term and Actionable Growth Opportunities in a Highly Fragmented Market Untapped RNG Potential(1) Sample of RNG Development Opportunities(2) Significant potential for Archaea to convert existing LFG to electric facilities and emitting landfills to RNG Only 13% of U.S. LFG is converted 451 Landfi
Slide 28: Financial Summary
RNG Overview Favorable Macro for Long-Term Success Company Highlights Premiere RNG Producer with Deep Inventory of High-Return Growth Financial Summary Financial Summary Cash Flow + Growth + Value Benchmarking & Valuation 8
Slide 29: Profitable Day-One Business With Significant Growth Potential
Profitable Day-One Business With Significant Growth Potential • Rapid growth in demand for Revenue ($mm) carbon negative fuels • Robust identified project pipeline Rapidly • Expect to underwrite growth by $739 $619 Scaling contracting 60-70% of our RNG $468 volumes under long-term fixed $326 $204 pr
Slide 30: Revenue Evolution Over Time
Revenue Evolution Over Time • Revenue growth driven by RNG Electric development of Archaea project Other backlog under conservative commodity price assumptions $739 • Archaea ideally positioned to $70 $619 $11 scale operations to meet rapidly $68 growing TAM via pull-through $13 Revenue $468 demand
Slide 31: Margin Expansion Over Time
Margin Expansion Over Time • Strong, resilient EBITDA margins RNG today Electric $395 RNG Development – Margins expected to improve Upgrade / Conversion $24 through (i) conversion of Aria’s Other(1) $327 LFG to Electric projects to RNG $23 and (ii) development of Archaea’s $149 project backlog $239
Slide 32: Highly Developed RNG Project Pipeline Will Create Strong, Resilient CF Profile
Highly Developed RNG Project Pipeline Will Create Strong, Resilient CF Profile • Capital expenditures expected to RNG Development Upgrade / Conversion Capitalized R&D Operating average ~$200mm per year from 2021- $225 $221 2023 through the development of $5 $4 $5 $8 Archaea’s existing project backlo
Slide 33: Benchmarking & Valuation
RNG Overview Favorable Macro for Long-Term Success Company Highlights Premiere RNG Producer with Deep Inventory of High-Return Growth Benchmarking & Valuation Financial Summary Cash Flow + Growth + Value Benchmarking & Valuation 8
Slide 34: Considering a Framework for Archaea's Valuation
Considering a Framework for Archaea’s Valuation • Most comparable business Renewable 13% 18% 31.0x • Varied product mix and scale 2020-’22E 2022E TEV / 2022E Natural Gas • Various levels of RIN or LCFS exposure Revenue CAGR EBITDA Margin EBITDA • Operational experience in alternative fuels Alternati
Slide 35: Comparison to Recent ESG-Oriented SPACs
Comparison to Recent ESG-Oriented SPACs ARCHAEA ENERGY Business Focus Renewable Natural Gas Renewable Plastics Renewable Plastics 2020A(1) / 2025E EBITDA ($mm) $40mm / $395mm ~$2mm / $169mm NM / $139mm Proven Technology + Producing at Scale Long-Term Fixed-Price Commercial Contracts Permanen
Slide 36: Comparison to Public Renewable Natural Gas Companies
Comparison to Public Renewable Natural Gas Companies Revenue EBITDA ($mm) ($mm) $1,458 $395 $1,300 $1,234 $1,125 $327 $239 $739 $200 $619 $184 $163 $140 $145 $468 $120 $328 $370 $140 $95 $454 $65 $67 $120 $396 $204 $326 $61 $95 $122 $220 $256 $145 $186 $40 $55 2021E 2022E 2023E 2024E 2025E 2021E 202
Slide 37: Operational Benchmarking and Relative Valuation
Operational Benchmarking and Relative Valuation Renewable Alternative Recent ESG Disruptors Natural Gas Fuels Transactions ’20-’22E Median: 13% ’20-22E Median: 6% ’22-’24E Median: 54% ’22-’24E Median: 45% Revenue CAGR 68% 54% 53% 45% 38% 34% 24% 19% 9% 13% 8% 4% NM NA PF Archaea +PFAria Archaea + Ar
Slide 38: Archaea Energy's Significant Upside Potential
Archaea Energy’s Significant Upside Potential • Apply a range of 28.0x – 32.0x to Archaea’s 2024E EBITDA • Multiple range reflects a discount to public comparables, underscoring upsides to transaction value • The resulting future enterprise value is discounted back 2 years to arrive at an implied en
Slide 39: Why Archaea Energy?
Why Archaea Energy? Strong Alignment Management + Rice Family + Saltonstall will own ~40% of company Compelling Valuation 2022E EBITDA: 8.2x vs. 31x for RNG peers; disruptors at ~80x in 2024E Motivated Leaders Proven landfill experts bringing new ideas to a fragmented industry Premiere Feedstock LFG
Slide 40: Appendix
Appendix 8
Slide 41: Independent Directors Bring a Wealth of Experience and Industry Knowledge
Independent Directors Bring a Wealth of Experience and Industry Knowledge KATE JACKSON JOE MALCHOW JIM TORGERSON • Independent director with operational, • Founding Partner at HNVR Technology • Former CEO and Director of Avangrid executive and board level experience for Investment Management, a Sili
Slide 42: Indicative Detailed Transaction Overview
Indicative Detailed Transaction Overview Transaction Overview Sources & Uses Pro Forma Ownership • 12/31/2020 valuation date Sources ($mm) Pro Forma Ownership(6) • Aria Purchase Price: $680mm RAC SPAC Cash in Trust(1) $238) Shareholder Shares (mm) % Ownership – $450mm cash New Corporate Debt(2) 220)
Slide 43: Pro Forma Financial Projections
Pro Forma Financial Projections ($ in mm, except where noted) 2021E 2022E 2023E 2024E 2025E RNG Production (MMBtu) 5,405,123 12,269,232 20,989,282 28,513,326 34,981,825 Electric Generation (MWh) 323,782 247,893 157,434 102,975 92,500 Revenue RNG $102 $220 $378 $538 $658 Electric 42 39 24 13 11 Other
Slide 44: Projected EBITDA Breakdown By Project Type
Projected EBITDA Breakdown By Project Type EBITDA Breakdown ($mm) Aria Base Projects (RNG & Electric) $395 Aria RNG Upgrade Projects Aria RNG Conversion Projects Additional RNG Development From Aria $327 Assai (Archaea PA Project) $131 Big Run (Archaea KY Project) Additional RNG Development From Arc
Slide 45: Pro Forma EBITDA Reconciliation
Pro Forma EBITDA Reconciliation FY2020 ($ 000s) Net Income $8,000 Depreciation, amortization and accretion 23,000 Change in value of loss on derivative (1,500) Interest expense & financing charges 10,000 Non-recurring sales costs 500 Equity in income (loss) of JV’s (10,000) Cash distribution from JV