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What changed in Montauk Renewables, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Montauk Renewables, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+444 added−450 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-16)

Top changes in Montauk Renewables, Inc.'s 2023 10-K

444 paragraphs added · 450 removed · 331 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

107 edited+16 added−15 removed95 unchanged
Biggest changeRenewable Electricity Generation Site COD (1) Capacity (MW) Source Bowerman Irvine, CA 2016 23.6 Landfill Security Houston, TX 2003 3.4 Landfill AEL Sand Spring, OK 2013 3.2 Landfill Total Capacity (MW) 30.2 Renewable Natural Gas Site COD(1) Capacity (MMBtu/ day) (2) Source Rumpke Cincinnati, OH 1986 7,271 Landfill Atascocita Humble, TX 2002*/ 2018 5,570 Landfill McCarty Houston, TX 1986 4,415 Landfill Apex Amsterdam, OH 2018 2,673 Landfill Monroeville Monroeville, PA 2004 2,372 Landfill Valley Harrison City, PA 2004 2,372 Landfill Galveston Galveston, TX 2019 1,857 Landfill Raeger Johnston, PA 2006 1,857 Landfill Shade Cairnbrook, PA 2007 1,857 Landfill (3) Coastal Plains Alvin, TX 2020 1,775 Landfill Southern Davidsville, PA 2007 928 Landfill Pico Jerome, ID 2020 903 Livestock (Dairy) Total Capacity (MMBtu/day) 33,850 = Renewable Natural Gas Project = Renewable Electricity Project (1) “COD” refers to the commercial operation date of each site.
Biggest changeRenewable Natural Gas Site COD(1) Capacity (MMBtu/ day) (2) Source Rumpke Cincinnati, OH 1986 7,271 Landfill Atascocita Humble, TX 2002*/ 2018 5,570 Landfill McCarty Houston, TX 1986 4,415 Landfill Apex Amsterdam, OH 2018 2,673 Landfill Monroeville Monroeville, PA 2004 2,372 Landfill Valley Harrison City, PA 2004 2,372 Landfill Galveston Galveston, TX 2019 1,857 Landfill Renewable Electricity Generation Raeger Johnston, PA 2006 1,857 Landfill Site COD (1) Capacity (MW) Source Shade Cairnbrook, PA 2007 1,857 Landfill (3) Bowerman Irvine, CA 2016 23.6 Landfill Coastal Plains Alvin, TX 2020 1,775 Landfill Security Houston, TX (4) 2003 3.4 Landfill Southern Davidsville, PA 2007 928 Landfill AEL Sand Spring, OK 2013 3.2 Landfill Pico Jerome, ID 2020 903 Livestock (Dairy) Total Capacity (MW) 30.2 Total Capacity (MW) 33,850 = Renewable Natural Gas Project = Renewable Electricity Project (1) “COD” refers to the commercial operation date of each site.
In addition, given the historic shortage in supply of D3 RINs to meet blending requirements, the EPA allows obligated refiners to satisfy RFS compliance obligations for D3 RINs by either purchasing CWC plus D5 RINs or by purchasing D3 RINs. CWC prices were set annually and are typically published by the EPA each November.
In addition, given the historic shortage in supply of D3 RINs to meet blending requirements, the EPA allows obligated refiners to satisfy RFS compliance obligations for D3 RINs by either purchasing CWC plus D5 RINs or by purchasing D3 RINs. CWC prices were set annually and were typically published by the EPA each November.
We sell the RNG produced from our projects under a variety of short-term and medium-term agreements to counterparties, with tenures varying from three years to five years. Our contracts with counterparties are typically structured to be based on varying natural gas price indices for the RNG produced.
We sell the RNG produced from our projects under a variety of short-term and medium-term agreements to counterparties, with tenures generally varying from three years to five years. Our contracts with counterparties are typically structured to be based on varying natural gas price indices for the RNG produced.
The collection of the fuel supply is much easier at dairy farms than at landfills due to higher quality, more uniform feedstock, less volatility in inlet gas and biogas collection in a more controlled environment. During the second quarter of 2021, we amended our Pico feedstock agreement (“Pico Feedstock Amendment”).
The collection of the fuel supply is potentially easier at dairy farms than at landfills due to higher quality, more uniform feedstock, and potentially less volatility in inlet gas and biogas collection in a more controlled environment. During the second quarter of 2021, we amended our Pico feedstock agreement (“Pico Feedstock Amendment”).
These liabilities or compliance costs did not have a material effect on our capital expenditures or competitive position for fiscal 2022, nor do we expect them to have a material effect in the future. We believe we are in material compliance with all environmental regulations applicable to our operations. Inflation Reduction Act .
These liabilities or compliance costs did not have a material effect on our capital expenditures or competitive position for fiscal 2023, nor do we expect them to have a material effect in the future. We believe we are in material compliance with all environmental regulations applicable to our operations. Inflation Reduction Act .
Our employee population is comprised of a mix of field operations personnel and office-based professionals. As of December 31, 2022, none of our employees were represented by a collective bargaining unit or labor union. We consider our employee relations to be good across our organization.
Our employee population is comprised of a mix of field operations personnel and office-based professionals. As of December 31, 2023, none of our employees were represented by a collective bargaining unit or labor union. We consider our employee relations to be good across our organization.
Pursuant to the Initial Promissory Note, the Company advanced a cash loan of $5,000 to MNK for MNK to pay its dividends tax liability arising from the Reorganization Transactions under the South African Income Tax Act, 1962 (Act No. 58 of 1962), as amended (the “South African Income Tax Act”).
Pursuant to the Promissory Note, the Company initially advanced a cash loan of $5,000 to MNK for MNK to pay its dividends tax liability arising from the Reorganization Transactions under the South African Income Tax Act, 1962 (Act No. 58 of 1962), as amended (the “South African Income Tax Act”).
The amendment increased the amount of feedstock supplied to the facility for processing over a three-year period. As part of our overall capacity expansion at the Pico facility, in 2021 and 2022, we undertook significant efforts to improve the performance of the existing digestion process at our Pico facility.
The amendment increased the amount of feedstock supplied to the facility for processing over a four-year period. As part of our overall capacity expansion at the Pico facility, in 2021 and 2022, we undertook significant efforts to improve the performance of the existing digestion process at our Pico facility.
ITEM 1. BUSINESS. Unless the context requires otherwise, references to “Montauk,” the “Company,” “we,” “us” or “our” refer to Montauk Renewables, Inc. and its consolidated subsidiaries. Overview We are a renewable energy company specializing in the recovery and processing of biogas from landfills and other non-fossil fuel sources to beneficial use as a replacement to fossil fuels.
ITEM 1. BUSI NESS. Unless the context requires otherwise, references to “Montauk,” the “Company,” “we,” “us” or “our” refer to Montauk Renewables, Inc. and its consolidated subsidiaries. Overview We are a renewable energy company specializing in the recovery and processing of biogas from landfills and other non-fossil fuel sources to beneficial use as a replacement to fossil fuels.
Our Shade site is closed to accepting new waste, but is currently expected to continue to generate a commercial level of RNG for an additional ten years. Our operating RNG projects have an average expected remaining useful life of approximately 18 years.
Our Shade site is closed to accepting new waste, but is currently expected to continue to generate a commercial level of RNG for an additional ten years. Our operating RNG projects have an average expected remaining useful life of approximately 17 years.
As our biogas processing technology continues to improve and the required energy intensity of the RNG and Renewable Electricity production process is reduced, we expect that we will be able to enter new markets for our products. Optimize Existing Assets and Project Portfolio and Opportunistically Develop New Projects Expanding Operations at Existing Project Sites .
As our biogas processing technology continues to improve and the required energy intensity of the RNG and Renewable Electricity production process is reduced, we expect that we will be able to enter new markets for our products. - 5 - Table of Contents Optimize Existing Assets and Project Portfolio and Opportunistically Develop New Projects Expanding Operations at Existing Project Sites .
We also share a portion of our Environmental Attributes with certain pathway providers as consideration for the counterparty using our RNG as a transportation fuel. -2- Table of Contents Renewable Electricity Renewable electricity is generated using gas-fueled engines or turbine-driven electrical generators, which are designed to operate efficiently on medium-Btu gas.
We also share a portion of our Environmental Attributes with certain pathway providers as consideration for the counterparty using our RNG as a transportation fuel. Renewable Electricity Renewable electricity is generated using gas-fueled engines or turbine-driven electrical generators, which are designed to operate efficiently on medium-Btu gas.
We have demonstrated a track record of strategic flexibility across our 30-year history which has allowed us to pivot towards projects and markets that we believe deliver optimal returns and stockholder value in response to changes in market, regulatory and competitive pressures. -12- Table of Contents The biogas market is highly fragmented.
We have demonstrated a track record of strategic flexibility across our 30-year history which has allowed us to pivot towards projects and markets that we believe deliver optimal returns and stockholder value in response to changes in market, regulatory and competitive pressures. The biogas market is highly fragmented.
Many states allow utilities to comply with RPS through tradable RECs, which provide an additional revenue stream to RNG projects that produce electricity from biogas. -4- Table of Contents The value of a REC is dependent on each state’s renewable energy requirements as mandated by its RPS.
Many states allow utilities to comply with RPS through tradable RECs, which provide an additional revenue stream to RNG projects that produce electricity from biogas. The value of a REC is dependent on each state’s renewable energy requirements as mandated by its RPS.
Montauk also participates in industry trade groups, such as the RNG Coalition, to advocate policies and regulatory frameworks that support continued expansion of renewable energy in the United States. The operation of our business may expose us to certain liabilities and compliance costs related to environmental matters.
Montauk also participates in industry trade groups, such as the RNG Coalition, to advocate policies and regulatory frameworks that support continued expansion of renewable energy in the United States. - 11 - Table of Contents The operation of our business may expose us to certain liabilities and compliance costs related to environmental matters.
For information regarding revenues and other information regarding our results of operations for each of our last two financial years, please refer to our financial statements included in this report and within “Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report. Corporate Information Montauk Renewables, Inc. is incorporated in the State of Delaware.
For information regarding revenues and other information regarding our results of operations for each of our last two financial years, please refer to our financial statements included in this report and within “Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report. - 12 - Table of Contents Corporate Information Montauk Renewables, Inc. is incorporated in the State of Delaware.
The dairy began delivering the first and second increases in feedstock during the third quarter of 2022 and we have made two payments to the dairy as required in the Pico Feedstock Amendment. The improved efficiencies of our existing digestion process and the water management improvements have enabled us to -5- Table of Contents process the increased feedstock volumes.
The dairy began delivering the first and second increases in feedstock during the third quarter of 2022 and we have made two payments to the dairy as required in the Pico Feedstock Amendment. The improved efficiencies of our existing digestion process and the water management improvements have enabled us to process the increased feedstock volumes.
We are required to document the QF status of each of our facilities in applications or self-certifications filed with FERC, which typically require disclosure of upstream facility ownership, fuel and size characteristics, power sales, interconnection matters, and related technical disclosures.
We are required to document the QF status of each of our facilities in applications or - 10 - Table of Contents self-certifications filed with FERC, which typically require disclosure of upstream facility ownership, fuel and size characteristics, power sales, interconnection matters, and related technical disclosures.
During 2021, we entered into an agreement to sell a portion of our production as a renewable component of refinery fuel exports into the European Union’s Renewable Energy Directive from certain RNG production facilities that have achieved International Sustainability & Carbon Certification registration. This diversification strategy accounted for approximately 1.5% of the reduction in generation of D3 RINs in 2022.
During 2021, we entered into an agreement to sell a portion of our production as a renewable component of refinery fuel exports into the European Union’s Renewable Energy Directive from certain RNG production facilities that have achieved International Sustainability & Carbon Certification registration. This diversification strategy accounted for approximately 1.4% of the reduction in generation of D3 RINs in 2023.
However, -3- Table of Contents cellulosic biofuel production grew slower than expected and prompted the EPA to expand the definition of biofuels that could qualify for D3 RINs to include fuels from cellulosic biogas, including biogas from landfills, livestock farms, and WRRFs.
However, cellulosic biofuel production grew slower than expected and prompted the EPA to expand the definition of biofuels that could qualify for D3 RINs to include fuels from cellulosic biogas, including biogas from landfills, livestock farms, and WRRFs.
Similar to RINs, LCFS credits can be sold separately from the RNG fuel sold, allowing us to monetize LCFS credits for fuel produced and purchased outside of states that have LCFS programs. REC s. The primary Environmental Attributes derived from the production of electricity from renewable resources are RECs, which translate into additional revenues for units of Renewable Electricity produced.
Similar to RINs, LCFS credits can be sold separately from the RNG fuel sold, allowing us to monetize LCFS credits for fuel produced and purchased outside of states that have LCFS programs. - 3 - Table of Contents RECs The primary Environmental Attributes derived from the production of electricity from renewable resources are RECs, which translate into additional revenues for units of Renewable Electricity produced.
In 2022, this has allowed us to maintain average production availability of approximately 90% at our RNG projects and 85% at our Renewable Electricity projects. We treat our existing assets as an integrated portfolio rather than a collection of individual projects.
In 2023, this has allowed us to maintain average production availability of approximately 90% at our RNG projects and 96% at our Renewable Electricity projects. We treat our existing assets as an integrated portfolio rather than a collection of individual projects.
While our corporate entity is not an operating segment, we discretely disclose corporate entity revenues for purposes of -15- Table of Contents reconciliation of the Company’s consolidated financial statements.
While our corporate entity is not an operating segment, we discretely disclose corporate entity revenues for purposes of reconciliation of the Company’s consolidated financial statements.
In addition to revenues generated from our product sales, we also generate revenues by providing various value-added services to certain of our biogas site partners. In 2022 and 2021, our projects generated approximately 8.1% and 11.0%, respectively, of all D3 RINs in the United States.
In addition to revenues generated from our product sales, we also generate revenues by providing various value-added services to certain of our biogas site partners. In 2023 and 2022, our projects generated approximately 7.7% and 8.1%, respectively, of all D3 RINs in the United States.
Several previous acquisitions are gas limited and therefore do not operate at their design capacity. Our larger projects have expansions planned or are being evaluated for future expansions dependent on the availability of excess biogas feedstock.
Several of our projects have reserve capacity when comparing design capacity to available biogas feedstock. Several previous acquisitions are gas limited and therefore do not operate at their design capacity. Our larger projects have expansions planned or are being evaluated for future expansions dependent on the availability of excess biogas feedstock.
We have relocated certain assets from Magnolia, NC to Turkey, NC and have recorded an impairment of approximately $1,393 related to assets which will no longer be used in the production process. However, we have not completed our improvements and have not yet reached commercial operations at the Turkey location.
We have relocated certain assets from Magnolia, NC to Turkey, NC and have recorded an impairment of approximately $1,393 in 2022 related to assets which will no longer be used in the production process. We continue our capital development improvements and have not yet reached commercial operations at the Turkey location.
The improvement project has impacted the timeline for modeling Pico’s initial CI Score pathway model and subsequent auditing approval by CARB. During the fourth quarter of 2022, we learned through CARB that our dairy project CI Score Pathway will be subject to a public comment period.
The improvement project impacted the timeline for modeling Pico’s initial CI Score pathway model and subsequent auditing approval by CARB. During the fourth quarter of 2022, we learned through CARB that our dairy project CI Score Pathway would be - 4 - Table of Contents subject to a public comment period.
Our recordable cases and total recordable incident rate (“TRIR”), excluding COVID-19 related incidents, was 3.00 in 2022, above the 2021 national average of 2.7 TRIR for all industries. We continue to focus on practices and measures to lower our TRIR.
Our recordable cases and total recordable incident rate (“TRIR”), excluding COVID-19 related incidents, was 0.00 and 3.00 in 2023 and 2022, respectively. The 2022 TRIR national average was 2.7 for all industries. We continue to focus on practices and measures to lower our TRIR.
The Inflation Reduction Act will be administered by multiple federal agencies including EPA, U.S. Department of Energy and the Internal Revenue Service of the U.S. Department of the -14- Table of Contents Treasury. The goals of the Inflation Reduction Act include incentivizing the development and production of renewable energy.
The Inflation Reduction Act (IRA or the Act) will be administered by multiple federal agencies including EPA, U.S. Department of Energy and the Internal Revenue Service of the U.S. Department of the Treasury. The goals of the IRA include incentivizing the development and production of renewable energy.
These include competitive salary structures, bonus programs and competitive benefits, as well as paid time off, sick leave, disability coverage, group term life insurance, and a retirement savings program. We also offer our employees tuition reimbursement for job-related education and training opportunities.
These include competitive salary structures, bonus programs and competitive benefits, as well as paid time off, sick leave, disability coverage, group term life insurance, and a retirement savings program. We also offer our employees tuition reimbursement for job-related education and training opportunities. We have also begun leadership and developmental training for our director and manager level employees.
Our Renewable Electricity projects utilize reciprocating engine generator sets to generate electricity at landfills. -10- Table of Contents Renewable Electricity Projects Site Location Capacity(1) Bowerman Power Irvine, CA 23.6 MW Security Cleveland, TX 3.4 MW Tulsa/AEL Sand Springs, OK 3.2 MW Pico(2) Jerome, ID 2.3 MW Total 32.5 MW (1) Assumes inlet methane content of 56% and process efficiency of 91%, (2) Beginning in October 2020, we began reporting the result of operations of Pico within RNG, but Pico continues to generate Renewable Electricity.
Renewable Electricity Projects Site Location Capacity(1) Bowerman Power Irvine, CA 23.6 MW Security Cleveland, TX 3.4 MW Tulsa/AEL (3) Sand Springs, OK 3.2 MW Pico(2) Jerome, ID 2.3 MW Total 32.5 MW (1) Assumes inlet methane content of 56% and process efficiency of 91%, (2) Beginning in October 2020, we began reporting the result of operations of Pico within RNG, but Pico continues to generate Renewable Electricity.
We cannot speculate on exactly how the Inflation Reduction Act will be implemented; however, the Act does contain numerus incentives for the production of clean energy which may impact our products. Employees and Human Capital Resources Employee Profile We employed 137 people on December 31, 2022, located in California, Idaho, Ohio, Oklahoma, Pennsylvania, North Carolina and Texas.
We cannot speculate on exactly how the IRA will be implemented; however, the Act does contain numerous incentives for the production of clean energy which may impact our products. Employees and Human Capital Resources Employee Profile We employed 151 people on December 31, 2023, located in California, Idaho, Ohio, Oklahoma, Pennsylvania, North Carolina and Texas.
This significantly increased the quantity of D3 RINs produced, with production increasing to approximately 33 million net RINs in 2014 and approximately 660 million net RINs in 2022.
This significantly increased the quantity of D3 RINs produced, with production increasing to approximately 33 million net RINs in 2014 and approximately 704 million net RINs in 2023.
We believe continued industry fragmentation presents an opportunity for further industry consolidation. We are well-positioned to take advantage of this consolidation opportunity because of our scale, operational and managerial capabilities, and execution track record in integrating acquisitions. Over the last ten years, we have acquired 13 projects and members of our current management team have led all of those acquisitions.
We are well-positioned to take advantage of this consolidation opportunity because of our scale, operational and managerial capabilities, and execution track record in integrating acquisitions. Over the last ten years, we have acquired 13 projects and members of our current management team have led all of those acquisitions.
For the sale of Renewable Electricity and RECs, the City of Anaheim represented approximately 7.6% of our operating revenues in 2022. These sales occurred under a PPA between us and the City of Anaheim, in which electricity and RECs are sold at fixed prices.
For the sale of Renewable Electricity and RECs, the City of Anaheim represented approximately 9.5% of our operating revenues in 2023. These sales occurred under a PPA between us and the City of Anaheim, in which electricity and RECs are sold at fixed prices.
We are also working on other projects which will repurpose equipment from existing biogas facilities for use at new project sites. The below graphic does not include the Montauk Ag project, which is currently under development.
We are currently in the process of expanding two RNG project from LFG. We are also working on other projects which will repurpose equipment from existing biogas facilities for use at new project sites. The below graphic does not include the Montauk Ag project, which is currently under development.
We routinely test the RNG produced at our facilities in order to ensure compliance with applicable pipeline gas quality standards. We monitor regulatory trends and developments in the U.S. regarding the regulation of greenhouse gas emissions. We are aware the U.S.
We routinely test the RNG produced at our facilities in order to ensure compliance with applicable pipeline gas quality standards. We monitor regulatory trends and developments in the U.S. regarding the regulation of greenhouse gas emissions. We are aware the EPA proposed the regulation of methane emissions, a greenhouse gas, from oil and gas facilities in November 2021.
Accordingly, we requested that our Turkey location be approved to participate in the Piedmont Natural Gas Renewable Gas Pilot Program which is a step towards obtaining the New Renewable Energy Facility (“NREF”) designation under the North Carolina Utilities Commission.
The Turkey location was approved to participate in the Piedmont Natural Gas Renewable Gas Pilot Program which is a step towards obtaining the New Renewable Energy Facility (“NREF”) designation under the North Carolina Utilities Commission.
Fuel that is eligible for RINs can also receive CA LCFS credits. As a result, CA LCFS credits represent a revenue stream incremental to the value RNG producers receive for RINs. For livestock digester RNG projects, CA LCFS credits are a substantial revenue driver.
As a result, CA LCFS credits represent a revenue stream incremental to the value RNG producers receive for RINs. For livestock digester RNG projects, CA LCFS credits are a substantial revenue driver.
We began releasing gas from storage during the third quarter of 2022 and recognized revenues from a portion of the RINs generated and currently expect to complete storage release during the third quarter of 2023. We committed RINs and recognized revenues from RINs generated in the fourth quarter of 2022.
We began releasing gas from storage during the third quarter of 2022 and recognized revenues from a portion of the RINs generated and completed storage release during the third quarter of 2022. We committed RINs and recognized revenues from RINs generated in the fourth quarter of 2022.
Competition There are several other companies operating in the renewable energy and waste-to-energy space, ranging from other project developers to service or equipment providers. Our primary competition is from other companies or solutions for access to biogas from waste.
We anticipate having this system migration completed in 2024. Competition There are several other companies operating in the renewable energy and waste-to-energy space, ranging from other project developers to service or equipment providers. Our primary competition is from other companies or solutions for access to biogas from waste.
To that end, we actively identify and evaluate opportunities to acquire entities that will further our vertically-integrated services. -8- Table of Contents Our Current Operating Portfolio We currently own and operate 15 projects, 12 of which are RNG projects and three of which are Renewable Electricity projects. We are currently in the process of expanding two RNG project from LFG.
To that end, we actively identify and evaluate opportunities to acquire entities that will further our vertically-integrated services. - 6 - Table of Contents Our Current Operating Portfolio We currently own and operate 15 projects, 12 of which are RNG projects and three of which are Renewable Electricity projects.
Oregon’s Clean Fuels Program, enacted in 2009 and implemented in 2016, operates using a credit system similar to the CA LCFS program. Washington’s Clean Fuel Standard was passed in 2021 and will be implemented in 2023 utilizing a similar credit system as Oregon and California.
Oregon’s Clean Fuels Program, enacted in 2009 and implemented in 2016, operates using a credit system similar to the CA LCFS program. Washington’s Clean Fuel Standard was passed in 2021 and implemented in 2023 utilizing a similar credit system as Oregon and California. New Mexico’s Clean Fuel Standard was passed in 2024 with plans to finalize implementation in 2026.
Ciroli was the North American Counsel and HR Manager for the North American subsidiaries of FAAC Group, a company that designs, builds and markets reliable solutions for pedestrian and vehicle needs, representing all the entities in their American and Canadian portfolio. From 2014 to July 2016, Mr.
Ciroli was the North American Counsel and HR Manager for the North American subsidiaries of FAAC Group, a company that designs solutions for pedestrian and vehicle needs, representing the entities in their American and Canadian portfolio. From 2014 to July 2016, Mr. Ciroli was a Senior Litigation Counsel with the Housing Authority of the City of Pittsburgh. Mr.
We completed the design of the digestion capacity expansion project in the third quarter of 2022 and have begun incurring capital expenditures related to the construction of the project. We currently expect the dairy to begin delivering the final increase in feedstock volumes during 2024.
We completed the design of the digestion capacity expansion project in the third quarter of 2022, commenced construction of the digestion expansion, and expect the project to be completed in 2024. We currently expect the dairy to begin delivering the final increase in feedstock volumes during 2025.
Foster Company, a manufacturer and distributor of products and provider of service for transportation and energy infrastructure (“ L.B. Foster ”), from July 2011 to March 2018. Prior to L.B. Foster, Mr. Van Asdalan held senior associate positions at PricewaterhouseCoopers LLP and Sisterson & Co LLP, both accounting firms.
Van Asdalan served as a lines of business controller and manager of external reporting at L.B. Foster Company, a manufacturer, distributor and service provider for transportation and energy infrastructure, from July 2011 to March 2018. Prior to L.B. Foster, Mr. Van Asdalan held senior associate accounting positions at PricewaterhouseCoopers LLP and Sisterson & Co LLP.
The Company’s common stock was also secondarily listed on the Johannesburg Stock Exchange under the trading symbol “MKR.” On January 26, 2021, the Company entered into a Loan Agreement and Secured Promissory Note (the “Initial Promissory Note”) with MNK.
The Company’s common stock was also secondarily listed on the Johannesburg Stock Exchange under the trading symbol “MKR.” On January 26, 2021, the Company entered into a Loan Agreement and Secured Promissory Note (as amended, the “ Promissory Note”) with MNK. MNK is currently an affiliate of the Company and certain of the Company’s directors are also directors of MNK.
He also held the position of Site Manager for five MEH operating sites in Pennsylvania from April 2015 to April 2016 and two MEH operating sites in Pennsylvania from June 2010 to March 2015. Prior to joining MEH, he was a facility manager for SONY Electronics Inc. at the world’s first vertically integrated television manufacturing facilities. Mr.
He was a Site Manager for five Montauk Energy Holdings operating sites from April 2015 to April 2016 and two Montauk Energy Holdings operating sites from June 2010 to March 2015. Prior to joining Montauk, Mr. Shaw was a facility manager for SONY Electronics at the world’s first vertically integrated television manufacturing facilities. Mr.
He was also a professor for Concord Law School, now Purdue Global, in the areas of Contracts, Constitutional Law, Torts and Evidence and is a member of the Pennsylvania State Bar and the bar of the U.S. Supreme Court. Sharon Frank . Ms.
He was also a professor for Concord Law School, now Purdue Global, in the areas of Contracts, Constitutional Law, Torts and Evidence and is a member of the Pennsylvania State Bar and the bar of the U.S. Supreme Court. Sharon Frank. Ms. Frank has served as our Vice President of Environmental, Health and Safety since October 2021.
In 2022, we converted 100% of the monetization of our Renewable Electricity production and Environmental Attributes under fixed-price agreements. For our electricity sales, all of our customers with whom we have off-take agreements are investment-grade entities with low credit risk. No other single customer represented more than 10% of our total 2022 operating revenues.
In 2023, we converted 100% of the monetization of our Renewable Electricity production and Environmental Attributes under fixed-price agreements. For our electricity sales, all of our customers with whom we have off-take agreements are investment-grade entities with low credit risk.
RNG Projects We currently own and operate 12 RNG projects across four states: Ohio (two), Pennsylvania (five), Texas (four) and Idaho (one) which, in the aggregate, have a total design capacity of approximately 33,850 MMBtu/day. This does not include the Montauk Ag Renewables project in North Carolina, which is not yet operational.
RNG Projects We currently own and operate 12 RNG projects across four states: Ohio (two), Pennsylvania (five), Texas (four) and Idaho (one) which, in the aggregate, have a total design capacity of approximately 33,850 MMBtu/day.
We attend industry conferences and maintain an ongoing dialogue with key equipment providers to ensure we stay informed of the latest technology that could be deployed at our current and future facilities. Stated capacity reflects the design capacity of each facility. Several of our projects have reserve capacity when comparing design capacity to available biogas feedstock.
We are capable of working with virtually all available biogas processing technologies at our sites. We attend industry conferences and maintain an ongoing dialogue with key equipment providers to ensure we stay informed of the latest technology that could be deployed at our current and future facilities. Stated capacity reflects the design capacity of each facility.
We will continue to monitor greenhouse gas regulatory initiatives in the U.S. and assess their potential relevance to our business and operations. We routinely conduct compliance audits on our projects to proactively identify and correct potential compliance deficiencies or risks. Additionally, we closely monitor emerging regulatory developments that may impact our operations or business strategy.
We routinely conduct compliance audits on our projects to proactively identify and correct potential compliance deficiencies or risks. Additionally, we closely monitor emerging regulatory developments that may impact our operations or business strategy.
The terms of these contracts range from 4 to 21 years, excluding renewal periods, with a weighted average remaining tenure of 13 years, based on 2022 electricity production.
The terms of these contracts range up to 20 years, excluding renewal periods, with a weighted average remaining tenure of 14 years, based on 2023 electricity production.
Ciroli was a Senior Litigation Counsel with the Housing Authority of the City of Pittsburgh. Mr. Ciroli has over 23 years of experience representing and advising domestic and international corporations and government entities in the areas of contracts, mergers and acquisitions, litigation, employment and governmental procurement and regulatory affairs.
Ciroli has over 25 years of experience representing and advising domestic and international corporations and government entities in the areas of contracts, mergers and acquisitions, litigation, employment and governmental procurement and regulatory affairs.
We believe our demonstrated versatility to operate processing facilities using multiple fuel supply sources will give us a competitive advantage in these markets relative to other new entrants who have only demonstrated capabilities with one fuel supply source.
As with LFG and dairy farms, biogas from both swine farms and WRRFs qualify for D3 RINs under the RFS program. We believe our demonstrated versatility to operate processing facilities using multiple fuel supply sources will give us a competitive advantage in these markets relative to other new entrants who have only demonstrated capabilities with one fuel supply source.
We have made substantial investments in a centralized Enterprise Resource Planning (“ ERP ”) system (Microsoft Dynamics) to better integrate operations across our projects. This system centralizes maintenance operations across all of our projects. Our proactive approach to maintenance, corrective maintenance, root cause analysis, failure reporting, project management, and budgeting are all completed using the ERP system.
This system centralizes maintenance operations across all of our projects. Our proactive approach to maintenance, corrective maintenance, root cause analysis, failure reporting, project management, and budgeting are all completed using the ERP system. We are currently in the process of migrating our ERP to the latest version of the Microsoft Dynamics system.
The EPA calculates a blending standard for each year based on estimates of gasoline usage from the Department of Energy’s Energy Information Agency. Separate quotas and blending requirements are determined for cellulosic biofuels, BBD, advanced biofuels and total renewable fuel. Further, we are required to register each RNG project with the EPA and relevant state regulatory agencies.
Separate quotas and blending requirements are determined for cellulosic biofuels, BBD, advanced biofuels and total renewable fuel. Further, we are required to register each RNG project with the EPA and relevant state regulatory agencies.
In a December 1, 2022 proposed rule, EPA indicated that it will not be utilizing its cellulosic waiver authority to reduce cellulosic biofuel volume for 2023-2025, thus CWCs will not be available unless actual production is lower than the RVO. The EPA will have discretion to utilize the CWC.
On July 12, 2023, the EPA issued final rules in the Federal Register which indicated that it will not be utilizing its cellulosic waiver authority to reduce cellulosic biofuel volume for 2023-2025, thus CWCs will not be available unless actual production is lower than the RVO. The EPA has indicated it will not utilize the CWC.
Renewable Electricity Projects We currently own and operate the following three Renewable Electricity projects in California, Oklahoma, and Texas which, in the aggregate, have a total design capacity of approximately 30.2 MW. During 2022, our Renewable Electricity projects collectively produced 190,000 MWh.
Renewable Electricity Projects We currently own and operate the following three Renewable Electricity projects in California, Oklahoma, and Texas which, in the aggregate, have a total design capacity of approximately 30.2 MW. Our Renewable Electricity projects utilize reciprocating engine generator sets to generate electricity at landfills.
Environmental Protection Agency proposed the regulation of methane emissions, a greenhouse gas, from oil and gas facilities in November 2021. We do not anticipate this proposed regulation will apply to our operations and could, combined with another public policy and private sector initiatives, increase interest in developing more renewable energy projects in the U.S.
We do not anticipate this proposed regulation will apply to our operations and could, combined with another public policy and private sector initiatives, increase interest in developing more renewable energy projects in the U.S. We will continue to monitor greenhouse gas regulatory initiatives in the U.S. and assess their potential relevance to our business and operations.
We established our operating portfolio of 12 RNG and three Renewable Electricity projects through self-development, partnerships, and acquisitions that span six states and have grown our revenues from $33.8 million in 2014 to $205.6 million in 2022.
We established our operating portfolio of 12 RNG and three Renewable Electricity projects through self-development, partnerships, and acquisitions that span six states.
We typically secure our biogas feedstock through long-term fuel supply agreements and property lease agreements with biogas site hosts. Once we secure long-term fuel supply rights, we design, build, own, and operate facilities that convert the biogas into RNG or use the processed biogas to produce Renewable Electricity.
Once we secure long-term fuel supply rights, we design, build, own, and operate facilities that convert the biogas into RNG or use the processed biogas to produce Renewable Electricity. Once collected, biogas can be processed into pipeline-quality RNG or converted into electricity.
We enter into written ordinary-course agreements with suppliers to obtain industry-standard equipment for use in our operations. The contracts generally do not include any intellectual property rights other than for the intended use of the equipment. Membrane separation equipment is primarily provided by UOP and Air Liquide. PSA equipment is primarily provided by Xebec, Guild, Air Products, and BioFerm.
The contracts generally do not include any intellectual property rights other than for the intended use of the equipment. Membrane separation equipment is primarily provided by UOP and Air Liquide. PSA equipment is primarily provided by Xebec, Guild, Air Products, and BioFerm. Solvent scrubbing is primarily provided by Selexol.
Government Regulation Our projects are subject to a range of federal, state and local environmental, health and safety laws and regulations, depending on the nature and configuration of the project, as well as where the project is located.
Finally, Republic has entered into a joint venture with bp (formerly through Archaea Energy) to develop certain of its LFG locations. Government Regulation Our projects are subject to a range of federal, state and local environmental, health and safety laws and regulations, depending on the nature and configuration of the project, as well as where the project is located.
Due to this public comment period, we now currently expect to receive approval of our score during the first quarter of 2023. This public comment period follows the completion of the validation of the CI Score, which CARB finalized in the first quarter of 2023. We began to release gas from storage in the third quarter of 2022.
Due to this public comment period, we received approval of our score during the first quarter of 2023. This public comment period followed the completion of the validation of the CI Score, which CARB finalized in the first quarter of 2023.
He has also served as the Vice President of Operations of MNK since September 2019. He previously served as North Region Manager of MEH from May 2016 to September 2019.
Shaw has served as our Vice President of Operations since January 2021 and has served as Vice President of Operations of Montauk Energy Holdings since September 2019. He previously served as North Region Manager of Montauk Energy Holdings from May 2016 to September 2019.
RNG from LFG and livestock digester biogas that are used as a transportation fuel both qualify for CA LCFS credits. The number of CA LCFS credits for RNG from livestock digesters is significantly higher than the number of CA LCFS credits for RNG from landfills, due to the relative CI scores of the two fuels.
The number of CA LCFS credits for RNG from livestock digesters is significantly higher than the number of CA LCFS credits for RNG from landfills, due to the relative CI scores of the two fuels. Fuel that is eligible for RINs can also receive CA LCFS credits.
Once collected, biogas can be processed into pipeline-quality RNG or converted into electricity. The conversion facility is typically located on landfill property away from the active fill operations where additional waste is added to the landfill site.
The conversion facility is typically located on landfill property away from the active fill operations where additional waste is added to the landfill site.
A portion of the RNG volume we produce is sold under bundled fixed-price arrangements for the RNG and Environmental Attributes, some of which included a sharing arrangement where we benefit from prices above certain thresholds.
Through contractual arrangements with our site hosts and counterparties, we typically share pricing and production risks while retaining our ability to benefit from potential upside. A portion of the RNG volume we produce is sold under bundled fixed-price arrangements for the RNG and Environmental Attributes, some of which include a sharing arrangement where we benefit from prices above certain thresholds.
Additionally, roughly 23% of WRRFs have biogas processing facilities, however, most process biogas for electricity production creating additional opportunities for acquisition and conversion to RNG facilities. As with LFG and dairy farms, biogas from both swine farms and WRRFs qualify for D3 RINs under the RFS program.
Like dairy farms, biogas production from swine farms is a nascent biogas industry, with less than 1% of swine farms with biogas processing capabilities. Additionally, roughly 23% of WRRFs have biogas processing facilities, however, most process biogas for electricity production creating additional opportunities for acquisition and conversion to RNG facilities.
We regularly analyze potential new projects that are at various stages of negotiation, engineering design and financial review. The potential projects typically include a mix of new project sites and strategic acquisitions. Currently, no new potential projects are subject to definitive agreements and each potential opportunity is subject to competitive market conditions . Developing LFG to Renewable Electricity Projects.
We are currently developing two project expansion opportunities at existing project sites and one project at a new project site. We regularly analyze potential new projects that are at various stages of negotiation, engineering design and financial review. The potential projects typically include a mix of new project sites and strategic acquisitions.
Name Age Position Sean F. McClain 48 President and Chief Executive Officer, Director Kevin A. Van Asdalan 45 Chief Financial Officer and Treasurer James A. Shaw 51 Vice President of Operations Scott Hill 56 Vice President of Business Development John Ciroli 52 Chief Legal Officer and Secretary Sharon Frank 66 Vice President of Environmental, Health and Safety Sean F.
Van Asdalan 46 Chief Financial Officer and Treasurer James A. Shaw 52 Vice President of Operations Michael Barsch 50 Vice President of Business Development John Ciroli 53 Chief Legal Officer and Secretary Sharon Frank 67 Vice President of Environmental, Health and Safety Sean F. McClain . Mr.
Fuel Supply Agreement Summary RNG Projects Fuel Supply Agreement Expiration Dates Current Sites as of December 31, 2022 % of 2022 Total RNG Production Within 0-5 years 3 6.6 % Between 6-15 years 1 15.2 % Greater than 15 years 8 78.2 % Renewable Electricity Projects Fuel Supply Agreement Expiration Dates Current Sites as of December 31, 2022 % of 2022 Total Renewable Electricity Production Within 0-5 years 1 5.5 % Between 6-15 years 0 0 % Greater than 15 years(1) 2 94.5 % (1) Our Pico project continues to generate both RNG and Renewable Electricity and is accounted for above in the RNG Projects summary. -11- Table of Contents Customers Our customers for RNG and RINs typically include large, long-term owner-operators of landfills and livestock farms, local utilities, and large refiners in the natural gas and refining sectors.
Fuel Supply Agreement Summary RNG Projects Fuel Supply Agreement Expiration Dates Current Sites as of December 31, 2023 % of 2023 Total RNG Production Within 0-5 years 3 6.8 % Between 6-15 years 2 24.4 % Greater than 15 years 7 68.8 % Renewable Electricity Projects Fuel Supply Agreement Expiration Dates Current Sites as of December 31, 2023 % of 2023 Total Renewable Electricity Production Within 0-5 years 1 7.8 % Between 6-15 years 0 0 % Greater than 15 years(1) 2 88.9 % (1) Our Pico project continues to generate both RNG and Renewable Electricity and is accounted for above in the RNG Projects summary.
We sell RINs to numerous RIN off-take parties and our largest RIN off-taker as a percentage of revenue can vary year to year given the short-term nature of these contracts.
Valero, GE Warren, and HF Sinclair represented approximately 31.6%, 16.8% and 16.8%, respectively, of our operating revenues in 2023 from the sale of Environmental Attributes. We sell RINs to numerous RIN off-take parties and our largest RIN off-taker as a percentage of revenue can vary year to year given the short-term nature of these contracts.
The EPA administers the RFS program with volume requirements -13- Table of Contents for several categories of renewable fuels. The EPA’s RFS regulations establish rules for fuel supplied and administer the RIN system for compliance, trading credits and rules for waivers.
The EPA administers the RFS program with volume requirements for several categories of renewable fuels. The EPA’s RFS regulations establish rules for fuel supplied and administer the RIN system for compliance, trading credits and rules for waivers. The EPA calculates a blending standard for each year based on estimates of gasoline usage from the Department of Energy’s Energy Information Agency.
McClain . Mr. McClain has served as our President and Chief Executive Officer and a member of our Board of Directors (the “ Board ”) since January 4, 2021. He previously served as a member of the Board of Directors of MNK from August 2014 until March 2023 and as its President and Chief Executive Officer since September 2019. Mr.
McClain has served as our President and Chief Executive Officer and a member of our Board of Directors since January 2021. Prior to the Reorganization Transactions, Mr. McClain served as President and Chief Executive Officer of Montauk Holdings USA and as a member of its Board of Directors. From April 2011 until September 2019, Mr.
Shaw has more than 25 years of experience in facilities operations and management. Scott Hill . Mr. Hill has served as our Vice President of Business Development since January 4, 2021. He has also served as Vice President of Business Development of MNK since December 2020. Mr.
Shaw has more than 25 years of experience in facilities operations and management. Michael J. Barsch. Mr. Barsch has served as our Vice President of Business Development since September 2023. He previously served as Director of Projects from January to September 2023. From February 2021 to January 2023, Mr.
This program encourages the production of low-carbon fuels by setting annual CI standards, which are intended to reduce GHG emissions from the state’s transportation sector. One of the key aspects of the program is that it encourages the use of low-carbon transportation fuel, such as CNG, in vehicles instead of gasoline.
One of the key aspects of the program is that it encourages the use of low-carbon transportation fuel, such as CNG, in vehicles instead of gasoline. This program further encourages use of renewable fuels in vehicles over CNG from fossil fuels.
We apply a financially disciplined model toward new project development that considers the relative risk of a given project and associated feedstock costs, offtake -7- Table of Contents contracts and any other related Environmental Attributes that can be monetized. We are currently evaluating two project expansion opportunities at existing project sites.
We will continue to explore the feasibility of other opportunities across our remaining Renewable Electricity portfolio. Opportunistic Development of New RNG Projects . We apply a financially disciplined model toward new project development that considers the relative risk of a given project and associated feedstock costs, offtake contracts and any other related Environmental Attributes that can be monetized.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUnder the Amended Credit Agreement, we are required to maintain: • a fixed charge coverage ratio of at least 1.20 to 1.00; and • a total leverage ratio of not more than 3.50 to 1.00 as of the end of any fiscal quarter from December 31, 2021 through June 29, 2023, 3.25 to 1.00 as of the end of any fiscal quarter from June 30, 2023 through June 29, 2024, and 3.00 to 1.00 after June 30, 2024. -37- Table of Contents The Amended Credit Agreement is subject to customary events of default, and contemplates that we would be in default if, for any fiscal quarter (x) the average monthly D3 RIN price is less than $0.80 per RIN and (y) the consolidated EBITDA for such quarter is less than $6.0 million.
Biggest changeUnder the Amended Credit Agreement, we are required to maintain: • a fixed charge coverage ratio of at least 1.20 to 1.00; and • a total leverage ratio of not more than 3.25 to 1.00 as of the end of any fiscal quarter from June 30, 2023 through June 29, 2024 and 3.00 to 1.00 after June 30, 2024.
While significant to the development associated with our emerging North Carolina Montauk Ag Renewables business, we do not currently consider the patented technology material to the total business.
While significant to the development associated with our emerging North Carolina Montauk Ag Renewables business, we do not currently consider patented technology material to the total business.
If our RNG projects do not generate the amount of RINs sold under such forward contracts we may be required to make up the shortfall of RINs under such forward contracts through purchases on the open market or of the payment of liquidated damages.
If our RNG projects do not generate the amount of RINs sold under such forward contracts we may be required to make up the shortfall of RINs under such forward contracts through purchases on the open market or the payment of liquidated damages.
In addition, several other factors related to the development and operation of individual renewable energy projects could adversely affect our business, including: • regulatory changes that affect the demand for or supply of Environmental Attributes and the prices thereof, which could have a significant effect on the financial performance of our projects and the number of potential projects with attractive economics; • changes in energy commodity prices, such as natural gas and wholesale electricity prices, which could have a significant effect on our revenues; • changes in pipeline gas quality standards or other regulatory changes that may limit our ability to transport RNG on pipelines for delivery to third parties or increase the costs of processing RNG to allow for such deliveries; • changes in the broader waste collection industry, including changes affecting the waste collection and biogas potential of the landfill industry, which could impede the LFG resource that we currently target for our projects; • substantial construction risks, including the risk of delay, that may arise due to forces outside of our control, including those related to engineering and environmental problems, as a result of inclement weather or labor disruptions; • operating risks and the effect of disruptions on our business, weather conditions, catastrophic events such as fires, explosions, earthquakes, droughts and acts of terrorism, and other force majeure events on us, our customers, suppliers, distributors and subcontractors; • the ability to obtain financing for a project on acceptable terms or at all and the need for substantially more capital than initially budgeted to complete projects and exposure to liabilities as a result of unforeseen environmental, construction, technological or other complications; -22- Table of Contents • entering into markets where we have less experience, such as our projects for biogas recovery at livestock farms; • the need for substantially more capital to complete projects than initially budgeted and exposure to liabilities as a result of unforeseen environmental, construction, technological or other complications; • failures or delays in obtaining desired or necessary land rights, including ownership, leases, easements, zoning rights and building permits; • a decrease in the availability, pricing and timeliness of delivery of raw materials and components, necessary for the projects to function; • obtaining and keeping in good standing permits, authorizations and consents from local city, county, state and U.S. federal governments as well as local and U.S. federal governmental organizations; • penalties, including potential termination, under short-term and long-term contracts for failing to deliver RNG in accordance with our contractual obligations; • unknown regulatory changes RNG which may increase the transportation cost for delivering under contracts in place; • the consent and authorization of local utilities or other energy development off-takers to ensure successful interconnection to energy grids to enable power sales; and • difficulties in identifying, obtaining and permitting suitable sites for new projects.
In addition, several other factors related to the development and operation of individual renewable energy projects could adversely affect our business, including: • regulatory changes that affect the demand for or supply of Environmental Attributes and the prices thereof, which could have a significant effect on the financial performance of our projects and the number of potential projects with attractive economics; • changes in energy commodity prices, such as natural gas and wholesale electricity prices, which could have a significant effect on our revenues; • changes in pipeline gas quality standards or other regulatory changes that may limit our ability to transport RNG on pipelines for delivery to third parties or increase the costs of processing RNG to allow for such deliveries; • changes in the broader waste collection industry, including changes affecting the waste collection and biogas potential of the landfill industry, which could impede the LFG resource that we currently target for our projects; • substantial construction risks, including the risk of delay, that may arise due to forces outside of our control, including those related to engineering and environmental problems, as a result of inclement weather or labor disruptions; • operating risks and the effect of disruptions on our business, weather conditions, catastrophic events such as fires, explosions, earthquakes, droughts and acts of terrorism, and other force majeure events on us, our customers, suppliers, distributors and subcontractors; • the ability to obtain financing for a project on acceptable terms or at all and the need for substantially more capital than initially budgeted to complete projects and exposure to liabilities as a result of unforeseen environmental, construction, technological or other complications; • - 17 - Table of Contents • entering into markets where we have less experience, such as our projects for biogas recovery at livestock farms; • exposure to liabilities as a result of unforeseen environmental, construction, technological or other complications; • failures or delays in obtaining desired or necessary land rights, including ownership, leases, easements, zoning rights and building permits; • a decrease in the availability, pricing and timeliness of delivery of raw materials and components, necessary for the projects to function; • obtaining and keeping in good standing permits, authorizations and consents from local city, county, state and U.S. federal governments as well as local and U.S. federal governmental organizations; • penalties, including potential termination, under short-term and long-term contracts for failing to deliver RNG in accordance with our contractual obligations; • unknown regulatory changes RNG which may increase the transportation cost for delivering under contracts in place; • the consent and authorization of local utilities or other energy development off-takers to ensure successful interconnection to energy grids to enable power sales; and • difficulties in identifying, obtaining and permitting suitable sites for new projects.
Further, if we are successful in consummating acquisitions, those acquisitions could subject us to a number of risks, including: • the purchase prices we pay could significantly deplete our cash reserves or result in dilution to our existing stockholders; • we may find that the acquired companies or assets do not improve our customer offerings or market position as planned; • we may have difficulty integrating the operations and personnel of the acquired companies; • key personnel and customers of the acquired companies may terminate their relationships with the acquired companies as a result of or following the acquisition; • we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting; -26- Table of Contents • we may experience delays in construction and development or regulatory approvals impacting, among other projects, the Pico, Apex or Montauk Ag development cycle; • we may incur additional costs and expenses related to inflation and complying with additional laws, rules or regulations in new jurisdictions; • we may assume or be held liable for risks and liabilities (including for environmental-related costs) as a result of our acquisitions, some of which we may not discover during our due diligence or adequately adjust for in our acquisition arrangements; • our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically diverse enterprises; • we may incur one-time write-offs or restructuring charges in connection with an acquisition; • we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and • we may not be able to realize the cost savings or other modeled financial benefits we anticipated.
Further, if we are successful in consummating acquisitions, those acquisitions could subject us to a number of risks, including: • the purchase prices we pay could significantly deplete our cash reserves or result in dilution to our existing stockholders; • we may find that the acquired companies or assets do not improve our customer offerings or market position as planned; • we may have difficulty integrating the operations and personnel of the acquired companies; • key personnel and customers of the acquired companies may terminate their relationships with the acquired companies as a result of or following the acquisition; • we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting; • we may experience delays in construction and development or regulatory approvals impacting, among other projects, the Pico, Apex or Montauk Ag development cycle; • we may incur additional costs and expenses related to inflation and complying with additional laws, rules or regulations in new jurisdictions; • we may assume or be held liable for risks and liabilities (including for environmental-related costs) as a result of our acquisitions, some of which we may not discover during our due diligence or adequately adjust for in our acquisition arrangements; • our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically diverse enterprises; • we may incur one-time write-offs or restructuring charges in connection with an acquisition; • we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and • we may not be able to realize the cost savings or other modeled financial benefits we anticipated.
Any of these factors could prevent us from completing or operating our projects, or otherwise adversely affect our business, financial condition and results of operations. If there is not sufficient demand for renewable energy, or if renewable energy projects do not develop or take longer to develop than we anticipate, we may be unable to achieve our investment objectives.
Any of these factors could prevent us from identifying, completing or operating our projects, or otherwise adversely affect our business, financial condition and results of operations. If there is not sufficient demand for renewable energy, or if renewable energy projects do not develop or take longer to develop than we anticipate, we may be unable to achieve our investment objectives.
As a result of the Consortium Agreement, certain of our stockholders control matters requiring stockholder approval, including the election of our directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by stockholders other than management.
As a result of the Consortium Agreement, certain stockholders control matters requiring stockholder approval, including the election of our directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control that may be otherwise viewed as beneficial by stockholders other than management.
While these rules largely do not directly impact our operations, they do represent a concerted effort at the federal level to reduce emissions of GHGs in an effort to mitigate adverse effects associated with climate change, which could in turn result in increased demand for renewable energy.
While these rules largely do not directly impact our operations, they do represent a concerted effort at the federal agency level to reduce emissions of GHGs in an effort to mitigate adverse effects associated with climate change, which could in turn result in increased demand for renewable energy.
Many of these third-party providers that attempt to impose limitations on their liability for such errors, disruptions, defects, performance deficiencies, or failures, and if enforceable, we may have additional liability to our customers or third-party providers that could have a material adverse effect on our business.
Many of these third-party providers attempt to impose limitations on their liability for such errors, disruptions, defects, performance deficiencies, or failures, and if such limitations are enforceable, we may have additional liability to our customers or third-party providers that could have a material adverse effect on our business.
If an event of default occurs, we may not be able to cure it within any applicable cure period, or at all. As of December 31, 2022, we were in compliance with all covenants. Variable rate indebtedness under our Amended Credit Agreement may adversely affect our business, financial condition and results of operations.
If an event of default occurs, we may not be able to cure it within any applicable cure period, or at all. As of December 31, 2023, we were in compliance with all covenants. Variable rate indebtedness under our Amended Credit Agreement may adversely affect our business, financial condition and results of operations.
Any of these factors could adversely affect our business, financial condition and operating results. Our renewable fuel projects may be exposed to the volatility of the price of RINs. The price of RINs is driven by various market forces, including gasoline prices and the availability of renewable fuel from other renewable energy sources and conventional energy sources.
Any of these factors could adversely affect our business, financial condition and operating results. Our renewable fuel projects may be exposed to the volatility of the price of RINs. The price of RINs is driven by various market forces, including regulatory action, gasoline prices and the availability of renewable fuel from other renewable energy sources and conventional energy sources.
While we have been the previous target of cyberattacks and security breaches, none of these attacks or breaches to date have had a material adverse effect on the Company. We cannot guarantee that future cyberattacks, if successful, will not have a material effect on our business or financial results.
While we have been the previous target of cyberattacks and security breaches, none of these attacks or breaches to date have had a material adverse effect on us. We cannot guarantee that future cyberattacks, if successful, will not have a material effect on our business or financial results.
In addition, in June 2019, the EPA issued the final Affordable Clean Energy (“ ACE ”) rule and repealed the Clean Power Plan (the “ CPP ”), which had previously established standards to limit carbon dioxide emissions from existing fossil-fueled power generation facilities.
In addition, in June 2019, the EPA issued the final Affordable Clean Energy (“ ACE ”) rule and repealed the Clean Power Plan (the “ CPP ”), which had previously established standards to limit carbon dioxide (CO 2 ) emissions from existing fossil-fueled power generation facilities.
In addition, we may be required to make capital expenditures on an ongoing basis to comply with increasingly stringent federal, state, provincial and local EHS laws, regulations and permits. -30- Table of Contents Negative attitudes toward renewable energy projects from the U.S. government, other lawmakers and regulators, and activists could adversely affect our business, financial condition and results of operations.
In addition, we may be required to make capital expenditures on an ongoing basis to comply with increasingly stringent federal, state, provincial and local EHS laws, regulations and permits. Negative attitudes toward renewable energy projects from the U.S. government, other lawmakers and regulators, and activists could adversely affect our business, financial condition and results of operations.
To the extent that any material disruptions or security breaches result in a loss or damage to our data, or an inappropriate disclosure of confidential, proprietary or customer information, it could materially cause damage to our reputation, affect our -34- Table of Contents relationships with our customers and strategic partners, lead to claims against us from governments and private plaintiffs, and ultimately have a material adverse effect on our business.
To the extent that any material disruptions or security breaches result in a loss or damage to our data, or an inappropriate disclosure of confidential, proprietary or customer information, it could materially cause damage to our reputation, affect our relationships with our customers and strategic partners, lead to claims against us from governments and private plaintiffs, and ultimately have a material adverse effect on our business.
Our success depends, in significant part, on the continued services of our senior management team and on our ability to attract, motivate, develop and retain a sufficient number of other highly skilled personnel, including engineering, design, finance, marketing, sales and support personnel.
Our success depends, in significant part, on the continued services of our senior management team and on our ability to attract, motivate, develop and retain a sufficient number of other highly skilled personnel, including engineering, design, finance and support personnel.
RINs are created through the RFS program administered by the EPA, which requires transportation fuel sold in the United States to contain a minimum volume of renewable fuel and has historically -28- Table of Contents permitted refineries and importers of transportation fuel to satisfy their RVOs by purchasing either (i) D5 RINs and cellulosic waiver credits (“ CWCs ”) or (ii) D3 RINs.
RINs are created through the RFS program administered by the EPA, which requires transportation fuel sold in the United States to contain a minimum volume of renewable fuel and has historically permitted refineries and importers of transportation fuel to satisfy their RVOs by purchasing either (i) D5 RINs and cellulosic waiver credits (“ CWCs ”) or (ii) D3 RINs.
See “—Operational Risks—“The concentration in revenues from five of our projects and geographic concentration of our projects expose us to greater risks of production interruptions from severe weather or other interruptions of production or transmission” for additional information. Our business is subject to risks arising out of climate change, which could result in increased operating costs.
See “—Operational Risks—“The concentration in revenues from five of our projects and geographic concentration of our projects expose us to greater risks of production interruptions from severe weather or other interruptions of production or transmission” for additional information. - 25 - Table of Contents Our business is subject to risks arising out of climate change, which could result in increased operating costs.
In the event that we fall out of favor with either of these landfill operators due to a dispute, problems with our operations at one of their facilities or otherwise, the landfill operator may seek to terminate the related project and be less inclined to work with us on future projects.
In the event that we fall out of favor with either of these landfill - 28 - Table of Contents operators due to a dispute, problems with our operations at one of their facilities or otherwise, the landfill operator may seek to terminate the related project and be less inclined to work with us on future projects.
We are required to register an RNG project with the EPA and relevant state regulatory agencies. Further, we qualify our RINs through a voluntary Quality Assurance Plan, which typically takes from three to five months -32- Table of Contents from first injection of RNG into the commercial pipeline system.
We are required to register an RNG project with the EPA and relevant state regulatory agencies. Further, we qualify our RINs through a voluntary Quality Assurance Plan, which typically takes from three to five months from first injection of RNG into the commercial pipeline system.
The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. Regulatory Risks The reduction or elimination of governmental economic incentives for renewable energy projects or other related policies could adversely affect our business, financial condition and results of operation.
The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. - 21 - Table of Contents Regulatory Risks The reduction or elimination of governmental economic incentives for renewable energy projects or other related policies could adversely affect our business, financial condition and results of operation.
Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us. -29- Table of Contents New laws, changes to existing laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures.
Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us. New laws, changes to existing laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures.
The ownership interests in the land subject to these easements, leases and rights-of-way may be subject to mortgages securing loans or other liens (such as tax liens) and other easement, lease rights and rights-of-way of third parties (such as leases of oil or mineral rights) that were created prior to our projects’ easements, leases and rights-of-way.
The ownership interests in the land subject to these easements, leases and rights-of-way may be subject to mortgages securing loans or other liens (such as tax liens) and other easement, lease rights and rights-of-way of third parties - 16 - Table of Contents (such as leases of oil or mineral rights) that were created prior to our projects’ easements, leases and rights-of-way.
Under these -41- Table of Contents corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
The market price of electricity is sensitive to cyclical changes in demand and capacity supply, and in the economy and geopolitical conditions (including the current conflict in Ukraine), as well as to regulatory trends and developments impacting electricity market rules and pricing, transmission development and investment to power markets within the United States and in other jurisdictions through interconnects and other external factors outside of the control of renewable energy power-producing projects.
The market price of electricity is sensitive to cyclical changes in demand and capacity supply, and in the economy and geopolitical conditions (including the current conflicts in the Middle East and Ukraine), as well as to regulatory trends and developments impacting electricity market rules and pricing, transmission development and investment to power markets within the United States and in other jurisdictions through interconnects and other external factors outside of the control of renewable energy power-producing projects.
A lengthy interruption of production or transmission of renewable energy from one or more of these projects, as a result of a severe weather event, failure or degradation of our or a landfill operator’s equipment or interconnection transmission problems could have a disproportionate effect on our revenues and cash flow as further described below.
A lengthy interruption of production or transmission of renewable energy from one or more of these projects, as a result of a severe weather event, failure or degradation of our or a landfill operator’s equipment or interconnection transmission problems could have a disproportionate effect on our revenues and cash flow.
Present and future environmental laws and regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial condition.
Present and future environmental laws and regulations, and interpretations of those laws and regulations, applicable to our - 22 - Table of Contents operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial condition.
In 2022, we recorded impairment charges of $2.1 million related to our estimate of future cash flows no exceeding the carrying amount of an Renewable Electricity facility and discrete charges of $1.4 million and $1.1 million related to the ongoing development of the Montauk Ag Renewables and an asset component of an RNG facility.
In 2022, we recorded impairment charges of $2.1 million related to our estimate of future cash flows not exceeding the carrying amount of a Renewable Electricity facility and discrete charges of $1.4 million and $1.1 million related to the ongoing development of the Montauk Ag Renewables and an asset component of an RNG facility.
We cannot assure you that we will be able to identify attractive opportunities outside of our current area of focus or acquire or develop such projects at a price and on terms that are attractive or that, once acquired or developed, such projects will operate profitably.
We cannot assure you that we will be able to identify - 19 - Table of Contents attractive opportunities outside of our current area of focus or acquire or develop such projects at a price and on terms that are attractive or that, once acquired or developed, such projects will operate profitably.
As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company.
As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to - 30 - Table of Contents Section 404 until the date we are no longer an emerging growth company.
We may rely on any or all of these exemptions so long as we remain a controlled company. The concentration of our capital stock ownership may limit our stockholders’ ability to influence corporate matters and may involve other risks.
We may rely on any or all of these exemptions so long as we remain a controlled company. - 31 - Table of Contents The concentration of our capital stock ownership may limit our stockholders’ ability to influence corporate matters and may involve other risks.
We expect to have quarterly variations in the revenues from the projects in which we generate revenue from the sale of RINs that we are unable to sell through forward contracts. Our revenues may be subject to the risk of fluctuations in commodity prices.
We expect to have quarterly variations in the revenues from the projects in which we generate revenue from the sale of RINs that we are unable to sell through forward contracts. - 20 - Table of Contents Our revenues may be subject to the risk of fluctuations in commodity prices.
Accordingly, the potential revenues and cash flows of these projects may be volatile and adversely affect the value of our investments. -27- Table of Contents Our off-take agreements for the sale of RNG are typically shorter in duration than our fuel supply agreements.
Accordingly, the potential revenues and cash flows of these projects may be volatile and adversely affect the value of our investments. Our off-take agreements for the sale of RNG are typically shorter in duration than our fuel supply agreements.
A material network breach in the security of our IT systems could include the theft of our trade secrets, customer information, human resources information or other confidential data, including but not limited to personally identifiable information, that could have a material adverse effect on our business, financial condition, or results of operations.
A material network breach in the security of our IT systems or those of our third-party vendors could include the theft of our trade secrets, customer information, human resources information or other confidential data, including but not limited to personally identifiable information, that could have a material adverse effect on our business, financial condition, or results of operations.
Since the number of LCFS credits for RNG generated on dairy farms is significantly greater than the number of LCFS credits for RNG generated at -25- Table of Contents landfills, we are substantially more dependent upon the revenue from LCFS credits for the commercial viability of the dairy farm project.
Since the number of LCFS credits for RNG generated on dairy farms is significantly greater than the number of LCFS credits for RNG generated at landfills, we are substantially more dependent upon the revenue from LCFS credits for the commercial viability of the dairy farm project.
Our senior credit facility consists of an $80.0 million principal amount term loan, of which $72.0 remains outstanding as of December 31, 2022, and a $120.0 million revolving credit line, which is undrawn as of December 31, 2022. This facility may not be sufficient to meet our financial needs as our business grows.
Our senior credit facility consists of an $80.0 million principal amount term loan, of which $64.0 remains outstanding as of December 31, 2023, and a $120.0 million revolving credit line, which is undrawn as of December 31, 2023. This facility may not be sufficient to meet our financial needs as our business grows.
If we are unable to grow and manage the capacity that we expect from our projects in our anticipated timeframes, it could adversely affect our business, financial condition and results of operations.
If we are unable to grow and - 24 - Table of Contents manage the capacity that we expect from our projects in our anticipated timeframes, it could adversely affect our business, financial condition and results of operations.
These include other renewable energy companies and service or equipment providers, consultants, managers and strategic investors. -20- Table of Contents We may not have the resources to compete with our existing competitors or with any new competitors, including in a competitive bidding process.
These include other renewable energy companies and service or equipment providers, consultants, managers and strategic investors. We may not have the resources to compete with our existing competitors or with any new competitors, including in a competitive bidding process.
Other than the patented technology acquired through the Montauk Ag Renewables Acquisition, we do not have any exclusive rights to any of the technologies that we utilize, and our competitors may currently use and may be planning to use identical, similar or superior technologies.
Other than the patented technology acquired through the Montauk Ag Renewables Acquisition and our internally developed condensate neutralization technology, we do not have any exclusive rights to any of the technologies that we utilize, and our competitors may currently use and may be planning to use identical, similar or superior technologies.
We cannot assure you that we will be able to perform our obligations under such agreements or that we will have sufficient funds to pay any fees or penalties thereunder.
We cannot assure you that we will be able to perform our obligations under such agreements, that fees and penalties will remain insignificant, or that we will have sufficient funds to pay any fees or penalties thereunder.
The market price for natural gas is sensitive to cyclical demand and capacity supply, changes in weather patterns, natural gas storage levels, natural gas production levels, general economic and geopolitical conditions (including the current conflict in Ukraine) and the volume of natural gas imports and exports.
The market price for natural gas is sensitive to cyclical demand and capacity supply, changes in weather patterns, natural gas storage levels, natural gas production levels, general economic and geopolitical conditions (including the current conflicts in the Middle East and Ukraine) and the volume of natural gas imports and exports.
RECs are created through state law requirements for utilities to purchase a portion of their energy from renewable energy sources. 70% and 62% of our operating revenues for 2022 and 2021, respectively, were generated from the sale of Environmental Attributes.
RECs are created through state law requirements for utilities to purchase a portion of their energy from renewable energy sources. 76% and 70% of our operating revenues for 2023 and 2022, respectively, were generated from the sale of Environmental Attributes.
Supreme Court concluded that Congress did not grant the EPA authority under the CAA to demand generation-shifting to achieve reduction of GHG emissions, but the court did not hold that the EPA is limited in future rulemakings to just the heat-rate improvements that made up the ACE rule.
Supreme Court concluded that Congress did not grant the EPA authority under the CAA to demand generation-shifting to achieve reduction of GHG emissions, but the court did not hold that the EPA is limited in future rulemakings to just the heat-rate improvements that made up the ACE rule. On remand from the Supreme Court, the D.C.
Governmental and public concern arising from GHG emissions has resulted in increasing regulatory, political, financial and litigation risks in the United States and globally that target predominantly fossil fuel-related energy entities or their operations, which may have indirect effects on other companies or industries, including the renewable energy industry. -33- Table of Contents In the United States, no comprehensive federal climate change legislation has been implemented.
Governmental and public concern arising from GHG emissions has resulted in increasing regulatory, political, financial and litigation risks in the United States and globally that target predominantly fossil fuel-related energy entities or their operations, which may have indirect effects on other companies or industries, including the renewable energy industry. The United States has not implemented comprehensive federal climate change legislation.
ITEM 1A. RISK FACTORS. This Annual Report on Form 10-K contains forward-looking information based on our current expectations.
ITEM 1A. RISK F ACTORS. This Annual Report on Form 10-K contains forward-looking information based on our current expectations.
Many of our existing equity holders have substantial unrecognized gains on the value of the equity they hold based upon the price of the IPO, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares.
Many of our existing equity holders have substantial unrecognized gains on the value of the equity they hold and may take steps to sell their shares or otherwise secure the unrecognized gains on those shares.
As a renewable energy producer, we face various security threats, including among others, computer viruses, malware, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the internet, attachments to emails, persons with access to systems inside our organization, cybersecurity threats to gain unauthorized access to sensitive information or to expose, exfiltrate, alter, delete or render our data or systems unusable, threats to the security of our projects and infrastructure or third-party facilities and infrastructure, such as processing projects and pipelines, natural disasters, threats from terrorist acts and war.
Our business could be negatively affected by security threats, including cybersecurity threats and other disruptions. - 27 - Table of Contents As a renewable energy producer, we face various security threats, including among others, computer viruses, malware, ransomware, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the internet, attachments to emails, persons with access to systems inside our organization, cybersecurity threats to gain unauthorized access to sensitive information or to expose, exfiltrate, alter, delete or render our data or systems unusable, threats to the security of our projects and infrastructure or third-party facilities and infrastructure, such as processing projects and pipelines, natural disasters, threats from terrorist acts and war.
Therefore, based on its limited historical performance and other available information, the future performance of BSBY cannot be accurately predicted, which could result in increases in our interest expense that may adversely impact the amount of interest payments under the Amended Credit Agreement.
Additionally, BSBY is a relatively new reference rates. Therefore, based on its limited historical performance and other available information, the future performance of BSBY cannot be accurately predicted, which could result in increases in our interest expense that may adversely impact the amount of interest payments under the Amended Credit Agreement.
Our fuel supply agreements with site hosts have defined contractual periods, and we cannot assure you that we will be able to successfully extend these agreements. Fuel supply rights are issued by the landfill owner to operators for a contractual period.
Our fuel supply agreements with site hosts have defined contractual periods, and we cannot assure you that we will be able to successfully extend these agreements at their historic revenue levels or at all. Fuel supply rights are issued by the landfill owner to operators for a contractual period.
Despite our implementation of reasonable security measures, our IT systems, like those of other companies, are vulnerable to damages from computer viruses, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, human error, unauthorized access, physical or electronic security breaches, cyber-attacks (including malicious and destructive code, phishing attacks, ransomware, and denial of service attacks), and other similar disruptions.
Our IT systems and those of our third-party vendors, are vulnerable to damages from computer viruses, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, human error, unauthorized access, physical or electronic security breaches, cyber-attacks (including malicious and destructive code, phishing attacks, ransomware, and denial of service attacks), and other similar disruptions.
However, we may be unable to implement this growth strategy if we cannot identify suitable landfills and livestock farms on which to develop projects, reach agreements with landfill or livestock farm owners to develop RNG projects on acceptable terms or arrange required financing for new projects on acceptable terms.
We plan to continue to develop new RNG projects at landfills and livestock farms but we may be unable to implement this growth strategy if we cannot identify suitable landfills and livestock farms on which to develop projects, reach agreements with landfill or livestock farm owners to develop RNG projects or arrange required financing for new projects.
Accordingly, we may not make, or may have to reduce or eliminate, the payment of dividends on our common stock, which could adversely affect the market price of our common stock. -43- Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Accordingly, we may not make, or may have to reduce or eliminate, the payment of dividends on our common stock, which could adversely affect the market price of our common stock. ITEM 1B. UNRESOLVED S TAFF COMMENTS. None.
For the years ended December 31, 2022 and 2021, excluding the effect of derivative instruments, approximately 72.4% and 76.3%, respectively, of operating revenues were derived from these locations.
For the years ended December 31, 2023 and 2022, excluding the effect of derivative instruments, approximately 68.4% and 72.4%, respectively, of operating revenues were derived from these locations.
We plan to expand our business in part through developing RNG recovery projects at landfills and livestock farms, but we may not be able to identify suitable locations or complete development of new projects. Historically, development of new RNG projects at landfills and livestock farms has been a significant part of our growth strategy.
We plan to expand our business in part through developing RNG recovery projects at landfills and livestock farms, but we may not be able to identify suitable locations or complete development of new projects.
In 2021, we recorded impairment charges of $0.8 million related to the ongoing Renewable Electricity facility decommissioning and $0.4 million related to certain assets at one RNG facility. In 2020, we recorded impairment charges of $0.3 million related to our digester joint venture.
In 2021, we recorded impairment charges of $0.8 million related to the ongoing Renewable Electricity facility decommissioning and $0.4 million related to certain assets at one RNG facility.
We take various steps to identify and mitigate potential cybersecurity threats. As cyber incidents become more frequent and the sophistication of threat actors increases, our associated cybersecurity costs are expected to increase. Specifically, we expect to implement several incremental cybersecurity improvements over the next 18 to 36 months to enhance our defensive capabilities and resilience.
As cyber incidents become more frequent and the sophistication of threat actors increases, our associated cybersecurity costs have and are expected to continue to increase. Specifically, we expect to implement several incremental cybersecurity improvements over the next 18 to 36 months to enhance our defensive capabilities and resilience.
Our PPAs typically require us to meet certain milestones and other performance criteria. Our failure to meet these milestones and other criteria, including minimum quantities, may result in price concessions, in which case we would lose any future cash flow from the relevant project and may be required to pay fees and penalties to our counterparty.
Our failure to meet these milestones and other criteria, including minimum quantities, may result in price concessions, in which case we would lose any future cash flow from the relevant project. In addition, we have in the past and, in the future, may be required to pay fees and penalties to our counterparty.
If we experience a problem with the functioning of an important IT system or a security breach of our IT systems, including during system upgrades or new system implementations, the resulting disruptions could have a material adverse effect on our business.
We also face the challenge of supporting our older systems and implementing necessary upgrades. If we experience a problem with the functioning of an important IT system or a security breach of our IT systems, including during system upgrades or new system implementations, the resulting disruptions could have a material adverse effect on our business.
We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and intend to rely on, exemptions and relief from certain governance requirements. Certain stockholders, which are Messrs.
We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and intend to rely on, exemptions and relief from certain governance requirements. Stockholder affiliates of Mr. Copelyn and Mr.
Additionally, pursuant to the terms of the Second Amended Promissory Note (as amended), MNK is required to use the proceeds from any sale of the 800,000 shares of our common stock previously pledged as security for MNK’s loan obligations to repay the amounts due under the Second Amended Promissory Note (as amended).
Additionally, pursuant to the terms of the Fourth Amended and Restated Promissory Note, MNK is required to use the proceeds from any sale of the 976,623 shares of our common stock pledged as security for MNK’s loan obligations to repay the amounts due under the Note.
Our projects are interconnected with electric distribution and transmission facilities owned and operated by regulated utilities necessary to deliver the Renewable Electricity that we produce.
Our projects are interconnected with electric distribution and transmission facilities owned and operated by regulated utilities necessary to deliver the Renewable Electricity that we produce. Our RNG projects are similarly interconnected with gas distribution and interstate pipeline systems required to deliver RNG.
Our RNG projects are similarly interconnected with gas distribution and interstate pipeline systems required to deliver RNG A failure or delay in the operation or development of these distribution or transmission facilities could result in a loss of revenues or breach of contract because such a failure or delay could limit the amount of RNG and Renewable Electricity that our operating projects deliver or delay the completion of our construction projects.
A failure or delay in the operation or development of these distribution or transmission facilities could result in a loss of revenues or breach of contract because such a failure or delay could limit the amount of RNG and Renewable Electricity that our operating projects deliver or delay the completion of our construction projects.
As operators, we have already invested resources in the development of existing sites and the ability to extend these contracts on expiration would enable us to achieve operational efficiency in continuing to generate revenues from a site without significant additional capital investments. We cannot assure you that we will be able to extend existing fuel supply agreements when they expire.
As operators, we have already invested resources in the development of existing sites and the ability to extend these contracts on expiration would enable us to achieve operational efficiency in continuing to generate revenues from a site without significant additional capital investments.
During 2022, Renewable Electricity production at our Bowerman Power LFG, LLC (“Bowerman”) facility accounted for approximately 90.5% of our Renewable Electricity Generation revenues and 82.3% of the Renewable Electricity we produced during 2022.
During 2023, Renewable Electricity production at our Bowerman Power LFG, LLC (“Bowerman”) facility accounted for approximately 89.7% of our Renewable Electricity Generation revenues and 80.3% of the Renewable Electricity we produced during 2023.
Obtaining long-term contracts for the sale of power produced by our projects at prices and on other terms favorable to us is essential for the long term success of our business. We must compete for PPAs against other developers of renewable energy projects.
Obtaining long-term contracts for the sale of power produced by our projects at prices and on other terms favorable to us is essential for the long term success of our business. We must compete for PPAs against other developers of renewable energy projects. This intense competition for PPAs has resulted in downward pressure on PPA pricing for newly contracted projects.
For so long as we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that -39- Table of Contents are not emerging growth companies.
For so long as we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. We cannot predict whether investors will find our common stock less attractive because we will rely on these exemptions.
We currently operate eight renewable energy projects (seven RNG projects and one Renewable Electricity project) on landfills operated by Waste Management and two RNG projects on landfills operated by Republic Services. Our projects located on Waste Management and Republic Services operated landfills represented a significant proportion of our revenue in 2022.
We currently operate seven renewable energy projects (six RNG projects and one Renewable Electricity project) on landfills operated by Waste Management and two RNG projects on landfills operated by Republic Services. Our projects located on Waste Management operated landfills represented 37.3% and 38.9% of our revenue in 2023 and 2022, respectively.
We cannot predict whether investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock to be less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
If some investors find our common stock to be less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Additionally, we do not carry key personnel insurance for any of our management executives, and the loss of any key employee or our inability to recruit, develop and retain these individuals as needed, could adversely affect our business, financial condition and results of operations.
Additionally, we do not carry key personnel insurance for any of our management executives, and the loss of any key employee or our inability to recruit, develop and retain these individuals as needed, could adversely affect our business, financial condition and results of operations. - 32 - Table of Contents Our ability to pay regular dividends on our common stock is subject to the discretion of our Board of Directors.
We are dependent upon our relationships with Waste Management and Republic Services for the operation and maintenance of landfills on which several of our RNG and Renewable Electricity projects operate.
Additionally, we experience work interruptions from time to time due to federally required maintenance shutdowns. We are dependent upon our relationships with Waste Management and Republic Services for the operation and maintenance of landfills on which several of our RNG and Renewable Electricity projects operate.
Ahmed and Yunis Shaik are residents of South Africa. Another director, Michael A. Jacobson, is a resident of Australia. As a result, it may not be possible for you to effect service of legal process, within the United States or elsewhere, upon certain of our directors, including matters arising under U.S. federal securities laws.
As a result, it may not be possible for you to effect service of legal process, within the United States or elsewhere, upon certain of our directors, including matters arising under U.S. federal securities laws.
This may make it difficult or impossible to bring an action against these individuals in the United States in the event that a person believes that their rights have been violated under applicable law or otherwise.
This may make it difficult or impossible to bring an action against these individuals in the United States in the event that a person believes that their rights have been violated under applicable law or otherwise. Even if an action of this type is successfully brought, the laws of the United States and South Africa may render a judgment unenforceable.
Certain of our PPAs, fuel supply agreements, RNG off-take agreements and other agreements require us to make payments or adjust prices to counterparties based on past or current changes in gas price indices, project -24- Table of Contents productivity or other metrics and involve complex calculations.
Certain of our PPAs, fuel supply agreements, RNG off-take agreements and other agreements require us to make payments or adjust prices to counterparties based on past or current changes in gas price indices, project productivity or other metrics and involve complex calculations. Moreover, the underlying indices governing payments under these agreements are subject to change, may be discontinued or replaced.
While the EPA has identified an additional 470 landfills as candidates for biogas projects, based on our industry experience and technical knowledge and analysis, after evaluating their currently available LFG collection systems and potential production capacities, we believe that approximately 38 of these sites produce sufficient quantities of LFG to support commercial-scale projects, with 25 of the approximately 38 sites being operated by Waste Management or Republic Waste, with whom we would need to negotiate with to secure sufficient LFG rights to support an RNG project.
While the EPA has identified an additional 463 landfills as candidates for biogas projects, we believe that approximately 38 of these sites produce sufficient quantities of LFG to support commercial-scale projects, with 25 of the approximately 38 sites being operated by Waste Management or Republic Waste, with whom we would need to negotiate with to secure sufficient LFG rights to support an RNG project.
In addition, we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources. Common Stock Risks Our stock price may be volatile, and the value of our common stock may decline.
In addition, we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources. Common Stock Risks Our shares of common stock may trade on more than one market and this may result in price variations.
On January 19, 2021, the United States Court of Appeals for the D.C. Circuit vacated the ACE rule and remanded the rule back to EPA for reconsideration of the “best system of emission reduction.” On February 22, 2021, the D.C. Circuit subsequently issued an order allowing EPA to promulgate new standards in lieu of reviving the CPP.
On January 19, 2021, the United States Court of Appeals for the D.C. Circuit vacated the ACE rule and remanded the rule back to EPA - 23 - Table of Contents for reconsideration of the “best system of emission reduction.” On February 22, 2021, the D.C.
Certain of our directors reside outside of the United States and it may be difficult to enforce judgments against them in the United States. Two of our directors, all of our executive officers and all of our operating assets reside in the United States. Certain of our directors, including John A. Copelyn, Theventheran (Kevin) G. Govender, Mohamed H.
Certain of our directors reside outside of the United States and it may be difficult to enforce judgments against them in the United States. Two of our directors, all of our executive officers and all of our operating assets reside in the United States. Directors Copelyn, Govender, Ahmed and Shaik are residents of South Africa.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline. The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us.
The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us.
Despite our ongoing and anticipated cybersecurity efforts, a successful cybersecurity incident could lead to additional material costs, including those related to the loss of sensitive information, repairs to infrastructure or capabilities essential to our operations, responding to litigation or regulatory investigations, and those related to a material and adverse impact on our reputation, financial position, results of operations, or cash flows. -35- Table of Contents Our implementation of various procedures and controls to monitor and mitigate these security threats, and to increase security for our information projects and infrastructure, may result in materially increased capital and operating costs.
Despite our ongoing and anticipated cybersecurity efforts, a successful cybersecurity incident could lead to additional material costs, including those related to the loss of sensitive information, repairs to infrastructure or capabilities essential to our operations, responding to litigation or regulatory investigations, and those related to a material and adverse impact on our reputation, financial position, results of operations, or cash flows.
Copelyn’s and Govender’s respective affiliates, have entered into a Consortium Agreement whereby the parties thereto agreed to act in concert with respect to voting our common stock in the election of directors, among other matters. The parties to the Consortium Agreement beneficially owned, in the aggregate, approximately 52.3% of our common stock as of February 28, 2023.
Govender have entered into a Consortium Agreement whereby they agree to act together when voting our common stock in the election of directors, among other matters. The parties to the Consortium Agreement beneficially owned, in the aggregate, approximately 52.3% of our common stock as of February 28, 2024.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease an 8,400 square foot regional office and warehouse to service our sites in Houston, Texas, pursuant to a lease which expires on December 31, 2026, for approximately $5,000 per month. We also have a month to month lease for nominal office space for Montauk Ag in Greensboro, North Carolina.
Biggest changeWe lease an approximate 24,000 square foot office space at this site for approximately $43,000 per month pursuant to a lease which expires on April 30, 2033. We also lease an 8,400 square foot regional office and warehouse to service our sites in Houston, Texas, pursuant to a lease which expires on December 31, 2026, for approximately $5,000 per month.
Removed
ITEM 2. PROPERTIES. Our principal executive office is located in Pittsburgh, Pennsylvania. We lease an approximate 24,000 square foot office space at this site for approximately $43,000 per month pursuant to a lease which expires on April 30, 2033.
Added
ITEM 2. PROP ERTIES. We own approximately 174 acres in Turkey, NC for which we are using to develop Montauk Ag Renewables. Montauk Ag Renewables is reported in our Renewable Electricity Generation segment. Our principal executive office is located in Pittsburgh, Pennsylvania.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNone of our directors, officers, affiliates, or any owner of record or beneficially of more than 5% of our common stock, is involved in a material proceeding adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. -44- Table of Contents PART II
Biggest changeNone of our directors, officers, affiliates, or any owner of record or beneficial owner of more than 5% of our common stock, is involved in a material proceeding adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries. ITEM 4. MINE SAFETY DISCLOSURES.
ITEM 3. LEGAL PROCEEDINGS. From time to time we and our subsidiaries may be parties to legal proceedings arising in the normal course of our business. We and our subsidiaries are currently not a party, nor is our property subject, to any material pending legal proceedings.
ITEM 3. LEGAL PRO CEEDINGS. From time to time we and our subsidiaries may be parties to legal proceedings arising in the normal course of our business. We and our subsidiaries are currently not a party, nor is our property subject, to any material pending legal proceedings.
Added
Not Applicable. - 34 - Table of Contents PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following performance graph and related information is being furnished and shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it into reference into such filing. -45- Table of Contents 1/22/21 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 Montauk Renewables, Inc. 100.00 116.49 73.87 108.29 98.84 108.00 96.91 168.18 106.36 NASDAQ Composite 100.00 102.95 112.92 112.66 122.18 111.25 86.46 83.08 82.43 Peer Group 100.00 121.76 85.76 78.41 54.99 65.34 34.06 38.35 34.48 Dividend Policy The Company did not pay any dividends in the fiscal year ended December 31, 2022 and currently intends to retain future earnings, if any, to finance the operations, growth and development of its business.
Biggest changeThe following performance graph and related information is being furnished and shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it into reference into such filing. - 35 - Table of Contents 1/22/21 3/21 6/21 9/21 12/21 3/22 6/22 Montauk Renewables, Inc. 100.00 116.49 73.87 108.29 98.84 108.00 96.91 NASDAQ Composite 100.00 102.95 112.92 112.66 122.18 111.25 86.46 2022 Peer Group 100.00 121.76 85.76 78.41 54.99 65.34 34.06 2023 Peer Group 100.00 105.94 94.35 87.29 88.23 89.02 50.82 9/22 12/22 3/23 6/23 9/23 12/23 Montauk Renewables, Inc. 168.18 106.36 75.89 71.75 87.85 85.92 NASDAQ Composite 83.08 82.43 96.48 109.07 104.77 119.22 2022 Peer Group 38.35 34.48 27.97 34.11 25.33 26.02 2023 Peer Group 64.52 55.01 47.23 49.77 42.25 35.22 Dividend Policy The Company did not pay any dividends in the fiscal year ended December 31, 2023 and currently intends to retain future earnings, if any, to finance the operations, growth and development of its business.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information The Company’s common stock has traded on the Nasdaq Capital Market under the ticker symbol of “MNTK” and on the JSE under the ticker symbol of “MKR” since January 22, 2021.
ITEM 5. MARKET FOR REGISTRANT ’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information The Company’s common stock has traded on the Nasdaq Capital Market under the ticker symbol of “MNTK” and on the JSE under the ticker symbol of “MKR” since January 22, 2021.
Use of Proceeds from Sale of Registered Securities On January 21, 2021, our Registration Statement on Form S-1, as amended (File No. 333-251312) (the “ Registration Statement ”), was declared effective by the SEC in connection with the IPO. The underwriter for the IPO was Roth Capital Partners.
Issuer Repurchases of Equity Securities None. Use of Proceeds from Sale of Registered Securities On January 21, 2021, our Registration Statement on Form S-1, as amended (File No. 333-251312) (the “ Registration Statement ”), was declared effective by the SEC in connection with the IPO. The underwriter for the IPO was Roth Capital Partners.
Our 2022 peer group, which is comprised of companies that we believe have comparable characteristics and are in the same industry or line-of-business, consists of Aemetis Inc., Clean Energy Fuels Corp., and Gevo Inc.
Our 2023 peer group, which is comprised of companies that we believe have comparable characteristics and are in the same industry or line-of-business, consists of Ameresco, Inc., Aemetis, Inc., Anaergia, Inc., Clean Energy Fuels Corp., Gevo, Inc., and Opal Fuels, Inc.
From the closing of the IPO through December 31, 2022, approximately $14.8 million of the net proceeds from the IPO have been used by Montauk for the following: the Montauk Ag Asset Acquisition in May 2021, the purchase of the real-estate and property in October 2021 related to Montauk Ag, and subsequent development activities related to Montauk Ag Renewables.
From the closing of the IPO through December 31, 2023, approximately $15.0 million of the net proceeds from the IPO have been used by Montauk for the following: the Montauk Ag Asset Acquisition in May 2021, the purchase of the real-estate and property in October 2021 related to Montauk Ag, and subsequent development activities related to Montauk Ag Renewables.
Prior to that time, there was no established public trading market for the Company’s common stock. Holders of Montauk Common Stock As of March 8, 2023, there were 11 holders of record of 141,633,417 shares of Montauk common stock outstanding as of such date.
Prior to that time, there was no established public trading market for the Company’s common stock. Holders of Montauk Common Stock As of March 8, 2024, there were 12 holders of record of 143,623,805 shares of Montauk common stock outstanding as of such date.
An immaterial amount has been used relating to other possible acquisitions and projects. As of December 31, 2022, the remaining net proceeds of approximately $0.2 million is held as cash. The remaining net proceeds have been used by the Company during 2023 in the continued development of Montauk Ag Renewables.
An immaterial amount has been used relating to other possible acquisitions and projects. As of December 31, 2023, all net proceeds were used by the Company. Recent Sales of Unregistered Securities None.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Issuer Repurchases of Equity Securities None.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our Board of Directors may deem relevant. - 36 - Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Removed
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our Board of Directors may deem relevant.
Added
With Opal Fuels, Inc. having sufficient trading activity to be included in our 2023 peer group, we refined our 2023 peer group to companies in the same industry or line-of-business. Our 2022 peer group consisted of Aemetis Inc., Clean Energy Fuels Corp., and Gevo Inc.
Removed
Recent Sales of Unregistered Securities None. -46- Table of Contents ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

97 edited+63 added−64 removed69 unchanged
Biggest change(in thousands, unless otherwise indicated) For the year ended December 31, 2022 2021 Change Change % Revenues Renewable Natural Gas Total Revenues $ 196,218 $ 131,803 $ 64,415 48.9 % Renewable Electricity Generation Total Revenues $ 17,170 $ 15,449 $ 1,721 11.1 % RNG Metrics CY RNG production volumes (MMBtu) 5,522 5,688 (166 ) (2.9 )% Less: Current period RNG volumes under fixed/floor-price contracts (1,278 ) (1,596 ) 318 (19.9 )% Plus: Prior period RNG volumes dispensed in current period 372 353 19 5.4 % Less: Current period RNG production volumes not dispensed (378 ) (372 ) (6 ) 1.6 % Total RNG volumes available for RIN generation(1) 4,238 4,073 165 4.1 % RIN Metrics Current RIN generation ( x 11.727)(2) 49,697 47,758 1,939 4.1 % Less: Counterparty share (RINs) (5,275 ) (5,124 ) (151 ) 2.9 % Plus: Prior period RINs carried into CY 140 110 30 27.3 % Less: CY RINs carried into next CY (739 ) (140 ) (599 ) 427.9 % Total RINs available for sale(3) 43,823 42,604 1,219 2.9 % Less: RINs sold (43,823 ) (42,604 ) (1,219 ) 2.9 % RIN Inventory — — — — RNG Inventory (volumes not dispensed for RINs)(4) 368 372 (4 ) (1.1 )% Average Realized RIN price $ 3.25 $ 1.91 $ 1.34 70.2 % Operating Expenses Renewable Natural Gas Operating Expenses $ 86,068 $ 65,046 $ 21,022 32.3 % Operating Expenses per MMBtu (actual) $ 15.59 $ 11.44 $ 4.15 36.3 % Renewable Electricity Generation Operating Expenses $ 14,910 $ 12,177 $ 2,733 22.4 % $/MWh (actual) $ 78.47 $ 66.56 $ 11.91 17.9 % Other Metrics Renewable Electricity Generation Volumes Produced (MWh) 190 183 7 3.8 % Average Realized Price $/MWh (actual) $ 90.37 $ 84.45 $ 5.92 7.0 % (1) RINs are generated in the month that the gas dispensed to generate RINs, which occurs the month after the gas is produced.
Biggest changeFor the year ended December 31, Change 2023 2022 Change % (in thousands, unless otherwise indicated) Revenues Renewable Natural Gas Total Revenues $ 156,455 $ 196,218 $ (39,763 ) (20.3 %) Renewable Electricity Generation Total Revenues $ 18,449 $ 17,170 $ 1,279 7.4 % RNG Metrics CY RNG production volumes (MMBtu) 5,499 5,522 (23 ) (0.4 %) Less: Current period RNG volumes under fixed/floor- price contracts (1,287 ) (1,278 ) (9 ) 0.7 % Plus: Prior period RNG volumes dispensed in current period 368 372 (4 ) (1.1 %) Less: Current period RNG production volumes not dispensed (358 ) (378 ) 20 (5.3 %) Total RNG volumes available for RIN generation (1) 4,222 4,238 (16 ) (0.4 %) RIN Metrics Current RIN generation ( x 11.727) (2) 49,508 49,697 (189 ) (0.4 %) Less: Counterparty share (RINs) (5,203 ) (5,275 ) 72 (1.4 %) Plus: Prior period RINs carried into current period 739 140 599 427.9 % Less: CY RINs carried into next CY (108 ) (739 ) 631 (85.4 %) Total RINs available for sale (3) 44,936 43,823 1,113 2.5 % Less: RINs sold (44,936 ) (43,823 ) (1,113 ) 2.5 % RIN Inventory — — — 0.0 % RNG Inventory (volumes not dispensed for RINs) (4) 358 368 (10 ) (2.7 %) Average Realized RIN price $ 2.71 $ 3.25 $ (0.54 ) (16.6 %) Operating Expenses Renewable Natural Gas Operating Expenses $ 80,762 $ 86,068 $ (5,306 ) (6.2 %) Operating Expenses per MMBtu (actual) $ 14.69 $ 15.59 $ (0.90 ) (5.8 %) REG Operating Expenses $ 13,730 $ 14,910 $ (1,180 ) (7.9 %) $/MWh (actual) $ 70.77 $ 78.47 $ (7.70 ) (9.8 %) Other Metrics Renewable Electricity Generation Volumes Produced (MWh) 194 190 4 2.1 % Average Realized Price $/MWh (actual) $ 95.10 $ 90.37 $ 4.73 5.2 % (1) RINs are generated the month following the month gas is produced and dispensed.
Volumes under fixed/floor-price arrangements generate RINs which we do not self-market. (2) One MMBtu of RNG has the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS program. (3) Represents RINs available to be self-marketed by us during the reporting period.
Volumes under fixed/floor arrangements generate RINs which we do not self-market. (2) One MMBtu of RNG has the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS program. (3) Represents RINs available to be self-marketed by us during the reporting period.
Refer to Item 7A for an estimate of the impact of decreases in the wholesale price of gas on the Company’s operating profit. RINs We generate D3 RINs through our production and sale of RNG used for transportation purposes as prescribed under the RFS program. Our operating costs are associated with the production of RNG.
Refer to Item 7A for an estimate of the impact of decreases in the wholesale price of gas on our operating profit. RINs We generate D3 RINs through our production and sale of RNG used for transportation purposes as prescribed under the RFS program. Our operating costs are associated with the production of RNG.
Consolidated EBITDA is defined under the Amended Credit Agreement as net income plus (a) income tax expense, (b) interest expense, (c) depreciation, depletion, and amortization expense, (d) non-cash unrealized derivative expense, (e) any extraordinary, unusual, or non-recurring cash expenses and/or losses not exceeding $500,000 in the aggregate to the extent not included in the determination of operating income on MEH’s consolidated statements of profits and loss, (f) subject to -60- Table of Contents Comerica’s approval, which may be granted or withheld in its reasonable credit judgment, any extraordinary, unusual, or non-recurring cash expenses or losses to the extent not included in the determination of operating income on MEH’s consolidated statements of profits and losses exceeding $500,000 in the aggregate, (g) any extraordinary, unusual, or non-recurring non-cash expenses and/or losses not included in the determination of operating income on MEH’s consolidated statements of profits and loss, and (h) any extraordinary, unusual, or non-recurring non-cash expenses and/or losses included in the determination of operating income on MEH’s consolidated statements of profits and loss, plus, to the extent not included in the calculation of net income, the amount of dividends and distributions paid by the Excluded Entities (as defined in the Amended Credit Agreement) to MEH during such period minus the sum of (j) any non-cash unrealized derivative income during such period, (k) any extraordinary, unusual or non-recurring cash or non-cash income and/or gains not included in the determination of operating income on MEH’s consolidated statements of profits and loss, (l) any extraordinary, unusual, or non-recurring non-cash income and/or gains included in the determination of operating income on MEH’s consolidated statements of profits and loss, all as determined on a consolidated basis for MEH and its subsidiaries (excluding the Excluded Entities except where an Excluded Entity is specifically included in the calculation) in accordance with GAAP.
Consolidated EBITDA is defined under the Amended Credit Agreement as net income plus (a) income tax expense, (b) interest expense, (c) depreciation, depletion, and amortization expense, (d) non-cash unrealized derivative expense, (e) any extraordinary, unusual, or non-recurring cash expenses and/or losses not exceeding $500,000 in the aggregate to the extent not included in the determination of operating income on MEH’s consolidated statements of profits and loss, (f) subject to Comerica’s approval, which may be granted or withheld in its reasonable credit judgment, any extraordinary, unusual, or non-recurring cash expenses or losses to the extent not included in the determination of operating income on MEH’s consolidated statements of profits and losses exceeding $500,000 in the aggregate, (g) any extraordinary, unusual, or non-recurring non-cash expenses and/or losses not included in the determination of operating income on MEH’s consolidated statements of profits and loss, and (h) any extraordinary, unusual, or non-recurring non-cash expenses and/or losses included in the determination of operating income on MEH’s consolidated statements of profits and loss, plus, to the extent not included in the calculation of net income, the amount of dividends and distributions paid by the Excluded Entities (as defined in the Amended Credit Agreement) to MEH during such period minus the sum of (j) any non-cash unrealized derivative income during such period, (k) any extraordinary, unusual or non-recurring cash or non-cash income and/or gains not included in the determination of operating income on MEH’s consolidated statements of profits and loss, (l) any extraordinary, unusual, or non-recurring non-cash income and/or gains included in the determination of operating income on MEH’s consolidated statements of profits and loss, all as determined on a consolidated basis for MEH and its subsidiaries (excluding the Excluded Entities except where an Excluded Entity is specifically included in the calculation) in accordance with GAAP.
In addition to development capital, we annually reinvest to maintain these facilities. • Impairment Loss: Expenses related to reductions in the carrying value(s) of fixed and/or intangible assets based on periodic evaluations whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. -53- Table of Contents • Transaction Costs: Transaction costs primarily consist of expenses incurred for due diligence and other activities related to potential acquisitions and other strategic transactions.
In addition to development capital, we annually reinvest to maintain these facilities. • Impairment Loss: Expenses related to reductions in the carrying value(s) of fixed and/or intangible assets based on periodic evaluations whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. • Transaction Costs: Transaction costs primarily consist of expenses incurred for due diligence and other activities related to potential acquisitions and other strategic transactions.
For discussion and analysis of our results for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on March 16, 2022.
For discussion and analysis of our results for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on March 16, 2023.
As to the remaining long lived asset groups, the Company further concluded, based on our annual cashflow assessment conducted for monitoring potential indicators of impairment, that the cashflows to be generated are significantly in excess of their carrying values of our operating sites primarily due to the lengths of the underlying gas rights agreements and the Company did not record any other impairments related to its cash flows assessment.
As to the remaining long lived asset groups, the Company further concluded, based on our annual cashflow assessment conducted for monitoring potential indicators of impairment, that the cashflows to be generated are significantly in excess of their carrying values of our operating sites primarily due to the lengths of the underlying gas rights agreements and the Company did not - 53 - Table of Contents record any other impairments related to its cash flows assessment.
From time to time, we may be parties to legal proceedings arising in the normal course of business which could increase our legal expenses. We expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2023.
From time to time, we may be parties to legal proceedings arising in the normal course of business which could increase our legal expenses. We expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2024.
Realized prices for RINs monetized in a year may not correspond directly to index prices due to the forward selling of commitments. Refer to Item 7A for an estimate of the impact of decreases in the realized price per RIN on the Company’s operating profit.
Realized prices for RINs monetized in a year may not correspond directly to index prices due to the forward selling of commitments. Refer to Item 7A for an estimate of the impact of decreases in the realized price per RIN on our operating profit.
The nature of the Company’s contracts may give rise to several types of variable consideration, such as periodic price increases. This variable consideration is outside of the Company’s influence as the variable consideration is dictated by the market. Therefore, the variable consideration associated with the long-term contracts is considered fully constrained.
The nature of our contracts may give rise to several types of variable consideration, such as periodic price increases. This variable consideration is outside of our influence as the variable consideration is dictated by the market. Therefore, the variable consideration associated with the long-term contracts is considered fully constrained.
CNG is commonly used by medium-duty fleets that are close to fueling stations, such as city fleets, local delivery trucks and waste haulers. -49- Table of Contents • Regulatory requirements, market pressure and public relations challenges increase the time, cost and difficulty of permitting new fossil fuel-fired facilities.
CNG is commonly used by medium-duty fleets that are close to fueling stations, such as city fleets, local delivery trucks and waste haulers. • Regulatory requirements, market pressure and public relations challenges increase the time, cost and difficulty of permitting new fossil fuel-fired facilities.
The revolving and term loans under the Amended Credit Agreement bear interest at the BSBY Margin or Base Rate Margin based on our Total Leverage Ratio (in each case, as those terms are defined in the Amended Credit Agreement). The Amended Credit Agreement contains customary covenants applicable to us and certain of our subsidiaries, including financial covenants.
The revolving and term loans under the Amended Credit Agreement bear interest at the BSBY Margin or Base Rate Margin based on our Total Leverage Ratio (in each case, as those terms are defined in the Amended Credit Agreement). - 49 - Table of Contents The Amended Credit Agreement contains customary covenants applicable to us and certain of our subsidiaries, including financial covenants.
Under the Amended Credit Agreement, we are required to maintain the following ratios: • a Total Leverage Ratio (as defined in the Amended Credit Agreement) of not more than 3.50 to 1.00 as of the end of any fiscal quarter from December 31, 2021 through June 29, 2023, 3.25 to 1.00 as of the end of any fiscal quarter from June 30, 2023 through June 29, 2024, and 3.00 to 1.00 as of the end of any fiscal quarter from June 30, 2024 and thereafter.; and • as of the end of each fiscal quarter, a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.2 to 1.0.
Under the Amended Credit Agreement, we are required to maintain the following ratios: • a Total Leverage Ratio (as defined in the Amended Credit Agreement) of not more than 3.25 to 1.00 as of the end of any fiscal quarter from June 30, 2023 through June 29, 2024, and 3.00 to 1.00 as of the end of any fiscal quarter from June 30, 2024 and thereafter.; and • as of the end of each fiscal quarter, a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.2 to 1.0.
As we continue to explore -61- Table of Contents strategic growth opportunities and while we have entered into nonbinding letters of intent for certain of these opportunities, we provide no assurances that our plans related to any or all of these strategic opportunities will progress to definitive agreements.
As we continue to explore strategic growth opportunities and while we have entered into nonbinding letters of intent for certain of these opportunities, we provide no assurances that our plans related to any or all of these strategic opportunities will progress to definitive agreements.
All revenue is recognized when we satisfy our performance obligation(s) under the contract (either implicit or explicit) by transferring the promised product to the customer either when (or as) the customer obtains control of the product. A performance -63- Table of Contents obligation is a promise in a contract to transfer a distinct product or service to a customer.
All revenue is recognized when we satisfy our performance obligation(s) under the contract (either implicit or explicit) by transferring the promised product to the customer either when (or as) the customer obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer.
Our debt before issuance costs (in thousands) is as follows: December 31, 2022 December 31, 2021 Term Loans $ 72,000 $ 80,000 Revolving Credit Facility — — Debt before debt issuance costs $ 72,000 $ 80,000 Amended Credit Agreement On December 21, 2021, the Company entered into the Fourth Amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement (the “Amended Credit Agreement”), with Comerica Bank (“Comerica”) and certain other financial institutions.
Our debt before issuance costs (in thousands) is as follows: December 31, 2023 December 31, 2022 Term loan $ 64,000 72,000 Revolving credit facility — — Debt before debt issuance costs $ 64,000 $ 72,000 Amended Credit Agreement On December 21, 2021, the Company entered into the Fourth Amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement (the “Amended Credit Agreement”), with Comerica Bank (“Comerica”) and certain other financial institutions.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAG EMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K.
At December 31, 2022, we had approximately 0.4 million MMBtus available for RIN generation and had approximately 0.7 million RINs generated and unsold. We had approximately 0.4 million MMBtus available for RIN generation and approximately 0.1 million RINs generated and unsold at December 31, 2021.
At December 31, 2023, we had approximately 0.4 million MMBtus available for RIN generation and had approximately 0.1 million RINs generated and unsold. We had approximately 0.4 million MMBtus available for RIN generation and approximately 0.7 million RINs generated and unsold at December 31, 2022.
Realized prices for Environmental Attributes monetized in a year may not correspond directly with that year’s production as attributes may be carried over and subsequently monetized. We may elect to not commit to transfer all available RINs in a given period which could impact our revenue and operating profit.
Realized prices for - 44 - Table of Contents Environmental Attributes monetized in a year may not correspond directly with that year’s production as attributes may be carried over and subsequently monetized. We may elect to not commit to transfer all available RINs in a given period which could impact our revenue and operating profit.
The Amended Credit Agreement, which is secured by substantially all of our assets and assets of certain of our subsidiaries, provides for a five-year $80,000 term loan and a five-year $120,000 revolving credit facility. As of December 31, 2022, $72,000 was outstanding under the term loan and we had no outstanding borrowings under the revolving credit facility.
The Amended Credit Agreement, which is secured by substantially all of our assets and assets of certain of our subsidiaries, provides for a five-year $80,000 term loan and a five-year $120,000 revolving credit facility. As of December 31, 2023, $64,000 was outstanding under the term loan and we had no outstanding borrowings under the revolving credit facility.
As of December 31, 2022, we were in compliance with all financial covenants related to the Amended Credit Agreement.
As of December 31, 2023, we were in compliance with all financial covenants related to the Amended Credit Agreement.
This section generally discusses our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This section generally discusses our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Although these arrangements serve a variety of our business purposes, we are not dependent on them to maintain our liquidity and capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on liquidity and capital resources.
Although these arrangements serve a variety of our business purposes, we are not dependent on them to maintain our liquidity and capital resources, and we are not aware of any circumstances that are reasonably likely to cause the off-balance sheet arrangements to have a material adverse effect on liquidity and capital resources. We have contractual obligations involving asset retirement obligations.
Montauk Ag Asset Acquisition In 2021, through a wholly-owned subsidiary Montauk Ag Renewables, we completed an asset purchase related to developing technology to recover residual natural resources from waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes in order to produce high quality renewable natural gas, bio-oil and biochar (the “Montauk Ag Renewables Acquisition”).
Montauk Ag Asset Acquisition In 2021, through a wholly-owned subsidiary Montauk Ag Renewables, we completed an asset purchase related to developing technology to recover residual natural resources from the waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes in order to produce high quality renewable natural gas and recapture nitrogen, phosphorus, and micronutrient organic fertilizer alternatives (the “Montauk Ag Renewables Acquisition”).
Our dairy farm project is expected to be awarded a more attractive CI by CARB, thereby generating LCFS credits at a multiple of those generated by our landfill projects. The sale of RINs, which is subject to market price fluctuations, accounts for a substantial portion of our revenues.
During the first quarter of 2023, our Pico dairy farm project was awarded a more attractive CI by CARB, thereby generating LCFS credits at a multiple of those generated by our landfill projects. The sale of RINs, which is subject to market price fluctuations, accounts for a substantial portion of our revenues.
For additional information regarding the Amended Credit Agreement, see the sections entitled “Description of Indebtedness and Note 13—Debt to our audited consolidated financial statements. Capital Expenditures We have historically funded our growth and capital expenditures with our working capital, cash flow from operations and debt financing.
For additional information regarding the Amended Credit Agreement, see the sections entitled “Description of Indebtedness" and Note 13 to our audited consolidated financial statements. Capital Expenditures We have historically funded our growth and capital expenditures with our working capital, cash flow from operations and debt financing. We expect our non-development 2024 capital expenditures to range between $14,000 and $17,000.
Accordingly, we requested that our Turkey location be approved to participate in the Piedmont Natural Gas Renewable Gas Pilot Program which is a step towards obtaining the New Renewable Energy Facility (“NREF”) designation under the North Carolina Utilities Commission.
The Turkey location was approved to participate in the Piedmont Natural Gas Renewable Gas Pilot Program which is a step towards obtaining the New Renewable Energy Facility (“NREF”) designation under the North Carolina Utilities Commission.
The JOBS Act allows emerging growth companies to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.
Emerging Growth Company We are an emerging growth company, as defined in the JOBS Act. The JOBS Act allows emerging growth companies to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.
Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments. -54- Table of Contents The following table summarizes the key operating metrics described above, which metrics we use to measure performance.
Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments. Comparison of Years Ended December 31, 2023 and 2022 The following table summarizes the key operating metrics described above, which metrics we use to measure performance.
The term loan amortizes in quarterly installments of $2,000 through December 2024, quarterly installments of $3,000 from 2025 through the maturity, with a final payment of $32,000, of December 21, 2026 with an interest rate of 4.12% and 2.91% at December 31, 2022 and 2021, respectively.
The term loan amortizes in quarterly installments of $2,000 through December 2024, quarterly installments of $3,000 from 2025 through the maturity, with a final payment of $32,000, on December 21, 2026. Interest rates were 6.11% and 4.12% at December 31, 2023 and 2022, respectively.
Intangible Assets Separately identifiable intangible assets are recorded at their fair values upon acquisition. We account for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Finite-lived intangible assets include interconnections, customer contracts, and trade names and trademarks.
See Note 14 to our audited consolidated financial statements for additional information. Intangible Assets Separately identifiable intangible assets are recorded at their fair values upon acquisition. We account for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Finite-lived intangible assets include interconnections, customer contracts, and trade names and trademarks.
As a result, we have approximately 3,890 RINs in inventory from 2022 gas production and have approximately 7,269 RINs in inventory from 2023 gas production as of the filing of this Report. -47- Table of Contents We have not entered into commitments to transfer these RINs in inventory nor have we entered into agreements to transfer future RINs generated from forecasted future production.
As a result, we have approximately 2,887 RINs in inventory from 2023 gas production and have approximately 7,250 RINs in inventory from 2024 gas production as of the filing of this Report. We have not entered into commitments to transfer these RINs in inventory nor have we entered into agreements to transfer future RINs generated from forecasted future production.
Recent Accounting Pronouncements For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements appearing elsewhere in this report.
Recent Accounting Pronouncements For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2 to our consolidated financial statements.
Historically, we have evaluated opportunities which we decided not to pursue further due to the prospective project not meeting our internal investment thresholds or a lack of success in a competitive bidding process. To the extent we seek to pursue a greater number of projects or bidding for projects becomes more competitive, our expenses may increase.
Historically, we have evaluated opportunities which we decided not to pursue further due to the prospective project not meeting our internal investment thresholds or a lack of success in a competitive bidding process.
Our RNG revenues from Environmental Attributes are recorded net of a portion of Environmental Attributes shared with off-take counterparties as consideration for such counterparties using the RNG as a transportation fuel.
Our RNG revenues from Environmental Attributes are recorded net of a portion of Environmental Attributes shared with off-take counterparties as consideration for such counterparties using the RNG as a transportation fuel. We have certain pathway provider sharing arrangements expiring throughout 2024.
Key Trends Market Trends Affecting the Renewable Fuel Market We believe rising demand for RNG is attributable to a variety of factors, including growing public support for renewable energy, U.S. governmental actions to increase energy independence, environmental concerns increasing demand for natural gas-powered vehicles, job creation, and increasing investment in the renewable energy sector.
Construction on this capital project commenced in 2022 and the improvements became commercially operational during the second half of 2023. - 40 - Table of Contents Key Trends Market Trends Affecting the Renewable Fuel Market We believe rising demand for RNG is attributable to a variety of factors, including growing public support for renewable energy, U.S. governmental actions to increase energy independence, environmental concerns increasing demand for natural gas-powered vehicles, job creation, and increasing investment in the renewable energy sector.
We intend to fund development projects using cash flows from operations and borrowings under our revolving credit facility. We believe that we will have sufficient cash flows from operations and borrowing availability under our credit facility to meet our debt service obligations and anticipated required capital expenditures (including for projects under development) for the next 12 to 24 months.
We believe that we will have sufficient cash flows from operations and borrowing availability under our credit facility to meet our debt service obligations and anticipated required capital expenditures (including for projects under development) for the next 12 to 24 months. However, we are subject to business and operational risks that could adversely affect our cash flows and liquidity.
We expect our non-development 2023 capital expenditures to range between $15,000 and $18,000. Our 2023 capital plans include annual preventative maintenance expenditures, annual wellfield expansion projects, critical spare expenditures, and other specific facility improvements. Additionally, we currently estimate that our existing 2023 development capital expenditures will range between $70,000 and $100,000.
Our 2024 capital plans include preventative maintenance expenditures, wellfield expansion projects, critical spare expenditures, and other specific facility improvements. Additionally, we currently estimate that our existing 2024 development capital expenditures will range between $135,000 and $150,000.
Operations at these facilities have resumed. • The landfill host at our McCarty facility recently changed its wellfield collection system which has contributed to elevated nitrogen in the feedstock received by our facility. Additionally, the landfill host modified the wellfield bifurcation approach which has impacted the quantity of feedstock received at the facility.
Mitigation efforts related to wellfield environmental factors will continue into 2024. • The landfill host at our McCarty facility recently changed its wellfield collection system which has contributed to elevated nitrogen in the feedstock received by our facility. Additionally, the landfill host modified the wellfield bifurcation approach which has impacted the quantity of feedstock received at the facility.
If we ultimately enter into definitive agreements for any of these opportunities, we expect to incur material capital expenditures related to either acquisitions costs or development costs, or both.
Development opportunities include: up to five LFG RNG sites, waste water treatment RNG, and CNG distribution opportunities. If we ultimately enter into definitive agreements for any of these opportunities, we expect to incur material capital expenditures related to either acquisitions costs or development costs, or both.
During the fourth quarter of 2022 we began to relocate the reactor in Magnolia, NC to the Turkey, NC location to centralize processing at one location. As part of the centralization and in connection with the optimization of the reactor, we assessed various assets of the Magnolia, NC reactor as no longer being applicable to the improved reactor process.
And as part of the centralization and in connection with the optimization of the reactor, we assessed various assets of the Magnolia, NC reactor as no longer being applicable to the improved reactor process.
We assess the impairment of intangible assets that have indefinite lives at least on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company has classified these NOx allowances as held for sale as of December 31, 2021 and sold the NOx allowances in 2022.
We assess the impairment of intangible assets that have indefinite lives at least on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
Factors Affecting Operating Expenses Our operating expenses include royalties, transportation, gathering and production fuel expenses, project operating and maintenance expenses, general and administrative expenses, depreciation and amortization, net loss (gain) on sale of assets, impairment loss and transaction costs. • Project Operating and Maintenance Expenses: Operating and maintenance expenses primarily consist of expenses related to the collection and processing of biogas, including biogas collection system operating and maintenance expenses, biogas processing, operating and maintenance expenses, and related labor and overhead expenses.
Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments. - 43 - Table of Contents Factors Affecting Operating Expenses Our operating expenses include royalties, transportation, gathering and production fuel expenses, project operating and maintenance expenses, general and administrative expenses, depreciation and amortization, net loss (gain) on sale of assets, impairment loss and transaction costs. • Project Operating and Maintenance Expenses: Operating and maintenance expenses primarily consist of expenses related to the collection and processing of biogas, including biogas collection system operating and maintenance expenses, biogas processing, operating and maintenance expenses, and related labor and overhead expenses.
Due to these factors, we place a primary focus on managing production volumes and operating and maintenance expenses as these factors are more controllable by us. -51- Table of Contents RNG Production Our RNG production levels are subject to fluctuations based on numerous factors, including: Disruptions to Production: Disruptions to waste placement operations at our active landfill sites, severe weather events, failure or degradation of our or a landfill operator’s equipment or interconnection or transmission problems could result in a reduction of our RNG production.
RNG Production Our RNG production levels are subject to fluctuations based on numerous factors, including: Disruptions to Production: Disruptions to waste placement operations at our active landfill sites, severe weather events, or failure or degradation of our or a landfill operator’s equipment or interconnection or transmission problems could result in a reduction of our RNG production.
As a result, we recorded an impairment charge of approximately $1,393 related to assets originally acquired in the May 2021 Montauk Ag Renewables Acquisition we determined were no longer usable.
As a result, we recorded an impairment charge of approximately $1,393 in 2022 related to assets originally acquired in the May 2021 Montauk Ag Renewables Acquisition we determined were no longer usable. We continue to develop the opportunities with Montauk Ag Renewables and can give no assurances that our plans related to this acquisition will meet our expectations.
The Company has contractual obligations involving asset retirement obligations. See Note 9 in the Consolidated Financial Statements for further information regarding the asset retirement obligations. The Company has contractual obligations under our debt agreement, including interested payments and principal repayments.
See Note 9 to our audited consolidated financial statements for further information regarding the asset retirement obligations. We have contractual obligations under our debt agreement, including interested payments and principal repayments. See Note 13 to our audited consolidated financial statements for further discussion of the contractual commitments under our debt agreements, including the timing of principal repayments.
Royalty Payments Royalties, transportation, gathering, and production fuel expenses in 2022 were $44,163, an increase of 15,480 (54.0%) compared to $28,683 in 2021. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes.
Royalty Payments Royalties, transportation, gathering, and production fuel expenses in 2023 were $34,861, a decrease of 9,302 (21.1%) compared to $44,163 in 2022. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes.
We perform various sensitivities around price estimates and our price estimates for certain environmental attributes are currently approximately 15-25% lower than current index prices. -65- Table of Contents Finite-Lived Asset Impairment In accordance with FASB ASC Topic 360, Property, Plant and Equipment and intangible assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Finite-Lived Asset Impairment In accordance with FASB ASC Topic 360, Property, Plant and Equipment and intangible assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
We continue to work with our engineer of record through the optimization of improvements to the now patented reactor technology. However, we have not completed our improvements, and we have not reached commercial operations at the Turkey, NC location. The improvements to the reactor technology are intended to be deployed at the Turkey, NC location.
However, we have not completed our improvements, and we have not reached commercial operations at the Turkey, NC location. The improvements to the reactor technology are intended to be deployed at the Turkey, NC location. In 2023, we completed the relocation of the reactor in Magnolia, NC to the Turkey, NC location to centralize processing at one location.
Renewable Electricity Generation Revenues We produced 190 MWh in Renewable Electricity in 2022, an increase of approximately 7 MWh (3.8%) compared to 183 MWh in 2021. In 2022, our Security facility produced 10 MWh in 2022 compared to zero production in 2021 as a result of the prior period engine restoration project.
Renewable Electricity Generation Revenues We produced 194 MWh in Renewable Electricity in 2023, an increase of approximately 4 MWh (2.1%) compared to 190 MWh in 2022. Our Security facility produced 5 MWh more in 2023 compared to 2022 as a result of the prior period engine maintenance.
Separate from our cash flows assessment, we identified discrete events and recorded impairment of $2,719 and $1,191 for 2022 and 2021, respectively. See Note 3 in the audited condensed consolidated financial statements for further information related to asset impairments. Emerging Growth Company We are an emerging growth company, as defined in the JOBS Act.
Separate from our cash flows assessment, we identified discrete events and recorded impairment of We identified discrete events and recorded impairment of $902 and $4,852 for 2023 and 2022, respectively. See Note 3 to our audited consolidated financial statements for further information related to asset impairments.
Recent Developments RINs Generated but Unsold Our profitability is highly dependent on the market price of Environmental Attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit.
As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. We determined not to transfer a significant amount of D3 RINs generated and available for transfer during the first quarter of 2024.
We manage against the risk of these fluctuations through forward sales of RINs, although currently we only sell RINs in the calendar year they are generated in the following calendar year. We did not forward sell a significant portion of expected 2023 RIN generation.
We manage against the risk of these fluctuations through forward sales of RINs, although currently we only sell RINs in the calendar year they are generated. We have not entered into commitments to transfer significant RINs generated from 2024 production.
A second REG -59- Table of Contents site was impaired for $1,393 due to discrete conclusion that certain assets acquired in the May 2021 Montauk Ag Renewables Acquisition would no longer be utilized.
In 2022, we recorded an impairment of $2,133 for a REG site wherein the forecast future cash flows did not exceed the carrying value of the site’s long lived assets. A second REG site was impaired for $1,393 due to discrete conclusion that certain assets acquired in the May 2021 Montauk Ag Renewables Acquisition would no longer be utilized.
Contractual Obligations and Commitments Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under -62- Table of Contents GAAP. Our off-balance sheet arrangements are limited to the outstanding letters of credit and operating leases described below.
The increase is primarily related to the Fourth Amended and Restated Loan Agreement and Secured Promissory Note amended during 2023. Contractual Obligations and Commitments Off-balance sheet arrangements comprise those arrangements that may potentially impact our liquidity, capital resources and results of operations, even though such arrangements are not recorded as liabilities under GAAP.
At the project level, this includes all labor and benefit costs, ongoing corrective and proactive maintenance, project level utility charges, rent, health and safety, employee communication, and other general project level expenses. • Royalties, Transportation, Gathering and Production Fuel Expenses: Royalties represent payments made to our facility hosts, typically structured as a percentage of revenue.
At the project level, this includes all labor and benefit costs, ongoing corrective and proactive maintenance, project level utility charges, rent, health and safety, employee communication, and other general project level expenses.
Pricing Our Renewable Natural Gas and Renewable Electricity Generation segments’ revenues are primarily driven by the prices under our off-take agreements and PPAs and the amount of RNG and Renewable Electricity that we -52- Table of Contents produce.
Delays in commencement of production or extended commissioning issues at a new project or a conversion project would delay any realization of production from that project. Pricing Our Renewable Natural Gas and Renewable Electricity Generation segments’ revenues are primarily driven by the prices under our off-take agreements and PPAs and the amount of RNG and Renewable Electricity that we produce.
Our fuel supply agreements are typically structured as 20-year contracts, providing long-term visibility into the margin impact of future royalty payments. Depreciation Depreciation and amortization in 2022 were $20,700, a decrease of $2,169 (9.5%) compared to $22,869 in 2021. The decrease is associated with assets remaining in service being fully amortized.
Our fuel supply agreements are typically structured as 20-year contracts, providing long-term visibility into the margin impact of future royalty payments. - 47 - Table of Contents Depreciation Depreciation and amortization in 2023 was $21,158, an increase of $458 (2.2%) compared to $20,700 in 2022. The increase is associated with the timing of capital investments placed into service in 2023.
Renewable Electricity Generation operating loss for 2022 was $7,019, an increase of $3,929 (127.2%) compared to an operating loss of $3,090 in 2021. Non-GAAP Financial Measures: The following table presents EBITDA and Adjusted EBITDA, non-GAAP financial measures for each of the periods presented below.
RNG operating profit for 2023 was $59,286, a decrease of $35,153 (37.2%) compared to $94,439 in 2022. Renewable Electricity Generation operating loss for 2022 was $595, a decrease of $6,424 (91.5%) compared to $7,019 in 2022. Non-GAAP Financial Measures: The following table presents EBITDA and Adjusted EBITDA, non-GAAP financial measures for each of the periods presented below.
For the year ended December 31, 2022, income and adjustments to income from operating activities provided $75,832 compared to $46,549 in 2021. Working capital and other assets and liabilities provided $5,234 in the current period compared to $3,671 being used in the prior year period.
For the year ended December 31, 2023, income and adjustments to income from operating activities provided $49,896 compared to $75,832 in 2022. Working capital and other assets and liabilities used $8,843 in 2023 compared to $5,234 being provided in 2022. When we commission new sites, we invest capital to ramp up operations prior to the project generating revenue.
Impairment loss We calculated and recorded impairment losses of $4,852 for 2022, an increase of $3,661 (307.4%) compared to $1,191 for 2021. The primary driver of this increase relates to an impairment of $2,133 for a REG site wherein the forecast future cash flows did not exceed the carrying value of the site’s long lived assets.
For the year ended December 31, 2022, we recorded an impairment of $2,133 for a REG site wherein the forecast future cash flows did not exceed the carrying value of the site’s long lived assets.
Variations in the quality of the biogas could affect our RNG production levels. At three of our projects, we operate the wellfield collection system, which allows greater control over the quality and consistency of the collected biogas. At two of our projects, we have operating and management agreements by which we earn revenue for managing the wellfield collection systems.
The quality of the waste at our landfill project sites is subject to change based on the volume and type of waste accepted. Variations in the quality of the biogas could affect our RNG production levels. At three of our projects, we operate the wellfield collection system, which allows greater control over the quality and consistency of the collected biogas.
Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for 2022 were $1,824, an increase of $73 (4.2%) compared to $1,751 in 2021 and as a percentage of Renewable Electricity Generation segment, revenues decreased from 11.3% to 10.6%.
Also, our Tulsa facility operating and maintenance expenses increased approximately $532 as a result of scheduled preventative maintenance interval costs and wellfield operational maintenance Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for 2023 were $1,985, an increase of $161 (8.8%) compared to $1,824 in 2022 and as a percentage of Renewable Electricity Generation segment revenues increased from 10.6% to 10.8%.
For 2022, our capital expenditures were $22,277, of which $6,860 and $3,555 were related to the Pico facility digestion capacity increase and Montauk Ag Renewables in North Carolina, respectively. For 2021, our capital expenditures were $9,986, of which approximately $2,428 were related to optimization projects at our recently commissioned facilities and $1,000 related to the Pico Feedstock Amendment.
For 2022, our capital expenditures were $22,277, of which $6,860 and $3,555 were related to the Pico facility digestion capacity increase and Montauk Ag Renewables in North Carolina, respectively. Our net cash flows used in financing activities of $9,330 for 2023 increased by $1,051 compared to cash used in financing activities of $8,279 in 2022.
In the first quarter of 2023 we signed a receipt interconnection agreement with Piedmont Natural Gas for the Turkey, NC location. This agreement is structured to coincide with the development timeline at the Turkey, NC location. We are also in varying stages of discussions with potential power purchasers.
Obtaining this designation could have an impact on the timing of utility infrastructure at the location. We signed a receipt interconnection agreement with Piedmont Natural Gas for the Turkey, NC location. This agreement is structured to coincide with the development timeline at the Turkey, NC location.
The Company accounts for stock-based compensation related to grants made through its equity and incentive compensation plan under FASB ASC 718. For more information, see Note 15 to our audited consolidated financial statements. • Depreciation and Amortization: Expenses related to the recognition of the useful lives of our intangible and fixed assets.
For more information, see Note 15 to our audited consolidated financial statements. • Depreciation and Amortization: Expenses related to the recognition of the useful lives of our intangible and fixed assets. We spend significant capital to build and own our facilities.
The primary driver for this increase relates to an increase of 70.2% in realized RIN pricing during 2022 of $3.25 compared to $1.91 in 2021. Additionally, the natural gas index price increased approximately 72.9% in 2022 and was $6.64 compared to $3.84 in 2021.
The primary driver for this decrease relates to the average realized RIN price decrease of approximately 16.6% in 2023 of $2.71 compared to $3.25 in 2022. Also contributing to this decrease was the natural gas index price decrease of approximately 58.7% during 2023 of $2.74 compared to $6.64 in 2022.
Certain of our contracts require these letters of credit to be issued to provide additional performance assurances. There have been no usage against these outstanding letters of credit. During 2021, we did not have off-balance sheet arrangements other than outstanding letters of credit of approximately $3,905. The Company has contractual obligations involving operating leases.
During 2023, we had $2,505 of off-balance sheet arrangements of outstanding letters of credit. These letters of credit reduce the borrowing capacity of our revolving credit facility under our Amended Credit Agreement. Certain of our contracts require these letters of credit to be issued to provide additional performance assurances. There have been no usage against these outstanding letters of credit.
Our revenues are priced based on published index prices which can be influenced by factors outside our control, such as market impacts on commodity pricing and regulatory developments. With our royalty payments structured as a percentage of revenue, royalty payments fluctuate with changes in revenues.
Our operating revenues are priced based on published index prices which can be influenced by factors outside our control, such as market impacts on commodity pricing and regulatory developments. Strategic decisions to not monetize RINs available to be transferred will have an impact on our operating revenues and operating profit.
Also in 2022, we recorded an impairment at an RNG facility for approximately $1,108 due to the specific identification of certain assets no longer being capable of use as designed. For year ended December 31, 2021, we recorded an impairment of $626 related to a landfill host request to decommission a previously converted RNG site.
Also in 2022, we recorded an impairment at an RNG facility for approximately $1,108 due to the specific identification of certain assets no longer being capable of use as designed. Other Expenses Other expenses in 2023 were $5,274, an increase of $3,950 (298.4%) compared to $1,324 in 2022.
The amendment will increase the amount of feedstock supplied to the facility for processing over a one to three-year period. We have paid $3,500 in cash under the terms of the Pico Feedstock Amendment. -48- Table of Contents Under the Pico Feedstock Amendment the dairy began delivering the first and second increases in feedstock during the third quarter of 2022.
Pico Digestion Capacity Increase Related to our Pico feedstock amendment, which increased the amount of feedstock supplied to the facility for processing over a one to four-year period (the “Pico Feedstock Amendment”), the dairy began delivering the first and second increases in feedstock in 2022 and we made three payments to the dairy as required in the Pico Feedstock Agreement.
The majority of our 2023 development capital expenditures are related to our Pico digestion capacity increase, the ongoing development of Montauk Ag Renewables and the second Apex facility. Our Amended Credit Agreement provides us with an $120,000 revolving credit facility, with a $75,000 accordion option, providing us with access to additional capital to implement our acquisition and development strategy.
Our Amended Credit Agreement provides us with a $120,000 revolving credit facility, with a $75,000 accordion option, providing us with access to additional capital to implement our acquisition and development strategy. We are currently in various stages of discussions regarding a variety of development and strategic growth opportunities.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability by tax jurisdiction. -64- Table of Contents See Note 14, “Income Taxes” to our audited consolidated financial statements included elsewhere in this report.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability by tax jurisdiction. - 52 - Table of Contents We evaluate our deferred tax assets at reporting periods on a jurisdictional basis to determine whether adjustments to the valuation allowance are appropriate considering changes in facts or circumstances.
Cash Flow The following table presents information regarding our cash flows and cash equivalents for years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Net cash flows provided by operating activities $ 81,066 $ 42,879 Net cash flows used in investing activities (20,794 ) (19,474 ) Net cash flows (used in) provided by financing activities (8,279 ) 8,649 Net increase in cash and cash equivalents 51,993 32,054 Restricted cash, end of period 429 347 Cash and cash equivalents and restricted, end of period 105,606 53,613 For the year ended December 31, 2022, we generated $81,066 of cash from operating activities, an 89.1% increase from the prior year ended December 31, 2021 of $42,879.
We believe that our existing cash and cash equivalents, cash generated from operations, and credit availability under our Amended Credit Agreement would allow us to pursue and close on our identified strategic growth opportunities. - 50 - Table of Contents Cash Flow The following table presents information regarding our cash flows and cash equivalents for years ended December 31, 2023 and 2022: For the year ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ 41,053 $ 81,066 Investing activities (63,087 ) (20,794 ) Financing activities (9,330 ) (8,279 ) Net (decrease) increase in cash and cash equivalents (31,364 ) 51,993 Restricted cash, end of the period 431 429 Cash and cash equivalents, end of period 74,242 105,606 For the year ended December 31, 2023, we generated $41,053 of cash from operating activities, a 49.4% decrease compared to $81,066 for the year ended December 31, 2022.
We strive to proactively address any issues that may arise through preventative maintenance, process improvement and flexible redeployment of equipment to maximize production and useful life. • In October 2020, California wildfires forced our Bowerman facility to temporarily shut down.
We strive to proactively address any issues that may arise through preventative maintenance, process improvement and flexible redeployment of equipment to maximize production and useful life. • Many of our operating locations are in areas that experienced lower than historical rainfall, higher than average temperatures, or both, during the second half of 2023.
(4) Represents gas production which has not been dispensed to generate RINs. -55- Table of Contents Results of Operations Comparison of Years Ended December 31, 2022 and 2021 The following table summarizes our revenues, expenses and net income for the periods set forth below: (in thousands, except per share data) For the year ended December 31, 2022 2021 Change Change% Total operating revenues $ 205,559 $ 148,127 $ 57,432 38.8 % Operating Expenses: Operating and maintenance expenses 57,267 49,477 7,790 15.7 % General and administrative expenses 34,139 42,552 (8,413 ) (19.8 )% Royalties, transportation, gathering and production fuel 44,163 28,683 15,480 54.0 % Depreciation and amortization 20,700 22,869 (2,169 ) (9.5 )% Gain on insurance proceeds (313 ) (332 ) 19 (5.7 )% Impairment loss 4,852 1,191 3,661 307.4 % Transaction costs 185 352 (167 ) (47.4 )% Total operating expenses $ 160,993 $ 144,792 $ 16,201 11.2 % Operating profit $ 44,566 $ 3,335 $ 41,231 1236.3 % Other expenses: 1,324 3,702 (2,378 ) (64.2 )% Income tax expense 8,048 4,161 3,887 93.4 % Net income (loss) $ 35,194 $ (4,528 ) $ 39,722 877.3 % Revenues for the Years Ended December 31, 2022 and 2021 Total revenues in 2022 were $205,559, an increase of $57,432 (38.8%) compared to $148,127 in 2021.
(4) Represents gas production on which RINs are not generated. - 45 - Table of Contents Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table summarizes our revenues, expenses and net income for the periods set forth below: For the year ended December 31, Change 2023 2022 Change % Total operating revenues $ 174,904 $ 205,559 $ (30,655 ) (14.9 )% Operating expenses: Operating and maintenance expenses 59,762 57,267 2,495 4.4 % General and administrative expenses 34,403 34,139 264 0.8 % Royalties, transportation, gathering and production fuel 34,861 44,163 (9,302 ) (21.1 )% Depreciation, depletion and amortization 21,158 20,700 458 2.2 % Gain on insurance proceeds — (313 ) 313 (100.0 )% Impairment loss 902 4,852 (3,950 ) (81.4 )% Transaction costs 178 185 (7 ) (3.8 )% Total operating expenses 151,264 160,993 (9,729 ) (6.0 )% Operating income $ 23,640 $ 44,566 $ (20,926 ) (47.0 )% Other expenses (income): 5,274 1,324 3,950 298.4 % Income before income taxes: 18,366 43,242 (24,876 ) (57.5 )% Income tax expense 3,418 8,048 (4,630 ) (57.5 )% Net income $ 14,948 $ 35,194 $ (20,246 ) (57.5 )% Revenues for the Years Ended December 31, 2023 and 2022 Total revenues in 2023 were $174,904, a decrease of $30,655 (14.9%) compared to $205,559 in 2022.
Second Apex RNG Facility In August 2022, we announced the planned construction of a second RNG processing facility at the Apex landfill. This project is being driven by projections in biogas feedstock availability from the host landfill. We anticipate an approximate 40% increase in RNG processing capacity with the addition of the second facility.
Second Apex RNG Facility In 2022, we announced the planned construction of a second RNG processing facility at the Apex landfill. Currently, the landfill host is providing biogas feedstock in excess of our existing processing capacity, therefore triggering the addition of a second facility based on our existing fuel supply agreement.
Included within these volumes are 0, 600, and 1,200 million volumes of eRINs generated from renewable electricity for 2023, 2024, and 2025, respectively. Changes to the LCFS program require annual verification of the CI score assigned to a project. Annual verification could significantly affect the profitability of a project, particularly in the case of a livestock farm project.
These projects will be required to demonstrate physical deliverability requirements beginning in 2041. Changes to the LCFS program require annual verification of the CI score assigned to a project. Annual verification could significantly affect the profitability of a project, particularly in the case of a livestock farm project.
We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions.
As of each reporting date, management considers new evidence, both positive and negative, when determining the future realization of our deferred tax assets. We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions.
However, we are subject to business and operational risks that could adversely affect our cash flows and liquidity. At December 31, 2022, we had debt before debt issuance costs of $72,000, compared to debt before debt issuance costs of $80,000 at December 31, 2021.
At December 31, 2023, we had debt before debt issuance costs of $64,000, compared to debt before debt issuance costs of $72,000 at December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk In order to maintain liquidity and fund a portion of development and working capital needs, we have the Amended Credit Facility, which bears a variable interest rate based on BSBY (the Bloomberg Short-Term Bank Yield Index rate plus a margin based on our Total Leverage Ratio (in each case, as those terms are defined in the Amended Credit Agreement).
Biggest changeThe estimated annual impact of a hypothetical 10% decrease in the market price of wholesale gas would have a negative effect on our operating profit of approximately $0.8 million. - 54 - Table of Contents Interest Rate Risk In order to maintain liquidity and fund a portion of development and working capital needs, we have the Amended Credit Facility, which bears a variable interest rate based on BSBY (the Bloomberg Short-Term Bank Yield Index rate plus a margin based on our Total Leverage Ratio (in each case, as those terms are defined in the Amended Credit Agreement).
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to changes in interest rates. -67- Table of Contents Based on our analysis, which may differ from actual results, a hypothetical increase in our effective borrowing rate of 10% would not have a material effect on our annual interest expenses and consolidated financial statements.
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to changes in interest rates. Based on our analysis, which may differ from actual results, a hypothetical increase in our effective borrowing rate of 10% would not have a material effect on our annual interest expenses and consolidated financial statements.
The estimated annual impact of a hypothetical 10% decrease in the average realized price per RIN would have a negative effect on our operating profit of approximately $7.3 million. RNG and Renewable Electricity Pricing Risk The price of RNG and Renewable Electricity changes in relation to the market prices of wholesale gas and wholesale electricity, respectively.
The estimated annual impact of a hypothetical 10% decrease in the average realized price per RIN would have a negative effect on our operating profit of approximately $10.9 million. RNG and Renewable Electricity Pricing Risk The price of RNG and Renewable Electricity changes in relation to the market prices of wholesale gas and wholesale electricity, respectively.
For information about our realized or unrealized gains or losses with respect to our derivative transactions and the fair value of such financial instruments, see Note 10, “Derivative Instruments” and Note 11, “Fair Value of Financial Instruments” to our audited consolidated financial statements.
For information about our realized or unrealized gains or losses with respect to our derivative transactions and the fair value of such financial instruments, see Note 10 and Note 11 to our audited consolidated financial statements.
Our analysis. which may differ from actual results, was based on a 2023 estimated NYMEX average Index Price of approximately $3.162/MMBtu and our actual 2022 gas production sold pursuant to contracts that do not provide for a fixed or floor price.
Our analysis, which may differ from actual results, was based on a 2024 estimated NYMEX average Index Price of approximately $2.373/MMBtu and our actual 2023 gas production sold pursuant to contracts that do not provide for a fixed or floor price.
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to RIN prices. Our analysis, which may differ from actual results, was based on a 2023 estimated D3 RIN Index price of approximately $2.08 and our actual 2022 RINs sold.
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to RIN prices. Our analysis, which may differ from actual results, was based on a 2024 estimated D3 RIN Index price of approximately $3.06 and our actual 2023 RINs sold.
We use interest rate swaps to set the variable interest rates under the Amended Credit Facility at a fixed interest rate to manage our interest rate risk. As of December 31, 2022, we had $72.0 million outstanding under the Amended Credit Facility. Our weighted average interest rate on variable debt balances during 2022 was approximately 4.12%.
We use interest rate swaps to set the variable interest rates under the Amended Credit Facility at a fixed interest rate to manage our interest rate risk. As of December 31, 2023, we had $64.0 million outstanding under the Amended Credit Facility. Our weighted average interest rate on variable debt balances during 2023 was approximately 6.11%.
We are also subject to credit risk due to concentration of our RNG receivables with a limited number of significant customers. This concentration increases our exposure to credit risk on our receivables, since the financial insolvency of these customers could have a significant impact on our results of operations. -68- Table of Contents http://fasb.org/us-gaap/2022#NetIncomeLosshttp://fasb.org/us-gaap/2022#AssetImpairmentChargeshttp://fasb.org/us-gaap/2022#AssetImpairmentCharges
We are also subject to credit risk due to concentration of our RNG receivables with a limited number of significant customers. This concentration increases our exposure to credit risk on our receivables, since the financial insolvency of these customers could have a significant impact on our results of operations. - 55 - Table of Contents
In particular, during 2022 and 2020, we entered into derivative transactions to hedge our exposure to the market price of wholesale gas. We did not enter into a 2023 derivative contract to hedge a portion of our RNG production.
In particular, during 2022, we entered into derivative transactions to hedge our exposure to the market price of wholesale gas. We did not enter into a 2023 derivative contract to hedge a portion of our RNG production. We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to the market price of wholesale gas.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are exposed to market risks related to Environmental Attribute pricing, commodity pricing, changes in interest rates and credit risk with our contract counterparties.
ITEM 7A. QUANTITATIVE AND QU ALITATIVE DISCLOSURES ABOUT MARKET RISK. We are exposed to market risks related to Environmental Attribute pricing, commodity pricing, changes in interest rates and credit risk with our contract counterparties. We currently have no foreign exchange risk and do not hold any derivatives or other financial instruments purely for trading or speculative purposes.
Any realized or unrealized gains or losses from our derivative transactions are reported within corporate revenue in our consolidated financial statements.
We employ various strategies to economically hedge these market risks, including derivative transactions relating to commodity pricing and interest rates. Any realized or unrealized gains or losses from our derivative transactions are reported within corporate revenue in our consolidated financial statements.
Removed
We currently have no foreign exchange risk and do not hold any derivatives or other financial instruments purely for trading or speculative purposes. -66- Table of Contents We employ various strategies to economically hedge these market risks, including derivative transactions relating to commodity pricing and interest rates.
Removed
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to the market price of wholesale gas.
Removed
The estimated annual impact of a hypothetical 10% decrease in the market price of wholesale gas would have a negative effect on our operating profit of approximately $1.1 million.

Other MNTK 10-K year-over-year comparisons