Montauk Renewables reported a loss for the six months to end-June as higher revenue driven by expanded operations was more than offset by rising costs, asset impairments and weaker prices for environmental credits.
The company reported a 7% year-on-year increase in revenue to $87.7m, thanks mainly to higher sales volumes of renewable natural gas and electricity, supported by the continued development and expansion of Montauk’s project portfolio across the US.
Renewable natural gas, also known as biomethane, is a renewable fuel made by capturing and upgrading biogas produced from the decomposition of organic waste materials.
Despite the revenue gains, earnings before interest, taxes, depreciation and amortisation fell 27% to $11.4m and the company reported a headline loss of $4m compared to a profit of $1.6m for the corresponding period a year ago.
The loss attributable to shareholders was about $6m, including $2.4m in impairment charges on plant and equipment.
The company said several factors contributed to the gap between revenue growth and weaker profitability, including a combination of higher costs, regulatory delays and softer market prices.
Operating and maintenance expenses rose sharply, with renewable natural gas facility costs up 22% in the second quarter due to increased spending on preventive maintenance and wellfield operations, it said.
In addition to the $2.4m in noncash impairment charges, earnings were also hit by a drop in prices for renewable identification numbers (RINs) — US tradable credits used by fuel producers to comply with renewable fuel standards. The average RIN price fell to $2.42 from $3.12 a year earlier, limiting revenue despite stable sales volumes.
The company also it was unable to recognise revenue from about 3-million RINs generated but not yet separated under a new US environmental rule, delaying income from those credits.
Production trends were mixed during the period, with renewable natural gas output largely unchanged, while renewable electricity generation slipped.
The company opted not to declare a final dividend, choosing instead to reinvest cash flows into the continuing development and expansion of operations.
The company, dual-listed on the Nasdaq and JSE, develops, owns and operates renewable natural gas and renewable electricity projects. It captures methane from landfill and agricultural biogas sources, converting it into renewable natural gas or electricity to help reduce emissions and provide alternative energy sources.
Montauk completed the construction and commissioning of its second renewable natural gas processing facility at the Apex site in Amsterdam in the second quarter. It also signed a 10-year power purchase agreement for its Montauk Renewables project in Turkey, securing long-term revenue from renewable electricity production.
Montauk also formed a joint venture, GreenWave Energy Partners, to boost biomethane utilisation for transportation “by offering third party all-in RNG volume producers access to exclusive, unique, and proprietary transportation pathways”.
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