Q4 2023 Clean Energy Fuels Corp Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the clean energy fuels fourth quarter 2022 'twenty three earnings conference call.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Clean Energy Fuels quarterly 2023 earnings conference call. At this time, all lines are in a listen-only mode.

At this time all lines in a listen only mode.

Operator: Following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Robert Vreeland, Chief Financial Officer. Please go ahead.

Following the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.

This call is being recorded on Tuesday February 27, 'twenty 'twenty four.

Now I'd like to turn the conference over to Robert <unk>, Chief Financial Officer. Please go ahead.

Thank you operator earlier.

Robert M. Vreeland: Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and year ending December 31, 2023. However, you did not receive the release.

Earlier this afternoon clean energy released financial results for the fourth quarter and year ending December 31 2023.

It did not received the release it is available on the Investor Relations section of the company's website at Www Dot clean energy fuels Dot com for the call is also being webcast there will be a replay available on the website for 30 days.

Robert M. Vreeland: It is available on the investor relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. A replay will be 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. 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 factors section of Clean Energy' I will note here for 2023's 10K, which is due by Thursday, the 29th.

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.

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 factors section of clean Energy's.

10-Q, and also our Form 10-K.

I will note here for 2020, Threes 10-K, which is due by Thursday the 29.

Robert M. Vreeland: We are waiting for the finalization of our internal review and external audit procedures for a SOC 1 report from one of our outside service providers. We just received the SOC 1 report from the service provider this morning. Once we finish these procedures around the SOC 1 report, we will file our 10-K. Now back to the forward-looking statements that will appear on this conference call. These forward-looking statements speak only as of 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. The company's non-GAAP EPS can adjust DBDA, 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.

We are waiting for the Finalization of our internal review and an extra and external audit procedures for a stock one report.

From one of our outside service providers we.

We just received the stock one report from the service provider this morning.

Once we finish these procedures around the stock one report we will file our 10-K.

Now back to the forward looking statements.

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Or will hear on this conference call.

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.

The company's non-GAAP EPS and adjusted EBITDA.

We will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative.

Today'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.

Andrew J. Littlefair: The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, 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.

And adjusted EBITDA 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 8-K today.

With that I will turn the call over to our President and Chief Executive Officer, Andrew Little Fair. Thank you Bob.

Andrew J. Littlefair: I know the people on this call are aware that the overall renewable energy sector has experienced market volatility in recent years. This is not new to us. We have been in business for over 26 years, and we have been a public company for over 17. Despite these external factors, the fundamentals of our business remain strong, and so does our conviction in our strategy. I think 2024 and 2025 will be very exciting years at Clean Energy and set the stage for many good years thereafter. As we start out a new year, I would like to take a moment to reiterate the pillars of our business and the strategy we've put in place to grow our business. The first pillar is our belief that R&G is the most effective solution to decarbonize heavy-duty transportation in North America.

I know that people on this call are aware that the overall renewable energy sector has experienced market volatility in recent months.

This is not new to us we have been in business for over 26 years in a public company for over 17.

Despite these external factors the fundamentals of our business remains strong and so does our conviction and our strategy.

2024, and 2025 will be very exciting years at clean energy and set the stage for many good years thereafter.

As we start out a new year I would like to take a moment to reiterate the pillars of our business and the strategy we've put in place to grow our business.

The first pillar is our belief that R&D is the most effective solution to decarbonize heavy duty transportation in North America.

Andrew J. Littlefair: R&G is affordable, available today, and has the greatest positive impact of any form of renewable energy. The pipeline infrastructure to move the R&G from its source to customers is robust and in place. Natural gas engine technology is currently available for regional trucks, and a larger 15 liter engine for Class A trucks that operate longer routes; the heavier loads are being added as we speak.

LNG is affordable available today and as the greatest positive impact of any form of renewable energy.

The pipeline infrastructure to move the R&D permits sourced customers is robust and in place.

Natural gas engine technology is currently available for regional trucks, and a larger 15 liter engine for class eight trucks that operate longer routes. The heavier loads is being added as we speak.

Andrew J. Littlefair: The 15 liter engine also happens to be the largest segment within the trucking industry. Our industry's fuel, infrastructure, and vehicles are available today and have been proven over multiple decades. The emissions benefits of R and G, both carbon and NOx, are clear, and they're supported by science. And dairy R and G is the only commercially available fuel with a negative life cycle emissions factor.

The 15 liter engine also happens to be the largest segment within the trucking industry.

Our industry's fuel infrastructure and vehicles are available today and has been proven over multiple decades.

The emissions benefits of R&D, both carbon and Knox are clear and they are supported by science.

And dairy R&D is the only commercially available fuel with a negative lifecycle emission spectrum.

The second pillar and the one that sets us apart from virtually any other company is that clean energy has the leading network of R&D distribution stations in North America, which enable our customers to achieve their low carbon goals by supplying RMG to their fleets.

Andrew J. Littlefair: The second pillar, and one that sets us apart from virtually any other company, is that Clean Energy has the leading network of R&G distribution stations in North America, which enable our customers to achieve their low-carbon goals by supplying R&G to their fleets. Many of our stations are strategically located on important trucking corridors with public fueling access for existing and future customers. And that number is growing with the opening of stations where Amazon operates as our anchor customer. Some of our stations are customer-owned, where we provide services and supply our customers. The third pillar of our business is how we work with our customers in many ways beyond just the sale of fuel. This includes education on the benefits of R&G and achieving emission goals, truck procurement, operational support, Station Construction and Services, Facility Modification, and Navigating the Complex World of Sustainability, Reporting, Public Policy, and Grant Applications. Clean Energy is also the largest distributor of third-party R&G production to the transportation industry.

Of our stations are strategically located on important trucking corridors with public fuelling access for existing and future customers and that number is growing with the opening of stations, where Amazon operates as our anchor customer.

So all of our stations our customer owned where we provide services and supply orange.

The third pillar of our business is how we work with our customers in many ways beyond just the sale of fuel. This includes.

The education on the benefits of R&D and achieving emission goals.

Procurement.

Operational support.

Station construction and servicing.

<unk> modification and navigating the complex world of sustainability reporting public policy and grant applications.

Clean energy is also the largest distributor of third party R&D production to the transportation industry.

Andrew J. Littlefair: We supply our customers with R&G from over 100 different productions. We are the largest offtaker in the business, and cannot be more pleased to extend our network and our service offerings to a vast group of fleets that will soon be able to adopt R&G vehicles thanks to Cummins' new X15N engine, which is a catalyst for our growth. The feedback from the fleets operating the test units of this engine has been very positive.

Supply our customers with LNG from over 100 different production sources, we are the largest off taker in the business.

Could not be more pleased to extend our network and our service offerings to a vast group of fleets that will soon be able to adopt R&D vehicles. Thanks to Cummins Nu X 15, and engine, which is a catalyst for our growth.

Feedback from the fleets operating the test units of this engine has been very positive.

Andrew J. Littlefair: PACCAR has recently opened the order book for trucks equipped with the X-15N, and commercial deliveries are expected in the early part of the second half of the year. Meanwhile, their OEMs have said they will follow soon by offering the new engine in their models. The largest segment of the trucking market will soon have access to an R&G solution, and this could not come at a better time for our industry and customers. R&G as a transportation fuel is becoming more mainstream. During the last quarter, our customer base and volumes grew with fleets that operate in the ports of LA and Long Beach, like Lincoln Transportation Services, Ecology Auto Parts, and Cross-Border Express, with transit agencies such as Nice Bus on Long Island and multiple refuse operators.

<unk> has recently opened the order book for trucks equipped with the X 15 Ann.

And commercial deliveries are expected in the early part of the second half of the year.

Sure Oems have said they will fall sudden by offering the new engine in their models.

Largest segment of the trucking market will soon have access to an R&D solution and this did not come at a better time for our industry and customers.

R&D as a transportation fuels, becoming more mainstream.

During the last quarter, our customer base and volumes grew with fleets that operate in the ports of La and long Beach.

Lincoln Transportation services oncology auto parts and cross border Express with transit agencies, such as nice bumps in long island, and multiple refuse operators and hot off the press, we recently signed an agreement with Phoenix.

Andrew J. Littlefair: And hot off the press, we recently signed an agreement with Cemex, one of the largest concrete companies in the world, to fuel 40 percent of their cement. The R&G industry recently notched a significant victory with New Mexico, passing legislation to establish a low-carbon fuel program. We believe this demonstrates the acceptance of these programs as a good way to address emissions issues that continue to expand, and are positive signs that other important states in the Midwest and Northeast could soon follow.

The largest concrete companies in the world to fuel 40 of their cement trucks.

The LNG industry recently notch significant victory with new Mexico, passing legislation to establish the establish of low carbon fuel program.

We believe this demonstrates the acceptance of these programs is a good way to address emissions issues that continue to expand.

There are positive signs that other important states in the Midwest and northeast considering follow.

Three years ago, we established our fourth pillar with the formation of joint ventures, with BP and total energies to invest directly in Orangey production facilities at dairies in the U S.

Andrew J. Littlefair: Three years ago, we established our fourth pillar with the formation of joint ventures with BP and Total Energies to invest directly in R&G production facilities at dairies in the U.S. We did this because we believe in R&G as a long-term solution, and our industry needs more R&G to meet growing demand. We saw an opportunity to invest our capital in attractive returns in these projects while augmenting the third-party R&D supply I And we are doing just that. Today, Clean Energy has invested $238 million of its capital into these joint ventures and another $35 million of our own funds in future R&G dairy projects. Six projects have completed construction and are operating or are in final commission; new projects are in or near. Construction, and we continue to evaluate others in our pipeline. Creating these projects online is no small feat and requires complex engineering, construction, operations, and regulatory approval.

We did this because we believe in R&D as a long term solution in our industry.

Needs more R&D to meet growing demand.

So an opportunity to invest our capital at attractive returns in these projects while augmenting the third party R&D supply I, just mentioned and we are doing just that.

To date clean energy has invested $238 million of our capital into these joint ventures, and another $35 million of our own funds in future R&D dairy projects.

These projects have completed construction and are operating.

Or are in final commissioning.

New projects are in or near construction.

<unk> and we continue evaluate others in our pipeline.

Bringing these projects online is no small feat.

<unk> complex engineering construction operations and regulatory approvals.

Andrew J. Littlefair: The world needs this ultra-low carbon fuel, and our industry needs to produce it more efficiently. You have the right platform and the right partners to take on this challenge. And we are on the path to achieving improvements in project costs and time. Bob will go into more detail, but when these projects come online, they have a ramp-up period of about 9 to 12 months where the project is producing gas but not yet monetizing federal and state environmental credits. With five projects coming online at the beginning of this year, this ramp-up period will have a negative drag on our financials in 2024 until we can monetize the R&G produced with environmental credit. This will enable us to virtually store our RNG until the regulatory pathways are certified to maximize revenue from environmental credit. This will create a lag in revenue recognition while operating costs are recognized at the time we produce the renewable gas.

World needs this ultra low carbon fuel in our industry needs to produce it more efficiently.

The right platform and the right partners to take on this challenge and we are on the path to achieving improvements in project costs and timelines.

Bob will go into more detail, but when these projects come online they have a ramp up period of about nine to 12 months, where the project is producing gas, but not yet monetizing federal and state environmental credits.

With five projects coming online at the beginning of this year. This ramp up period, we will have a negative drag on our financials and 2024 until we can monetize the R&D produced with environmental credits.

Tuesday, virtually store RMG until the regulatory pathways are certified to maximize revenue from environmental credits.

This will create a lag in revenue recognition, while operating costs were being recognized at the time, we produce renewable gas.

Andrew J. Littlefair: This is an accounting and regulatory feature of our industry that we want investors to understand and should not detract from our successful completion of dairy R&D projects, all producing ultra-low emissions fuel that we supply to our customers. This is also more amplified as we are starting from zero in the upstream production of R&G. As we bring more projects online, the glaring financial startup impact should be muted by projects operating at full financial capability. And the fifth pillar of our business strategy is the fact that we have a strong balance sheet to fund our continued growth in both stations and R&G projects. In December, we announced a $400 million term loan facility with Stone Peak.

This is an accounting and regulatory feature of our industry that we want investors to understand and should not detract from our successful completion of dairy R&D projects, all producing ultra low emissions fuel that we supply to our customers.

This is also more amplified as we are starting from zero in the upstream production of R&D as we bring more projects online the glaring financials startup impact should be muted by projects operating at full financial capabilities.

And the fifth pillar of our business strategy is the fact that we have a strong balance sheet to fund our continued growth in both stations and R&D projects in December we announced a $400 million term loan facility with stone peak.

Andrew J. Littlefair: $300 million was funded at close, and an additional $100 million can be drawn by us for a two-year commitment period. We have secured the capital needed for our next phase of growth. And we are pleased to be partnered with a well-respected infrastructure investment firm like, Our existing station footprint is well-positioned to support additional volumes from new customers. We also expect opportunities to expand our network with new stations strategically positioned for our customers. Like our stations, we built them to benefit Amazon. Over the last three to four months, we've opened two stations for heavy-duty trucks in Texas, two in California, a second one in Ohio, and others around the country, bringing the total number of purpose-built stations in 2023 to 18 across the country. Amazon continues to utilize over 75 other clean energy stations on any given day.

300 million was funded at close an additional $100 million can be drawn by us for the two year commitment period.

We have secured the capital needed for our next phase of growth and we are pleased to be partnered with a well respected infrastructure investment firm like Sean peak.

Our existing station footprint is well positioned to support additional volumes from new customers.

We also expect opportunities to expand our network with new station strategically positioned for our customers like our stations, we have built to benefit Amazon.

Over the last three to four months, we've opened two stations for heavy duty trucks in Texas, two in California, a second one in Ohio, and others around the country, bringing the total in 2023 to 18 purpose built stations. Amazon continues also utilize over 75 other clean energy stations on any given day.

Yeah.

Let me just close by repeating we are very optimistic that over the next 12 to 24 months you will see much of the strategy that we laid out several years ago fall into place with the investments beginning to show the fruits of our labor.

Andrew J. Littlefair: Let me just close by repeating that we are very optimistic that over the next 12 to 24 months, you will see much of the strategy that we laid out several years ago fall into place, with the investments beginning to show the fruits of our labor. At a time when more uncertainties continue to surround other alternatives, customer interest in R&G is increasing, especially with the introduction of the Cummins X15N. In 2024, we will remain focused on the adoption of R&G fuels along with growing R&G production. Thank you for your time today, and now I'll hand the call over to Bob. Thank you, Andrew, and good afternoon to everyone.

At a time when more uncertainties continue to surround other alternatives customer interest of R&D is increasing especially with the introduction of the Cummins X 15 in.

In 2024, we will remain focused on the adoption of RMG fuel along with growing R&D production.

Thank you for your time today, and now I'll hand, the call over to Bob.

Thank you Andrew and good afternoon to everyone.

I'll speak to our fourth quarter and year end 2020.

Robert M. Vreeland: I'll speak to our fourth quarter and year-end 2023 results and then discuss our outlook for 2024. Our fourth quarter and year-end results met our expectations, with our annual results being within the range of our most recent guidance. The year-ended 2023 gap net loss was $99.5 million versus our guidance of $98 to $103 million.

'twenty three results and then discuss our outlook for 2024.

Our fourth quarter and year end results met our expectations with our annual results being within the range of our most recent.

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For the year ended 2023, GAAP net loss was $99 5 million versus our guidance of 98% to $103 million.

And our adjusted EBITDA for 2023 was $43 6 million versus a range of $42 million to $47 million.

Robert M. Vreeland: And our adjusted EBITDA for 2023 was $43.6 million versus our range of $42 to $47 million. Keeping in mind, our annual results were significantly impacted by the $10 million in net incremental costs we incurred back in the first quarter from the historic run-up in California gas costs in January 2023. Without this $10 million gas cost anomaly, we would have more than beat our original guidance on gap net loss, and we would have landed in the middle of our original guidance for adjusted EBITDA. To meet our full year expectations, we had to have a solid fourth quarter, which we did. We saw an improved mix in our fuel gallons with more vehicles fueling and helping increase fuel margins. Our rent revenues continued to trend up with a 35% increase over our 2023 third quarter.

Keeping in mind, our annual results were significantly impacted by the $10 million and net incremental costs, we incurred back in the first quarter from the historic Runup in California gas cost in January 2023.

Without this $10 million gas costs anomaly, we would have more than beat our original guidance on GAAP net loss than we would have landed in the middle of our original guidance for adjusted EBITDA.

Meet our full year expectations, we had to have a solid fourth quarter, which we did.

We saw improved mix in our fuel gallons with more vehicles, fueling and helping increased fuel margins.

Our RIN revenues continued to trend up with the 35% increase over our 2023 third quarter.

L CFS pricing on the other hand continued to be low along with some delays in expected low Ci R&D supply so we <unk>.

Robert M. Vreeland: LCFS pricing, on the other hand, continued to be low, along with some delays in expected low CI R&G supply. So we actually lost some ground in the LCFS area in the fourth quarter. And lastly, we were able to get some relief at our Texas L&G plant with some insurance recoveries that we had been working on in the second half of the year to reimburse us for our losses due to that plant being inoperable all year. These insurance recoveries helped true up the annual results for the Texas LNG plant and were recorded as a reduction in SG&A, which is largely why there was a drop in SG&A expenses in the fourth quarter, although there were also incremental costs in SG&A during the fourth quarter from some new fueling station activity.

Actually lost some ground in the <unk>.

CFS area in the fourth quarter and lastly, we were able to get some relief at our Texas LNG plant.

Insurance recoveries that we had been working on in the second half of the year to reimburse us for our losses due to that plant being inoperable all year.

These insurance recoveries helped true up the annual results for the Texas LNG plant and were recorded as a reduction in SG&A, which is largely why there's a drop in SG&A expenses in the fourth quarter.

Although there were also incremental cost in SG&A during the fourth quarter.

From some new fueling station activities.

Importantly, all of these factors were considered in some form in our latest annual guidance for 2023, knowing there likely would be a mix of outcomes that help.

Form our guidance range.

Robert M. Vreeland: Importantly, all these factors were considered in some form in our latest annual guidance for 2023, knowing there likely would be a mix of outcomes that helped form our guidance range. We're pleased with the strong contributions of our vehicle fueling margins and glad that we're able to get some financial relief for our Texas LNG plant. The other big fourth-quarter highlight was our financing transaction in December, which Andrew mentioned in his remarks. After that financing transaction and then paying off the $150 million of prior debt and after contributing another $68 million to our Dairy R&G JV with BP in December, we ended the year with $263 million of unrestricted cash and investments.

<unk> with the strong contributions of our vehicle fueling margins and glad that we're able to get some financial relief for our Texas LNG plant.

The other big fourth quarter highlight was our financing transaction in December which Andrew mentioned in his remarks.

After the debt financing transaction, and then paying off the $150 million of prior debt and after contributing another $68 million into our dairy R&D JV with BP in December we ended the year with $263 million unrestricted cash and investments.

There was another $198 million of cash down at the JV, we have with BP at the end of December which is all earmarked for dairy projects.

I'll now turn my attention to 2024 and our outlook.

First off one of our goals of providing our 2024 outlook is to continue providing transparency into our model and level set our outlook, particularly as we move our dairy R&D projects into production.

Robert M. Vreeland: Now there was another $198 million of cash down at the JV we have with BP at the end of December, which is all earmarked for dairy projects. I'll now turn my attention to 2024 and our outlook. First off, one of our goals of providing our 2024 outlook is to continue providing transparency into our model and level setting our outlook, particularly as we move our dairy R&D projects into production. And we know the outlook in the dairy R&G area is nuanced with the timing of producing R&G and the time involved in ramping to steady state operation and monetizing the R&G. We appreciate, however, that what we lay out for 2024 can help form your thinking about 2025 and beyond. So where we can, we will answer questions about the outer years, recognizing there is still significant clarity needed around the IRA and the production tax credit, for example, seeing the actual timing around dairy R&D production and the timing of revenue recognition and how that takes shape, and where and when M&A fits into the equation.

And we know the outlook in the dairy R&D area is nuanced with the timing of producing R&D and the time involved in ramping to steady state operation and monetizing the R&D.

We appreciate however that what we lay out for 2024 can help form youre thinking about 2025 and beyond so where we can we will answer questions about outer years.

Recognizing there is still significant clarity needed around the IRA and the production tax credit for example.

The actual timing around dairy R&D production and the timing of revenue recognition and how that takes shape and where and when M&A fits into the equation as.

As we've said all along we're willing to consider acquiring existing projects and even pipelines that meet our investment return requirements.

Accelerate building, our R&D production volumes.

For 2024, we are providing a breakdown of our results between our legacy fuel distribution business and the results. We anticipate from our dairy R&D equity method investments. We've referred to these equity method investments in the past <unk> R&D supply, but just to avoid any confusion. This is our R&D supply.

Robert M. Vreeland: As we've said all along, we're willing to consider acquiring existing projects and even pipelines that meet our investment return requirements to help accelerate building our R&D production volume. For 2024, we're providing a breakdown of our results between our legacy fuel distribution business and the results we anticipate from our dairy R&G equity method investment. We've referred to these equity method investments in the past as R&G supply, but just to avoid any confusion, this is our R&G supply that we are producing in our dairy R&G joint ventures with BP and Total Energies and the related net economics attributed to Clean Energy.

<unk> that we're producing in our dairy R&D joint ventures, with BP and total energies and the related net economics attributed to clean energy nothing has changed here from how we've been presenting information in discussing our business, but just to.

To provide further clarity since we are breaking out this information and separate tables.

I'll start with the net results and then go on to some of our key assumptions for.

Our guidance on 2024, our consolidated GAAP net loss for 2024 is estimated to be in a range of $111 million to $101 million compared to our consolidated GAAP net loss of $99 5 million in 2023.

The breakdown is.

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To $87 million GAAP net loss from the fuel distribution business.

Robert M. Vreeland: Nothing has changed here from how we've been presenting information and discussing our business, but just to provide further clarity since we are breaking out this information into separate tables. I'll start with the net results and then go on to some of our key assumptions for our guidance for 2024. Our consolidated gap net loss for 2024 is estimated to be in a range of $111 million to $101 million, compared to our consolidated gap net loss of $99.5 million in 2023.

And 18 million to $14 million GAAP net losses from our dairy R&D equity method investments.

Our consolidated adjusted EBITDA is estimated to be in a range of 62 million to $72 million for 2024 compared to $43 6 million.

For 2023.

Breakdown of adjusted EBITDA for 2024 $76 million to $82 million from the fuel distribution business compared to $50 million in 2023, and a negative <unk> 14 to negative $10 million from our dairy RMG equity method investments compared to a negative $6 7 million for <unk>.

Robert M. Vreeland: The breakdown is $93 million to 87 million gap net loss from the fuel distribution business and $18 million to $14 million gap net losses from our Dairy R&D Equity Method. Our consolidated adjusted EBITDA is estimated to be in a range of $62 million to $72 million for 2024, compared to $43.6 million for 2023. Breakdown of adjusted EBITDA for 2024 is $76 million to $82 million from the fuel distribution business, compared to $50 million in 2023, and a negative $14 to negative $10 million from our dairy R&G equity method investments, compared to a negative $6.7 million for 20 As you can see, the fueling distribution business continues its financial improvement, and you see the effects of the dairy R&G joint ventures being in ramp-up mode.

2023.

As you can see the fueling distribution business continues its financial improvement and you see the effects of the dairy R&D joint ventures being in ramp up mode.

I think this is where we have the biggest expectation gap on how quickly projects will produce at a positive earnings level.

Our focus in 2024 is twofold with the R&D projects.

So cute operationally and optimize revenue however, possible and we do have good optimization choices with our network and even outside the network.

Staying on the or the R&D equity method investments and looking at the ramp.

We're expecting nearly 100% of the net losses to occur in the first half of 2024.

And then we'll start to see the effects of monetizing the R&D in the second half of the year.

Of course, there's risk involved from both the amount of gas produced and when it's produced and the end demand markets.

Pricing standpoint mainland.

Robert M. Vreeland: I think this is where we have the biggest expectation gap on how quickly projects will produce at a positive earnings level. Our focus in 2024 is twofold with the R&D project, execute operationally, and optimize revenue, however possible. And we do have good optimization choices with our network and even outside, of staying on the R&G equity method investments and looking at the ramp. We're expecting nearly 100% of the net losses to occur in the first half of 2024. And then we'll start to see the effects of monetizing the R&D in the second half of the year. Of course, there's risk involved from both the amount of gas produced and when it's produced and the in-demand markets from a pricing standpoint, mainly.

I'll also point out that there are large that we have a large project in Idaho with around 37000 dairy cows that is estimated to be complete.

Around the end of 'twenty four maybe beginning of the 25 that is responsible for over half of the earnings drag in 2020 for.

Idaho project has certain operating expenses that are occurring as we separately build out the main project and those operating expenses are reflected in our 2020 for guidance.

Those are also heavier in the first half of 2024.

Also one other point to make is our recently announced investment in <unk> is being reflected as an adjustment out of adjusted EBITDA as we view the money that we are contributing into ramirez to be more of an investment.

Albeit reported as development cost in that JV.

Robert M. Vreeland: Also point out that there is a large project in Idaho with around 37,000 dairy cows that is estimated to be complete, around the end of 24, maybe beginning of 25, that is responsible for over half of the earnings drag in 2024. IDO has certain operating expenses that are occurring as we separately build out the main project, and those operating expenses are reflected in our 2024 guidance. Those numbers are also heavier in the first half of 2024.

Okay now taking a step back for some of the assumptions in our 2020 for guidance.

We're looking.

Our guidance.

Contemplates RIN price staying around $3 level.

Noting that we've seen that kind of bounce above and below the mark recently with reason to be cautious here.

And the Lcs.

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We have that considered remaining soft around the low $60 level.

Our RMC volume is estimated to be 245 million gallons.

484% above 2023.

While this increase may seem a little light.

Robert M. Vreeland: Also, one other point to make is our recently announced investment in Ramier is being reflected as an adjustment out of adjusted EBITDA as we view the money that we are contributing to Ramier to be more of an investment, albeit reported as development costs in that JV. Okay, now taking a step back for some of the assumptions in our 2024 guidance. We're looking. Our guidance contemplates the REN price staying around the $3 level, noting that we've seen that kind of bounce above and below the mark recently with reason to be cautious here and LCFS pricing. We have that considered remaining soft around the low $60 level.

Note that we had around 13 million gallons of R&D that we dispense.

In 2023, who assist some other participants in the market and meeting their demand.

And we are not including a repeat of those gallons in our 2024 plan I have to say that that couldn't happen again, but.

We're not putting them in our plan.

GAAP revenues.

Our estimated to be in the range of $440 to $450 million.

We're estimating about $69 million and noncash Amazon warrant charges for 2024, which reduces our GAAP revenue.

Now keep in mind here that there was about $22 million of Amazon warrant charges and our 2023 total.

Robert M. Vreeland: Our R&G volume is estimated to be 245 million gallons, or 8.4% above 2023. While this increase may seem a little light, I'll note that we had around 13 million gallons of RNG that we dispensed in 2023 to assist some other participants in the market in meeting their demand, and we are not including a repeat of those gallons in our 2024 plan. Not to say that that couldn't happen again, but... We're not putting them in our plan. Gap revenues are estimated to be in a range of $440 to $450 million.

Warrant charges of $60 6 million.

That $22 million that won't reoccur in 2024.

Due to that due to that portion of the warrant charge being fully amortized.

At the end of 'twenty three.

SG&A for 2024 is estimated to be in a range of $115 million to $120 million, including $18 million of stock based compensation.

Noting again that the Q4 run rate was low due to that LNG plant recoveries that were recorded in SG&A.

Our 2024 capital plan calls for $60 million of capital spending in the distribution business.

Robert M. Vreeland: We're estimating about $69 million in non-cash Amazon warrant charges for 2024, which reduces our GAAP revenue. Keep in mind here that there was about 22 million in Amazon warrant charges in our 2023 total, warrant charges of $60.6 million. $22 million that won't reoccur in 2024, due to that portion of the warrant charge being fully amortized at the end of 23.

And $100 million.

Dairy R&D investments, noting again that there is a $198 million in cash down at the dairy.

JV with BP.

Lastly, we are forecasting GAAP.

Cash flow from operations of a range of $45 million to $55 million for 24.

With that operator, please open the call to questions.

Thank you ladies and gentlemen should you have a question. Please press star followed by one on your Touchtone phone if you'd like to withdraw your question. Please press star two.

Please give me if youre using a speakerphone. Please before pressing any keys one moment. Please for your first question.

Operator: The SG&A for 2024 is estimated to be in the range of $115 million to $120 million, including $18 million of stock-based compensation. Note again that the Q4 run rate was low due to LNG plant recoveries that were recorded in SG&A. Our 2024 capital plan calls for $60 million of capital spending in the distribution business and $100 million in dairy R&G investments, noting again that there is $198 million in cash down at the dairy JV with BP. Lastly, we're forecasting a cash flow from operations gap of a range of $45 million to $55 million for 2024. With that, operator, please open the call to questions. Thank you. Ladies and gentlemen, should you have a question, please press star followed by 1 on your touch-tone phone. If you would like to withdraw your question, please press star 2. Please leave me a message if you're using your speaker before pressing any key.

Your first question comes from Manav Gupta from UBS. Please go ahead.

Congrats on a good fourth quarter my question relates to lift.

The guidance I think you made a very strong case, why it's slightly negative in the first half and then improve I'm just trying to understand if you continue on this run rate and the volumes to ramp would it be fair to say that exiting 2024.

Your upstream EBITDA would actually be a decent positive number and we'll start making a contribution in year 2025, if you could talk a little bit about that.

I would say manav that.

We and we're being careful here that we expect.

The projects that we are going online this year.

But their performance will ramp up and improve throughout 'twenty four.

And.

There is certainly a good chance that base.

Operator: One moment, please, for your first question. Your first question comes from Manav Gupta from UBS. Please go ahead. Congratulations on a good fourth quarter.

They can produce EBITDA.

One caveat a minute put out there as you've got the production tax credit.

But we're not 100% reliant on them on that PTC, but frankly, that's where some of our hesitation is Justin.

Robert M. Vreeland: My question relates a little to the guidance. I think you made a very strong case why it's slightly negative in the first half and then improved. I'm just trying to understand if you continue on this run rate and the volumes do ramp, would it be fair to say that exiting 2024, your upstream EBITDA would actually be a decent positive number and would start making a contribution in the year 2025? If you could talk a little bit about that. I would say, Manav, that we, and we're being careful here, that we expect the projects that we are going online to share, that their performance will ramp up and improve throughout 24 and there is certainly a good chance that they, you know, can produce EBITDA. One caveat I'm going to put out there is that you've got the production tax credit.

Quoting numbers on this stuff because we don't have the guidance if that guidance comes out and it's clear.

Then we will be able to speak to that but we certainly know.

That's the process that we've quickly online.

So far we're happy with their operations. They are producing gas, we absolutely see a path forward that they will produce the gas that we anticipate and then you can start to do the math.

On those projects is like well if youre producing.

That gas then.

We start to look at and then of course, you have to look at what your view is on <unk> and Ren.

We're still.

Were soft in 'twenty, four but in 'twenty five.

Let's hope with that yes.

Yes, who knows that could come back but those are other factors in there so.

This is a long answer to.

Robert M. Vreeland: But we're not 100% reliant on that PTC, but frankly, that's where some of our education is, just in, quoting numbers on this stuff because we don't have the guidance. If that guidance comes out and it's clear, then we'll be able to speak to that. But we certainly know the process that we've put online. So far, we're happy with their operations. They're producing gas.

I'm optimistic.

We are also optimistic my quick follow up here. So it looks like Youll, Mexico is moving ahead with it.

This program and then there is some bonds out there that the reason the.

Bookshop off as CFO, Bob workshop got delayed because they might actually even be adding adding to the sound like making the sun can even more stringent so help with the overall balance of carbon credits.

Robert M. Vreeland: We absolutely see a path forward where they will produce the gas that we anticipate, and then you can start to do the math on those projects. It's like, well, if you're producing that gas, then... You know, we start to look at, and then, of course, you have to look at, you know, what your view is on LCFS and REN. We're still, you know, we're soft in 24, but in

Any view you have lot of anything that would really help us out. Thank you.

Yes manav.

Thank you are exactly right on that.

Makes my group nervous we've been.

And the industry had been engaged with.

With carbon.

Others in the state government to make them understand that you would be very important as they finalize these goals to do everything they can to tightened down the.

Andrew J. Littlefair: Let's hope that that... You know, who knows that it could come back, but those are other factors in there. So, you know, this is a long answer. I'm an optimist. Perfect, we are also optimistic. My quick follow-up here is, sir. Looks like New Mexico is moving ahead with its new LCFS program, and then there is some buzz out there that the reason the LCFS, CARB, workshop got delayed is because they might actually even be, you know, adding to the stand, like making the stand even more stringent, so helping with the overall balance of carbon credits. Any view you have or anything you have heard would really help us out.

The obligation curve and so I think there is some expectation that that's being received well.

And while you know that the.

The.

The first.

Release suggested that the curve would steepen or deepen from 13 to 18, 5%.

There is some talk that that could go up into the into the Twenty's maybe.

Maybe even mid 'twenty so.

We believe that that the Lcs program can handle that.

There is plenty of RMG and plenty of low carbon fuels to do that.

And that this would be a good time for them to.

Andrew J. Littlefair: Thank you. Yes, Manav, I think you're exactly right on that. You know, it makes my group nervous.

To be aggressive.

That of course, but not as you correctly pointed out will begin to reduce the increase the obligation and reduce the the oversupply of credits that are currently on the books and probably.

Andrew J. Littlefair: We've been engaged with CARB and others in the state government to make them understand that it would be very important as they finalize these goals to do everything they can to tighten down the obligation curve. And so I think there is some expectation that that's being received well. And while you know that the first release suggested that the curve would steepen or deepen from 13% to 18.5%, there's some talk that that could go up into the 20s, maybe even the mid 20s.

<unk> reduced that oversupplied faster than some people might think.

I think that that month delay is a bullish sign for the low carbon fuel standard and for credit pricing.

No.

I agree and hopefully do Mexico also kicks in and you can supply volumes over there. So thank you so much.

Yes.

Yes, Manav, if I can just embellish a little bit we are encouraged next week, Illinois is a senate.

Andrew J. Littlefair: So we believe that the LCFS program can handle that, that there's plenty of RNG and plenty of low-carbon fuels to do that, and that this would be a good time for them to be aggressive. And that, of course, Manav, as you correctly point out, will begin to increase the obligation and reduce the oversupply of credits that are currently on the books and probably reduce that oversupply faster than some people might think. So I think that that month delay is a bullish sign for the low carbon fuel standard and for credit prices. No, we agree, and hopefully, New Mexico also kicks in, and you can supply volumes over there also. Thank you so much for taking the time to answer my questions.

Committee hearing on the low carbon fuel standard.

New York is a difficult one right.

There is negotiations there with the Governor's office as we speak as you know that that's been passed in various houses in New York in past sessions.

New Jersey things seem to be going well, Pennsylvania. There has been a bill written in the house and they're talking about introducing you to the Senate and Michigan I think if you were to look for a near term stay to move maybe quicker. So these are large loans of course is probably Illinois, so safe.

<unk>.

Yeah.

Thank you so much guys doing nikola thank you.

Thank you.

Andrew J. Littlefair: Yes, you know, Manav, if I can just embellish a little bit, you know, we're encouraged. Next week, Illinois has a Senate committee hearing on the low carbon fuel standard. New York's a difficult one, right? There's negotiations there with the governor's office as we speak, as you know, that's been passed in various houses in New York in past sessions. New Jersey, things seem to be going well.

Your next question comes from Eric Stine from Craig Hallum. Please go ahead.

Andrew Hi, Bob.

Hey, there.

Hi.

So maybe just starting with Amazon.

I'm curious I know that their truck.

Truck fleet build out is underway I know, they're waiting on the 15 liter as well.

Just curious if you have started discussions on potentially either the next round of stations or the next supply agreement for R&D.

Andrew J. Littlefair: Pennsylvania, there's been a bill written in the House, and there's talking about introducing it to the Senate, and Michigan. I think if you were to look for a near-term state to move maybe quicker, though these are large ones, of course, it would probably be Illinois. So stay tuned. Thank you so much.

Okay.

Boy, if there was ever a customer that doesn't want me talking about stuff like that it's a smart my friends at Amazon. So good try Eric tried it gives me in a weak moment, but.

Let me say this.

Operator: I'll turn it over to you. Thank you. Your next question comes from Eric Stine from Craigshalem; please go ahead. Andrew, hi Bob.

We obviously supply a lot of fuel to them already.

The important thing is RMG.

All over the United States program has gone very well.

Andrew J. Littlefair: Transcribed by https://otter.ai Hey, so maybe just starting with Amazon, you know, curious. I know that their truck fleet buildout is underway. I know they're waiting on the 15 liter as well. Just curious if you have started discussions on potentially either the next round of stations or the next supply agreement for R&G. Oh, you know, boy, if there was ever a customer that didn't want me talking about stuff like that, it's my friends at Amazon. So good try, Eric, trying to catch me in a weak moment, but, Let me say this.

And I believe Amazons indicated they have over 20 512 liter trucks operating.

I don't know, if they've said it or not but.

I believe it's been indicated that they've actually tested 15 leave so I take these always good signs we have.

We have sales.

<unk>.

Manager that is in constant contact with the team on the logistics side and the fuel side and the truck side and Amazon. So we're in constant.

I don't want to say negotiations constant contact with how we might.

Andrew J. Littlefair: We obviously supply a lot of fuel to them. The important thing is R&G, all over the United States. The program has gone very well, and I believe Amazon has indicated they have over 2,500 12-liter trucks operating. I don't know if they've said it or not, but I believe it's been indicated that they've actually tested at 15 liters, so I take these all as good signs.

Mint.

Stations that we've recently built.

Sure.

Some of their fleet will be deployed at existing locations and new locations. So it's really all I can say right now Eric of course, they are one of the larger fleets of course, we're talking to them.

We think that the program has been such.

That.

It will likely be expanded and we're trying to do everything we can to be that company that helps them expanded.

Yes understood.

It was worth a shot.

Andrew J. Littlefair: We have a sales manager that is in constant contact with the team on the logistics side and the fuel side and the truck side and Amazon, so we're in constant, I don't want to say negotiations, constant contact with how we might augment the stations that we've recently built, where some of their fleet will be deployed at existing locations and new locations. So, really, all I can say right now, Eric, of course, they're one of the larger fleets. Of course, we're talking to them. We think that the program has been such a success that it will likely be expanded, and we're trying to do everything we can to be that company that helps them expand. It was, it was worth a shot. Well, maybe you're not sticking with that. And I don't know, it was a good try.

Well, maybe I'll take that and I don't know if it was a good try I don't know if this is something you could answer but I know that each location has the the private but also the public side.

Anything you can talk about in terms of non Amazon volumes at those stations, maybe how those are trending.

And I would think that those kind of like the rest of your network at this point.

There's a lot of room for growth within well Theres a lot of room.

I think it would be it's early to overstate the third party volume at these at these locations right.

However, they are all beautifully situated for third party volumes right, So theyre public access and.

In gallons a minute plenty of volume Theyre all in warehouse district, I mean, they were picked because they're great locations.

Most of those we have seen some additional volume coming into the San Bernardino location and a few of those in California, where we have more robust drove fleet activity.

Andrew J. Littlefair: I don't know if this is something you could answer. But I know that each location has its own, you know, private but also public side. Anything you can talk about in terms of non-Amazon volumes at those stations, maybe how those are trending. And I would think that those, you know, kind of like the rest of your network at this point, there's a lot of room for growth. Well, there's a lot of room, you know, I think it would be, it's early to overstate the third-party volume at these locations, right? However, they're all mutually situated for third-party volumes, right? So their public access.

But we really are counting on the 15 liter that as these these fleets that are housed at the same location as Amazon begin to bring the 15 liter into their fleets, we expect that those will avail themselves of our public gasless locations.

And I hope Eric that the Amazon, while it's a little different because in many ways we built.

We build from ground up.

Terminals for Amazon right, a lot of the existing trucking fleet.

Andrew J. Littlefair: 10 gallons a minute, plenty of volume. They're all in warehouse districts. I mean, they were picked because they're great locations.

The largest fleets they have terminals already.

So it's my expectation when we kind of replicate the Amazon model it'll be at locations it'll be faster to market with these with these stations.

Andrew J. Littlefair: You know, most of those We have seen some additional volume come into the San Bernardino location and a few of those in California, where we have more robust fleet activity. But, you know, we really are counting on the 15 liter. As these fleets that are housed at the same locations as Amazon begin to bring the 15 liter into their fleets, we expect that those will avail themselves of our public access location. And I hope Eric that Amazon while it's a little different because, in many ways, we built, from the ground up, terminals for Amazon, right? A lot of the existing trucking fleets and the largest fleets already have terminals. So it's my expectation that when we kind of replicate the Amazon model, it'll be in locations, and it'll be faster to market with these stations. Bye.

But.

It will be essentially the same design there'll be public access in many of these locations. Some of it will be behind it will be private and it'll be both fast fill and time Phil.

But.

Lee net.

Many many in the industry are looking at those Amazon locations look there are beautiful.

A five acre location with 220 trucks.

Look at some of the other competing technologies. They can't Park 220 trucks that take 80 gallons of trucks for 16000 gallons a day in one location.

And then those trucks can can go a thousand miles or 800 miles the other technologies aren't there yet and we're and we've done this now all over the country for Amazon we're proud of it.

Andrew J. Littlefair: It'll be essentially the same design. There'll be public access at many of these locations. Some of it will be hidden, it'll be private, and it'll be both fast fill and time fill. But largely, many in the industry are looking at those Amazon locations. Look, they're beautiful to see a five-acre location with 220 trucks.

Right. So I mean, you, obviously ideally longer term would love to replicate Amazon with some of the bigger fleets, but but you don't need it right you've got plenty of room, whether it's at the Amazon stations or other stations, but you don't need that capital Youre right I mean, we have 100.

100, and I guess with this now my number is about 100.

Andrew J. Littlefair: You know, when I look at some of the other competing technologies, they can't park 220 trucks that take 80 gallons a truck for 16,000 gallons a day in one location, and then those trucks can go a thousand miles or 800 miles. The other technologies aren't there yet. And we're, and we've done this now all over the country for Amazon. We're very proud.

18 to 20 public truck stop locations in the country.

We have on the order of a couple of hundred maybe 250 to 350 million gallons of excess capacity at those locations. So we arent hard pressed to have to continue to build out now.

We'll want to.

Yeah.

For instance.

Andrew J. Littlefair: Right. So, I mean, obviously, you'd love to replicate Amazon with some of the bigger fleets, but you don't need them, right? You've got plenty of room, whether it's at the Amazon stations or other stations so you don't need that cap.

My friends at Knight Swift, They have 26000 power units I believe they buy 5000 units they have terminals all over the United States.

We want to put locations in typically these kinds of fleets do about two thirds backlog one thirds out on the public network.

Andrew J. Littlefair: Well, you're right. I mean, we have 100, I guess with this now my number has to go, about 118 to 120 public truck stop locations across the country. We have on the order of a couple hundred, maybe 250 to 350 million gallons of excess capacity at those locations. So we aren't hard-pressed to have to continue to build out. Now we'll want to. You know, for instance, my friends at Knight Swift have 26,000 power units. I believe they buy 5,000 units a month. They have terminals all over the United States.

So we have a lot of the public network built for these lanes. We want is very sticky if we're able to be the fuel provider at the terminals since I hope that's what we get to do and of course, we're in discussions with a lot of those fleets that have already taken and tested the 15 liter and then some of whom have already put in orders.

Right.

Okay. Thank you.

You bet.

Your next question comes from Rob Brown from Lake Street Capital markets. Please go ahead.

Hi, good afternoon.

Andrew J. Littlefair: We want to put locations in. Typically, these kinds of fleets do about two-thirds in the back lot, one-third out on the public network. So we have a lot of the public network built for these lanes. We want, it's very sticky if we're able to be the fuel provider at their terminals. And so I hope that's what we get to do. And, of course, we're in discussions with a lot of those fleets that have already taken and tested the 15 liter and some of whom have already put them in order. Right. Okay. Thank you.

Thank you for all the color on <unk>.

Thanks for all the color on the.

The outlook I, just wanted to get a little bit more on the ramp in the R&D facilities that could you talk a little bit about.

Some some timing of producing gas, but holding in inventory and are waiting for the for the credits, but just wanted to clarify what how the how the timing of the ramp kind of plays out.

Yes.

Yes, well you.

Yes.

<unk> got to meet I mean, essentially you're at about a six to nine months.

Period.

Sure.

Sure.

Youre, producing gas and operating but youre not monetizing these.

The.

The credits.

Okay.

<unk>.

You could you can maybe get there sooner if you, but you've got to get temporary pathways in.

Operator: You bet. Your next question comes from Rob Brown from Lake Street Capital Markets. Please go ahead. Good afternoon. Thanks for all the color on the Outlook, I just wanted to get a little bit more on the RAMP and the RNG facilities. I think you talked a little bit about some timing of producing gas but holding an inventory and waiting for the credits. I just wanted to clarify how the timing of the RAMP kind of works. Bob?

So thats, but thats about what it is so as we have.

Five of these coming online.

Five of these coming online.

That's why you why we're seeing kind of the monetization of that happening towards the back end of the year, because <unk> got to get to steady state you have got to get steady state operations.

Robert M. Vreeland: Yeah. Yeah, well, you, uh... You've got to meet, I mean, essentially, you're at about a six to nine month, Gary, where you're producing gas and operating, but you're not monetizing the credit. So, you can maybe get there sooner if you, but you've got to get temporary pathways and So that's, but that's about what it is. So, as we have, five of these coming online. Rob, let me help because it can be a little confusing. I know Bob knows this, but maybe to help everyone on the call.

Yes so.

Rob Let me help because its a little.

Can be a little confusing I know Bob knows this but I mean, maybe just to help everyone on the call.

You began injecting <unk> been building this project for a year alright, you begin injecting gas theres, a commissioning, which isn't like just turning on a switch it takes a little bit of time Theres a commissioning process that could take a month you begin injecting gas and then there is a period, where you get out the call.

<unk> is a little bit and you stabilize the production and you get it up to kind of a steady state, but that may take 30 to 60 days to get it to where you're really producing yet at the stage.

Andrew J. Littlefair: You begin injecting, you've been building this project for a year, all right, you begin injecting gas, and there's a commissioning process, which isn't like just, you know, turning on a switch takes a little bit of time. There's a commissioning process that could take a month. You begin injecting gas, and then there's a period where you, you know, you get out the cobwebs a little bit, and you stabilize the production, and you get it up to kind of a steady state.

At about that time, then you get.

You get you begin to keep very close.

Track of your data and let's call. It at the end of three months can be as long as four months five months.

You've got steady state operations, you have really good data. That's when you go submitted to the EPA for their verification now Thats quick.

Andrew J. Littlefair: But that may take 30 to 60 days to get it to where you're really producing it at a rate. At about that time, then, you get, you get, you begin to keep very close track of your data, and let's call it at the end of three months, can be as long as four months, five months.

That could be 30 days and then you get a temporary provisional.

Pathway at that point and you begin to.

I believe in some of them sit around the table here correct me if I'm wrong I believe that you are able to get the rins at that point.

I don't know that I'll CFS I'm not there yet and then during at that point then you.

Andrew J. Littlefair: You've got steady state operations. You have really good data. That's when you go submit it to the EPA for their verification. Now that's quick. That could be 30 days, and then you get a temporary, a provisional pathway at that point, and you begin to, I believe, and someone is sitting around the table here, correct me if I'm wrong, I believe then you're able to get the RINs at that point.

Really after that.

You begin to put your application together four and frankly, you know I have been very kind of.

I've spoken on this.

The pathway process for the low carbon fuel standards been way too long.

When we first started this business it was four months, maybe a month or so longer than what the.

Andrew J. Littlefair: Well, I'm not there yet. And then during that point, then you it's really after that. You begin to put your application together for, and frankly, you know, I've been very kind of outspoken on this. The pathway process for the low carbon fuel standard has been way too long. When we first started this business, it was four months, maybe a month or so longer than what the Feds were doing at the EPA, stretched out now to anywhere between 12 months and 18 months, so it's ridiculous. Okay, and it's broken, and they've outsourced it to third parties, and there's this verification effect. It's not uncommon for those of us in the business to have to put it in, put in our application, and wait six months. But nothing happens.

We're doing it the EPA stretched out now to anywhere between 12 months 18 months. So it's ridiculous.

And it's broken.

And they've outsourced to third parties and there's the specification effect, it's not uncommon for those of us in the business App to put it in put in our application and wait six months nothing happens.

And then they had the nerve to ask us to resubmit for another six month wait and then maybe another.

So that obviously has to get fixed and reduced and there has to be some sort of.

Compromise here, where they allow us to at least true up and produce our guests because otherwise. This is a real penalty. So like building a sort of like building a skyscraper and then waiting around 18 months for anybody to move in.

Andrew J. Littlefair: And then they have the nerve to ask us to resubmit for another six-month wait, and then maybe another. So that obviously has to get fixed and reduced, and there has to be some sort of compromise here where they allow us at least to true up and produce our gas, because otherwise this is a real penalty. It's like building a skyscraper and then waiting around 18 months for anybody to move in.

And now I happen to feel pretty good about the fact that we have sounded that alarm and at the highest levels of government and I'd cards and I'm told that.

They hear us now and that we're going to be working to get reduce that time. So let's let's hope that's the case, but that that whole process between when you begin to inject.

Andrew J. Littlefair: And now, I happen to feel pretty good about the fact that we have sounded that alarm at the highest levels of government and at CARB, and I'm told that they hear us now and that we're going to be working to reduce that time. So let's hope that's the case. But that whole process between when you begin to inject, when you can begin to get, store, steady state, store, when you can collect RINs. But the low carbon fuel standard takes substantially longer, and you can't split those two things. So it takes, so it really hamstrings you.

You can begin to get store as steady state store.

You can.

Select rens, but but the low carbon fuel standards takes.

Substantially longer than you can split those two things so it takes us so it really hamstrings you. So this is why we say it's.

It's really a six to nine months process. After we begin steady state.

So I wish it was a lot sooner and I'm hopeful that it will be and I feel like it will but thats kind of the current situation and that's why there's this drag with these projects that have come on that will come on this year and I think it's where some were modeling our company thinking that there would be much more contribution EBITDA conference.

Andrew J. Littlefair: So this is why we say it's really a six to nine month process after we begin steady state. So I wish it was a lot sooner, and I'm hopeful that it will be, and I feel like it will, but that's kind of the current situation.

Contribution this year from these projects just not the way it works.

It's not unique to us it's toward that the process works.

Yeah, Okay, great. Thank you for that.

And then in terms of.

Andrew J. Littlefair: That's why there's this drag with these projects that have come on, that will come on this year. And I think it's, or some were modeling our company thinking that there would be much more contribution, even our contribution this year from these projects. It's just not the way it works.

The ability to do the construction and sort of the activity in terms of.

Cost of cost of the facility.

Build and and.

And sort of the ability to.

Get the get the gas you want.

How is that going is that been in line with expectations and is there any sort of uncertainty there well I think I think rod I mean, Bob said this a little bit and I think you. All know these projects have taken I think its not again unique to us so I'm not trying to do.

Andrew J. Littlefair: It's not unique to us; it's the way that the process works. Okay, great. Thank you for that. And then in terms of the ability to do the construction and sort of the activity in terms of the cost of the facility build and sort of the ability to get the gas you want. How is that going?

Behind others I mean, these projects have tended in the industry to take a little bit longer than many of the stock.

Now not years months.

And ours that we thought that these projects would conclude in the third quarter and early fourth quarter and.

Andrew J. Littlefair: Has that been in line with expectations? Well, I think, I think, Rob, and Bob said this a little bit, and I think you all know it, these projects have taken, I think it's not, again, unique to us, and I'm not trying to hide behind others, I mean, these projects have tended in the industry to take a little bit longer than many of us thought. Now, not years, months, and ours did.

They took an extra three months of really.

Commissioning and getting them all done so so the time to time to finish these projects has taken a little bit longer and I would say there has been a.

A little bit maybe it was the pandemic maybe was the supply chain, we saw an increase in costs in these projects.

Andrew J. Littlefair: We thought that these projects would conclude in the third quarter and early fourth quarter, and they took an extra three months of really commissioning and getting them all done. So the time to finish these projects has taken a little bit longer, and I would say they've been a little bit, maybe it was the pandemic, maybe it was the supply chain; we saw an increase in cost in these projects of 10 to 15 to 18 percent. Now that it's stabilized, But we also know, Rob, that as we go forward, we're going to have to bring in outside help, and I feel certain we have a project team underway here at Clean Energy. We need to bring in these costs, right? We need to we need to try to systematize and make these more, you know, be able to replicate these projects without, you know, kind of artwork design at each one, so it's so customized.

10% to 15% to 18% now that's stabilized.

But we also know Rob that as we go forward, we're going to have to bring in and then I feel certain we have a project team underway here at clean energy, we need to bring in these costs right, we need to we need to try to systematize and and make these more be able to replicate these projects without.

The.

Got it.

Artwork designed that each one so customized and we're working on that now and others in the industry have brought some new designs of how they might handle.

The digesters.

As such so we.

We need to wring out some of the pricing bring in the time to market of the construction and the permitting these things and then certainly the pathway to begin to produce and collect monetize the credits.

So there is work to be done good news is we're going to need this RMG look.

Andrew J. Littlefair: And we're working on that now, and others in the industry have brought some new designs of how they might handle, you know, the digesters and et cetera. So we need to wring out some of the pricing, bring in the time to market for the construction and the permitting of these things, and then certainly the pathway to begin to produce and collect, monetize the credit. There's work to be done. The good news is we're going to need this R&G. Look, if it goes the way we think, and if it goes, if you look at what Cummins is saying.

If it goes the way, we think and if it goes if you look at what covenants as say.

They believe they will sell about 3030 515 leaders in 2024. They have suggested in their materials. These are not mine 7000 units next year.

And then they say could go up to somewhere between eight and 15%.

Percent penetration.

The class a market.

Plus a market by the way is about a quarter of a million engines, so that could be anywhere between <unk>.

<unk> 15 to 25000 units in the third year well in that year, you need 300 million gallons 375 million gallons of R&D right.

Andrew J. Littlefair: They believe they'll sell about 3,000 to 3,515 liters in 2024. They've suggested in their materials, these are not mine, 7,000 units next year. And then they say it could go up to somewhere between 8% and 15% penetration of the Class 8 market.

Two years, you need $110 million to $115 million, so the industry needs RMG, so youre going to need to dropdown.

There will be many more landfills coming on into the market as well as dairies.

Andrew J. Littlefair: The Fossade market, by the way, is about a quarter of a million engines. So that could be anywhere between, you know, 15 to 25,000 units in the third year. Well, in that year, you need 300 million gallons, 375 million gallons of RNG, right? In two years, you need 110 or 115 million. So the industry needs RNG. So you're going to need to drop down.

And the dairies the industry has done a pretty good job at it.

<unk> some of the largest dairies.

But there are many thousands of other dairies that are smaller so youre going to have to just lower the cost.

To be able to tackle the smaller dairies and I feel certain that the industry will do that.

Okay, great. Thank you I'll turn it over very good color.

Your next question comes from Derrick Whitfield from Stifel. Please go ahead.

Good afternoon, Andrew Bob and team and thanks for your time.

Andrew J. Littlefair: There will be many more landfills coming into the market, as well as dairy. And the dairies, you know; the industry has done a pretty good job at tackling some of the largest dairies. But there are many thousands of other dairies that are smaller, so you're going to have to just lower the cost to be able to tackle these smaller dairies, and I feel certain that the industry will do so. Okay, great. Thank you. I'll turn it over to you. Very nice color.

Hi, Derik.

Taken a slightly different approach on your guidance could you offer some broader parameters around the amount of what Cal equivalent you'll have online at the end of 2024 and 2025 with with projects that are clearly under contract today.

I didn't get I didn't get it.

I didn't either.

Sure so.

Question was just could you offer.

Some broader parameters on the amount of wet Cal equivalent.

We will have online in 2024 and 2025 with the projects that are under contract.

Yes so.

Operator: Your next question comes from Derek Whitfield from Stifel; please go ahead. Good afternoon, Andrew, Bob, and team, and thanks for your time. Bye, Derek. In a slightly different approach to your guidance, you offer some broader parameters around the amount of wet cow equivalent you'll have online, with projects that are clearly under contract. I didn't understand the first part of that. I didn't either.

Let me, let me kind of total up here so.

About 29500, <unk>, what cow equivalent of the projects. We've just finished.

About another 8500 that are in construction well actually it's more than that 8536, so almost 45000 for a total of about 75000 wet cow equivalents.

Operator: So, the question was just, could you offer broader parameters on the amount of wet cow equivalent you guys will have online in 2024 and 2025 with the projects that are under contract. Yeah, so let me kind of total up here. So, about 29,500 wet cow equivalent of the projects we just finished, about another 8,500 that are in construction. Well, actually, it's more than that. It's 8,500 plus 36.

And our.

Our pipeline, which which doesn't really.

As just ones that we're looking at is about another 115000.

But I think it's a good point.

Good Derek maybe opportune time dimension.

We all all of us in the history of these pipelines right and we've traded documents with farmers.

And we even spend money on doing some of the early design work Ci investigation, and this and that but we've had with being good stewards of our money. Some of the projects that we thought we were about to put in construction. We've had slipped some of those based on on several factors right based on the.

Andrew J. Littlefair: So almost 45,000 for a total of about 75,000 wet cow equivalents. Then our, you know, then our pipeline, which, which, you know, doesn't really, you know, which is just one that we're looking at is about another 115,000. But, you know, I think it's a good point to an excellent point, Eric, maybe an opportune time to mention, but, you know, we all, all of us in the industry have these pipelines, right? And we've created documents with farmers, and we even spend money on doing some of the early design work, CI investigation, and this and that.

Based on the L CFS credit pricing.

Based on some of the things that we saw coming out of carb.

The fact that we didn't really have clarity on the PTC.

So a little bit of a glitch on the ITC.

Because of the pricing of the.

The prices.

Equipment and about two of the projects that we were literally getting ready to go into construction on.

Here a month ago as you take a look at the potential of a Greek for model, which means you might have to if it goes the way theyre talking about clean out the lagoon every year that throws a loop into the economics and so look none of these things are.

Andrew J. Littlefair: But, you know, we've had to be good stewards of our money; some of the projects that we thought we were about to put into construction, we've had to slip some of those based on several factors, right? Based on the LCFS credit pricing, based on some of the things that we saw coming out of CARB. The fact that we didn't really have clarity on the PTC, a little bit of a glitch on the ITC because of the price of the equipment and about two of the projects that we were literally getting ready to go into construction on here a month ago, as you take a look at the potential of a GREAT-4 model, which means you might have to, if it goes the way they're talking about, clean out the lagoon every year, that And so, look, none of these things are, you know, Game Stoppers.

Yeah.

Gamestop offers there just as we look at deploying precious capital.

We have to be careful and there may be a better time, there may be opportunity when we get a little better view of the economics around the PTC and other things that we would pull the trigger. So so we continue to work on a robust pipeline. We continue to look at M&A opportunities.

We take all this into and I think our shareholders want us to they want.

In the Meanwhile.

We're aggregating and bringing in more R&D than anyone else in the business.

Andrew J. Littlefair: They're just, as we look at deploying precious capital, we have to be careful. And there may be a better time, there may be an opportunity when we get a little better view of the economics around the PTC and other things, that we would pull the trigger on. So we continue to work on a robust pipeline. We continue to look at M&A opportunities.

But when we deploy our capital we want to make sure. It's a very solid project that meets our thresholds.

And our partner thresholds and so we've we've dropped a couple here for a second to make sure that we like the projects would go forward.

That's great and thanks for the added color makes complete sense and that's what investors would want you guys to do.

Andrew J. Littlefair: But we take all this into account, and I think our shareholders want us to, in the meanwhile, we're aggregating and bringing in more R&G than anyone else in the business. But when we deploy our capital, we want to make sure it's a very solid project that meets our threshold and our partners' thresholds. And so we've dropped a couple here for a second to make sure that we like the projects as we go forward. That's great, and thanks for the added color. It makes complete sense, and that's what investors would want you guys to do. Okay. Thank you, taking part of your answer. When you look at the current M&A environment, maybe could you speak to the competitive landscape and your thoughts on what a dairy-heavy RNG package might transact for on a dollars per MMBTU basis or however you'd like to characterize it? And the reason I ask is we really haven't seen a dairy-heavy package transact for quite some time. So any color that you could offer on that would be greatly appreciated.

Maybe just taking that part of.

Taking part of your answer.

When you look at the current M&A environment, maybe could you speak to the competitive landscape and your thoughts on what a dairy heavy R&D package might transact for on a dollars per M. M btu basis, or however, you'd like to characterize it and the reason I ask is we really haven't seen it.

Dairy heavy package transact and our last quite a bit of while so any color that you could offer on that would be greatly appreciated.

I don't know that I am going to be much help to you there Derek we've looked at several.

We've tried to make transactions on a couple of as you may or may not know, but I think I'd better stay away from that other than to say that that.

I think it's taken a while for some with maybe.

Maybe everyone in the street kind of come off the fact that we no longer at $200 <unk> pricing and we're at 60. It makes a difference by the way I think it's important to note. It doesn't make these projects negative.

Andrew J. Littlefair: Oh, I don't know that I'm going to be much help to you there, though, you know, we've looked at several. We've tried to make transactions on a couple, as you may or may not know. But I think I'd better stay away from that, other than to say that I think it's taken a while for some, maybe everyone in the industry, to kind of come to terms with the fact that we no longer have $200 LCFS pricing, and we're at 60. That makes a difference.

It just makes the battle.

Longer right, Andy kind of makes you scratch your head a little bit on whether or not you want to.

Embark on a 12% return right so.

Some of our friends in the business that packages that were maybe looking to transact still we're looking at pricing as if we had $200 CFS we don't.

So.

One of my investment banking, France, as well they just need a little market therapy. So we'll see some of those transact at some point.

Andrew J. Littlefair: By the way, I think it's important to note that it doesn't make these projects negative. It just makes the payout a little bit, you know, longer, right? And it kind of makes you scratch your head a little bit on whether or not you want to embark on a 12% return, right? So, some of our friends in the business that package that were maybe looking to transact still were looking at pricing as if we had a $200 LCFS. We don't.

There was a time to where we were going to have <unk> right. So a lot of people were thinking of voluntary market in this E. <unk>. It's interesting that most of the folks in the industry are now looking to come back to the transportation sector.

So that puts us in a very nice positions, where the biggest offtake are right. We have the big we have the most end users we have the most stations and so we're talking all the suppliers in the business and we're looking at several of these deals so.

Andrew J. Littlefair: So, you know, as one of my investment banking friends says, well, they just need a little market therapy. So we'll see some of those transactions at some point. But you know, there was a time, too, where we were going to have e-rents, right?

We are still very bullish on the need for RMG optimistic about our role in it and we will be there when it's time.

Thanks for your time I certainly appreciate the challenges with the math that you guys having to run with all of the different variables. So thanks. Thanks for your comments.

You bet.

Your next question comes from Matthew Blair from T. P. H. Please go ahead.

Andrew J. Littlefair: So a lot of people were thinking of this voluntary market and this e-rent. It's interesting that most of the folks in the industry are now looking to come back to transportation. So, that puts us in a very nice position. We're the biggest offtaker, right?

Thank you and good afternoon, Andrew and Bob.

The stuff in written revenue.

What's pretty encouraging in Q4 could you talk about what drove that was that simply just a higher RIN price environment on the screen or were you able to capture.

Andrew J. Littlefair: We have the biggest, we have the most end users, we have the most stations, and so we're talking to all the suppliers in the business, and we're looking at several of these deals. So, we are still very bullish on the need for R&G, optimistic about our role in it, and we'll be there kind of when it's time. Thanks for your time.

Higher percentage of that RIN revenue relative to your R&D gallons.

It was mostly mostly price driven.

On that.

Okay.

Operator: I certainly appreciate the challenges with the math that you guys have to run with all of the different variables. So thanks for your comment. You bet. Your next question comes from Matthew Blair from TPH. Please go ahead.

Yes, I mean, I think there was.

But taken all of that was fairly steady if you will in the past we've seen it come down so I think it stabilized a little bit there so that was helpful.

Okay and then.

We've been hearing that new dairy LNG producers are having a hard time getting their gas into.

Robert M. Vreeland: Thank you and good afternoon Andrew and Bob. We thought the step up in RIN revenue was pretty encouraging in Q4. Could you talk about what drove that?

The California market, just simply due to how saturated is R&D already.

Does this present an opportunity for your downstream Steve.

Robert M. Vreeland: Was that simply just a higher RIN price environment on the screen, or were you able to capture a higher percentage of that RIN revenue relative to your RNG gallons? It was mostly, mostly price driven on that. I think, yeah. Okay. I mean, I think there was the take and all that was fairly steady, if you will.

Station network in California to perhaps.

Capture a bigger pie piece of the pie.

The economics going forward.

Yes.

Don't tell anybody Matthew.

Yeah, I think it's good for us.

And it's good for our hour.

Ours comes online too.

Andrew J. Littlefair: In the past, we'd seen it come down, so I think it's stabilized a little bit there, so that was helpful. Yeah. Okay, and then we've been hearing that new dairy R&G producers are having a hard time getting their gas into the California market just due to how saturated it is with R&G already. Does this present an opportunity for your downstream station network in California to perhaps, you know, capture a bigger pie, a piece of the pie of the economics going forward? Yes. Don't tell anybody, Matthew.

All of our stations in California are.

About almost 150 all of our stations in California are.

Yes.

Our 100% of R&D, but only about half of it's there right.

Alright, so there is still lots of room for us for third parties and for our own.

So that's why we're pretty bullish on the need for bringing low Ci and of the state.

Because we have all four.

And our network supports the vehicles yes.

As the demand actually goes right then.

We've got certain certainly have capacity at the <unk> station. Good example, just.

Andrew J. Littlefair: I think it's good for us. And it's good for our hour, you know, when ours comes online too. You know, all of our stations in California are about almost 150. All of our stations in California are 100% R&G, but only about half of it. Mary.

It sounds Scott.

Just to bring it down I mean, okay. So youll open up sand.

Sandburg Dino location brand boson and they have 200 trucks there they all want R&D.

And we had a peak day the other day with these 15000 gallons one day.

So that's that is the kind of growth that I hope, we will see a lot more up but that is ongoing.

Andrew J. Littlefair: Alright, so there's still lots of room for us for third parties and for our own. So that's why we're pretty bullish on the need for bringing low CI into the state, because we have a home for it, and our network supports the vehicles. Yeah, so as the demand actually goes, right, then, you know, we've got certain certainly have capacity at our station. Well, good example.

Great. Thank you.

Okay.

Your next question comes from Craig Shere from Tuohy Brothers. Please go ahead.

Okay.

Hi, Thanks for taking my questions.

Hi.

I'm not sure I understand if you'd get a catch up on Rins and El CFS credits. Once you finally get the certifications while you effectively have a lot of bank credits on already executed RMG production by the end of 'twenty four.

Andrew J. Littlefair: Just, you know, it sounds Scott. You know, just to bring it down. I mean, okay, so you open up a San Bernardino location for Amazon and they have 200 trucks there. They all want R&G? And we had a peak day the other day where they used 15,000 gallons in one night.

There is not a catch up.

That's in play right now, there's some discussion of that.

But no that's one of the that's one.

As part of that whole timing thing that Rob Brian was asking about.

Andrew J. Littlefair: So that is the kind of growth that I hope we'll see a lot more of, but that is ongoing. Great, thank you. Thank you. Your next question comes from Craig Shearer from Thruy Brothers. Please go ahead.

And us.

Having to make decisions on.

And in fact kind of letting the gasco at a provisional but there is discussion.

Operator: Thanks for taking the question. Hi, I'm not sure I understand if you get a catch-up on RINs and LCFS credits once you finally get these certifications. Will you effectively have a lot of bank credits on already executed R&G production by the end of 2024? There's not a catch-up; that's in play right now.

Of a claw back if you will.

Otherwise you have to let it go 150, yes. Once it goes in you and you're either transact that the provisional with ran then it's done.

You're not you're not banking.

Any of that if we want to virtually store.

We would then virtually store, but then youre not youre going to you at that point, then you can't get store of the gas longer than six months, that's kind of the issue is the gas has got to move after six months.

Robert M. Vreeland: There's some discussion of that, but no, that's one of the things that's part of that whole timing thing that Rob Brown was asking about and and and us, having to make decisions on, You know, in effect, kind of letting the gas go at a provisional level, but there is discussion of a clawback, if you will. I don't know why you have to let it go.

So you get a little bit stuck with happen to move that if they would allow.

They have a lot of claw back that would be great. Because you can move that gas its out of provisional and then you could go back and say, okay. It's not a negative $1 50, it was really a negative $2 70.

Robert M. Vreeland: Yeah, once it goes and you either transact at the provisional level with the RIN, then it's done, and you're not banking, or any of that. If we want to virtually store, we would then virtually store, but then you're not, you're gonna, you at that point then, but you can't yet store the gas for longer than six months. That's kind of the issue, is the gas has got to move after six months, so you get a little bit stuck with having to move that. If they would just allow, Thank you, and make up that difference, but that's not in place right now. And that's what we're working on, Craig. And I think that's reasonable, right? Hey, allow us to produce it as if it were $250. We don't have to be ridiculous.

And make up that difference, but that's not in place right now and that's what we're working on Craig and I think thats reasonable right, hey allow us to produce it as if it were $2 50, I mean, we don't have to be ridiculous and then we'll come back and true it up.

Actually third $3 13 or whatever it is.

Right.

Okay and two other quick ones here.

And I'm sorry, I know you said this in your prepared comments, but I'm still confused.

About why this big Idaho dairy project will contribute about half of 2020 for upstream losses, if it's not completed.

Why would your expense.

The cost of a project that's still in development.

And then my final question is on.

On the M&A opportunity, how do you think about hurdle rates for prospective acquisitions, and how do you handicap things like emission credit pricing PTC regulation and other variables.

Robert M. Vreeland: And then we'll come back and true it up, and actually 313, you know, or whatever. Right. Okay, now, we have two other quick ones here.

Yes, okay well.

Robert M. Vreeland: And I'm sorry, I know you said this in your prepared comments, but I'm still confused about why this big Idaho dairy project would contribute about half of 2024 upstream losses if it's not completed. You know, why would you expense the costs of a project that's still in development? And then my final question is, on the M&A opportunity, how do you think about hurdle rates for prospective acquisitions? And how do you handicap things like emission credit pricing, PTC regulation, and other variables?

Start out on the on the Idaho.

That is just unique to that project, but that is a that project is really a massive project it will be.

One of the largest in the country.

When we're done with that but it has some features to it that we are.

Along with our partners.

We are providing.

Certain activities.

Kind of around the around the.

Farm in an area, where we're constructing and that sort of thing.

That does not qualify for capitalization.

So it's a little bit.

Kind of.

Part of that program, a little bit I mean, but it's not kind of capitalized cost. So it's.

Robert M. Vreeland: Yeah, okay, well, I'll..., start out on the Idaho. That is just, it's unique to that project, but that is a that project is really a massive project. It'll be, You know, one of the largest in the country when we're done with that, but it has some features to it that, along with our partners, we are providing certain activities, you know, kind of around the farm and an area where we're constructing and that sort of thing that does not qualify for capitalization. So it's it's a little bit just, you know, kind of, part of that program a little bit. I mean, but it's not kind of a capitalizable cost. So it's, it's nothing that's kind of nonsensical, or why would you do that?

It's nothing thats kind of nonsensical or why would you do that it's.

When youre doing a project of that magnitude.

Look in the Grand scheme of things this is not.

Not a big material piece of that contract, but it is enough to our.

Quarterly earnings and what we and what we put out there for the annual guidance for 'twenty for that it was meaningful enough to just note that.

That relates to something Thats kind of in progress and I think the point there was really not.

Not wanting to have an impression that the five six projects that we will have operating in 24.

Is that kind of thing that kind of drag on it the cycle. What why is there such a drag and then you say well, okay, well, we do have a massive project, where we've got some opex that's going on.

Robert M. Vreeland: It's, You know, when you're doing a project that's of that magnitude. They're, look, in the grand scheme of things, this is not. Not a big material piece of that contract, but it is enough to our quarterly earnings and what we put out there for the annual guidance for 24 that was meaningful enough to just note that you know, that relates to something that's kind of in progress. And I think the point there was really not wanting to have an impression that the five, the six projects that we'll have operating in 24 have that kind of drag on them. It's like, well, what, why is there such a drag?

Concurrently with us building that out so we're doing some stuff.

And just just to clarify this is unique or one off we shouldnt expect something similar in 'twenty five.

That's right.

We shouldnt expect well, we shouldn't expect we don't have another deal thats structured like this but also we don't have another deal that is this large.

Look there is no.

And now we're getting down maybe.

Robert M. Vreeland: And then you say, well, okay, well, we do have a massive project where we've got some OPEX fits going on concurrently with us building that out. So we're doing some services there that, just to clarify this, are unique or one-off. We shouldn't expect something similar in 25.

On one hand, when you start talking about deals that add that so there are certain.

Aspects of that deal that we factored all into.

The economics will work I will say that as we've talked about these coming online and then when you really go into operating that with all of the Digesters. They have in the massive size of that.

Robert M. Vreeland: That's right. But we shouldn't expect, well, we shouldn't expect that we don't have another deal that's structured like this, but we also don't have another deal that is this large. I mean, look, now we're getting down to maybe on the one hand when you start talking about deals that have this. So there are certain aspects of that deal that we factored into, you know, how this economy will work. I will say that, as we talked about these coming online, and then when you really go into operating that, you know, with all the digesters, they have the massive size of that, they'll, they'll likely be some drag from starting that project up, but it's not because of how we're operating right now, okay? Craig, I'm not going to give you hurdle rates on our M&A, and I've missed the last part Well, how do we handicap ourselves?

They'll they'll likely be some drag from starting that project up but its not because of how we're operating.

<unk> right now okay.

Yes.

Greg I'm not going to give you a hurdle rates.

On <unk>.

M&A.

And I missed the last part of the.

Question was the PTC well, how do we handicap sure of that just yet.

PTC and <unk>.

<unk>.

Hi.

I actually think.

Wanted to say that I had been sort of we have sort of been right on this I'm handicapping, the carb outcomes as positive for the industry.

You will remember the white boarding stuff, Greg we've talked about a year ago, we're going to what we were going to have any dairy R&D was going to be excluded from the low carbon fuel credit or they weren't going to avoided methane was out.

Andrew J. Littlefair: Sure. You know, just see how they're using a lot of PTC and a lot of variables. Well, I actually think, and I want to say that we have sort of been right about this. I'm handicapping the carb outcomes as positive for the industry. You remember the whiteboarding stuff, Craig? We talked about a year ago, we weren't going to have any dairy, RNG was going to be excluded from the low carbon fuel credit, they weren't going to avoid it, methane was out, book and claim was going to crater the entire deal, and so on. Well, none of that. Everything worked out well for us.

<unk> claim was going to crater the entire deal on an all or none of that happens.

All of that worked out well for us all of it got grandfathered out for a long period of time.

The last piece here is we're talking about is the obligation curve.

And that looks like they've taken another month to steepen in some more.

That should work off a little bit of this bank. So you know just as the market started to say well look there is an oversupply of credits for the next two and a half years I don't know maybe not.

Both from 18, 5% to 23 of 24% to 25% that can make a material change in that so.

So from a <unk> point of view I'm, feeling like we dodged all the bullets and they've all come out Rosie for the R&D business, So I like that.

Andrew J. Littlefair: All of it got grandfathered out for a long period of time. The last piece here we're talking about is the obligation curve, and that looks like they've taken another month to steepen it some more.

Andrew J. Littlefair: That should work off a little bit of this bank. So, you know, just as the market started to say, well, look, there's an oversupply of credit for the next two and a half years. I don't know, maybe not, goes from 18.5 to 23 or 24, 25%.

On the PTC I think all of it's got a little scared about the IRR.

Because of the ITC was sort of bundled.

At treasury or they disallowed some of the cleanup equivalent but yeah. As you saw a week ago, They came out and said whoops.

We should include some of that so that made me feel better about it.

Andrew J. Littlefair: That could make a material change to that. So, from a LCFS point of view, I'm feeling like we dodged all the bullets, and they've all come out rosy for the R&G business. So I like that. On the PTC, you know, I think all of us got a little scared about the IRA because the ITC was sort of bungled at Treasury, where they disallowed some of the cleanup equipment.

There wasn't a political change going on there that just was a complicated and it just got there was an oversight and so when we look at the PTC I feel like that legislation was clear.

That was designed to encourage low carbon fuels.

So while I fully understand that having spent time in Washington, and that a treasury secretary could.

Andrew J. Littlefair: But as you saw a week ago, they came out and said, "whoops. Maybe we should include some of that." So that made me feel better about it. There wasn't a political change going on there. That just was complicated, and it just got worse. There was an oversight. And so when we look at the PTC, I feel like that legislation was clear: it was designed to encourage low-carbon fuels. So while I fully understand, having spent time in Washington, that a Treasury Secretary could do what he or she wants and could limit the size of that credit, I think. The spirit of that was to encourage the lowest carbon fuel for transportation suitable for transportation.

Do what he or she wants and could limit the size of that credit I think these.

The spirit of that was to encourage the lowest carbon fuel for transportation suitable for transportation.

Im guessing youre going to see something that's on the higher side of I hope on the higher side of Av.

Something contribution of credit per gallon textbook per gallon so.

I'm, an optimist by nature, but I'm guessing that's the way that's going to turn out.

Gotcha.

Okay.

Parts out and the laws of dollar and as you know depending on where you get on carbon intensity. There have been those that have suggested it could be worth I don't know six or seven bucks a gallon.

Andrew J. Littlefair: So I'm guessing you're going to see something that's on the higher side of, I hope, on the higher side of, something, you know, contribution credit per gallon, tax credit per gallon. So, I'm an optimist by nature, but I think that's the way that's going to turn out. Gotcha. Thank you, part out in the laws of the dollar. And as you know, depending on where you stand on carbon intensity, there have been those that have suggested it could be worth, I don't know, six or seven bucks a gallon. I don't want to be greedy, but we'll see where it lands, and the PTC. Your next question comes from Pavel Molchanov of Raymond James. Please go ahead. Pavel

Well I don't want to be greedy, but we'll see where it where it lands.

Peter on the BTC.

Your next question comes from Pavel Mucha.

James Please go ahead.

Thanks.

Yes, thanks for taking the question.

Back to the fuel distribution business.

The billion dollar 60 million of Capex in two.

2024.

That's kind of a meaningful increase from the last several levels correct.

Well it was 90 last year actually we ended up about 100.

Operator: Yeah, thanks for taking the question. Now, back to the fuel distribution business. $60 billion, or $60 million of CapEx in 2024. That's kind of a meaningful increase from the last several levels, correct? Well, it was 90 last year, actually, we ended up about 100, and that has come down from last year. It is absolutely, it is remaining much higher than. So, Pavel, if you go back a decade, you know, we had those three years where we ran 100 million, 85, 87, and we were building out a lot of the network. Then we dropped it down. I think we ran for about three years around 25, didn't we?

So it has come down from last year. It is.

Absolutely it is remaining much.

Much higher than.

Cup.

A couple of years back and then a little before that where we were kind of.

85%.

We were into the 190.

Five Oh, yes, you already I mean, because we were really.

If you go back a decade, we had those three years, where we ran a $100 million 85 to 87 as we are building out a lot of the network then we dropped it down.

And I think we ran about three years around 25.

And then then it ticked up and then Amazon of course ticked it up yes.

And it remains up I mean, I don't know that we've ever had a backlog as big as we have this year.

Robert M. Vreeland: And then it kicked up, and then Amazon, of course, kicked it up, and it remains up. I mean, look, I don't know that we've ever had a backlog as big as we have this year. So there's a little bit of Canada in there. Yeah, there's some Canada.

So there's a little bit of Canada in there.

In Canada.

Because while we have a partner there.

Right right, but I mean, we're we've got like four more stations to build there and more on top of that but.

So yes it is.

At least from a current run rate standpoint.

Andrew J. Littlefair: Oh, yeah. Yeah, because we have a partner there. Right. But I mean, we're, you know, we've got like four more stations to build there and more on top of that. But, So yeah, it is, at least from a current run rate standpoint, we're kind of back up into the, you know, a bit higher number. Right, I mean, I think between 2017 and 2020, You make a good point. It's come down versus last year but is still elevated. Geographically, where are you focused on the build-out?

Kind of backup.

A bit higher number.

Right I mean, I think between 2017 and 2022 it was <unk>.

20% to $30 million a year so yeah, that's correct.

You make a good point its come down versus last year by still elevated so.

Geographically where are you focused on on.

On the build out.

So Canada.

And.

There's four there's about.

A handful are fairly large in California.

Andrew J. Littlefair: Canada, and There's four, there's about a handful, they're fairly large in California, and the And then there's a couple big transit opportunities that we've got. So, you know, it's it's not unlike always. We have probably more refuse projects than we've ever had that are in the pipeline right now. Now, some of those are with our customers' money, and some of it's with ours. So, you know, it kind of depends. Pavel, it's all over the country.

And then.

And then there's a there's a couple of big transit transit opportunities.

That we've got.

So.

It's it's not unlike always we have probably more refuse projects that we've ever had.

That are in the pipeline right now some of those are with our customer money some of those with ours. So.

It depends of al it's all over the country.

Okay.

Robert M. Vreeland: And it's in all of our segments, probably none in the airport segment really that I think of on top. Okay, and then just a kind of quick housekeeping point: when you begin to generate meaningful sales from the joint venture. Will you?

Segments, probably probably none in the airport segment really that I think of on top of my head.

Okay, and then just kind of quick housekeeping point when you begin to <unk>.

Generate meaningful sales from the joint ventures.

Will you be.

Robert M. Vreeland: Publishing, Price x Volume, Yes. We will publish volume from those. You know exactly how we'll put it in. I mean, you know, Pavel, in some of those, we may be maintaining those stations, so we're going to count that in our service gallons, but we are going, we will begin to report, you know, what kind of gallons are coming off of those production facilities. Okay, perfect. Thanks very much.

Publishing price times volume.

Yes.

We will we will publish volume from those.

Exactly how we'll put it in.

But in some of those we may be maintaining the devastation. So we're going to count that in our service gallons, but we are going.

We'll begin to report.

What kind of gallons are coming off of those.

Those production facilities.

Okay perfect. Thanks very much.

Operator: Yeah. Your next question comes from Betty Zhang from Scotiabank; please go ahead. Hi, Andrew. Hi, Bob. Hi, Betty. Thanks for coming.

Okay.

Your next question comes from Betty Zhang from Scotiabank. Please go ahead.

Hi, Andrew.

Thanks for that.

Okay.

Yes.

Betty Zhang: I appreciate the new disclosure where we're breaking out the distribution and the production EBITDA. I wanted to ask, could you help us with a bridge from the $50 million of EBITDA in 2023 to a midpoint of about $79 billion in 2024? You talked about RINs at $3, and LCFS at $60, so it seems like maybe a slight decline from the pricing we had in 2023, although RIN is up a little

I appreciate the new disclosure, where we're breaking out the distribution and production.

EBITDA.

I wanted to ask could you help us with a bridge from the $15 million of EBITDA in 2023 to <unk>.

Midpoint of about $79 billion in 'twenty four.

You talked to the wins.

$3 of CFS <unk>.

So it seems like.

Maybe a slight decline from the pricing we had in 2023, well, although rent is up a little bit.

Robert M. Vreeland: So is that mostly coming from higher volumes, or as you talked about in the past, fuel mix, but yeah, just any color there. Yeah, I mean, it is continued growth in vehicle fueling, as well as... We are fairly consistent with our assumption on the spread of diesel to natural gas or oil to natural gas. So, you know, the what we saw kind of going on and, Really, kind of in the second, third, and fourth quarter of 23, we see that trend. We do see that trend moving into, into 24. You know, Betty, one of the things that, you and I have talked about this before, but one of the things that, you know, that I hope comes out the way Bob's breaking this out is, I mean, to see the underlying strength of the fueling business, right? I mean, I noted today with 70, what? $78 oil and $1.80 natural gas. I don't know that we've ever seen such a spread. I'm sure there's been one, but of 43. The One. The difference between natural gas and oil.

So is that mostly coming from higher volumes or I think you talked about in the past fuel mix.

But yeah, just any color there.

Yes, I mean, it is continued growth in vehicle fueling.

Yes.

As well as.

We we are fairly consistent with.

Our assumption on kind of the spread of.

Diesel to natural gas or oil to natural gas so.

What we saw kind of going on.

Really kind of in the second third and fourth quarter of 'twenty three.

We see that trend.

We do see that trend moving into.

Into 'twenty for Betty one of the things you and I have talked about this before but one of the things that I hope comes out the way Bob's break. This out is I mean to see that the underlying strength of the fueling business right.

I noted today with 77.

$78 oil and $1 80, natural gas I don't know that we've ever seen a spread sure theres been one but.

43.

The one.

Difference between natural gas and.

And oil.

Andrew J. Littlefair: So the underlying economics of our fuel and, therefore, the fuel margin and the discount that we can offer to our customers to help our customers and also have a nice margin of sales have probably never been better. And I think that should come through as you look at the contribution of the fueling business distribution business this year. Yeah, and you know that, Look, our model, the design of the model is also helpful for any vehicles that, Any vehicles that were fueling with us but did not fuel for 12 months last year? Well, then they have a full 12 months this year, and it kind of builds on itself like that. So that's like a built-in kind of game that you get, in addition to just adding new vehicles during the year.

So the underlying.

Economics of our fuel and therefore, the fuel margin and the discount that we can offer to our customers to help our customers and also have a nice margin shelves has probably never been better.

And I think that should come through as you look at that.

The contribution of the fueling business distribution business.

This year, yes.

And that.

Look our model the design of the model is is also helpful in any vehicles that.

Any vehicles that.

We're fueling with us, but did not fuel for 12 months last year.

So then they have a full 12 months this year.

Kind of builds on itself like that so.

That's like a built in gain that you get.

In addition to just adding new vehicles during the year.

Robert M. Vreeland: Right. That makes sense. So, following on to that, I'm wondering why the R&G volume guidance then isn't higher, because, like you said, for those that perhaps weren't fueling last year for the full year, they're seeing a full year in 24.

Right that makes sense.

Thus following onto that I'm wondering why the orange juice volume guidance then.

Higher because like you said.

For those.

Such that maybe you weren't feeling last year for the full year, they're seeing a full year and 24.

Robert M. Vreeland: So you're looking for about two 45 million gallons, and if you could maybe break that down between your own production versus third-party buildings. Yeah, well, I, well, I don't know. I mean, part of the, may be part of the nuance that you're seeing there was, you can tell me if this is okay or not, but it was the nuance that I spoke to in my comments, right?

So let's move for about 245 million gallons.

And if you could maybe break that down between your own production versus third party volumes.

Yes, well.

Well I don't know I mean part of the.

Maybe part of the nuance that.

That youre seeing there was.

You can tell me.

This is okay, but was the new ones that I spoke to in my comments when I look at when we look at last year.

Robert M. Vreeland: When I look at, when we look at last year, there were 13 million gallons. It's meaningful, that I would say, was not, say, our vehicle fuel, but we did..., you know, moved this R&G out to participants, and it was R&G volume. And so if you're kind of looking at a run rate from 23 up to 24, you would..., maybe handicap 23 and take out 13 million.

There was 13 million gallons its meaningful.

That I would say.

Was not.

Lets say our vehicle fuel that but we did.

Move this R&D out to participants in and it was R&D volume.

And so.

If youre looking at a run rate from 23% up to 24 you would.

Have you handicapped 'twenty, three and take out 13 million, so youre stepping up quite a bit from the mix of vehicle fuel.

Robert M. Vreeland: So you're stepping up quite a bit from the mix of vehicle fuel, which is really what, you know, probably more difficult for you to see, but that's what's happening is now you can kind of get into the type of R&G gallons that are moving, and you really do want those to be all the way to vehicles. And the growth you're seeing is that. It doesn't have to be such a... a tremendous increase in just the volume number itself. It also matters the type of volume that's going on there.

It is really what.

Probably more difficult for you to see but that's what's happening is now you can kind of get into the type of R&D gallons.

That are moving and you really do want those to be all the way to vehicles.

The growth Youre seeing is that it doesn't have to be setup.

Tremendous increase in gist.

Just the volume number itself.

It also matters the type of volume that's going on there.

Robert M. Vreeland: Got it. And then what was the second part of your question? Was there a second part there?

Got it and then what was that was it.

The second part of your question was there a second part there.

Robert M. Vreeland: Yeah, I was wondering if you could break out the 245 million gallons for 2024 between your own production and third-party volumes. Yeah, well... I mean, most of it we're looking at, kind of higher single, well, single digits on our own production, you know. $6-$7 million, something like that, of the Yeah, and I think has, As Pavel can, I didn't, you know, those are not in the 244.

Yes, I was wondering if you could break out the $2 45 million gallons for 2024 between your own production and third party volumes.

Yeah.

Yes, well.

I mean, most of it we're looking at.

Kind of higher single well single digits on our own production.

Yeah.

767 million something like that.

Of the.

Yes, and I think has.

As to Val Ken I didn't yes, those are not in the 244 <unk> hundred 40 <unk>.

My 244 is, 245, kind of our throughput for R&G. So, like I said, we will report kind of separately about what kind of volumes are being produced at our facility. All of those gallons come to us, but they're feeding into my 245 million gallons, if you will. So yeah, I guess you could say that seven of that comes from us, and the rest of it comes from all the other 100 sources that we have of suppliers.

$245.

Yes kind of our throughput of RG. So like I said, we are well we will report separately.

About what kind of volumes are being produced at our <unk>.

All of those gallons come to us, but they are feeding into my 245 million gallons. If you will.

And so yes, I guess, you could say that 7% of that comes from us.

And the rest of it comes from all the other 100 sources that we have of suppliers.

Okay, I see it. Thank you. OK. And there are no further questions at this time. I will turn the call back over to Andrew Littlefair, CEO, for closing remarks. Thank you, operator, and thank you, everyone, for joining us. We look forward to talking with you next quarter. Ladies and gentlemen, this concludes your conference call for today. Thank you for joining us, and you may now disconnect your lines. Thank you. Copyright 2020, New Thinking Allowed Foundation.

Okay.

Okay. Thank you.

Okay.

And there are no further questions at this time I will turn the call back over to <unk> CEO for closing remarks.

Thank you operator, and thank you everyone for joining us we look forward to talking with you next quarter.

Ladies ladies and gentlemen. This concludes your conference call for today. Thank you for joining and you may now disconnect your lines. Thank you.

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