Q2 2021 Montauk Renewables Inc Earnings Call

August 16, 2021

[music].

Yeah.

Good afternoon, everyone and thank you for participating in today's conference call I would now like to turn the call over to Mr. Johnston Raleigh as he reads the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides.

Important cautions regarding forward looking statements John Please go ahead.

Thank you and good afternoon, everyone welcome to Montauk Renewables second quarter 2021 earnings Conference call.

John thoroughly Vice President General Counsel and Secretary at Montauk Renewables.

With me today are Shawn Mcclain, <unk>, Chief Executive Officer, and President and Kevin Van <unk>, Chief Financial Officer.

And they are here to discuss our second quarter 2021 results. During this call certain statements. We make will be forward looking and based on management's beliefs and assumptions and information currently available to management at this time, including without limitation statements relating to acquisition and other growth opportunities.

Communities, such as with Pico monetization of renewable natural gas production abroad, and diversification of montage monetization strategy.

These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our safe Harbor provision for forward looking statements that can be found in our second quarter 2021 earnings press release issued this afternoon and our Form 10-Q.

This afternoon and our most recent Form 10-K annual report and in our other reports on file with the SEC provide further detail about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated.

And except as required by law, we undertake no obligation to update any forward looking statements.

Our remarks today May also include non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial.

Measures can be found in our slide presentation.

And in our second quarter 2021 earnings release, and Form 10-Q issued and filed this afternoon, which are available on our website at IR Montoc renewables dot com with that I will turn the call over to Sean.

Thank you John.

Hello, everyone and thank you for joining our call. This is a very exciting time for Montauk, our strength and longevity in the renewable energy industry combined with the tailwind of the federal state and now international attribute incentive programs that support renewable natural gas have enabled us to execute and progress their arm.

Multi pronged growth strategy.

We continue to identify develop and prioritize opportunities to optimize and grow within our existing portfolio. Most recently evidenced by our feedstock supply amendment, which we referred to as the Pico feedstock amendments at our dairy Digester cluster project, and Jerome, Idaho, which we refer to as our Pico project.

With that amendment, we intend to both increase the capacity and optimize the technology of our facility to provide best in class manure management for the dairy farm supported while increasing the efficiency of our methane recovery and optimizing our production of renewable natural gas.

For the first time in the Companys history, our renewable natural gas production is supporting international renewable fuel programs such as the renewable energy directive of the European Commission through the qualification and registration of our facilities under the international sustainability and carbon certification program.

This strategy to redirect and monetize R&D production abroad has the potential to help stabilize domestic attribute pricing both at the federal and state levels for renewable natural gas production.

The continued optimization and expansion of our existing portfolio combined with the diversification of our monetization strategies creates that financial stability and support groundbreaking development in exciting new ways to address environmental impacts of industrial agriculture, Our recent acquisition of business asset.

In North Carolina, a pioneering environmental technology company with specialized patent pending near zero emissions technology to convert animal and agricultural waste into renewable energy alternatives is a great example.

The acquisition provides us an exciting opportunity to service the swine farming community in North Carolina and help address their challenges of a good management, while deploying a highly efficient technology that converts approximately 95% of the btu value of animal agriculture feedstock, it's a multiple product.

Our actions all of which have the potential to provide expansive growth opportunities for <unk> talked for years to come.

And with that I'll turn the call over to Kevin Van <unk>, Our Chief Financial Officer, Kevin.

Thank you Sean I'll be discussing our second quarter 2021 financial and operating results on this call. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information.

Total revenues in the second quarter of 2021 were.

$31.7 million, an increase of $3.8 million or 13, 5% compared to $27.9 million in the second quarter of 2020. The primary driver for this increase relates to higher revenues of $4.6 million recognized under counter party sharing agreements.

Partially offsetting this increase was a decrease in the volume of wind solar during the second quarter of 2021 due to inter period timing of transfers of returns as the majority of our range our self marketed.

As a reminder, we entered 2021 with forward commitment of approximately 50% of our expected 2021 rent generation. These.

These forward commitments were based on D. Three rent index prices at the time of the commitment which is now below the <unk> three rent index as a result realized prices for environmental attributes monetize in a year may not correspond directly to index prices and the current year due to the forward selling up commitments.

Total general and administrative expenses were $7.3 million for the second quarter of 2021, an increase of $3.6 million or <unk>, 95% compared to $3.8 million for the second quarter of 2020.

Of the total.

In the second quarter of $2000.21 million to $2 million related to stock based compensation costs, primarily associated with the IPO and reorganization transaction.

Excluding the impact of IPO related stock based compensation general and administrative expenses increased approximately $1.5 million.

This increase in general and administrative expenses was primarily driven by increased corporate insurance premiums and to a lesser extent professional fees.

Turning to our segment operating metrics I'll begin by reviewing our renewable natural gas segment.

We produced approximately $1.4 million and then Btu of R&D during the second quarter of 2021, a decrease of approximately <unk> 1 million and then btu or eight 2% over the $1.5 million and then Btu produced in the second quarter of 2020.

The second quarter of 2021 volumes approximately 30000 Btu of R&D was produced from development sites commissioned during 2020.

Of the <unk> 1 million lower and then B to use of R&D produced at our other locations. This reduction relates primarily to process equipment failures at our Mccarty facility, we have repaired the equipment failures at our Mccarty facility.

Revenues from the renewable natural gas segment in the second quarter of 2021 were $27.6 million, an increase of $3.7 million or 15, 6% compared to $23.9 million in the second quarter of 2020.

During the second quarter of 2021, we felt monetize $8.8 million rins, representing a $3.3 million decrease or 27, 1% compared to $12 million in the second quarter of 2020.

This decrease was primarily related to inter period timing of transfers of rent as the majority of our rent yourself marketed resulting in fewer commitment for the second quarter of 2021 versus the second quarter of 2020.

Average pricing realized when RIN sales during the second quarter of 2021 was $1.78 as compared to $8.37 in the second quarter of 2020, an increase of 29, 9%. This compares to the average <unk> index price for the second quarter of 2021 of $3 <unk>.

Being more than double the average <unk> index price in the second quarter of 2020.

Operating and maintenance expenses for our R&D facility in the second quarter of 2021 were $10.2 million an increase of 3.1.

$1 million or 43% as compared to $7.1 million in the second quarter of 2020, approximately $1 million of the increase is related to development sites commissioned during 2020.

Exclusive of the effects of these development sites operating and maintenance expenses for the second quarter of 2021 were $9.2 million, an increase of $2.1 million or 29, 5% compared to the second quarter of 2020.

This increase is related to additional immediate changes and disposal expenses.

Increased repair expenses due to elevated levels of hydrogen sulfide contaminants and site outage timing at our attached to see the Galveston and lumpy facilities respectively.

We produced approximately 47000 megawatt hours and renewable electricity during the second quarter of 2021, a decrease of 4000 megawatt hours from the 51000 megawatt hours or seven 8% produced in the second quarter of 2020.

The decrease 3000 megawatt hours related to our security facility, having zero production in the second quarter of 2021 compared to three megawatts 3000 megawatt hours produced in the second quarter of 2020.

Revenues from renewable electricity in the second quarter of 2021 were $4.1 million a decrease of zero point $4 million or nine 6% compared to $4.5 million in the second quarter of 2020.

Prior to its commissioning in 2020, the result of our Pico facility were reported in our renewable electric electricity segment until October 2020.

Operating and maintenance expenses for our renewable electricity facilities in the second quarter of 2021 with $2.3 million a decrease of Europe was $7 million or 23, 8% compared to $3 million in the second quarter of 2020 of.

Of the 2020 period total <unk> contributed <unk> 4 million and exclusive of Pico renewable electricity facility operating and maintenance expenses decreased in the second quarter of 2021 compared to the second quarter of 2020 by zero.

<unk> 3 million or 43% with.

The decrease is primarily a result of timing of scheduled engine preventative maintenance intervals at our <unk> facility.

Operating loss in the second quarter of 2021 with a loss of <unk> 5 million, a decrease of $4.1 million or 115% compared to the operating profit of $3.6 million in the second quarter of 2020.

R&D operating profit for the second quarter of 2021 was $7.6 million a decrease of <unk> 5 million or six 5% compared to $8.1 million in the second quarter of 2020 renewed.

Renewable electricity generation operating profit for the second quarter of 2021 with 16000, an increase of <unk> 8 million or 100.

And two 1% compared to an operating loss of Europe was $8 million in the second quarter of 2020.

During the second quarter of 2021 associated with our purchase of <unk> at market prices, we recorded an adjustment of <unk> 7 million to reduce the rent to net realizable value.

Turning to the balance sheet as of June 32021, 25.0 million without standing under our term loan and $36.7 million was outstanding under our revolving credit facility.

The company's capacity available for borrowing under the revolving credit facility was $37.5 million.

During the first six months of 2021, we generated $11.2 million of cash from operating activities of <unk>.

Eight 8% increase from the first six months of 2020 of $8.7 million.

For the first six months of 2021, our capital expenditures were $4.5 million of which approximately $1.6 million of our first six months of 2021 capital expenditures were related to optimization projects at our recently commissioned facilities and 1.0 million related to the Pico feedstock Amendment.

<unk> acquisition costs of <unk> 3 million, we acquired assets for the business in North Carolina, a $4.1 million.

We present EBITDA and adjusted EBITDA metrics, because we believe the measures.

Investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Adjusted EBITDA for the three months ended June 32021 was $5.2 million a decrease of $3.7 million or 41, 5% over adjusted EBITDA of $8.8 million for the three months ended June 32020.

The reduction in adjusted EBITDA in the second quarter of 2021 is primarily from our $3.1 million increase net loss as compared to adjusted EBITDA in the second quarter of 2020.

With the announcement of the acquisition of the North Carolina business assets. The amendment of our peak of feedstock agreement.

In the current D. Three RIN market index price, we look forward to the rest of 2021.

We will now turn the call over to the operator for Q&A.

And ladies and gentlemen to ask a question you will need to press star one on Europe telephone again, if he would like to ask a question. Please press star one on your telephone keypad.

If you would like to withdraw your question. Please press the pound key.

Okay. Okay reminder, to ask a question. Please press star one on your telephone keypad, well pause for just a moment to see if there are any questions.

And we have a question from Adrienne <unk> of Atkins in Boston.

Please ask your question.

Yeah.

Hello, Good evening everyone.

My first question is just around the production performance.

Can you can you please clarify.

What exactly happened at Mcclatchy because.

If memory serves me correctly, we had an engine failure at Mcclatchy.

In Q1 in 2020, which.

I understood was a competing abnormally veins.

And that would have impacted Q2 'twenty between cheese production.

As well.

In this in this quarter Q2, 2021, you seem to have another.

In engine and the engine plan to issue.

Can you just clarify exactly what's going on there.

Sure Adrian happy too.

Provide clarity on that.

The issues that you are referring to are separate and distinct we did have an engine failure.

The former issue that you referred to that is the the compressor others too large compressors that that facility each providing about 50% of the production capacity that has since been remediated.

That engine is back online.

The issues that we had with equipment failures in this past quarter are separate and distinct those issues have all been resolved are call. It more balance of plant equipment and subsequent to those repairs all of the critical spare equipment has been replenished as well as root cause.

Analyses to minimize any chance of recurrence.

Should we consider these to be abnormal.

I have no move ins.

Yes.

Yeah.

No.

That's a very good question.

Yes.

The robustness of our maintenance programs are over years and years of interval.

Measurement failure rates of the equipment are critical spare matrices based on lead times and on.

Likelihood of failures.

Although we are speaking about one facility that did have equipment challenges in two separate reporting periods. They are separate and distinct and they have resulted in the same course of action that is applied to any of those failures that we have across our portfolio, which is immediate corrective.

Action replenishment of the critical spares and then.

A minimalist nation of the likelihood of recurrence of that failure as the root cause analysis dictates why the piece of equipment has failed outside of its normal maintenance intervals.

Okay.

So what was the kaki.

Any production be now going forward normalized.

Adrian one of the things that we have not done to date is disclosed specific production statistics for our operating facilities individually.

Okay.

I mean now that that's behind you.

You said there was a one.

100000.

100000 Btu.

CIT Bank.

So.

So can we expect a normalized run rate of $1.5 million btu per quarter.

So the remaining two quarters.

Uh huh.

I think a better way to look at it Adrian is the the deviation that we reference in the comparative periods.

Has been explained by this non recurring unusual equipment failure and so the expectation would be going forward that you would recapture that lost production thats been explained.

But.

Short of giving forward looking guidance that you've asked for that we have not at this point.

What I would point you to is the.

The growing portfolio and optimization that we have for the facilities that we've commissioned recently.

<unk>.

The likelihood that the issues that were referring to at the Mccarty facility. As an example, we will not.

Without a high degree of probability of your recurring obviously for the next quarter.

Yes.

I mean, it does sound as though than the $1.5 million should be.

Mr minimum given the ramp up of new facilities and the non recurrence of these kinds of one off.

I think that it's a it's a reasonable.

<unk> expectation, but keep in mind that these projects sit on very large active landfills. The majority of the portfolio and there are a lot of intersections between the filling patterns or management of those landfills and what would normally be the optimization.

Of renewable natural gas production.

There will always be sort of non linear.

Ebbs and flows in terms of what you could do to become closer or farther away from your ultimate production capacity at each of those locations.

But all things being equal had you not had that equipment failure at mccarty.

Would have recaptured to the levels at least for this past quarter that youre referring to.

Uh huh.

So, especially when you got a good job in disclosing.

Production capacity.

<unk> of each site.

Which if you look at us it works out to about $12 million in <unk>.

The overall portfolio size.

No.

I mean.

The way below that in terms of actual production.

Looking at our current run rate probably of over five.

Five and a half million for this year.

Maybe 6 million.

Next year.

I mean, how do we think about.

That actual production number versus Europe.

Your capacity going forward.

Because it is a big is a big big GAAP.

How do we think about that.

How we look at it internally is an opportunity to.

To become closer to capacity, but never.

<unk> current filling practices at the landfill the current waste and take that's happening at that landfill dairy projects. The current.

Management of the herd at each of the different areas that are supported.

The level of contaminants that are in what's going into the digest date.

All of those factors.

Have a tendency to change the primary hosted business model necessitates changes in that either taking in large amounts of construction waste at a landfill or different varying levels of sand or other sediment and nor feedstock that you would take from a dairy digestion project all.

Those things can challenge, reaching higher levels of production versus the capacity at those facilities.

Now with that said there are a lot of opportunities that we continue to look at that we bottle that we we evaluate what additional optimization or modifications to equipment or even processes as to how we collect that feedstock be it either the methane in the landfill for the.

Sure animal waste at the at the dairy or our future development projects in North Carolina, So that we can determine.

Then prioritize what those opportunities look like for us to make those appropriate investments one of the biggest examples that we can have of that is how we're looking to expand the dairy project and Jerome Idaho.

That project has stated capacity that is in excess of what current production is the limiting factors being on the digestion side and so with the expansion opportunity that we're taking there it paves the way for an investment to optimize the technology that is most <unk>.

Official for the production of renewable natural gas and the byproduct of that will be edging that project closer and closer to the stated capacity of the actual R&D production facility.

Yeah.

But I mean it.

Sure over those years, because I'm trying to forecast.

<unk> for this business.

The next one three.

Three and five years.

A crucial element in my starting point is going to be production volumes.

And at this stage will you disclose is.

Yeah.

Capacity by size.

Okay.

How should I think about that and then there's this massive gap you're currently at 45% of production capacity.

Does that number got you.

50% does it go to 60% does it go to 70% of your actual production capacity.

And I mean, I mean that is that is critical.

I'm trying to evaluate.

Of your business.

Adrian I cannot I can appreciate sure I can appreciate that question. What we have not done to date is offer forward looking guidance on production volumes or expenses or any of those components.

What I would.

<unk> is looking at the business with the run rate realizing that there is opportunity to increase production relative to the capacity at a number of our projects and those are announced at the time that we commenced those similar to the announcement that we did with the dairy project and when we make those.

Investments to optimize and bring those production numbers closer to the potential production at each of those projects.

That will allow for you to model and incorporate those into your forward looking views.

Yeah.

So.

We are not sitting with a risk here that you have.

Over invested in capacity.

And we never guidance.

If they're going to get anywhere close to the actual production capacity that you discussed.

I would I would say that we have not over invested at any of the facilities.

The facilities that have excess capacity have the opportunity to reach that capacity or near that capacity better stead.

With the appropriate adjustments or optimization and how the feedstock is collected and potential.

Peripheral pieces of equipment to treat contaminants higher levels of H, two S higher levels of sediment or sand and animal waste all of those items don't necessarily point you to a risk of an over investment in a facility, but rather an appropriate invest.

And that's in a higher capacity facility that paves the way for thoughtful investments at a smaller scale to optimize those projects to have them reach closer to the ultimate capacity levels of the R&D facilities themselves.

Okay.

Can I just ask a question around around pricing.

Yes.

Okay.

Firstly, the $1.78, because obviously.

Regular regular sparkling there and that's because of your hedging.

Can you clarify can you clarify what hedges.

Our spend in place.

So.

My thinking is that most of the hedges have rolled off by 30 June 2021.

Do you have any of the European hedge of the non in 2000 and maybe to you.

Starting on one July.

Going forward is that correct is there anything else, we should be aware of.

Yes, the hedge that we put in place we're referring to.

The forward commitments for the RIN monetization at the end of 2020 into 2021 was a I.

I would characterize it as an anomaly it was centered around a high degree of concern over the political environment or the futures environment of the attribute programs that we sell into for our renewable natural gas and so as we work through those commitments.

Through 2021, Youre right what remains as we get closer to the end of the year.

Is a subset of some of the volumes that have currently been under fixed price contracts to date.

A subset of that is rolling into this European Union hedge if you call it but at a fixed price.

Selling into.

Into starting July one.

Okay, and the Adrian to supplement what Sean has said is that we still will be monetizing. These.

Yeah.

Forward commitments that we entered into in the fourth quarter of 2020 will still be monetizing those throughout the remainder of 2021 as well.

That's our Adrian although the commitments don't represent 100% of production for 2021, the transfer timing of those commitments aren't necessarily in a first in first out basis, they're transferred per the terms of the counter party of the obligated party that you.

Sell forward, two and 2020 for 2021 and some of those will not transfer until you get to the ended the year, but the majority of the production that you're creating in the back half of this year, we'll start to.

Monetize closer to the index pricing that you can enjoy at today's current markets.

How much.

How much how much exposure to the spot market going into <unk>.

Or another way of putting it.

How much volumes are still subject to some sort of hedge commitment.

Whether it was taken off of the year.

Yeah.

Kevin within the confines of our we've got.

Yes.

We hedged approximately 50% of our production.

In the fourth quarter of 2020 for 2021.

Yeah.

Okay, but did you say it does decrease going into the last two quarters of this year.

Okay.

Yes, we will be able to benefit from.

The spot price of the D. Three we're in in the latter half of 2021.

I mean.

Again, if we come back to we need to have enough information to.

And be able to forecast earnings.

For the last few quarters and for next year.

A critical component of that could be the pricing side any sense then he comes back.

<unk>.

What how.

How many how much volumes are still subject to age.

And what that and what that.

Pricing for that disease.

Consider that pretty material information.

Yeah.

That's correct Adrian and we just haven't released or provided any forward guidance associated with the future results of the company at this point.

Yes.

I'll answer it for guidance consider its historical contracts that you've entered into and the company has commitments.

Under their contracts.

So there's not there's no guidance failure should be factual.

Right and I would just point you back Adrian to the approximately 50% of our expected RIN generation that we've hedged throughout 2021.

Can you I mean can you tell me what can you tell me what the European.

It is all a process.

Thank God.

What we can offer in that regard is that at the time, we announced the <unk>.

The agreement to fixed price agreement that we bid into in the fourth quarter.

Of 2020.

The price that we bid into it was respective of the RIN prices at the tail end of 2020.

Uh huh.

What the spot prices at the end.

2020.

That's right.

That's right when you bid into these opportunities into the European Union.

The the pricing that you can enjoy is is very similar to the prices that you can get domestically four three range.

The advantage, obviously being taking more and more of your product out of the domestic market and relieving some pressure on the supply demand mechanics that would ultimately underpin an RVO that would be set for the subsequent years.

And then you're able to lock that price in full.

<unk>.

Duration of the hits for the four and a half years.

You are able to lock that in for.

Extended periods of time in the case of this first one that we did we had the opportunity to lock that price for the full four and a half years.

Okay.

Missing chart in front of me, but it should be.

Already about 180 to $2 does that sound about right.

I think fits.

I think that the prices, we headed into the average for Q4 might have been a little bit south of that but directionally.

Directionally correct and keep in mind that when you monetize your domestic orange.

You are selling those it's sort of a marketplace assumption and the sharing components that you give away as part of the pathways that you monetize these attributes on all go into the pricing mechanics, even when you're bidding abroad to have these volumes support the renewable energy <unk>.

<unk> in the European Union, So it's not a perfect correlation to an index price because even when we sell at those index prices domestically. There's always a component of it that is distributed amongst the pathway providers to be able to generate monetize those attributes.

Okay.

I mean, I think we are going to have to agree to disagree.

My question is for the company.

In terms of disclosures I really think you should you should be providing more detailed production.

Production guidance besides.

And given us, giving us a better idea of when production gets due as a percentage.

The available capacity I think it's critical and in.

Being able to forecast the income for.

For this business and the cash flows.

And then and then also just on your pricing.

Again, we need to know.

We need to note.

At what price you are hedging.

These volume that I mean, you are.

Hedging significant volumes.

It's very material to the numbers going forward.

This is Mike's addition.

No I can appreciate the combination room.

Okay.

Ill, let me see if there's anybody else who wants to ask questions Huh.

Okay.

And again, it's very in line to ask a question. Please press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypad.

Okay.

We have a question from Entre Ivanka wrong of Marvell had let me ask a question.

Oh sure.

Andre.

How are you.

I'm well how are you.

With that Sean.

I'm just picking up on a question, which I do not.

You know I think it's important for the market to understand.

But more about the.

Future cash flow potential of the assets.

I think the big disparity between production capacity versus actual production.

The key parts of the business that you need to clarify.

We do have issues.

Ron can you give any monroeville.

That's might be can you just speak to the markets in our D C.

Exempt guidance when the hedging that you do.

Contract is.

Number.

Even those not forward looking.

As mentioned number which would be disclosed to the market.

I think the board needs to consider those numbers.

I think it's.

Important to the board.

And then just can we disclose to disclose those numbers to the public markets.

Welcome to the ACC regulations in terms of the responsibility indexes.

So that's a decent guidance and so what you would want to indicate.

To use.

I think the company set up pool.

What an exciting Peter go ahead.

I think the disclosure both in terms of the Pico and the data that positions them to potential going forward.

Great area.

Which you need to.

Clarified to the market and provide some guidance I mean nothing cause this moment.

Give us.

Okay.

Capex.

Indications, but no.

Income indications.

So I don't require.

The full cost income potential, but I do think it's important for the market to understand the sensitivity.

As and when prices does the income potential and.

Changes in income on the.

The big problems.

Income going forward.

We can do our own calculations about the EBITDA going forward, but can you give us some sensitivity indications.

Changes to the constant changes TLC if this.

Appliances.

And the impact on EBITDA going forward.

At the moment, the only people that have good insights into those brands.

And I think that's it.

And I think even if you just think about disclosing sensitivity parameters of the market.

So that investors can make their uncles.

Use of RIN prices else's responses are going forward.

Good day now.

And potential production numbers.

So at the moment, we disclose production capacity for example to the market, but we've got no idea where the potential production capacity would be.

Versus actual capacity I think that that's a point, which is the most.

Previously we indicated that we are sitting at 50% of production capacity.

We've got no idea of what you estimate the production capacity going forward.

And we have no idea of what the potential change.

This parameter resolve launch.

Who put tons of production this would be EBITDA.

So that's nice to very good results for the next Bill in Vista.

To determine who even both models.

And because what the EBITDA is going forward.

I need you to make a coordinate with them, but I do think that you need to think about disclosing sufficient information to the external markets.

Excluding this system as the uncles.

Those parameters.

We can influence EBITDA going forward some.

That's the point that John and I do.

At this stage and that's why in the Doc and the only people that have good information about the directors and management and I think that can fit unclear to us so.

I think the board to consider those parameters.

Yeah.

Well Andre I appreciate those comments to try and.

Respond in kind to a number of your points.

With respect to pricing.

One of the things that we tried to disclose on a recurring basis is the percentage of our monetization that is self marketed versus what's under fixed price. So it gives you a sense per quarter per annum in terms of what volumes are able to be monetized at.

Current market pricing and I stress current to say that there's always a monetization of those attributes that take place.

123 quarters in advance.

To readdress Adrian <unk> question in terms of what percentage of your production is still under a hedge or a forward sale commitments. That's a function of exactly what I'm, saying that the transfers if those attributes are not always a day a week a month later, sometimes there are two or three quarters in advance.

And in the case of 2020 to 2021.

Was longer than that which is disproportionate to what we typically try to do.

As far as production is concerned the capacity disclosures are in effect the goal that we aspire to achieve for each of our locations.

Save for one of our operating projects all of these are on open and growing landfills.

And open and thriving dairy.

Dairy farms and so the opportunities have to be paired with the investment that's required to achieve that sometimes it is investment in the collection systems for the methane sometimes it is the investment in the operating practices of the dairies, sometimes it is in additional process.

<unk> equipment to take contaminants out of the feedstock.

Supply that was not originally contemplated in the design of those facilities not to say that theyre not invested properly not to say that they're failing facilities, but as the host industry. The host projects or business continues to evolve sometimes those parameters.

Has changed to the point where to reach a higher level of percentage of capacity. It does require a corresponding investment.

So the challenge with trying to disclose the increases as to what we can expect you also have to disclose what the investment that you intend to make to be able to realize that increased level of production, which is what we're trying to choose thoughtfully and effectively as part of our multi pronged.

Both strategy and looking at those projects. The most recent one being the dairy the project that we are investing in there and the capital commitment is to do exactly what you are referring to which is realized as close to the production capacity of that R&D facility as it was designed and so the hope is as we can.

Continue to progress in that investment and it is coupled with the expansion of the dairy that they have committed to give to us in terms of feedstock that we'll realize the full potential of that facility or something very close to it.

But all of your point make sure we're still not getting it.

I think that you need the three inches between Darien landfill I think.

There's a few different different and lithium prices and you recognize that Muslim bronchi and on volume herbal doesn't keep defensive business cases, and I think that the danger would you face is not disclosed production capacity per slot, which is mostly different absolute production you're correct. The inflation that is oh.

And imminent possibility that those production capacities could be met and I think that you need to give them out guidance to the market with respect to dairy that's in our SEC.

<unk> very good return calculation, so I assume that when you sit down with the board you couldn't myeloma that you want to achieve in the project and you disclosed to the market at some stage would be you've achieved with a remote.

So the team's really a natural buildup to boston different than with some criticism and usually keep them as different cases.

The point, which I'm trying to make is that at the moment, you'll disclosures do not enable external investors to make the determination and it's been it's nipped in the gray area and.

As a management team as a board.

Your goal should be to eliminate right here is a strong responsible and at the moment to integrate areas and I would say that with respect to your fluid agent food.

<unk> burst capacity or program was to ship to Europe, I don't know what the prices I don't know how long.

I mean, you need to use it the vintage so so.

We can use long in.

And if you could was display with loved ones because I'm going to now.

I mean do you gauge for how long and at what price into Europe, if you're not willing to disclose if you decided that you are not willing to snuggle.

And then there is a competitive reasons for that but at the moment he talking around the issue and that is not in our interest.

So that's what I'm trying to get to.

Don't know what percentage of your capacity of religion to Europe, I don't know whats the seemed to have a capacity of hedged in terms of you an answer.

And I don't know what Youll program was announced with this.

We can talk about the disclosure two months before you talk about percentages.

When we talk about the sensitivity to percentages the problem with percentages.

This concept.

So we don't know with a solid starting point is.

My view that it would be more beneficial to investors to understand.

A simple metric which is that.

Tim since James in the M. N V to utilize this as a change in EBITDA margin percentage the percentage relative comps do you understand what I'm, saying so.

When when the RIN price goes to them.

One two to see that.

But then to changes.

That's helpful.

I'm trying to understand because.

It wasn't price changes by day since the MBT this statistic.

On EBITDA.

That would be beneficial to shareholders at the moment, you're talking about percentages is not beneficial to shareholders because I've gone to this year interest in Brazil, not done different starting point.

If you're if you're awesome good feedback from shareholders, but I'm trying to understand is trying to understand this as soon as COVID-19, which is the price changes and the disclosure most adequate at the moment given that we would need to do that because you don't want to do that and just say that it's probably something isn't so much in Wisconsin.

But we shouldn't talk around that issue.

I appreciate the comments.

The.

The European Union.

Hedge that we have sold forward on the.

The price was not specifically to closed disclosed due to confidentiality of this first agreement that we had done with origin as well as a competitive reasons for the ability to continue to explore opportunities into that market. So.

I understand your point about disclosing.

What we can but being very explicit as to why there are certain items that were choosing not to disclose I can assure you and I'm gonna be honest children can I just be honest on that point then it means that no director is able to provide shares rather than promotions mother's gloves, because that material nonpublic information do you understand my point.

And then in terms of ACC rules, you kind of you tell them right initiative, while nonpublic information about can shed the shelves.

So I'm happy I'm happy that you don't disclose it but then you need to understand the implications of not doing that.

Because that the material prosper and to shareholders.

I mean.

I understand completely but it is confidential information, but in fact confidential and then direct isn't under management, including with shell can you should be doing but that distinction.

And do you need to understand that point.

And I'm happy with that if you're willing to be bound by that point, then you'll dawns on decline, but you've kind of gone beyond confidentiality when its Youtube.

Andre I can I can appreciate and will will definitively acknowledged that the board and the management understand and will be bound by any requirements to not trade.

Being in possession of material nonpublic information.

And my point too soon if not in the interest of shareholders.

So if you signed an agreement with a European counterpart and agreed to confidentiality restrictions, it's not in the interest of shareholders and the potential of the guidance going forward to be down about those restrictions. So I don't think it was smart to be borne by those jurisdictions.

Because we're all in English to promoting the potential of this company, which we think is boss.

And we are supportive of the management team and I think that that under your guidance, we will take this business.

Forward.

In a in a thoughts, which which makes me very excited.

But at some stage you've got to recognize if you go to expand the potential of this company to the market.

And if you cant expand the potential of this company.

The I'll see if there's potential rent that thing so many european potential to the Mazda Akshay profit will be constrained.

I'm gonna be bound by confidentiality agreement is not small.

I mean, you've got a company now which is sitting in the sweet spot of sweetness.

In America in an industry, which is good vast potential and all we can talk about the potential upside of this business in the market.

It doesn't seem to me.

To be very small.

Ray would you as the management team can make money, but youll see options when your shares but why wouldnt want to constrain the growth of the shares bought by restricting inflammation, which indicates the vast potential of this business going forward, what you're doing in the dairy industry has grown so much of it is small it is going to change the income.

This business going forward, but we can talk about it.

It just doesn't just doesn't make sense to me.

No no no the way or would you build confidence in the business and and attract shareholders explaining them very clear concise stones to the market. What other income drivers of the business, but I can tell you looking at this business from your disclosures you need a Phd to understand what.

This business does and taking it to calculate it.

Now the way, which we will grow.

Our collective wealth and collected interest in this business is to make this very easy to understand and explain to the market that we had in the best possible industry, which has existed in the last 50 years.

But it seems to me in the way that you're answering the question when you're trying to do to make information uptake, but you just just making it difficult for people to understand.

Why is it sensible to invest in this business and that is my frustration at the moment.

Well as far as is the guidance or the explanations that we have provided publicly what we have is disclosures regarding the historical run rate of all of our production facilities. We have explained where there are deviations from what our expectations or year over year or quarter over quarter comparisons have been.

And so the resolution of those issues and those anomalies should result in a clearer picture of our run rate save for any additional investment now increases in additional investments the GAAP of between current production run rate say for those anomalies and for the the capacity.

Potential of each of those facilities needs to be appropriately matched with the prioritization of the disclosure of the investment that's going to be made to realize the potential of those R&D facilities.

As far as the dairy projects concern.

The acknowledgement of the investment that we're making and the capital investment that we're making and the potential revenue potential at the prices that we disclosed would give you a a relatively clear view as to what the revenue potential is for that facility realizing it.

Very close to capacity production potential after the investment that is made in that additional digestion.

Capacity and equipment.

And how that materially contributes to the financials.

<unk> would be at indices for the attributes for RFS and for CFS and they would be correlated to the production percentages that we disclosed that are not tied to fixed prices and contract. So I do appreciate the need for additional tranche.

Parents, seeing we always take that under advisement.

But definitively there is a run rate trajectory and explanations in the financials and the commentary that had been provided that can allow for an investor to understand what the base potential is for the business at varying points of view that the <unk>.

<unk> has on the outlook of attribute pricing, which makes up the majority of the revenue stream of the business.

But it's really as long as they don't show in the us.

This isn't Christina you've made no disclosures about sensitivity I'll see if it W.

Disclosures over L CFS.

Okay.

The sensitivity of our process the process change in LTM EBITDA.

That's begun to close on it.

That's because the component.

Yes.

I'm Gonna disclosures of Lcs with since your blood is very limited, it's verbal not the thin digital hold on that.

A major part of your business going forward would be the bigger component and which is in the call, but then that sort of index related to LTE. It. This is the major components of the income potential of those assets because there's no way and then Mr. Good model that at the moment.

Right.

The existing dairy project has not yet begun to monetize those else CFS credits. So they have not had a material impact to the financials.

But he is not in the future potential of daily would be in there.

Following ratio relating to healthier place secondly, the existing facility you haven't disclosed elsewhere.

Okay.

The existing component of <unk> revenue is not a material enough of a component of the legacy portfolio to two.

Adjusted for sensitivities. The majority of the business is driven by the RFS. The D. Three rent monetization and the fixed price contracts that we have for power generation.

So would you say that going forward as LTE becomes material you'll disclose ups.

And could you give any guidance on what is a mature.

<unk>, which would cause their disclosure requirements.

Definitely.

<unk> are moving into more and more agriculture.

Production feedstock production and so as we move into North Carolina and develop the swine opportunity.

A definitive component of this will be L. CFS credit monetization, we will begin to be able to disclose what the sensitivities are similar to how we do financially about changes in the D. Three RIN pricing and the impacts that can have on the financials of the business, we will do that in kind.

Once L CFS credit monetization becomes a material component of the business.

But you can also ask you a question what the board has made the decision to invest and that's very exciting data opportunity.

Why would the board and management.

Nazis.

I didn't say that interruption per center just all we have reached the end of our generation do you have any closing remarks.

Yes.

Other than to thank everyone for taking the time to join US on the conference call. Today, we look forward to speaking to you again on our third quarter call.

And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Yes.

[music].

Yes.

[music].

Right.

[music].

Good afternoon, everyone and thank you for participating in today's conference call I would now like to turn the call over to Mr. Tom to Raleigh as he reads the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995, that's the one.

It's important cautions regarding forward looking statements John Please go ahead.

Thank you and good afternoon, everyone welcome to Montauk Renewables second quarter 2021 earnings Conference call I'm, John thoroughly Vice President General Counsel and Secretary at Montauk Renewables.

Joining me today are Shawn Mcclain, montage, Chief Executive Officer, and President and Kevin Van <unk>, Chief Financial Officer.

Two entities, such as with Pico monetization of renewable natural gas production abroad, and diversification of Montagues monetization strategy. These.

Except as required by law, we undertake no obligation to update any forward looking statements.

Our remarks today May also include non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.

Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation.

In our second quarter 2021 earnings release, and Form 10-Q issued and filed this afternoon, which are available on our website at IR Dot Montoc renewables dot com with that I will turn the call over to Sean.

Thank you John.

Multi pronged growth strategy.

This strategy to redirect and monetize RMG production abroad has the potential to help stabilize domestic attribute pricing both at the federal and state levels for renewable natural gas production.

The continued optimization and expansion of our existing portfolio combined with the diversification of our monetization strategies creates the financial stability and support groundbreaking development in exciting new ways to address environmental impacts of industrial agriculture, Our recent acquisition of business asset.

Our actions all of which have the potential to provide expansive growth opportunities for <unk> talk for years to come.

And with that I'll turn the call over to Kevin Van <unk>, Our Chief Financial Officer, Kevin.

Total revenues in the second quarter of 2021 were $31.7 million, an increase of $3.8 million or 13, 5% compared to $27.9 million in the second quarter of 2020.

Primary driver for this increase relates to higher revenues of $4.6 million recognized under counter party sharing agreements.

Partially offsetting this increase was a decrease in the volume of Rins sold during the second quarter of 2021 due to inter period timing of transfers of rent as the majority of Rins ourself marketed.

As a reminder, we entered 2021 with forward commitment of approximately 50% of our expected 2021 rent generation.

These forward commitments were based on the three rent index prices at the time of the commitment which is now below the <unk> three rent index as a result realized prices for environmental attributes monetize in a year may not correspond directly to index prices and the current year due to the forward selling up commitments.

Total general and administrative expenses were $7.3 million for the second quarter of 2021, an increase of $3.6 million or <unk>, 95% compared to $3.8 million for the second quarter of 2020.

Of the total.

In the second quarter of $2000.21 million to $2 million related to stock based compensation costs, primarily associated with the IPO and reorganization transaction.

Excluding the impact of IPO related stock based compensation general and administrative expenses increased approximately $1.5 million.

This increase in general and administrative expenses was primarily driven by increased corporate insurance premiums and to a lesser extent professional fees.

Turning to our segment operating metrics I'll begin by reviewing our renewable natural gas segment.

The second quarter of 2021 volumes approximately 30000 M. Btu of R&D was produced from development sites commissioned during 2020.

Revenues from the renewable natural gas segment in the second quarter of 2021 were $27.6 million and increased $3.7 million or 15, 6% compared to $23.9 million in the second quarter of 2020.

During the second quarter of 2021, we felt monetize $8.8 million rins, representing a $3.3 million decrease or 27, 1% compared to $12 million in the second quarter of 2020.

This decrease was primarily related to inter period timing of transfers of Rins as the majority of Rins yourself marketed resulting in fewer commitments for the second quarter of 2021 versus the second quarter of 2020.

Average pricing realized when RIN sales during the second quarter of 2021 was $1.78 as compared to $8.37 in the second quarter of 2020, an increase of 29, 9%. This compares to the average D. Three rent index price for the second quarter of 2021 of $3 <unk>.

Being more than double the average D. Three rent index price in the second quarter of 2020.

Operating and maintenance expenses for our R&D facilities in the second quarter of 2021 were $10.2 million an increase of $3 one.

$1 million or 43% as compared to $7.1 million in the second quarter of 2020, approximately $1 million of the increase is related to development sites commissioned during 2020.

This increase is related to additional media changes in disposal expenses.

Increased repair expenses due to elevated levels of hydrogen sulfide contaminants and site outage timing at our past to see the Galveston and rocky facilities, respectively.

Revenues from renewable electricity in the second quarter of 2021 were $4.1 million a decrease of zero point $4 million or nine 6% compared to $4.5 million in the second quarter of 2020.

Prior to its commissioning in 2020, the result of our Pico facility were reported in our renewable electric electricity segment until October 2020.

Operating and maintenance expenses for our renewable electricity facilities in the second quarter of 2021 were $2.3 million a decrease of the Europe was $7 million or 23, 8% compared to $3 million in the second quarter of 2020 of.

<unk> 3 million or 43%.

The decrease is primarily a result of timing of scheduled engine preventative maintenance intervals at our <unk> facility.

Operating loss in the second quarter of 2021 with a loss of <unk> 5 million, a decrease of $4.1 million or 115% compared to the operating profit of $3.6 million in the second quarter of 2020.

<unk> operating profit for the second quarter of 2021 was $7.6 million a decrease of <unk> 5 million or six 5% compared to $8.1 million in the second quarter of 2020.

Renewable electricity generation operating profit for the second quarter of 2021 with 16000, an increase of <unk> 8 million or 100.

And two 1% compared to an operating loss of <unk> 8 million in the second quarter of 2020.

During the second quarter of 2021 associated with our purchase of Rins at market prices, we recorded an adjustment of <unk> 7 million to reduce the rent to net realizable value.

Turning to the balance sheet as of June 32021, 25.0 million without standing under our term loan and $36.7 million was outstanding under our revolving credit facility.

The company's capacity available for borrowing under the revolving credit facility was $37.5 million.

During the first six months of 2021, we generated $11.2 million of cash from operating activities of <unk>.

Eight 8% increase from the first six months of 2020 of $8.7 million.

<unk> acquisition costs of <unk> 3 million, we acquired assets for the business in North Carolina of $4.1 million.

We present EBITDA and adjusted EBITDA metrics, because we believe the measures.

Assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Adjusted EBITDA for the three months ended June 30th 2021 was $5.2 million a decrease of $3.7 million or 41, 5% over adjusted EBITDA of $8.8 million for the three months ended June 32020.

Reduction in adjusted EBITDA in the second quarter of 2021 is primarily from our $3.1 million increase net loss as compared to adjusted EBITDA in the second quarter of 2020.

With the announcement of the acquisition of the North Carolina business assets. The amendment of our peak of feedstock agreement in the current D. Three RIN market index price, we look forward to the rest of 2021.

We will now turn the call over to the operator for Q&A.

And ladies and gentlemen to ask a question you will need to press star one on your telephone.

Dan if he would like to ask a question Lisa Star one on your telephone keypad.

He would like to try a question. Please press the pound key.

Okay. Okay reminder, to ask a question. Please press star one on your telephone keypad.

For Jessica moment to see if there are any questions.

And we have a question from Adrienne <unk> of active in basketball.

Please ask your question.

Hello, Good evening everyone.

My first question is just around the production performance.

Can you can you please clarify.

What exactly happened at Mcclatchy because.

If memory serves me correctly, we had an engine failure at Mcclatchy.

In Q1 in 2020, which.

I understood was a competing abnormally range.

And that would have impacted Q2 'twenty between cheese production.

As well and then in this in this quarter Q2, 2021, you seem to have another and engine.

In Japan the issue can.

Can you just clarify exactly what's going on there.

Sure Adrian I'm happy to.

Provide clarity on that.

The issues that you're referring to are separate and distinct we did have an engine failure.

In the former issue that you referred to that is the the compressor others too large compressors that that facility each providing about 50% of the production capacity that has since been remediated.

That engine is back online the issues that we had with equipment failures in this past quarter are separate and distinct those issues have all been resolved are call it more balance of plant equipment.

And subsequent to those repairs all of the critical spare equipment has been replenished as well as root cause analysis to minimize any chance of returns.

Should we consider these to be abnormal.

Abnormal events.

Yes.

Okay.

No.

That's a that's a very good question.

Yes.

The robustness of our maintenance programs are over years and years of interval.

Measurement failure rates of the equipment are critical spare matrices based on lead times and on.

Likelihood of failures.

Action replenishment of the critical spares and then.

A minimalist nation of the likelihood of recurrence of that failure as the root cause analysis dictates why the piece of equipment has failed outside of its normal maintenance intervals.

Okay.

So what was the khaki Dale.

Any production be now going forward normalized.

And one of the things that we have not done to date is disclosed specific production statistics for our operating facilities individually.

Okay.

I mean now that that's behind you.

You said there was a it was a 100000.

1000 <unk>.

Setback.

So.

So can we expect a normalized run rate of $1.5 million btu per quarter.

So the remaining two quarters.

I think a better way to look at it Adrian is the the deviation that we reference in the comparative periods has been explained by this non recurring unusual equipment failure and so the expectation would be going.

Forward that you would recapture that lost production Thats been explained.

But.

Short of giving forward looking guidance that you've asked for that we have not at this point.

What I would point you to is the the growing portfolio and optimization that we have for the facilities that we've commissioned recently.

And the the likelihood that the issues that were referring to at the Macquarie facility. As an example, we will not.

Without a high degree of probability of your recurring.

Obviously for the next quarter.

Yeah Yeah.

I mean, it does sound as though than the $1.5 million should be.

Mr minimum given the ramp up of new facilities and the non recurrence of these kinds of one off.

I think that it's a it's a reasonable expectation, but keep in mind that these projects sit on very large active landfills. The majority of the portfolio and there are a lot of intersections between the filling patterns or management of those.

Landfills and what would normally be the optimization of renewable natural gas production. So there will always be sort of non linear.

Ebbs and flows in terms of what you could do to become closer or farther away from your ultimate production capacity at each of those locations.

But all things being equal had you not had that equipment failure at mccarty.

You would have recaptured to the levels at least for this past quarter that youre referring to.

Uh huh.

So, especially when you got a good job and in disclosing.

Production capacity.

On each side.

Which he called me to work it off it works out to about $12 million in Med D to you.

So the overall portfolio.

Yes.

No.

I mean you.

Way below that in terms of actual production.

When youre looking at our current run rate probably of.

Five and a half million for this year.

<unk>.

Maybe 6 million next year.

I mean, how do we think about.

That actual production number versus Europe.

Your capacity going forward.

Because there's a big it's a big big GAAP.

So how do we think about that.

How we look at it internally is an opportunity to.

To become closer to capacity, but never.

Unlikely, reaching the full capacity of each facility. When these facilities are designed and commission. It is under a very specific set of circumstances contaminants in the methane that's being collected the volumes the current filling practices at the landfill the current waste and take that's happening at that.

So dairy projects the current <unk>.

Management of the herd at each of the different areas that are supported.

The the level of contaminants that are in what's going into the digest date.

All of those factors have a tendency to change the primary hosted business model necessitates changes in that either taking in large amounts of construction waste at a landfill or different varying levels of sand or other sediment and the north feedstock that you would take from it.

Gary Digestion project all of those things can challenge, reaching higher levels of production versus the capacity at those facilities.

Sure animal waste at the at the dairy or our future development projects in North Carolina, So that we can determine.

Official for the production of renewable natural gas and the byproduct of that will be edging that project closer and closer to the stated capacity of the actual R&D production facility.

Yeah.

But I mean it.

So those you expect so I'm trying to forecast.

<unk> for this business.

The next one.

Three and five years.

A crucial element of my starting point is going to be production volumes.

And at this stage or do you disclose is.

Youll capacity that's us.

Okay.

How should I think about and there's this massive gap you are currently at 45% of production capacity.

Does that number got you.

50% is it go to 60% does it go to 70% of your actual production capacity.

And I mean, I mean that is that is critical.

I'm trying to evaluate.

Of your business.

Adrian I cannot I can appreciate sure I can appreciate that question. What we have not done to date is offer forward looking guidance on production volumes or expenses or any of those components.

What I would <unk>.

Commend is looking at the business with the run rate realizing that there is opportunity to increase production relative to the capacity at a number of our projects and those are announced at the time that we commenced those similar to the announcement that we did with the dairy project and when we make those.

Investments to optimize and bring those production numbers closer to the potential production at each of those projects.

That will allow for you to model and incorporate those into your forward looking views.

Okay.

We were not sitting with a risk here that you have.

Over invested in capacity.

And we never guidance, you're never going to get anywhere close to the actual production capacities that you discussed.

I would I would say that we have not over invested at any of the facilities.

The facilities that have excess capacity have the opportunity to reach that capacity or near that capacity better stead.

With the appropriate adjustments or optimization and how the feedstock is collected and potential.

Okay.

Hum.

Can I ask a question around around pricing.

So yes.

Okay.

Especially the the dollar 70 outages obviously.

Regular webinars thought Green day, and that's because of your hedging.

Can you clarify can you clarify what hedges.

Our spend in place.

So.

My thinking is that most of the agents who have rolled off by 30 June 2021.

Do you have any of the European hedge of the non in 2000 and maybe to you.

Starting on one July.

Going forward is that correct was there anything else, we should be aware of.

Yeah, Yeah, the hedge that we put in place we're referring to.

The forward commitments for the RIN monetization at the end of 2020 into 2021 was a I.

Through 2021, Youre right what remains as we get closer to the end of the year.

Is a subset of some of the volumes that have currently been under fixed price contracts to date.

A subset of that is rolling into this European Union hedge if you call it but at a fixed price.

Selling into.

Into starting July one.

Okay Adrian to the ultimate what Sean has said is that we still will be monetizing. These.

Yeah.

Forward commitments that we entered into in the fourth quarter of 2020 will still be monetizing those throughout the remainder of 2021 as well.

Sell forward, two and 2020 for 2021 and some of those will not transfer until you get to the end of the year, but the majority of the production that you are creating in the back half of this year, we will start to.

Monetize closer to the index pricing that you can enjoy at today's current markets.

How much.

How much how much exposure to the spot market going into <unk>.

So or the other way.

How much volumes are still subject to some sort of hedge commitment.

Whether it was taken off the ball.

Yeah.

Kevin within the confines of our you've got.

Yes.

We hedged approximately 50% of our production.

In the fourth quarter of 2020 for 2021.

Yeah.

Okay, but did you say it does decrease going into the last two quarters of this year.

Yeah.

Yes, we will be able to benefit from.

The spot price of the D. Three we're in in the latter half of 2021, yes, but.

But what is what.

Again, if we come back to we need to have enough information to be able to forecast earnings.

For the last few quarters and for next year.

I mean, a critical component of that could be the pricing side.

Then you need to understand.

<unk>.

How many how much volumes are still subject to age.

And what that and what that that pricing for their pages.

Consider that pretty material information.

Yeah.

That's correct Adrian and we just haven't released or provided any forward guidance associated with the future results of the company at this point.

Yeah.

I'll answer it for guidance because I consider it.

Historical contracts that you've entered into.

The company has commitments under.

Under their contracts.

So does that is that guidance really yes should be factual.

Right and I would just point you back Adrian to the approximately 50% of our expected RIN generation that we've hedged throughout 2021.

Can you I mean can you tell me what can you tell me what the European.

Hey, just a process.

Going forward.

What we can offer in that regard is that at the time, we announced the AR.

The agreement to fixed price agreement that we bid into in the fourth quarter.

<unk> 'twenty 'twenty.

The price that we bid into it was respective of the RIN prices at the tail end of 2020.

Uh huh.

What the spot prices at the end.

2020.

That's right.

That's right when you bid into these opportunities into the European Union.

The the pricing that you can enjoy is is very similar to the prices that you can get domestically.

For the three range.

And then you're able to lock that price in full.

But.

Duration of the hedge before and a half years.

You are able to lock that in for.

Extended periods of time in the case of this first one that we did we had the opportunity to lock that price for the full four and a half years.

Okay.

Missing chart in front of me, but it should be.

The weighted by 180 to $2 does that sound about right.

I think fits.

I think that the price as we headed into the average for Q4 might have been a little bit south of that but directionally.

Directionally correct and keep in mind that when you monetize your domestic orange.

You are selling those it's sort of a marketplace assumption.

The sharing components that you give away as part of the pathways that you monetize these attributes on all go into the pricing mechanics, even when you're bidding abroad to have these volumes support the renewable energy directive and the European Union. So it's not a perfect correlation to an index price.

Because even when we sell at those index prices domestically, there's always a component of it that is distributed amongst the pathway providers to be able to generate monetize those attributes.

Okay.

I mean, I think we are going to have to agree to disagree.

This one is for the company.

In terms of disclosures I really think you should you should be providing more detailed production.

Production guidance besides.

And given giving us a better idea of when production gets too.

Each of available capacity I think it's critical in.

And being able to forecast the earnings for this business and the cash flows and then and then also just on your pricing.

Again, we need to know.

We need to note.

At what price you are hedging.

These volume that I mean, you are hedging significant volumes and it's very material to the numbers going forward.

This is Mike's addition.

No I can appreciate the combination.

Okay.

Let me see if there's anybody else who wants to ask questions Huh.

Okay.

And again as a reminder to ask a question. Please press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypad.

We have a question from Andres and Iran. Marblehead. Please ask your question.

Hello, Sean.

Andre.

How are you.

I'm well how are you.

With that Sean.

I'm just picking up on a question, which I think we lost.

I think it's important for the market to understand.

But more about the.

Future cash flow potential of the assets.

I think the big disparity between production capacity versus actual production.

He was a key part of the business that you need to clarify.

We do have issues.

Ron P value monroeville.

Can you just speak to the markets in our D C.

But I've seen them the hedging that you do.

Contract is.

Number.

Even those not forward looking.

And actually a number which you can disclose to the market. So I think the board needs to consider those numbers.

I think in <unk>.

For the board.

These are fully disclosed to disclose those numbers to the public markets.

Both in terms of the ACC regulation in terms of responsibility indexes.

So that's a decent guidance and so what you would call want to indicate.

To use.

I think the company set up pool.

What an exciting period.

It does.

I think the disclosure both in terms of the people in the theater acquisitions on the potential going forward.

He is a great area, which we need to.

Clarified to the market and provide some guidance I mean, nothing because this moment you gave us.

Okay.

Capex.

Indications, but no.

Income indications.

So I didn't require.

The full cost to income potential, but I do think it's important for the market to understand the sensitivity.

Changes in rent prices does it the income potential.

Changes in income on the.

The big problems.

Income going forward.

We can do our own calculations about the EBITDA going forward, but can you give us some sensitivity indications.

It was changes to those thoughts and changes to <unk>.

Appliances.

And the impact on EBITDA going forward.

At the moment, the only people that have good insights into those brands and all the directors and I think that's an instance.

And I think you need to think about disclosing sensitivity parameters of the market.

So that investors can make their uncles.

Use of RIN prices else's responses as you're going forward.

Good day now.

Potential production numbers.

So at the moment to disclose production capacity for example to the market, but we've got no idea where the potential production capacity would be.

Versus actual capacity I think the point, which I previously.

Previously we indicated that we were sitting at 50% of production capacity.

No idea of what you estimate the production capacities going forward.

And we look no idea of what the potential change.

If these parameters all the plants.

Ooh Taco production visit the EBITDA.

So that's nice and very good results for the next Bill in Vista.

To determine.

Ooh, even boat models, which indicate what the EBITDA is going forward.

I don't need you to Mike Orlando to but I do think that you need to think about disclosing sufficient information to the external market.

Excluding this system is the uncles.

Those parameters would.

Which influence over there going forward.

Yeah.

That's the point that John and I do.

At this stage in this line the Doc and the only people go to get information on SEDAR.

And management and I think that's unclear to us so.

No I think the board to consider those parameters.

Yeah.

Well Andrea I appreciate those comments to try and.

Respond in kind to a number of your points.

With respect to pricing.

One of the things that we tried to disclose on a recurring basis is the percentage of our monetization that itself marketed versus what's under fixed price. So it gives you a sense per quarter per annum in terms of what volumes are able to be monetized at.

Current market pricing and I I stress current to say that there's always a monetization of those attributes that take place.

123 quarters in advance.

And in the case of 2020 to 2021.

Was longer than that which is disproportionate to what we typically try to do.

As far as production is concerned the capacity disclosures are in effect the goal that we aspire to achieve for each of our locations.

Save for one of our operating projects all of these are on open and growing landfills.

And open and thriving dairy.

<unk> equipment to take contaminants out of the feedstock.

Supplied that was not originally contemplated in the design of those facilities not to say that theyre not invested properly not to say that they're failing facilities, but as the host industry. The host projects or business continues to evolve sometimes those parameters.

Has changed to the point where to reach a higher level of percentage of capacity. It does require a corresponding investment.

Our strategy and looking at those projects. The most recent one being the dairy the project that we are investing in there and the capital commitment is to do exactly what you're referring to which is realized as close to the production capacity of that R&D facility as it was designed and so the hope is as we can.

Continue to progress in that investments and it is coupled with the expansion of the dairy that they have committed to give to us in terms of feedstock that we'll realize the full potential of that facility or something very close to it.

But all of your point I'm sure are well known.

Yes.

I think that you need to differentiate between dairy and landfill.

There's a few different different in lithium prices in Europe, the mindset Muslim bronchi and on volume or local doesn't keep defensiveness places and I think that the danger would you face is that if you disclose production capacity per slot, which is modestly different.

So production will create the inflation that is oh.

And imminent possibility that those production capacities could.

And I think that you need to give them out guidance to the market with respect to dairy that's in.

And it's like a required rate of return calculation. So I assume that when you sit on the board you've got non along that you want to achieve in the project.

You used to disclose to the market at some stage you wouldn't be achieved with a remote.

The team here in Nashville, Milwaukee, Boston different in this guidance.

You should keep them as different cases.

Thank you John clients you, Mike is that the non material disclosures.

To explain this to us to make that determination and it's been it's mixed in the gray area and.

As a management team as a board.

Your goal should be to eliminate right here is as long as possible and at the moment that unique values and I would say that with respect to your fluid agent food.

<unk> burst capacity or program with a ship to Europe I don't know what the prices I don't know how long.

I mean, maybe to use your words so so.

We can use long in.

And if you could disclose a dull moment.

I mean do you gauge for how long and at what price into Europe, if you're not willing to disclose what did you say that you're not willing to smoke.

And then there's a competitive reasons for that but at the moment he talking around the issue and that is nothing out of interest.

So that's what I'm trying to get to.

Don't know what percentage of your capacity of religion to Europe, I don't know whats the capacity you've hedged in terms of Europe.

And I don't know, what your program or something else with this.

If you talk about the disclosure two months before you talk about percentages.

When you talk about the sensitivity to percentages.

With percentages.

The concept.

So we don't know with a solid starting point is.

My view that it would be more beneficial to investors to understand.

A simple metric, which is that we ended them since James in the M. N V to utilize this as a change in EBITDA margin percentage the percentage relative comps if you understand what I'm, saying so.

When when the RIN price goes from one two to see that.

But then goods changes.

That's helpful.

I'm trying to understand what's going on.

Price changes by Tencent premium Btu.

Great.

On the EBITDA.

No that does.

I could give you an official to shareholders at the moment, you're talking about percentages, it's not beneficial to shareholders because I've gone to this year interest in Brazil have done just the starting point.

If you're if you're awesome good feedback from shareholders, but I'm trying to understand is trying to understand this is attributed to the price changes.

Closure not adequate at the mountain, which enables them to do that you don't want to do that.

Say that it's probably something isn't so much in its confidential that midtown one disclose them, but we shouldn't talk around that issue.

I appreciate the comments.

The.

The European Union.

Hedge that we have sold forward on.

The price was not specifically to closed disclosed due to confidentiality of this first agreement that we had done with origin as well as.

Competitive reasons for the ability to continue to explore opportunities into that market. So.

I understand your point about disclosing.

What we can but being very explicit as to why there are certain items that were choosing not to disclose Shaw and I'm gonna be honest Q1 can I just be honest from that point then it means that <unk> is able to pledge shares rather than promotions mother's guns, because that the material nonpublic information you understand that point.

And then in terms of ACC rules, you kind of you tell them right initiative, while nonpublic information has not been shared the shelves.

So I'm happy I'm happy that you don't disclose that but then you need to understand the implications of not doing that.

Is that the material prosper and to shareholders.

I mean.

I understand completely that it is confidential information, but besides confidential and then did that rate isn't under management, including the shell can you should be doing but that distinction.

And you need to understand that point.

And I'm happy with that if you're willing to be down but the point that you are bound by this point, but you've kind of gone beyond confidentiality when its Youtube.

Andre I can I can appreciate and will will definitively acknowledged that the board and the management understand and will be bound by any requirements to not trade AR being in possession of material nonpublic information.

And my point too soon if not in the interest of shareholders.

So if you signed an agreement with the European counterparts and agreed to.

Due to confidentiality restrictions.

In the interest of shareholders.

Essentially the guidance going forward to be down about those restrictions. So I don't think it was smart to be borne by those jurisdictions.

Because we're all in English to promoting the potential of this company, which we think is boss.

And we are supportive of the management team and I think that that under your guidance, we will take this business.

Forward.

And our thoughts, which which makes me very excited.

But at some stage.

But you've got to expand the potential of this company to the market.

And if you cant expand the potential of this company.

The the healthiest potential rent that thing so many European potential to the Mazda Akshay profit will be constrained.

And to be bound by confidentiality agreement is not small.

I mean, you've got a company now which is sitting in the sweet spot of sweetness.

In America in an industry, which is good vast potential and all.

We can talk about the potential upside of this business in the market.

It doesn't seem to me.

To be very small.

Ray would you as the management team can make money, you'll see options when you're sure, but why wouldnt want to constrain the growth of the shares bought by restricting income.

<unk>, which indicates the vast potential of this business going forward, what you're doing in the dairy industry has grown so much of it is small it is going to change the income potential of this business going forward, but we can talk about it.

It just doesn't just doesn't make sense to me.

This business does and taking it to calculate it.

No the way, which we will grow.

Oh collective wealth uncollected interest in this business is to make this very easy to understand and explain to the market that we entered into the best possible industry, which isn't just because in the last 50 years.

But it seems to me in the way that you're answering the questions and when you're trying to do to make information uptake, but you just just making it difficult for people to understand.

Why is it sensible to invest in this business and that is my frustration at the moment.

Very close to capacity production potential after the investment that is made in that additional digestion.

<unk> and equipment.

And and how that materially contributes to the financials. The sensitivities would be at indices for the attributes for RFS and for CFS and they would be correlated to the production percentages that we disclosed that are not tied to fixed.

Prices and contract. So I do appreciate the need for additional transparency and we always take that under advisement.

But definitively there is a run rate trajectory.

Explanations in the financials and the commentary that had been provided that can allow for an investor to understand what the base potential is for the business at varying points of view that the investor has on the outlook of attribute pricing, which makes up the majority of the revenue stream of the business.

But it's really as long as they don't show and I said I have to.

This isn't firstly, you've made no disclosures about sensitivity else if it February.

Disclosures over L CFS.

Okay.

The sensitivity of our process the process change in LTM EBITDA.

Because think about hone it.

That's because they cannot hold it.

Yes.

I'm Gonna disclosures of LTE at the switch of blood is very limited, it's verbal not the thin digital or run rate.

A major part of your business going forward would be the bigger component in which the SEC.

On the call, but then that sort of index related to LTE. It. This is the major components of the income potential of those assets because there's no way and then the Vista good muddled up at the moment.

Right.

The existing dairy project has not yet begun to monetize those else CFS credits. So they have not had a material impact to the financials.

But not in the future potential of daily would be in the following ratio realize ngl's and with this SEC.

It can be the existing facility you haven't disclosed elsewhere.

It seems that some of it.

The existing component of L. CFS revenue is not a material enough of a component of the legacy portfolio to two.

Adjusted for sensitivities. The majority of the business is driven by the RFS. The D. Three rent monetization and the fixed price contracts that we have for power generation.

So would you say that going forward as LTE becomes material, you'll disclose ups and.

And could you give any guidance on what is going to do them.

Vintage, which would trigger disclosure requirements.

Definitely we are moving into more and more agriculture.

Production feedstock production and so as we move into North Carolina and develop the swine opportunity.

Once L CFS credit monetization becomes a material component of the business.

But you can also ask you a question what the board has made the decision to invest and that's very exciting day opportunity.

Why would the board and management.

Nazis.

I didn't say the interruption Percenters just all we have reached the end of our generation do you have any closing remarks.

Yes.

Other than to thank everyone for taking the time to join US on the conference call. Today, we look forward to speaking to you again on our third quarter call.

And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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