Quarterly report pursuant to Section 13 or 15(d)

Equity Method Investments - Predecessor

v3.22.2.2
Equity Method Investments - Predecessor
9 Months Ended
Sep. 30, 2022
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]  
Equity Method Investments - Predecessor
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: 
(in thousands)
September 30, 2022 December 31, 2021
Assets
$ 232,762  $ 203,864 
Liabilities
58,463  15,477 
Net assets
$ 174,299  $ 188,387 
Company’s share of equity in net assets
$ 87,150  $ 94,194 
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)
2022 2021 2022 2021
Total revenues
$ 28,960  $ 4,786  $ 80,985  $ 4,786 
Net income
$ 11,333  $ 2,259  $ 29,769  $ 2,259 
Company’s share of net income
$ 5,666  $ 1,130  $ 14,885  $ 1,130 
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
Aria Energy LLC  
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]  
Equity Method Investments - Predecessor Equity Method Investments - Predecessor
Aria holds 50% interests in two joint ventures accounted for using the equity method – Mavrix and Sunshine Gas Producers, LLC. Prior to the sale of LESPH in June 2021, Aria also held 50% interests in the following four joint ventures: Riverview Energy Systems, LLC, Adrian Energy Systems, LLC, Salem Energy Systems, LLC, and Salt Lake Energy Systems LLC.
Under the terms of the Mavrix, LLC Contribution Agreement dated September 30, 2017, Aria 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. As defined in the Contribution Agreement, the payment represents additional consideration for Aria’s equity interest in Mavrix, and the earn-out payment will be based on the performance of certain projects owned by Mavrix through the earn-out period which ends September 30, 2022. No earn-out payment is made until after the end of the earn-out period. Aria has estimated the earn-out payment to be $1.7 million at September 14, 2021 and has recorded the amount in other long-term liabilities.
Summary information on the equity method investments is as follows:

(in thousands) July 1 to September 14, 2021 January 1 to September 14, 2021
Revenue $ 25,223  $ 78,125 
Net income $ 13,237  $ 38,512 
Aria’s share of net income $ 6,451  $ 19,777