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One of the biggest day-one pops for a SPAC merger announcement in weeks happened Thursday with news that a renewable gas (RNG) platform is being created.
The SPAC Deal: The company being formed through a SPAC merger will combine Rice Acquisition Corp (NYSE:RICE) with Aria Energy Operating, a portfolio company of Ares Management Corp (NYSE:ARES) and Archea Energy LLC, currently majority-owned by Rice Investment Group, which is an affiliate of the SPAC sponsor.
The new company will take the name of Archaea Energy and will have more than $350 million in cash on the balance sheet post-deal, which the company said will fund its pipeline of development projects.
The transaction is expected to close in the third quarter of 2021 and the combined company plans to be listed on the NYSE under the ticker symbol “LFG," stated the press release from Rice.
Current Rice Acquisition Corporation public shareholders will own 20% of the new company.
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The New Company: Archaea Energy will be a proven and profitable business and an industry leader in the RNG industry.
The company will capture and convert waste emissions from landfills and anaerobic digesters into low-carbon RNG and electricity.
U.S. landfills are expected to grow from 8 billion tons of waste in 2020 to 13 billion tons by the year 2050. This could increase landfill gas (LFG) emissions dramatically, according to the company. Capturing the emissions has the same environmental benefit as electrifying 75% of U.S. passenger vehicles, the company said.
The new combined company will have nine operating RNG projects and 13 operating electricity projects. BP plc (NYSE:BP) and Exelon Corporation (NASDAQ:EXC) are listed as partners to the company.
The combined company is expected to have better revenue growth and margins than its competitors, including Ameresco Inc (NYSE:AMRC), Clean Energy Fuels Corp (NASDAQ:CLNE) and Montauk Renewables Inc (NASDAQ:MNTK).
Growth Ahead: Archaea has the world’s largest RNG plant currently under construction, which could help its commercial strategy.
Food waste, wastewater, agriculture waste and landfill gas can be used to produce RNG, which is one of the lowest emission transportation fuels.
The company is also working on groundbreaking low-cost carbon sequestration and negative-carbon LFG to green hydrogen projects, according to the press release.
Landfill waste growth is expected to be a major growth catalyst for the company. The company also has lower costs, predictable revenues and can help the impacts of climate change.
Financials: Archaea is estimating its fiscal 2021 EBITDA of $65 million and $327 million in 2024.
The company sees 60% to 70% of its RNG volumes being signed under 10- to 20-year fixed-price arrangements with investment-grade buyers.
Revenue projections for the new company are $204 million in fiscal 2021 and $326 million in fiscal 2022.
RICE Price Action: Shares of Rice Acquisition Corporation are up 451.68% to $15.32 on market close Thursday.
(Photo by Marc-Olivier Jodoin on Unsplash)
