Q2 2024 OPAL Fuels Inc Earnings Call
That's what it's all about.
Speaker Change: Good morning and welcome to the Opal Fuels second quarter 2024 earnings call and webcast. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 1 1 on your telephone.
You will then hear an automated message advising your hand is raised.
To withdraw your question, please press star 11 again.
Speaker Change: As a reminder, this event is being recorded.
Todd Firestone: I would now like to turn the call over to Todd Firestone, Vice President of Investor Relations to begin. Please go ahead.
Todd Firestone: Thank you and good morning everyone. Welcome to the Opal Fuels second quarter 2024 earnings conference call. With me today are co-CEOs Adam Comora and Jonathan Maurer and Scott Contino, Opal's interim chief financial officer.
Speaker Change: Opal Fuels released financial and operating results for the second quarter of 2024 yesterday afternoon, and those results are available on the investor relations section of the website.
Todd Firestone: of our website at opalfuels.com. Presentation and access to the webcast of this call are also available on our website. After completion of today's call, replay will be available for 90 days.
Speaker Change: Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements.
Speaker Change: Several factors that could cause or contribute to such differences are described on slides 2 and 3 of our presentation.
Speaker Change: These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion on certain non-GAAP measures.
Speaker Change: A definition of non- GAAP measures used and a reconciliation of these measures to the nearest gap measure is included in the appendix of the release and presentation.
Speaker Change: Adam will begin today's call by providing an overview of the court's results and recent highlights.
Adam Comora: and an update on our strategic and operational priorities. John will then give a commercial business development update, after which Scott will review financial results. We'll then open the call for questions. And now, I'll turn the call over to Adam Comora, Co-CEO of Opal Fuels.
Adam Comora: Good morning, everyone, and thank you for participating in Opal Fuel's second quarter 2024 earnings call.
Operator: Good morning, and welcome to the Opal Fuels 2nd quarter, 2024, earnings call and webcast. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Do withdraw your question, please press star 11 again.
Scott: Our second quarter results were solid and in line with our expectations.
Speaker Change: A number of factors are driving our growth outlook for the remainder of the year, including a strong RIN market, which we've taken advantage of by selling forward the majority of our expected RIN sales at favorable pricing.
Speaker Change: Accelerating production growth from our operating facilities.
Speaker Change: Are SAFIRE and PULC R&G projects remaining on schedule?
Operator: As a reminder, this event is being recorded.
Speaker Change: And finally, growth in our fuel station services segment.
Todd Firestone: I would now like to turn the call over to Todd Firestone, Vice President of Investory Relations to begin. Please go ahead. Thank you, and good morning, everyone.
Adam Comora: Adjusted EBITDA for the quarter was approximately $19 million.
Adam Comora: sequentially higher versus the first quarter as we continue to see improvements across our business segments driven by higher R&G production, increasing throughput of R&G in our dispensing network, and improved margins in fuel station services.
Operator: Welcome to the Opal Fuels 2nd quarter, 2024, earnings conference call.
Todd Firestone: Let's meet today our co-seo, Adam Comora, and Jonathan Maurer, and Scott Contino, Opal's Interim Chief Financial Officer. Opal Fuels released financial and operating results for a second quarter of 2024, yesterday afternoon. The results are available in the Investory Relations section of our website at Opal Fuels.com. The presentation and access to the webcasts this call are also available on our website. After completion of today's call, Replay will be available for 90 days.
Adam Comora: We expect continued sequential growth over the balance of the year and are maintaining our 2024 adjusted EBITDA guidance of 90 to 100 million.
Adam Comora: One contributing factor to this sequential growth, which we are happy to announce, is that our Prince William project has received EPA certification, and we expect to begin selling RINs from this project in the third quarter.
Todd Firestone: Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties and assumptions, forward-looking statements, are not a guarantee of performance, and actual results could differ material from what is contained in such statements. Some of the factors that could cause or contribute to such differences are described on slide 2 and 3 of our presentation. Each forward-looking statement reflects our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements, to reflect events or circumstances after the date of this call.
Adam Comora: We remain on track to bring our next two landfill R&G projects, Sapphire and Paul County, online as expected in the third and fourth quarters respectively.
Adam Comora: We're executing on our growth objectives and are excited that construction has begun on our 16th R&G project at the Burlington County, New Jersey landfill.
Adam Comora: This project is the second with our joint venture partner, South Jersey Industries, and represents 0.46 million MMBTUs of annual design capacity.
Todd Firestone: Additionally, this call will contain discussion on certain non-GAB measures. The definition of non-GAB measures use and reconciliation of these measures to the nearest GAB measures included in the appendix of the release and presentation.
Adam Comora: Combined with the Cottonwood Project announced last quarter, we have now placed 1.1 million MMBTU of new R&G production annual design capacity into construction this year, and are maintaining our guidance of placing at least 2 million MMBTU of new R&G production into construction for 2024.
Adam Comora: Adam will begin today's call about providing overview of the course results and reach some highlights and an update on our Strategic and Operational Priorities.
John Maurer: John will then give a commercial business development update after which Scott will review financial results.
Adam Comora: Our fuel station service segment continues to perform and grow in line with our expectations, supporting our upstream R&G projects with dispensing in the highest value transportation fuel.
Todd Firestone: We'll then open the call for questions. And now I'll turn the caller out of tomorrow, CoCO, Opal Fuels.
Adam Comora: Offtake Market
Adam Comora: We are maintaining fuel station services adjusted EBITDA guidance of 75 to 90% growth in 2024 compared to 2023.
Adam Comora: Good morning everyone, and thank you for participating in Opal Fuels 2nd quarter or 2024 earnings call. Our second quarter results were solid and in line with our expectations. A number of factors are driving our growth outlook for the remainder of the year, including a strong RIN market, which we've taken advantage of by scaling forward the majority of our expected RIN sales at favorable pricing, accelerating production growth from our operating facilities, our Sapphire and Polk RNG projects remaining on schedule, and finally growth in our fuel station services segment.
Adam Comora: I also wanted to mention a change to our full year R&G production outlook.
Adam Comora: which is now expected to range between 4.0 and 4.4 million mmBtu versus previous guidance of 4.4 to 4.8 million mmBtu, primarily driven by the ramp-up of our most recent facilities, which we expect to be short-term in nature.
Adam Comora: Finally, we continue to believe there is a great opportunity for our industry to expand bipartisan support, including renewable electricity produced from biogas.
Adam Comora: Adjusted EBITDA for the quarter was approximately 19 million, sequentially higher versus the first quarter, as we've continued to see improvements across our business segments, driven by higher RNG production, increasing throughput of RNG and our dispensing network, and improved margins and fuel station services. We expect continued sequential growth over the bounds of the year, and our maintaining our 2024 Adjusted EBITDA guidance of 90 to 100. 100 million. One contributing factor to the sequential growth which we are happy to announce is that our Prince William project has received EPA certification and we expect to begin selling rents from this project in the third quarter.
Adam Comora: It is important to remember what we do. We capture harmful methane emissions from decaying organic waste in place and convert them into productive and low-carbon energy products that utilize existing pipeline and electricity grids.
Adam Comora: We believe Opal is well positioned to continue to be a leader in the development, operation, and distribution of these low carbon intensity fuels, utilizing proven technologies and a proven track record. With that, I'll turn it over to John . John ?
John: Thank you, Adam, and good morning, everyone. Opal Fuels continues to execute on building and operating reliable R&G production facilities.
Adam Comora: We remain on track to bring our next two Lantel R&G projects, Sapphire and Paul County, online as expected in the third and fourth quarters respectively. We're executing on our growth objectives and are excited that construction has begun on our 16th R&G project at the Burlington County, New Jersey, Lantel. This project is the second with our joint venture partner south Jersey industries and represents 0.46 million MMBTUs of annual design capacity. Combined with the Cottonwood project announced last quarter we have now placed 1.1 million MMBTU of new R&G production annual design capacity into construction this year and are maintaining our guidance of placing at least 2 million MMBTU of new R&G production into construction for 2024.
John: and Fueling Stations.
John: Operationally, second quarter production results were in line with our expectations.
John: R&G production was 0.9 million MMBTUs for the three months ended June 30, 2024, a more than 50% increase year over year.
Speaker Change: As Adam mentioned, we're making progress on our strategic growth goals by putting projects into construction like Burlington this quarter and Cottonwood last quarter, and we're also executing by moving construction projects into operation.
Adam Comora: We currently have nine operating R&G projects and seven R&G projects in construction.
Adam Comora: Construction of our new projects is proceeding well and they continue to be on schedule.
Adam Comora: We expect to bring online three large landfill RNG projects during 2024. We've already brought online the Prince William RNG project.
Adam Comora: Our fuel station service segment continues to perform and grow in line with our expectations supporting our upstream R&G projects with dispensing in the highest value transportation fuel off-take market. We are maintaining fuel station services adjusted EBITDA guidance of 75 to 90% growth in 2024 compared to 2023. I also wanted to mention a change to our full year R&G production outlook which is now expected to range between 4.0 and 4.4 million MMBTU versus previous guidance of 4.4 to 4.8 million MMBTU.
Speaker Change: And the SAFIRE project is mechanically complete and in commissioning, on track for a third quarter completion date.
Speaker Change: and Polk County continues to be on track for a fourth quarter completion date.
Speaker Change: We expect to exit the year with 11 R&G facilities online, representing an annual design capacity of 8.8 million MMBTU.
Speaker Change: Compared to 2.3 million MMBTU at year-end 2021, more than tripling over the past three years.
Adam Comora: Primarily driven by the ramp up of our most recent facilities which we expect to be short term in nature. Finally we continue to believe there's a great opportunity for our industry to expand bipartisan support including renewable electricity produced from biogas. It is important to remember what we do. We capture harmful methane emissions from decaying organic waste in place and convert them into productive and low carbon energy products that utilize existing pipeline and electricity grids.
Speaker Change: Atlantic, our first SJI joint venture R&G project, which we put into construction in the third quarter of 2023, is progressing, and we continue to expect it to begin commercial operation in the third quarter 2025.
Speaker Change: Atlantic is expecting to contribute 0.3 million MMBTU of annual design capacity NEP to Opal.
Speaker Change: Construction at our 100% owned Cottonwood Landfill R&G project is also progressing well and represents 0.7 million mm BTU of design capacity net to Opal.
Adam Comora: We believe Opal is well positioned to continue to be a leader in the development, operation and distribution of these low carbon intensity fuels utilizing proven technologies and a proven track record.
Speaker Change: We expect the project to begin commercial operations consistent with recent project timelines.
John Maurer: With that I'll turn it over to John.
John Maurer: John?
John Maurer: Thank you Adam and good morning everyone. Opal fuels continue to execute on building and operating reliable R&G production facilities and fueling stations. Operationally second quarter production results were in line with our expectations. R&G production was 0.9 million MMBTUs for the three months and a June 30th 2024 a more than 50% increase year over year. As Adam mentioned for making progress on our strategic growth goals by putting projects into construction like Burlington this quarter and Cottonwood last quarter and we're also executing by moving construction projects into operation.
Speaker Change: Finally, we are happy to have announced the start of construction at the Burlington R&G Project. As mentioned, this project is the second R&G conversion project with our joint venture partner, South Jersey Industries.
Speaker Change: and represents 0.46 million MMBTU of annual design capacity for our 50% ownership.
Speaker Change: and helps us progress towards our goal of putting 2.0 million of MMBTU of design capacity into construction this year.
Speaker Change: Industry Tailwinds continue to support Opal's mission. We are seeing demand strengthen across end markets.
John Maurer: We currently have nine operating R&G projects and seven RNG projects in construction. Construction of our new projects is proceeding well and they continue to be on schedule. We expect to bring online three large landfill RNG projects during 2024. We've already brought online the Prince William RNG project and the Sapphire project is mechanically complete and in commissioning on track for a third quarter completion date. And Polk County continues to be on track for a fourth quarter completion date.
Speaker Change: With that, I'll turn it over to Scott to discuss the quarter's financial performance.
Speaker Change: Scott?
Scott: Thank you, John , and good morning to all the participants on today's call.
Scott: Last night, we filed our earnings press release, which detailed our quarterly results for the quarter ending June 30, 2024. Our 10-Q will be filed tomorrow.
Speaker Change: Looking at second quarter results, R&G production increased to 0.9 million MMBTUs from 0.6 million MMBTUs in the second quarter of 2023.
Speaker Change: The increase is largely due to both the Emerald and Prince William R&G Project's contribution to production volumes.
John Maurer: We expect to exit the year with 11 RNG facilities online representing an annual design capacity of 8.8 million MMBTU compared to 2.3 million MMBTU at year end 2021 more than tripling over the past three years. Atlantic, our first SJI joint venture RNG project which we put into construction in the third quarter of 2023 is progressing and we continue to expect it to begin commercial operation in the third quarter 2025. Atlantic is expecting to contribute 0.3 million MMBTU of annual design capacity next to Opal. Construction at our 100% own cottonwood landfill RNG project is also progressing well and represent 0.7 million MMBTU of design capacity net to Opal. We expect the project to begin commercial operations consistent with recent project timelines.
Speaker Change: Revenue in the second quarter was $71 million as compared to $55 million in the second quarter of 2023.
Speaker Change: The main driver for the increase in revenues was the timing and pricing of environmental credit sales.
Speaker Change: including both R&G fuel and fuel station services where we dispense all of the R&G for our projects, including our joint venture projects, as well as other third-party R&G supplies.
Speaker Change: Opal's share of revenues from equity method investments for the quarter was $11.2 million as compared to $2.1 million in Q2 2023, which is not included in revenue as reported on the income statement.
Speaker Change: Net income for the second quarter was approximately $1.9 million.
Speaker Change: as compared to $114.1 million in the second quarter of 2023. The difference was primarily driven by the gain last year from the deconsolidation of our emerald and sapphire projects.
John Maurer: Finally, we are happy to have announced the start of construction at the Burlington RNG project. As mentioned, this project is the second RNG conversion project with our joint venture partner South Jersey Industries and represents 0.46 million MMBTU of annual design capacity for our 50% ownership and helps us progress towards our goal of putting 2.0 million of MMBTU. We expect the project to begin commercial operations in the third quarter of 2020. We expect the project to begin commercial operations consistent with recent project timelines.
Speaker Change: Excluding this one-time gain, our adjusted net loss for the second quarter 2023 was 7.8 million dollars.
Speaker Change: Adjusted EBITDA was $18.9 million in the second quarter, as mentioned, compared to $5.1 million in the second quarter of 2023, partially driven by the timing of environmental credit sales.
Speaker Change: A reconciliation to GAAP results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website.
Speaker Change: The fuel station services segment revenues were $39.3 million for the quarter as compared to $30.0 million in the second quarter of 2023.
Scott Contino: Thank you, John.
Scott Contino: Good morning to all the participants on today's call. Last night, we filed our earnings press release, which detailed our quarterly results for the quarter-ending June 30, 2024. Our 10Q will be filed tomorrow. Looking at second quarter results, RNG production increased to 0.9 million MMBTUs from 0.6 million MMBTUs in the second quarter of 2023. The increase is largely due to both the Emerald and Prince William RNG projects contribution to production volumes. Revenue in the second quarter was $71 million as compared to $55 million in the second quarter of 2023.
Speaker Change: The increase in revenues was primarily the result of increased R&G marketing fees, concurrent RIN and LCFS sales, and improved margins.
Speaker Change: Renewable power revenues were $12.2 million for the quarter compared to $14.5 million in the second quarter of 2023.
Speaker Change: This decrease was primarily due to the Emerald and Prince William R&G facilities, which are using gas that was previously utilized in renewable power facilities.
Speaker Change: In the second quarter, capital expenditures were approximately $28.5 million, which includes approximately $5.6 million relating to equity method investments and approximately $7.7 million associated with downstream stations.
Scott Contino: The main driver for the increase in revenues was the timing and pricing of environmental credit sales, including both RNG fuel and fuel station services where we dispense all of the RNG for all projects, including our joint venture projects, as well as other third party RNG supply. Opal Share of Revenues from Equity Method Investments for the Quarter was $11.2 million as compared to $2.1 million in Q2 2023, which is not included in revenue as reported on the income statement.
Speaker Change: Our senior secured credit facility provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit.
Speaker Change: As of June 30, 2024, approximately $211.6 million was drawn down on the facility and we have utilized approximately $13.7 million of our revolver availability to issue letters of credit.
Scott Contino: Net income for the second quarter was approximately $1.9 million as compared to $114.1 million in the second quarter of 2023. The difference was primarily driven by the gain last year from the deconsolidation of our Emerald and Sapphire projects. Excluding this one time gain, our adjusted net loss for the second quarter 2023 was $7.8 million. Adjusted EBITDA was $18.9 million in the second quarter, as mentioned, compared to $5.1 million in the second quarter of 2023, partially driven by the timing of environmental credit sales.
Speaker Change: As of June 30, 2024, liquidity was approximately $302 million, consisting of $275 million of availability under the credit facility, and $27 million of cash, cash equivalents, and short-term investments.
Speaker Change: We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs.
Speaker Change: We are maintaining our 2024 guidance, except for R&G production, which is expected to be 4.0 to 4.4 million MMBTUs, compared to our previous range of 4.4 to 4.8 million MMBTUs.
Scott Contino: A reconciliation to gap results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website. The fuel station services segment revenues were $39.3 million for the quarter as compared to $30.0 million in the second quarter of 2023. The increase in revenues was primarily the result of increased RNG marketing fees, concurrent RIN and LCFS sales, and improved margins. Renewable power revenues were $12.2 million for the quarter compared to $14.5 million in the second quarter of 2023.
Speaker Change: primarily driven by the ramp-up of our most recent R&G facilities.
Speaker Change: I'll now turn it back to John for concluding remarks.
John: In closing, we are pleased with this quarter's results.
John: We remain committed to furthering Opal's vertically integrated mission, together with our partners,
John: To build and operate best-in-class biomethane capture and conversion projects that deliver industry-leading, reliable, and cost-effective low-carbon intensity energy products that displace fossil fuels
Speaker Change: and Mitigate Climate Change.
Scott Contino: This decrease was primarily due to the Emerald and Prince William RNG facilities, which are using gas that was previously utilized in renewable power facilities. In the second quarter, capital expenditures were approximately $28.5 million, which includes approximately $5.6 million relating to equity method investments and approximately $7.7 million associated with downstream stations. Our senior secured credit facility provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit.
Speaker Change: And with that, I'll turn the call over to the operator for Q&A. Thank you all for your interest in Opal Fuels.
Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from Matthew Blair with TPH. Your line is open.
Matthew Blair: Thank you and good morning.
Matthew Blair: I guess just in regards to the guide, so you maintain the full year EBITDA guidance, but the R&G guidance.
Scott Contino: As of June 30, 2024, approximately $211.6 million was drawn down on the facility and we have utilized approximately $13.7 million of our revolver availability to issue letters of credit. As of June 30, 2024, liquidity was approximately $302 million consisting of $275 million of availability under the credit facility and $27 million of cash equivalents and short-term investments. We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs.
Matthew Blair: fuel production numbers coming down. Could you talk about the moving parts there and
Speaker Change: And what's the offset, like, why is unit profitability, I guess, coming in higher than you expected? Thanks.
Matthew Blair: Yeah, hey, good morning. This is Adam Comora here and appreciate the question.
Adam Comora: So on a high level, you know, the map, when we gave our initial guidance of 4.4 to 4.8 million MMB2s of production,
Matthew Blair: and using a $3 RIN.
Matthew Blair: We had our adjusted EBITDA guidance of $90 to $100 million.
Matthew Blair: And you can see in that production spread between 4.4 and 4.8, about $400,000 leads to about a $10 million adjusted EBITDA between the low end and the high end.
Scott Contino: We are maintaining our 2024 guidance except for RNG production, which is expected to be 4.0 to 4.4 million MNBTUs compared to our previous range of 4.4 to 4.8 million MNBTUs, primarily driven by the ramp-up of our most recent RNG facility.
Matthew Blair: We also had guided folks that every $0.25 in a RIN price move would be about $12 million of adjusted EBITDA when we were giving out the sensitivity in our initial guidance.
Scott Contino: Please.
John Maurer: I'll now turn it back to John for concluding remarks. In closing, we are pleased with this quarter's results. We remain committed to furthering Opal's vertically integrated mission together with our partners to build and operate best in class biomethane capturing conversion projects that deliver industry-leading, reliable, and cost-effective, low-carbon intensity energy products that display fossil fuels and mitigate climate change.
Matthew Blair: So if you think about, you know, our new production range being 400,000, lighter than what the original guidance was.
Matthew Blair: and the RIN price being stronger than our original guidance.
Matthew Blair: and our forward sales position where we've sold forward the vast majority of our production for this year.
Matthew Blair: You can see that the written price that we'll achieve for the year will basically offset where that production shortfall came from.
Operator: And with that, I'll turn the call over to the operator for Q&A. Thank you all for your interest in Opal Fuels. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. Do we draw your question, please press star 1-1 again. In the interest of time, we ask that you please own yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.
Matthew Blair: We had guided folks that a $0.25 written price move was a $12 million move in the adjusted EBITDA.
Matthew Blair: Okay, sounds good. And then, Adam, are you seeing any incremental opportunities for selling R&G into non-transportation markets? I know in the past Opal
Speaker Change: It's thought that the utility market just doesn't offer enough value. You don't get paid for the full RIN. But what about any sort of other markets, you know, shipping or chemicals? Are there any other opportunities to monetize R&D?
Matthew Blair: Our first question comes from Matthew Blair with PPH. Your line is open. Thank you, and good morning. I guess just in regards to the guide, so you maintained the full year EBITDA guidance, but the R&G fuel production numbers coming down. Could you talk about the moving parts there? And what's the opposite? Why is unit profitability I guess coming in higher than you expected? Thanks. Yeah, hey, good morning. This is Adam Camorra here and appreciate the question.
Adam Comora: Yeah, thanks. Thanks again for that question. There certainly are increasing opportunities and and we are seeing
Adam Comora: New end markets continue to develop and quite frankly strengthen.
Matthew Blair: from a demand perspective for RNG and marine fuel is one that I think is or we think is particularly interesting.
Matthew Blair: As we're seeing a lot of ships being delivered that can run off of renewable methanol, and certainly, you know, there are some export markets.
Matthew Blair: So on a high level, the map, when we gave our initial guidance of 4.4 to 4.8 million MB2s of production, and using a $3 ring, we had our EBITDA guidance of 90 to 100 million. And you can see in that production spread between 4.4 and 4.8, about $400,000 leads to about a $10 million EBITDA between the low end and the high end. And we also had guided folks that every 25 cent in a ring price move would be about $12 million of a just at EBITDA when we were giving out the sensitivity in our initial guidance.
Matthew Blair: over to Europe that we think will develop as well. I know there are some regulatory matters that are still being figured out in terms of tracking RNG to export over to Europe .
Matthew Blair: You know, at this point, we think that there are great applications for RNG.
Matthew Blair: In marine fuel and you know, we think that there's going to be continued interest there And and the voluntary markets here in the US. I know I know some folks are contracting out to sell their RNG at fixed price contracts
Matthew Blair: There are some California utilities that are really interested in purchasing it and some others as well. I would say that the discount to the transportation fuel market still seems too great for us.
Matthew Blair: So if you think about our new production range being 400,000 lighter than what the original guidance was, and the ring price being stronger than our original guidance, and our forward sales position where we've sold forward the vast majority of our ring production for this year, you can see that the ring price that will achieve for the year will basically offset where that production shortfall came from. We had guided folks that a 25 cent ring price move was a $12 million move in the in the adjusted EBITDA. Okay, sounds good.
Matthew Blair: So we have not yet engaged in in those other end markets, but we think that they're going to continue to develop. Pricing likely will continue to rise there to effectively
Speaker Change: We continue to see all sorts of interest in RNG. I know folks are a little bit longer out talking about renewable hydrogen or SAF.
Speaker Change: But at this point we still feel like the discount is too great versus transportation fuel.
Speaker Change: and are continuing to pursue the transportation fuel offtake market. But those markets are developing and we are keeping a close eye on them and do think they will be part of our portfolio mix, just not yet.
Adam Comora: And then Adam, are you seeing any incremental opportunities for selling RNG into non-transplantation markets? I know in the past, Opal has thought that the utility market just doesn't offer enough value. You don't get paid for the full ring. But what about, again, these sort of other markets, you know, shipping or chemicals, are there any other opportunities to monetize RNG? Yeah, thanks again for that question. There certainly are increasing opportunities and we are seeing new end markets continue to develop and quite frankly strengthen from a demand perspective for RNG and Marine Fuel is one that I think is particularly interesting as we're seeing a lot of ships being delivered that can run off of Renewable Methanol and certainly there are some export markets over to Europe that we think will develop as well.
Adam Comora: Sounds good. Thanks, Adam.
Speaker Change: Thank you. Our next question comes from Paul Cheng with Scotiabank. Your line is now open.
Paul Cheng: Thank you. Good morning, guys.
Paul Cheng: Adam and Jonathan, two questions. First, maybe it's a little bit from a vision or strategic standpoint. As you grow your R&G upstream production, does the
Speaker Change: The business strategy is to grow your service station business in tandem.
Speaker Change: keep track so that you keep relatively a balanced portfolio between upstream and downstream or that you say okay I mean I have sufficient scale in the downstream into a service station and then the industry also have enough and we really don't need to grow that and so we will see more tilt to us into the upstream over time.
Adam Comora: I know there are some regulatory matters that are still being figured out in terms of tracking RNG to export over to Europe and at this point we think that there are great applications for RNG in marine fuel and we think that there's going to be continued interest there and the voluntary markets here in the U.S. I know some folks are contracting out to sell their RNG at fixed price contracts. There are some California utilities that are really interested in purchasing it and some others as well.
Speaker Change: So what's the business strategy from that standpoint? That's the first question.
Speaker Change: The second question is, I have to apologize for the little bit of detail. On the second quarter, your LCFS sales price of $100 is actually up sequentially.
Speaker Change: If we're looking at the industry, actual benchmark for LCFS price is down. So how's the mechanic work in here? Thank you.
Adam Comora: I would say that the discount to the transportation fuel market still seems too great for us so we have not yet engaged in those other end markets but we think that they're going to continue to develop pricing likely will continue to rise there to effectively try and procure or entice folks away from the transportation fuel market so we continue to see all sorts of interest in RNG and I know folks are a little bit longer out talking about Renewable Hydrogen or SAF but at this point we still feel like the discount is too great versus transportation fuel and are continuing to pursue the transportation fuel off-take market but those markets are developing and we are keeping a close eye on them and do you think they will be part of our portfolio mix just not yet? Sounds good thanks Adam. Thank you.
Speaker Change: Alright, great Paul. I'll take the first question and then John will talk about our off-take contract in the LCFS market. So I believe the first question was...
Speaker Change: How are we viewing the downstream distribution and marketing business and fuel station business?
John: In conjunction with our upstream. And I will say, we are extremely excited on both the upstream development of those R&G assets and the downstream fuel station business.
John: The fuel station business for Opal is attractive in its own right. We're achieving good returns on capital on fuel stations we own with fuel purchase agreements, long-term tenure in nature fuel purchase agreements for those stations.
Paul Cheng: and we have a very profitable business to build and service those stations.
Speaker Change: Even if R&G was not part of the picture, we like the growth outlook for our fuel station service business and we'll continue to grow that business, even if we are taking our R&G and finding other off-take markets.
Paul Cheng: Our next question comes from Paul Cheng with Scotian. Your line is now open. Thank you. Good morning guys. I'm Adam and Jonathan. Two questions first maybe it's a little bit from a vision or strategic standpoint.
Paul Cheng: It just so happens that there is that terrific strategic tie-in with our upstream business. So we're seeing great opportunities to deploy capital both in new R&G projects and the downstream fuel station business. Quite frankly, if you went back 10 years,
Adam Comora: As you grow your RNG upstream production that's the the business strategies that to grow your service station business that intend them or keep track so that you keep where can they balance the portfolio between upstream and downstream or that you say okay I mean I have sufficient scale in the downstream in the service station and then the industry also have enough and we really don't need to grow that and so we will see more till towards into the upstream over time. So what's the business strategy from that standpoint that's the first question The second question is after apologize, a new bill of detail.
Speaker Change: There was a lot of growth experienced by Opal Fuels building fuel stations and servicing those fuel stations.
Speaker Change: You know, we think that's going to be an attractive place for us to continue to invest and grow that business and see a lot of conversion potential for the fuel station service business.
Speaker Change: Adam, do you have a capex or the number of station growth chi or matrix you can share per year over the next several years?
Adam Comora: On the second quarter, your LCFS sales price of 100 is actually up-sequentialty but if we're looking at the industry actual benchmark for LCFS price is down. So how's the mechanic work in here? Thank you. All right, great Paul. I'll take the first question and John will talk about our off-take contract in the LCFS market. So I believe the first question was, how are we viewing the downstream distribution of marketing business and fuel station business in conjunction with our upstream?
Speaker Change: Yeah, I think what we do, well, we don't give guidance out past 2024, but we do provide detail in our CapEx for how much is being invested in the fuel stations versus the R&G projects.
Speaker Change: Again the vast majority of the CapEx that we spend is on new biogas capture and conversion projects.
Speaker Change: I think it's somewhere in the 80 plus percent range that likely will continue, but we do give it at least on a historic basis in our filings.
Adam Comora: And I will say we are extremely excited on both the upstream development of those RNG assets and the downstream fuel station business. The fuel station business for Opal is attractive in its own right. We're achieving good return on capital on fuel stations we own with fuel purchase agreements, long-term tenure in nature fuel purchase agreements for those stations. And we have a very profitable business to build and service those stations. So even if RNG was not part of the picture, we like the growth outlook for our fuel station service business and we'll continue to grow that business.
Speaker Change: is commensurately larger than the average price of the fueling station projects as well.
Speaker Change: Paul, I'm turning to your LCFS question.
Speaker Change: We get LCFS credits principally from two sources. One is our Sonoma...
Speaker Change: Dairy Project in Arizona.
Speaker Change: And there we have a...
Speaker Change: Off-take contract that has a floor price of $100 for the credit. So we enjoy a hundred dollar sale price there as long as the
Adam Comora: Even if we are taking our RNG and finding other off-take markets, it just so happens that there is that terrific strategic tie in with our upstream business. And so we're seeing great opportunities to deploy capital, both in new RNG projects and the downstream fuel station business. And quite frankly, if you went back 10 years, there was a lot of growth experience by Opal fuels building fuel stations and servicing those fuel stations just for the commodity price differential of CNG versus diesel fuel.
Speaker Change: prices below that, and that's currently the...
Speaker Change: situation
Speaker Change: Yeah, just to follow up there, that contract goes out for multiple years.
Speaker Change: So that $100 floor is in place for the next four and a half years.
Speaker Change: Yeah.
Speaker Change: And then the other place we get our LCFS credits is from our downstream dispensing, where we get a portion of the credits as a marketing fee for low CI projects that we dispense into California.
Speaker Change: And there, typically, we're recognizing those credits at market prices, and those market prices have been in the $45 to $50 range most of the year.
Adam Comora: And with that 15-liter engine, we see a lot of opportunities even with just the economics of CNG versus diesel. So we think that's going to be an attractive place for us to continue to invest and grow that business and see a lot of conversion potential for the fuel station service business.
Speaker Change: I think in the second quarter we did not sell at those prices, so we've been holding those credits in inventory. But they're recognized at that price. I see. Perfect. Thank you. We appreciate it. Sure.
Speaker Change: Thank you. Our next question comes from Ryan Pfingst with B Riley. Your line is open.
Adam Comora: Adam, do you have a CAPEX or that number of station growth kind of matrix you can share per year over the next several years? Yeah, I think what we do, well, we don't give guidance out past 2024, but we do provide detail in our CAPEX for how much is being invested in the fuel stations versus the RNG projects. Again, the vast majority of the CAPEX that we spend is on new biogas capture and conversion projects.
Ryan Pfingst: Hey, good morning guys. Thanks for taking my questions.
Ryan Pfingst: Maybe just a follow-up on Cath-X.
Speaker Change: A couple months ago, we spoke about the maintenance cap ex for your operating assets.
Ryan Pfingst: Can you just remind us what maintenance CapEx is for the current R&G portfolio or, you know, on a dollars per MMBTU basis to help give folks a sense of what your discretionary cash flow looks like?
Adam Comora: I think it's somewhere in the 80 plus percent range that likely will continue. But we do give it at least on a historic basis in our in our filings. And the average price of RNG projects obviously is commensurately larger than the average price of the fueling station projects as well.
Ryan Pfingst: For our Renewable Power Portfolio, there is...
Speaker Change: You know a reasonable amount of maintenance capex a year
Scott Contino: Paul, turning to your LCFS question, we get LCFS credits principally from two sources. One is our Sonoma dairy project in Arizona, and there we have an off-take contract that has a floor price of $100 for the credit, so we enjoy $100 sale price there as long as the prices below that, and that's currently the situation. Yeah, just to follow up there, that contract goes out for multiple years, so that $100 floor is in place for the next four and a half years.
Speaker Change: that we we add back to Adjusted EBITDA. It's you know in the ten million dollars a year range something something like that maybe a little less in that ballpark. For our R&G projects
Speaker Change: There's a lot less major maintenance, CapEx, that's all capitalized.
Speaker Change: And I don't have a dollars per MMBTU number to give you, but it's not a large number. In fact, since most of our projects are very new,
Speaker Change: It's not a significant number right now.
Speaker Change: Yeah, this is Adam. Just a quick follow-up there because, you know, we've been chatting internally where I think it might be helpful for investors to understand the discretionary free cash flow generation of this business. You know, we've told people historically that we'll have 90 to 95 percent free cash flow conversion.
Scott Contino: Yeah, and then the other place we get our LCFS credits is from our downstream dispensing where we get a portion of the credits as a marketing fee for low CI projects that we dispense into California, and there typically we're recognizing those credits at market prices, and those market prices have been in the $45 to $50 range most of this year. Yeah, and I think in the second quarter we did not sell at those prices, so we've been holding those credits in inventory, but they're recognized at that price.
Speaker Change: from our EBITDA and I think it's lost on folks and we're going to start really illustrating that. You know, as Scott was just mentioning, you know, one of the beautiful things about our business is after we build these facilities, unlike a traditional energy company, we don't have to drill or spend capital to produce our fuel.
Operator: Perfect, thank you. We now appreciate it. Sure.
Scott: If you remember what we do, we drop PVC pipes into landfills.
Scott: and they have perforations, and we connect them all together, and we apply a little bit of suction to gather all that gas to our facilities. And the facilities themselves, if you look across the portfolio where it sits today, it's in the single-digit millionths of maintenance capex. And these are 20-, 25-year assets.
Ryan Pfingst: Thank you. Our next question comes from Ryan, thanks to Berile, your line is open. Hey, good morning guys, thanks for taking my questions. Maybe just to follow up on cat-backs, a couple of months ago we spoke about the maintenance cat-backs for your operating assets. Can you just remind us what maintenance cat-backs is for the current R&G portfolio or, you know, on a dollars per MMB TU basis to help give folks a sense of what your discretionary cash flow looks like?
Scott: You know, and some of our gas rights, you know, even go out longer.
Speaker Change: So, so when you really think about us, you know, and, and, and, and the valuation of Opal Fuels, you know, our discretionary free cash flow after we build these facilities is really pretty phenomenal. And that discretionary free cash flow can be used to invest in new projects. And that's what we're doing today because we still see, you know, really attractive opportunities to grow the business.
Ryan Pfingst: This is Scott Contino, thank you, Ryan, for the question. With respect to maintenance cat-backs, for our renewable power portfolio, there is you know, a reasonable amount of maintenance cat-backs a year that we add back to adjusted EBITDA. It's, you know, in the $10 million a year range, something like that, maybe a little less in that ballpark. For our R&G projects, there's a lot less major maintenance cat-backs that's all capitalized, and I don't have a dollars per MMB TU number to give you, but it's not a large number.
Speaker Change: and and you know in the future you've got other things you could be doing with that discretionary free cash flow you could make acquisitions.
Speaker Change: You could, you know, pay a really healthy dividend. There's all sorts of things that we think can be a powerful, you know, sort of shareholder value driving tool.
Speaker Change: I think we're going to get back into that and start illustrating to folks, you know, not only is this really, you know, are we growing extraordinarily quickly from an adjusted EBITDA perspective, but that adjusted EBITDA, you know, translates into discretionary free cash flow to enhance.
Speaker Change: Shareholder Values. So I'm thankful for the question. And, you know, we're going to start, I think.
Ryan Pfingst: In fact, since most of our projects are very new, it's not a significant number right now. Yeah, this is that. I'm just a quick follow-up there because we've been chatting internally where I think it might be helpful for investors to understand the discretionary free cash flow generation of this business. You know, we've told people historically that we'll have 90 to 95% free cash flow conversion from our EBITDA, and I think it's lost on folks, and we're going to start really illustrating that.
Speaker Change: you know, showing better descriptors of growth CapEx versus maintenance CapEx and discretionary free cash flow. So, in total, as Scott was mentioning, our maintenance CapEx across renewable power and the R&G facilities is
Scot: You know, you know, you know, in the low, you know, between 10 and 20 million, I think if we if we if we aggregated it all up, and you look forward, and, you know, it's really, it's really attractive from that discretionary free cash flow perspective.
Ryan Pfingst: You know, as Scott was just mentioning, you know, one of the beautiful things about our business is after we build these facilities, unlike a traditional energy company, we don't have to drill or spend capital to produce our fuel, right? If you remember what we do, we drop PVC pipes into landfills, and they have perforations, and we connect them all together, and we apply a little bit of suction to gather all that gas to our facilities.
Speaker Change: Yeah, I appreciate all that color, Adam and Scott.
Speaker Change: So, for my second question, I guess just wondering if you have an update on the ITC and any thoughts on timing there or, you know, potential risks you might see if we have a change in administration in November .
Scot: Yeah, another good question. This is Adam here. So I think...
Ryan Pfingst: And the facilities themselves, if you look across the portfolio where it sits today, it's in the single digit millions of maintenance cat-backs. And these are 20, 25-year assets. You know, in some of our gas rights, you know, even go out longer. So when you really think about us, you know, and the valuation of local fuels, you know, our discretionary free cash flow after we build these facilities is really pretty phenomenal. And that discretionary free cash flow can be used to invest in new projects, and that's what we're doing today, because we still see, you know, really attractive opportunities to grow the business.
Adam Comora: I think we're in a pretty good spot in terms of getting a final
Adam Comora: A final rule that we think likely will include our R&G projects for that saleable ITC credit.
Speaker Change: As for timing, I feel like what we've been hearing is that Treasury does not want to just issue another piecemeal correction or on specifically Section 48
Speaker Change: for R&G projects, they may be trying to issue one set.
Ryan Pfingst: And, you know, in the future, you've got other things you could be doing with that discretionary free cash flow. You could make acquisitions. You could, you know, pay a really healthy dividend. There's all sorts of things that we think can be a powerful, you know, sort of shareholder value driving tool. And I think we're going to get back into that and and start illustrating to folks, you know, not only is this really, you know, are we growing extraordinarily quickly from an adjustative adopt perspective, but that adjustative adopt, you know, translates into discretionary free cash flow to enhance shareholder values.
Speaker Change: of Total Final Guidance on 48, and I think there may be some other issues that they're trying to work through and finalize, so I feel like our specific Section 48 final rule may be
Speaker Change: You know, just waiting as they finalize whatever else they're doing in Section 48.
Speaker Change: You know, I know folks have been saying, you know, late summer, we're in late summer, third quarter. So we're still anticipating that that we'll see that
Adam Comora: you know, hopefully soon, um, and, um...
Ryan Pfingst: So I'm thankful for the question. And, you know, we're going to start, I think, you know, showing better descriptors of growth capbacks versus maintenance capbacks and discretionary free cash flow. So in total, as Scott was mentioning, our maintenance capbacks across renewable power and the RNG facilities is, you know, you know, in the low, you know, between 10 and 20 million, I think if we aggregated it all up and you look forward, and, you know, it's really attractive from that discretionary free cash flow perspective. Yeah, I appreciate all that color, Adam, and Scott.
Adam Comora: So,
Adam Comora: You know, there's no change to how we're thinking about it in terms of total dollars that, you know, we think we'll be able to sell here as cash proceeds and, you know, we've told folks not included in our adjusted EBITDA, you know, something close to that to that $40 million range and we've been
Speaker Change: You know, just in discussions with folks to, you know, even potentially, you know, close some of those sales as Treasury is still.
Speaker Change: Thank you for coming out with that final guidance.
Speaker Change: You know, just in, you know, an addendum to that previous question that we talked about in terms of discretionary, you know, free cash flow, you know, you know, those kinds of levels may be available for us in the next several years, because I think everybody understands that it's everything that you place into construction this year that qualifies.
Adam Comora: So, for my second question, I guess just wondering if you have an update on the ITC and any thoughts on timing there, or potential risks you might see if we have a change in administration in November. Yeah, another good question, this is Adam here. So, I think, I think we're in a pretty good spot in terms of getting a final rule that we think likely will include our RNG projects for that saleable ITC credit.
Speaker Change: And we've got a host of projects that, you know, we think we're going to pre-qualify here before the end of the year. So, if you want to think about our discretionary free cash flow over the next several years, that would be something else that's available to us.
Speaker Change: And, you know, we're still working through the accounting treatment of where it'll show up on the income statement.
Speaker Change: because they are saleable credits.
Speaker Change: You know, so still optimistic that we're going to get that positive final resolution, disappointed it's taking this long, but it's not slow enough down in terms of setting up projects to pre-qualify it and setting up our monetization for those credits when they ultimately get generated.
Adam Comora: As for timing, I feel like what we've been hearing is that Treasury does not want to just issue another piecemeal correction or on specifically Section 48 for RNG projects, they may be trying to issue one set of total final guidance on 48. And I think there may be some other issues that they're trying to work through and finalize. So, I feel like our specific Section 48 final rule may be just waiting as they finalize whatever else they're doing in Section 48.
Speaker Change: Thank you, appreciate that Adam. I'll throw it back. Oh, I'm sorry. Yeah. Yeah. Thanks Scott. Just reminded me I missed the change of administration and
Speaker Change: or I should say now potential change of administration, or at least change of party.
Speaker Change: There's been a lot of Republican support for what we do, and I think there was a letter that was sent.
Speaker Change: to the House Speaker signed by 18 or 20 Republicans.
Adam Comora: I know folks have been saying late summer, we're in late summer, third quarter. So, we're still anticipating that we'll see that hopefully soon. And so, there's no change to how we're thinking about it in terms of total dollars that we think we'll be able to sell here as cash proceeds. And, you know, we've told folks, not including in our just the EBITDA, something close to that 40 million range. And we've been in discussions with folks to even potentially close some of those sales as Treasury is still coming out with that final guidance.
Speaker Change: You know, talking about some of the benefits that are in the IRA and, you know, some of the tax credits that go along with it. You know, I don't think that the Section 48 is at particular risk.
Speaker Change: And there is a lot of Republican support for specifically this tax credit within the IRA. So we don't think that there's a lot of risk that necessarily this piece of the IRA will fall under that kind of scrutiny.
Speaker Change: Got it. Thanks for that additional detail.
Speaker Change: Thank you. Our next question comes from Adam Bubes with Golden Saks. Your line is now open.
Adam Bubes: Hi, good morning.
Adam Bubes: Can you update us on just how you're thinking about your capacity to build fuel stations if demand for the 15 liter natural gas engine takes off, you know, how many fuel stations could you build in a given year?
Adam Comora: And, you know, just in a, you know, an addendum to that previous question that we talked about in terms of discretionary free cash flow, you know, those kinds of levels may be available for us in the next several years because I think everybody understands that it's everything that you place into construction this year that qualifies. And we've got a host of projects that, you know, we think we're going to pre-qualify here before the end of the year.
Speaker Change: So, our current build is in that 40 range, 40 to 50 range, and that's sort of how we're set up today. I would say it would, you know, in terms of scaling up that business,
Speaker Change: You know, it would, it would not be difficult for us. We, we don't have many
Adam Comora: So, if you want to think about our discretionary free cash flow over the next several years, that would be something else that's available to us. And, you know, we're still working through the accounting treatment of where it'll show up on the income statement because they are saleable credits. And, you know, so still optimistic that we're going to get that positive final resolution disappointed. It's taking this long, but it's not slow enough down in terms of setting up projects to pre-qualify it. And setting up our monetization for those credits when they ultimately get generated.
Speaker Change: constraints to how we would continue to add.
Speaker Change: a scaling capacity there, it would be to continue to add to our staff, quite frankly, both on the construction side and the service side. And you know, Opal Fuels is in a little bit, you know, we like to think of ourselves as being unique in a lot of ways. One of the ways that we're unique is our ability to attract talent.
Speaker Change: You know, a lot of folks out there want to be part of the Opal Fuels team, really like what we're doing.
Speaker Change: We think we'll be in a good spot to continue to add service techs and construction teams.
Adam Comora: Thank you. Appreciate that, Adam. I'll turn it back. Oh, sorry, yeah. Thanks, Scott. Just reminded me I missed the change of administration. Or I should say now potential change of administration or at least change of party. There's been a lot of Republican support for what we do. And I think there was a letter that was sent to the House Speaker signed by 18 or 20 Republicans talking about some of the benefits that are in the IRA and some of the tax credits that go along with it.
Speaker Change: To scale up that business and really don't see any constraints from that perspective if Cummins and others are right in the industry for what the uptake will be for that 15 liter engine.
Speaker Change: And then as we think about the Burlington and Cottomwood projects, what's the marked market on how you're thinking about project timing today?
Speaker Change: So, um...
Speaker Change: You know, it's interesting because the PULC project, which is coming online in Q4, we expect that to be early Q4, and that project will hit around a 15 or 16 month time frame.
Adam Comora: I don't think that the Section 48 is at particular risk. And there is a lot of Republican support for specifically this tax credit within the IRA. So we don't think that there's a lot of risk that necessarily this piece of the IRA will fall under that kind of scrutiny. Thank you. Thanks for that additional detail. Thank you.
Speaker Change: So I would say that's kind of at the faster end of our projects.
Speaker Change: We're certainly focused more on the time period leading up to getting projects into construction to ensure that those construction timeframes remain tight, you know, for a project.
Alex Kania: Our next question comes from Adam Lewis, with Goldman Sachs. Your line is now open. Hi, good morning. Can you update us on just how you're thinking about your capacity to build fuel stations if demand for the 15-liter natural gas engine takes off? How many fuel stations could you build in a given year? So our current build is in that 40 range, 40 to 50 range. And that's how we're set up today.
Speaker Change: An average project, we would think an 18 to 20 month period would be a reasonable time frame for us. Recollect that, you know, when we put a project into construction,
Speaker Change: We have a basic...
Speaker Change: Project Design, we have the gas rights executed.
Speaker Change: and a path to pipeline.
Speaker Change: and Electric Interconnection Supply. So those are some of our key...
Speaker Change: Critical path items for putting a project into construction. Some people define construction differently the actual time of You know getting out and and starting to work
Alex Kania: I would say it would in terms of scaling up that business, it would not be difficult for us. We don't have many constraints to how we would continue to add a scaling capacity there. It would be to continue to add to our staff, quite frankly, both on the construction side and the service side. And we like to think of ourselves as being unique in a lot of ways. One of the ways that we're unique is our ability to attract talent.
Speaker Change: You know, turning over the ground and putting in foundations and whatnot may occur somewhat later in the process.
Speaker Change: And certainly during that period, we'll complete the pipelines, we'll complete the rest of the permitting and other construction. Sometimes in the past, some of those other items have taken a little while longer to complete.
Speaker Change: And so it pushed us out. So, for example, on the Sapphire project, which is in commissioning right now, at the front end, the landfill was working on some issues associated with PFAS and other things that we
Alex Kania: You know, a lot of folks out there want to be part of the opal fuels team, really like what we're doing. And we think we'll be in a good spot to continue to add service tax and construction teams to scale up that business and really don't see any constraints from that perspective. If commons and others are writing the industry for what the uptake will be for that 15-liter engine.
Speaker Change: that delayed our permitting by a couple months and so set that time frame longer. But, you know, we're seeing projects in the future ought to reach that same 18 to 20 month time frame that I alluded to before.
Speaker Change: And then the last one for me, you know, in the beginning of the year, I think you got it towards an increase of R&G pending monetization in 2024 of $15 million. Can you just update us on how you're thinking about the difference between the timing of R&G monetization and actual production and the balance of the year?
Adam Comora: And then as we think about the Burlington and Cottonwood project, what's the marked market on how you're thinking about project timing today? So, you know, it's interesting because the pulp project which is coming online in Q4, we expect that to be early Q4 and that project will hit around up 15 or 16-month time frame. So, I would say that's kind of at the faster end of our projects. We're certainly focused more on the time period leading up to getting projects into construction to ensure that those construction time frames remain tight.
Speaker Change: Yeah, this is this is Adam here. We
Speaker Change: You know, once we started talking about our adjusted EBITDA, you know, not...
Speaker Change: You know, having that R&G pending monetization component, we still think it's helpful for folks to see.
Speaker Change: What is being sold in a given quarter and pricing and that sort of thing to get a sense of, you know, how the operations are performing. I, you know, we don't see any major changes to how we were thinking about it. But, you know, we just don't think it's as impactful anymore to talk about as a guidance metric. And, you know, likely as we move into 25 and beyond.
Adam Comora: You know, for a project, an average project, we would think an 18 to 21th period would be a reasonable time frame for us, recollect that when we put a project into construction, we have a basic project design, we have the gas rights executed and a path to a pipeline and electric interconnection supply. So, those are some of our key critical path items for putting a project into construction. Some people define construction differently.
Speaker Change: You know, likely not be talking about that as much and talking more about what our production outlook and adjusted EBITDA outlook is and that sort of thing. I think I can illuminate another part of your question, and that is that
Speaker Change: We look at our production across the year and we will sell when the market, when we feel that the market is a good place, those credits on a forward.
Adam Comora: The actual time of, you know, getting out and starting to work, you know, turning over the ground and putting in foundations and whatnot may occur somewhat later in the process. And certainly during that period, we'll complete the pipelines, we'll complete the rest of the permitting and other construction. Sometimes in the past, some of those other items have taken a little while longer to complete. And so it pushed us out. So, for example, on the Sapphire project, which is in commissioning right now at the front end.
Speaker Change: basis so that, as Adam said earlier in his comments, we've sold, as he put it, a vast majority.
Adam: of our credits for the year.
Speaker Change: Typically, we'll look at credit at the projects that are in operation and try to sell as much of those as we can during the course of a given year.
Speaker Change: As projects come online,
Speaker Change: and complete their commissioning. We'll start to sell those as well.
Adam: Credits are generally saleable within the current year or the current vintage year, and with regard to 2025.
Adam Comora: And the landfill was working on some issues associated with PFAS and other things that we delayed our permitting by a couple months and so set that time frame longer. But, you know, we're seeing projects in the future ought to reach that same 18 to 20 month time frame that I alluded to before.
Adam: In the merchant RIN market, there's not really a deep market there yet. That'll develop towards the end of the year. So, Adam, I don't know if you wanted to add to that. Yeah, no, I think maybe I missed that nuance in the question. You know, we are anticipating selling all of our RINs that we generate.
Adam Comora: And then the last one for me, you know, in the beginning of the year, I think you got it towards an increase of R&G pending monetization in 2024 or $15 million. Can you just update us on how you're thinking about the difference between the timing of R&G monetization and actual production and the balance of the year? Yeah, this is Adam here. We, you know, once we started talking about our adjusted EBITDA, you know, not, you know, having that R&G pending monetization component, we still think it's helpful for folks to see what is being sold in a given quarter and pricing and that sort of thing to get a sense of, you know, how the operations are performing.
Adam: in 2024 in the calendar year of 2024.
Adam: Got it. Very helpful. Appreciate the call.
Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone. Again that is star 1 1 to ask a question.
Speaker Change: Our next question comes from Alex Kania with Marathon Capital. Your line is open.
Alex Kania: Hi, good morning. Thanks for taking my question.
Alex Kania: Maybe the first thing I was curious about is just as you look to, you know, in the face of the updated production guidance for this year, do you expect that really by year end that all of the, you know, operating and
Speaker Change: Commissioning assets are going to be roughly at full expected run rate or will still be a little bit more to go as you move into early 2025.
Adam Comora: I, you know, we don't see any major changes to how we were thinking about it, but, you know, we just don't think it's as impactful anymore to talk about as a guidance metric. And, you know, likely as we move into 25 and beyond, you know, likely not be talking about that as much and talking more about what our production outlook and adjusted EBITDA outlook is and that sort of thing. I think I can illuminate another part of your question, and that is that we look at our production across the year and we will sell when the market, when we feel that the market is a good place, those credits on a forward basis.
Speaker Change: Yeah, this is this is Adam here. So just wanted to provide a little bit more color on on the production outlook in in some of the newer facilities that have been have been commissioned.
Adam: And, you know, you can see some of that variability in the ramp of those new facilities from time to time. And specifically this year at Prince William, we had done a significant amount of well field drilling and expansion at that landfill before the facility came online.
Adam: and we were not able to tie in all those well field improvements and expansions.
Adam Comora: So that, as Adam said earlier in his comments, we've sold as he put in a vast majority of our credits for the year. Typically, we'll look at credits at the projects that are in operation and try to sell as much of those as we can during the course of the given year as projects come online and complete their commissioning. We'll start to sell those as well. And credits are generally saleable within the current year or the current vintage year.
Adam: into the broader collection system before we began operating the facility. And the root cause of that was really flare capacity that the municipality had in terms of us collecting the additional gas and flowing that additional gas.
Adam: and
Adam: When we when we tied in the well field expansion and and drilling into the base collection system
Adam: There was a little bit of a slower tie-in and seeing the gas flow from those additional wells. So we're in the process of remediating them and re-drilling some of them.
Adam Comora: And with regard to 2025 in the merchant market, there's not really a deep market there. Yeah, that will develop towards the end of the year. So Adam, I don't know if you wanted to add to that. Yeah, no, I think maybe I missed that nuance in the question. You know, we are anticipating selling all of our rims that we generate in 2024 in the calendar year of 2024. Got it. Very helpful. Appreciate the color. Thank you. As a reminder to ask a question, please press star 1-1 on your telephone. Again, that is star 1-1 to ask a question.
Adam: You know, we believe it's short-term in nature, and for us, we think short-term means several months.
Adam: So, you know, we've been a little bit conservative for when we'll see, you know, the gas production from that well field expansion and...
Adam: You know, we are, I'd say, cautiously optimistic that, you know, we'll start to see all those improvements in the gas flowing from the expansions that we had done, you know, as we move through the balance of the year and certainly provide, obviously, our 2025 guidance.
Thomas Meric: Our next question comes from Alex Kania with Marathon Capital. Your line is open. Hi, good morning. Thanks for taking my question.
Adam: you know, sort of later on when we issue.
Thomas Meric: Maybe the first, I think I was curious about is just as you look to, you know, in the face of the updated production guidance for this year, is you expect that really by your end that all of the, you know, operating and commissioning assets are going to be roughly at full expected run rate or will it still be a little bit more to go if you move into early 25? Yeah, this is Adam here.
Adam: Our final year results. But, you know, that's that's how we think about, you know, sort of short term in nature. And the plant is performing excellent in terms of its processing of its of its inlet gas and
Adam: You know, so that's the one issue that popped in terms of our production, and we're also continuing to optimize the equipment at our Emerald facility to be appropriately scaled to the size of the project, and you all may recall that it's one of the largest R&G projects in the country.
Thomas Meric: So just wanted to provide a little bit more color on the production outlook in some of the newer facilities that have been commissioned. And, you know, you can see some of that variability in the ramp of those new facilities from time to time. And specifically this year at Prince William, we had done a significant amount of well-field drilling and expansion at that landfill before the facility came online. And we were not able to tie in all those well-field improvements and expansions into the broader collection system before we began operating the facility.
Adam: And, you know, certain scalability that we're still optimizing when you're looking at the compressor size that we used there, or deoxyskid that we used there, and again, those are relatively short term in nature as we continue to optimize that equipment, and really that's really on the margin there. So, you know, I feel like both of those facilities will be, will show good growth as we move into 25.
Adam: And just to repeat things that we've talked about in the past, that...
Thomas Meric: And the root cause of that was really flare capacity that the municipality had in terms of us collecting the additional gas and flowing that additional gas. And when we tied in the well-field expansion and drilling into the base collection system, there was a little bit of a slower tie in and see in the gas flow from those additional wells. So we've done, you know, we're in the process of remediating them and, you know, re-drilling some of them.
Adam: We build projects to a size larger than the current gas resource because these...
Speaker Change: Landfills that we're on are all open and growing landfills.
Adam: And so over time, you'll see these projects continue to improve as we call same-store sales.
Adam: As the gas resource continues to grow, we reach fairly quickly on each of these projects an availability and efficiency.
Adam: for these projects.
Adam: In the kind of low to mid 90s range, which when multiplied together gives you kind of a mid 80% productivity factor.
Thomas Meric: And, you know, we believe it's short term in nature and for us, we think short term means several months. So, you know, we've been a little bit conservative for when we'll see, you know, the gas production from that well-field expansion. And, you know, we are, I'd say cautiously optimistic that, you know, we'll start to see all those improvements in the gas flowing from the expansions that we had done, you know, as we move through the balance of the year and certainly provide obviously our 2025 guidance, you know, sort of later on when we issue our final year results.
Adam: And so we look at both of those factors over time.
Adam: The growth in same-store sales, the efficiency.
Adam: and availability of our projects, and as Adam was talking about earlier, the ramp on the initial front end of the project. Yeah, so our initial thinking, just to sort of put a button on that, is really more about 24 than 25 at those newer facilities.
Collar: Great, thanks for that, Collar. And then maybe just to follow up on, you know, thinking about the, maybe on the fueling side and the Class VIII side.
Thomas Meric: But, you know, that's how we think about, you know, sort of short term in nature. And the plant is performing excellent in terms of its processing of its inlet gas. And, you know, so that's the one issue that popped in terms of our production. And we're also continuing to optimize the equipment at our emerald facility to be appropriately scaled to the size of the project. And you all may recall that it's one of the largest RNG projects in the country.
Speaker Change: You know, I know that, you know, the phase three final rules were out. I think there have been some revisions, but just kind of wondering about how you how you think about, you know, you know, the
Speaker Change: The kind of adoption of the pace of acceleration, or accelerating pace, I should say, on CNG-related vehicles as it stands relative to kind of what EPA is doing.
Speaker Change: have been kind of given.
Speaker Change: in terms of their guidance. [inaudible]
Speaker Change: That is a really interesting question and it dovetails into a couple of things.
Adam: So on the 15-liter itself...
Thomas Meric: And, you know, certain scalability that we're still optimizing when you're looking at the compressor size that we use there or a deoxy-skid that we use there. And again, those are relatively short term in nature as we continue to optimize that equipment. And really, that's really on the margin there. So, you know, feel like both of those facilities will show good growth as we move into 25. And just to repeat things that we've talked about in the past that we build projects to a size larger than the current gas resource because these landfills that we're on are all open and growing landfills.
Speaker Change: You know, really pleased with the feedback that we're hearing, really pleased that Freightliner is going to be rolling it out and make available for those that like to buy Freightliner trucks and to join PACCAR and
Adam: You know, really think that it's a it's going to be a terrific product for for fleets to replace diesel and save money. And if they're working with an RNG supplier, they'll get all the sustainability benefits with it as well. And, you know, there have been a couple of things out there, which
Adam: You know, I feel like, um, you know,
Adam: I would say, you know, not accelerating adoption. How's that? And one of them is that noise that has come out of the EPA on Phase 3.
Thomas Meric: And so, over time, you'll see these projects continue to improve as we call same-store sales as the gas resource continues to grow. We reach fairly quickly on each of these projects a availability and efficiency, for these projects in the kind of low to mid 90s range, which when multiplied together gives you kind of a mid 80% productivity factor. And so we look at both of those factors over time, the growth in same store sales, the efficiency and availability of our product projects. And as Adam was talking about earlier, the ramp on the initial front end of the project.
Adam: Truck Regulations, which I do believe, you know,
Adam: People are starting to listen to industry feedback on You know people in DC. I think are going to you know are starting to listen to what industry is telling them
Adam: about those Phase III regs.
Adam: You know, it's one of the interesting things that we and folks in our sector and our industry are really focused on is really educating the democratic side of things or the more progressive climate side of things.
Adam: that not all molecules are bad. You know specifically in our industry we're collecting waste molecules that exist and you know transportation fuel and heavy-duty trucking is a terrific application form where where other technologies are not are struggling to meet you know sort of emission reductions for transportation.
Adam Comora: Yeah, so it's our initial thinking just to sort of put a button on that is really more about 24 than 25 at those Nord facilities. Great. Thanks for that, Collar.
Adam Comora: And then maybe just to follow up, you know, thinking about the maybe on the fueling side and the class eight side. You know, I know that, you know, the phase three final rules were out. I think there were some revisions, but just kind of wondering about how you think about, you know, the kind of adoption or the pace of acceleration. A, coloring pace, I should say, on C&G related vehicles as it stands relative to kind of what EPA has been kind of giving in terms of their guidance.
Adam: And...
Speaker Change: So, you know, we spend a lot of time talking to Republicans about, you know, hey, this is a really great pragmatic solution and really supports a lot of, you know, Republican constituencies in ag and municipalities and rural communities that we should be incentivizing.
Speaker Change: and recognizing the benefits of collecting biogas emissions at their source.
Adam Comora: Oh, that is, that is a really interesting question. And it does tails into into a couple of things. So I'm a 15 liter itself, you know, really pleased with the feedback that we're hearing. Really pleased that freight liners going to be rolling rolling it out and make available for those that like five freight liner trucks and to join PACR. And, you know, really think that it's going to be a terrific product for fleets to replace diesel and save money.
Adam: and and specifically with Republicans talking to them about we you know we should really be also embracing some of these electron policies whether it be erins or other things that that promote renewable electricity and and on the Democratic side is really explaining to them that you know you know combustion of molecules you know isn't always bad depending on where it comes from and and what the other options are there
Adam: So yes, the phase three EPA regs have created some noise.
Speaker Change: have created some confusion, you know, have, you know, had, you know, some fleets say, hey, wait a minute, what do those mean for me deploying RNG? And, you know, look, that's one of the things that we're focused on and doing.
Adam Comora: And if they're working with an R&G supplier, they'll get all the sustainability benefits with it as well. And, you know, there have been a couple of things out there which, you know, I feel like, you know, I would say, you know, not accelerating adoption. How is that? And, and one of them is that noise that has come out of the EPA on on phase three truck regulations, which, which I do believe, you know, you know, people are starting to listen to industry feedback on, you know, people in DC, I think are going to, you know, are starting to listen to, to what industry is telling them about those, those phase three regs.
Adam: You know, different political outcomes have different...
Adam: You know, areas of focus for us to do education and advocacy wise.
Adam: and and that's one where if there is a Republican administration you know I think I think we could be off to the races on on on the use of
Adam: R&G in heavy-duty trucking, and maybe have a little bit more work to do on the electric policies, whether they be E-RINs or some other incentives for renewable power. And we can all talk about electricity demand and what's happening in this country and why this is a good answer. And if the Democrats happen to win the White House, I think we're off to the races on a lot of those electricity policies, whether it be E-RINs or other things. And we've got a little work to do to make sure that, hey, this is a really good answer for heavy-duty trucking and really work on those phase three regs. So needless to say, we think whoever wins, both sides of those policies make sense, which is what we keep talking about. But it'll just...
Adam Comora: And, you know, it's one of the interesting things that we and folks in our sector and our industry are really focused on is really educating the democratic side of things or the more progressive climate side of things that not all molecules are bad. You know, specifically in our industry, we're collecting waste molecules that exist. And, you know, transportation fuel and heavy duty trucking is a terrific application form where other technologies are not are struggling to meet, you know, sort of emission reductions for transportation.
Adam: direct our focus on to, you know, which ones, you know, we really have to spend more time on.
Speaker Change: Great, thank you.
Alex Kania: Thanks, Alex.
Speaker Change: Thank you. Our next question comes from Thomas Merrick with Janney Montgomery Scott. Your line is open.
Adam Comora: And, you know, so, so, you know, we spend a lot of time talking to Republicans about, you know, hey, this is a really great pragmatic solution and really supports a lot of, you know, Republican constituencies in ag and municipalities and rural communities that we should be incentivizing. And recognizing the benefits of collecting bio gas emissions that their source and specifically with Republicans talking to them about we, you know, we should really be also embracing some of these electron policies, whether it be earrings or other things that promote renewable electricity.
Thomas Merrick: Thanks gentlemen, thanks for taking the time for a few questions. Just want to touch base on the coming 15-liter, ask a question slightly different way, I know you've talked about it extensively so far. Just want to think through potential fleet owners
Speaker Change: As they look at supply and demand at C&G, are they contemplating kind of a front-loading of infrastructure needed for whatever scale of fleet they're looking to operate, or do they look at it and think the supply of stations is
Speaker Change: Adequate for their needs. And then just a follow up.
Adam Comora: And on the democratic side is really explaining to them that, you know, you know, combustion of molecules, you know, isn't always bad depending on where it comes from. And what the other options are there. So, yes, the phase three EPA regs have created some noise, have created some confusion, you know, have, you know, had, you know, some fleets say, hey, wait a minute, what do those mean for me deploying RNG? And you look, that's one of the things that we're focused on and doing.
Speaker Change: Yeah, another another good question. So, you know, we're still in early days of deploying either CNG or RNG as transportation fuel for heavy duty trucking. And I would I would remind folks that 85 to 90% of what we build is really dedicated fueling distribution centers and now looking at potentially rolling out lanes for folks.
Speaker Change: between those distribution centers and and and that sort of thing. It takes us also about 12 to 14 months to build a fuel station which is about the same amount of time for their trucks to get delivered.
Adam Comora: And, you know, different political outcomes have different, you know, areas of focus for us to do education and advocacy wise. And that's one where if there's a Republican administration, you know, I think I think we could be off to the races on the use of RNG in heavy duty trucking. And maybe have a little bit more work to do on the electric policies, whether they be earrings or some other incentives for renewable power.
Speaker Change: So we see the, you know, we see those fleets making those decisions at the same time.
Speaker Change: on fueling infrastructure as they're ordering trucks. And they typically go hand in hand where, you know, OK, they're happy with the truck. They know what they're specing, they're ordering them, and then they're engaged in their fueling strategy. You know, one interesting thing for Opal Fuels is the beautiful nature of our vertical integration.
Adam Comora: And we can all talk about electricity demand and what's happening in this country and why this is a good answer. And if the Democrats happen to win the White House, I think we're off to the races on a lot of those electricity policies, whether it be earrings or other things. And we got a little work to do to make sure that, hey, this is a really good answer for heavy duty trucking and, you know, really work on those phase three regs.
Speaker Change: and how, you know, certainly RNG has captured the attention of a lot of these fleets.
Speaker Change: because they're also looking for ways to reduce their Scope 1 and Scope 2 emissions. And I would remind folks when fleets use R&G versus diesel, the Greenhouse Gas Accounting Protocol is zero Scope 1 emissions.
Speaker Change: and also Xero Scope 2 because that's derived from your electricity usage. So this is a really powerful product for them.
Adam Comora: So needless to say, we think whoever wins, both sides of those policies make sense, which is what we keep talking about. And, but it just, it'll just direct our focus on to, you know, which ones we really have to spend more time on. Great. Thank you. Thanks, Alex. Thank you.
Speaker Change: You know, so they're engaging with us at the same time that they're thinking about that truck order and really working with us to make sure that, you know, the fuel station is aligned and they can get their fuel as those trucks are being delivered.
Adam Comora: Our next question comes from Thomas Meric with Janie Montgomery, Scott. Your line is open. Thanks, gentlemen. Thanks for taking the time for a few questions. Just want to touch base on coming 15-liter, ask a question slightly different way and you talk about it extensively so far. Just want to think through potential fleet owners, as they look at supply and demand at CNG, are they contemplating front loading of infrastructure needed for whatever scale of fleet they're looking to operate?
Speaker Change: Thanks super helpful and then my follow-up is really on EPA rules or potential EPA rules as they look to potentially update their landfill emission standards from 2016.
Adam Comora: Or do they look at it and think the supply of stations is adequate for their need and then follow up? Yeah, another good question. So we're still in early days of deploying either CNG or RNG is transportation fuel for heavy duty trucking and I would remind folks that 85-90% of what we build is really dedicated fueling distribution centers and now looking at potentially rolling out lanes for folks between those distribution centers and that sort of thing.
Speaker Change: I'm curious just how you think about that opportunity, what are the puts and takes from the stakeholders, you know, I know it's early days, the rule, you know, hasn't even been proposed yet, but
Speaker Change: Any color you could provide to us would be helpful just as we contemplate the future of landfill gas and what the EPA is requiring.
Speaker Change: Yeah, so, um, I think the EPA is, is, is, is really focused on methane emissions wherever they come from. And, and, and quite frank, quite frankly, rightfully so, you know, 80% more damaging than, than CO2 and really the most impactful thing we can do.
Speaker Change: So they are looking at methane emissions from a variety of places, and they already came out with a lot of regulations on pipeline companies and E&P companies on how they're going to do methane monitoring and that sort of thing.
Adam Comora: It takes us also about 12-14 months to build a fuel station, which is about the same amount of time for their trucks to get delivered. So we see those fleets making those decisions at the same time on fueling infrastructure as they're ordering trucks and they typically go hand in hand where they're happy with the truck, they know what they're speccing, they're ordering them, and then they're engaged in their fueling strategy. One interesting thing for Opal Fuels is the beautiful nature of our vertical integration and how certainly RNG has captured the attention of a lot of these fleets because they're also looking for ways to reduce their scope one and scope two emissions and I would remind folks when fleets use RNG versus diesel, the greenhouse gas accounting protocol is zero scope one emissions and also zero scope two because that's derived from your electricity usage.
Speaker Change: And, you know, I think they're moving on to other sources of methane as well. And I think EPA recognizes and folks in D.C. recognize that it's really important to continue to promote public policies that incentivize
Adam Comora: So this is a really powerful product for them and so they're engaging with us at the same time that they're thinking about that truck order and really working with us to make sure that the fuel station is aligned and they can get their fuel as those trucks are being delivered.
Speaker Change: You know, the capture of biogas to make sure that it incentivizes the right behavior.
Speaker Change: And, you know, what technologies or how they're thinking about methane monitoring and measurement. I think a lot of that is being worked through and, you know, we don't have a specific opinion on how to do methane monitoring or that sort of thing. But what I do know is that focus on methane emissions or methane emissions from organic waste.
Speaker Change: You know, is likely going to come into focus and, you know, we think we're in a terrific, you know, place to help folks capture it and turn it into a beneficial use. So, um...
Speaker Change: You know, we think it's going to be, you know, it's going to be a helpful talent for public policy and what we're doing and you know, we're happy to partner with folks to make sure we're capturing as many biogenic methane emissions that we can and turning them into their productive use.
Speaker Change: Our landfill partners.
Adam Comora: That's super helpful and then my follow-up is really on EPA rules or potential EPA rules as they look to potentially update their landfill emissions standards from 2016. I'm curious just how you think about that opportunity, what are the puts and takes from the stakeholders, I know it's a really day through rule, hasn't even been proposed yet but any color you could provide to us would be helpful just as we contemplate the future of landfill gas and what the EPA is requiring.
Speaker Change: are super focused on collecting methane.
Speaker Change: and they recognize that this is a real opportunity.
Speaker Change: I think that the value of the R&G projects has really helped them to increase their focus as well.
Speaker Change: As the more methane they're able to collect, obviously, that turns into higher royalties as well as for those who have ownership interests in projects, higher
Adam Comora: Yeah so I think the EPA is really focused on methane emissions wherever they come from and quite frankly rightfully so 80% more damaging than CO2 and really the most impactful thing we can do to halt climate change. So they are looking at methane emissions from a variety of places and they already came out with a lot of regulations on pipeline companies and E&P companies on how they're going to do methane monitoring and that sort of thing and I think they're moving on to other sources of methane as well and I think EPA recognizes and folks in DC recognize that it's really important to continue to promote public policies that incentivize the capture of biogas to make sure that it incentivizes the right behavior.
Speaker Change: It's a great focus. In addition to the R&G projects that the policy makers, as they start to focus on methane emissions, particularly at landfills,
Speaker Change: You'll see that, you know.
Speaker Change: um
Speaker Change: The E-RIN policy and others.
Speaker Change: really helped to promote that capture and conversion.
Speaker Change: and particularly at smaller landfills that may not have...
Speaker Change: The scale to do a larger R&G project. So we'll be looking very closely at how we work with our great landfill partners.
Speaker Change: to promote that policy and increase that collection. Yeah, and really what it does is, you know, that focus on methane emissions, it's just going to create greater alignment.
Speaker Change: Between us and our feedstock hosts, where everybody is going to be aligned to make sure we're doing everything that we can to maximize the gas collection and its productive use.
Adam Comora: What technologies or how they're thinking about methane monitoring and measurement I think a lot of that is being worked through and we don't have a specific opinion on how to do methane monitoring or that sort of thing but what I do know is that focus on methane emissions or methane emissions from organic waste is likely going to come into focus and we think we're in a terrific place to help folks capture it and turn it into a beneficial use. So we think it's going to be a helpful talent for public policy and what we're doing and we're happy to partner with folks to make sure we're capturing as many biogenic methane emissions that we can and turning them into their productive use.
Speaker Change: Great, thanks gentlemen. Appreciate the feedback.
Speaker Change: Thank you.
Speaker Change: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Adam Comora for closing remarks.
Adam Comora: Yeah, I appreciate everybody's interest in Opal Fuels. We are really excited about what we're doing here and our growth outlook and I hope everybody has a wonderful rest of their day.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This is the end of the video. Thanks for watching. I hope you enjoyed it. See you next time. Bye.
Adam Comora: Our our landfill partners are super focused on collecting methane and they recognize that this is a real opportunity. I think that the value of the RNG projects has really helped them to increase their focus as well. As the more methane they're able to collect obviously that turns into higher royalties as well as for those who have ownership interest in projects higher equity distributions as well. So it's a great focus in addition to the RNG projects that the policy makers as they start to focus on methane emissions, particularly at landfills, you will see that the E-Rin policy and others really help to promote that capture and conversion.
Adam Comora: And particularly at smaller landfills that may not have the scale to do a larger RNG project. So we'll be looking very closely at how we work with our great landfill partners to promote that policy and increase that collection. Yeah, and really what it does is that focus on methane emissions, it's just going to create a greater alignment between us and our feedstock hosts where everybody's going to be aligned to make sure we're doing everything that we can to maximize the gas collection and its productive use.
Operator: Great, thanks, gentlemen. I appreciate the feedback. Thank you. I'm showing no further questions at this time.
Adam Comora: Oh, now let's turn it back to Adam Gamora for closing remarks. Yeah, I appreciate everybody's interest in in in open fuels. We are really excited about what we're doing here and our and our growth outlook and I hope everybody has a wonderful rest of their day.
Operator: Alright, this concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.
Operator: [inaudible] Good morning, and welcome to the Opal Fuels 2nd quarter, 2024, earnings call and webcast. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Do withdraw your question, please press star 11 again. As a reminder, this event is being recorded.
Speaker Change: Good morning and welcome to the Opal Fuels second quarter 2024 earnings call and webcast.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 11 again.
Speaker Change: As a reminder, this event is being recorded.
Todd Firestone: I would now like to turn the call over to Todd Firestone, Vice President of Investor Relations to begin. Please go ahead.
Todd Firestone: Thank you and good morning everyone. Welcome to the Opal Fuels second quarter 2024 earnings conference call. With me today are co-CEOs Adam Comora and Jonathan Maurer and Scott Contino, Opal's Interim Chief Financial Officer.
Speaker Change: Opal Fuels released financial and operating results for the second quarter of 2024 yesterday afternoon, and those results are available on the investor relations section.
Speaker Change: of our website at opalfuels.com. The presentation and access to the webcast of this call are also available on our website. After completion of today's call, replay will be available for 90 days.
Speaker Change: Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements.
Speaker Change: Several factors that could cause or contribute to such differences are described on slides 2 and 3 of our presentation.
Speaker Change: These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion of certain non-GAAP measures.
Speaker Change: A definition of non- GAAP measures used and a reconciliation of these measures to the nearest gap measure is included in the appendix of the release and presentation.
Speaker Change: Adam will begin today's call by providing an overview of the Corps' results and recent highlights and an update on our strategic and operational priorities. John will then give a commercial and business development update, after which Scott will review financial results.
Adam Comora: We'll then open the call for questions. And now I'll turn the call over to Adam Comora, Co-CEO of Opal Fuels.
Adam Comora: Good morning, everyone, and thank you for participating in Opal Fuel's second quarter 2024 earnings call.
Adam Comora: Our second quarter results were solid and in line with our expectations.
Speaker Change: A number of factors are driving our growth outlook for the remainder of the year, including a strong RIN market, which we've taken advantage of by selling forward the majority of our expected RIN sales at favorable pricing.
Speaker Change: Accelerating production growth from our operating facilities.
Speaker Change: Are SAFIRE and PULC RNG projects remaining on schedule?
Adam Comora: And finally, growth in our fuel station services segment.
Todd Firestone: I would now like to turn the call over to Todd Firestone, Vice President of Investory Relations to begin. Please go ahead. Thank you and good morning everyone. Welcome to the Opal Fuels 2nd quarter, 2024, earnings conference call. Let's meet today are co-ceo, Adam Comora, and Jonathan Maurer, and Scott Contino, Opal's Interim Chief Financial Officer. Opal Fuels release financial and operating results for a second quarter, 2024, yesterday afternoon, and those results are available on the Investory Relations section of our website at opalfuels.com.
Adam Comora: Adjusted EBITDA for the quarter was approximately $19 million.
Adam Comora: sequentially higher versus the first quarter as we've continued to see improvements across our business segments driven by higher RNG production, increasing throughput of RNG in our dispensing network, and improved margins in fuel station services.
Speaker Change: We expect continued sequential growth over the balance of the year and are maintaining our 2024 adjusted EBITDA guidance of 90 to 100 million.
Adam Comora: One contributing factor to this sequential growth, which we are happy to announce, is that our Prince William project has received EPA certification, and we expect to begin selling RINs from this project in the third quarter.
Todd Firestone: The presentation and access to the webcast this call are also available on our website. After completion of today's call, replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks uncertainties and assumptions, forward-looking statements, are not a guarantee of performance, and actual result could differ material from what is contained in such statements. Some of the factors that could cause or contribute to such differences are described on slide 2 and 3 of our presentation.
Adam Comora: We remain on track to bring our next two landfill R&G projects, Sapphire and Paul County, online as expected in the third and fourth quarters respectively.
Adam Comora: We're executing on our growth objectives and are excited that construction has begun on our 16th R&G project at the Burlington County, New Jersey landfill.
Todd Firestone: These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update for-looking statements to reflect events or circumstance of the after-the-date of this call. Additionally, this call will contain discussion on certain non-gap measures. The definition of non-gap measures used in a reconciliation of these measures to the nearest gap measures, including in pandemics of the release and presentation.
Speaker Change: This project is the second with our joint venture partner, South Jersey Industries, and represents 0.46 million MMBTUs of annual design capacity.
Speaker Change: Combined with the Cottonwood Project announced last quarter, we have now placed 1.1 million MMBTU of new R&G production annual design capacity into construction this year, and are maintaining our guidance of placing at least 2 million MMBTU of new R&G production into construction for 2024.
Todd Firestone: Adam will begin today's call by providing overview of the court's results and reach the highlights in an update on our strategic and operational priorities. John will then give up commercial and business development update after which Scott will review penance results. We'll then open the call for questions.
Speaker Change: Our fuel station service segment continues to perform and grow in line with our expectations.
Speaker Change: Supporting our upstream R&G projects with dispensing in the highest value transportation fuel.
Todd Firestone: And now I'll turn the caller out of tomorrow, co-CO, of Opal Fuels. Good morning, everyone, and thank you for participating in Opal Fuels 2nd quarter or 2024 earnings call. Our second quarter results were solid and in line with our expectations. A number of factors are driving our growth outlook for the remainder of the year including a strong RIN market, which we've taken advantage of by scaling forward the majority of our expected RIN sales at favorable pricing.
Adam Comora: Offtake Market
Adam Comora: We are maintaining fuel station services adjusted EBITDA guidance of 75 to 90% growth in 2024 compared to 2023.
Adam Comora: I also wanted to mention a change to our full year R&G production outlook, which is now expected to range between 4.0 and 4.4 million MMBTU versus previous guidance of 4.4 to 4.8 million MMBTU.
Todd Firestone: Accelerating production growth from our operating facilities. Our Sapphire and Polk RNG projects remaining on schedule. And finally growth in our fuel station services segment. Adjusted EBITDA for the quarter was approximately 19 million sequentially higher versus the first quarter as we continue to see improvements across our business segments driven by higher RNG products. Increasing throughput of RNG and our dispensing network and improved margins and fuel station services. We expect continued sequential growth over the balance of the year and our maintaining our 2024 Adjusted Evid Dog Guidance of 90 to 100 million.
Adam Comora: primarily driven by the ramp-up of our most recent facilities, which we expect to be short-term in nature.
Adam Comora: Finally, we continue to believe there is a great opportunity for our industry to expand bipartisan support, including renewable electricity produced from biogas.
Adam Comora: It is important to remember what we do. We capture harmful methane emissions from decaying organic waste in place and convert them into productive and low-carbon energy products that utilize existing pipeline and electricity grids.
Adam Comora: We believe Opal is well positioned to continue to be a leader in the development, operation, and distribution of these low carbon intensity fuels, utilizing proven technologies and a proven track record. With that, I'll turn it over to John . John ?
Todd Firestone: One contributing factor to the sequential growth which we are happy to announce is that our Prince William Project has received EPA certification and we expect to begin selling rins from this project in the third quarter. We remain on track to bring our next two Lantel RNG projects, Sapphire and Paul County, online as expected in the third and fourth quarters respectively. We're executing on our growth objectives and are excited that construction has begun on our 16th RNG project at the Burlington County New Jersey Lantel.
John: Thank you, Adam, and good morning, everyone. Opal Fuels continues to execute on building and operating reliable R&G production facilities.
John: and Fueling Stations.
John: Operationally, second quarter production results were in line with our expectations.
John: R&G production was 0.9 million MMBTUs for the three months ended June 30, 2024, a more than 50% increase year over year.
Todd Firestone: This project is the second with our joint venture partner south Jersey Industries and represents 0.46 million MMBTUs of annual design capacity. Combined with the Cottonwood Project announced last quarter, we have now placed 1.1 million MMBTU of new RNG production annual design capacity into construction this year and our maintaining our guidance of placing at least 2 million MMBTU of new RNG production into construction for 2024. Our fuel station service segment continues to perform and grow in line with our expectations supporting our upstream RNG projects with dispensing in the highest value transportation fuel off-take market.
Speaker Change: As Adam mentioned, we're making progress on our strategic growth goals by putting projects into construction like Burlington this quarter and Cottonwood last quarter, and we're also executing by moving construction projects into operation.
Adam: We currently have nine operating R&G projects and seven R&G projects in construction.
Adam: Construction of our new projects is proceeding well and they continue to be on schedule.
Adam: We expect to bring online three large landfill RNG projects during 2024. We've already brought online the Prince William RNG project.
Speaker Change: And the SAFIRE project is mechanically complete and in commissioning, on track for a third quarter completion date.
Todd Firestone: We are maintaining fuel station services adjusted EBITDA guidance of 75 to 90 percent growth in 2024 compared to 2023. I also wanted to mention a change to our full year RNG production outlook which is now expected to range between 4.0 and 4.4 million MMBTUs versus previous guidance of 4.4 to 4.8 million MMBTUs. Primarily driven by the ramp up of our most recent facilities which we expect to be short-term in nature. Finally, we continue to believe there's a great opportunity for our industry to expand bipartisan support including renewable electricity produced from biogas.
Adam Comora: and Polk County continues to be on track for a fourth quarter completion date.
Adam Comora: We expect to exit the year with 11 R&G facilities online, representing an annual design capacity of 8.8 million MMBTU.
Adam Comora: Compared to 2.3 million MMBTU at year-end 2021, more than tripling over the past three years.
Adam Comora: Atlantic, our first SJI joint venture R&G project, which we put into construction in the third quarter of 2023, is progressing, and we continue to expect it to begin commercial operation in the third quarter 2025.
Todd Firestone: It is important to remember what we do. We capture harmful methane emissions from decaying organic waste in place and convert them into productive and low carbon energy products that utilize existing pipeline and electricity grids. We believe Opal is well positioned to continue to be a leader in the development, operation and distribution of these low carbon intensity fuels utilizing proven technologies and a proven track record.
Adam Comora: Atlantic is expecting to contribute 0.3 million MMBTU of annual design capacity net to Opal.
Adam Comora: Construction at our 100% owned Cottonwood Landfill RNG project is also progressing well and represents 0.7 million MMBTU of design capacity net to Opal.
Adam Comora: We expect the project to begin commercial operations consistent with recent project timelines.
Adam Comora: With that, I'll turn it over to John. Thank you, Adam, and good morning everyone. Opal fuels continue to execute on building and operating reliable RNG production facilities and fueling stations. Operationally, second quarter production results were in line with our expectations. RNG production was 0.9 million MMBTUs for the three months and a June 30th, 2024. A more than 50% increase Euro, over a year. As Adam mentioned, we're making progress on our strategic growth goals by putting projects into construction like Burlington, this quarter, and Cottonwood, last quarter, and we're also executing by moving construction projects into operation.
Adam Comora: Finally, we are happy to have announced the start of construction at the Burlington R&G Project. As mentioned, this project is the second R&G conversion project with our joint venture partner, South Jersey Industries.
Adam Comora: and represents 0.46 million MMBTU of annual design capacity for our 50% ownership.
Adam Comora: and helps us progress towards our goal of putting 2.0 million of MMBTU of design capacity into construction this year.
Adam Comora: Industry Tailwinds continue to support Opal's mission. We are seeing demand strengthen across end markets.
Adam Comora: We currently have nine operating RNG projects and seven RNG projects in construction. Construction of our new projects is proceeding well, and they continue to be on schedule. We expect to bring online three large landfill RNG projects during 2024. We've already brought online the Prince William RNG project, and the Sapphire project is mechanically complete and in commissioning, on track for a third quarter completion date, and Polt County continues to be on track for a fourth quarter completion date.
Adam Comora: With that, I'll turn it over to Scott to discuss the quarter's financial performance.
Adam Comora: Scott?
Scott: Thank you, John , and good morning to all the participants on today's call.
Scott: Last night, we filed our earnings press release, which detailed our quarterly results for the quarter ending June 30, 2024. Our 10-Q will be filed tomorrow.
Scott: Looking at second quarter results, R&G production increased to 0.9 million MMBTUs from 0.6 million MMBTUs in the second quarter of 2023.
Scott: The increase is largely due to both the Emerald and Prince William R&G Project's contribution to production volumes.
Adam Comora: We expect to exit the year with 11 RNG facilities online, representing an annual design capacity of 8.8 million MMBTU compared to 2.3 million MMBTU at year end 2021, more than tripling over the past three years. Atlantic, our first SJI joint venture RNG project, which we put into construction in the third quarter of 2023, is progressing, and we continue to expect it to begin commercial operation in the third quarter 2025. Atlantic is expecting to contribute 0.3 million MMBTU of annual design capacity net to oval.
Scott: Revenue in the second quarter was $71 million as compared to $55 million in the second quarter of 2023.
Adam Comora: The main driver for the increase in revenues was the timing and pricing of environmental credit sales, including both R&G fuel and fuel station services, where we dispense all of the R&G for our projects, including our joint venture projects, as well as other third-party R&G supplies.
Adam Comora: Opal's share of revenues from equity method investments for the quarter was $11.2 million as compared to $2.1 million in Q2 2023, which is not included in revenue as reported on the income statement.
Adam Comora: Construction at our 100% own Cottonwood landfill RNG project is also progressing well, and represents 0.7 million MMBTU of design capacity net to oval. We expect the project to begin commercial operations consistent with recent project timelines. Finally, we are happy to have announced the start of construction at the Burlington RNG project. As mentioned, this project is the second RNG conversion project with our joint venture partner South Jersey Industries, and represents 0.46 million MMBTU of annual design capacity for our 50% ownership and helps us progress towards our goal of putting 2.0 million of MMBTU of design capacity into construction this year. Industry tailwinds continue to support Opel's mission. We are seeing demand strengthen across end markets.
Adam Comora: Net income for the second quarter was approximately $1.9 million.
Adam Comora: as compared to $114.1 million in the second quarter of 2023. The difference was primarily driven by the gain last year from the deconsolidation of our emerald and sapphire projects.
Adam Comora: Excluding this one-time gain, our adjusted net loss for the second quarter 2023 was 7.8 million dollars.
Adam Comora: Adjusted EBITDA was $18.9 million in the second quarter, as mentioned, compared to $5.1 million in the second quarter of 2023, partially driven by the timing of environmental credit sales.
Adam Comora: A reconciliation to GAAP results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website.
Scott Contino: With that, I'll turn it over to Scott to discuss the quarter's financial performance. Scott. Thank you, John, and good morning to all the participants on today's call. Last night, we filed our earnings press release, which detailed our quarterly results for the quarter ending June 30, 2024. Our 10Q will be filed tomorrow. Looking at second quarter results, RNG production increased to 0.9 million MMBTUs from 0.6 million MMBTUs in the second quarter of 2023.
Adam Comora: The fuel station services segment revenues were $39.3 million for the quarter as compared to $30.0 million in the second quarter of 2023.
Adam Comora: The increase in revenues was primarily the result of increased R&G marketing fees, concurrent RIN and LCFS sales, and improved margins.
Adam Comora: Renewable power revenues were $12.2 million for the quarter compared to $14.5 million in the second quarter of 2023.
Scott Contino: The increase is largely due to both the Emerald and Prince William RNG project's contribution to production. Volume. Revenue in the second quarter was $71 million as compared to $55 million in the second quarter of 2023. The main driver for the increase in revenues was the timing and pricing of environmental credit sales, including both R&G fuel and fuel station services where we dispense all of the R&G for our projects, including our joint venture projects, as well as other third party R&G supplies.
Adam Comora: This decrease was primarily due to the Emerald and Prince William R&G facilities, which are using gas that was previously utilized in renewable power facilities.
Adam Comora: In the second quarter, capital expenditures were approximately $28.5 million.
Adam Comora: which includes approximately 5.6 million people.
Adam Comora: $1 million relating to equity method investments, and approximately $7.7 million associated with downstream stations.
Adam Comora: Our senior secured credit facility provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit.
Scott Contino: Opal share of revenues from equity method investments for the quarter was $11.2 million as compared to $2.1 million in Q2 2023, which is not included in revenue as reported on the income statement. Net income for the second quarter was approximately $1.9 million as compared to $114.1 million in the second quarter of 2023. The difference was primarily driven by the gain last year from the deconsolidation of our Emerald and Sapphire projects, excluding this one time gain, our adjusted net loss for the second quarter 2023 was $7.8 million.
Adam Comora: As of June 30, 2024, approximately $211.6 million was drawn down on the facility, and we have utilized approximately $13.7 million of our revolver availability to issue letters of credit.
Speaker Change: As of June 30, 2024, liquidity was approximately $302 million, consisting of $275 million of availability under the credit facility, and $27 million of cash, cash equivalents, and short-term investments.
Adam Comora: We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs.
Scott Contino: Adjusted EBITDA was $18.9 million in the second quarter, as mentioned, compared to $5.1 million in the second quarter of 2023, partially driven by the timing of environmental credit sales. A reconciliation to GAP results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website. The fuel station services segment revenues for $39.3 million for the quarter as compared to $30.0 million in the second quarter of 2023.
Adam Comora: We are maintaining our 2024 guidance, except for R&G production, which is expected to be 4.0 to 4.4 million MNBTUs, compared to our previous range of 4.4 to 4.8 million MNBTUs, primarily driven by the ramp up of our most recent R&G facilities.
Adam Comora: I'll now turn it back to John for concluding remarks.
John: In closing, we are pleased with this quarter's results.
Speaker Change: We remain committed to furthering Opal's vertically integrated mission, together with our partners,
Scott Contino: The increase in revenues was primarily the result of increased R&G marketing fees, concurrent, win, and LCFS sales, and improved margins. Renewable power revenues were $12.2 million for the quarter compared to $14.5 million in the second quarter of 2023. This decrease was primarily due to the Emerald and Prince William R&G facilities, which are using gas that was previously utilized in renewable power facilities. In the second quarter, capital expenditures were approximately $28.5 million, which includes approximately $5.6 million relating to equity method investments, and approximately $7.7 million associated with downstream stations.
John: to build and operate best-in-class biomethane capture and conversion projects that deliver industry-leading, reliable, and cost-effective low-carbon intensity energy products that displace fossil fuels.
Adam Comora: and Mitigate Climate Change.
Speaker Change: And with that, I'll turn the call over to the operator for Q&A. Thank you all for your interest in Opal Fuels.
Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from Matthew Blair with TPH. Your line is open.
Scott Contino: Our senior secured credit facility provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit. As of June 30, 2024, approximately $211.6 million was drawn down on the facility and we have utilized approximately $13.7 million of our revolver availability to issue letters of credit. As of June 30, 2024, liquidity was approximately $302 million, consisting of $275 million of availability under the credit facility, and $27 million of cash equivalence and short-term investments.
Matthew Blair: Thank you and good morning.
Matthew Blair: I guess just in regards to the guide, so you maintain the full year EBITDA guidance, but the R&G fuel production number is coming down. Could you talk about the moving parts there?
Speaker Change: And what's the offset, like, why is unit profitability, I guess, coming in higher than you expected? Thanks.
Speaker Change: Yeah, hey, good morning. This is Adam Comora here and appreciate the question.
Adam Comora: So on a high level, you know, the map, when we gave our initial guidance of 4.4 to 4.8 million MMB2s of production,
Speaker Change: and using a $3 RIN, we had our adjusted EBITDA guidance of $90 to $100 million.
Scott Contino: We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs. We are maintaining our 2024 guidance, except for RNG production, which is expected to be 4.0 to 4.4 million MNBTUs, compared to our previous range of 4.4 to 4.8 million MNBTUs, primarily driven by the ramp-up of our most recent RNG facilities.
Adam Comora: And you can see in that production spread between 4.4 and 4.8, about $400,000 leads to about a $10 million adjusted EBITDA between the low end and the high end.
Adam Comora: We also had guided folks that every $0.25 in a RIN price move would be about $12 million of adjusted EBITDA when we were giving out the sensitivity in our initial guidance.
John Maurer: I'll now turn it back to John for concluding remarks. In closing, we are pleased with this quarter's results. We remain committed to furthering Opal's vertically integrated mission, together with our partners, to build and operate best-in-class biomethane capturing conversion projects that deliver industry-leading, reliable, and cost-effective, low-carbon, intensity energy products that displace fossil fuels and mitigate climate change.
Adam Comora: So if you think about our new production range being $400,000 lighter than what the original guidance was, and the RIN price being stronger than our original guidance,
Adam Comora: and our forward sales position where we've sold forward the vast majority of our RIN production for this year. You can see that the RIN price that we'll achieve for the year will basically offset where that production shortfall came from.
Operator: And with that, I'll turn the call over to the operator for Q&A. Thank you all for your name to be announced. Do we draw your questions? Please press star 1-1 again. In the interest of time, we ask that you please own yourself to one question and one follow-up. Please stand by while we can follow the Q&A roster.
Speaker Change: We had guided folks that a 25 cent written price move was a 12 million dollar move in the Adjusted EBITDA.
Speaker Change: Okay, sounds good.
Adam Comora: Adam, are you seeing any incremental opportunities for selling R&G into non-transportation markets? I know in the past Opal
Speaker Change: It's thought that the utility market just doesn't offer enough value. You don't get paid for the full RIN. But what about any sort of other markets, you know, shipping or chemicals? Are there any other opportunities to monetize R&D?
Matthew Blair: Our first question comes from Matthew Blair with TPH. Your line is up. Thank you and good morning. I guess just in regards to the guide, so you maintain the full-year EBITDA guidance, but the R&G fuel production numbers coming down. Could you talk about the moving parts there? And what's the opposite? Like, why is unit profitability I guess coming in higher than you expected? Thanks. Yeah, hey, good morning. This is Adam Kamori here and appreciate the question.
Adam: Yeah, thanks. Thanks again for that question. There certainly are increasing opportunities and we are seeing
Adam: New end markets continue to develop and quite frankly strengthen.
Speaker Change: from a demand perspective for RNG and marine fuel is one that that I think is or we think is particularly interesting as we're seeing a lot of ships being delivered that can run off of renewable methanol and and certainly you know there are some export markets
Matthew Blair: So on a high level, you know, the math, when we gave our initial guidance of 4.4 to 4.8 million MB2s of production and using a $3 in, we had our adjusted EBITDA guidance of 90 to 100 million. And you can see in that production spread between 4.4 and 4.8, about 400,000 leads to about a $10 million of adjusted EBITDA between the low end and the high end. And we also at guided folks that every 25 cent in a RIN price move would be about $12 million of a adjusted EBITDA when we were giving out the sensitivity and our initial guidance.
Speaker Change: Over to Europe that we think, you know, will develop as well. I know there are some regulatory matters that are still being figured out in terms of tracking RNG to export over to Europe . And...
Speaker Change: You know, at this point, we think that there are great applications for RNG.
Speaker Change: In marine fuel and you know, we think that there's going to be continued interest there And and the voluntary markets here in the US. I know I know some folks are contracting out
Speaker Change: to sell their R&G at fixed price contracts.
Speaker Change: There are some California utilities that are really interested in purchasing it and some others as well. I would say that the discount to the transportation fuel market still seems too great for us.
Matthew Blair: So if you think about our new production range being 400,000 lighter than what the original guidance was and the RIN price being stronger than our original guidance and our forward sales position where we've sold forward the vast majority of our RIN production for this year. You can see that the RIN price that will achieve for the year will basically offset where that production shortfall came from. We had guided folks that a $25 set rate of price move was a $12 million move in the in the adjustity but die.
Speaker Change: So we have not yet engaged in in those other end markets, but we think that they're going to continue to develop. Pricing likely will continue to rise there to effectively
Speaker Change: We continue to see all sorts of interest in RNG, and I know folks are a little bit longer out talking about renewable hydrogen or SAF.
Speaker Change: But at this point, we still feel like the discount is too great versus transportation fuel.
Speaker Change: and are continuing to pursue the transportation fuel offtake market. But those markets are developing and we are keeping a close eye on them and do think they will be part of our portfolio mix, just not yet.
Matthew Blair: Okay, sounds good. And then Adam, are you seeing any incremental opportunities for selling RNG into non-transportation markets? I know in the past Opal has thought that the utility market just doesn't offer enough value. You don't get paid for the full rim. But what about, like any sort of other markets, you know, shipping or chemicals, are there any other opportunities to monetize RNG? Yeah, thanks. Thanks again for that question. There certainly are increasing opportunities and we are seeing new new end markets continue to develop and quite frankly strengthen from a demand perspective for RNG.
Adam: Sounds good. Thanks, Adam.
Speaker Change: Thank you. Our next question comes from Paul Cheng with Scotiabank. Your line is now open.
Paul Cheng: Thank you. Good morning, guys.
Paul Cheng: Adam and Jonathan, I have two questions. First, maybe it's a little bit of a
Speaker Change: From a vision or statistics standpoint, as you grow your RNG upstream production, that's the…
Matthew Blair: And Marine Fuel is one that I think is, or we think is particularly interesting as we're seeing a lot of ships being delivered that can run off of renewable methanol. And certainly, you know, there are some export markets over to Europe that we think, you know, will develop as well. I know there are some regulatory matters that are still being figured out in terms of tracking RNG to export over to Europe.
Speaker Change: Fantastic.
Speaker Change: The business strategy is to grow your service station business in tandem.
Speaker Change: or keep track so that you keep relatively a balanced portfolio between upstream and downstream or that you say, okay, I mean, I have sufficient scale in the downstream into a service station and then the industry also have enough and we really don't need to grow that. And so we will see more tilt to us into the upstream over time.
Matthew Blair: And, you know, at this point, we think that there are great applications for RNG in Marine Fuel. And, you know, we think that there's going to be continued interest there. And the voluntary markets here in the US, I know some folks are contracting out to sell their RNG at six price contracts. There are some California utilities that are really interested in purchasing it, and some others as well. I would say that the discount to the transportation fuel market still seems too great for us.
Speaker Change: So what's the business strategy from that standpoint? That's the first question.
Speaker Change: The second question is, I have to apologize, it's a little bit of a detail. On the second quarter, your LCFS sales price of $100 is actually up sequentially.
Speaker Change: If we're looking at the industry, actual benchmark for LCFS price is down. So how's the mechanic work in here? Thank you.
Speaker Change: Alright, great Paul. I'll take the first question and then John will talk about our off-take contract in the LCFS market. So I believe the first question was...
Matthew Blair: So we have not yet engaged in those other end markets, but we think that they're going to continue to develop pricing likely will continue to rise there to effectively try procure or entice folks away from the transportation fuel market. So we continue to see all sorts of interest in RNG. And I know folks are, you know, a little bit longer out talking about renewable hydrogen or SAF. But at this point, we still feel like the discount is too great versus transportation fuel, and are continuing to pursue the transportation fuel off-take market. But those markets are developing, and, you know, we are keeping a close eye on them, and do you think they will be part of our portfolio mix just not yet? Sounds good. Thanks, Adam. Thank you.
Speaker Change: How are we viewing the downstream distribution and marketing business and fuel station business?
Speaker Change: In conjunction with our upstream. And I will say we are extremely excited on both the upstream development of those R&G assets and the downstream fuel station business.
Speaker Change: The fuel station business for Opal is attractive in its own right. We're achieving good return on capital on fuel stations we own with fuel purchase agreements, you know, long-term tenure in nature fuel purchase agreements for those stations.
Speaker Change: and we have a very profitable business to build and service those stations.
Speaker Change: Even if R&G was not part of the picture, we like the growth outlook for our fuel station service business, and we'll continue to grow that business, even if we are taking our R&G and finding other off-take markets.
Paul Cheng: Our next question comes from Paul Cheng with Scoshbang. Your line is now over. Thank you. Good morning, guys. Adam and Jonathan, two questions. First, maybe it's a little bit for me, vision or strategic standpoint. As you grow your RNG upstream product... The business strategy is that to grow your service station business, that intend them or keep checks so that you keep relatively abundance portfolio between upstream and downstream, or that you say okay, I mean I have sufficient scale in the downstream in the service station and then the industry also have enough and we really don't need to grow that.
Speaker Change: It just so happens that there is that terrific strategic tie-in with our upstream business. So we're seeing great opportunities to deploy capital both in new R&G projects and the downstream fuel station business. Quite frankly, if you went back 10 years,
Paul Cheng: And so we will see more to towards into the upstream over time. So what's the business strategy from that standpoint, that's the first question. The second question is after a project is a newbie of the detail. On the second quarter, your LCFS sales price of 100 is actually up sequentially, but if we're looking at the industry actual benchmark for LCFS price is down. So how's the mechanic working here. Thank you. All right, great Paul.
Speaker Change: There was a lot of growth experienced by Opal Fuels building fuel stations and servicing those fuel stations.
Speaker Change: just for the commodity price differential of CNG versus diesel fuel.
Speaker Change: And with that 15 liter engine, we see a lot of opportunities, even with just the economics of CNG versus diesel.
Speaker Change: You know, we think that's going to be an attractive place for us to continue to invest and grow that business and see a lot of conversion potential, you know, for the fuel station service business.
Speaker Change: Adam, do you have a capex or the number of station growth kind of matrix you can share per year over the next several years?
Adam: Yeah, I think what we do, well, we don't give guidance out past 2024, but we do provide detail in our CapEx for how much is being invested in the fuel stations versus the R&G projects.
Paul Cheng: I'll take the first question and then John will talk about our offtake contract in the LCFS market. So I believe the first question was how are we viewing the downstream distribution of marketing business and fuel station business in conjunction with with our upstream and I will say we are extremely excited on both the upstream development. Of those RNG asset and the downstream fuel station business, the fuel station business for Opal is attractive in its own right we're achieving good return find capital on fuel stations we own with fuel purchase agreements.
Speaker Change: Again the vast majority of the CapEx that we spend is on new biogas capture and conversion projects.
Paul Cheng: You know long term tenure in nature fuel purchase agreements for for those stations and we have a very profitable business to build and service those stations. So even if RNG was not part of the picture, we like the growth outlook for for our fuel station service business and we'll continue to grow that business even if we are taking our RNG and finding other offtake markets. It just so happens that there is that terrific strategic tie in with our with our upstream business.
Speaker Change: I think it's somewhere in the 80 plus percent range that likely will continue, but we do give it at least on a historic basis in our filings.
Speaker Change: is, you know, commensurately larger than the average price of the fueling station projects as well.
Speaker Change: Paul, I'm turning to your LCFS question.
Paul Cheng: We get LCFS credits principally from two sources. One is our Sonoma...
Speaker Change: Dairy Project in Arizona.
Speaker Change: And there we have a...
Speaker Change: Off-take contract that has a floor price of $100 for the credit.
Speaker Change: So we enjoy a $100 sale price there as long as the
Speaker Change: Price is below that and that's currently the situation.
Speaker Change: situation.
Speaker Change: Yeah, just to follow up there, that contract goes out for multiple years. So that $100 floor is in place for the next four and a half years. Yep.
Paul Cheng: And so we're seeing great opportunities to deploy capital both in new RNG projects and the downstream fuel station business and you know quite quite frankly, you know, if you went back 10 years, there was a lot of growth experience by Opal fuels building fuel stations and servicing those fuel stations just for the commodity price differential of CNG versus versus diesel fuel. And with that 15 liter engine, we see a lot of opportunities even with just the economics of CNG versus diesel.
Speaker Change: And then the other place we get our LCFS credits is from our downstream dispensing.
Speaker Change: where we get a portion of the credits as a marketing fee.
Speaker Change: for low CI projects that we dispense into California.
Speaker Change: And there, typically, we're recognizing those credits at market prices, and those market prices have been in the $45 to $50 range most of the time.
Speaker Change: Yeah, and I think in the second quarter, we did not sell at those prices, so we've been holding those credits in inventory. But they're recognized at that price for accounting. I see. Perfect. Thank you.
Paul Cheng: So, you know, we think that's going to be an attractive place for us continue to invest and grow that business and see a lot of conversion potential for for the fuel station service business. Heather, do you have a cat X or that number of station growth kind of matrix you can share per year over the next several years? Yeah, I think what we do, well, we don't give guidance out past past 2024, but we do provide a detail in our cat X for how much is being invested in the fuel stations versus the RNG projects.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Ryan Pfingst with B Riley. Your line is open.
Ryan Pfingst: Hey, good morning, guys. Thanks for taking my questions.
Ryan Pfingst: Maybe just to follow up on CapEx. A couple months ago, we spoke about the maintenance CapEx for your operating assets. Can you just remind us what maintenance CapEx is for the current R&G portfolio? Or, you know, on a dollars per MMBTU basis?
Paul Cheng: Again, the vast majority of the cat X that we spend is on new bio gas capture and conversion projects. I think it's somewhere in the 80 plus percent range that likely will continue, but we do give it at least on a historic basis in our in our filings. In the average price of RNG projects. Obviously it's commensurately larger than the average price of the fueling station projects as well.
Speaker Change: to help give folks a sense of what your discretionary cash flow looks like.
Ryan Pfingst: This is Scott Contino. Thank you, Ryan, for the question. With respect to maintenance CapEx,
Speaker Change: For our Renewable Power Portfolio, there is...
Speaker Change: You know, a reasonable amount of maintenance capex a year.
Scott Contino: Paul, turning to your LCFS question, we get LCFS credits principally from two sources. One is our Sonoma dairy project in Arizona, and there we have an off-take contract that has a floor price of $100 for the credit, so we enjoy $100 sale price there as long as the prices below that, and that's currently the situation. Yeah, just to follow up there, that contract goes out for multiple years, so that $100 floor is in place for the next- four and a half years.
Speaker Change: that we we add back to Adjusted EBITDA. It's you know in the ten million dollars a year range something something like that maybe a little less in that ballpark. For our R&G projects
Speaker Change: There's a lot less major maintenance, CapEx, that's all capitalized.
Speaker Change: And I don't have a dollars per MMBTU number to give you, but it's not a large number. In fact, since most of our projects are very new,
Speaker Change: It's not a significant number right now.
Speaker Change: Yeah, this is Adam. Just a quick follow up there because, you know, we've been we've been chatting internally where I think it might be helpful for investors to understand the discretionary free cash flow generation of this business.
Scott Contino: And then the other place we get our LCFS credits is from our downstream dispensing where we get a portion of the credits as a marketing fee for low-CI projects that we dispense into California, and there typically were recognizing those credits at market prices, and those market prices have been in the $45 to $50 range most of this year. Yeah, and I think in the second quarter we did not sell at those prices, so we've been holding those credits in inventory. But they're recognized at that price. Perfect, thank you. We now appreciate it. Sure. Thank you.
Speaker Change: You know, we've told people historically that we'll have 90-95% free cash flow conversion.
Speaker Change: from our EBITDA and I think it's lost on folks and we're going to start really illustrating that. You know, as Scott was just mentioning, you know, one of the beautiful things about our business is after we build these facilities, unlike a traditional energy company, we don't have to drill or spend capital to produce our fuel.
Scott: If you remember what we do, we drop PVC pipes into landfills.
Scott Contino: and they have perforations, and we connect them all together, and we apply a little bit of suction to gather all that gas to our facilities. And the facilities themselves, if you look across the portfolio where it sits today, it's in the single-digit millionths of maintenance capex. And these are 20-, 25-year assets.
Ryan Pfingst: Our next question comes from Ryan, thanks. Be right, your line is open. Hey, good morning, guys. Thanks for taking my questions. Maybe just to follow up on CAPEX, a couple of months ago, we spoke about the maintenance CAPEX for your operating assets. Can you just remind us what maintenance CAPEX is for the current R&G portfolio, or, you know, on a dollars per MMB TU basis to help give folks a sense of what your discretionary cash flow looks like?
Speaker Change: You know, and some of our gas rights, you know, even go out longer.
Speaker Change: So, so when you really think about us, you know, and, and, and, and the valuation of Opal Fuels, you know, our discretionary free cash flow after we build these facilities.
Speaker Change: is really pretty phenomenal, and that discretionary free cash flow can be used to invest in new projects, and that's what we're doing today because we still see, you know, really attractive opportunities to grow the business.
Ryan Pfingst: This is Scott Contino, thank you, Ryan, for the question. With respect to maintenance CAPEX, for our renewable power portfolio, there is, you know, a reasonable amount of maintenance CAPEX a year that we add back to adjusted EBITDA. It's, you know, in the $10 million a year range, something like that, maybe a little less in that ballpark. For our R&G projects, there's a lot less major maintenance CAPEX that's all capitalized. And I don't have a dollars per MMB TU number to give you, but it's not a large number.
Speaker Change: and and you know in the future you've got other things you could be doing with that discretionary free cash flow you could make acquisitions.
Speaker Change: You could, you know, pay a really healthy dividend. There's all sorts of things that we think can be a powerful, you know, sort of shareholder value driving tool.
Speaker Change: I think we're going to get back into that and start illustrating to folks, you know, not only is this really, you know, are we growing extraordinarily quickly from an adjusted EBITDA perspective, but that adjusted EBITDA, you know, translates into discretionary free cash flow to enhance.
Speaker Change: Shareholder Values. So I'm thankful for the question. And, you know, we're going to start, I think,
Ryan Pfingst: In fact, since most of our projects are very new, it's not a significant number right now. Yeah, this is out of just a quick follow up there, because, you know, we've been chatting internally where I think it might be helpful for investors to understand the discretionary free cash flow generation of this business. You know, we've told people historically that we'll have 90 to 95% free cash flow conversion from our EBITDA. And I think it's lost on folks, and we're going to start really illustrating that.
Speaker Change: showing better descriptors of growth CapEx versus maintenance CapEx and discretionary free cash flow. So in total, as Scott was mentioning, our maintenance CapEx across renewable power and the R&G facilities is
Speaker Change: You know, you know, you know, in the low, you know, between 10 and 20 million, I think if we if we if we aggregated it all up, and you look forward, and, you know, it's really, it's really attractive from that discretionary free cash flow perspective.
Ryan Pfingst: You know, as Scott was just mentioning, you know, one of the beautiful things about our business is after we build these facilities, unlike a traditional energy company, we don't have to drill or spend capital to produce our fuel. Right? If you remember what we do, we drop PVC pipes into landfills and have perforations, and we connect them all together, and we apply a little bit of suction to gather all that gas to our facilities.
Speaker Change: Yeah, I appreciate all that color, Adam and Scott.
Speaker Change: So...
Speaker Change: For my second question, I guess just wondering if you have an update.
Speaker Change: on the ITC and any thoughts on timing there or, you know, potential risks.
Speaker Change: you might see.
Speaker Change: If we have a change in administration.
Speaker Change: and Logan.
Speaker Change: Yeah, another good question. This is Adam here. So I think...
Ryan Pfingst: And the facilities themselves, if you look across the portfolio where it sits today, it's in the single digit millions of maintenance CAPEX. And these are 20, 25 year assets, you know, and some of our gas rights, you know, even go out longer. So when you really think about us, you know, and the valuation of local fuels, you know, our discretionary free cash flow after we build these facilities is really pretty phenomenal.
Adam: I think we're in a pretty good spot in terms of getting a final
Adam: A final rule that we think likely will include our R&G projects for that saleable ITC credit.
Ryan Pfingst: And that discretionary free cash flow can be used to invest in new projects, and that's what we're doing today, because we still see, you know, really attractive opportunities to grow the business. And, you know, in the future, you've got other things you could be doing with that discretionary free cash flow, you could make acquisitions, you could, you know, pay a really healthy dividend. And there's all sorts of things that we think can be a powerful, you know, sort of shareholder value driving tool.
Speaker Change: As for timing, I feel like what we've been hearing is that Treasury does not want to just issue another piecemeal correction or on specifically Section 48
Adam: for R&G projects, they may be trying to issue one set.
Speaker Change: of Total Final Guidance on 48, and I think there may be some other issues that they're trying to work through and finalize, so I feel like our specific Section 48 final rule may be
Speaker Change: You know, just waiting as they finalize whatever else they're doing in Section 48.
Ryan Pfingst: And I think we're going to get back into that and start illustrating to folks, you know, not only is this really, you know, are we growing extraordinarily quickly from an adjusted EBITDA perspective, but that adjusted EBITDA, you know, translates into discretionary free cash flow to enhance shareholder value. So I'm thankful for the question. And, you know, we're going to start, I think, you know, showing better descriptors of growth catbacks versus maintenance catbacks and discretionary free cash flow.
Speaker Change: You know, I know folks have been saying, you know, late summer, we're in late summer, third quarter, so we're still anticipating that we'll see that.
Speaker Change: You know, hopefully soon. And...
Speaker Change: Um, so, um,
Speaker Change: You know, there's no change to how we're thinking about it in terms of total dollars that, you know, we think we'll be able to sell here as cash proceeds and, you know, we've told folks not included in our adjusted EBITDA, you know, something close to that to that 40 million range and we've been
Ryan Pfingst: So in total, as Scott was mentioning, our maintenance catbacks across renewable power and the RNG facilities is, you know, you know, you know, in the low, you know, between 10 and 20 million, I think if we, if we aggregated it all up and you look forward. And, you know, it's really, it's really attractive from that discretionary free cash flow perspective. Yeah, I appreciate all that color, Adam, and Scott.
Speaker Change: You know, in discussions with folks to, you know, even potentially, you know, close some of those sales as Treasury is still
Speaker Change: Thank you for coming out with that final guidance.
Speaker Change: You know, just in, you know, an addendum to that previous question that we talked about in terms of discretionary, you know, free cash flow, you know, you know, those kinds of levels may be available for us in the next several years, because I think everybody understands that it's everything that you place into construction this year that qualifies.
Adam Comora: So for my second question, I guess just wondering if you have an update on the ITC and any thoughts on timing there or potential risks you might see if we have a change in administration in November. Yeah, another good question, this is Adam here. So I think we're in a pretty good spot in terms of getting a final rule that we think likely will include our RNG projects for that saleable ITC credit.
Speaker Change: And we've got a host of projects that, you know, we think we're going to pre-qualify here before the end of the year. So if you want to think about our discretionary free cash flow over the next several years, that would be something else that's available to us.
Speaker Change: And, you know, we're still working through the accounting treatment of where it'll show up on the income statement.
Speaker Change: because they are saleable credits.
Speaker Change: You know, so still optimistic that we're going to get that positive final resolution, disappointed it's taking this long, but it's not slow enough down in terms of setting up projects to pre-qualify it and setting up our monetization for those credits when they ultimately get generated.
Adam Comora: As for timing, I feel like what we've been hearing is that Treasury does not want to just issue another piecemeal correction or on specifically Section 48 for RNG projects. They may be trying to issue one set of total final guidance on 48 and I think there may be some other issues that they're trying to work through and finalize. So I feel like our specific Section 48 final rule may be just waiting as they finalize whatever else they're doing in Section 48.
Speaker Change: I appreciate that Adam. I'll turn it back. Oh, sorry. Yeah. Yeah. Thanks Scott. Just reminded me I missed the change of administration and
Speaker Change: or I should say now potential change of administration, or at least change of party. We, you know, there's been a lot of Republican support for what we do, and I think there was a letter that was sent
Speaker Change: to the House Speaker signed by 18 or 20 Republicans.
Adam Comora: I know folks have been saying late summer, we're in late summer, third quarter. So we're still anticipating that we'll see that hopefully soon. So there's no change to how we're thinking about it in terms of total dollars that we think we'll be able to sell here as cash proceeds. We've told folks not include in our justice EBITDA, something close to that 40 million range and we've been in discussions with folks to even potentially close some of those sales as Treasury is still coming out with that final guidance.
Speaker Change: You know, talking about some of the benefits that are in the IRA and, you know, some of the tax credits that go along with it.
Speaker Change: You know, I don't think that the Section 48 is at particular risk.
Speaker Change: And there is a lot of Republican support for specifically this tax credit within the IRA. So we don't think that there's a lot of risk that necessarily this piece of the IRA will fall under that kind of scrutiny.
Speaker Change: Got it. Thanks for that additional detail.
Speaker Change: Thank you. Our next question comes from Adam Bubes with Golden Saks. Your line is now open.
Adam Bubes: Hi, good morning.
Adam Bubes: Can you update us on just how you're thinking about your capacity to build fuel stations if demand for the 15 liter natural gas engine takes off, you know, how many fuel stations could you build in a given year?
Adam Comora: And just an addendum to that previous question that we talked about in terms of discretionary free cash flow, those kinds of levels may be available for us in the next several years because I think everybody understands that it's everything that you place into construction this year that qualifies. And we've got a host of projects that we think we're going to pre-qualify here before the end of the year. So if you want to think about our discretionary free cash flow over the next several years, that would be something else that's available to us.
Adam Bubes: Adam Contino. Thanks for joining us. We hope to see you again next week. Until then, thanks for listening. We'll see you next time.
Speaker Change: So our current our current build is is in that 40 range 40 to 50 range. And that's sort of how we're set up today. I would say it would, you know, in terms of scaling up that business.
Speaker Change: You know, it would not be difficult for us. We don't have many...
Speaker Change: constraints to how we would continue to add.
Adam Comora: And we're still working through the accounting treatment of where it'll show up on the income statement because they are saleable credits. So still optimistic that we're going to get that positive final resolution disappointed. It's taking this long, but it's not slow enough down in terms of setting up projects to pre-qualify it and setting up our monetization for those credits when they ultimately get generated. Thank you. I appreciate that, Adam. I'll turn it back.
Speaker Change: a scaling capacity there. It would be to continue to add to our staff, quite frankly, both on the construction side and the service side. And, you know, Opal Fuels is in a little bit, you know, we like to think of ourselves as being unique in a lot of ways. One of the ways that we're unique is our ability to attract talent.
Speaker Change: You know, a lot of folks out there want to be part of the Opal Fuels team, really like what we're doing.
Adam Comora: Oh, sorry, yeah. Thanks, Scott. Just reminded me. I missed the change of administration or I should say now potential change of administration or at least change of party. There's been a lot of Republican support for what we do and I think there was a letter that was sent to the House Speaker signed by 18 or 20 Republicans talking about some of the benefits that are in the IRA and some of the tax credits that go along with it.
Speaker Change: We think we'll be in a good spot to continue to add service techs and construction teams.
Speaker Change: To scale up that business and really don't see any constraints from that perspective if Cummins and others are right in the industry for what the uptake will be for that 15 liter engine.
Adam Comora: I don't think that the section 48 is at particular risk and there is a lot of Republican support for specifically this tax credit within the IRA. So we don't think that there's a lot of risk that necessarily this piece of the IRA will fall under that kind of scrutiny. Thank you. Thanks for that additional detail. Thank you.
Speaker Change: And then as we think about the Burlington and Cottonwood project, what's the marked market on how you're thinking about project timing today?
Speaker Change: So, um...
Speaker Change: You know, it's interesting because the pulp project which is coming online in Q4, we expect that to be early Q4 and that project will hit around a 15 or 16 month time frame.
Speaker Change: So, um...
Speaker Change: I would say that's kind of at the faster end of our projects.
Speaker Change: We're certainly focused more on the time period leading up to getting projects into construction to ensure that those construction timeframes remain tight, you know, for a project.
Adam Comora: Our next question comes from Adam Lewis with Goldman Sachs. Your line is now open. Hi, good morning. Can you update us on just how you're thinking about your capacity to build fuel stations if demand for the 15-liter natural gas engine takes off. How many fuel stations could you build in a given year? So our current build is in that 40 range, 40 to 50 range and that's how we're set up today.
Speaker Change: An average project, we would think an 18 to 20 month period would be a reasonable time frame for us. Recollect that, you know, when we put a project into construction,
Speaker Change: We have a basic project design, we have the gas rights executed, and a path to pipeline and electric interconnection supply. So those are some of our key...
Speaker Change: Critical path items for putting a project into construction. Some people define construction differently the actual time of You know getting out and and starting to work
Adam Comora: I would say it would in terms of scaling up that business, it would not be difficult for us. We don't have many constraints to how we would continue to add a scaling capacity there. It would be to continue to add to our staff, quite frankly, both on the construction side and the service side. We like to think of ourselves as being unique in a lot of ways. One of the ways that we're unique is our ability to attract talent.
Speaker Change: You know, turning over the ground and putting in foundations and whatnot may occur somewhat later in the process.
Speaker Change: And certainly during that period, we'll complete the pipelines, we'll complete the rest of the permitting and other construction. Sometimes in the past, some of those other items have taken a little while longer to complete.
Speaker Change: And so it pushed us out. So, for example, on the Sapphire project, which is in commissioning right now, at the front end, the landfill was working on some issues.
Adam Comora: A lot of folks out there want to be part of the Opal Fuels team, really like what we're doing. We think we'll be in a good spot to continue to add service techs and construction teams to scale up that business and really don't see any constraints from that perspective if commons and others are right in the industry for what the uptake will be for that 15-liter engine. And then as we think about the Burlington and Cottonwood project, what's the marked market on how you're thinking about project timing today?
Speaker Change: Associated with PFAS and other things that that we that delayed our permitting by a couple months and so set that time frame longer, but You know we're seeing
Speaker Change: Projects in the future ought to reach that same 18 to 20 month time frame that I alluded to before.
Speaker Change: And then the last one for me, you know, in the beginning of the year, I think you got it towards an increase of R&G pending monetization in 2024 of $15 million. Can you just update us on how you're thinking about the difference between the timing of R&G monetization and actual production and the balance of the year?
Adam Comora: It's interesting because the pulp project which is coming online in Q4, we expect that to be early Q4 and that project will hit around up 15 or 16-month time frame. So I would say that's kind of at the faster end of our projects. We're certainly focused more on the time period leading up to getting projects into construction to ensure that those construction time frames remain tight. You know, for a project, an average project, we would think an 18 to 21th period would be a reasonable time frame for us, recollect that when we put a project into construction, we have a basic project design.
Speaker Change: Yeah, this is this is Adam here. We
Speaker Change: You know, once we started talking about our adjusted EBITDA, you know, not...
Speaker Change: You know, having that RNG pending monetization component, we still think it's helpful to for folks to see what is being sold in a given quarter and pricing and that sort of thing to get a sense of, you know, how the operations are performing.
Speaker Change: We don't see any major changes to how we were thinking about it, but we just don't think it's as impactful anymore to talk about as a guidance metric, and likely as we move into 25 and beyond, likely not be talking about that as much and talking more about what our production outlook and adjusted EBITDA outlook is and that sort of thing.
Adam Comora: We have the gas rights executed and a path to pipeline and electric interconnection supply. So those are some of our key critical path items for putting a project into construction. Some people define construction differently. The actual time of getting out and starting to work, you know, turning over the ground and putting in foundations and whatnot. It may occur somewhat later in the process. And certainly during that period will complete the pipelines will complete the rest of the permitting and other construction.
Speaker Change: I think I can illuminate another part of your question, and that is that...
Speaker Change: We look at our production across the year and we will sell when the market
Speaker Change: When we feel that the market is in a good place, those credits on a forward...
Speaker Change: basis so that
Speaker Change: As Adam said earlier in his comments, we've sold, as he put it, a vast majority.
Adam: of our credits for the year. Typically, we'll look at credit at the projects that are in operation and try to sell as much of those as we can during the course of a given year. As projects come online and complete their commissioning, we'll start to sell those as well.
Adam Comora: Sometimes in the past, some of those other items have taken a little while longer to complete. And so it pushed us out. So for example, on the Sapphire projects, which is in commissioning right now, at the front end, the landfill was working on some issues associated with PFAS and other things that we delayed our permitting by a couple of months. And so set that time frame longer. But, you know, we're seeing projects in the future ought to reach that same 18 to 20 month time frame that I alluded to before.
Speaker Change: Credits are generally saleable within the current year or the current vintage year.
Speaker Change: and with regard to 2025.
Speaker Change: In the merchant RIN market, there's not really a deep market there yet. That'll develop towards the end of the year. So, Adam, I don't know if you wanted to add to that. Yeah, no, I think maybe I missed that nuance in the question. You know, we are anticipating selling all of our RINs that we generate.
Adam Comora: And then the last one for me, you know, in the beginning of the year, I think you got it towards an increase of RNG pending monetization in 2024 or $15 million. Can you just update us on how you're thinking about the difference between the timing of RNG monetization and actual production and the balance of the year? Yeah, this is Adam here. We, you know, once we started talking about our adjusted EBITDA, you know, not, you know, having that RNG pending monetization component, we still think it's helpful for folks to see what is being sold in a given quarter and pricing and that sort of thing to get a sense of, you know, how the operations are performing.
Adam: in 2024, in the calendar year of 2024.
Adam: Got it. Very helpful. Appreciate the call.
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone. Again, that is star 11 to ask a question.
Speaker Change: Our next question comes from Alex Kania with Marathon Capital. Your line is open.
Alex Kania: Hi, good morning. Thanks for taking my question.
Alex Kania: Maybe the first thing I was curious about is just as you look to, you know, in the face of the updated production guidance for this year, do you expect that really by year-end that all of the, you know, operating and commissioning assets are going to be roughly at full expected run rate, or will it still be a little bit more to go as you move into early 2025?
Adam Comora: I, you know, we don't see any major changes to how we were thinking about it. But, you know, we just don't think it's as impactful anymore to talk about as a guidance metric. And, you know, likely as we move into 25 and beyond, you know, likely not be talking about that as much and talking more about what our production outlook and adjusted EBITDA outlook is and that sort of thing. I think I can illuminate another part of your question and that is that we look at our production across the year and we will sell when the market, when we feel that the market is a good place, those credits on a forward basis.
Speaker Change: Yeah, this is this is Adam here. So just wanted to provide a little bit more color on on the production outlook in in some of the newer facilities that have been have been commissioned.
Speaker Change: And, you know, you can see some of that variability in the ramp of those new facilities from time to time. And specifically this year at Prince William, we had done a significant amount of well field drilling and expansion at that landfill before the facility came online.
Adam Comora: So that, as Adam said earlier in his comments, we've sold as he put in a vast majority of our credits for the year, typically we'll look at credits at the projects that are in operation and try to sell as much of those as we can during the course of the given year. As projects come online and complete their commissioning, we'll start to sell those as well. And credits are generally saleable within the current year or the current vintage year.
Speaker Change: and we were not able to tie in all those well field improvements and expansions.
Speaker Change: into the broader collection system before we began operating the facility. And the root cause of that was really flare capacity that the municipality had in terms of us collecting the additional gas and flowing that additional gas.
Speaker Change: and
Speaker Change: When we when we tied in the well field expansion and and drilling into the base collection system
Speaker Change: There, you know, there was a little bit of a slower tie-in and seeing the gas flow from
Adam Comora: And with regard to 2025 in the merchant market, there's not really a deep market there. Yeah, that will develop towards the end of the year. So Adam, I don't know if you wanted to add to that. Yeah, no, I think maybe I missed that nuance in the question. You know, we are anticipating selling all of our rims that we generate in 2024 in the calendar year of 2024. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Again, that is star 1-1 to ask a question.
Speaker Change: from those additional wells. So we've done, you know, we're in the process of remediating them and, you know, re-drilling some of them.
Speaker Change: You know, we believe it's short-term in nature and for us, we think short-term means several months.
Speaker Change: So, you know, we've been a little bit conservative for when we'll see, you know, the gas production from that well field expansion and...
Speaker Change: You know, we are, I'd say, cautiously optimistic that, you know, we'll start to see all those improvements in the gas flowing from the expansions that we had done, you know, as we move through the balance of the year and certainly provide, obviously, our 2025 guidance.
Alex Kania: Our next question comes from Alex Kania with Marathon Capital. Your line is open. Hi, good morning. Thanks for taking my question. Maybe the first, I think I was curious about is just as you look to, you know, in the face of the updated production guidance for this year, do you expect that really by year end that all of the, you know, operating and commissioning assets are going to be roughly at full expected run rate, or will it still be a little bit more to go if you move into early 25?
Speaker Change: you know, sort of later on when we issue.
Speaker Change: Our final year results, but you know, that's that's how we think about, you know, sort of short term in nature and and the plant is performing excellent in terms of its processing of its of its inlet gas and
Speaker Change: So that's the one issue that popped in terms of our production. And we're also continuing to optimize the equipment at our Emerald facility to be appropriately scaled to the size of the project. And you all may recall that it's one of the largest R&G projects in the country.
Alex Kania: Yeah, this is Adam here. So just wanted to provide a little bit more color on the production outlook in some of the newer facilities that have been commissioned. And, you know, you can see some of that variability in the ramp of those new facilities from time to time. And specifically this year at Prince William, we had done a significant amount of well-filled drilling and expansion at that landfill before the facility came online.
Speaker Change: and, you know, certain scalability that we're still optimizing when you're looking at the compressor size that we used there or deoxy SCID that we used there. And again, those are relatively short-term in nature as we continue to optimize that equipment. And really, that's really on the margin there. So, you know, I feel like both of those facilities will show good growth as we move into 2025.
Alex Kania: And we were not able to tie in all those well-filled improvements and expansions into the broader collection system before we began operating the facility. And the terms of us collecting the additional gas and flowing that additional gas. And when we tied in the well-filled expansion and drilling into the base collection system, there was a little bit of a slower tie in and seeing the gas flow from those additional wells. So we've done, you know, we're in the process of remediating them and, you know, re-drilling some of them.
Speaker Change: And just to repeat things that we've talked about in the past, that...
Speaker Change: We build projects to a size larger than the current gas resource because these...
Speaker Change: Landfills that we're on are all open and growing landfills.
Speaker Change: And so over time, you'll see these projects continue to improve as we call same-store sales.
Speaker Change: As the gas resource continues to grow, we reach fairly quickly on each of these projects an availability and efficiency.
Speaker Change: for these projects.
Speaker Change: In the kind of low to mid 90s range, which when multiplied together gives you kind of a mid 80% productivity factor.
Alex Kania: And, you know, we believe it's short-term in nature. And for us, we think short-term means several months. So, you know, we've been a little bit conservative for when we'll see, you know, the gas production from that well-filled expansion. And, you know, we are, I'd say cautiously optimistic that, you know, we'll start to see all those improvements in the gas flowing from the expansions that we had done, you know, as we move through the balance of the year and certainly provide obviously our 2025 guidance, you know, sort of later on when we issue our final year results.
Speaker Change: And so we look at both of those factors over time.
Speaker Change: The growth in same-store sales, the efficiency.
Speaker Change: and availability of our projects, and as Adam was talking about earlier, the ramp on the initial front end of the project.
Adam: Yeah, so it's our initial thinking just to, you know, sort of put a put a button on that is, you know, really more about 24 than 25 at those newer facilities.
Collar: Great, thanks for that, Collar. And then maybe just to follow up, you know, thinking about the, maybe on the fueling side and the Class VIII side.
Alex Kania: But, you know, that's how we think about, you know, sort of short-term in nature and the plant is performing excellent in terms of its processing of its inlet gas. And, you know, so that's the one issue that popped in terms of our production. And we're also continuing to optimize the equipment at our emerald facility to be appropriately scaled to the size of the project. And you all may recall that it's one of the largest RNG projects in the country.
Speaker Change: You know, I know that, you know, the phase three final rules were out, and I think there have been some revisions, but just kind of wondering about how you think about, you know, the kind of adoption or the pace of acceleration, or accelerating pace, I should say, on, you know, CNG-related vehicles as it, you know, as it stands relative to kind of what EPA has been.
Alex Kania: And, you know, certain scalability that we're still optimizing when you're looking at the compressor size that we use there or deoxy-skid that we use there. And, again, those are relatively short-term in nature as we continue to optimize that equipment. And really, that's really on the margin there. So, you know, feel like both of those facilities will show good growth as we move into 25. And just to repeat things that we've talked about in the past that we build projects to a size larger than the current gas resource because these landfills that we're on are all open and growing landfills.
Speaker Change: and then kind of give an interview.
Speaker Change: Thank you. Aaron Reckford Jack Contino Scott Contino reduz Adam Comora Scott Contino Tout Adam Comora Adam Comora Scott Contino iz Richard Chong Tony Sivitz Battie
Speaker Change: That is a really interesting question and it dovetails into a couple of things.
Speaker Change: So, on the 15-liter itself, you know, really pleased with the feedback that we're hearing, really pleased that Freightliner is going to be rolling it out and make available for those that like to buy Freightliner trucks and to join PACCAR, and, you know, really think that it's going to be a terrific product for fleets.
Speaker Change: To replace diesel and save money. And if they're working with an RNG supplier, they'll get all the sustainability benefits with it as well. And, you know, there have been a couple of things out there which...
Speaker Change: You know, I feel like, um, you know,
Speaker Change: I would say, you know, not accelerating adoption. How's that? And one of them is that noise that has come out of the EPA on Phase 3.
Alex Kania: And so, over time, you'll see these projects continue to improve as we call same-store sales as the gas resource continues to grow. We reach fairly quickly on each of these projects, a availability and efficiency, for these projects in the kind of low to mid 90s range, which when multiplied together gives you kind of a mid 80% productivity factor. And so we look at both of those factors over time, the growth and seems to ourselves, the efficiency and availability of our projects.
Speaker Change: Truck Regulations, which I do believe, you know,
Speaker Change: People are starting to listen to industry feedback on You know people in DC. I think are going to you know are starting to listen to what industry is telling them
Speaker Change: about those Phase III regs.
Speaker Change: You know, it's one of the interesting things that we and folks in our sector and our industry are really focused on is really educating the democratic side of things or the more progressive climate side of things.
Speaker Change: that not all molecules are bad.
Alex Kania: And as Adam was talking about earlier, the ramp on the initial front end of the project. Yeah, so it's our initial thinking just to, you know, sort of put a button on that is, you know, really more about 24 than 25 at those Nord facilities. Great.
Speaker Change: You know, specifically in our industry, we're collecting.
Speaker Change: Waste Molecules that exist and you know transportation fuel and heavy-duty trucking is a terrific application form where where other technologies are are not are struggling to meet you know sort of emission reductions for for transportation and
Adam Comora: Thanks for that color. And then maybe just to follow up, you know, thinking about the, maybe on the fueling side and the class eight side, you know, I know that, you know, the phase three final rules were out. I think there were having some revisions, but just kind of wondering about how you, how you think about, you know, the kind of adoption or the pace of acceleration or a coloring base, I should say on, you know, CNG related vehicles as it stands relative to kind of what EPA has been kind of giving in terms of their guidance.
Speaker Change: So, you know, we spend a lot of time talking to Republicans about, you know, hey, this is a really great pragmatic solution and really supports a lot of, you know, Republican constituencies in ag and municipalities and rural communities that we should be incentivizing and recognizing the benefits of collecting biogas emissions at their source.
Adam Comora: Oh, that is, that is a really interesting question. And it, and it, and it dovetails into into a couple of things. So on the 15 liter itself, you know, really pleased with, with the feedback that we're hearing, really pleased that freight liners going to be rolling, rolling it out and, and make available for those that like five freight liner trucks and to join PACR. And, you know, really think that it's going to be a terrific product for, for fleets to replace diesel and save money.
Speaker Change: and and specifically with Republicans talking to them about we you know we should really be also embracing some of these electron policies whether it be erins or other things that that promote renewable electricity and and on the Democratic side is really explaining to them that you know you know combustion of molecules you know isn't always bad depending on where it comes from and and what the other options are there
Speaker Change: So yes, the phase three EPA regs have created some noise.
Speaker Change: have created some confusion, you know, have, you know, had, you know, some fleets say, hey, wait a minute, what do those mean for me deploying RNG? And, you know, look, that's one of the things that we're focused on and doing.
Adam Comora: And, and if they're working with an RNG supplier, they'll get all the sustainability benefits with it as well. And, you know, there've been a couple of things out there which, you know, I feel like, you know, I would say, you know, not accelerating adoption. How's that? And, and one of them is that noise that has come out of the, the EPA on, on phase three truck regulations, which, which I do believe, you know, you know, people are starting to listen to industry feedback on, on, you know, people in DC, I think are going to, you know, are starting to, to listen to, to what industry is telling them about those, those phase three regs.
Speaker Change: You know, different political outcomes have different...
Speaker Change: You know, areas of focus for us to do education and advocacy wise.
Speaker Change: and and that's one where if there is a Republican administration you know I think I think we could be off to the races on on on the use of
Speaker Change: R&G in heavy-duty trucking and maybe have a little bit more work to do on the electric policies whether they be e-RINs or some other incentives for renewable power and and we can all talk about electricity demand and what's happening in this country and why this is a good answer and and if the Democrats happen to win the White House I think we're off to the races on a lot of those electricity policies whether it be e-RINs or other things and we got a little work to do to make sure that
Adam Comora: And, you know, it's, it's one of the interesting things that we and, and, and folks in our sector and our industry are, are really focused on is, is really educating the democratic side of, of, of things or, or the more progressive climate side of things, that not all molecules are bad. You know, specifically in our industry, we're, we're collecting waste molecules that exist. And, you know, transportation fuel and heavy duty trucking is a terrific application form where, where other technologies are, are not, are struggling to meet, you know, sort of emission reductions for, for transportation.
Speaker Change: Hey, this is a really good answer for heavy duty trucking and, you know, really work on those phase three regs. So, needless to say, we think whoever wins, both sides of those policies make sense, which is what we keep talking about. And, but it just, it'll just direct our focus on to, you know, which ones, you know, we really have to spend more time on.
Speaker Change: Great, thank you.
Alex Kania: Thanks, Alex.
Speaker Change: Thank you. Our next question comes from Thomas Merrick with Janney Montgomery Scott. Your line is open.
Adam Comora: And, you know, so, so, you know, we, we spend a lot of time talking to Republicans about, you know, hey, this is a really great pragmatic solution and really supports a lot of, you know, Republican constituencies in ag and municipalities and rural communities that we should be incentivizing and, and recognizing the benefits of, of collecting bio gas emissions at their source. And, and specifically with Republicans talking to them about, we, you know, we should really be also embracing some of these electron policies, whether it be earrings or other things that promote renewable electricity.
Thomas Merrick: Thanks gentlemen, thanks for taking the time for a few questions. Just want to touch base on the coming 15-liter, ask a question slightly different way, I know you've talked about it extensively so far. Just want to think through potential fleet owners
Speaker Change: As they look at supply and demand at C&G, are they contemplating kind of a front-loading of infrastructure needed for whatever scale of fleet they're looking to operate? Or do they look at it and think the supply of stations is
Speaker Change: Adequate for their needs. And then just to follow up.
Adam Comora: And, and on the democratic side is really explaining to them that, you know, you know, combustion of, of molecules, you know, isn't always bad, depending on where it comes from and, and what the other options are there. So, yes, the phase three EPA regs have created some noise, have created some confusion, you know, have, you know, had, you know, some fleets say, hey, wait a minute, what do those mean for me deploying RNG?
Speaker Change: Yeah, another another good question. So, you know, we're still in early days of deploying either CNG or RNG as transportation fuel for heavy duty trucking. And I would I would remind folks that 85 to 90% of what we build is really dedicated fueling distribution centers and now looking at potentially rolling out lanes for folks.
Speaker Change: between those distribution centers and and and that sort of thing. It takes us also about 12 to 14 months to build a fuel station which is about the same amount of time for their trucks to get delivered.
Adam Comora: And, you look, that's, that's, that's one of the things that, that we're focused on and, and doing and, you know, you know, different political outcomes have different, you know, areas of focus for us to do education and advocacy wise. And, and that's one where, if there's a Republican administration, you know, I think, I think we could be off to the races on, on, on the use of RNG in heavy duty trucking and maybe have a little bit more work to do on the electric policies, whether they be earrings or some other incentives for renewable power.
Speaker Change: So we see the, you know, we see those fleets making those decisions at the same time, you know, on fueling infrastructure as they're ordering trucks and they typically go hand in hand where, you know, okay, they're happy with the truck, they know what they're speccing, they're ordering them, and then they're engaged in their fueling strategy. You know, one interesting thing for Opal Fuels is the beautiful nature of our vertical integration.
Adam Comora: And, and we can all talk about electricity demand and what's happening in this country and why this is a good answer. And, and if the Democrats happen to win the White House, I think we're off to the races on a lot of those electricity policies, whether it be earrings or other things. And, we got a little work to do to make sure that, hey, this is a really good answer for, for heavy duty trucking and, you know, really work on those phase three regs.
Speaker Change: and how, you know, certainly RNG has captured the attention of a lot of these fleets.
Speaker Change: because they're also looking for ways to reduce their Scope 1 and Scope 2 emissions. And I would remind folks when fleets use R&G versus diesel, the Greenhouse Gas Accounting Protocol is zero Scope 1 emissions.
Speaker Change: and also Xero Scope 2 because, you know, that's derived from your electricity usage. So this is a really powerful product for them and...
Adam Comora: So, needless to say, we think whoever wins, both sides of those policies make sense, which is what we keep talking about. And, but it just, it'll just direct our focus on to, you know, which ones, you know, we really have to spend more time on.
Adam Comora: Great. Thank you. Thanks, Alex.
Speaker Change: You know, so they're engaging with us at the same time that they're thinking about that truck order and really working with us to make sure that, you know, the fuel station is aligned and they can get their fuel as those trucks are being delivered.
Thomas Meric: Thank you. Our next question comes from Thomas Meric with Janie Montgomery, Scott. Your line is open. Thanks, gentlemen. Thanks for taking the time for a few questions. Just want to touch base on the coming 15-liter, ask a question slightly different way, and you talk about it extensively so far. Just want to think through potential fleet owners, as they look at supply and demand at CNG, are they contemplating front loading of infrastructure needed for whatever scale of fleet they're looking to operate, or do they look at it and think the supply of stations is adequate for their needs, and then another good question.
Speaker Change: me
Speaker Change: Thanks super helpful and then my follow-up is really on EPA rules or potential EPA rules as they look to
Speaker Change: potentially update their landfill emission standards from 2016.
Speaker Change: I'm curious just how you think about that opportunity, what are the puts and takes from the stakeholders, you know, I know it's early days, the rule hasn't even been proposed yet, but any color you could provide to us would be helpful just as we contemplate the future of landfill gas and what the EPA is requiring.
Speaker Change: Yeah, so, um, I think the EPA is, is, is, is really focused on methane emissions wherever they come from. And, and, and quite frank, quite frankly, rightfully so, you know, 80% more damaging than, than CO2 and really the most impactful thing we can do.
Thomas Meric: We're still in early days of deploying either CNG or RNG as transportation fuel for heavy duty trucking, and I would remind folks that 85-90% of what we build is really dedicated fuel distribution centers, and now looking at potentially rolling out lanes for folks between those distribution centers, and that sort of thing. It takes us also about 12-14 months to build a fuel station, which is about the same amount of time for their trucks to get delivered.
Speaker Change: So they are looking at methane emissions from a variety of places, and they already came out with a lot of regulations on pipeline companies and E&P companies on how they're going to do methane monitoring and that sort of thing.
Speaker Change: And, you know, I think they're moving on to other sources of methane as well. And I think EPA recognizes and folks in D.C. recognize that it's really important to continue to promote public policies that incentivize
Thomas Meric: We see those fleets making those decisions at the same time on fueling infrastructure as they're ordering trucks, and they typically go hand-in-hand, where they're happy with the truck, they know what they're speccing, they're ordering them, and then they're engaged in their fueling strategy. One interesting thing for opal fuels is the beautiful nature of our vertical integration, and how certainly RNG has captured the attention of a lot of these fleets, because they're also looking for ways to reduce their scope one and scope two emissions, and I would remind folks when fleets use RNG versus D use all the greenhouse gas accounting protocol is zero scope one emissions, and also zero scope two, because that's derived from your electricity usage.
Speaker Change: You know, the capture of biogas to make sure that it incentivizes the right behavior.
Speaker Change: And, you know, what technologies or how they're thinking about methane monitoring and measurement. I think a lot of that is being worked through and, you know, we don't have a specific opinion on how to do methane monitoring or that sort of thing. But what I do know is that focus on methane emissions or methane emissions from organic waste.
Speaker Change: You know, is likely going to come into focus and, you know, we think we're in a terrific, you know, place to help folks capture it and turn it into a beneficial use. So, um...
Thomas Meric: So this is a really powerful product for them, and so they're engaging with us at the same time that they're thinking about that truck order, and really working with us to make sure that the fuel station is aligned, and they can get their fuel as those trucks are being delivered. That's super helpful, and then my follow-up is really on EPA rules, or potential EPA rules, as they look to potentially update their landfill emissions standards from 2016.
Speaker Change: You know, we think it's going to be, you know, it's going to be a helpful talent for public policy and what we're doing. And, you know, we're happy to partner with folks to make sure we're capturing as many biogenic methane emissions that we can and turning them into their productive use.
Speaker Change: Our landfill partners.
Speaker Change: are super focused on collecting methane.
Speaker Change: and they recognize that this is a real opportunity.
Speaker Change: I think that the value of the R&G projects has really helped them to increase their focus as well.
Thomas Meric: I'm curious just how you think about that opportunity? What are the puts and takes from the stakeholders? I know it's early days, the rule hasn't even been proposed yet, but any color you could provide to us would be helpful, just as we contemplate the future of landfill gas and what the EPA is requiring. Yeah, so I think the EPA is really focused on methane emissions wherever they come from, and quite frankly, rightfully so, 80% more damaging than CO2, and really the most impactful thing we can do to halt climate change.
Speaker Change: As the more methane they're able to collect, obviously, that turns into higher royalties, as well as for those who have ownership interests in projects, higher...
Speaker Change: It's a great focus. In addition to the R&G projects that the policy makers, as they start to focus on methane emissions, particularly at landfills,
Speaker Change: You'll see that. Thank you.
Thomas Meric: So they are looking at methane emissions from a variety of places, and they already came out with a lot of regulations on pipeline companies and E&P companies on how they're going to do methane monitoring and that sort of thing. And I think they're moving that it's really important to continue to promote public policy, is that incentivize the capture of biogas to make sure that it incentivizes the right behavior. And what technologies or how they're thinking about methane monitoring and measurement, I think a lot of that is being worked through, and we don't have a specific opinion on how to do methane monitoring or that sort of thing, but what I do know is that focus on methane emissions or methane emissions from organic waste, is likely going to come into focus, and we think we're in a terrific place to help folks capture it and turn it into a beneficial use.
Speaker Change: The eRIN policy and others really help to promote that capture and conversion, and particularly at smaller landfills that may not have the scale to do a larger RNG project. So we'll be looking very closely at how we work with our great landfill partners.
Speaker Change: to promote that policy and increase that collection. Yeah, and really what it does is, you know, that focus on methane emissions, it's just going to create greater alignment.
Speaker Change: Between us and our feedstock hosts, where everybody is going to be aligned to make sure we're doing everything that we can to maximize the gas collection and its productive use.
Speaker Change: Great, thanks gentlemen, appreciate the feedback.
Speaker Change: Thank you.
Speaker Change: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Adam Comora for closing remarks.
Adam Comora: Yeah, I appreciate everybody's interest in Opal Fuels. We are really excited about what we're doing here and our growth outlook and I hope everybody has a wonderful rest of their day.
Thomas Meric: So we think it's going to be a helpful talent for public policy and what we're doing. And we're happy to partner with folks to make sure we're capturing as many biogenic methane emissions that we can and turning them into their productive use. Our our landfill partners are super focused on collecting methane and they recognize that this is a real opportunity. I think that the value of the RNG projects has really helped them to increase their focus as well.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
Thomas Meric: As the more methane they're able to collect, obviously, that turns into higher royalties as well as for those who have ownership interest in projects, higher equity distributions as well. So it's a great focus in addition to the RNG projects that the policy makers, as they start to focus on methane emissions, particularly at landfills, you'll see that the E-Rin policy and others really help to promote that capture and conversion. And particularly at smaller landfills that may not have the scale to do a larger RNG project.
Thomas Meric: So we'll be looking very closely at how we work with our great landfill partners to promote that policy and increase that collection. Yeah, and really what it does is that focus on methane emissions, it's just going to create a greater alignment between us and our feedstock hosts where everybody's going to be aligned to make sure we're doing everything that we can to maximize the gas collection and its productive use. Great, thanks, John. I'm going to appreciate the feedback. Thank you. I'm showing you no further questions at this time.
Adam Comora: Now let's turn it back to Adam Kamora for closing remarks. Yeah, I appreciate everybody's interest in open fuels. We are really excited about what we're doing here and our growth outlook. And I hope everybody has a wonderful rest of their debt.
Operator: This concludes today's conference call. Thank you for participating. You may now.