As disclosed in Note 2, the Company adopted ASC 842 as of January 1, 2022. As a lessee, the Company enters into agreements with various Site Hosts, which allow the Company to lease space to operate the charging stations on their property, and with various parties to lease its office and laboratory space. The Company, at the inception of the contract, determines whether a contract is or contains a lease. For leases with an initial contractual term in excess of 12 months, the Company records the related operating or finance right-of-use asset and lease liability. Some leases also include renewal and/or early termination options, which can be exercised under specific conditions. Renewal and termination options are not included in the measurement of the right-of-use assets and lease liabilities unless the Company is reasonably certain to exercise the options.

The Company’s lease agreements primarily require lease payments based on a minimum annual rental amount. In addition to minimum lease payments, the Company’s lease agreements may contain variable lease payments based on revenue sharing or inflation adjustments. The Company has elected the practical expedient to not separate non-lease components from lease components in the measurement of liabilities for all asset classes. Lease liabilities are recognized at the present value of the fixed lease payments using an implicit rate and, if not available, an incremental borrowing rate based on estimated collateralized borrowings available to the Company. The Company incurs initial direct costs and receives landlord incentives that increase or decrease the calculated right-of-use asset, respectively. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. The Company expenses variable lease payments as incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company has not entered into any finance leases.

As a lessor, the Company has entered into agreements to lease charging equipment, charging stations and other technical installations or sublease properties leased from Site Hosts to third parties. The Company, at the inception of a lease contract, determines if it is an operating, sales-type or direct financing lease. The leases generally provide for fixed monthly payments and sometimes include provisions for contingent variable rent based on the number of charging sessions and minutes used, which are recognized when earned. Fixed payments received under lease agreements for operating leases are recognized on a straight-line basis over the lease term and are reported in revenue in the condensed consolidated statements of operations and comprehensive income (loss).

The Company has entered into agreements with Site Hosts, which allow the Company to operate the charging stations on the Site Hosts’ property. Additionally, the Company leases offices 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 range from one to 15 years and certain leases contain renewal options that can extend the term for an additional one to 10 years. The Company has not entered into any finance leases.

The Company has estimated operating lease commitments of $48.0 million for leases where the Company has not yet taken possession of the underlying asset as of September 30, 2022. 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 September 30, 2022.

For the three and nine months ended September 30, 2022, the Company’s lease costs consisted of the following:

¹Rental expense for operating leases was $0.7 million and $1.8 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the maturities of operating lease liabilities for the years ending December 31, are as follows:


(in thousands)
2022	$	1,670
2023		8,076
2024		7,483
2025		6,545
2026		6,024
2027		5,381
Thereafter		26,453
Total undiscounted operating lease payments		61,632
Less: imputed interest		(18,605)
Total discounted operating lease liabilities	$	43,027

The following table shows future minimum payments under noncancellable operating leases with initial terms of greater than one year, based on the expected due dates of the various installments as of December 31, 2021, as previously reported in the Company’s Annual Report, prior to the adoption of ASC 842:


(in thousands)
2022	$	3,486
2023		3,515
2024		2,987
2025		2,093
2026		1,767
Thereafter		5,570
	$	19,418

Other supplemental information, as of September 30, 2022, consisted of the following:


	September 30,
	2022
Weighted-average remaining lease term		8.9 years
Weighted-average discount rate		7.86	%

Other supplemental cash flow information, for the nine months ended September 30, 2022, consisted of the following:


(in thousands)
Cash paid for amounts included in measurement of operating lease liabilities	$	4,106
Right-of-use assets obtained in exchange for new operating lease liabilities	$	26,548

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 five to 10 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, on the condensed consolidated balance sheets and is depreciated to estimated residual value over its expected useful life.

For the three and nine months ended September 30, 2022, the Company’s lease income consisted of the following components:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2022		2022
Operating lease income:
Fixed lease income	$	152	$	616
Variable lease income		106		404
Sublease income		99		117
Total lease income¹	$	357	$	1,137

¹Lease income was $0.9 million and $1.4 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, future minimum rental payments due to the Company as lessor under operating leases (including subleases) for the Company’s fiscal years ending December 31, were as follows:


(in thousands)
2022	$	356
2023		1,422
2024		1,110
2025		485
2026		242
	$	3,615

The components of charging equipment and charging stations leased to third parties under operating leases, which are included within the Company’s property, equipment and software, net, were as follows as of September 30, 2022 and December 31, 2021:


	September 30,		December 31,
(in thousands)	2022		2021
Charging station equipment and construction costs	$	2,532	$	4,114
Less: accumulated depreciation		(419)		(815)
	$	2,113	$	3,299