Archaea Infrastructure LLC, a wholly owned subsidiary of Archaea Energy Inc., has entered into a definitive purchase and sale agreement to purchase NextGen Power Holdings LLC (INGENCO) for $215 million in cash, according to a company press release on April 28.

The transaction, subject to customary adjustments at closing, is expected to close on or after July 1, 2022. Archaea expects to finance the acquisition of INGENCO, subject to market conditions and other factors, via one or more capital markets transactions or private financing transactions.

“Today’s announcement marks a significant achievement in executing on our strategy of securing as many economically attractive RNG [renewable natural gas] development opportunities as possible, building the biggest and highest quality RNG development backlog in the industry and growing the long-term earnings power of our business,” Archaea's co-founder and CEO Nick Stork commented in the press release.

The transaction will add significant RNG development opportunities to Archaea's existing electricity generation assets, including 14 operating landfill gas-to-electric plants and gas rights for these sites. The company expects to build RNG facilities on the majority of these sites over time, materially expanding its earnings power of the asset base.

The acquisition will also bring an estimated pro forma long-term annual RNG production of approximately 6 million MMBtu and estimated net annual electricity generated of over 500,000 MWh once development projects associated with the INGENCO assets are completed and ramped to full flows.

INGENCO will bring estimated pro forma multiple of approximately 6X total capital expenditures, including acquisition and RNG development costs, to estimated long-term annual adjusted EBITDA associated with the INGENCO assets, as well as opportunities for additional upside to estimated long-term annual adjusted EBITDA through initiatives such as improving heat rates and increasing landfill gas flows into facilities.

"If we assume a $12/MMbtu EBITDA figure for RNG and $21/MWh for electricity, potential EBITDA could be $82 million, putting the total deal cost at $492 million," Tudor Pickering Holt & Co. analyst Matthew Blair commented on the acquisition.