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Lease Accounting

3 Months Ended

Mar. 31, 2023

Note 4 – Lease Accounting

Lessee Accounting

The Company has entered into agreements with Site Hosts, which allow the Company to operate charging stations on the Site Hosts’ property. Additionally, the Company leases offices, off-site charging hubs, a warehouse and laboratory space under agreements with third-party landlords. The agreements with the Site Hosts and landlords are deemed to be operating leases. Original lease terms generally range from one to 15 years and generally leases contain renewal options that can extend the term for up to an additional five years. The Company has not entered into any finance leases.

The Company has estimated operating lease commitments of $49.2 million for leases where the Company has not yet taken possession of the underlying asset as of March 31, 2023. As such, the related operating lease right-of-use assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of March 31, 2023.

For the three months ended March 31, 2023 and 2022, the Company’s lease costs consisted of the following:


	Three Months Ended
	March 31,
(in thousands)	2023		2022
Operating lease costs
Cost of sales	$	1,319	$	361
General and administrative expenses		1,219		673
Variable lease costs
Cost of sales		39		90
General and administrative expenses		36		21
Short-term lease costs		33		12
	$	2,646	$	1,157

As of March 31, 2023, the maturities of operating lease liabilities for the periods ending December 31, were as follows:


(in thousands)
2023	$	7,386
2024		9,685
2025		8,798
2026		8,305
2027		7,667
Thereafter		38,613
Total undiscounted operating lease payments		80,454
Less: imputed interest		(26,630)
Total discounted operating lease liabilities	$	53,824

Other supplemental and cash flow information, for the three months ended March 31, 2023 and 2022, consisted of the following:


	Three Months Ended
	March 31,
(dollars in thousands)	2023			2022
Weighted-average remaining lease term (in years)		8.9			7.6
Weighted-average discount rate		9.16	%		5.71	%
Cash paid for amounts included in measurement of operating lease liabilities	$	1,849		$	910
Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,409		$	5,008

Lessor Accounting

The Company leases charging equipment, charging stations and other technical installations and subleases properties leased from Site Hosts to third parties under operating leases where EVgo is the lessor. Initial lease terms are generally one to five years with renewal options. Since the leasing arrangements the Company enters into with lessees are operating leases, the underlying asset is carried at its carrying value as owned and operated systems within property, equipment and software, net, or included in operating lease right-of-use assets on the condensed consolidated balance sheets.

For the three months ended March 31, 2023 and 2022, the Company’s lease income consisted of the following components:


	Three Months Ended
	March 31,
(in thousands)	2023		2022
Operating lease income:
Fixed lease income	$	458	$	261
Sublease income		267		170
Total lease income	$	725	$	431

As of March 31, 2023, future minimum rental payments due to the Company as lessor under operating leases (including subleases) for the periods ending December 31, were as follows:


(in thousands)
2023	$	1,971
2024		1,618
2025		663
2026		242
	$	4,494

The components of charging equipment, charging stations, land, and subleased host sites leased to third parties under operating leases, which are included within the Company’s property, equipment and software, net, and operating lease right-of-use-assets were as follows as of March 31, 2023 and December 31, 2022:


	March 31,		December 31,
(in thousands)	2023		2022
Charging station equipment and construction costs	$	3,558	$	3,557
Land and building		10,507		10,507
Less: accumulated depreciation		(1,094)		(980)
Property, equipment and software, net	$	12,971	$	13,084

Operating lease right-of-use assets	$	5,357	$	5,554