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United States securities and exchange commission logo
November 10, 2020
Sean F. McClain
President and Chief Executive Officer
Montauk Renewables, Inc.
680 Anderson Drive, 5th Floor
Pittsburgh, PA 15220
Re: Montauk Renewables,
Inc.
Draft Registration
Statement on Form S-1
Submitted October
14, 2020
CIK No. 0001826600
Dear Mr. McClain:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Market Opportunity
Availability of Long-Term FeedStock Supply, page 3
1. We note you disclose
that although the EPA estimates that many of the 477 candidate
landfills identified
could support economic installation of LFG recovery systems enabling
the development of LFG
projects, your view is that these are not economically viable LFG
project sites, and that
you have the industry experience and technical knowledge to
identify the
economically viable sites and projects for acquisition and growth. Please
clarify these
statements and also reconcile this disclosure with your assertion on page 105
that you are
well-positioned to take advantage of the 477 landfills identified as candidates
Sean F. McClain
Montauk Renewables, Inc.
November 10, 2020
Page 2
for LFG projects by the EPA as 25% of them are located in states in
which you currently
operate. We also note your related risk factor on page 25.
Our Strengths
Large and Diverse Project Portfolio, page 4
2. Please expand your disclosure to explain how your "Environmental
Attributes
monetization strategies can have an effect on the market."
Our Projects, page 8
3. We note you disclose that you typically secure your biogas feedstock
through long-term
fuel supply agreements and that as of October 2020, approximately 65%
of your expected
2020 RNG projection and 89% of your expected 2020 Renewable
Electricity
production has been monetized under fuel supply agreements with a term
of more than 15
years. We also note you disclose on page 24 that approximately 80.4%
and 77.2% of your
revenues for the year ended December 31, 2019 and 2018, respectively,
were derived
from five project sites. Please tell us what consideration you have
given to filing your
material long-term fuel supply agreements. Refer to Item 601(b)(10) of
Regulation S-K.
How We Generate Revenue, page 9
4. We note you disclose that a significant portion of the RNG volume you
produce is sold
under bundled fixed-price arrangements for the RNG and Environmental
Attributes, with
a sharing arrangement where you benefit from prices above certain
thresholds. Please tell
us what consideration you have given to filing your material long-term
contracts for RNG
and Renewable Electricity, including your RNG off-take agreements and
PPAs. In that
regard, we note you disclose that your revenues are generated from the
sale of RNG and
Renewable Electricity, under long-term contracts, along with the
Environmental Attributes that are derived from these products and that
Royal Dutch Shell
plc, ACT Fuels, Inc., and the City of Anaheim represented 14% of your
operating
revenues in 2019. Refer to Item 601(b)(10) of Regulation S-K.
Risk Factors, page 17
5. We note that following the Reorganization Transactions, all of the
directors of MNK will
serve as your directors. We further note that the Remuneration Committee
of the MNK
Board of Directors determined the compensation of the directors of MNK
for 2019 in
ZAR. Your disclosure appears to indicate that some of your directors are
located outside
of the United States. Please advise whether your executive officers and
directors reside in
FirstName LastNameSean F. McClain
the United States. If not, please provide a risk factor addressing the
risk to U.S.
Comapany NameMontauk
stockholders Renewables,
of effecting Inc.
service of process, enforcing judgments and
bringing original
actions
November 10, in foreign
2020 Pagecourts
2 to enforce liabilities based on the U.S.
federal securities laws.
FirstName LastName
Sean F. McClain
FirstName LastNameSean
Montauk Renewables, Inc. F. McClain
Comapany 10,
November NameMontauk
2020 Renewables, Inc.
November
Page 3 10, 2020 Page 3
FirstName LastName
Our Amended and Restated Certificate of Incorporation will provide that, unless
we determine
otherwise, page 42
6. We note your forum selection provision identifies the Court of
Chancery of the State of
Delaware (or, if the Court of Chancery does not have jurisdiction, the
federal district court
for the District of Delaware) as the exclusive forum for certain
litigation, including any
derivative action. Please disclose whether this provision
applies to actions arising under
the Securities Act or Exchange Act. If this provision does not apply
to actions arising
under the Securities Act or Exchange Act, please ensure that the
exclusive forum
provision in the governing documents states this clearly.
We also note you state that the U.S. federal district courts will be,
to the fullest extent
permitted by law, the sole and exclusive forum for any action
asserting a claim arising
under the Securities Act. Please also state that investors cannot
waive compliance with
the federal securities laws and the rules and regulations thereunder.
In that regard, we note
that Section 22 of the Securities Act creates concurrent jurisdiction
for federal and state
courts over all suits brought to enforce any duty or liability created
by the Securities Act
or the rules.
Use of Proceeds, page 50
7. Please revise your disclosure to more specifically identify the
intended uses and the
amounts to be allocated to each of the identified uses if known,
including new project
development costs, including the identification and due diligence
activities to evaluate,
select and initiate beneficial greenfield development, acquisition,
existing project
expansion and existing project conversion opportunities. In that
regard we note you
disclose on pages 6 and 8 that you are currently evaluating three
project expansion
opportunities at existing project sites and one new electricity-to-RNG
conversion project.
We also note you disclose on page 25 that you entered into a
non-binding letter of
intent on September 15, 2020 to acquire two Renewable Electricity
digester projects in
North Carolina and Rhode Island. If you have no specific plan for a
significant portion of
the proceeds, please state this, and discuss the principal reasons for
the offering at this
time. Refer to Item 504 of Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies and Estimates, page 70
8. The disclosures of your critical accounting policies and estimates
appear to be more
descriptive of the accounting policies utilized, rather than any
specific uncertainties
underlying your estimates. Please revise your disclosures to address
the material
implications of the uncertainties that are associated with the
methods, assumptions and
estimates underlying your critical accounting estimates. For example,
but not limited to
your disclosure related to asset impairments, you state that
recoverability of assets to be
held and used is measured by comparing the carrying amount of an asset
or asset group to
Sean F. McClain
FirstName LastNameSean
Montauk Renewables, Inc. F. McClain
Comapany 10,
November NameMontauk
2020 Renewables, Inc.
November
Page 4 10, 2020 Page 4
FirstName LastName
future undiscounted cash flows expected to be generated by the asset
or asset group. Such
estimates are based on certain assumptions, which are subject to
uncertainty and may
materially differ from actual results. Revise to provide additional
information describing
the methods through which the information underlying these key
assumptions is
determined. Your expanded disclosure throughout the Critical
Accounting Policies and
Estimates section should address the risk related to using different
assumptions and
analyze their sensitivity to change based on outcomes that are deemed
reasonably likely to
occur. For additional guidance, refer to Section V of SEC Release No.
33-8350.
Business
Competition, page 108
9. Please tell us the basis for your statement that you are the largest
operator of LFG-to-
RNG projects.
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm, page F-2
10. Please revise to include a report of the independent registered public
accounting firm
indicating that their audit was conducted in accordance with the
standards of the PCAOB,
rather than only the auditing standards. Refer to the guidance in
paragraph .09 of AS
3101.
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies
Goodwill and Intangible Assets, page F-9
11. You have disclosed that emission allowances consist of credits that
need to be applied to
nitrogen oxide (NOx) emissions from internal combustion engines and
are accounted for
as indefinite intangible assets. Expand your disclosure and tell us
why you believe
emission allowances should be accounted for as indefinite intangible
assets.
Long Lived Asset Impairment, page F-10
12. You state property, plant and equipment and intangible assets with
finite useful lives are
evaluated for impairment whenever events or changes in circumstances
indicate that the
carrying amount of an asset may not be recoverable. However, your
disclosures here and
elsewhere also state that the Company performed its annual impairment
test for the years
ended December 31, 2019 and 2018. Revise throughout your filing to
clarify whether the
evaluation of asset impairments is performed annually.
Renewable Identification Numbers, page F-12
13. We note that you generate, purchase and sell RINs and RECs. Expand
your disclosure
and tell us how you account for these credits, including timing of
recognition and
valuation methods. Your revised disclosure should address whether you
view the credits
Sean F. McClain
Montauk Renewables, Inc.
November 10, 2020
Page 5
as outputs of your renewable operating projects and how this viewpoint
supports the
underlying accounting. In addition, you state that you had 886 and 1,690
RINs generated
and unsold as of December 31, 2019 and 2018, respectively. The statement
is inconsistent
with the disclosure on page 71. Please revise accordingly.
Note 3. Acquisitions, page F-14
14. Expand your disclosure to provide additional information on
the contingent consideration arrangement required by ASC 805-30-50-1(c).
Exhibits
15. Please file a form of the Equity Plan and the First Amendment and Second
Amendment to
your Second Amended and Restated Revolving Credit and Term Loan Agreement
as
exhibits to your registration statement or tell us why you believe such
agreements are not
required to be filed. Refer to Item 601(b)(10) of Regulation S-K.
General
16. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Wei Lu, Staff Accountant, at (202) 551-3725 or Shannon
Buskirk, Staff
Accountant, at (202) 551-3717 if you have questions regarding comments on the
financial
statements and related matters. Please contact Karina Dorin, Staff Attorney, at
(202) 551-3763
or Loan Lauren Nguyen, Legal Branch Chief, at (202) 551-3642 with any other
questions.
Sincerely,
FirstName LastNameSean F. McClain
Division of
Corporation Finance
Comapany NameMontauk Renewables, Inc.
Office of Energy &
Transportation
November 10, 2020 Page 5
cc: Amy Pandit
FirstName LastName