Equity Method Investments
|9 Months Ended|
Sep. 30, 2022
|Equity Method Investments and Joint Ventures [Abstract]|
|Equity Method Investments||
NOTE 7 – Equity Method Investments
As a result of the Aria Merger, the Company holds 50% interest in two joint ventures, Mavrix, LLC (“Mavrix”) and Sunshine Gas Producers, LLC (“SGP”), which are accounted for using the equity method due to the joint control by both the Company and unrelated parties with ownership interest in each entity.
Under the terms of the original Mavrix, LLC Contribution Agreement dated September 30, 2017, the Company is required to make an earn-out payment to its joint venture partner holding the other 50% membership in Mavrix in an amount up to $9.55 million. The earn-out payment represents additional consideration for the Company’s equity interest in Mavrix and is based on the performance of certain projects owned by Mavrix through the earn-out period, which ended September 30, 2022. In February 2022, the Mavrix, LLC Contribution Agreement was amended to exclude certain upgrade and optimization capital expenditures incurred for one specific project from the earn-out calculation and to add a maintenance expenditure cap. In September 2022, the Mavrix, LLC Contribution Agreement was amended a second time to exclude optimization capital expenditures for an additional project and clarify inclusion of certain control room capital expenditures for the final earn-out calculation. Based on the amended terms, the Company has accrued a liability of $7.9 million related to the earn-out payment as of September 30, 2022, and this amount is reflected in the accompanying balance sheet in accrued and other current liabilities. The calculated earn-out amount has been agreed to by the joint venture partner and is expected to be paid in the first quarter of 2023.
The summarized financial information for the Mavrix and SGP equity method investments is as follows:
The Company’s carrying values of the Mavrix and SGP investments also include basis differences totaling $151.4 million as of September 30, 2022 primarily as a result of the fair value measurements recorded as part of the Aria Merger. Amortization of the basis differences reduced equity investment income by $2.6 million and $7.7 million for the three and nine months ended September 30, 2022, respectively, and $0.4 million for both the three and nine months ended September 30, 2021.
On December 30, 2021, the Company entered into a new joint venture. The Company contributed $7.5 million in cash in 2021 into this newly created entity, Saturn Renewables LLC ("Saturn"), in exchange for a 50% interest, and the joint venture acquired gas rights at two landfill sites to develop RNG facilities. The Company is the operator of Saturn’s day-to-day operations and accounts for its investment in Saturn using the equity method. The Company has contributed an additional $8.0 million to the Saturn joint venture during the nine months ended September 30, 2022, and the carrying value of Saturn was $15.5 million as of September 30, 2022.In addition, the Company also owns several smaller investments accounted for using the equity method of accounting totaling $7.0 million and $7.1 million as of September 30, 2022 and December 31, 2021, respectively
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef