Anaergia Reports Second Quarter 2023 Financial Results

Anaergia Inc. (“Anaergia” or the “Company”) (TSX: ANRG) today announced its financial results for the three- and six-month periods ended June 30, 2023 (“Q2 2023”), and the related management’s discussion and analysis (“MD&A”) for the period. Certain highlights from these financial results and from the MD&A follow. All financial results are reported in Canadian dollars unless otherwise stated.

Rialto Bioenergy Facility Update

As previously disclosed, the Rialto Bioenergy Facility, LLC (the “RBF”) voluntarily entered into Chapter 11. The facility is facing a shortfall in feedstock supply primarily due to delayed implementation and enforcement of laws requiring organic waste diversion from landfills by the City of Los Angeles as required under the city’s contracts with private waste management companies as well as under California State law SB1383. Anaergia anticipates that if and when regulation is enforced, future feedstock for the RBF will increase, and with additional time and relief from debt service and other payments provided under a Chapter 11 restructuring to allow ramp up, the long-term value will be improved for all stakeholders.

As part of the ongoing restructuring process, a key milestone is the outcome of the court proceedings in August 2023 concerning a dispute over valuation. The result of this court process will clarify potential outcomes of the restructuring.

The Company has ceased control of the RBF from an accounting perspective during the restructuring process and is no longer consolidating the RBF on its consolidated financial statements. As previously disclosed, Anaergia had been supporting the RBF with loans or equity contributions to address liquidity challenges but will no longer be providing financial support to the RBF during the restructuring process.

Other Notable Developments

• Anaergia is currently undergoing a strategic review of the Company's options to maximize shareholder value.
• As further discussed in the MD&A, the Company notes the possible implications of a lender option relating to the loan for the Build-Own-Operate assets in Italy, which allows the lender to require purchase of the loan by Anaergia, if certain conditions are not met.
• The Financial Statements have been prepared in accordance with IFRS, which contemplates continuation of the Company as a going concern. However, the Company’s operating performance has not generated the positive cash flows required to maintain its business as a going concern without access to external sources of capital.

Financial Results for the First Half of Fiscal 2023

Six-month financial highlights:

• Revenues increased 1.5%, or $1.2 million, to $79.1 million compared to the same period in Fiscal 2022 (Q2 2022: $77.9 million). The increase was driven mainly by increased revenue in the Build-Own-Operate segment, offset by a decline in our Capital Sales segment.
• Net loss of $131.0 million increased 299.6%, or $98.2 million, compared to the same period in Fiscal 2022 (Q2 2022: net loss of $32.8 million). The increase was mainly due to a loss of $37.9 million related to the deconsolidation of the RBF during Q2 2023 and a total estimated credit loss expense taken during the quarter of $59.4 million, which included a loss of $54.6 million on certain loans that were no longer deemed recoverable during the Company’s ongoing strategic review, including discussions with lenders.
• Adjusted EBITDA1 decreased 232.9%, or $13.2 million, to a loss of $18.9 million compared to the same period in Fiscal 2022 (Q2 2022: loss of $5.7 million). The decrease was due to a decline in gross profit and increased operating expenses.

For a more detailed discussion of Anaergia’s results for Q2 2023, please see the Company’s financial statements for Q2 2023 and related MD&A, which are available at and on the Company’s SEDAR+ page at www.sedarplus.ca.

Fiscal 2023 Guidance Withdrawn

Anaergia, in prior periods, has provided guidance regarding its projected revenue and Adjusted EBITDA for Fiscal 2023, which was based on it having adequate liquidity and access to capital in order to execute its plans. In light of a number of factors, including the continued deterioration of the Company’s financial performance (as reflected in the reported net losses and negative operating cash flows), weakened liquidity position, recent changes to senior management, and the ongoing strategic review, the Company now believes it will not achieve the estimates included in previous guidance and expects such measures of revenue and Adjusted EBITDA to be lower than previously guided. Accordingly, management has withdrawn the Company’s previously disclosed Fiscal 2023 guidance.

Management will not be able to provide any updates regarding guidance, including projected revenue and Adjusted EBITDA, until the completion of the Company’s strategic review and a reassessment of assumptions related thereto.

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures to provide investors with supplemental measures. Management also uses non-IFRS measures internally in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our future debt service, capital expenditure and working capital requirements. Management believes these non-IFRS measures and industry metrics are important supplemental measures of operating performance because they eliminate items that have less bearing on operating performance and highlight trends in the core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management believes such measures allow for assessment of our operating performance and financial condition on a basis that is more consistent and comparable between reporting periods. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of public companies.

Definitions of non-IFRS measures and industry metrics used in this press release are provided below. A reconciliation of the non-IFRS measures used in this press release to the most comparable IFRS measure can be found below under “Reconciliation of Non-IFRS Measures”.

“Adjusted EBITDA” is defined as net earnings before finance costs, taxes and depreciation and amortization adjusted for our normalized proportionate interest in our BOO assets and one-time or non-recurring items, stock-based compensation expense, asset impairment charges and write downs, gains and losses for equity-accounted investees, foreign exchange gains or losses, restructuring costs, ERP customization and configuration costs, litigation and other claims settlements, gains and losses resulting from changes in certain balance sheet valuations (such as derivatives and warrants), acquisition costs and costs related to our initial public offering, including estimated incremental auditing and professional services costs incurred in connection with our initial public offering. For further details, refer to “Reconciliation of Non-IFRS Measures” below.

Conference Call and Webcast Details

A conference call to review the Company’s financial results will take place at 9:00 a.m. (ET) on Tuesday, August 15, 2023. It will be hosted by management of Anaergia. An accompanying slide presentation will be posted to the Investor Relations section of the Company’s website shortly before the call.

To participate on the call, please sign up using the following pre-registration link to receive details on how to access the conference call:

• Conference Call Pre-registration:
  https://www.netroadshow.com/events/login?show=689562e4&confId=51402
  You will receive your access details via email.

• To listen to the webcast live:
  https://events.q4inc.com/attendee/128700757

The webcast will be archived and available in the Investor Relations section of our website following the call.

About Anaergia

Anaergia was created to eliminate a major source of greenhouse gases by cost effectively turning organic waste into renewable natural gas (“RNG”), fertilizer and water, using proprietary technologies. With a proven track record from delivering world-leading projects on four continents, Anaergia is uniquely positioned to provide end-to-end solutions for extracting organics from waste, implementing high efficiency anaerobic digestion, upgrading biogas, producing fertilizer and cleaning water. Our customers are in the municipal solid waste, municipal wastewater, agriculture, and food processing industries. In each of these markets Anaergia has built many successful plants including some of the largest in the world. Anaergia owns and operates some of the plants it builds, and it also operates plants that are owned by its customers.

Forward-Looking Information

This press release contains forward-looking information within the meaning of applicable securities legislation, which reflects the Company’s current expectations regarding future events, including statements regarding its financial position, business strategy, growth strategy, milestones, budgets, operations, financial results, plans and objectives . In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “may”, “will”, “could”, “expects”, “anticipates”, “believes”, “estimates”, “likely”, “potential”, “continue”, or “future” or the negative or other variations of these words or other comparable words or phrases.

Forward-looking information is based on a number of assumptions including, without limitation, the Company’s ability to meet its financing and liquidity requirements on a continuing basis; its inability to achieve estimates in previous guidance; its ability to provide projected revenue and Adjusted EBITDA (as defined above) upon completion of the strategic review; its ability to enter into feedstock and offtake arrangements on acceptable terms; statements regarding the Company’s ongoing strategic review, including the potential options to maximize shareholder value; its ability to obtain or maintain existing financing on acceptable terms; and its ability to continue as a going concern. The Company is subject to a number of risks and uncertainties, many of which are beyond the Company’s control. Such risks and uncertainties include, but are not limited to, the factors discussed under “Risk Factors” in the Company’s annual information form dated April 10, 2023 for the fiscal year ended December 31, 2022 and under “Risks and Uncertainties” in the MD&A. Actual results could differ materially from those projected herein. Anaergia does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required under applicable securities laws.

Reconciliation of Non-IFRS Financial Measures

For further information please see: www.anaergia.com

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1 See “Non-IFRS Measures”.

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