Q4 2022 Clean Energy Fuels Corp Earnings Call

Speaker 2: Greetings and welcome to Clean Energy Fuels.

Speaker 2: Fourth quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Robert Freeland. Thank you. You may begin. Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the quarter and year ending December 31st, 2022.

Speaker 2: If you did not receive the release, it is available on the investor relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as believe, intend, expect, plan, should, and anticipate, and similar variations identifying forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the risk factor section of Clean Energy's Form 10-K filed today. These forward-looking statements speak only as the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

Speaker 2: Companies non-GAAP EPS and adjusted EVA DA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EVA DA, and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair. Thank you, Bob. Good afternoon, everyone, and thank you for joining us. We continue to make excellent progress on the execution of our R&G business strategy over the last quarter.

Speaker 2: With our investments in renewable natural gas facilities and new stations, we expanded our leadership position. Clean energy remains the largest supplier of RNG used as a transportation fuel in North America. In the important California market, more than half the RNG used to fuel natural gas vehicles is from clean energy. In 2022, our California RNG portfolio had a weighted average carbon intensity of minus 51, which demonstrates this success.

Speaker 2: success of our RNG strategy to develop and secure the lowest carbon RNG available in the market. We expect the carbon intensity of our product to continue to decline as our dairy investments begin producing gas this year. We funded our joint ventures for the projects underway while strengthening our balance sheet leaving us well positioned for the future.

Speaker 2: The fourth quarter of last year, we sold over 54 million gallons of RNG, which was an increase of 21% compared to the same quarter in 2021. The expansion of our relationship with Amazon is having a positive impact on this growth. And we're also seeing increased demand for the clean fuel from other heavy duty trucking firms as well as transit, refuse and other sectors.

Speaker 2: Our revenue for the quarter came in at $114 million, which was $22 million more than Q4 2021. We generated $13 million of adjusted EBITDA for the quarter. Bob will get into more details about our financial performance momentarily, but let me just say we acknowledge that our 2022 adjusted EBITDA number ended up lower than we expected it to be at the beginning of the year. We experienced a few sustained headwinds in the latter part of the year that impacted our results. The biggest contributor to this was the lower prices of environmental credits of California's low carbon

Speaker 2: that have hindered us and slowed our station construction. Also we believe we are at the lows of the environmental credit and regulatory situation and credit prices should improve over the medium term. And as I previously mentioned we continue to be pleased with the way we are performing on our plans that we laid out to you over a year ago to expand our business, particularly having more control over the supply of low carbon RNG flowing to our fueling infrastructure.

Speaker 2: the 13 dairy projects underway. We remain confident that the investments we're making today will generate attractive returns in the future. But for 2023, we believe we will continue to see pressure on the environmental credit prices.

Speaker 2: In another step to position us for future growth, we secured a $150 million sustainability-length loan with Riverstone Credit Partners last quarter. This should keep our balance sheet healthy as we continue to build fueling stations and additional RNG facilities with our partners, Total Energies and BP.

Speaker 2: At the end of 2022, we had over $263 million in cash and investments.

Speaker 2: This is after contributing nearly $178 million into our R&G production joint ventures since their inception and expanding our fueling infrastructure by funding 23 additional station projects during 2022.

Speaker 2: Speaking of new RNG production, it doesn't seem that long ago I participated in a groundbreaking at Del Rio Dairy in the Texas Panhandle, which is Clean Energy's first biogas digester to be built from the ground up. I'm pleased to announce today that as a few weeks ago, the methane captured the methane.

Speaker 2: from the manure produced by Del Rio's 8,000 dairy cows is now being injected as renewable natural gas into the pipeline. That capacity will flow at a rate of 140,000 mnVtus, ultimately translating into 1.1 million gallons of ultra low carbon fuel at clean energy stations annually. We've also made a good progress at other dairies with construction underway on projects in Iowa, Minnesota, Idaho, and three in South Dakota. Engineering has begun at another five sites. Overall we are pleased with the progress of our new RNG supply facilities. Remember that when these dairy digesters begin to produce RNG over the next two years, this fuel will receive some of the lowest carbon intensity scores available for our customers and generate the greatest number of credits. No other alternative fueling solution comes close to the next negative CI scores that RNG produced at agricultural facilities received. And the beauty is that RNG drops right into the existing pipelines and then into our existing fueling infrastructure.

Speaker 2: On the RNG demand side, as I previously mentioned, we open new stations as part of our announced agreement with Amazon. In addition to the 80-odd existing clean energy stations that have been supporting the Amazon fleet of heavy-duty trucks, new stations in four states have been added to our filling network. All these stations are purpose-built for Amazon but also have public access and are strategically located in and around distribution centers, allowing for fleets from a variety of companies that fuel with RNG. One station that has been only open for a few months has already become our largest by monthly buy.

Speaker 2: There are another handful of stations that will be opening in the next few months with a robust schedule through the rest of this year. We are particularly excited that these stations will be open and accessible for truck fleets when the new Cummins 15-liter natural gas engine hits the market next year. As the commercial introduction of heavy-duty electric trucks and the required charging infrastructure continues to get pushed out, this next generation of Cummins natural gas engines, combined with our already installed RNG fueling infrastructure,

Speaker 2: will accelerate fleet stability or reach their emissions reduction goals a lot quicker. Before I close, I wanted to mention that we added one of the largest transit agencies in the country as our customer in the fourth quarter. San Diego MTS, which signed a contract for 86 million gallons of RNG fuel for its fleet of 764 buses. We also renewed an RNG contract with the largest transit agency in the country, LA Metro during Q4, and we'll be supplying them 20 million gallons of RNG annually for the bus fleet. Our relationship with rest-reviewed customers continues to expand during the quarter with new contracts with ATHLEAN Services, Burk Tech Waste, and additional stations for Republic Services.

Speaker 2: Remain as optimistic as ever about the future of a renewable natural gas, both as a direct transportation fuel, as well as for an ultra clean feedstock for other alternatives. We have quickly become one of the largest developers and owners of dairy RNG production and are growing our leadership position in the distribution of RNG.

Speaker 2: Thank you for your time today and now I'll hand the call over to Bob. Thank you, Andrew, and good afternoon to everyone. As reported today, we finished 2022 with $420 million in revenue and a gap loss of $59 million versus 2021 revenues of $256 million and a gap loss of $93 million.

Speaker 2: Our adjusted EBITDA for 2022 was $50 million versus $57 million in adjusted EBITDA last year, which last year included $4 million of earnouts from our sale of RNG assets to BP. On an adjusted non-GAAP basis, we reported net income for the year 2022 of approximately $3 million versus non-GAAP net income of approximately $8 million in 2021. Although adjusted EBITDA fell short of our estimate of approximately $60 million, the variances to our estimates were $1.5 million.

Speaker 2: were temporary in nature, we believe, and timing related in terms of volume associated with station builds and SG&A spending. In our view, nothing systemic or permanent in nature. For example, we thought there could be some rebound in the LCFS credit prices during the fourth quarter, and the LCFS credit prices actually remained at their lowest level of the year throughout the fourth quarter. LCFS prices have gone up recently, so a little later than we anticipated, but still moving up as we thought as additional information is kind of hitting the marketplace around that program. We also saw the price of natural gas double for the month of December in California, increasing the equivalent of a dollar a gallon in our –

Speaker 2: presentation we've presented our volumes and revenue tables in our new format in our Form 10k that we filed today. We made this change in the third quarter on our in our 10q filing where we separated fuel volume volumes and the O&M service volumes and we enhanced our revenue disclosures around our volume related product and service revenues.

Speaker 2: So with that, I wanted to inform you that today we posted an updated company presentation on our investor relations website that provides this new volume and revenue table format for all four quarters of 2022. And in the in the back of that presentation that was posted, we have had some questions on visibility to the first quarters of 22 in the new format. So we're accommodating there.

Speaker 2: So now taking a closer look at the fourth quarter of 2022, our revenues were 113.8 million compared to 91.9 million a year ago. The higher volumes and fuel prices along with higher station construction sales in the fourth quarter of 2022 contributed to the increase over 2021. With the lower environmental credit prices in 2022, offsetting some of those revenue increases. We reported a gap net loss of 12.3 million in the fourth quarter of 2022 compared to a gap net loss of 2.4 million in 2021. On a non-gap basis, adjusted EBITDA for the fourth quarter of 2022 was 12.6 and the adjusted non-gap net income was 2 million. That's for the fourth quarter of 2022. This compares to adjusted EBITDA of 18 million and adjusted non-gap net income of 6.4 million in the fourth quarter of 2022.

Speaker 2: quarter of 2021. For the quarter, our overall product and service margins were slightly higher in the fourth quarter of 2022 versus 2021, despite the lower credit prices. However, our spending on growing our RNG business was higher in 2022 as expected and planned. And as well, as I mentioned, 2021 benefited from the earn out income of approximately $4 million when comparing the two periods. Andrew noted that we finished the year with approximately 264 million in cash and investments, which included proceeds from a debt raise of 150 million in December . As part of that financing, we paid off the equipment financing debt at NG Advantage of approximately 27 million. Also, as of the end of December 31st, 2022, we had contributed, we have contributed $178 million.

Speaker 2: into our RNG supply joint ventures with our partners TotalEnergies and BP. Cash provided by operating activities for 2022 was $66.7 million. And we had, that's against, we had 44.5 million of property and equipment purchases. These are both up from 2021, where operating cashflow was 41.3 million and property and equipment purchases was 23.1 million. So nice on the cash front. Now looking at 2023,acist ratio.

Speaker 2: We normally provide annual guidance, which we'll do here. We've provided our annual outlook in our press release. For a gap net loss of a range of 105 million to 115 million, we've provided a

Speaker 2: which is reconciled to our outlook for adjusted EBITDA of a range of 50 million to 60 million. On the gap net loss, you'll note a large increase in the Amazon warrant incentive charge, which is associated with an estimated volume increase for Amazon in 2023 as we complete more stations. Revenues are projected to be around $350 million. That's our gap revenue. That's net of around 66 million in these incentive charges.

Speaker 2: that really don't rebound much from what we saw in the fourth quarter of 22 and starting 2023.

Speaker 2: So, as we know, those have been, they were lower in the fourth quarter, and so we're kind of seeing that continuing on in 2023, and our outlook contemplates that. Our SG&A spend will increase slightly to around $30 million per quarter, which is up a little bit from the fourth quarter, as we've added personnel at the end of 22. And our stock compensation kind of levels out, but that is about $5 to $6 million higher in 2023 versus 2022.

Speaker 2: We're estimating around $25 to $30 million of cash flow from operations, mostly reflecting added interest costs, and our CapEx spend is estimated around $90 million. That's at the core business of clean energy. We may also contribute up to $40 million more into our RNG supply joint ventures, and that's on top of the $178 million that we've already contributed, and frankly that doesn't bring in potential pipeline for this exercise.

Speaker 2: have good line of sight on it, but it could be higher. Clearly, the credit pricing environment, inflation, and industry volatility have changed from the beginning of 2022, but we feel very good about the view forward and upside possibilities with continued volume growth, the tailwind from the Inflation Reduction Act, the forthcoming launch of the Cummins 15 liter engine, and just frankly, the continued demand for this very low carbon fuel of RNG. With that operator, please open the call to questions.

Speaker 2: Thank you. At this time we'll be conducting a question and answer session. If you'd like to ask a question please press star 1 on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys.

Speaker 2: Thank you. At this time we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Speaker 3: Our first question comes from Manav Gupta with UBS. Please proceed with your question. Good afternoon, guys. I just wanted just if you could, you mentioned earlier on the call 13 dairies in progress. So if you could help us understand the pace of development here, what stage of development are they, and if you could be a little more granular and let us know how many of those should be online by end of first half or by year end? And the bigger question I'm trying to get to here is, Bob, is...

Speaker 3: It looks like the derives are in progress, but you're not really accounting for too much of EBITDA contribution from these theories in 2023. That's why the guidance is relatively flat. So if you could talk about that also. Correct, okay, I'll just that. You're correct. And I've actually, you know, we've even a year ago, we contemplated 2023 would be minimal, minimal contribution. So we will be.

Speaker 2: flowing gas in a number of projects, but you know there's time between flowing gas and revenue recognition which has to do with the whole pathway certification and when we really can do get to meaningful revenue. So you're correct there's not much of a contribution there in 23 and then we'll see how 24 kind of shakes out and just.

Speaker 2: for sure as we go into 25 and 26 and you know there you start to get into the inflation reduction act and contributions that could happen there. So that's why but um Manabh also say um you know a big part of of uh of the of the forecast being kind of flat um as well is is the credit price uh deal. You know we going into into the fourth quarter we felt that there would be more information about you know kind of the pathway forward if you will um particularly in California but we also knew the RIN you know had information there um that just didn't really materialize in in our view very meaningful so the market kind of stayed flat. We're not going to kind of say that that you know try to predict exactly when that will uh turn around we're we're bullish on it and and know that.

Speaker 2: We believe that it will, but you know, we're, that's just a big part of the flatness because we're kind of assuming fairly recent credit prices stick around. You know, on the dairies, yeah, on the dairies look, they're. You know, probably 9 of those are. Are well.

Speaker 2: seven, eight are constructing for sure. And I think we'll get a number of those absolutely, well, one's already flowing gas and we'll get maybe four or five in 23. But again, you're not really seeing an EVA, but which is okay. That's a long time and we've recognized that, but we're also very mindful of the execution on operational execution on these, which is going well. I mean, I think we've experienced some of the delays that a lot of the folks in the industry.

Speaker 3: are seeing just on equipment and things like that, but relative to it was pretty exciting to finally start injecting gas into the commercial pipeline at one of our dairies. That's one of the keys as well as getting those things running. Bob, my quick follow up here is, if I remember correctly, and let me know if I'm wrong, but last year at the R&G analyst day, you had come up with a full budget, I think somewhere between 1.2 to 1.4, which was what you would have to put in to develop this R&G offering and take it to the gallon volume that you were targeting. What I'm wondering here is with the IRA, Inflation Reduction Act and Direct Pay,

Speaker 3: There's a 30% IDC credit now. So in your mind, does that final CapEx number that you need to develop your RNG offering fully, does it drop by 25%, 30%? If you could talk about that.

Speaker 2: Well, I think, Manav, of course, the ITC will apply and it will reduce our capital by 30%. Now, that tends to flow in, you know.

Speaker 2: a year after, but I mean no that's real and so it will lighten the capital load by 30 percent. Our projects will qualify and you're right that is the scope. When we looked at, you know, what we talked about a year ago to get to the roughly 100 million gallons of our own equity, you know, projects, equity, you know, RNG projects, you know, that

Speaker 2: number still holds. We still believe that's a good number and so there's more work to be done and there's more money to be raised, there's more debt to be organized. There are a lot of opportunities, a lot of projects still to come. You know, we feel good about the projects 13 that we have underway, which you know if you look back 18 months ago, you know, we've we moved quickly. We have a robust pipeline of more projects. We haven't lost any, you know, through all of it even with the the reduction of the of the credit price. We haven't lost any enthusiasm. You know what we try to stay focused on here is we have the lowest carbon fuel

Speaker 2: that's commercially available today in the world. And you know, there's a lot of there are a lot of regulatory policy folks speaking at all sorts of different levels and projecting how that fuel should be used and how it might be used and trying to micromanage the way the market will work. But you know what we know is we have a really low carbon fuel that can be used today that can be disseminated in the nation's pipelines now. And when we look at that fuel and we compare it to the other technologies that are available that most people want to talk about right now, we feel very well positioned. So there's more to be done and you'll see that come on. And so don't be surprised if you see us, you know, continue to do things to do.

Speaker 2: You know, move along that pathway that we all talked about a year ago, because we haven't lost any interest in that. Thank you so much. Our next question is from Rob Brown with Lake Street Capital Markets. Please proceed with your question. Hi, Andrew and Bob. I just wanted to double check. Did you say 350 million of revenue? Was that the fuel volume revenue or the total revenue? That was total. That's net of, I'm just going to put it out there, that's net of about 66 million dollars in non-cash incentives. Yep, got it. Just so you know. Yeah. Thank you. And then I know you get some color on the Amazon station activity. How many stations do you sort of plan this year? And I guess maybe.....................

Speaker 2: that we all talked about a year ago. Because we haven't lost any interest in that. Thank you so much. You bet. Our next question is from Rob Brown with Lake Street Capital markets. Please proceed with your question. Hi, Andrew and Bob. I just wanted to double check. Did you stay $350 million of revenue? Was that the fuel volume revenue or the total revenue? That was total. That's net of, I'm just, you know, put it out there. That's net of about $66 million in, you know, non-cash and sentence. Yeah, kind of just so you know. Yeah. Thank you. And then I know you give some color on the Amazon station activity. How many stations do you sort of plan this year and I guess maybe where's the answer? Get our site available on Amazon. That's, uh, a full format address that I posted on your spin.

Speaker 2: be anywhere from you know six months to a year. So you know we have a lot of these projects we've been working on now for quite a while and then the permitting less so the construction part of it is not anything that's much different than what we've always seen which is five to six you know five months.

Speaker 2: So a lot more to be done this year, and we hope we'll just continue on that next year as well. Okay, thank you. I'll turn it over. Our next question is from Eric Stein with Craig Hallam. Please proceed with your question. Hi, Andrew. Hey, so just coming back to the 2023 EBITDA guide, so looking for modest growth there, and I know part of that you've got RNG plants, I guess pushed out a little bit. You know, you're still conservative on the credit side, and you've got higher OPEX, but you've got some areas where you're more optimistic as well. You know, I guess is that a fair way to characterize it, one? And then secondly, can you just talk about maybe the linearity of it throughout the year? I know that the natural gas spike in California was, I believe, even more pronounced in the first quarter. So, you know, how do you expect to start the year?

Speaker 2: then maybe for it how it plays out for the remainder of the year. You know Rob when you were when we're assigning, I'll let Bob get on here in a second, but when you're assigning the the you know the EBITDA and what you know why that why that is you know what we're guiding to look and it may kill me here but if you went back to credit prices of last year you'd have 90 you'd add 44.5 million of EBITDA. So we're trying to be responsible by by not trying to project you know get get over our skis on projecting what's going to happen in the LFCFS. We remain bullish. We think the the fact that the California is now talking about increasing the obligation curve 20% to 30% look that's a huge increase.

Speaker 2: We believe that when that finally gets done, that'll put pressure on LCFS prices. In fact, when you go back from the workshop that happened just a few days ago, the LCFS prices up. We actually thought that was supposed to happen, and it was supposed to happen back in November last year. So it happened now. So we're violently bullish on what's going to happen with the LCFS, and we certainly are in the medium term. That'd probably be more 24 or 25, but it's not the fact that the RNG projects are not on production yet, because we always knew that those would come on and really contribute in 24 as most do with the credit prices. But now you may fix me up here on that. So I agree there. Eric, you asked about the linearity versus, yeah, I mean, I mean, versus getting guys to one.

Speaker 2: Yeah, I know, but I mean, that would be exactly look here here. Well. You know, last year didn't bode too well without a little bit of linearity, but I would say that or talking about it. So I'm going to say that there's a little bit of similarity between the years where historically Q1 we've. You know, it's just a little bit of a slower quarter and then, you know, as we talk about completing stations, they're not all going to get done. You know, here in March kind of thing, so that plays into, you know, increasing volumes throughout the year. Right? And you, you are correct. Eric, it is interesting. I'll put that the little caveat out there. California did have a huge issue with with natural gas prices in January . More I noted that natural gas prices doubled in December , so they went from, like, seven dollars and then to fifteen.

Speaker 2: And that's about a dollar Then they went from 15 and M to 50 So It's home with that's kind of mind-boggling and and we're gonna see some impact from that there's no doubt about it I Mean, it's you know, like usual I mean it may be some painful the good news is we have a fair amount of the year to try to manage around that and recover from it, but That was that's something that you know, that's that's that's kind of part of how we do things I didn't get out there and You know necessarily he changed guidance on on January at all But it's it's something that's you know Those are the types of things that we had some headwinds in in 22 Frankly, we had it in in the third quarter and then we thought we again that was part of the optimistic view of the fourth quarter was that we have that high gas price from the third quarter out of the way and It just when we thought we were kind of out of the woods, California our largest market doubles. So, you know, all of that is Temporary Volatility you know, so I mean our our view is is long on on this solution and the fuel and you know, we've got projects being built out and

Speaker 3: So we're in this for the long haul. Got it. That's helpful. Just going to the RNG, just maybe an update. I know you've provided it before. But as you see the JVs playing out, ultimately the number of projects you see and then maybe the average gallons per project. Thank you. Well, these projects tend to be, the dairies tend to be, oh, Eric, I'm sorry. Eric, these projects tend to be in the range of 1 and 1 half to 2 million gallons, 2 and 1 half. Now, we have one underway in Idaho right now. It's a really big project, 5, 5 million. But let's just say 2 million is a good number. So you can see that we've got many more projects come on, which we are very excited about. The scope and the size of the market is still big. Now, what you'll have, Eric, is you won't have as many 10,000 cow dairies or larger. But you'll begin to cluster these. And so there's dozens and dozens of projects that are still out there. And in fact, right now we have 27, I think, in our pipeline. So not of the ones we've discussed, not of the 13 that are sort of, I put, under construction and underway.

Speaker 3: We've got another 27 that we've, you know, we're talking to and trading paper with. So I think we've always sort of said that you'd be in the, you know, 35 to 40 project before this is, you know, before we realize what we laid out for you last year. Okay, thank you. Our next question is from Matthew Blair with Tutor Pickering Hole. Please proceed with your question.

Speaker 2: Hey, good afternoon, Andrew and Bob. Thanks for taking my question. So I think if I heard correctly, you were saying that your current profitability would look more like 95 million at 2022 credit prices. And I think at one point you were providing a 2023 guide of 136 million. So could you walk through the delta between that original 2023 guide, 136 million, and then the 95? I mean, I guess would that be just an assumption of lower volumes coming through in 2023 than what you originally envisioned?

Speaker 2: Matt, I would say there's a little bit of that. We're in a little bit of a different world than we were at the beginning. Look back to January 22, credit prices were extremely high. The world was in a little different place. For sure the lion's share of it is simply an assumption on credit prices. That's huge. The other gap there is nothing notable other than a little here and a little there. That tends to be aBut is the CGI really changing?

Speaker 2: as your environment changes, you know, you get, you know, plans change and, you know, for us, you know, as usual, I really feel that it's, it's kind of timing related, you know, of, you know, of when the volumes come on, is the biggest piece. It really is. And so it's not if it's when and just how, you know, we're always constantly trying to get engaged, you know, when will the trucks show up at the fueling station, you know, going through the buying cycle and the adoption and all of that and getting it there and, you know, as things move and look, moving out stations these, you know, barriers when we open up stations, because we're their purpose built stations for all of our customers these days, they were building them because there's a need for volume. So as soon as they open the fuel starts flowing. So it's, you know, that that volume kind of follows how you're opening stations, for the most part. I mean, we get more volume at our existing stations as well. But that's it. I mean, it's just I think Matthew, probably if you were to go back and look at look at and try to piece it together, of course, I was just giving you kind of back on the envelope that gets you to close to 95 or 100. It's timing, it's timing on the projects.

Speaker 3: Right, we probably realized today these projects take a little bit longer to come on production than You know we thought a year ago Okay, and you know the the other thing and I don't war let's not go down this too long But you know, they're sort of there is some good news in here, right? I mean there when we were when we were laying it out for you here ago. We didn't have the IRA We didn't have an ITC and we didn't sure didn't have a producer production tax credit production tax credit You you lay that in and put any kind of number on it that you know It's been bandied about and in 25 26. Those are really big numbers So it it also we're going to work out. It's all going to work out here in the wash I mean in those numbers when you when you put play four or five or six dollars or whatever you want I'm gonna let you do it. Not me. Those are big numbers out there that can be attributed based on the You know the production tax credit Okay, and and I just want to confirm that the 50 to 60 million for 2023 that does not include any ITC ad back

Speaker 2: correct? Correct. Well yeah and it wouldn't necessarily mean ITC is more of an investment tax credit but yeah there's no there's no IRA number in the 50 to 60. Great thank you very much. Okay you bet thank you. Our next question comes from Greg Waskowski with Weber Research. Please proceed with your question. Hey good afternoon guys. I don't mean to beat a dead horse here but just going back to you know the financial metrics and projections from the RNG day a little over a year ago. Really obviously a lot has changed. I'm just wondering you know what at all can we still take away from you know the 2022 to 2026 projections.

Speaker 3: And then the RNG dairy in our account and our partners account, we haven't come off of that. Now, I think, you know, it may be that that you might need to slide everything six months to the right.

Speaker 3: the RNG dairy in our account and our partners accounts, we haven't come off of that. Now I think you know it may be that that you might need to slide everything six months to the right. I think that's probably prudent to do.

Speaker 3: And of course, you know, as we've all discussed here this afternoon, the credit prices that we used back then are different, so we all have to employ our best thinking on those credit prices. We happen to believe that by the time you get to 24 and 25, you know, the credit prices will strengthen substantially. And then of course, you know, we like some of the some of the benefits that we've received from the IRA, certainly the production tax credit is very meaningful out there as well.

Speaker 3: So we haven't really pivoted in terms of saying, you know what, let's not do this RNG or let's not pursue dairies or let's not pursue third party. It's all pretty much still intact and if you want to critically look at what's changed, you could say, well, some of these projects, dairy projects, are probably taking a little bit longer to build, but I mean, gosh, in the scheme of things.

Speaker 3: you know, when you start when you have 30, 35 projects underway, you know, it's, I don't know how meaningful that is. And if there's an impact, it could be in, you know, late, late 23, 20, 24, early 24, but I think it's generally going to hold in pretty well. Okay, that's helpful. Yeah.

Speaker 2: Go ahead, Bob. No, go ahead. Oh, well, yeah, look, I mean, maybe I'm saying the same thing, but, you know, so it gets tempered a little bit, but then, you know, frankly, we have, you know, we have tailwinds from the IRA that come in there and really help that out, because you can, you know, you can look at a model like that and simply, you know, change a credit price, and the numbers would go down. That was great.

Speaker 2: I mean, I can tell you the math on that. If you take the LCFS from 185 to 100 or 62, it's gonna go down. Now, we don't believe that for that five-year period. Although, we do our partners by the way. Yeah, so maybe there's a little temperament there, but then we also didn't plan in 25 for a production tax credit to come in as well. So, we're almost kind of back in. So, I think that in general, the...

Speaker 2: the shape of the curves and the potential out there is still there. Okay, that's helpful. I'm not going to ask you for exact numbers, but is it fair to say then that when we look out into 25 and 26, the delta between your revised estimates for those years is...

Speaker 3: Can you maybe elaborate on that a little bit more? You know, things, you think the outside of just permitting, you know, what competitive forces were going to add to that. Yeah, I'm excited. Greg, again, if what I, competition, maybe you thought of competition to build.

Speaker 3: natural gas and RNG fueling. That's not the kind of competition. It's just pressure on real estate competition. What kind of scarcity? And what kind of property cities want in their city? Okay, okay, so it's not others kind of doing the same thing that you're doing.

Speaker 3: different uses for the land in general. Exactly. Exactly. Gotcha. Okay. Cool. That's helpful. Thanks a lot, guys. Our next question comes from Pavel Machanov with Raymond James. Please proceed with your question. Thanks for taking the question. I know you're not giving guidance formally beyond 2023, but you said that you would expect California LCFS pricing to improve over the next two years. What gives you the confidence in that directionally? Yeah. Pavel would give us the confidence on it is that the low-carbon fuel standards working.

Speaker 3: and R&G is an important component of it. And I think that we feel fairly confident, certainly after the workshop of the 22nd, that all of the comments were supportive of an increased obligation curves, increasing the obligation and compliance curves from 20% to 30%. And I think there's a chance that they could go to 35%. And then you know there's this new concept that they've now, the staff has actually endorsed, which is kind of a ratchet, that if you're in an oversupplied market that they could ratchet.

Speaker 3: down the compliance curve. So you can kind of theoretically go from 30 to 32. So I think all of that is, you're gonna need all the RNG you can get. So I think you're gonna be back in a much more supportive environment for increased prices. Okay, let me ask a similar question about RINs, which I think for the year as a whole, RINs were as large as the tax credit and California combined.

Speaker 3: The EPA seems to be kind of rethinking the entire RVO framework including these electric rents that are being discussed. What's your thinking directionally on where that goes? Yeah. I, Pavel, support the Earth Atlas Group in this year.

Speaker 3: I actually think that we've learned a lot over these last few weeks since they came out with their new proposal on the RVO and for the Renewable Fuel Standard and the E-RIN. I think they've overshot.

Speaker 3: and the EPA has. And when you look at the four or so largest organizations that the EPA listens to, you know, the Louisville Fuel Association, AFPM and the API and the INGC, just to name a few, all of them, growth energy. All of them are unanimous in that the proposed E-RIN,

Speaker 3: your fuel, where frankly, D.P. wanted the fuel. I don't think that's...

Speaker 3: probably going to end up being the way it's going to be enacted. The idea that they kind of jury-rigged the math to create RINs out of thin air, frankly, to incent RNG to go to make electricity for light-duty electric vehicles versus putting RNG into a hard-to-decarbonize heavy-duty truck, I don't think that's going to end up being the case.

Speaker 3: And I think it was almost just too much, you know, it's just going to fall apart under its own weight. It was too obvious. And the move in the origination from the producer at the, you know, that, the other day, Pavel, I was with the chairman of the agriculture committee and a member of Congress who happens to own a dairy farm and happens to have a, an R&D farm.

Speaker 3: goes into heavy duty trucks. And I said to the chairman of the agriculture committee, I said, well, now there's one for you. And I pointed to the congressman whose dairy farm was and I said, Can you imagine that the EPA proposed that the generators no longer Congressman Valadeo and it's no longer

Speaker 3: They're not the generator here at the dairy farm. They're going to pass that on to Ford or to someone making electric vehicles in Detroit, or Elon Musk. And he said, well, you got to be kidding me. How could that possibly lead? So that's just another example of what was going on in this deal. And I just don't think that's going to all end up being enacted that way at all. I think what's going to happen, Pavel, is you'll see perhaps they're under an obligation to enact the RBO by June . Now, whether or not they do that, I don't know. I'm not sure they're going to get this all cleaned up and figured out, the E-RIN, to be able to make that date. And so it wouldn't surprise me that the E-RIN maybe gets...

Speaker 3: delayed some and restyled some and that they go with some other kind of RBO in June . So we'll, you know, we'll have to see. Just a quick question at the end. Smaller programs, but do you get anything from Oregon or Washington State LCFS? We do, but a little bit. We have several customers. I'm looking at one of my guys, Oregon. Yeah, Oregon for sure. And Washington State not quite yet, but we will there. But Oregon program.

Speaker 3: credit prices are working more. They're nice, but we don't we don't do a lot of people up there yet, but I think we have four or five customers right now. Yeah, okay. Thank you guys. Okay. Our next question is from Craig Sharry with Tilly Brothers. Please proceed with your question. Good afternoon. Thanks for taking questions.

Speaker 3: prices are working they're nice but we don't we don't do a lot of people up there yet about but I think we have four or five customers right now yeah okay thank you guys okay our next question is from Craig Sherry with Tilly brothers please proceed with your question good afternoon thanks for taking questions it so

Speaker 3: I mean obviously neither CARB nor the EPA wants these programs to implode. So I guess what I want to ask is one, do you see a silver lining that the regulators feel more pressured with these low prices? And two, do you see any catalysts?

Speaker 3: for other state programs and there were some draconian possible recommendations with options being evaluated by the CARB you know kind of eliminating you know projects past a certain

Speaker 3: line in the sand from west to east or other things. Do you see them starting to shy away from some of those draconian changes and just focus on total supply demand in terms of the carbon reduction track?

Speaker 3: versus tweaking the market, you know, in other ways. Yeah, well Craig, look, I think, I hope, what I've been trying to say on this call is that I'm actually somewhat optimistic of the way both these programs are going to end up. And it hasn't helped. You know, as the markets watch this kind of making of sausage and regulatory proclamations and staff workshops and all that, you know, that's kind of can be a little bit of a unnerving and it frankly has done that to the credit prices in the latter part of the year.

Speaker 3: But I'm kind of, I think I'm picking up where you are. I don't believe that either California or the EPA wants to dismantle these programs, okay? I think unfortunately there was a tendency to want to micromanage and steer and pick winners and losers and maybe some things that we see governments do from time to time and certainly staff in governments do from time to time. And,

Speaker 3: not always, you know, well guided and certainly often not, you know, market. I think it's beginning to, but having said that, if I look at California, but you know what overpowers some of these, the micromanaging of, you know, west, you know, lines in the sand and the west and pathways and book and claim and some of these different things and length of service and, you know, all that, some of that stuff that have been kind of proposed is that when that they know the program works, they know that half the dairies of the state of California, for instance, have voluntarily gone into capturing methane. They know they need RNG in order to lower the carbon in the state. It works. Other states know it works. The governor of the state, you know, Governor Newsom, he knows it works. So the last thing you want to do is, you know, kill the golden cow, if you will. So I think what you'll see is what

Speaker 3: What kind of overpowers all of those tendencies to want to micromanage the program is the fact that they're going to increase the obligation curve from 20% to 30% that's big. And if they go to 35% which many have suggested that there's no better time to do it. You're going to need all the RNG and a lot of these little programs, little things that they were kind of wanting to test, I think will go away because you're going to need it all. So I feel actually kind of, you know, I'm an optimist, but I feel actually that that is head into in a better direction.

Speaker 3: And then as we relate to the EPA, I feel similar, in a similar way. You know, for the federal government to decide that they want to decide where this fuel should go, and jury-rig the math on generating RINs to force it to go to make electricity for their electric vehicle program, I just don't think that is the way it's going to go.

Speaker 3: And I know that there's a, you know, it would be kind of interesting, we should tune in tomorrow, there's confirmation hearing by the fellow in charge of this program. At the EPA, in charge of the Office of Air and Radiation, he's trying to get confirmed tomorrow. And I'm sure these kind, the questions that we've talked about just now, about what they were trying to do with the program, probably brought up tomorrow.

Speaker 3: And so I kind of feel like I don't have anything against E-RIN, but I think the way that it was being done was probably not the right way to do it. Not even sure the EPA has authority to do it, but we'll see. But I think in particular some of the things they were doing you know, it's probably not the right way to go about it. And I think I'm not the only one without it, just about everybody. You should read those comments. I mean, I think there was general agreement in that. That's helpful. And you're talking about finishing up the 19 stations for Amazon.

Speaker 3: I guess, do you require similar massive fleet fueling agreements? So what's next after that? Do you have to have other Amazon type agreements in order to roll out the next 10 or 20 new stations or do you just see increasing widespread adoption with the

Speaker 3: new commons 15 liter engine and so you're just gonna have more open access and just keep going. Well now you just keep going and look 19 I hope there's more beyond that with Amazon right there could be many more just with Amazon alone. But like we've launched that look we're not just one trick pony in terms of just Amazon I mean you'll go work with all of our trucking fleets and we have a eye you know we are really focused on the these 40 sort of household name largest fleets that are working right now with commons as they introduce the test vehicles.

Speaker 3: for these next four, five, six months, and then we hope, as they order the order book sometime in 2023 on the 15 later, you know, we're all over those fleets.

Speaker 3: to work with them to build and develop stations for them in the future as they, we hope, begin to order vehicles. So there'll be, you know, we have a very large network that can take a lot of fuel now, and many of these fleets will use our nationwide network, and then, you know, we would be thrilled to work with some of these very large fleets and do what we're doing with Amazon.

Speaker 3: And I'm sure that'll be the case. For instance, Craig, I don't know how to pay an out. So I'm just giving, I'm just speculating, just kind of for fun. I mean, look, we know Walmart's testing the new Cummins 15 line. We know Werner. I would love to be the fuel partner using RNG for those kinds of fleets. And there's a bunch of them. And last one for me, two to the greeders.

Speaker 3: you know, two or three or four more states to come up with these types of LCF programs in the next two, three years? Yeah, you know what, that was part of your question. I wrote them down here. I wrote down New York, Illinois, and New Mexico, so there will be other states. I think New York's pretty close and Illinois is, I think, introduced it.

Speaker 3: We've got some work to do in North Carolina. You'll have other states. There'll be some that won't go But you'll have you'll have other states to do it and I think New Jersey once in New York goes You probably get New Jersey and the other the others in the area. So yeah, they should And and you know Craig if California does something to louse up their program they will Gotcha, okay. Thank you for those insights Okay, thank you Doesn't your

Speaker 3: Our next question is from Paul Chen with Scotiabank. Please proceed with your question. Hey, guys. Good afternoon. It's pretty late, so real quick. There's some discussion, I think California may want to change the way. No longer give the LCFS credit to LNG unless it prove Calm down, guys.

Speaker 4: What to say about your projects that currently under construction will list the code that you will have to apply my connection all the way to California and that also how much is your how NG sells that currently from the third party you will be able to do that. Thank you.

Speaker 2: Yeah, Paul, yeah, I mean, I think that's, I mean, it's kind of wrong, the Booker claim, the Booker claim and whether, you know, what they're going to require us to physically move gas in to do that. And I think...

Speaker 2: Yeah, Paul, yeah, I mean, I think that's, I mean, it's kind of around the Booker claim, the Booker claim and whether, you know, whether they're going to require us to physically move gas in to do that. And you know, I mean, first we don't.

Speaker 2: You know, we think that's yet to be determined, so we're not really moving around to try to accommodate that. Now, you know, in some sense I think there'd be some cost added, but one of the beauties is we've got pipelines and we already have certified pathways, so we actually, we do have to be able to get gas from the farm to the dispenser in San Diego. I mean, it has to be able to go there. What we talk about, and you know, I mean, but it's a little tricky, right? Because once methane goes into the pipeline, it's methane.

Speaker 3: It's kind of indistinguishable. It's like putting a dollar in the ATM. You know, I mean, I go take it out. It's not the same dollar, but it's a dollar. So that's, but I, you know, look, however we would have to track molecules, I think you'd add a little cost, but it would be done on a way out of the end. Bob, I mean, just to, I mean, that there's discussion of they wouldn't allow you to do use the current book and claim which you have to pay for essentially the transportation, right? And that's not a pay for it. That's not a deal killer ball. I mean, it's, you know, it's not fair. And it's not the way it should work. And frankly, this is the kind of crazy stuff that's going on. But again, I'm going to.

Speaker 4: and it's time-consuming. But don't, you know, that's not in stone yet, Paul. Sure. Just trying to understand that what is the tie-up impact. Any rough estimate that was the incremental cost for you guys? No, I don't. I don't have it.

assuming. But don't, you know, that's not in stone yet. Sure. Just trying to understand that what is the kind of impact any rough estimate that was the incremental cost for you guys? I don't I don't I don't have.

No, but I mean if you're getting into kind of transportation costs, you know, you know, you're kind of dollars on the MMB to you kind of thing. Our guys know it. I'll see if we can't get it for you, Paul. I don't know it. Yeah, that would be great. We're being asked by some clients. I'm busy fighting it, so I'm not worried about paying it. So don't put me down in the fight column. Yeah. Sure. Okay, my final question is that just a simple.

I can't any question. On the, we're talking about that the credit reduction, the capital reduction say 30% or so accounting wise that power power does its work that I will imagine in your cash flow statement, your capital number is still winning the same. You're just receiving that tax credit or check from the government and showing up with. Yeah, well, it'll reduce the basis in our.

on your cash flow statement. Let's say if you're supposed to have 200 million on the CapEx in 2026, and let's assume that in 2025 you spend 100, so you end up at 30 million. So yes, the cash flow statement is still showing up in your capital spending line at 200 or just 170.

It's going to show gross. Okay. And then there's 30 minutes that way it's going to show up in the cash flow statement? It's going to show up in the investing section. Okay. Thank you. Okay.

You're proud of yourself, aren't you Bob with the accounting? Yeah I'm doing what I think is conservative and what the FASB would want me to say Have another lesson. Thanks. Bob

Our next question is from Jason Gableman with Callan. Please proceed with your question.

Hey guys, thanks for taking my questions. Two, if I may, the first, on the clean fuel production credit, which I think starts 2025, it seems like the benefit to your RNG production could be pretty high if the credit isn't capped.

could be as high as $6 a gallon. Is that your interpretation and do you expect that credit value to be capped? And then my second question is just on the near term numbers. It looked like 4Q, the fuel margin, excluding all the credits, was just $0.04 per gallon, which was down quarter over quarter, I think, by $0.06.

Was that just due to the higher natural gas prices and do you expect that to rebound back to I guess the 10 cents where it wasn't 3Q and that's once again just the fuel dollar per margin excluding any of the credits? Thanks. Okay. Andrew, do you want to talk about the PTC? You know, Jason, it's a good question. You know, that as you point out that.

the production tax credit has not been promulgated. It hasn't been adopted by the Treasury Department, by the Treasury Secretary. And I've been told to our folks here, let's be careful. We don't know how that's going to come out. We don't know. It appears on its face, as the law suggested, that it could be a rather big credit based on the carbon intensity. And I've seen estimates between $5 to $6. But I also know that's a big number. And Jason, this is the first time really anybody asked, maybe it's because you and I talked about it before or something, but whether that it could be capped.

But you know, stranger things have happened. So I don't know how to handicap that yet. I know that this incentive was designed to get really low carbon fuels produced. And so, you know, you want to be careful how much you cap it. Because then it works against what it was designed to do. But, you know, could it be? So, do I think it will? I don't know that I'm not sure it would be, but you know, it could be. Have you heard something, Jason?

No, no. I was seeing if you did. I have not heard anything. No, but I also know politicians and you know, someone said, whoa, that's pretty big. But, but, um, but there are a lot of big numbers associated with all this stuff. So I'm not so sure that it would be, and I don't know how fair that would be just to cap it. And because, because it's so low carbon, you know, so.

Jason, on your second question, by the numbers that you're giving to me, I can tell that, and I'm not saying right or wrong at all, but I think you're taking like the fuel sales value that we report.

Yeah, Jason on your second question. By the by the numbers that you're giving to me, I can tell that and I'm not saying right or wrong at all. But I think you're you just you're taking like the fuel sales value that we report. And that's probably what happens.

the Amazon incentive number is. Right, because that nets down the revenue and then your cost is kind of the same. And so, you know, your margin gets a little skinnier as a result of the value of that. And whether you wanna have that in there or not is up to you. But I can say that, you know, the value of that charge was,

the largest it's been in any quarter and it was larger than Q3 so it was like 7 million in Q3 and 8.8 million. So that's netted in your revenue number, but then I will say yes, Q4 was impacted certainly by the doubling of natural gas costs in California because it's such a big market and we're going to see a little pressure on that in the first quarter. I would like to say

You know, that dissipated, we kind of righted itself, but I already know in January that, you know, costs went from $15 an end to $50. I don't know if any of you have heard on the news about, I mean, it's all the way down into residence and I mean, it's a complete debacle in my opinion, my own humble opinion there. It's a bit of a debacle on how we're managing the natural gas here in the state. But now having said all that, that's in January , we'll work our way out of that. In January , we did, by the way, have to, we were forced to our own selves, no one externally, but raise our prices at the pump totally to accommodate that. We don't always do that because we're mindful of our customers wanting that, you know, to enjoy the spread in the pricing. And so we don't always jump out there and do that.

Right away, we did. So anyway, I think your four cents is influenced, see how it's influenced by the non-cash incentive charge and then yes, you do have a little bit of pressure on the COGS. Thanks. Okay. We have reached the end of the question and answer session. I would now like to turn the call back over to Andrew Littlefair for closing comments. Thank you. Thank you for joining us today and we look forward to updating you.

on our progress next quarter. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. you

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Fourth quarter, 2022, earnings conference call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Robert Freeland. Thank you, you may begin. Thank you, operator. Earlier this afternoon, clean energy released financial results for the quarter and year ended.

December 31, 2022. If you did not receive the release, it is available on the investor relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as believe, intend, expect, plan, should, and should not be.

and anticipate and similar variations of identifying forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the risk factor section of clean energies form 10K, filed today. These forward-looking statements speak only as the date of this release, the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

Companies non-GAP, EPS, and adjusted EBIDA will be reviewed on this call and excludes certain expenses that the company's management does not believe or indicative of the company's core business operating results. Non- GAAP financial measures should be considered in addition to results prepared in accordance with GAP and should not be considered as a substitute for or superior to GAP results. The directly comparable GAP information reasons why management uses non-GAP information, a definition of non-GAP EPS and adjusted EBIDA, and a reconciliation between these non-GAP and GAP figures is provided in the company's press release.

which has been furnished to the SEC on form 8K today. With that, I will turn the call over to our president and Chief Executive Officer Andrew Littlefair. Thank you, Bob. Good afternoon, everyone, and thank you for joining us. We continue to make excellent progress on the execution of our R&G business strategy over the last quarter. With our investments in renewable natural gas facilities and new stations, we expanded our leadership position. Clean energy remains the largest supplier of R&G used as a transportation fuel in North America. In the important California market, more than half the R&G used to fuel natural gas vehicles from clean energy. In 2022, our California R&G portfolio had a weighted average carbon intensity of minus 51, which demonstrates the success of our R&G strategy to develop and secure the lowest carbon R&G available in the market.

We expect the carbon intensity of our product to continue to decline as our dairy investments begin producing gas this year. We funded our joint ventures for the projects underway while strengthening our balance sheet leaving us well positioned for the future. The fourth quarter of last year, we sold over 54 million gallons of R&G, which was an increase of 21 percent compared to the same quarter in 2021. The expansion of our relationship with Amazon is having a positive impact on this growth. We're also seeing increased demand for the clean fuel from other heavy duty trucking firms as well as transit, repuse and other sectors. A revenue for the quarter came in at $114 million, which was 22 million more than Q4 2021. We generated $13 million of adjusted EBITDA for the quarter. Probably getting into more details about our finance performance momentarily. But let me just say we acknowledge

construction.

Also, we believe we are at the lows of the environmental credit and regulatory situation, and credit prices should improve over the medium term. And as I previously mentioned, we continue to be pleased with the way we are performing on our plans that we laid out to you over a year ago to expand our business, particularly having more control over the supply.

of low carbon RNG flowing to our fueling infrastructure, the 13 dairy projects underway. We remain confident that the investments we're making today will generate attractive returns in the future. But for 2023, we believe we will continue to see pressure on the environmental credit crisis. And another step to position us for future growth, we secured a $150 million sustainability link loan with Riverstone credit partners last quarter. This should keep our balance sheet healthy as we continue to build fueling stations and additional RNG facilities with our partners, Hotel Energies and BP.

At the end of 2022, we had over $263 million in cash and investments. This is after contributing nearly $178 million into our RNG production joint ventures since their inception, and expanding our fueling infrastructure by funding 23 additional station projects during 2022. Speaking of new RNG production, it doesn't seem that long ago that I participated in a groundbreaking at Del Rio Dairy in the Texas Panhandle, which is Clean Energy's first biogas digester to be built from the ground up. I'm pleased to announce today that as a few weeks ago, the methane captured from the manure produced by...

Del Rio's 8,000 dairy cows is now being injected as renewable natural gas into the pipeline. Pack capacity will flow at a rate of 140,000 MMBTUs, ultimately translating into 1.1 million gallons of ultra low carbon fuel at clean energy stations annually. We've also made a good progress at other dairies with construction underway on projects in Iowa, Minnesota, Idaho, and 3D in South Dakota.

Engineering has begun at another five sites. Overall, we are pleased with the progress of our new RNG supply facilities. Remember that when these dairy digesters begin to produce RNG over the next two years, this fuel will receive some of the lowest carbon intensity scores available for our customers and generate the greatest number of credits. No other alternative fueling solution comes close to the negative CI scores that RNG produced

agricultural facilities receive. And the beauty is that RNG drops right into the existing pipelines and then into our existing fueling infrastructure. On the RNG demand side, as I previously mentioned, we open new stations as part of our announced agreement with Amazon. In addition to the 80-odd existing clean energy stations that have been supporting the Amazon fleet of heavy duty trucks, new stations in four states have been added to our filling network. All these stations are purpose-built for Amazon but also have public access and are strategically located in and around distribution centers allowing for fleets from a variety of companies to fuel with RNG.

One station that has been only open for a few months has already become our largest bimonthly volume. There are another handful of stations that will be opening in the next few months with a robust schedule through the rest of this year. We are particularly excited that these stations will be open and accessible for truck fleets when the new Cummins 15-liter natural gas engine hits the market next year. As the commercial introduction of heavy duty electric trucks and the required charging infrastructure continues to get pushed out, this next generation of Cummins natural gas engines, combined with our already installed RNG fueling infrastructure, will accelerate fleets' ability to reach their emissions reduction goals a lot quicker. Before I close, I wanted to mention that we added one of the largest transit agencies in the country as our customer in the fourth quarter, San Diego MTS, which signed a contract for 86 million gallons of RNG fuel for its fleet of 764 buses.

We also renewed an RNG contract with the largest transit agency in the country, LA Metro, during Q4, and will be supplying them 20 million gallons of RNG annually for their bus fleet. Our relationship with refuse customers continues to expand during the quarter with new contracts with Athens Services, Burtech Waste, and additional stations for Republic Services. We remain as optimistic as ever about the future of renewable natural gas, both as a direct transportation fuel, as well as for an ultra-clean feedstock for other alternatives. We have quickly become one of the largest developers and owners of dairy RNG production, and are growing our leadership position in the distribution of RNG. Thank you for your time today, and now I'll hand the call over to Bob.

Thank you, Andrew, and good afternoon to everyone. As reported today, we finished 2022 with $420 million in revenue and a gap loss of 59 million versus 2021 revenues of 256 million and a gap loss of 93 million. Our adjusted EVA for 2022 was 50 million versus 57 million in adjusted EVA last year, which last year included 4 million of earnouts from our sale of RNG assets to BP. On an adjusted non-gap basis, we reported net income for the year 2022 of approximately $3 million versus non-gap net income of approximately 8 million in 2021. Although…

Our adjusted EBITDA fell short of our estimate of approximately 60 million. The variances to our estimates were temporary in nature, we believe, and timing related in terms of volume associated with station builds and SG&A spending. In our view, nothing systemic or permanent in nature. For example, we thought there could be some rebound in the LCFS credit prices during the fourth quarter, and the LCFS credit prices actually remained at their lowest level of the year throughout the fourth quarter.

Now, LCF as prices have gone up recently, so a little later than we anticipated, but still moving up as we thought as additional information is kind of hitting the marketplace around that program. We also saw the price of natural gas double for the month of December in California, increasing the equivalent of a dollar a gallon in our largest market. And we had some delays in station openings, which pushed out volumes. And our fourth quarter SGNA spending increased, which was...

largely due to really our own success in adding personnel to accommodate our RNG growth activities. Looking forward, we believe we have upsides ahead given where the credit prices are today, knowing we're much closer to opening more stations to support Amazon, and our RNG dairy projects continue to proceed well with tailwinds from the Inflation Reduction Act ahead of us. And with that, I mean, I'll go into our 2023 outlook here in a moment. I'd like to take a moment here just as a reminder on our presentation. We've presented our volumes and revenue tables in our new format in our Form 10-K that we filed today. We made this change in the third quarter in our 10-Q filing where we separated fuel volumes and the O&M service volumes, and we enhanced our revenue disclosures around our volume related product and service revenues.

some questions on visibility to the first quarters of 22 in the new format. So we're accommodating there.

So now taking a closer look at the fourth quarter of 2022, our revenues were $113.8 million compared to $91.9 million a year ago. Higher volumes and fuel prices along with higher station construction sales in the fourth quarter of 2022 contributed to the increase over 2021. With the lower environmental credit prices in 2022, offsetting some of those revenue increases. We reported a gap net loss of $12.3 million in the fourth quarter of 2022 compared to a gap net loss of $2.4 million.

in 2021. On a non-GAAP basis, adjusted EBITDA for the fourth quarter of 2022 was 12.6 and the adjusted non-GAAP net income was $2 million. That's for the fourth quarter of 2022. This compares to adjusted EBITDA of $18 million and adjusted non-GAAP net income of $6.4 million in the fourth quarter of 2021.

For the quarter, our overall product and service margins were slightly higher in the fourth quarter of 2022 versus 2021, despite the lower credit prices. However, our spending on growing our RNG business was higher in 2022, as expected and planned, and as well, as I mentioned, 2021 benefited from the earn-out income of approximately $4 million when comparing the two periods. Nature noted that we finished the year with approximately $5 million in 2020.

supply joint ventures with our partners Total Energies and BP. CASH provided by operating activities for

2022 was $66.7 million and we had that's against we had $44.5 million of property and equipment purchases. These are both up from 2021 where operating cash flow was $41.3 million and property and equipment purchases was $23.1 million. So nice on the cash front. Now looking at 2023.

We normally provide annual guidance, which we'll do here. We've provided our annual outlook in our press release for a gap net loss of a range of 105 million to 115 million, which is reconciled to our outlook for adjusted eva d'âh of a range of 50 million to 60 million. On the gap net loss, you'll note a large increase in the Amazon warrant incentive charge, which is associated with an estimated volume increase for Amazon in 2023, as we complete more stations. Revenues are projected to be around $350 million. That's our gap revenue. That's net of around 66 million in these incentive charges.

Our 2023 Outlook Reflex continued double-digit fuel volume growth in the range of 15% to 20%. Much of that is RNG, which is also projected to grow in that same range. Service volumes growth is expected to be in the mid-single-digit range. Our Outlook Reflex

Environmental credit prices that really don't rebound much from what we saw in the fourth quarter of 2022 and starting 2023. So as we know those have been, they were lower in the fourth quarter and so we're kind of seeing that continuing on in 2023 and our outlook contemplates that. Our SG&A spend will increase slightly to around 30 million per quarter which is up a little bit from the fourth quarter as we've added personnel at the end of 2022 and the stock compensation levels out but that is about 5 to 6 million higher.

in 2023 versus 2022. We're estimating around 25 to 30 million of cash flow from operations, mostly reflecting added interest costs, and our capex spend is estimated around 90 million. That's at the core business of clean energy. We may also contribute up to 40 million dollars more into our RNG supply joint ventures, and that's on top of the 178 million that we've already contributed. And frankly, that doesn't bring in potential pipeline and for this exercise, that's really what we.

have good line of sight on it, but it could be higher. Clearly, the credit pricing environment, inflation, and industry volatility have changed from the beginning of 2022, but we feel very good about the view forward and upside possibilities with continued volume growth, the tailwind from the Inflation Reduction Act, the forthcoming launch of the Cummins 15 liter engine, and just frankly, the continued demand for this very low carbon.

fuel of R&G. With that operator, please open the call to questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation, don't indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants use a speaker equipment and may be necessary to pick up your handset before pressing the star keys.

of R&G. With that operator, please open the call to questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation, don't indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the store keys. One moment, please, while we pull for questions.

Our first question comes from Manav Gupta with UBS. Please proceed with your question. Good afternoon, guys. I just wanted just if you could, you mentioned earlier on the call 13 dairies in progress. So if you could help us understand the pace of development here, what stage of development are they, and if you could be a little more granular and let us know how many of those should be online by end of first half or by year end. And the bigger question I'm trying to get to here is, Bob, is it looks like the dairies are in progress, but you're not really accounting for too much of EBITDA contribution from these dairies in 2023. That's why the guidance is relatively flat. So if you could talk about that also. Correct. Okay. I'll judge that.

You're correct. And I've actually, you know, we've even a year ago, we contemplated 2023 would be minimal contribution. So we will be flowing gas in a number of projects. But you know, there's time between flowing gas and revenue recognition, which has to do with the whole, you know, pathway certification and when we really can do get to meaningful revenue. So you're correct. There's not much of a contribution there in 23. And then, you know, we'll see out 24 kind of shakes out and just for sure as we go into 25 and 26 and, you know, you know.

there you start to get into the Emplacement Reduction Act and contributions that could happen there. So that's why, but Manava also say, you know, a big part of the forecast being kind of flat, as well as the credit price deal. You know, we going into into the fourth quarter, we felt that there would be more information about, you know, kind of the pathway forward, if you will, particularly in California. But we also knew the rent, you know, had information there. That just didn't really materialize in our view, very meaningful. So the market kind of stayed flat. We're not going to kind of say that that, you know, try to predict exactly when that will turn around. We're, or we're bullish on it and know that we believe that it will. But.

you know, we're that's just a big part of the flatness because We're kind of assuming, you know fairly recent credit prices stick around You know on the dairies yeah on the dairies look there You know, probably nine of those are are well seven eight are constructing for sure And I think we'll get a number of those absolutely. Well one's already flowing gas and we'll we'll get Maybe four or five in in 23, but again, you're not really seeing an EBITDA, but You know, which is okay. It's it's you know, that's a long time and we've recognized that but

We're also very mindful of the execution on, you know, the operational execution on these, which is going well. I think we've experienced some of the delays that a lot of the folks in the industry are seeing just on equipment and things like that. But relative to, it was pretty exciting to finally start injecting gas into the commercial pipeline at one of our dairies. So, you know, that's one of the keys as well, is getting those things running. Thank you.

But my quick follow-up here is, if I remember correctly and let me know if I am wrong, but last year at the RNG analystay, you had come out with a full budget, I think somewhere between 1.2 to 1.4, which was what you would have to put in to develop this RNG offering and take it to the gallon volume that you were targeting. And what I'm wondering here is, with the IRA in patient reduction act and direct pay, there's a 30% IDC credit now. So in your mind, does that final capex number that you need to develop your RNG offering fully? Does it drop by 25%, 30%, if you could talk about that.

Well, I think, Minab, of course, the ITC will apply and it will reduce our capital by 30%. Now, that tends to flow in, you know, a year after, but I mean, no, that's real. And so it will lighten the capital load by 30%, our progress will qualify. And you're right. That is the scope. When we looked at, you know, when we talked about a year ago, to get to the roughly 100 million gallons of our own equity, you know, projects, you know, R&G projects, you know, that number still holds. We still believe that's a good number. And so there's more work to be done. And there's more money to be raised.

There's more debt to be organized. There are a lot of opportunities, a lot of projects still to come. We feel good about the projects 13 that we have underway, which if you look back 18 months ago, we've moved quickly. We have a robust pipeline of more projects. We haven't lost any through all of it, even with the reduction of the credit price. We haven't lost any enthusiasm. What we try to stay focused on here is we have the lowest carbon fuel that's commercially available today in the world. There are a lot of regulatory policy...

folks speaking at all sorts of different levels and projecting how that fuel should be used and how it might be used and trying to micromanage the way the market will work. But, but, you know, what we know is we have a really low carbon fuel that can be used today that can be disseminated in the nation's pipelines. Now, and when we look at that fuel. And we compare it to the other technologies that are available that most people want to talk about right now. We feel very well positioned. So there's more to be done. And you'll see that come on. And so don't be surprised if you see us, you know, continue to do things to.

move along that pathway that we all talked about a year ago. Because we haven't lost any interest in that. Thank you so much. You bet. Our next question is from Rob Brown with Lake Street Capital Markets. Please proceed with your question. Hi Andrew and Bob. I just wanted to double check. Did you say $350 million of revenue? Was that the fuel volume revenue of the total revenue? That was total. That's net of, I'm just going to put it out there, that's net of about $66 million in non-cash incentives. Just so you know. Yeah. Thank you. And then I know you have some color on the Amazon station activity. How many stations do you sort of plan this year? And I guess maybe where's the uncertainty yet on?

some of those things open. Are you still seeing the permitting blazers? That sort of started to be worked there. Rob, what we've announced, you know, I have to be careful with my friends there. They don't want me talking too much about what we've previously announced. So, you know, we, we admitted an aspect that we would develop 19 stations through them. So we've, you know, you can slice and dice this number all out. We build a, we've, we've, we've built. An open four of those so you can assume that the remainder of that for the most part will come on in production in 2023.

But we've got a lot underway and in various stages right now. Some of those will be finished right toward the end of the year, October , November timeline. But you know, there'll be half of them will come on in the first half of the year. So that's really important for us. What we've seen, Rob, is it's different. You know, we've built, building stations is not new for us, right? In our history, we've built close to 750 station projects. We actually, one year you remember, Rob, we built 87 truck stops in one year. And then I think the next year was a like number. So building stations is not new to us.

What has been a little challenging is green field locations, right? So you're building truck, what's called the truck stops from scratch, in and around, highly sought distribution centers. So the locating, the coordination with the Amazon, then the entitlements and the permitting, entitlements really more. Those of you haven't built anything awhile. The entitlement process in the country is daunting and that can be anywhere from, you know, six months through a year. So, you know, we have a lot of these projects we've been working on now for quite awhile. And then the permitting less so the construction part of it is not anything that's much different than what we've always seen, which is five to six, you know, five months. So a lot more to be done this year and we hope we'll just continue on that next year as well. Okay, thank you, O'Connor.

Our next question is from Eric Stein with Craig Hallum. Please proceed with your question. Hi, Andrew Hamba. Hey Eric. So just coming back to the 2023 EBITDA guide. So looking for modest growth there, and I know part of that. So you've got RNG plants, I guess, pushed out a little bit. You're still conservative on the credit side, and you've got higher op-ex. But you've got some areas where you're more optimistic as well. You know, I guess, is that a fair way to character as it won? And then secondly, can you just talk about maybe the linearity of it throughout the year? I know that the natural gas spike in California was, I believe, even more pronounced in the first quarter. So, you know, how do you expect to start the year and then maybe for it, or how it plays out for the remainder of the year?

Rob, when you were signing all about getting on here in a second, but when you're assigning the EBITDA and why that is, what we're guiding to, look, and it may kill me here, but if you went back to credit prices of last year, you'd have $94.5 million of EBITDA. So we're trying to be responsible by not trying to project, you know, get over our skis on projecting what's going to happen in the LCSS. We remain bullish. We think the fact that the California is now talking about increasing the obligation curve 20% to 30% look, that's it.

as most do with the credit prices.

Bob, you might fix me up here on that. I agree there. Eric, you asked about the linearity versus giving guys a few more minutes.

I know, but I mean that would be helpful. Exactly. Last year didn't bode too well without a little bit of linearity, but I would say that we're talking about it. I'm going to say that there's a little bit of similarity between the years where we've been able to go out and draw theEDPFirst

Historically Q1, it's just a little bit of a slower quarter. And then as we talk about completing stations, they're not all going to get done here in March. Kind of thing. So that plays into increasing volumes throughout the year. Correct. And you are correct. Eric, it is interesting. I'll put that little caveat out there.

California did have a huge issue with natural gas prices in January . Like more, I noted that natural gas prices doubled in December . So they went from like $7 an M to $15. And that's about a dollar. Then they went from $15 an M to $50.

So, that's kind of mind boggling and we're going to see some impact from that. There's no doubt about it. I mean, it's, you know, like usual, I mean, it may be some painful. The good news is we have a fair amount of the year to try to manage around that and recover from it. But shell for you. Sorry! Exactly! OK!

That was something that, you know, that's that's that's kind of part of how we do things. I didn't get out there, you know, necessarily he changed guidance on January at all, but it's something that's, you know, those are the types of things that we had some headwinds in in 22. Frankly, we had it in the third quarter and then we thought we again, that was part of the optimistic view of the fourth quarter was that we had that high gas price from the third quarter out of the way. And just when we thought we were kind of out of the woods California, our largest market doubles. So, you know, all of that is temporary volatility. You know, so I mean, our view is, is long on on this solution and the fuel and, you know, we've got projects being built out and, you know, so we're in we're in this for the long haul.

Got it, that's helpful. Maybe just going to the RNG, just maybe an update I know you've provided before, but as you see the JV's playing out ultimately the number of projects you see and then maybe the average gallons per project. Thank you. Oh, you know, these projects tend to be the derries tend to be, oh, air comes.

Eric, these projects tend to be in the range of one and a half to two million gallons, two and a half. Now we have one underway in Idaho right now. It's a really big project, five. But let's just say two million is a good number. So you can see that we've got many more projects come on, which we are very excited about. The scope and the size of the market is still big. Now what you'll have, Eric, is you won't have as many 10,000 cow dairies or larger, but you'll begin to cluster these. And so there's dozens and dozens of projects that are still out there. In fact, right now we have.

I think in our pipeline. So not of the ones we've discussed, not of the 13 that are sort of, I put under construction and under way, we've got another 27 that we're talking to and trading paper with. So I think we've always sort of said that you'd be in the 35 to 40 project before we realize what we laid out for you last year.

I think, in our pipeline. So not of the ones we've discussed, not of the 13 that are sort of, I put under construction and underway. We've got another 27 that we're talking to and trading paper with. So I think we've always sort of said that you'd be in the 35 to 40 project before we realized what we laid out for you last year. So, okay, thank you.

Our next question is from Matthew Blair with 2 to Pickering Hull. Please proceed with your question. Good afternoon, Andrew and Bob. Thanks for taking my question. So I think if I heard correctly, you were saying that your current profitability would look more like 95 million at 2022 credit prices. And I think at one point you were providing a 2023 guide of 136 million. So could you walk through the delta between that original 2023 guide 136 million and then the 95? I guess would that be just an assumption of lower volumes coming through in 2023 than what you originally envisioned? You know, Matt, I would say there's...

Yes, a little bit of that. I mean, we're in a little bit of a different world than we were at the beginning. Look back to January 22, credit prices were extremely high and the world was in a little different place. So I think that for sure the lion's share of it is just simply an assumption on credit prices. That's huge. The other gap there is what I'm going to say, nothing.

Notable other than a little here and a little there and you know kind of as you as you as your environment changes, you know, you get you know plans change and you know for us. You know as usual, I really feel that it's it's kind of timing related of you know of when the volumes come on is the biggest piece. It really is and so it's not if it's when and just how you know we're always constantly trying to get engaged. You know when will the trucks show up at the fueling station going through the buying cycle and the adoption and all of that and you know.

getting it there and as things move and look, moving out stations, these, you know, various, when we open up stations because we're, their purpose built stations for all of our customers these days, they were building them because there's a need for volume. So as soon as they open, the fuel starts flowing. So it's.

that volume kind of follows how you're opening stations, for the most part. I mean, we get more volume at our existing stations as well, but that's it. I mean, it's just. I think Matthew probably, if you were to go back and look at it and try to piece it together, and of course I was just giving you kind of back on the envelope that gets you to close to 95 or 100. It's timing, it's timing on the projects, right? We probably realized today these projects take a little bit longer to come on production than we thought a year ago. Okay, and the. You know, the other thing, and I don't, let's not go down this too long, but there is some good news in here, right? I mean.

Okay, and I just want to confirm that the 50 to 60 million for 2023, that does not include any ITC add-backs, correct?

confirm that the 50 to 60 million for 2023 that does not include any IPC addbacks. Correct?

It wouldn't necessarily mean the ITC is more of an investment tax credit. There's no IRA number in the 50 to 60. Great. Thank you very much. Okay. You bet. Thank you. Our next question comes from Greg with Weber Research. Please proceed with your question.

Hey, good afternoon guys. I don't mean to beat a dead horse here, but just going back to the financial metrics and projections from the RNG day a little over a year ago, obviously a lot has changed. I'm just wondering, what at all can we still take away from the 2022 to 2026 projections, whether it's can we slide things to the right, is the general ramp or the shape of the ramp still intact? Should we just be kind of haircutting everything by a certain percentage or should we just wipe it out altogether? I'm just curious when you look at that.

Hey, good afternoon guys. I don't mean to beat a dead horse here, but just going back to You know the financial metrics and projections from the RNG day Little over a year ago Really obviously a lot has changed. I'm just wondering you know What at all can we still take away from you know the 2022 to 2026 projections? You know whether it's can we slide things to the right? Is the general ramp or the you know the shape of the ramp still intact? Should we just be kind of Haircutting everything by a certain percentage, or you know should we just wipe it out all together? Just curious when you look at that You know what can we still take away from from those numbers?

Well, let me hit some of the broad strokes is we still see the need almost exactly the same as we did. So the 2026 number of, you know, I don't have a firm before, 459, you know, whatever the total was, we still see that. We still see the third party in the exactly the same place. And by the way, we're kind of on track on being able to lay that in as we thought. And then the RNG dairy in our account and our partners account, we haven't come off of that. Now, I think, you know, it may be that that you might need to slide everything six months to the right.

I think that's probably prudent to do. And of course, as we've all discussed here this afternoon, the credit prices that we use back then are different. So we all have to employ our best thinking on those credit prices. We happen to believe that by the time you get to 24 and 25, the credit prices will strengthen substantially. And then of course, we like some of the benefits that we've received from the IRA, certainly, the production tax credit is very meaningful out there as well. So we haven't really pivoted in terms of saying, let's not do this R&G or let's not pursue third party.

It's all pretty much still intact and you know if you want to Critically look at what's changed you could say well some of these projects Dairy projects are probably taking a little bit longer to build, but I mean gosh in the scheme of things You know when you start when you have 30 35 projects Underway, you know It's I don't know how meaningful that is and then if there's an impact it could be and you know late late 23 20 24 early 24, but I think it's generally going to hold in pretty well.

Okay, that's helpful. Go ahead, Bob. No, go ahead. Well, yeah, look, I mean, maybe I'm saying the same thing, but, you know, so it gets tempered a little bit, but then, you know, frankly, we have tailwinds from the IRA that come in there and really help that out. Because you can, you know, you can look at a model like that and simply, you know, change a credit price.

And the numbers would go down. I mean, I can tell you the math on that. If you take the LCFS from 185 to 100 or 62, it's going to go down. Now, we don't believe that for that five-year period. Although, we do our partners, by the way. Yeah, so maybe there's a little temperament there. But then, we also didn't plan in 25 for production tax credit to come in as well. So, we're almost kind of back in. So, I think that in general, the shape of the curve and the potential out there is still there. Okay. That's helpful. I'm not going to ask you for exact numbers, but is it fair to say then that when we look at the numbers,

That's not the kind of competition. It's just pressure on real estate competition. What kind of scarcity and I'm a property and what kind of property cities want in their city? It's not others kind of doing the not others are trying to do the same thing that you're doing itself just you know different different uses for the land in general Exactly exactly got you

Okay, cool. That's helpful. Thanks a lot guys. I'll pass it on. Yeah, you bet. Thank you. Our next question comes from Pavel Machanov with Raymond James. Please proceed with your question. Thanks for taking the question. I know you're not giving guidance formally beyond 2023, but you said that you expect California LCFS pricing to improve over the next two years. What gives you the confidence in that directionally?

Yeah, Pavel, what gives us the confidence on it is that the low carbon fuel standard is working. And RNG is an important component of it. And I think that we feel fairly confident, certainly after the workshop of the 22nd, that all of the comments were supportive of an increased obligation curves, increasing the obligation compliance curves from 20% to 30%. And I think there's a chance that they could go to 35%. And then you know there's this new concept that they've now, the staff has actually endorsed, which is kind of a ratchet that if you're in an oversupplied market that they could ratchet.

down the compliance curve. So you know you can kind of theoretically go from 30 to 32. So I think all of that is you're going to need all the RNG you can get. So I think you're going to be back in a much more supportive environment for increased prices. Okay, let me ask a similar question about RINs. You know which I think for the year as a whole, RINs were as large as the tax credit and California combined.

The EPA seems to be kind of rethinking the entire RVO framework, including these electric rins that are being discussed. What's your thinking directionally on where that goes? Yeah, Pavel, I actually think that we've learned a lot over these last few weeks since they came out with their new proposal on the RVO for the Renewable Fuel Standard and the E-RIN. I think they've overshot, and the EPA has. When you look at the four or so largest...

organizations that the EPA listens to, you know, the Renewable Fuel Association, the AFPM and the API and the RNGC, just to name a few. All of them, growth energy, all of them are unanimous in that the proposed ERIN framework won't work. And then, you know, specifically as we look at it, Pavel, you know, the way they kind of engineered the equivalency of how they would have credits, what kind of level of credit you would get depending where you put your fuel, where frankly the EPA wanted the fuel, I don't think that's probably going to end up being the way it's going to be enacted. And the idea that they kind of jury-rigged the math to create RINs out of thin air, frankly.

to incent RNG to go to make electricity for light duty electric vehicles versus putting RNG into a hard to decarbonize heavy-duty truck, I don't think that I don't think that that's going to end up being the case and I think was almost just too much you know it's going to fall apart under its own weight. It's too obvious.

incent RNG to go to make electricity for light duty electric vehicles versus putting RNG into a hard to decarbonize heavy-duty truck, I don't think that I don't think that that's going to end up being the case. And I think it was almost just too much, you know, it's just going to fall apart under its own weight. It was too obvious. And...

the move in the origination from the producer at the, you know, that the other day Pavel I was with the chairman of the Agriculture Committee and a member of Congress who happens to own a dairy farm and happens to have a RNG digester out at his dairy farm in Central Valley, California. We're standing on the bladder on top of the you know on top of it and of the lagoon there and you know filled up with methane that this guy's capturing. We by the way get all that gas and it goes into heavy-duty trucks. And I said to the chairman of the Agriculture Committee I said well now there's one for you, and I pointed to the congressman whose dairy farm was and I said can you imagine that the EPA's proposed that the generator is no longer Congressman Valadeo and it's no longer

they're not the generator here at the dairy farm, they're gonna pass that on to Ford or to someone making electric vehicles in Detroit, or Elon Musk. And he said, well, you gotta be kidding me, how could that possibly be? So that's just another example of what was going on in this deal, and I just don't think that's gonna all, is gonna end up being enacted that way at all. So appreciate the color on that. I think what's gonna happen, Bobel, is you'll see perhaps,

They're under obligation to enact the RBO by June . Now whether or not they do that, I don't know. I'm not sure they're going to get this all cleaned up and figured out the E-RIN to be able to make that date. And so it wouldn't surprise me that the E-RIN maybe gets delayed some and restyled some and that they go with some other kind of RBO in June . But we'll have to see.

Just a quick question at the end. Smaller programs, but do you get anything from Oregon or Washington State LCFS? We do, but a little bit. We have several customers. I'm looking at one of my guys, Oregon. Yeah, Oregon for sure. Washington State not quite yet, but we will there. Oregon program, better prices are worth more. They're nice. But we don't do a lot of people up there yet. But I think we have four or five customers right now. Okay. Thank you guys. Okay. Our next question is from Craig Sherry with Tilly Brothers. Please proceed with your question. Good afternoon. Thanks for taking the questions.

Just a quick question at the end. Smaller programs, but do you get anything from Oregon or Washington State LCFS? We do, but a little bit. We have several customers. I'm looking at one of my guys, Oregon. Yeah, Oregon, for sure. Washington State, not quite yet, but we will there. But Oregon program, better prices are worth more. They're nice, but we don't do a lot of people up there yet. But I think we have four or five customers right now. Yeah, okay. Thank you guys. Okay. Our next question is from Craig Sherry with Tilly Brothers. Please proceed with your question. Good afternoon. Thanks for taking the questions.

I mean obviously neither CARB nor the EPA wants these programs to implode. So I guess what I want to ask is one, do you see a silver lining that the regulators feel more pressured with these low prices? And two, do you see any catalysts for other state programs? And there were some draconian possible recommendations with options being evaluated by the CARB, kind of eliminating projects past a certain line in the sand from west to east or other things. Do you see them starting to shy away from...

some of those draconian changes and just focus on total supply demand in terms of you know, the carbon reduction you know track Versus tweaking the market, you know in other ways. Yeah Well Craig look, I think I hope what I've been trying to say on this call is that I'm actually somewhat optimistic of the way both these programs are going to end up and And it hasn't helped you know as the markets watch this kind of making a sausage and regulatory Proclamations and staff workshops and all that, you know that's kind of can be a little bit of a unnerving and it Frankly has done that to the credit prices in the latter part of the year but I'm kind of I think I'm picking up where you are I I don't believe that either California or the EPA wants to dismantle these programs. Okay, I think unfortunately Fortunately, there was a tendency to walk

in order to lower the carbon in the state. It works. Other states know it works. The governor of the state, Governor Newsom, he knows it works. So the last thing you want to do is kill the golden cow, if you will. So I think what you'll see is what...

What kind of overpowers all of those tendencies to want to micromanage the program is the fact that they're going to increase the obligation curve from 20% to 30%. That's big. And if they go to 35%, which many have suggested that there's no better time to do it, you're going to need all the R&G and a lot of these little programs, little things that they were kind of wanting to test, I think will go away because you're going to need it all. So I feel actually kind of, you know, I'm an optimist, but I feel actually that that is headed in a in a better direction.

And then as we relate to the EPA, I feel similar, in a similar way. You know, for the federal government to decide that they want to decide where this fuel should go, and jury-rig the math on generating RINs to force it to go to make electricity for their electric vehicle program, I just don't think that is the way it's going to go. And I know that there's a, you know, it would be kind of interesting, we should tune in tomorrow, there's confirmation hearing by the fellow in charge of this program. At the EPA, the charge of the Office of Air and Radiation, he's trying to get confirmed tomorrow.

And I'm sure these kind of questions that we've talked about just now about what they were trying to do with the program probably brought up tomorrow. And so I kind of feel like I don't have anything against E-RIN, but I think the way that it was being done was probably not the right way to do it. Not even sure the EPA has authority to do it, but we'll see. But I think in particular some of the things they were doing, you know, it's probably not the right way to go about it. And I think I'm not the only one without just about everybody. You should read those comments. I mean, I think there was general agreement in that. That's helpful. And you're talking about finishing up the 19 stations for Amazon.

I guess, do you require similar massive fleet fueling agreements? So what's next after that? Do you have to have other Amazon type agreements in order to roll out the next 10 or 20 new engines or do you just see increasing widespread adoption with the new Cummins 15 liter engine and so you're just going to have more open access and just keep going?

Well now you just keep going and look 19 I hope there's more than that with Amazon right there could be many more just with Amazon alone but like we've long said look we're not just a one-trick pony in terms of just Amazon I mean you know we're working with all the large trucking fleets and we have a I you know we are really focused on the these 40 sort of household name largest fleets that are working right now with Cummins as they introduce the test vehicles for these next four or five six months and then we hope as they order the order of books sometime in 2023.

you know I don't know how it'll pan out so I'm just giving is just you know I'm just speculating just kind of for fun I mean look we know Walmart's testing the Newcomen's 15 layer we know Werner I would love to be the fuel partner with using RNG for for those kinds of fleets and there's a bunch of them.

Last one for me, to the degree there's wider spread adoption and these fleets want to drive lower carbon fuel in other geographies nationwide, not just California or Oregon or what have you. Do you think that there's increasing multi-fold pressure on two or three or four more states to come up with these types of programs in the next two or three years? That was part of your question. I wrote them down here. I wrote down New York, Illinois, and New Mexico. So there will be other states. I think New York's pretty close.

Illinois, I think, introduced it. We've got some work to do in North Carolina. You'll have other states. There'll be some that won't go, but you'll have other states to do it. And I think New Jersey, once New York goes, you'll probably get New Jersey and the others in the area. So yeah, they should. And you know, Craig, if California does something to louse up their program, they will. Gotcha. Okay, thank you for those insights. Okay, thank you. Our next question is from Paul Chen with Scotiabank. Please proceed with your question. Hey guys. Good afternoon. Hey. It's pretty late, so real quick. There's some discussion, I think California may want to change the way. No longer keep the LCFS credit to RNG and NAS.

proof the gas is physically in the state. I want to see if you guys have any read or have you talked to the government officials there to see where that's stand and if it does get past how that impact your operation. I mean what to send off your projects that currently under construction realistically that you will have the pipeline connection all the way to California and that also how much is your RNG sales that currently from the third party you will be able to do that. Thank you. Yeah Paul yeah I mean I think that's I mean it's kind of around the the booker claim the book and claim and whether you

you know, where they're going to require us to physically move gas in to do that. And, you know, I mean, first, we don't, you know, we think that's yet to be determined. So we're not really moving around to try to accommodate that now. You know, in some sense, I think there'd be some cost. There'd be some cost added, but, you know, one of the beauties is we've got pipelines and we already have, you know, we have certified pathways. So we actually, we do have to be able to get gas from the farm to the dispenser in San Diego. I mean, it has to be able to go there. What we talk about, and, you know, I mean, but it's a little tricky, right? Because once it goes, once methane goes into the pipeline, it's methane. It's kind of indistinguishable. You know, it's like putting a dollar in the ATM. You know, you don't, I mean, you go take it out. It's not the same dollar, but it's a dollar. So that's, but I, you know, look, however, we would have to track molecules. I think you'd add a little cost, but it would be done. I don't think Bob, I mean, just, I mean that there's.

discussion that they wouldn't allow you to use the current booking claim, but you have to pay for the, essentially the transportation, right? And that's not a deal-killer fall. I mean, it's, you know, it's not fair and it's not the way it should work. And frankly, this is the kind of crazy stuff that's going on. But again, I'm gonna I'm gonna kind of assign it to faceless bureaucrats, right? I mean, it's, by the way, that's not the case if you use it for hydrogen, even while they would want to do it for us. I mean, that's the kind of thing that it's just, I just think that when cooler heads look at something, I don't see that. And but if it were to happen as they've discussed in some of these workshops, there would be an extra cost to it. But it's... We can accommodate. Yeah. Because I mean, we certify our pathways. Yeah, we have to prove that now. The connectivity, all of that. It's all that work. And that's a lot of work. And it's time-consuming.

But don't, you know, that's not in stone yet. Sure. Just trying to understand that what is the kind of impact. Any estimate that was the incremental cost for you guys? I don't have it. No, but I mean if you're getting into kind of transportation costs, you know, you're kind of dollars on the MMBTU kind of thing. Our guys know it. I'll see if we can't get it to 44. I don't know it. Yeah, that would be great. We're being asked by some clients. I'm busy fighting it, so I'm not worried about paying it. So don't put me down in the fight column. Sure. My final question is just a simple accounting question. We're talking about the credit reduction, the capital reduction, say 30% or so. Okay.

Accounting wise, how does it work? I imagine in your cash flow statement, your CapEx number is still the same, you're just receiving the tax credit or check from the government and showing up where? Yeah, well, it'll reduce the basis in our asset. So it will lower, it'll basically lower the value of what we have capitalized. So if you're going to, you know, a hundred million and you get your 30, then you're going to kind of end up net with a $70 million asset there. No, but I guess my question is that from an accounting standpoint, when we're looking at your 10K on your cash flow statement, let's say if you supposed to have 200 million on the CapEx in 2026.

And let's assume that in 2025 you spend 100, so you end up at 30 minutes. So, yes, the cash flow statement is still showing up in your capital spending line at 200 or you show 170? It's going to show gross. Okay. And then there's 30 minutes that way it's going to show up in the cash flow statement? It's going to show up in the investing section. Okay. Thank you. You're proud of yourself, aren't you, Bob? We did count it.

Yeah, I'm doing what I think is conservative and what the FASB would want me to say. Thanks, Paul. Our next question is from Jason Gabelman with Callan. Please proceed with your question. Hey guys, thanks for taking my questions. Two, if I may, the first, on the clean fuel production credit, which I think starts 2025, it seems like the benefit to your RNG production could be pretty high if the credit isn't capped. It could be as high as $6 a gallon. Is that your interpretation, and do you expect that credit value to be capped? And then my second question is just on the near-term numbers. It looks like 4Q, the fuel margin excluding all the credits.

was just four cents per gallon, which was down quarter over quarter, I think by six cents. Was that just due to the higher natural gas prices and do you expect that to rebound back to, I guess, the ten cents where it was in 3Q and that's once again just the fuel dollar per margin excluding any of the credits. Thanks. Okay. Andrew, I don't know if you want to talk about the PTC. You know, Jason, it's a good question. I, you know, that as you point out that the production tax credit has not been promulgated. It hasn't been, you know, it hasn't been adopted by the Treasury Department, by the Treasury Secretary and I've

I've told our folks here, let's be careful, we don't know how that's going to come out. It appears on its face, as the law has suggested, that it could be a rather big credit based on the carbon intensity. I've seen estimates between $5-$6.

But I also know that's a big number and and and Jason's the first time really heard anybody ask is maybe because you and I talked about it before or something But whether you know that it could be capped But you know stranger things have happened So I don't know how to handicap that yet I know that this incentive was designed to get really low carbon fuels Produced and so you know you want to be careful how much you cap it Is that it works against what it was designed to do, but you know? you could it be

Do I think it will? I don't know. I'm not sure it would be, but it could be. Have you heard something, Jason? No, no. I was seeing if you did. I have not heard anything. I also know politicians and someone said, whoa, that's pretty big. But there are a lot of big numbers associated with all this stuff. So I'm not so sure that it would be. And I don't know how fair that would be.

just to cap it because it's so low carbon, you know, so So we'll see how that goes Yeah Jason on your second question By the By the numbers that you're giving to me I can tell that and I'm not saying right or wrong at all, but I think you're you just you're taking like the fuel sales value that we

Amazon incentive number is, right? Because that nets down the revenue and then your cost is kind of the same.

And so, you know, your margin gets a little skinnier as a result of the value of that. And whether you want to have that in there or not is up to you. But I can say that. You know, the value of that charge was.

You know, the largest it's been in any quarter, and it was larger than Q3. So it was like 7M in Q3 and 8.8M. So that's netted in your revenue number, but then I will say, yes, Q4 was impacted certainly by the doubling of natural gas costs in California, because it's such a big market and so it's very much needed in the market.

We're going to see a little pressure on that in the first quarter. I would have liked to have said, you know, that dissipated, we've got kind of righted itself, but I already know in January that, you know, costs went from $15 an end to $50. I don't know if any of you have heard on the news about, I mean, it's all the way down into residence and I mean, it's a complete debacle in my opinion, my own humble opinion there. It's a complete debacle on how we're managing the natural gas here in the state. Now having said all that, that's in January , we'll work our way out of that. In January we did, by the way.

Have to we were forced to our own selves. No one no one externally but raised our prices At the pump totally to accommodate that we don't always do that because we're mindful of our customers Wanting that you know to enjoy the spread in the pricing and so we don't always jump out there and do that Right away we did so So, anyway, I think your your four cents is influenced See how it's influenced by the non cash incentive charge and then yes, you do have a little bit of pressure on the cogs Thanks We have reached the end of the question-and-answer session I would now like to turn the call back over to Andrew little fair for closing