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ArcLight Clean Transition Corp. II

ArcLight Clean Transition Corp. II

Feb 4, 2021 by Kristi Marvin

PROPOSED BUSINESS COMBINATION: OPAL Fuels Inc.

ENTERPRISE VALUE: $1.75 billion
ANTICIPATED SYMBOL: OPL

ArcLight Clean Transition Corp. II proposes to combine with OPAL Fuels LLC, a leading vertically integrated producer, and distributor of renewable natural gas (RNG).

OPAL Fuels, a FORTISTAR portfolio company, is a vertically integrated, waste-to-fuel RNG production and distribution company with a Capture and Conversion upstream business and Dispensing and Monetization downstream business serving the domestic heavy-duty transportation sector. Underpinned by gas rights agreements that are typically at least twenty years in length, Capture and Conversion projects produce RNG by capturing methane emissions from landfill sites and dairy farms. The captured methane emissions are purified and treated, turning once harmful emissions into a source of clean, renewable energy, reducing the harmful long-term effects of methane and carbon emissions. This flips a substantial cost – managing dairy waste and landfill gas – into significant revenue streams for dairy farms and landfills. OPAL Fuels’ Dispensing and Monetization operations help deliver this clean, reliable, and renewable fuel to heavy-duty trucking fleets through OPAL Fuels’ national network of fueling stations, which spans 42 states and is typically backed by fueling agreements averaging ten years in duration.

Today, OPAL Fuels operates 21 biomethane projects, of which three are in RNG service and the balance is in renewable power service. Increasing secular tailwinds, which include public policy initiatives and corporate sustainability objectives, are supporting the growth of RNG as a way to cost-effectively halt climate change and decarbonize transportation, providing strong visibility into significant volume and EBITDA growth for OPAL Fuels over the next several years. The company’s project pipeline totals 23, seven of which are in construction and the balance of which are in advanced development execution.

SUBSEQUENT EVENT – 11/18/22 – LINK

  • OPAL Fuels Inc. announced that it has commenced an exchange offer and consent solicitation relating to its outstanding:
    • (i) public warrants to purchase shares of Class A common stock of the Company, which warrants trade under the symbol “OPALW”, and
    • (ii) private placement warrants to purchase shares of Class A common stock.
  • The purpose of the Offer and Consent Solicitation is to simplify the Company’s capital structure and reduce the potential dilutive impact of the warrants, thereby providing the Company with more flexibility for financing its operations in the future.
  • Offering to receive 0.250 shares of Class A common stock in exchange for each outstanding warrant tendered
  • The Company is offering up to an aggregate of 3,861,623 shares of its Class A common stock in exchange for the warrants.
  • Concurrently with the Offer, the Company is also soliciting consents from holders of the warrants to amend the warrant agreement that governs all of the warrants to permit the Company to require that each warrant that is outstanding upon the closing of the Offer be exchanged for 0.225 shares of Class A common stock, which is a ratio 10% less than the exchange ratio applicable to the Offer.
  • All except certain specified modifications or amendments require the vote or written consent of holders of at least 65% of each of the outstanding public warrants and the outstanding private placement warrants.
    • Parties representing approximately 53.30% of the outstanding public warrants and approximately 100% of the outstanding private placement warrants have agreed to tender their public warrants and private placement warrants in the Offer and to consent to the Warrant Amendment in the Consent Solicitation.
  • Accordingly, if holders of an additional approximately 11.70% of our outstanding public warrants consent to the Warrant Amendment in the Consent Solicitation, and the other conditions of the Offer are satisfied or waived, then the Warrant Amendment will be adopted.
  • The offering period will continue until 11:59 p.m., Eastern Time, on December 16, 2022 (the “Expiration Date”).
  • Tendered warrants may be withdrawn by holders at any time prior to the Expiration Date.
  • As of November 17, 2022, there were:
    • (i) 25,671,390 shares of Class A common stock outstanding,
    • (ii) 144,399,037 shares of the Company’s Class D common stock outstanding, and
    • (iii) a total of 15,446,494 warrants outstanding, consisting of 6,223,233 public warrants and 9,223,261 private placement warrants.
  • Assuming all warrant holders tender their warrants for exchange in the Offer, the Company would expect to issue up to 3,861,623 shares of Class A common stock, resulting in 29,533,013 shares of Class A common stock outstanding
    • (an increase of approximately 15.0% of total Class A common stock outstanding and an increase of approximately 2.3% in total issued share capital), and no public or private placement warrants outstanding.
  • The Company has engaged BofA Securities as the dealer manager for the Offer and Consent Solicitation.

SUBSEQUENT EVENT – 7/18/22 – LINK

  • On July 18, 2022, ArcLight II entered into a forward share purchase agreement with Meteora Capital Partners provided that so long as Meteora will have acquired from redeeming shareholders of ArcLight at least 1,900,000 ArcLight Class A ordinary shares as of the closing, and has not redeemed any of such ArcLight Class A ordinary shares, then Meteora may elect to sell and transfer to the combined company, on the six month anniversary of the closing of the Business Combination, up to 2,000,000 shares of Class A common stock of the Combined Company held by Meteora at the time of closing of the Business Combination.
  • The price at which Meteora has the right to sell the Meteora Shares to the Combined Company is $10.02 per share.
  • Meteora will notify the Combined Company in writing not less than 5 business days prior to the closing date of the Share Repurchase (the “Put Date”), specifying the number of Meteora Shares that the Combined Company will be required to purchase.
  • Meteora is also permitted at its election to sell any or all of the Meteora Shares in the open market commencing after the closing of the Business Combination, so long as the sale price exceeds $10.02 per share prior to the payment of any commissions due by Meteora for such sale.
  • ArcLight will place into escrow with Continental an aggregate amount of up to $20,040,000.
  • If and when Meteora sells the Meteora Shares to any third party, an amount equal to the Combined Company’s purchase price obligation for that portion of such Meteora Shares, which Meteora sells in the open market, will be released from escrow to the Combined Company.
  • In exchange for ArcLight’s commitment to purchase the Meteora Shares on the Put Date, Meteora agrees to continue to hold, and not to redeem, the Meteora Shares prior to the closing date of the Business Combination.
  • In consideration for Meteora’s entry into the Purchase Agreement and the transactions and covenants therein, ArcLight shall, at its option,
    • (i) issue to Meteora 112,500 shares of Class A common stock of the Combined Company or
    • (ii) pay to Meteora a cash payment in the amount of $600,000 upon consummation of the Business Combination.

SUBSEQUENT EVENT – 5/12/22 – LINK

  • ArcLight today announced that thus far, PIPE Investors representing $110,806,000 (or approximately 89%) of committed equity financing for the Business Combination have amended the PIPE Investors’ Subscription Agreements (the “Amended Subscription Agreements”), whereby the termination provisions of such agreements extended by 60 days (the “PIPE Extension”).

TRANSACTION

  • The business combination values OPAL Fuels at an implied $1.75 billion pro forma enterprise value at a price of $10.00 per ArcLight share. The transaction and related financings are expected to provide gross proceeds of approximately $536 million to OPAL Fuels, comprised of:
    • ArcLight’s $311 million of cash held in trust, assuming no redemptions
    • A $125 million fully committed PIPE, anchored by NextEra Energy, an affiliate of ArcLight, Electron Capital Partners, Gunvor Group, Wellington Management, and Adage Capital Management
      • Up to a $100 million preferred equity investment from affiliates of NextEra Energy.

opal trans overview

PIPE

  • Pursuant to the Subscription Agreements, each investor agreed to subscribe for and purchase, and ArcLight agreed to issue and sell to such investors, immediately prior to the Closing, an aggregate of 12,500,000 shares of ArcLight common stock for a purchase price of $10.00 per share, for aggregate gross proceeds of $125,000,000 (the “PIPE Investment”).
  • Anchored by NextEra Energy, an affiliate of ArcLight, Electron Capital Partners, Gunvor Group, Wellington Management, and Adage Capital Management
    • Up to a $100 million preferred equity investment from affiliates of NextEra Energy.

EARNOUT

  • 0.78MM founder shares are subject to an earnout, vesting at $12.50 and $15.00.
  •  If New Opal’s annual EBITDA for the calendar year 2023 exceeds $238,000,000 (the “First Earnout Triggering Event”), New Opal will issue to Opal HoldCo, Ares and Hillman (collectively, the “Earnout Participants”) an aggregate of 5,000,000 shares of New Opal Class B Common Stock and New Opal Class D Common Stock and corresponding Opal Units (collectively, the “First Earnout Tranche”) in accordance with the allocations set forth in the Business Combination Agreement.
  • Additionally, if New Opal’s annual EBITDA for the calendar year 2024 exceeds $446,000,000 (the “Second Earnout Triggering Event”), New Opal will issue to the Earnout Participants an aggregate of 5,000,000 additional shares of New Opal Class B Common Stock and New Opal Class D Common Stock and corresponding Opal Units (collectively, the “Second Earnout Tranche”) in accordance with the allocations set forth in the Business Combination Agreement.
  • In the event that the First Earnout Triggering Event does not occur but the Second Earnout Triggering Event does occur, New Opal will be obligated to issue both the First Earnout Tranche and the Second Earnout Tranche upon the occurrence of the Second Earnout Triggering Event.

LOCK-UP

  • The New Opal Holders will agree not to transfer, sell, assign or otherwise dispose of their shares of New Opal Class A common stock for up to 180 days following the Closing, subject to certain exceptions.

NOTABLE CONDITIONS TO CLOSING

  • The obligation of ArcLight to consummate the Business Combination is further conditioned upon the aggregate cash proceeds from ArcLight’s trust account, together with the proceeds from the PIPE Financing (as defined below) and NextEra Contribution Amount (as defined in the Business Combination Agreement), equaling no less than $225,000,000 (after deducting any amounts paid to ArcLight shareholders that exercise their redemption rights in connection with the Business Combination and transaction expenses)

NOTABLE CONDITIONS TO TERMINATION

  • The Business Combination Agreement may be terminated by either ArcLight or Opal Fuels if the Closing has not occurred by August 29, 2022.

ADVISORS

  • BofA Securities, Inc. (“BofA Securities”) is serving as lead financial advisor and Credit Suisse Securities (USA) LLC (“Credit Suisse”) is serving as financial advisor while Sheppard Mullin Richter & Hampton LLP is serving as legal advisor to OPAL Fuels.
  • Citigroup Global Markets Inc. (“Citi”) is serving as lead financial advisor and Barclays Capital Inc. (“Barclays”) is serving as financial advisor while Kirkland & Ellis LLP is serving as legal advisor to ArcLight.
  • Citi, BofA Securities, Barclays and Credit Suisse are serving as joint placement agents on the PIPE offering, while Winston & Strawn LLP is counsel to the Placement Agents.
  • J.P. Morgan Securities LLC served as sole financial advisor and Hogan Lovells US LLP acted as counsel to NextEra Energy on the transaction.

MANAGEMENT & BOARD

Executive Officers

Jake F. Erhard, 46
President, Chief Executive Officer and Director

Mr. Erhard joined ArcLight around the time of its founding in 2001 and is currently a Partner. Mr. Erhard has 20 years of energy finance and private equity experience. Mr. Erhard has also been serving as President, Chief Executive Officer and a Director of ACTC I (Nasdaq: ACTC) since September 2020. Prior to joining ArcLight, Mr. Erhard was an Analyst at the investment banking firm Schroder Wertheim, where he focused on mergers and acquisitions. Mr. Erhard earned a Bachelor of Arts in Economics from Princeton University and a Juris Doctor from Harvard Law School.

Marco F. Gatti, 37
Chief Financial Officer

Mr. Gatti joined ArcLight in 2018 and has 11 years of energy and private equity experience. Mr. Gatti has also been serving as Chief Financial Officer of ACTC I (Nasdaq: ACTC) since September 2020. Prior to joining ArcLight, Mr. Gatti spent five years as a Vice President in the Energy group at Warburg Pincus, where he focused on the sourcing, execution and portfolio management of equity investments in the energy and heavy industry sectors. Prior to joining Warburg Pincus in 2013, Mr. Gatti worked at Bain Capital, McKinsey & Company and Praxair between 2007 and 2012. Mr. Gatti earned a Master of Business Administration from the Wharton School of the University of Pennsylvania, a Master of Science in Mechanical Engineering from the University of Minnesota and a Bachelor of Science in Mechanical Engineering from Politecnico di Milano.

Rick S. Knauth, 57 [Resigned 12/30/21]
Chief Operating Officer

Mr. Knauth joined CAMS in 2013 and has 25 years of energy project development and asset management experience. Mr. Knauth has been serving as Chief Operating Officer of ACTC I (Nasdaq: ACTC) since September 2020. Prior to CAMS, Mr. Knauth was a Director at Vestas, a Danish wind turbine manufacturer, where he held both contract negotiation and asset management roles. Mr. Knauth has a bachelor’s degree in engineering from Tulane University and an MA in Economics and International Relations from the Johns Hopkins School of Advanced International Studies, with a concentration in energy and the environment.

Christine M. Miller, 50
General Counsel

Ms. Miller joined ArcLight in 2004 and has 23 years of legal experience in the areas of investment transactions and fund operations, with 21 years specific to energy finance and private equity. Ms. Miller has also been serving as General Counsel of ACTC I (Nasdaq: ACTC) since September 2020. Prior to joining ArcLight, she was Counsel in John Hancock’s Investment Law Division, where she represented investment managers and advised institutional investors in purchasing private debt and equity securities. Ms. Miller earned a Bachelor of Arts in Political Science from the University of Massachusetts at Amherst and a Juris Doctor from Boston University School of Law.

Board of Directors

Daniel R. Revers, 58
Chairman 

Mr. Revers is the founder of ArcLight and has 30 years of energy finance and private equity experience. Mr. Revers is responsible for overall investment, asset management, strategic planning, and operations of ArcLight and its funds. Mr. Revers has also been serving as Chairman of the board of directors of ACTC I (Nasdaq: ACTC) since September 2020. Prior to forming ArcLight in 2001, Mr. Revers was a Managing Director in the Corporate Finance Group at John Hancock Financial Services, a private insurance and financial services firm, where he was responsible for the origination, execution, and management of a $6 billion portfolio consisting of debt, equity, and mezzanine investments in the energy industry. Prior to joining John Hancock in 1995, Mr. Revers held various financial positions at Wheelabrator Technologies, where he specialized in the development, acquisition, and financing of domestic and international power and energy projects. Mr. Revers earned a Bachelor of Arts in Economics from Lafayette College and a Master of Business Administration from the Amos Tuck School of Business Administration at Dartmouth College.

Arno Harris, 51
Director

Mr. Harris has spent the last 25 years starting and growing successful businesses in high technology, clean energy and electric mobility. Mr. Harris has also been serving on the board of directors of ACTC I (Nasdaq: ACTC). He now advises startups and growth companies, helping them to raise capital and achieve scale. In addition to his advisory work, Mr. Harris serves as an independent director for Pacific Gas & Electric Company (NYSE:PCG), California’s largest investor-owned utility, and Azure Power Global Limited (NYSE:AZRE), India’s leading solar developer with almost 2GW of operating assets and over 5GW in development. Between 2006 and 2015, Mr. Harris was the founder, CEO and chair of Recurrent Energy, one of North America’s largest solar project developers. Prior to Recurrent Energy, Mr. Harris was the founder and CEO of Prevalent Power, one of California’s fastest growing commercial solar project developers. Mr. Harris earned a Bachelor of Arts from the University of California Berkeley.

Dr. Ja-Chin Audrey Lee, 42
Director

Dr. Lee has 15 years of experience in clean energy. Dr. Lee has also been serving on the board of directors of ACTC I (Nasdaq: ACTC). Previously, Dr. Lee served as Vice President of Energy Services at Sunrun Inc (NASDAQ: RUN) from 2017 to 2020. Prior to Sunrun, she served as Vice President of Analytics and Design at Advanced Microgrid Solutions from 2014 to 2017. Before her role at Advanced Microgrid Solutions, Dr. Lee was appointed by the Governor as Advisor to the President of the California Public Utilities Commission from 2011 to 2014, where she led the approval of first-in-the-nation rules on customer energy data. Dr. Lee serves on the board of Gridworks, a non-profit that convenes, educates and empowers stakeholders to decarbonize electricity grids. She also serves on the board of Pinnacle Engines, commercializing advanced engines for reduced petroleum usage and greenhouse gas emissions. Dr. Lee also serves on the board of Redaptive, an Efficiency-as-a-Service tool for commercial and industrial customers. She volunteered as Co-Chair and Co-Founder of Clean Energy for Biden. Dr. Lee earned her Ph.D. and M.S. in Electrical Engineering from Princeton University and her B.S. in Applied Physics from the California Institute of Technology.

Brian Goncher, 64
Director

Mr. Goncher is Strategy Advisor to Powerhouse and active member of Clean Energy for Biden with more than 42 years of experience in finance, management and consulting. Mr. Goncher has also been serving on the board of directors of ACTC I (Nasdaq: ACTC). Mr. Goncher was a Managing Director at Deloitte until 2019, where he created and led their Energy Tech Practice. Before Deloitte, Mr. Goncher was a venture capitalist at Frontier Ventures between 1997 and 2000, and Crystal Ventures between 2000 and 2003 where he invested in technology companies. In addition, between 1990 and 1996, Mr. Goncher created and led the Emerging Company Services Group at Coopers & Lybrand (now part of PwC). He provided financial and strategic consulting services to tech startups. Earlier in his career, Mr. Goncher was the founder/CFO of several technology-enabled startups and a Corporate Banking Officer at Bank of America. Mr. Goncher earned a BS in Economics and MBA in Finance from the University of Chicago.

Steven Berkenfeld, 61
Director

After 33 years, Mr. Berkenfeld retired from a career in investment banking in 2019 to focus entirely on impact and sustainability. Steven is founder and principal of Ecotopia Consulting LLC. and is primarily engaged in advising earlier stage, mission driven companies. Mr. Berkenfeld has also been serving on the board of directors of ACTC I (Nasdaq: ACTC). Previously he was a Managing Director in Investment Banking at Barclays where he served as senior sponsor of the Environmental and Social Impact Banking Initiative and was co head of the firm’s Cleantech Initiative. Before joining Barclays in 2008, Steven spent over 21 years at Lehman Brothers in numerous roles including Chief Investment Officer of the firm’s Private Equity Division. Steven is former chair of the board of the Sierra Club Foundation, and is a sponsor of several projects, and board member of several other organizations, focused on social impact and sustainability. He holds a J.D. from Columbia Law School and a Bachelor’s Degree from Cornell University.

 

ByKristi Marvin