Q2 2023 Montauk Renewables Inc Earnings Call

August 9, 2023

Okay.

Good afternoon.

And every one and thank you for participating in today's conference call I would like to turn the call over to Mr. John So Raleigh as he provides some important cautious important cautions regarding forward looking statements and non-GAAP financial measures contained in the earnings material are made on this call.

John Please go ahead.

Thank you and good afternoon, everyone welcome to Montauk Renewables earnings Conference call to review, the second quarter 2023 financial and operating results and developments I'm, John <unk>, Chief Legal Officer and Secretary at Montauk. Joining me today are Shawn Mcclain, Montagues, President and Chief Executive Officer.

<unk> business development.

And Kevin Vann, Azlan, Chief Financial Officer to discuss our second quarter of 2023 financial and operating results at this time I would like to direct your attention to our forward looking disclosure statement.

During this call certain comments, we make constitute forward looking statements and as such involve a number of assumptions risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed or implied by such forward looking statements. These risk factors and uncertainties are detailed in.

<unk> talk renewables SEC filings. Our remarks today May also include non-GAAP financial measures, we present, EBITDA and adjusted EBITDA metrics, because we believe the majors assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core.

<unk> performance.

These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.

Details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation and in our second quarter 2023 earnings press release and Form 10-Q issued and filed this afternoon, which are also available on our website.

I R Montoc renewables dot com.

After our prepared remarks, we will open the call to questions. We ask that you. Please keep to one question to accommodate as many questions as possible and with that I'll turn the call over to Sean.

John Good day, everyone and thank you for joining our call.

On June 21, 2023, the environmental Protection Agency announced final rules for the renewable fuel standard by 2023 through 2025 years.

While the final rules did not finalize the RIN program. It did set final volumes for Cellulosic biofuel at 838, 1090, and 1370 6 million Rins for the years 2023, 2024 and 2025, respectively.

Noting that the way the RIN program. The Finalization of the rules had an appreciable impact on the <unk> index price.

The average <unk> price from June <unk> through June 30 was approximately 31% higher than the index price average from June <unk> through June 21.

As planned we monetized a significant number of brands after the announced final rules prioritizing obligated parties and benefiting from the notable rise in D. Three rent index price.

We monetize all rens generated an unsold as of June 32023, and committed the majority of our expected 2023 third quarter RIN generation, we have not yet entered into forward sale commitments beyond the fourth quarter of 2023 RIN generation.

The average realized price of these July 2023 commitments were priced at or above the July 2043 average <unk> index price.

The final rule also included significant changes to the existing RFS program referred to as biogas regulatory reform requiring the R&D industry to modify how all rooms are generated.

New RFS participating facilities that register on or after July one 2024 will have to meet the biogas regulatory reform provisions beginning July one 2024 existing.

Existing RFS participating facilities that registered prior to July one 2024, we will have until July January one 2025 to come into compliance with biogas regulatory reforms.

For existing registrants registration update must be submitted by October one 2044.

On January one 2025, all RFS participants must comply with biogas regulatory reform provisions.

The EPA finalized a limitation.

Gas from one facility has a single use under the RFS as proposed the EPA clarified that this does not preclude non RFS uses at the same facility.

Over the last few quarters, we have announced a series of development projects that in the aggregate are expected to materially contribute to the growth of the business.

During the third quarter of 2022, we announced our second facility at the apex sites. We expect this plant to increase daily production by approximately 2100 <unk> per day at commissioning during the second half of 2044.

During the first quarter of 2023, we announced our expansion into South Carolina with our planned Blue granite R&D facility. We expect this plant to increase daily production by approximately 900 MB to use a day at commissioning in 2025.

And last but not least in June 2023, we announced our planned development of a landfill gas to R&D project in Irvine, California at the freight car Bauer <unk> landfill. This project is anticipated to process, a large and growing volumes of biogas in excess of the existing capacity of our renewable.

Electric generation facility.

With a targeted date in 2026, we currently expect the capital investments of the new R&D facility to range between $85 million and $95 million with a production nameplate capacity of approximately 3600 <unk> per day, assuming currently forecasted biogas feedstock volumes that are project.

To be available from the host landfill at the time of commissioning.

Next I would like to provide an update on our Pico dairy cluster project in Idaho.

As a result of the public comment period, ending March 14th 2023, without any significant comments carb certified our tier two application and certified Ci value of minus $2 65, six it will be used to report and generate our CFS credits, we released the remaining gas from storage in the second quarter.

Of 2023.

Related to our Pete's eco feedstock amendments, which increases the amount of feedstock supply to the facility for processing over a three year period. The dairy has delivered the first two increases in feedstock and we have made the corresponding contractual payments.

The efficiencies and improvements to both our feedstock digestion and water management have enabled us to process the increased feedstock volumes from the Derrick.

As we previously disclosed we completed the design of the digestion capacity increase in the third quarter of 2022 and began and current capital expenditures related to the completed design of our digestion expansion construction of the project.

We continue to expect the digestion expansion project will be functionally complete during the third quarter of 2023.

We also expect the dairy to begin delivering the third and final tranche of increased feedstock volumes in 2024.

As to our swine waste to renewable energy development initiative in North Carolina, We continue to work with our engineer of record through the optimization and deployment of improvements to the patented reactor technology at our Turkey Creek, North Carolina location.

In July 2023, we signed a renewable energy certificates agreement with Duke energy under which Duke will purchase the swine wastes Rex from the conversion of swine waste feedstock into renewable Energy Act that Turkey Creek, North Carolina location.

<unk> fully commissioned we expect the facility to sell up to 47000 <unk> per year to Duke annually to meet the terms of that agreement.

As a reminder, in the first quarter of 2023, we executed a receipt interconnection agreement with Piedmont natural gas for the Turkey Creek, North Carolina location.

This agreement is structured to coincide with the development timeline at the Turkey Creek, North Carolina location.

Lastly, I would like to highlight our recent announcement regarding our potential development opportunity to create a beneficial use of otherwise waste biogenic carbon dioxide in.

In July 2043, we entered into a letter of intent with a north American subsidiary of Denmark, based European energy, which reserves the use of the Cotwo for our Texas facilities.

Under the terms of the LOI, we expected contract Sidoti volumes from facilities to European energy.

Sufficient for their large scale production of methanol.

Upon final agreement execution delivery term is expected to last up to 15 years with first delivery in 2026.

Lower terms allow for our capital commitments to be based on choosing technology that is most suited for the optimal delivery of the coty volumes to European energy.

The planned delivery is expected to prevent critical amounts of biogenic cotwo from entering the atmosphere put into beneficial use and create a new fixed price commodity revenue stream for ballpark and with that I will turn the call over to Ken.

Thank you, Sean I will be discussing our second quarter of 2023 financial and operating results.

Please refer to our earnings press release, and the supplemental slides that have been posted to our website for additional information.

Total revenues in the second quarter of 2023 were $53 3 million a decrease of $14 6 million or 21, 5% compared to $67 9 million in the second quarter of 2022 <unk>.

The decrease is primary primarily related to a decrease in pricing of gas commodity indices and average realized RIN pricing during the second quarter of 2023 compared to the second quarter of 2022.

Gas commodity indices decreased 77% during the second quarter of 2023 compared to the second quarter of 2022.

Realized RIN pricing decrease during the second quarter of 2023 to $2 16, as compared to $3 38 in the second quarter of 2022, which also contributed to the decrease in total revenues.

Additionally, contributing to the decrease with the exploration of the gas commodity hedge in the elimination of our counterparty sharing agreements we recognized gains in the second quarter of 2022 of $1 $6 million related to a gas commodity hedge program, we reported the impacts of our gas commodity hedge program within our corporate segment.

We have not currently entered into any gas commodity hedge program for 2023.

We also recognized revenues of approximately $1 1 million in the second quarter of 2022 under our previous counterparty sharing agreements.

Total general and administrative expenses for the second quarter of 2023 were $8 7 million, which was flat as compared to $8 7 million for the second quarter of 2022.

Increased rental expense and stock based compensation expense as a result of stock option grants to our executives in the second quarter of 2023, and the 2022 amendments to the Montauk AG Renewables acquisition stock awards were offset by the forfeiture of restricted stock and lower professional fees.

2023 option awards vest ratably over a period of three to five years.

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

We produced $1 4 million Btu of R&D during the second quarter of 2023, a decrease of less than <unk> 1 million compared to $1 4 million <unk> produced in the second quarter of 2022.

Our rocky facility produced approximately <unk> $1 million less in <unk> in the second quarter of 2023 compared to the second quarter of 2022 as a result of process equipment failure in the second quarter of 2023, which temporarily impacted production.

The process equipment, which fail it has been repaired or.

Our Pico facility produced approximately <unk> 1 million less <unk> in the second quarter of 2023 compared to the second quarter of 2022 due to feedstock processing challenges.

Our Galveston facility produced less than 0.1 million more <unk> in the second quarter of 2023 compared to the second quarter of 2022 as a result of process equipment modifications.

Revenues from the renewable natural gas segment in the second quarter of 2023 were $48 6 million, a decrease of $16 million or 24, 7% compared to $64 6 million in the second quarter of 2022.

Average commodity pricing for natural gas for the second quarter of 2023 with $2 10 per <unk>, 77% lower than the second quarter of 2022 during the second quarter of 2023, we self monetize $17 4 million rins, representing a $3 million increase or 28% compared to 40.

4 million Rins in the second quarter of 2022.

Average realized pricing on Rins sales during the second quarter of 2023 with $2 16, as compared to $3 38 in the second quarter of 2022, a decrease of 36, 1%.

This compares to the average D. Three rent index price for the second quarter of 2023 of $2 16.

Being approximately 32, 9% lower than the average <unk> rent index price in the second quarter of 2022.

At June .

32023, we had approximately <unk> 4 million <unk> available for RIN generation and had approximately 3 million Rins generated an unsold at June 32022, we had approximately zero point $4 million or <unk> available for RIN generation and had approximately $1 1 million Rand has generated an unsold.

Our profitability is highly dependent on the market price of environmental attributes, including the market price for rent as.

As a result at June 30 of 2023, we had approximately $3 million in inventory an increase of 167, 5% compared to June 32022.

Sean previously noted we entered into commitments to transfer during July 2023, all of these rens generated but unsold our average realized RIN price for these July 23 transfers were priced at or in excess of the July 2023 average <unk> price of $3 <unk>.

Our operating and maintenance expenses for our R&D facilities in the second quarter of 2023 were $11 7 million, an increase of <unk> 7 million or six 5% compared to $11 million in the second quarter of 2022.

Primary driver of this increase was related to the timing of preventative maintenance expenses during the second quarter of 2023 at our apex and attached casino facilities also contributing to the increase in the second quarter of 2023 were well field operational enhancements at our task of Cedar and coastal facilities.

Our security facility produced approximately 1000 megawatt hours more in the second quarter of 2023 compared to the second quarter of 2022 due to engine maintenance completed in the second quarter of 2022.

Revenues from renewable electricity facilities in the second quarter of 2023 were $4 6 million, an increase of zero point $3 million or seven 3% compared to $4 3 million in the second quarter of 2022.

The increase was primarily driven by the increase in our renewable electricity production volumes.

Our renewable electricity generation operating and maintenance expenses in the second quarter of 2023 were $3 4 million a decrease of <unk> 4 million or 10% compared to $3 8 million in the second quarter of 2022.

The decrease is primarily related to scheduled preventative maintenance at our <unk> facility, which was approximately <unk> 7 million higher in the second quarter of 2022 compared to the second quarter of 2023.

Our Turkey Creek facility operating and maintenance expenses increased approximately zero zero point $2 million as a result of non capitalized costs for montage AG renewables.

We calculated and recorded an impairment loss of <unk> 3 million in the second quarter of 2023, an increase of <unk> 2 million compared to <unk> 1 million in the second quarter of 2022.

The impairments in the second quarter of 2023 were for specifically identified R&D machinery and equipment that were no longer an operational use other than these discrete events, we did not record any other impairments related to future cash flows.

Operating income in the second quarter of 2023 with $13 6 million a decrease of $10 4 million or 43, 4% compared to 24.0 million in the second quarter of 2022.

R&D operating income for the second quarter of 2023 was $23 million, a decrease of $12 2 million or 34, 7% compared to $35 2 million in the second quarter of 2022.

Renewable electricity generation operating loss for the second quarter of 2023 was <unk> 6 million a decrease of <unk> 8 million or 58, 7% compared to $1 4 million in the second quarter of 2022.

Turning to the balance sheet as of June 32023, $68 million outstanding under our term loan.

Our capacity available for borrowing under the revolving credit facility was approximately $117 6 million.

During the second quarter of 2023, we generated $6 $1 million of cash from operating activities, a decrease of $20 7 million or <unk> 77, 2% compared to $26 8 million of cash provided provided by operating activities in the second quarter of 2022.

For the second quarter of 2023, our capital expenditures were $29 6 million of which approximately $9 8 million 5 million $6 7 million and $3 million were related to the ongoing Pico facility adjusting capacity increase our Montauk Agra <unk> with development in North Carolina.

Apex, R&D facility, and the South Carolina Blue granite R&D projects, respectively.

As of June 32023, we had cash and cash equivalents of approximately $78 1 million.

On June 21, 2023, we entered into the third amended and restated loan agreement and secured promissory note and between <unk> and Manta Holdings limited.

Amending and restating in its entirety, the second loan agreement in security promissory note as amended.

Mmk Amendment increases the principal amount of the loan from its current balance of $8 9 million to a total of $10 million in the aggregate and extends the maturity date of the loan from June 32023 to December 31, 2023 and increases our security interest from 800000 shares two 976600 <unk>.

<unk> three shares of common stock of Montoc owned by Montoc Holdings limited.

The terms of the M&A amendment or otherwise substantially similar to the <unk> loan agreement as previously disclosed we entered into the <unk> loan agreement in accordance with our obligations set forth in the transactional implementation agreement entered into by and among US Montauk Holdings Limited and other party in connection with our 2021 initial public offering.

Adjusted EBITDA for the second quarter of 2023, with $19 2 million, a decrease of $8 4 million or 34% compared to $27 6 million for the second quarter of 2022.

EBITDA for the second quarter of 2023 was $18 9 million a decrease of $10 2 million or 35, 1% compared to $29 1 million for the second quarter of 2022.

Net income for the second quarter of 2023 decreased $18 1 million or <unk> 94, 8% over the second quarter.

2022.

This decrease was primarily related to a reduction of revenues due to a decrease in pricing of gas commodity indices and average realized RIN pricing.

I'll now turn the call back over to Sean.

Thank you Kevin.

In closing, we would like to provide an updated full year 2043 outlook.

We don't provide guidance on our expectations of future environmental attribute pricing volatility in index pricing does impact our revenue expectations.

We continue to expect R&D production volumes to range between five seven and $6 $1 million to use and have increased the corresponding R&D revenues to between $160 million and $175 million.

We expect renewable electricity production volumes to range between 195, and 200000 megawatt hours with corresponding renewable electricity revenues between 18 and $19 million and with that we will pause for any questions.

Thank you.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and then re queue.

Please standby, while we compile the Q&A roster.

Our first question will come from Manav Gupta with UBS. Your line is open.

Guys I just wanted to say a lot of times, you see companies trying to make trading decisions and the completely mess it up.

Our decision to not sell wins in <unk> with an absolute masterstroke I have never seen a saturday executed fills out so congratulations on that.

My question is you announced something very interesting in agreement with Duke energy.

Can you talk a little bit more about why it makes strategic sense, how it adds value or will it be enough time and the benefits of this agreement.

Sherman of one thank you very much for the compliment regarding the Rins strategy. The company continues to focus its monetization strategy by prioritizing its sales directly to the obligated parties under the renewable fuel standard and by doing that and synchronizing the timing.

At which they are.

Satisfy their obligations throughout the year.

The timing of the release the favorable release of the obligations for 2023 through 2025 could have been better matched with the timing of.

That demand side coming from the obligated parties. So thank you.

With respect to the Duke agreement is highly beneficial in a number of ways.

One that you start to see the advancement of.

Sort of the regulatory environment in North Carolina.

It is starting to acknowledge and prioritize renewable electricity credits coming from the conversion of Swan waste into renewable energy.

Second <unk>.

Equally as important.

That first project that we are developing with that newly patented reactor technology is the fact that it is a fixed commodity price.

Businesses as you indicated through your comment initially.

You end up at summit measured degree of volatility in monetizing your attribute pricing to be able to bolster.

A phenomenal project for.

<unk> for the environment and for the diversification of our product suite to be able to do that under a fixed price contract further underpins the security of the revenue and the EBIT streams to allow for us to continue our strategy on the floating piece of the business in the form of the timing and to who the off takers are of our.

<unk> attributes.

Thank you.

Yeah.

Our next question will come from <unk>.

Greg Sheri with Tuohy Brothers your line is open.

Hi.

I'd like to dig in a little more on.

Your comments around the Duke Rec agreement.

If I recall correctly.

Swine opportunity in North Carolina was envisioned as possibly 20 projects over five years.

How does this kind of.

In terms of its size and chunk in us kind of fit into that.

Yes.

Craig Yes, that's a great question.

The Duke arrangement represents the first stage of not a 'twenty project deployment, but a deployment up to 20 reactors, but primary focus is on the collection and the processing on a per ton basis of swine waste in it.

Around those communities of Eastern North Carolina, the Duke arrangement allows for the first deployment of the tranche of reactors that were continuing to optimize and increasing the throughput that will continue to create a diversity of environmental projects products.

In the form of bio Char.

And natural gas renewable natural gas and renewable electricity and in the Rex and so it is an anchor arrangement that starts that monetization process and gives US a line of sight as to when the project will in turn.

Contribute to EBITDA.

Thank you.

For our next question.

We have a question from Matthew Blair with Tpa Your line is open.

Hey, Sean and Kevin Congrats on the strong results.

Wanted to.

Just to dig in a little bit more on the details of the RIN monetization in Q2.

I believe you said that $17 4 million rooms were monetized.

At the 2016.

I guess price is your regular run rates on RIN generation per quarter, approximately $12 million. So just doing the math there. The 17 minus 12 times for 2016 should.

Should we think about that extra boost in Q2 as around 10, maybe $11 million of EBITDA and then as we look into Q3.

It sounded like the remaining $3 million of RIN inventory were sold at 306, so that would be roughly a $9 million boost as we look into Q3 on top of your regular operations is that the right way to think about those moving parts on on the RIN inventory.

Generally Matthew Yes, you can look at it that way and also don't forget youre going to have to account for the carryover rens exiting the first quarter that would have been sold.

<unk> revenues and monetize in the second quarter as well.

Into the third quarter, yes, we we highlighted the <unk> index price.

It did make a comment that our three our third quarter commitments.

The RIN is generated and unsold.

In July of 2023 were at or above that index price. So generally.

How youre getting to your math with contribution from RIN pricing in the second quarter in the third quarter.

Generally geographically aligned to what we're trying to convey.

Thank you and our next question.

It comes from.

Ryan.

Things with B Riley your line is open.

Hey, guys congrats on all the recent.

Recent developments here.

Kind of a higher level question around the RVO with it being the first time, we've had a multiyear RVO can you talk about what that might mean for the industry and how it could benefit you guys in particular as a producer.

In General Ryan, we do not comment on pricing speculation for the attributes but definitively.

Having a demand.

The range of clarity for multiple years.

Does and we will likely shape the landscape of development opportunities acquisition opportunities.

Folks are starting to determine the level of supply that will go across the industry. We are active participants and renewable natural gas coalition.

And that information is routinely aggregated.

For EPA comment as they go through the RVO and so theres always a mindset, where we are trying to determine what that supply demand mechanic looks like particularly with the absence of a formal cellulosic waiver credit.

But beyond that we typically don't focus on guidance or commentary associated with what the pricing outlook could look like for those attributes in this year and beyond.

Thank you.

It looks like we have a follow up from.

Matthew Blair with Tpa <unk> your line is open.

Hey, Thanks for taking my follow up on the swine R&D efforts.

You seem to be making good progress.

I would say <unk> is certainly a leader in the space could you just talk about what's your competitive edge on swine RMG as the technology is the people is it relationships or maybe something else.

Sure Matthew as we have disclosed in previous quarters.

Our patented reactor technology allows for a very efficient processing of the swine waste in sort of a spoke and hub type of fashion that allows for the optimal conversion of the swine waste into the various elements of bio char renewable natural.

Gas and renewable electricity.

It is essentially.

Essentially an opportunity to do what traditional digestion methods due in a fraction of the time with a more compact more reliable piece of technology.

And demonstrate that with folks like Duke energy and with other folks as we look to monetize all of the commodity and attribute streams of that project. So in general that would be our largest competitive advantage.

Thank you.

We have one more follow up from Manav Gupta with UBS. Your line is open.

Quickly on this carbon dioxide agreement the European energy. This is somewhat of a newer concept for us.

Help us understand some of the benefits of this I understand the deliveries starting in 2006, but help us understand.

This can take you and what are the real benefits of delivering this to this European energy company. Thank you.

Sure Manav.

The opportunity for us to take.

A natural consequence of our <unk>.

Operational facilities in the form of biogenic Cotwo that is being destroyed in our thermal oxidizer.

Has routinely only been available for the generation of tax credits require you to be able to utilize those tax credits coming out of the inflation reduction Act and the evolution of those credits that are also tradable.

Alongside of that has been the opportunity to actually monetize the cotwo and in this opportunity partnering with an exemplary.

Business that is.

Been able to utilize that for the creation of methanol.

The opportunity to look beyond this initial arrangement definitively exists across our entire portfolio and exists in the form of actual cotwo that is destroyed in our thermal oxidation process, but also exists in the form of <unk> E and avoidance that happened.

At projects similar to what we are doing in North Carolina.

The <unk> he would be primarily focused on the generation of tax credits.

The equivalent obviously cannot be sold as a commodity.

All of our operating facilities are capturing and destroying carbon dioxide, which can be used as a commodity as we start to look across the portfolio. So we're very excited for this first opportunity and again the benefits to us similar to the Duke arrangement that we have done.

In North Carolina is bolstering the business with fixed price revenue streams and the ability to allow for a stronger more patient ability to monetize our environmental attributes in the hands of the obligated parties and allow for that timing to them.

Throughout the year.

Thank you and I'm showing no other questions in the queue I'd like to turn the call back over to Shawn Mcclain for any closing remarks.

Well, thank you and thank you all for taking the time to join US on the conference call. Today, We look forward to speaking with you on our 2023 third quarter conference call.

Thank you. This concludes today's conference call.

You may now disconnect.

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Good afternoon, everyone and thank you for participating in today's conference call I would like to turn the call over to Mr. John So Raleigh as he provides some important cautious important cautions regarding forward looking statements and non-GAAP financial measures contained in the earnings material are made on this call.

John Please go ahead.

<unk> business development, and Kevin Vann, Azlan, Chief Financial Officer to discuss our second quarter 2023 financial and operating results at this time I would like to direct your attention to our forward looking disclosure statements.

During this call certain comments, we make constitute forward looking statements.

And as such involve a number of assumptions risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed or implied by such forward looking statements. These risk factors and uncertainties are detailed in Montauk renewables SEC filings. Our remarks today May also include non <unk>.

<unk> financial measures, we present, EBITDA and adjusted EBITDA metrics, because we believe that the majors assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.

IR Montoc renewables dot com.

After our prepared remarks, we will open the call up to questions. We ask that you. Please keep to one question to accommodate as many questions as possible and with that I'll turn the call over to Sean.

Thank you John Good day, everyone and thank you for joining our call.

On June 21, 2023, the environmental Protection Agency announced final rules for the renewable fuel standard for the 2023 through 2025 years.

While the final rules did not finalize the E. <unk> program. It did set final volumes for Cellulosic biofuel at 838, 1090, and 1370 6 million Rins for the years 2023, 2024 and 2025, respectively.

So, noting the delay the RIN program. The Finalization of the rules had an appreciable impact on the <unk> index price.

The average <unk> price from June <unk> through June 30 was approximately 31% higher than the index price average from June <unk> through June of 'twenty one.

As planned we monetized a significant number of brands after the announced final rules prioritizing obligated parties and benefiting from the notable rise in D. Three rent index price.

The average realized price of these July 2023 commitments were priced at or above the July 2023 average <unk> index price.

The final rule also included significant changes to the existing RFS program referred to as biogas regulatory reform requiring the RMG industry to modify how all rooms are generated.

New RFS participating facilities that register on or after July one 2024, we will have to meet the biogas regulatory reform provisions beginning July one 2024.

Existing RFS participating facilities that registered prior to July one 2024, we will have until January one 2025 to come into compliance with biogas regulatory reforms.

For existing registrants registration update must be submitted by October one 2024.

On January one 2025, all RFS participants must comply with biogas regulatory reform provisions.

The EPA finalized a limitation that biogas from one facility has a single use under the RFS as proposed the EPA clarified that this does not preclude non RFS uses at the same facility.

Over the last few quarters, we have announced a series of development projects that in the aggregate are expected to materially contribute to the growth of the business.

During the first quarter of 2023, we announced our expansion into South Carolina with our planned Blue granite RMG facility. We expect this plant to increase daily production by approximately 900 F&B to use a day at commissioning in 2025.

And last but not least in June 2023, we announced our planned development of a landfill gas to R&D project in Irvine, California at the <unk> landfill. This project is anticipated to process, the large and growing volumes of biogas in excess of the existing capacity of our renewed.

<unk> electric generation facility.

With a targeted date in 2026, we currently expect the capital investments of the new R&D facility to range between $85 million and $95 million with a production nameplate capacity of approximately 3600 <unk> for net assuming currently forecasted biogas feedstock volumes that are projected to.

Be available from the host landfill at the time of commissioning.

Next I would like to provide an update on our Pico dairy cluster project in Idaho.

As a result of the public comment period, ending March 14th 2023, without any significant comments carb certified our tier two application and certified Ci value of minus $2 65, six it will be used to report and generate L. CFS credits, we released the remaining gas from storage in the second.

Quarter of 2023.

Efficiencies and improvements to both our feedstock digestion and water management have enabled us to process the increased feedstock volumes from the Derek.

As we previously disclosed we completed the design of the digestion capacity increase in the third quarter of 2022 and began incurring capital expenditures related to the completed design of our digestion expansion construction of the project.

We continue to expect the digestion expansion project will be functionally complete during the third quarter of 2023.

We also expected there to begin delivering the third and final tranche of increased feedstock volumes in 2024.

As to our swine waste to renewable energy development initiative in North Carolina, We continue to work with our engineered record through the optimization and deployment of improvements to the patented reactor technology at our Turkey Creek, North Carolina location.

<unk> fully commissioned we expect the facility to sell up to 47000 <unk> per year to Duke annually to meet the terms of that agreement.

As a reminder, in the first quarter of 2023, we executed a receipt interconnection agreement with Piedmont natural gas for the Turkey Creek, North Carolina location.

This agreement is structured to coincide with the development timeline at the Turkey Creek, North Carolina location.

Lastly, I would like to highlight our recent announcement regarding our potential development opportunity to create a beneficial use of otherwise waste biogenic carbon dioxide in.

In July 2043, we entered into a letter of intent with a north American subsidiary of Denmark, based European energy, which reserves the use of the Cotwo for our Texas facilities.

Under the terms of the LOI, we expected contract Sidoti volumes from facilities to European energy.

Sufficient for their large scale production of methanol.

Upon final agreement execution delivery term is expected to last up to 15 years with first delivery in 2026.

Hello, I terms allow for our capital commitments to be based on choosing technology that is most suited for the optimal delivery of the goto volumes to European energy.