Q4 2024 OPAL Fuels Inc Earnings Call
Okay.
Speaker Change: Good morning, and welcome to the Opel fuels fourth quarter 2024 earnings call and webcast. At this time all participants are in listen only mode.
Speaker Change: After the Speakers' presentation, there'll be a question and answer session.
Speaker Change: A question. During this session you will need to press star one on your telephone.
Speaker Change: In here automated message advising our hand as race.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: As a reminder, this event is being recorded I'll now turn the call over to Todd Firestone Vice President of Investor Relations to begin. Please go ahead.
Jonathan Tomorrow: Thank you and good morning, everyone and welcome to the <unk> fuels fourth quarter and full year 2024 earnings conference call with their co CEO of <unk> Jonathan Tomorrow.
Speaker Change: Kazakhstan, <unk> Chief Financial Officer.
Speaker Change: Although fuels released financial and operating results for the fourth quarter and full year 2024 yesterday afternoon, and those results are available on the Investor Relations section of our website at <unk> Dot com.
Speaker Change: The presentation and access to the webcast for this call are also available on our website. After completion of today's call. A replay will be available for 90 days before we begin I would like to remind you that our remarks, including answers to your questions contain forward looking statements, which involve risks uncertainties and assumptions.
Speaker Change: 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 two and three of our presentation.
Speaker Change: These forward looking statements reflect our views as of the date of this call.
Speaker Change: And <unk> does not undertake any obligation to update forward looking statements to reflect events or circumstances. After the date of this call.
Speaker Change: Additionally, this call will contain certain discussion of non-GAAP measures a definition of non-GAAP measures. The reconciliation of these measures to the nearest GAAP 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 quarter's results recent highlights and an update on our strategic and operational priorities.
Jon will then give a commercial and business development update after which Kathy will review financial results. We will then open the call for questions.
Speaker Change: Now ill turn the call over to our co CEO of opioids.
Speaker Change: Thank you Todd and good morning, everyone and thank you for participating in <unk> fourth quarter and full year 2024 earnings call.
2024 was a strong year for Opel fuels that showcased our disciplined execution across our business segments and the strength of our vertically integrated platform. Both key drivers of our market share gains across our segments.
Speaker Change: Results from the fourth quarter and full year were solid with 2024, adjusted EBITDA of $90 million in line with our guidance. Our 2024 fuel station service segment, EBITDA was $40 2 million, 76% higher versus 2023 and within the guidance. We set out for this segment last March.
Speaker Change: R&D fuel production for 2024 was $3 8 million and then to use up 41% versus 2023, but slightly behind guidance of $4 8 million F&B to use.
Speaker Change: The shortfall was mainly due to a longer ramp up time lines at our newly commissioned R&D facilities.
Speaker Change: John will go into greater detail in a few minutes of what we expect in 2025 from a production and operation standpoint.
Speaker Change: We brought online three large landfill R&D projects in 2024 totaling $3 8 million <unk> of annual design capacity.
Speaker Change: We commenced commercial operations at Prince William in the Spring then at Sapphire in the third quarter and finally at <unk> in the fourth quarter.
Speaker Change: Since going public in 2022, we've gone from two operating landfill R&D facilities to 11 now over that period, we've more than tripled our annual design capacity in operation and more than doubled our production in adjusted EBIT.
Separately, we continue to execute our growth objectives by putting projects into construction in 2024, we put nearly $2 million to use of annual design capacity into construction with the announced projects at Cottonwood, Burlington and Kirby all three of which showcase our ability to grow organically through new.
Speaker Change: <unk> opportunities.
Speaker Change: <unk> growth continues to be driven by our execution in building and operating successful R&D projects and our vertical integration, which provides the most value for <unk> and our feedstock partners.
Speaker Change: Our 17 R&D projects that are in operation and construction trials have been the result of securing new gas rates over the past three years and five were a combination of acquisition and conversion of existing landfill gas to electric projects.
Speaker Change: We see growth of our RMG production base, driven by continuation of such project opportunities.
Speaker Change: Our fuel station service segment also had a solid year of execution meeting our growth objectives for the year.
We talk a lot about the strategic value of our downstream segment, but it is worth highlighting the attractiveness of the segment on a standalone basis.
The fuel station service segment provides diversification predictable cash flows attractive returns on capital and a large and sustainable growth opportunity natural gas and cheaper cleaner alternative to diesel fuel for class eight heavy duty fleets is only fueling around 2%.
Speaker Change: Of that market in the U S.
Speaker Change: An enormous opportunity to cost effectively decarbonize that sector as other technologies continue to struggle to meet the operational needs of those fleets.
Speaker Change: With the introduction of the 15 liter engine, we're optimistic fuel station services will be an increasingly important part of our capital allocation strategy.
I'd like to mention some additions to our leadership team since our last call. We're excited that Kathy Hassan has joined as Chief Financial Officer of <unk> fuels coffee is an experienced leader who is already adding tremendous value to our team.
Speaker Change: I'd also like to thank Scott <unk>, who served as our interim Chief financial officer for over a year.
Speaker Change: <unk> is the consummate professional and I know Ford Istar will enjoy having his full attention now that Kathy has joined Opal.
Speaker Change: We also hired Darryl Burke as EVP of biogas operations in December Daryl.
Speaker Change: Daryl brings a wealth of operational experience from a long career of Koch industries, we're fortunate to be able to fill these important leadership positions with the caliber of professionals like causey and Daryl and their impacts are already being felt throughout the organization.
Speaker Change: We expect 2025 will be another year of growth adjusted EBITDA is expected to range from $90 million to $110 million and is based on the 2025 RMG production guidance of five to $5 4 million Btu, 30% to 40% higher versus 2024 at a RIN price assumption of $2 <unk>.
Speaker Change: <unk> per RIN.
Speaker Change: This 2025 RIN prices approximately 50 per gallon below 2020 fours realized price.
Speaker Change: At last year's RIN price, our guidance would be approximately $30 million higher.
Speaker Change: Every 10% shift in <unk> RIN price equates to an approximate $5 million to $6 million impact on 2025 adjusted EBITDA.
The 2025 adjusted EBITDA range includes fuel station services, adjusted EBITDA growth of 30% to 50% in 2025 versus 2024.
However, our guidance excludes approximately $50 million of expected ITC sales in 2025% compared to the approximately $9 million in 2024, which will contribute meaningfully to operating cash flow growth and earnings per share in.
Speaker Change: In addition, our renewable power adjusted EBITDA is experiencing about a $10 million decline in 2025 versus 2024 due to Europe, no longer certifying U S biogas for its regulatory programs.
I also want to comment on the current regulatory environment and why we remain bullish on RMG as an American biofuel.
Speaker Change: RMG and renewable power from biogas are attractive sources of renewable energy because they are sourced from a stable and growing feedstock or drop in fuels that use proven and cost effective technology.
Speaker Change: R&D is here today in heavy duty trucking and increasingly in marine fuel RMG as an American biofuel that aligns quite well with other American liquid biofuels from the agricultural sector within the RFS and other potential public policies with that I'll turn it over to John John.
John: Thank you Adam and good morning, everyone.
John: 2024 was a strong year for Opel fuels, we're particularly pleased that we brought online three large landfill R&D projects.
John: Prince William Sapphire in Polk, our significant achievements in total they represent $3 6 million Btu of annual designed capacity.
Exiting 2024, we now have 11 R&D projects in operation, representing an annual design capacity of $8 8 million Btu.
John: Up from $3 9 million Btu at year end 2022.
This represents a 50% annualized growth rate over the last two years.
As Adam mentioned production results, while significantly higher than 2023 did not meet our expectations full year 2020 for RMG production was $3 8 million Btu.
John: For 2020 for RMG production was affected by slower ramp up of the newly online projects in the fourth quarter.
John: As we move through the ramp up period from these facilities in the first quarter, we expect to see production growth from these facilities.
John: And landfill volumes grow at our other operating facilities.
We expect to see full year 2025, LNG production to range between $5 million <unk> to five 4 million <unk>, which at the midpoint.
37% increase versus 2024.
John: Shifting gears to our landfill construction portfolio, we put three landfill R&D projects into construction in 2024 at Burlington, Cottonwood, and Kirby, representing an aggregate $1 8 million Btu of annual design capacity.
John: Now have a total of four landfill R&D projects in construction, representing $2 1 million Btu of Opel share of annual design capacity, including Atlantic, which we expect to commence commercial operation in the third quarter of this year.
John: We have a robust development pipeline, including the four development projects, we recently announced and conversion opportunities within our renewable power portfolio.
John: We expect to place 2 million Btu in construction in 2025.
John: In fuel station services, we entered the year with a solid backlog of new stations with 47 in construction of which 20 are open wound.
John: Adam mentioned, we expect to grow fuel station services 2025, adjusted EBITDA, 30% to 50% compared with 2024.
John: This growth continues to be driven by our successful track record building operating and maintaining highly reliable stations.
John: Replicating a diesel like fueling experience without operational disruptions.
With Opel fuels nationwide construction and service capabilities, we are in a strong position to partner with large scale fleets.
For natural gas vehicle deployment.
John: We're happy with where we are positioned for 2025, despite the near term volatility.
John: Longer term market fundamentals are supportive of our business plan.
John: And growth and we expect our disciplined execution will result in increasing shareholder value.
Speaker Change: With that it is my pleasure to introduce <unk> <unk>, New Chief Financial Officer.
Speaker Change: He will discuss the quarter's financial performance, causing.
Speaker Change: Thank you John.
Speaker Change: Good morning to all the participants on today's call.
Speaker Change: Last night, we filed our earnings press release, which details our quarterly and annual results for the quarter and year ending December 31 2024.
Speaker Change: Our 10-K will be filed on Monday.
Speaker Change: Revenue and adjusted EBITDA in fourth quarter were $80 million and $22 6 million as compared to $87 million and $32 million in the same quarter in 2023, respectively.
Speaker Change: Net loss for the quarter was $5 4 million as.
As compared to net income of $20 1 million in 2023.
Speaker Change: The main driver for the decrease in revenue adjusted EBITDA and earnings.
Speaker Change: Was the timing and pricing of.
Speaker Change: Environmental credit sales compared to the fourth quarter of 2023.
Speaker Change: For the full year 2020 for revenue adjusted EBITDA and net income were 299, 990.0, and $14 3 million compared to $256 151, nine and $127 million in 2023.
Speaker Change: <unk>.
Primary reason for the decrease in net income for 2024.
Is it related to a gain of 129 million recognized.
Speaker Change: Related to the deconsolidation of MRO and supplier in 2023.
Speaker Change: Included in the foregoing is awful share of adjusted EBITDA from equity method investments.
Speaker Change: Which for the quarter was $4 2 million as.
Speaker Change: As compared to $6 7 million in the fourth quarter of 2023.
Speaker Change: And our full year 2024 was $24 9 million versus <unk>.
$11 4 million in 2023.
Speaker Change: The reduction in the fourth quarter is a combination of the timing of last year's <unk> sales and the startup cost expense at new joint venture projects.
Speaker Change: Full year capital expenditures were $162 3 million, including $35 2 million relating to equity method investments.
Speaker Change: I would now want to shift gears to our 2025 guidance.
Speaker Change: Full year 25 guidance, we expect.
The adjusted EBITDA to be between 90 and $110 million.
Speaker Change: And RMG production to range between five and $5 4 million <unk>.
Speaker Change: Our EBITDA guidance is based off the high and low range of our production forecast and assumes a $2 60 per gallon decrease in price.
As of December 31, 2024, our liquidity was $223 6 million.
Speaker Change: Consisting of $178 4 million of unused capacity.
Speaker Change: Under our $450 million senior secured credit facility.
Speaker Change: $29 million of unused capacity under associated revolver.
Speaker Change: And $24 3 million of cash cash equivalents and short term investments.
Speaker Change: In 2025.
Speaker Change: We expect approximately 50 million of cash proceeds from ITC sales.
Speaker Change: Bolstering both earnings and operating cash flow to continue to fund our investments.
Speaker Change: As we disclosed in recent filings we agreed to a 12 month extension of the drop period on the credit facility.
Speaker Change: Our liquidity.
Speaker Change: Anticipated cash flows from operations are sufficient to meet our anticipated funding needs.
Speaker Change: As I conclude my first earnings call as CFO of <unk> fields.
I want to express how generally impressed I am.
Speaker Change: By the extraordinary team we have in place.
Speaker Change: Including all leadership team led by Adam John.
Speaker Change: The team's proven ability to prudently execute our business plan combined with our disciplined and prudent approach to capital allocation positions us well to continue to capture and improve shareholder value.
Speaker Change: I'm truly glad to be part of the team and I look forward to meeting and collaborating with our investors.
Speaker Change: We will be scheduling an investor day.
Speaker Change: Later in the year and we will reach out.
Speaker Change: I will now turn it back to John for concluding remarks.
Speaker Change: In closing we are pleased with our 2024 results and are positioned well for continued disciplined execution of our strategic growth objectives.
Speaker Change: We remain committed to furthering <unk> vertically integrated mission.
Speaker Change: Together with our partners.
Speaker Change: Build and operate best in class biogas capture and conversion projects that deliver industry, leading reliable and cost effective low carbon intensity energy products.
Speaker Change: Displace fossil fuels 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 continued interest in <unk> fuels.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: A reminder.
Speaker Change: You will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Sam our composite Q&A roster.
Speaker Change: And our first question comes from the line of Derrick Whitfield with Texas Capital. Your line is now open.
Derrick Whitfield: Good morning, and thanks for taking my questions.
Derrick Whitfield: My first question I wanted to focus on production guidance and evaluating your Q4 design capacity and the expected contributions from projects in construction. It would appear that your guidance is quite conservative for the year.
Derrick Whitfield: We can take design capacity in Q4 and has seen some optimization to drive higher enlink gas volumes, maybe just speak to the trajectory that you guys would expect in Q1 and Q2 from that alone.
Adam: Good morning, Derik. This is Adam here I'll start and then maybe I'll hand, it over to John.
Derrick Whitfield: I think as we've.
Adam: Explained and talked about in the past.
Adam: We do expect increasing utilizations from our facilities and as as we build them. We're always building in that capacity for the increasing.
Adam: Landfill gas volumes from the open landfills and.
Adam: We see the year playing out with the.
As we're moving through some of those ramp up issues sequential upticks throughout the year and.
Adam: I'll pass it over to John to talk a little bit more about the cadence.
Adam: Good.
Derrick Whitfield: Good morning Derik.
Speaker Change: Again, we're going to see continued growth from same store sales.
Derrick Whitfield: These open and growing landfills.
Speaker Change: Additional gas.
Speaker Change: Adams of the.
Speaker Change: Projects that were building.
Speaker Change: A good amount of unused capacity.
Speaker Change: So what we'll see is that growth during the course of the year.
Speaker Change: One of the things that we.
Speaker Change: We have experienced and I expect as.
Speaker Change: Part of the <unk>.
Q4, and as we move into the 2025 is really the ramp rate that we see at projects.
Speaker Change: Ramp rate is a little bit.
Speaker Change: Uncertain when you get to a project, we look at kind of average ramp rates being a couple of months long, but sometimes a project will come right online and work out of the box, sometimes a project might take a little bit longer too.
Speaker Change: Ramp up we.
Speaker Change: We saw that in the fourth quarter with the bulk in sapphire projects, taking a little bit longer than we expected.
Speaker Change: But as those projects really.
Speaker Change: Come to full capacity.
Speaker Change: We're actually seeing better results from them, particularly because the gas resource is somewhat higher than what we had projected our forecast. So we're really.
Speaker Change: I guess optimistic about where we're seeing these projects.
The cadence that we're going to see during the course of the year.
Speaker Change: Great and maybe bigger picture for you guys.
Speaker Change: From the fallout.
Speaker Change: BP pivot in the waste management situation.
We could see some material projects coming to market this year.
Speaker Change: How are you guys thinking about the competitive landscape from a growth perspective.
Speaker Change: And how would you pursue those opportunities from a funding perspective, if they became available.
Speaker Change: So.
Speaker Change: It's interesting.
Speaker Change: There were a number of portfolios that came to market over the course of the last year. The last one that really transacted was the Enbridge acquisition of Tomorrow renewables portfolio, which was.
Speaker Change: One $2 billion.
Speaker Change: And really reaffirm the relative value of.
<unk> fuels when we look at MMA, our first focus of course is execution.
Speaker Change: The opportunity set that we have in front of us.
As we were saying before we have a great set of projects both from inside our portfolio that we're converting from a renewable power projects as well as from outside of our portfolio that we're developing through the relationships that we're building with our landfill partners. So that's really our primary source of.
Growth, but as we look across the industry.
Speaker Change: Some of the opportunities, we do participate and look at each of the opportunities that come across.
And.
Speaker Change: We believe that we have good access to capital for these opportunities.
Speaker Change: It should.
Speaker Change: One of these come across like you said when you mentioned vps pivot.
Speaker Change: Their pivot.
Speaker Change: Not pivot away from RMG It was really other renewables.
Speaker Change: So I'll, just kind of point that out but.
Speaker Change: Youre right, the Wm portfolio and others were on the market and others will likely come to market. During the course of this year and we will be in they are evaluating it and looking at the opportunities as they arise.
Speaker Change: And I'll just follow up there real quickly Derek this is Adam again.
Speaker Change: One thing that.
Speaker Change: We have.
Speaker Change: <unk> shown over the last three years is our ability to grow by securing new gas rates and it's really driven by.
Speaker Change: <unk> ability to successfully bring online and operate those successful R&D projects and also our vertical integration to realize the most value for those molecules in transportation fuel and I would say.
Speaker Change: That's continuing so we think we're in a really good position to compete for for new biogas rights projects and.
Speaker Change: Again that that successful execution also.
Speaker Change: It gives capital providers confidence in working with Opel fuels. So we feel like we're in a very strong position to compete for some of those new business opportunities.
Speaker Change: That's great. Thanks for your time.
Speaker Change: Okay.
Speaker Change: Thank you Amit next question.
Speaker Change: Our next question comes from the line of Matthew Blair of Tpa, which your line is now open.
Matthew Blair: Thank you and good morning, Adam I think you mentioned the ITC tailwind.
Speaker Change: But what about the PTC.
Speaker Change: Is there any 45 is the number included in your 2025 guidance and if not what would it take for you to receive 40 privacy credits this year and how much might that.
Speaker Change: Come to.
Speaker Change: Good morning. Thank you for the question I'll, let Kathy answer the question on what's in our guidance and then I'm happy to talk about the process and how we see that playing out.
Good morning, Matthew.
Kathy: Our low end of the guidance, we actually has an immaterial amount of 45 Z on the top of the guidance. We do include a expected value, which is not not also that material, but we do have a little bit on the top end.
Speaker Change: Yeah, and as far as how the process is playing out on 45 Z. There was a proposal proposed rule that.
Kathy: That is seeking final comments by April 10.
Kathy: We are supportive of them finalizing what was in that proposed rule. There are a few tweaks that we'll be in our comment letter that we think can improve some of the scoring and the value that could accrue to us.
Kathy: We're cautiously optimistic that 45 Z.
Kathy: We'll remain intact and hopeful that we'll get a little bit of an improvement in how they are doing some of that scoring and calculating that value. We think that we should get resolution of that shortly after the final comment period.
Sounds good and then could you elaborate a little bit more on the tightness in the dispensing market. It looks like the unit margins of your FSS segment have been moving up.
Kathy: Past few quarters.
Kathy: I know there's plans to build I believe its 20 of your own stations.
Kathy: This year.
Speaker Change: Awesome, what looks like third party station as well, but yes could you just elaborate a little bit more on the tightness youre seeing and is that really a function of the new Cummins engine coming to market or are there other growth drivers as well.
Kathy: Yes so.
Speaker Change: Couple of things on our fuel station service segment, we are seeing.
Good growth and good margin improvement across all the different contributors to our fuel station services.
Speaker Change: But certainly and increasing.
Speaker Change: Out of RMG through our dispensing network also benefits.
That segment.
The tightness of the market in terms of dispensing has been.
Speaker Change: Occurring over the last 12 to 18 months as RMG supply continues to grow faster than what the dispensing offtake market.
Speaker Change: It has been growing and.
Speaker Change: That that certainly.
Speaker Change: Has been a result of a few things one is the model changeover from the 12 liter engine to the 15 liter engine and a slightly slower adoption than what those folks in the industry have been.
Speaker Change: Looking for in terms of adoption of the 15 liter engine.
Speaker Change: Both in terms of when Oems have been incorporating that.
Speaker Change: Engine into their into their into their trucks.
Speaker Change: Also driven by a little bit of confusing noise out of regulation, where we had that phase III truck.
Speaker Change: Regulations that was really.
Speaker Change: Causing fleets to pause in terms of purchasing combustion engines are thinking about combustion engines.
Speaker Change: Clearly the EPA has been quite active in.
Speaker Change: Most most recently.
Look to remove that stipulation on combustion engines. So we think that may be.
Speaker Change: An area, where fleets may be more.
Speaker Change: In tune to adopting RMC or natural gas engines and.
Speaker Change: So so that dispensing market has been tightening and we do believe that there could be some acceleration in that 15 liter adoption now with some product availability the removal of that phase III truck regulation and we're still working on on on the cost of those vehicles and.
Speaker Change: Thinking about how to give some certainty around residual values of those trucks for the fleets.
Speaker Change: Great. Thanks for your comments.
Speaker Change: Thank you gentlemen, our next question.
Speaker Change: Our next question comes from the line of Thomas <unk> of <unk>.
Speaker Change: <unk> Montgomery Scott Your line is now open.
Speaker Change: Good morning, gentlemen, and thanks for the time.
A couple of questions on Capex kind of a multipart question here, but.
Speaker Change: What are you seeing on equipment cost inflation at the moment and then.
Speaker Change: Specifically as it relates to steel and aluminum tariffs.
Just can you help us.
Speaker Change: Through the impact.
Speaker Change: On the R&D build out like a capex per annum btu feedstock that's appropriate.
Speaker Change: And then on the fuel station service side.
Speaker Change: How do you see those.
Speaker Change: Tariffs impacting the capex about build out.
Speaker Change: Sure.
Speaker Change: So this is John I'll start on this one here first off when we enter into construction on a project.
Speaker Change: We commit to all of the equipment major.
Speaker Change: Major equipment right out of the gate so.
Speaker Change: We don't subject existing projects to the inflation or the tariffs or anything else.
Speaker Change: Second.
Speaker Change: Virtually all of our projects are qualifying for domestic content within the ITC rules.
And so we have we don't really have a whole lot of exposure to foreign tariffs.
Speaker Change: Use a lot of aluminum in our projects and we use a little bit of structural steel and so.
Speaker Change: Steel prices going up will.
Speaker Change: Have.
Speaker Change: A small effect on pricing, but not.
Speaker Change: Tremendous overall inflation compared to what we saw coming out of the Covid era is greatly tamed.
Speaker Change: I'll just reiterate that when we.
We do put a project into construction, we're committing to it so we see good opportunities that meet our.
Speaker Change: Hurdle.
Speaker Change: Our IRR hurdles for projects, so that will continue to be able to put more projects into construction.
Speaker Change: Even in the current environment so.
While it is a little choppy or volatile out there.
Speaker Change: We are seeing good opportunities.
Speaker Change: We continue to look at value engineering on our projects to keep the costs.
Speaker Change: In control and.
Speaker Change: And making sure that our returns are solid there I.
I hope that answered your.
Speaker Change: Question.
Speaker Change: Yes, John Thanks appreciate the detail there.
Speaker Change: One one more on the EPA, just whats a reasonable timeline on resolution of the partial waiver.
Speaker Change: If you can kind of walk through Gantt chart of that that would be helpful. And then just want to sneak in a third one I appreciate it.
Speaker Change: Just on the power projects is there opportunity to.
Speaker Change: Re contract some of the Ppas over the next few quarters or do some of these ppas run longer than that thanks.
Speaker Change: Yes. This is Adam here, we are advocating for resolution on that partial waiver as quickly as we can.
Speaker Change: It feels to me like the EPA in their in their actions.
Speaker Change: A few days back that was their first focus I think they're turning their attention to RFS now.
Speaker Change: Now.
Speaker Change: They had set a deadline in place also to come out with the next set rule in March.
Speaker Change: <unk>.
Speaker Change: I don't think its going to happen in March we're hopeful that we could see it in the April may timeframe.
Speaker Change: As it pertains to the partial waiver they did come out on March seven and.
Speaker Change: And extended the compliance deadline for 2020 for compliance.
Compliance into.
Speaker Change: Into the June timeframe.
Speaker Change: And.
Speaker Change: And did not finalize that that partial waiver down.
Speaker Change: When they did that.
Speaker Change: So.
Speaker Change: I'm not sure if we'll see that withdrawal of the partial way or a potential withdrawal of the partial waiver before they set rule or they'll do them. Both at the same time, but we do believe that EPA is now squarely focused on on some of those RFS actions.
Speaker Change: And then with regard to the power projects first off our obviously, our renewable power portfolio is.
Speaker Change: A smaller contributor to our overall EBITDA, but within that portfolio.
Speaker Change: Somewhat less than half of the projects are subject to merchant pricing, which gets.
Set.
Speaker Change: Over periods of.
Speaker Change: Months or.
Speaker Change: A year in some cases are two years in other cases.
Speaker Change: That we've seen good strong merchant pricing supporting these so that.
Speaker Change: For the other part of our projects when.
When they roll off we will proactively enter into additional contracts and will set the terms of those based upon what we see in the market at the time, but.
Speaker Change: Good pricing and I think tail winds on those merchant pricing.
Speaker Change: Adam did you want to follow up on 1.1 thing one thing I'd like to talk about for renewable power is.
Speaker Change: Obviously, it has not been a significant growth driver of <unk> fuels or a significant contributor to our overall EBITDA and we still do spend money maintaining those facilities and we.
Speaker Change: We really view that segment as as some pretty interesting optionality, both on our existing portfolio operations, plus a number of renewable power projects.
Speaker Change: That we could develop.
Speaker Change: And.
Speaker Change: At some point given what people are talking about in terms of electricity demand in the U S and still trying to enhance grid stability.
Speaker Change: And we hear this all the time in DC, where folks are really focused on electricity prices, whereas new electricity generation can come from.
Speaker Change: We think theres a significant opportunity in this country.
Speaker Change: To capture the biogenic methane molecules from smaller landfills wastewater treatment facilities smaller AG sources of biogas emissions.
Speaker Change: To create renewable electricity, which is stable baseload power.
Speaker Change: And and enhances grid stability so.
Initial focus right now is really making sure we get clarity and resolution and some of those RFS areas, but we do believe that.
Electricity created from from biogas is going to be something that.
Speaker Change: Folks are going to think make a lot of sense and.
Speaker Change: At some point.
Speaker Change: We think we're going to be talking about renewable power not only as an incremental opportunity for our existing portfolio, but also a growth driver and I wanted to circle back to the RFS.
Speaker Change: Question that you had on the partial waiver.
Speaker Change: And also the upcoming set rule.
Speaker Change: It is really important where we feel like the energy transition space is all getting painted with the with the same brush here.
Speaker Change: In the capital markets.
And the reality is where we sit.
Speaker Change: Really aligns with.
Speaker Change: What agricultural Biofuels are seeking out of the EPA in terms of a.
Strong.
Speaker Change: And relatively stable Cellulosic D three category.
Speaker Change: It's pretty interesting to us that ethanol players are now participating in the in the Cellulosic D. Three category and they are doing it in a more meaningful way as we look out over the next 12 to 18 months and.
Speaker Change: And the renewable diesel producers specifically those that create the renewable diesel from soy from soybeans are also seeking similar things in terms of.
Speaker Change: Removing or withdrawing that that retroactive.
Speaker Change: Shall waiver down of volumes and they would also like to see strong <unk> volumes and.
Speaker Change: Perhaps an introduction a reintroduction of the Cellulosic waiver credit in the <unk> five.
Speaker Change: <unk> price cap mechanism.
And.
Speaker Change: It's.
Speaker Change: We'll see how the next.
Speaker Change: Month, or two play out on on those key issues, but those could be material.
Speaker Change: In terms of providing clarity to the <unk> market.
Speaker Change: Well. Thank you both for the thorough explanation I appreciate it.
Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Adam <unk> with Goldman Sachs. Your line is now open.
Adam <unk>: Hi, good morning.
Adam <unk>: Nice to see the continued strong execution and outlook.
Speaker Change: Fuel station services segment can you just parse out the moving pieces driving the 30% to 50% EBITDA growth outlook in that segment is that margin improvement more dispensing volumes any color on the underlying drivers would be great.
Speaker Change: I appreciate the question there Adam it's a combination across the the drivers of that segment. So just a quick reminder, for folks fuel station services.
Speaker Change: <unk> revenues and EBITDA from constructing third party stations.
Speaker Change: From a long term from long term service contracts, which are.
Speaker Change: Good visible tangible.
Speaker Change: Growth.
And.
Speaker Change: Dispensing volumes through our station network.
Speaker Change: And so.
Speaker Change: So we see that continuation of those.
Speaker Change: <unk>.
Speaker Change: Growing in terms of revenues and and.
And improving margins across that segment. So it's really a multi pronged revenue growth and margin improvement in that segment.
Speaker Change: And then can you help us think about the build up to the $2 63, RIN price assumption for 2025 what percent of.
Volume is locked in and at what price.
Speaker Change: What does that sort of imply that youre selling into the spot market for the year, Yes, no I appreciate that I. Appreciate that question. So if youll remember one of the things we liked about a multiyear set rule, where you've got visibility on volumes over three years.
We were always hopeful that you would start to see trading in a multiyear way and you could look out beyond just the current year in terms of how you would trade in transact your rins the market never fully developed into a three year strip or multi years on that but we didn't start.
Speaker Change: To see a little bit of trading in the out year rent. So we did transact.
Speaker Change: A small amount of rins.
Speaker Change: In November started to in November of last year for 2025 D three wins.
<unk>.
Speaker Change: We have been.
Speaker Change: Moderately active here in the beginning part of the year. So our written price outlook is really a combination of.
Speaker Change: What was sold forward, a little bit and where we see the current market today and.
Speaker Change: And that's that's how we arrived at our 260 RIN price for 2025, and I would go back to those other comments on the RFS.
Speaker Change: Where.
Speaker Change: We're still cautiously optimistic.
Speaker Change: If we and the folks on the agricultural biofuel side.
Speaker Change: <unk>.
Speaker Change: Effective in our discussions and add advocacy.
Speaker Change: We still could see.
Speaker Change: Prices in the market return to wear.
Speaker Change: Sure.
Where where they had been previously over the last 12 months to 18 months.
Great and then last one for me.
Speaker Change: Nice to see the Atlantic project on track to commence operations in <unk> can you just update us on timing of the other three landfill gas projects, Burlington and two with waste management.
Speaker Change: Sure.
Speaker Change: So.
Speaker Change: As you pointed out the Atlantic project is on track for the.
Speaker Change: Third quarter here and we're excited about.
Speaker Change: The projects really shaping up well.
Speaker Change: The other projects are on track.
Speaker Change: As we move into 2026.
Speaker Change: We are looking at the.
Speaker Change: The first two.
Speaker Change: Cottonwood and Burlington in the first half of the year and then Kirby in the second half of the year the Kirby project.
Speaker Change: Is being built out in California, and so it'll be a little bit longer timeframe overall than the other projects but.
Speaker Change: We would look to see Kirby coming online towards the end of.
Speaker Change: 2026.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you Amit for next question.
Speaker Change: Our next question comes from the line of Ryan. Thanks, B Riley. Your line is now open.
Speaker Change: Yes.
Ryan: Hey, guys. Thanks for taking my questions.
Can you talk about project development broadly if you've seen a slowdown maybe in earlier stage discussions given some uncertainty related to federal incentives.
Yes. So this is Adam here, no I wouldn't say that.
Ryan: That theres been a slowdown in early development activity.
Ryan: We have a number of projects that we.
Ryan: We feel our actionable close to actionable.
It's really the same one off discussions whether or not we've got.
Ryan: Partnerships and.
Ryan: And documentation around.
Ryan: Whether they be partnership agreements or.
Ryan: The biogas rights agreements, so I wouldn't say any any federal policy or that sort of thing is slowing down those discussions.
Ryan: You have to remember.
Ryan: These.
Ryan: <unk> stock hosts are looking to move these things as quickly as they can as well.
Ryan: Whether it's for their own environmental compliance, where they're seeking to make sure that they have beneficial use of their biogenic methane emissions. They also recognize that there is value to those molecules in these in these renewable energy market. So they are trying to move as quickly as we can and.
Ryan: We're not we're not seeing a slowdown on the front end there it's they're all idiosyncratic as you negotiate through <unk>.
Ryan: Documentation.
Ryan: I appreciate that.
Ryan: Secondly, I wanted to get a better understanding on.
Ryan: How youre thinking about the toggle between growth.
Ryan: And capital preservation today.
Ryan: At what point does it make sense to perhaps take your foot off the gas in order to let your operating assets generate free cash flow without.
Ryan: Meaningful ongoing growth Capex.
Ryan: That is a terrific question and it's one that we discuss quite a bit you have to remember that in our DNA here is is.
Ryan: Is disciplined capital allocation and.
Ryan: Making sure that we have terrific risk adjusted returns and you.
Ryan: You can be sure that.
The shareholders.
Ryan: Certainly appreciate that fact and.
Ryan: What I think we need to do a better job of explaining to investors that we built a free cash flow machine here and.
At.
Ryan: At certain at certain points, we do have that flexibility and ability.
Ryan: To turn off the growth engine and just create a significant amount of discretionary free cash flow and for those new listeners are getting up to speed on Opel fuels. After we build these facilities our maintenance capex is extraordinarily low and.
Ryan: We we understand that we've got the ability to toggle and if it makes sense to create that discretionary free cash flow.
Ryan: Certainly going to do that and it's a nice thing about our business model is that we do have that flexibility and that ability and.
Ryan: We.
Speaker Change: We look forward to potentially hosting an analyst day actually we're going to host an analyst day I'm looking over at Ghazi here. He has been on the job for months.
Ryan: And.
Ryan: Maybe it will be in the third quarter that will target it and we're going to do a much better job of explaining to folks what the free cash flow generation is at <unk> fuels and what the flexibility we have to create enhanced unlock shareholder value with that discretionary free cash flow and.
Ryan: And perhaps talk a little bit about our earnings per share and what it looks like where we have.
Ryan: Significant income generated which is not getting captured.
Ryan: In adjusted EBITDA as well so.
Ryan: We understand we've got that toggle and flexibility.
Ryan: At the same time, we've also got access to capital to continue to grow if those <unk>.
Ryan: Projects continue to look like Theyre good risk adjusted returns. So we're also in a little bit of a unique position I talked about it earlier as a renewable fuel our energy.
Ryan: Company.
Ryan: Feel like we're not getting differentiated and at the same time our capital.
Ryan: Availability and.
Ryan: And what we do with the discretionary free cash flow also provides us a lot of different opportunities.
Ryan: Great I appreciate that detail.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of.
Speaker Change: <unk> of Scotia Bank. Your line is now open.
Speaker Change: Good morning.
Speaker Change: My question.
I wanted to ask about.
Speaker Change: The mix between upstream and downstream just looking at your guidance for 2025, and assuming sanitation services.
Speaker Change: Kind of grows EBITDA by between 30% to 50% and your overall EBITDA guidance it looks like fuel station services.
Speaker Change: <unk> growing to more than 50% of your overall EBITDA.
Is this the right balance for Opel.
Speaker Change: Sure has certainly increased over over time, what how do you see that going forward.
Speaker Change: Yes, I just wanted to.
Speaker Change: Correct, one thing there I think from a segment EBITDA perspective.
Speaker Change: I don't think that that is maybe allocating out sort of corporate G&A and that sort of thing.
Speaker Change: And but you are right that fuel station services segment EBITDA is growing faster than the rest of the.
Speaker Change: The company in 2025.
Speaker Change: And really R&D fuels not growing as quickly this year.
Speaker Change: Really from that that RIN price assumption between 24, and 25 and of course renewable power, we've highlighted has that $10 million.
Speaker Change: Decline in 25 versus <unk> 24, I'm going to let.
Speaker Change: Causing step in here as well so just to clarify.
Speaker Change: Going forward, what you said is 50% of the portfolio to field services is not there yet if you look at it as a growing portion as Adam mentioned, but it's not still 50% of the total portfolio.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay understood.
Speaker Change: And the fourth quarter I wanted to ask about RIN generation and the fuel station.
Speaker Change: Services segment.
Speaker Change: And slightly lower than the normal I think it was only around.
Speaker Change: 100, <unk> thousand wins was there anything in particular there.
Speaker Change: I think we may have to get back to you on that 100000, RIN generation and our fuel station services.
Speaker Change: I think that does get that light, we're going to get back to you on that one.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you for next question.
Speaker Change: And our next question comes from the line of Matthew Blair of Tpa <unk>. Your line is now open.
Matthew Blair: Hi, Thanks for taking my follow ups, just two quick ones.
And if I missed this but.
Matthew Blair: Is there a guide yet for 2025 Capex and then also how should we be thinking about your corporate.
Spending in in 2025, I believe in 'twenty four it was approximately $46 million headwind.
Matthew Blair: Would that be pretty similar.
Matthew Blair: In 25 or would that step up thank you.
Matthew Blair: Let me take the Capex one first.
Matthew Blair: Hi, Matthew.
Matthew Blair: We are not guiding the exact capex, but we are guiding through what we're going to put into the construction because the capex generally is more announce payment.
Payment to the contractors that varies from one project to them actually I'm just trying to.
Matthew Blair: Give you an indication of where we are heading rather than a specific dollar amount.
Matthew Blair: Yes, one thing we've noticed.
Matthew Blair: This is actually a positive for Opel fuels is that our capital expenditures on our projects.
Matthew Blair: Came a little bit later in the project than when the projects came online, which actually enhance our returns and enhance our cash flow.
Matthew Blair: So.
Matthew Blair: We don't think it's as impactful to talk about a specific year of Capex.
Matthew Blair: Just because of that factor and although I've never heard corporate G&A referred to as a headwind or people as a headwind.
Matthew Blair: Which is interesting I would say that our corporate G&A will be up in <unk> 25 versus <unk> versus 2024.
Matthew Blair: As we.
Matthew Blair: Continue to add add to the platform here at at <unk> fuels.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you I'm showing no further questions at this time I would now like to turn it back to Adam Tomorrow for closing remarks.
Adam Tomorrow: We appreciate your taking your time and interest in Opal fuels and I hope everybody has a wonderful day.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.
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Adam Tomorrow: <unk>.