Q2 2025 Montauk Renewables Inc Earnings Call

Speaker #2: Good, everyone. And thank you for participating in ay's conference call. I would like to turn the call over to John Ciroli as he provides some important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings material or made on this call.

Speaker #2: John, please go ahead.

Speaker #3: Thank you, and good day, everyone. Welcome to Montauk Renewables' earnings conference call to review the second quarter of 2025 financial and operating results and development.

Speaker #3: I'm John Ciroli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments, and Kevin Asdalan, Chief Financial Officer, to discuss our second quarter 2025 financial and operating results.

Speaker #3: At this time, I would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements, and as such, involve a number of assumptions, risks, and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements.

Speaker #3: These risks, factors, and uncertainties are detailed in Montauk Renewables SEC filings. Our remarks today may also include non-GAAP financial measures. We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Speaker #3: These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide presentation and in our second quarter 2025 earnings press release and form 10-Q issued and filed on August 6, 2025.

Speaker #3: These are available on our website at ir.montaukrenewables.com. After our remarks, we will open the call to panelists' questions. We ask that you please keep to one question to commodate as many questions as possible.

Speaker #3: And with that, I will turn the call over to Sean.

Speaker #4: Thank ou, John. Good day, everyone. And thank ou for joining our call. On June 13th, 2025, the EPA released the Partial Waiver of the 2024 Cellulose Biofuel Volume Requirement, the RFS standards for 2026 and 2027, the Partial Waiver of the 2025 Cellulose Biofuel Volume Requirement, and other changes in their proposed rule.

Speaker #4: The final 2024 Cellulose Biofuel Volume Requirement was reduced from 1 billion 90 million to 1 billion 10 million, D3 rims. This reduction was based on actual volumes of D3 rims generated in 2024.

Speaker #4: In addition, the EPA is making cellulose waiver credits available for 2024 as an additional compliance flexibility measure for obligated parties. This final rule has limited direct impact to Montauk, as we have sold all of our 2024 rims.

Speaker #4: For 2025, the EPA has proposed cellulose biofuel volumes for 2025 to be reduced from 1 billion 376 million to 1 billion 190 million rims and to make cellulose waiver credits available for 2025.

Speaker #4: These proposals coupled with the EPA's biogas regulatory reform rule of matching the production of RNG with the dispensing of RNG to transportation appear to have limited the pricing level at which the D3 rim currently trades.

Speaker #4: The proposed cellulose biofuel volume requirements for 2026 and 2027 are 1 billion 300 million and 1 billion 360 million D3 rims, respectively. In justification of these lower than expected volumes and the suggestion that small refinery exemptions be potentially revisited, the EPA has expressed their view that cellulose rim generation from biogas CNG LNG during 2026 to 2030 will be constrained by the total usage capacity of CNG LNG as transportation fuel.

Speaker #4: In the first quarter of 2025, we entered into an agreement with Pioneer Renewables Energy Marketing to form a joint venture, GreenWave Energy Partners. The primary goal of the joint venture is to help address this limited capacity of RNG utilization for transportation by offering third-party RNG volume producers access to exclusive unique and proprietary transportation pathways.

Speaker #4: We expect to be the rim separator for the joint venture and expect to receive separated rims as our distributions. While we have yet to realize material benefits from the joint venture through the second quarter, we have begun successfully contracting, dispensing, and separating rims through these proprietary transportation pathways.

Speaker #4: We continue our development efforts in North Carolina with an expectation to commence production and revenue generation activities in early 2026. As previously noted, the favorable change in swine renewable energy credit generation legislation enacted by the state of North Carolina in 2024 has us engaged in various stages of negotiations with obligated utilities to provide wrecks from our expected 2026 production.

Speaker #4: We have executed a power purchase agreement for the expected power to be produced from the first phase of electric production. The term of this PPA begins once we commission the facility and covers 100% of the electricity produced for 10 years.

Speaker #4: The PPA price is based on set tariffs and considers various impacts, including but not limited to demand, season and time of day, and we believe the average price considering these factors of 48 per megawatt hour is in line with various Southeastern United States power markets ranging from $40 to $60 megawatt hours.

Speaker #4: This favorable change in swine renewable energy credit generation legislation has compelled us to refine development efforts in North Carolina to focus feedstock exclusively from swine waste, no longer inclusive of an agricultural component.

Speaker #4: Additionally, we've refined our production focus for this first phase to be exclusively electricity generation. Correspondingly, we continue to optimize the collection and transportation of swine feedstock from the collection farms to the centralized processing location including the removal of low-energy content liquid waste.

Speaker #4: Such efforts include the pelletization of collected waste and the incorporation of additional upstream processes using screw press and centrifuge technologies. Our feedstock collection and transportation optimization efforts are expected to have an impact on both the number of farms serviced as well as the associated equipment and operating costs.

Speaker #4: Given the opportunity set afforded by the change in legislation and our refined focus on both the feedstock optimization and increased electricity generation, we are increasing the range of capital investment expected for this first phase to $180 million to $220 million.

Speaker #4: To revise the estimate of the total project to the extent impacting 2025 is included in our 2025 development capital expenditures range. We have successfully completed the construction and commissioning of a second RNG processing facility at the Apex Landfill.

Speaker #4: As previously noted, the construction of the second facility was triggered by the landfill host projections of biogas feedstock volumes in excess of the original facility's production capacity, driven by the landfill host's waste intake projections.

Speaker #4: The second facility provides us with an additional 2,100 MMBtu per day of production capacity. We continue to expect a period of excess production capacity as the landfill host continues to increase their waste intake.

Speaker #4: In 2024, we signed a contract for the annual delivery of 140,000 tons per year of biogenic carbon dioxide. We intend to capture, clean, and liquefy CO2 at select excess facilities at which point EE North America will transport it to a Texas-based emethanol facility.

Speaker #4: The delivery term is expected to last 15 years with the first delivery expected to begin in late 2027. During the period prior to commissioning, we have been recognizing an exclusivity fee related to the minimum tons of CO2.

Speaker #4: The annual price per ton under the contract is adjusted by the US Consumer Price Index. The agreement with EENA also includes a 50% sharing of any available tax attributes generated by us under a code section 45-Q.

Speaker #4: Carbon dioxide sequestration credit, in the Inflation Reduction Act as applicable. There are other revenue sharing components under the agreement to the extent we're able produce CO2 prior to EENA accepting delivery.

Speaker #4: Excluding any estimated tax attributes and including a US Consumer Price Index range of 2.5 to 3 percent annually, we estimate the total revenues under this 15-year term to provide an annual minimum $140,000 tons of CO2 will range between $170 million to $201 million in total.

Speaker #4: We have completed the initial site surveys related to the location of the CO2 processing equipment, have evaluated equipment suppliers, and started engineering design. We continue to target a commissioning start in 2027 and begin incurring capital expenditures for long lead items and design engineering in the second quarter of 2025.

Speaker #4: Also in 2024, we announced a collaboration with Emblon to transform methane emissions from waste stream biogas into high-value carbon-negative fuel. Leveraging Emblon's patented technology, the initial pilot was a small-scale demonstration of recovering and converting biogas into green methanol.

Speaker #4: The initial pilot project at our Akaska Seda facility in Houston, Texas, exceeded its anticipated results. Following a successful field demonstration project, together with Emblon, we planned to deploy a portfolio of biogas sites with an aggregate annual production capacity of up to 50,000 metric tons of green methanol by 2030.

Speaker #4: We do not expect short-term financial benefits from this joint development venture, nor a disruption to our operations. And with that, I will turn the call over to Kevin.

Speaker #4: Thank you, Sean. I will be discussing our second quarter 2025 financial and operating results. Please refer to our earnings press release in the supplemental slide that had been posted to our website for additional information.

Speaker #4: Our profitability is highly dependent on the market price of environmental attributes, including the market price of rims. As we self-market a significant portion of our rims, a strategic decision not to commit to transfer available rims during a period will impact our revenue and operating profit.

Speaker #4: The impact of the EPA rulemaking associated with the implementation of BEE K2 separation and the extension of the 2024 rim compliance period has temporarily impacted our mitment timing of our 2025 RNG production.

Speaker #4: At June 30th, 2025, we had approximately $3 million rims generated and unseparated. We expect this timing between rims generated but unseparated and rims available for sale to only impact 2025, which is the year BEE became effective.

Speaker #4: We had approximately $108,000 rims in inventory from 2025 RNG production as of June 30th, 2025. These rims were transferred in July under a commitment entered into in June 2025 at a price of $2.42.

Speaker #4: The average D3 rim index price for the second quarter of 2025 was approximately 2.36. Total revenues in second quarter of 2025 were $45.1 million, an increase of $1.8 million or $4.1% compared to $43.3 million in the second quarter 2024.

Speaker #4: The increase is primarily related to timing of revenues recognized under a short-term fixed ice contract in the 2025 second quarter when compared to the amount of rims available but unsold at June 30th, 2024.

Speaker #4: Partially offsetting this impact was a decrease in realized rim pricing during the second quarter 2025 to 2.42 compared to $3.12 in the second quarter of 2024, and a reduction in rims available for sale as a result of the EPA BEE reform.

Speaker #4: Total general and administrative expenses were $9.0 million for the second quarter 2025, an increase of $0.3 million or $3.5% compared to $8.7 million in the second quarter 2024.

Speaker #4: Employee-related costs, including stock-based compensation, were $6.1 million in the second quarter 2025, an increase of $0.7 million or $13.7% compared to $5.4 million in the second quarter of 2024.

Speaker #4: The increase in non-cash stock-based compensation costs relate to one relate to a one-time acceleration of approximately $1.6 million in the second quarter of 2025 due to the termination of an employee, which we do not expect to recur in the second half of 2025.

Speaker #4: This compares to unrecognized stock compensation costs of $4.9 million that will be recognized over approximately the following three and one-quarter years. Before turning to our operating segment metrics, I want to address the recent tax law changes occurring with the passage of the One Big Beautiful Bill Act.

Speaker #4: On July 4th, 2025, this bill was signed into law. The tax changes are enacted in the period passed and, as such, we will adopt applicable changes beginning in the third quarter 2025.

Speaker #4: This legislation includes significant tax and spending policies, extends or enhances various components of the tax cuts and jobs acts, and made various changes to the tax credit included in the Inflation Reduction Act.

Speaker #4: Please refer to our 2025 second quarter form 10-Q filed on August 6th, 2025, for various aspects of the tax law changes we are reviewing.

Speaker #4: Included in our second quarter of 2025 tax provision is approximately $0.8 million in tax benefits from investment tax credits for certain qualifying property resulting from our 2024 PICO digestion expansion project.

Speaker #4: Based on our PICO project study, we are better positioned to understand the Inflation Reduction Act investment tax credits for qualifying projects and assets. For other qualifying projects, we now believe that approximately 50 to 75% of the project capital will qualify for investment tax credits, and depending on a wide variety of factors for projects started within safe harbor guidelines, the tax benefits could range up 30%.

Speaker #4: Related to our second Apex RNG facility, placed in the service this quarter, we expect to generate tax attribute benefits in ur 2025 tax year and to include these benefits in our annual tax provision as of December 31st, 2025.

Speaker #4: For estimation purposes, we believe that based on approximately 50% of the project capital qualifying and with safe harbor guidelines not being met, investment tax credits could range between $1.0 million and $2.1 million for this project.

Speaker #4: For similar other qualifying projects, we continue to believe that 50 to 75% of the capital will qualify at a 6 to 12% investment tax credit subject to various safe harbor applicability.

Speaker #4: Turning to ur segment operating metrics, I'll begin by reviewing our renewable natural gas segment. We produced $1.4 million MMBTU of RNG during the second quarter of 2025.

Speaker #4: Flat as compared to $1.4 million during the second quarter of 2024. Our rum key facility produced $67,000 MMBTU more in the second quarter of 2025 compared to the second quarter of 2024, as a result of a previously disclosed reduction in feedstock inlet and process equipment failures, which occurred in the second quarter of 2024.

Speaker #4: Offsetting this increase was the fourth quarter of 2024 sale of our Southern facility, which produced $22,000 MMBTU in the second quarter of 2024. Revenues from the renewable natural gas segment during the second quarter of 2025 were $40.8 million, an increase of $2.0 million or $5.1% compared to $38.8 million during the second quarter 2024.

Speaker #4: Average commodity pricing for natural gas for the second quarter of 2025 was $82.0% higher than the prior year period. During the second quarter of 2025, we self-marketed $11.1 million rims, representing a $1.1 million increase or $10.5% compared to $10 million rims self-marketed during the second quarter of 2024.

Speaker #4: Average pricing realized when rim sales during the second quarter of 2025 was $2.42 as compared $3.12 during the second quarter of 2024. A decrease of approximately $22.4%.

Speaker #4: This compares to the average D3 rim index price for the second quarter of 2025 of $2.36 being approximately $26.1% lower than the average D3 rim index price for the second quarter of 2024, of $3.20.

Speaker #4: At June 30th, 2025, we had approximately $0.3 million MMBTU available for rim generation, $3.0 million rims generated but unseparated, and $0.1 million rims separated and unsold.

Speaker #4: At June 30th, 2024, we had approximately $0.4 million MMBTU available for rim generation, and $4.7 million rims generated and unsold. At June 30th, 2024, there were no rims generated but unseparated.

Speaker #4: Our operating and maintenance expenses for our RNG facilities during the second quarter 2025 were $17.0 million, an increase of $3.1 million or 22%. Compared to $13.9 million during the second quarter of 2024, we do not anticipate approximately $1.8 million of non-linear discrete expenses to occur to recur in the second quarter in the second half of 2025, as they relate primarily to annual preventative maintenance and gas processing equipment preventative maintenance.

Speaker #4: The primary drivers of the 2025 second quarter increase of $3.1 million were timing of preventative maintenance, media changeout maintenance, and other well-filled operational enhancement programs at our Apex McCarty Rum Key and Akaska Seda facilities.

Speaker #4: We produced approximately $42,000 megawatt hours in renewable electricity during the second quarter of 2025. A decrease of approximately $3,000 megawatt hours or $6.7% compared to $45,000 megawatt hours during the second quarter of 2024.

Speaker #4: Approximately $2,000 of this decrease relates primarily to the planned timing of preventative engine maintenance at our Bowerman facility. Revenues from the renewable electricity facilities during the second quarter 2025 were $4.3 million, a decrease of $0.2 million or $4.5% compared $4.5 million during the second quarter of 2024.

Speaker #4: The decrease is primarily driven by the aforementioned decrease in our Bowerman facility production volumes. Our renewable electricity generation operating and maintenance expenses during the second quarter of 2025 were $4.8 million, an increase of $0.1 million or 2% compared to $4.7 million during the second quarter 2025.

Speaker #4: We do not anticipate approximately $1.4 million of discrete expenses primarily associated with our Bowerman facility to occur to recur in the second half of 2025, as they relate to non-linear annual preventative maintenance.

Speaker #4: The nominal resulting increase in the second quarter of 2025 was primarily driven by an increase in non-capitalizable costs at our Montauk Ag Renewables projects, in Turkey, North Carolina.

Speaker #4: Offsetting the increase, our Tulsa facility operating and maintenance expenses decreased approximately $0.2 million, primarily related to well-filled collection enhancements. During the second quarter of 2025, we reported impairments of $0.4 million, an increase of $0.2 million compared to $0.2 million in the second quarter of 2024.

Speaker #4: The increase primarily relates to specifically identified assets deemed obsolete or non-offerable. We do not report any impairments related to our assessment of future cash flows.

Speaker #4: Operating loss for the second quarter 2025 was $2.4 million, a decrease of $3.3 million compared to an operating income of $0.9 million for the second quarter of 2024.

Speaker #4: RNG operating income for the second quarter of 2025 was $9.2 million, a decrease of $2.5 million or $21.2% compared to an operating income of $11.7 million for the second quarter of 2024.

Speaker #4: Renewable electricity generation operating loss for the second quarter of 2025 was $2.3 million, an increase of $0.3 million or $19.2% compared to the $2 million operating loss for the second quarter 2024.

Speaker #4: Turning to our balance sheet, at June 30th, 2025, $50 million was outstanding under our term loan, and we had approximately $20 million of outstanding borrowings under our revolving credit facility.

Speaker #4: As of June 30th, 2025, the company's capacity available for borrowing under our revolving credit facility was $97.4 million. For the first six months of 2025, we generated $17.3 million of cash from operating activities, an increase of $19.3% compared to $14.5 million for the first six months of 2024.

Speaker #4: Based on our estimate of the present value of our peak PICO earnout obligation, we reported an increase of $0.8 million to liability at June 30th, 2025.

Speaker #4: This increase was recorded through our RNG segment royalty expense. For the first six months 2025, our capital expenditures were approximately $45.3 million. Of which, $27.7 million and $8.4 million and $7.3 million were related to our ongoing development of Montauk Ag Renewables contractually obligated rum key RNG relocation and our second Apex facility, respectively.

Speaker #4: As of June 30th, 2025, we had cash and cash equivalents net of restricted cash of approximately $29.1 million. We had accounts and other receivables of approximately $7.5 million.

Speaker #4: We do not believe we have any collectability issues within our receivables balance. Adjusted EBITDA for the second quarter of 2025 was $5.0 million, a decrease of $2.0 million or $28.6% compared to adjusted EBITDA of $7.0 million for the second quarter of 2024.

Speaker #4: As previously noted, for the second quarter of 2025, we incurred the following discrete or non-linear expenses. Approximately $1.5 million within general administrative expenses for accelerated stock-based compensation, and approximately $1.8 million and 1.4 million, respectively, within RNG and REG operating expenses relating to the timing of discrete preventative maintenance.

Speaker #4: We do not expect these discrete and non-linear expenses to recur in the second half of 2025. EBITDA for the second quarter of 2025 was $4.6 million, a decrease of $2.1 million or $31.3% compared to EBITDA of $6.7 million for the second quarter 2024.

Speaker #4: Net loss for the second quarter of 2025 was $5.5 million, an increased loss of $4.8 million as compared to $0.7 million for the second quarter of 2024.

Speaker #4: Our income tax expense increased approximately $1.5 million for the second quarter of 2025, as compared to second quarter of 2024. The difference in effective tax rates between 2025 second quarter and the 2024 second quarter primarily relate to changes in pre-tax loss for the second quarter of 2025, as compared to second quarter of 2024 pre-tax profit.

Speaker #4: Additionally impacting ur second quarter of 2025 tax provision was the discrete impacts of the affirmation to accelerated stock vesting and the Inflation Reduction Act investment tax credits.

Speaker #4: I'll return the call back over to Sean. Thank you, Kevin. In closing, and though we don't provide guidance as to our internal expectations on the market price of environmental attributes, including the market price of D3 rims, we are reaffirming our full-year 2025 outlook provided in May 2025.

Speaker #4: For 2025, we continue to expect our RNG production volumes to range between 5.8 and 6 million MMBTUs with corresponding RNG revenues to range between $150 and $170 million.

Speaker #4: We note that these ranges have not changed relative to our 2025 expectations as we continue to manage through regulatory uncertainty. We continue to expect our 2025 renewable electricity production volumes to range between 178 and 186 thousand megawatt hours with corresponding renewable electricity volumes to range revenues to range between 17 and 18 million.

Speaker #4: Again, unchanged from our previous guidance. And with that, we will pause for any questions from our analysts.

Speaker #2: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press *11 on your telephone and wait for your name to be announced.

Speaker #2: To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from a line of Matthew Blair from TPH.

Speaker #2: Your line is now open.

Speaker #5: Thank you. And good morning. I have a two-parter here. The first is on the D3 RBO and, an, thanks for your comments to start things off.

Speaker #5: But it looks like this year's D3 rim generation is on pace not just to easily exceed the RBO for 2025, but also the proposed numbers for 2026 and 2027.

Speaker #5: Are you sharing anything that the EPA may reconsider these proposed numbers and move them higher? Is there any hope for a better RBO for the RNG space?

Speaker #5: And then the second question is, you highlighted that RNG OPEX moved up in the second quarter, it sounds like that was mostly one-time preventative maintenance, media changeouts, things like that.

Speaker #5: It looks like the royalty share also moved up to about 21% in Q2. Versus 19% in Q1. Would you ect that royalty share to stay around 21% for the third and fourth quarters, or would that move down as well?

Speaker #5: Thank ou.

Speaker #4: Thank you, Matthew. I will take the first part related to the RBO. As we're all aware, the RBO is still within a comment period.

Speaker #4: And obviously, a data point that they are taking into consideration. Is that imbalance between the run rate of production and generation of D3 rims and what the RBO proposed to be set?

Speaker #4: And so that continues to be evaluated by the EPA. With that potential change pending, Kevin, perhaps you can comment on the OPEX.

Speaker #3: Yes. Thank you, Matthew. And yeah, we expect to not have the approximate 1.8 within RNG and the 1.4 within our REG segment to recur in the second half of the year.

Speaker #3: These were planned expected preventative maintenance items that, you know, again, occurred generally once a year. So that's why we wanted to highlight the fact that we had these preventative maintenance impacts incurring, now primarily in the second half of this year.

Speaker #3: And we 't expect to incur those levels of expense in the second half of this year. Specifically in regards to that royalty calculation, that was a one-time, we addressed our PICO earnout quarterly as we're reporting based upon our expectations of future results of our PICO location.

Speaker #3: However, the increase this quarter was related to a discrete impact of us receiving our final tranche increase of feedstock manure associated with the expansion of feedstock that led to our building and commissioning the CSTRs increasing our digestion capacity.

Speaker #3: With us receiving that final increase and making a final payment to the dairy for that manure increase, we reduced our discount rate, i.e., reduced the risk of us not receiving that.

Speaker #3: So it was a sort of a formulaic calculation associated with a discount rate in our expectations as opposed to anything necessarily changing with the results or operations of PICO.

Speaker #3: So that one-timer influenced our second quarter RNG royalty expense. And on a run rate standpoint, we would expect that, you know, production revenue notwithstanding on our tiered royalties to normalize back at that approximate 20% level.

Speaker #2: Thank you. Our next question comes from a line of Tim Moore from Clear Street. Your line is now open.

Speaker #6: Thanks. Just a couple of quick questions. You know, your operating and maintenance expense, you know, rose significantly since last October, so the revenues, you know, you discussed which was nice to quantify the discrete 1.8, 1.4 million expenses that weren't really being incurred at that level in the second half.

Speaker #6: Are there any other expenses you can think of as you look at your projects, whether it's swine or anything else you're doing that might, you know, drag down some of the profitability in the second half of this year or early next year?

Speaker #6: Just kind of curious about that as, ou know, as we kind of look at the second half of this year and into next year.

Speaker #4: Thanks for the question, Tim. Generally, we we do some planned outages at our facilities early in the year. Specifically, some outages at our McCarty location with a planned outage that, you ow, drove an increase in, you ow, power controls and equipment controls and things like that.

Speaker #4: But no, generally for the second half of this year, we don't expect those large one-timers to continue in the second half. If you look back at our first half of this year compared to the first half of last year, you'll see the generally for our existing locations, we generally incur higher expenses in the first half versus lower expenses in second half.

Speaker #4: So presuming that our timing of outages continue, I would expect that that run rate, if you will, in the ure to continue. However, occasionally our outages are impacted if we receive word from our, you ow, outbound utilities that there's going to be some outages impacting us.

Speaker #4: We might change the timing of our planned outages or if we are looking at other preventative maintenance that indicates that we need to do something else with the equipment that either an RNG or a power site, we might move that around.

Speaker #4: But along-winded way, Tim, of saying that, you know, as of right now, as we're ering into our detailed bottoms-up budgeting for 2026, I don't necessarily anticipate any change from our historical run rate of 2025 or our second half of 2025 expectations being lower than the first half of this year, nor a robust change in our timing or overall level of expenses into 2026.

Speaker #4: So just summary of things that could happen, not things that we have any anticipation of happening.

Speaker #3: Correct.

Speaker #4: One other comment that's probably not material, but at least worth mentioning is if you're looking at operating expenses, on a percentage basis of production or revenue, there is a baseline of non-capitalizable costs associated with our build-out at Turkey.

Speaker #4: And so where you will see those costs continue they're not currently paired with production or revenue. And have a disproportionate impact. These are onboarding staff and personnel and you're doing certain things to run the facility, equipment that we've already commissioned down there, utility charges and whatnot.

Speaker #4: Those things will continue to ramp up, but will be significant as when we get into the early part of '26. It will be matched with your revenue and your production coming from that new facility.

Speaker #2: Thank ou. Our next question comes from a line of Betty Zane from Scotiabank. Your line is now open.

Speaker #7: Thank you. Good morning. Thanks for taking my question. I wanted to ask about the JVs that you announced. Could you please elaborate on perhaps what's the nature of that JV and the contribution by the partners and maybe should understand it as distribution of RNG?

Speaker #7: How should we think about that? Thank you.

Speaker #4: Thanks, Betty. I think the best way to explain or give a little more detail behind that JV is the comments that we made regarding the positioning that the EPA has been taking.

Speaker #4: As they've been adjusting the RVO, for the proposed RVO volumes for this year in the outward years, they've been explaining they've been very, very verbal about that they have this concern that the growth in the usage of RNG into transportation is not growing at the pace of the potential production of RNG.

Speaker #4: Knowing that that's your critical path, no pun intended, for the generation of D3 rims, they have slowed the growth percentages that they've applied to those RVOs.

Speaker #4: And so rather than fixing volumes at lower pricing or looking for alternative usage of the feedstock biomethane for something other than the production of RNG in the underlying rim, we have focused on trying to form, pathway opportunities that are new, unique, proprietary, that qualify for these transportation usages.

Speaker #4: the ability to do that that has been acknowledged by the EPA is an opportunity to offset those perceived, growth slowing of the usage of the RNG into transportation and allow for that to be more commensurate to the growth of the production of RNG.

Speaker #4: should go well to offset the approach that the EPA is currently taking to try and keep those growth volumes slower, but at a minimum opens up the opportunity short-term for a large amount of volumes that the industry is claiming that do not have a home for usage in the RNG transportation space.

Speaker #3: And then also, Betty, to address your contribution question, we've contributed approximately $2.3 million and subject to various triggers and requirements within the underlying agreement, excuse me, we can contribute potentially up to an additional $2.1 million.

Speaker #3: So our contribution in the form of capital could approximately up to $4.5. As well as the technical understanding and know-how associated with, you know, with transacting rims.

Speaker #3: The other partners are bringing in what we would consider the the IP that relationships and these new and unique pathways to dispense third-party volumes and separate K3 from K2 rims.

Speaker #2: Thank ou. Our next question comes from a line of Tim Moore from Clear Street. Go head.

Speaker #6: Thanks for owing the follow-up. So, Sean, for, you know, the North Carolina Ag Swine Project, when might you get a better understanding maybe of the expansion potential there?

Speaker #6: You know, it seems like it would just be highly incremental margin. As you build that out more and the and there ramps up, and just, you ow, just curious, you know, investors are always asking, me, you know, besides that project, you know, what else you're most excited and husiastic about, you know, as you look out the next 12 to 18 months for the company?

Speaker #4: That's a great question, Tim. Obviously, before we seek to do rapid expansion of that opportunity in North Carolina, it's critical to the company that we commission the first phase of this and it's done so with predictable long-term fixed price off-take arrangements.

Speaker #4: The opportunity to do that and to take advantage of the enhanced legislation has really caused a very refined focus and optimization as to what it is that we intend to do.

Speaker #4: In North Carolina, predominantly address the growing need for the farming community to remove this waste from their core business and to do so in a way that removes the most amount non-caloric liquid and to have a very optimized dry pelletized product that is specifically now for the generation of just electricity.

Speaker #3: And take full advantage of that legislation change that was passed at the of the year. The expandability, you are correct. There is an economy of scale there that can be reached quite enthusiastically with the optimization of the farm side collection, the optimization the pelletization, and the continued suite of combustible fuel supply that comes out of our patented reactor process that allows for you to continue electric generation to segue into gas generation.

Speaker #3: And the continuation of a valuable biochar product that is used as fertilizer and soil amendments. There's a lot of directional flexibility that happens on a project that has the way that we are building this.

Speaker #3: The opportunity for both the electric and the gas interconnections; the opportunity for pelletized waste; the opportunity that we have on this campus for rail transportation that could allow for us to reach beyond not only from a feedstock inlet, but also a production outlet in the form of the pelletized waste that we're creating; there's a variety of different directions that that project can be taken for future expansion.

Speaker #3: And notwithstanding the cost reductions that you can get from further horizontal or vertical integrations particularly in the manufacturing and the securing of the raw materials that go into the production of even our reactors, the space that we have taken in Turkey, North Carolina, is sufficient a lot of these additional expansion opportunities or optimization opportunities.

Speaker #3: And we continue to work with local municipalities and government agencies to pursue any types tax credit or incentive opportunities to expand what we believe is a very exciting project that we've en on.

Speaker #4: I'm excited about all projects that we have in the company. It is a very fortunate position for a company that's been in this business as long as it has to have everything from its traditional landfill RNG conversion opportunities or additional electric gen opportunities to be in second and third phases of its shift to an increasing level of commodity-based revenue streams.

Speaker #4: The opportunity to take on the large-scale production of biogenic carbon dioxide in a commodity-based that has the upside of potential tax credit revenue, but doesn't have the attribute risk associated with that commodity.

Speaker #4: And the ability to look at projects that may be limited in terms of size and scope or proximity to a pipeline for RNG injection and look at the opportunity to develop those with a very efficient technology in the form of methanol production, are the two areas that I think are very nice balances to our continuation to materially and enthusiastically be in the generation of D3 rims.

Speaker #4: Those are the items that keep us the most excited, all the while we continue to evaluate and explore existing and future opportunities in sort of the legacy business that we have landfill gas to RNG and the subsequent generation of rims.

Speaker #3: And then we could point you to the press release yesterday between Montauk Renewables and Emblon for the joint development, joint venture between our companies that was mentioned in today's call for the $50,000, right, 50,000 gallons per year of green methanol looking to be produced.

Speaker #2: Thank you, everyone. This concludes the question and answer session. I would now like to turn it back to Sean for closing remarks.

Speaker #4: Thank you. And thank you for taking the time to join us on the conference call today. We look forward to speaking with you when we present our third quarter of 2025 results.