Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

v3.22.2.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
NOTE 8 – Goodwill and Intangible Assets
Goodwill
At September 30, 2022 and December 31, 2021, the Company had goodwill of $47.8 million and $29.2 million, respectively, all of which is allocated to the RNG segment. The goodwill is primarily associated with the acquisitions of Aria and INGENCO. As discussed in “Note 4 - Business Combinations and Reverse Recapitalization,” changes in goodwill during the nine months ended September 30, 2022 include an increase of $18.0 million related to the INGENCO acquisition and an increase of $0.6 million related to finalizing the Aria Merger allocation. The Company performs its annual impairment testing on October 1 of each year or as circumstances change or necessitate. There have been no material changes related to the Company’s impairment assessments since its fiscal year ended December 31, 2021.
Intangible Assets
Intangible assets consist of biogas rights agreements, off-take agreements, O&M contracts, an RNG purchase contract, customer relationships and trade names that were recognized as a result of the allocation of the purchase price under business acquisitions based on their future value to the Company, and such intangible assets will be amortized over their estimated useful lives. Biogas rights agreements also include the cost of agreements entered into with biogas site hosts. The biogas rights agreements have various renewal terms in their underlying contracts that are factored into the useful lives when amortizing the intangible asset.
Intangible assets consist of the following as of September 30, 2022 and December 31, 2021:
(in thousands)
September 30, 2022
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
$ 994,170  $ 31,387  $ 962,783 
Electricity off-take agreements 28,631  3,202  25,429 
O&M contracts
8,620  604  8,016 
RNG purchase contract 10,290  6,956  3,334 
Trade names and customer relationships
500  275  225 
Total
$ 1,042,211  $ 42,424  $ 999,787 
(in thousands)
December 31, 2021
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
$ 603,868  $ 8,237  $ 595,631 
Electricity off-take agreements 26,511  749  25,762 
O&M contracts
8,620  173  8,447 
RNG purchase contract 10,290  1,959  8,331 
Trade names and customer relationships
500  200  300 
Total
$ 649,789  $ 11,318  $ 638,471 
Total amortization expense was approximately $9.6 million and $26.1 million for the three and nine months ended September 30, 2022, respectively, and $1.7 million and $1.8 million for the three and nine months ended September 30, 2021, respectively, excluding the $1.7 million and $5.0 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million for both the three and nine months ended September 30, 2021, of amortization of the RNG purchase contract that is amortized to cost of energy.
Below-Market Contracts
As a result of the Aria Merger and INGENCO acquisition, the Company assumed certain fixed-price sales contracts that were below current and future market prices at the respective closing dates. The contracts were recorded at fair value and are classified as other long-term liabilities on the Company’s consolidated balance sheets as of September 30, 2022 and December 31, 2021:
September 30, 2022
Gross Liability
Accumulated
Amortization
Net
Gas off-take agreements
$ 146,990  $ 15,490  $ 131,500 
Power off-take agreement 1,140  14  1,126 
Total $ 148,130  $ 15,504  $ 132,626 
December 31, 2021
Gross Liability
Accumulated
Amortization
Net
Gas off-take agreements
$ 146,990  $ 4,360  $ 142,630 
The below-market contract amortization was $3.7 million and $11.1 million for the three and nine months ended September 30, 2022, respectively, and $0.5 million for both the three and nine months ended September 30, 2021, and was recognized as an increase to revenues since it relates to the sale of RNG, Power and related Environmental Attributes.