Good morning, and welcome to the OPAL Fuels Third Quarter 2022 Earnings Call and Webcast. [Operator Instructions] As a reminder, this event is being recorded. I would now like to turn the conference call over to Todd Firestone, Vice President of Investor Relations to begin. Please go ahead.

Thank you, and good morning, everyone. Welcome to the OPAL Fuels Third Quarter 2022 Earnings Conference Call. With me today are co-CEOs, Adam Comora and Jonathan Maurer; and Ann Anthony, OPAL Fuels Chief Financial Officer. OPAL Fuels released financial and operating results from third quarter and nine months year-to-date of 2022 yesterday afternoon and those results are available on our Investor Relations portion of our website at opalfuels,com. The presentation and access to the webcast for this call are also available on our website and after completion of this call replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks on this call would including answer your questions contain forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements are not guarantee to performance and actual results could differ materially from one it contained in such statements. These forward-looking statements reflect our views as of the day 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 including but not limited to adjusted EBITDA. The definition of non-GAAP measures used in the reconciliation of these measures due to nearest GAAP measures included in an appendix of the release and presentation. Adam will begin today's call by providing an overview of the third quarter results, recent highlights and update on our strategic and operational priorities. John will then give a commercial business development update, after which Ann will review the financial results and full year 2022 guidance. We'll then open the call for questions. And now, I'll turn the call over to Adam Comora, OPAL Fuels Co-Chief Executive Officer. Adam?

Thank you, Todd. Good morning, everyone, and thank you for being here for OPAL Fuels third quarter earnings call. Given this is our first public earnings call, before discussing our results and providing a business update, I want to read a brief message from our Chairman, Mark Comora. We at OPAL Fuels are very proud of what we are seeking to accomplish. Our mission is not only to generate profits but also to leave the world in a better place than we found it. We are doing this by addressing two of the most significant contributors to climate change; capturing methane gas emissions and reducing transportation emissions. And we do this at a lower cost than diesel. Heavy-duty trucks are the backbone of our economy. Every day they bring products to retail and industrial customers all over the country. These trucks are fueled by diesel, and diesel is a major producer of greenhouse gas emissions. Today there is a big focus on reducing diesel in the transportation sector and the associated greenhouse gas emissions. People talk of electricity and hydrogen, which could be solutions in the future. We can use our RNG in the future for these new applications, but we are focused on addressing the issue now. Simply stated, we do it by displacing diesel fuel with renewable natural gas. Not only is it very valuable for us, our customers and our investors, it is good for the planet. Thank you. With that message, I would like to move into what is truly a remarkable time not only for OPAL Fuels, but for our entire industry. We have achieved significant milestones over the course of this year. Chief among these achievements was OPAL Fuels going public on July 21. OPAL Fuels is now one of the largest developers and…

Thank you, Adam and good morning, everyone. I'd like to share a few key highlights of our performance for the third quarter. First, let me say we've done the math for you. All of our production and nameplate capacity numbers represent our proportional share. First for the third quarter 2022, we reported adjusted EBITDA of 25.5 million and OPAL’s share of RNG production sold of 0.6 million MMBtu. For the first nine months of the year, we reported adjusted EBITDA of 40.6 million, and OPAL's share of RNG production sold of 1.6 million MMBtu. Our positive performance was the result of bringing new RNG projects and new fueling stations online, along with strong market pricing of environmental attributes, natural gas and electricity. As we look to the remainder of the year, we are introducing our 2022 adjusted EBITDA guidance of $60 million to $63 million. We are also updating our full year 2022 RNG production sold guidance to 2.2 to 2.3 million MMBtus based on OPAL's equity ownership of the underlying projects. As expected, our adjusted EBITDA and RNG production are showing an upward trajectory associated with bringing projects online and getting certification for environmental credit sales. As Adam said, we think it's helpful to look at our annual earnings power. We expect that our existing operating and construction projects have annual earnings power of about $200 million. This is where we stand today before accounting for putting more projects through our development pipeline into construction and operation, and all of the tailwinds related to investment tax credits, e-RINs, pricing power, et cetera. Underlying our annual earnings power assumption, our assumptions regarding RIN prices of $2.70, LCFS prices of $100 and natural gas prices of $5 per MMBtu. Now some updates on projects in our portfolio. During the first nine…

Thank you, John, and good morning to all of the participants on today's call. Last night, we filed our third quarter 10-Q an earnings press release, which detailed our quarterly and year-to-date results for the period ending September 30, 2022. We saw strong growth across all three of our business segments, RNG fuels, fuel station services, and renewable power. The biggest driver of the quarter and year to date results is RNG Fuels, where we are starting to see the contribution from the RNG projects that have come online over the course of the past year. As a reminder, once a project achieves commercial operations, there's a period of time during which a project is store and gas. While it waits for certification for RINs from the EPA and LCFS from Carp. RIN certification can take between four to six months and LCFS certification is now running about 12 to 14 months. So during this time, the project is incurring operating expenses and storing its gas until certification is achieved. Then the gas can be dispensed and environmental credits generated and monetized. That is the backdrop let's look at the third quarter and nine month results for 2022. We saw strong top-line growth for the third quarter, up 41% year over year, driven primarily by higher volumes produced and sold in the RNG fuel segment, as well as higher brown gas pricing and higher RIN pricing. Under forward sales contracts, we had entered into earlier this year. On a year-to-date basis, revenue was up 61% compared to prior year. We generated net income in the third quarter of 5.4 million. As I just noted, we benefited from strong market pricing of environmental attributes, which we had locked in earlier in the year via forward sales, as well as higher brown…

Thanks, Ann. To conclude today's prepared remarks, I want to reiterate the sizable earnings power of our existing operating and in construction projects, as well as our robust advanced development pipeline, of projects that we reasonably expect to be in construction in the next 12 to 18 months. We have enormous tailwind associated with IRA benefits with potential e-RINs and with the pricing power of our low emissions low cost renewable fuel. Our strategic priority is executing on bringing these RNG projects through development, through construction and online, leveraging our decades of operational knowhow to deliver value to our stakeholders. In closing, we believe we are on-track for OPAL's mission to build and operate best-in-class RNG facilities that liver industry-leading, reliable and cost effective RNG solutions to displace fossil fuels and mitigate climate 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.

[Operator Instructions]. Our first question comes from the line of Derrick Whitfield from Stifel.

Wanted to focus on your CapEx run rate relative to prior projections with my first question. Throughout earnings, we've broadly observed the trend of project delays across our coverage. And while your projects are advancing and you're adding in construction projects to your backlog, the rate of capital deployment is lagging -- noted in your prepared remarks all parties. With that said, are there one or two common themes that are contributing to the delays? And secondly, are you in a position to comment on the expected timing impacts for your in-construction projects?

For that question -- hold on one second. There seems to be some background noise that we're trying to eliminate here.

John, if I need to repeat that, let me know.

Sorry. No, I got the question. I'm just trying to deal with some background noise here. So, but again, thanks for that question. I would say first off, overall the earnings power targets of our business are still valid. However, we are indeed somewhat delayed in our putting our projects into construction and completing those. And yes, you see that in our lower CapEx. There's really a couple key reasons for this. Starting in the mid to latter part of last year, we saw most of the major landfill owners and some of the dairy owners really take some time off to reassess their pipeline of projects. You probably have seen that there's been a number of RFPs that have been out there while these landfill owners have sought to really put some order around the development of their pipeline. Included in that is an evaluation of taking equity interests in some of these projects. And I think overall that process has really is the principal source of the delay. You see similar things on the dairy side, it's more fragmented, but there was a very high LCFS price, which prompted a lot of people to come in. That price is obviously much lower today, but the dairy owners still continue to seek the best opportunities. Yeah, you have people coming into the market who maybe don't have the skills and background of OPAL Fuels. With our 20-year experience in the industry trying to enter the field by offering higher value to the counterparties, we remain disciplined. In addition to the landfills and the dairies evaluating this some of our development activities have been delayed to a lesser degree related to permitting delays that we've been seeing, I think somewhat COVID related, but -- and pipeline interconnections where some of…

Terrific. And as my follow up, maybe stepping back to the 30,000 foot level and touching on the comment you just made in your remarks there, we've also observed unprecedented levels of M&A for RNG assets over the last call it several months. In your view, what do these transactions imply about the value of your business and how do they alter the competitive and operating environment for you? Seemingly there are less agile players at the table at the moment who are well funded, but I'd like your take on that as well.

This is Adam here. And yes, we have noticed some of the larger financial and traditional energy players moving into the sector. And as Jon did say in his prepared remarks, we believe it's a validation of the attractiveness of RNG as a renewable energy resource and more specifically for OPAL Fuels validating the business model that we've gone down in terms of maximizing the value of the RNG, and that sort of thing. I'll say this and then and then I'll just chat on how we think it may or may not impact competitive dynamics out in the marketplace. But our focus is on building our platform and being a leader in the production and distribution of RNG. We're building a free cash flow machine, and it's interesting when we see the analyst reports talking about EBITDA multiples and that sort of thing, we think there may be another leg to this when people start looking at these businesses as free cash flow yields given the extremely low capital intensity of our business after the plants are built. So we are absolutely focused on maximizing shareholder value. We think we do that by finding and investing in very attractive risk adjusted return projects and running them efficiently. But, make no mistake, this management team and our largest shareholder is focused and our focus on maximizing shareholder value. And we think we're building something here that will ultimately get recognized. And that pertains to what's happening out there on the competitive dynamic. We think, it's likely a positive, as we move through, some of these RFPs and bidding processes and that sort of thing where consolidation likely helps along some of those processes. And we think maybe, there could be some digestion and integration, as those are happening. So all-in-all, we fell, we have noticed it and we do we think it's a good validation of whether we are join in building.

[Operator Instructions]. Your Our next question comes from the line of Matthew Blair from Tudor, Pickering, Holt & Company.

So the 2022 EBITDA guidance, if we just do some simple math, I believe it implies Q4 midpoint at $20.9 million versus the Q3 number you just put up of $25.5 million. Could you walk us through the bridge Q4 or sorry Q3 to Q4?

Yes. Hey this is Adam and I'll take the first shot at it. So there were a couple of items in the third quarter that you should be made aware of. One is that, we did have a gain of about $2 million from our biogas investment, where they liquidate data and monetized some, given the money forward sales contracts at LCFS. So once gastric that came in and and we added our adjusted EBITDA. But that was about $2 million. I wouldn't necessarily consider that recurring. And in the third quarter, we have also tried to present our adjusted EBITDA by moving out or better matching the operating cost for RNG production and when we were waiting for in certification when we had those forward sales. In our third quarter number, there was an additional $1 million headwind from the second quarter, how do we been treating it the same way in the second quarter. So there was approximately about $3 million or so in that $25 million in the third quarter.

Okay. And then the renewable power EBITDA in the third quarter, if we make some add backs, looks pretty strong. Was that boosted by high natural gas and electricity prices in Q3 that might not re-occur in Q4?

This is Ann. Yes, I mean we've seen that actually across all of our businesses. But yes, particularly in that segment, we do get the benefit of higher prices on the flip side as you typically see entire utilities you for operating the projects as well.

This is John another factor is that, we have been operating our retail electric project flat out, while we are building the Emerald RNG project and the royalty associated with that project has gone down or been eliminated. So the project is showing much better profitability during this time of period with a higher hold output and higher energy prices associated with it. So yes, it's obviously would a big driver of that.

Got it. And then Ann, I think you mentioned that twenty twenty two results been helped out by by locking in some RIN at higher prices. Have you been able to do the same with 2023 RINs? Have any that been locked in at higher prices? If so, do you have any details from that?

Yes. This is Adam Comora. We have not sold forward yet any 2023 production. There is some news that will be coming out at the end of this month from the EPA regarding their set rule and how they may manage obligated volumes for a period of time, whether it be three years or five years. And there's not a lot of volume trading yet in 2023. And I think a lot of people are waiting for what that new guidance looks like out of the ERA. So as of now, we have been waiting and holding off some of that forward sale activity.

And then last question, I thought the assumptions were, were interesting that you laid out for your annual earnings power. I believe that the D3 rent assumption you're using is a little bit more conservative than current pricing. So could you talk about that? Are you worried about potential impacts of RINs on D3 supply demand? And then on the other hand, I think the LCFS assumption is a little bit better than current pricing. So perhaps are you constructive on some of this recent commentary from Carb and it looks like they're looking to, to tighten up the LCFS program?

Yeah, this is Adam here and a couple of different things in there that I can address. The first is, we've used a 270 rent assumption in that annual earnings power and it is below what we were able to achieve in sales at 2022. And if the EPA continues to manage the program as they have in the past, likely a good estimate for 2023 although it is yet to be seen as you would intimate it how RINs can play into that. And we think some RIN guidance likely comes out at the end of the month as well, along with the set volumes. And again, both of those things likely get finalized 180 days out from when they publish it or maybe a 65 days because they're 15 days later already. And the RIN has a lot of interesting potential for our business. We're there could be incremental RINs created from our renewable power portfolio. Again, just to create an RIN it has to be AUL source. You don't get it from solar or wind. It would just be from biona being or biogas burning into electricity. And that's what we've been talking in the industry we've been talking to the EPA about is, it is terrific to add this new pathway. How are you going to manage around those additional rims that that could potentially get created. And we've been talking to the EPA about different ways that they can manage that process net. I think it'll be a large benefit for our business. And we're hopeful that the EPA understands that they should be setting up mechanisms in place to handle the potential for additional RINs that come out of electricity pathway. And the last piece I think you asked about was the LCSS pricing,…

I'll just add as well, I mean, clearly, as Adam just said, there's a lot of moving parts to this, right? It's all very fluid and we're trying to make I think conservative but realistic assumptions with this annual earnings power target. Because again, it's long term, there's no specific date on it. But I will just add, for Sonoma, we actually do have a collar in place with a hundred dollars floor for LCFS. Obviously as dairy projects come on over time that that becomes diluted, as more comes into our system. But it's an important underpinning for the assumption to be mindful of.

Our next question comes from the line of Joshua Cohen from Westbury Capital Group.

Good morning, guys and thanks for taking my questions. An additional question on the M&A environment in the sector. Can you speak to the interest you're receiving from potential buyers right now and how you think through staying independent versus selling?

I am not going to answer that question. I will tell you this. We feel like we're in a really strong position to build this company, this platform with the team that we have and really think we've got terrific opportunities in front of us to continue to win new business, continue to develop more projects, continuing to operate them efficiently and continue to maximize the value of the RNG. Specifically, as the market currently sits in transportation fuel and that annual earnings earning power recently translates into predominantly free cash flow. And we've got a long history here at our sponsor company and within OPAL Fuels of figuring out what to do when we're generating significant amounts of free cash flow to enhance shareholder value. So we see many, many different ways to win here. And I appreciate the question.

Okay, got. I appreciate that. I mean, it's a good good situation to be in, having a no strong trajectory independently. But I'm sure also having quite a few phone calls. Just seeing what's going on in industry right now it's pretty incredible. Just as a quick follow up, can you talk through the potential benefit in more detail from the IRA specifically the new ITC. But both on magnitude of savings on your planned CapEx but then also on those kind of additional opportunities, it's now opening up?

Yes, I'll step into to that. This is Adam here. And that's one of the things that we will likely highlight in terms of granularity when we do provide guidance in '23 and beyond. And should be noted these IRA benefits have at least five years of life of them between the ITC, which is stated it's about 30% of the capital cost of the tax credit. That you get that after you complete commissioning at a the plant. There likely will be some friction costs when you try and modify monetize those tax credits but you more able to sell them. And there is still some guidance coming out of treasury to further nail down what qualifies by project and that sort of thing. But it looks like, it's about 30% percent of your costs on projects. And the rules around that are, it has to not be in operation by the end of this year. So it's all market structured project and anything that answers construction by the end of 2024. So with that we are going to be sprint the fast as we can. We have already motivated at these projects with construction. That's how that ITC works. There is also a 45 C which is a tax credit so sale production sale of renewable biofuels and the -- treasury likely will come a little bit later. Those don't fit until '25 through '27. But those could be significant drivers. I mean if you look at our portfolio of projects and look at language in there, there is room for between $5 a gallon of tax credits. And it's also interesting why -- one of the reasons why we like to sort of hold our R&D open to the transportation to market, so we can take advantage of these additional incentive as they come up overtime. So we believe those two are really significant. And then we are investing in some others as well. There are some carbon capture credits available and we are looking at potentially doing some carbon capture on our projects. There is also a clean hydrogen production tax credit, which we believe to use RNG in production you can qualify for hydrogen. We didn't really talk about in our prepared remarks but we are still doing partnership with renewal and fueling stations. Still think it's an interesting potential end-market, but haven't really seen commercial, whether or not it could replace what we could get in the transportation market.

I guess just as a quick follow to that, if I mean I agree that the treasury will almost certainly come out with favorable guidance for the ITC in regards to bio gas. And so if that's the case, when you think through the capital on balance sheet, plus your ability to raise project level debt and to what extent if we assume that 30% would be applicable to your what in construction and your development pipeline, to what extent would that capital extend further than you currently expect?

Yeah, it would absolutely have an additional benefit. We've -- I'm looking at Ann right now to see if we provided the remaining capital.

We have not. I mean, again, what we've stated is that from a liquidity and access to capital perspective, clearly we see a runway for at least the ability to build out everything that's currently in construction and start development. We do anticipate that we would need additional debt capital. But again, we're still evaluating obviously the, what we will get from the IRA. Clearly, it extends the runway, but until we have more guidance, I don't think we can really put a number on it. Again, it's a positive tailwind for us. Absolutely.

And the other way to think about it is its definitely been helpful offsetting inflationary costs pressures that we've seen on build multiples look still look pretty good in our advanced development pipeline.

Our next question comes from the line of Ryan Todd from Piper Sandler.

Maybe a follow-up on that last question as since that, I mean, as you think of the pace of your development over the coming years over the next few years is the pace at which you're able to progress projects? What are the primary gating factors there? Is it permitting and just normal project execution? Is it capital availability depth you have a strong depth of pipeline, so what determines eventually kind of the pace of which you're able to progress and execute projects here?

Development is characterized by projects that surge forward and those that fall backwards. A lot of elements of project development has to do with items that are not under, strictly under our control, but dealing with third parties. It is not capital availability. It's really just getting hurting all the caps, if you will and getting all of it together in a condition, in a discipline condition where we can reasonably start construction on a project once a project goes into construction. It's just a matter of time to get that project through the construction period and into operation, but is development that has some of that uncertainty associated with it. We feel very, very good about our pipeline. As I said before, it's in better shape than ever. We have many new opportunities that we're not in our pipeline at the beginning of the year. And as a reminder, when we talk about advanced development pipeline, these are projects which have been qualified by us and which we feel reasonably likely to enter construction in the next 12 to 18 months, meaning that we see with the third parties that we're dealing with reasonable opportunities to get these into construction. Many of them are really just subject to getting, say partnership documentation together. Others might be subject to finalizing the biogas rights associated with it, and others might be associated with getting pipeline interconnections. But once you really have those basic parts and I'll add permitting to it as well, that you have the basic parts that you need along with the construction contract itself to get a project into construction. Does that help answer your question?

Yeah, that's, that's helpful. Maybe on a follow up on construction, I mean, you have, you have roughly 5 million MMBtu of RNG projects under construction at present seven projects I think you, you said. Can you provide any, I know you're going to provide more specific guidance not too far down the line, but can you provide any clarity on how you would think about the cadence of these volumes coming on stream throughout 2023 and 2024 backend loaded, rateable, any overall kind of rough way to think about when those volumes come online?

Sure. So you're right, we're not going to be providing guidance here, and this is not in the form of guidance. And as said earlier I really feel, we all feel that our earnings power targets are valid if somewhat delayed, but and the IRA tailwinds and the industry consolidation is really validation of what we're doing. But in terms of the projects themselves, we think that the bio town project some of those digesters may be coming online now, but we think the project officially goes commercial in the first quarter. We think our large landfills through the course of the next year Emerald and Prince William mid-year, Sapphire towards the end of the year, and then the BS Hilltop Digester projects and the new Northeast Project through mid-2024. We think it's going to be fairly regular in terms of the cadence as to what you see. And you're right that the construction portfolio is about 4.8 million MMBtus of being play capacity. So that is what we're looking at. So I hope that helps. Thanks for the question.

Yeah, that's very helpful. Maybe one last one. Can you talk about what you're seeing whether it's at a national level or regional level, or even kind of a direct-to-consumer corporate type of inbound or relationship level what you're seeing on, CNG transportation demand growth, and how you think about kind of the pace of that growth over the next few years.

Yeah. This is Adam here. Thanks for the question. I it's funny, we've got what I think is a pretty interesting business embedded in our RNG business. And there is really some traction happening right now. And I think if you look at our fuel station service business you'll see that there's been some growth there exhibited. And there's a number of things driving it, price of diesel is number one. When look at this part of the business, with diesel -- elevated diesel prices, it's getting a lot of attention and the benefits of RNG. Quite frankly was just PNG to make a lot of sense for some of these companies. We are seeing a lot of interest in his covenant introduced 15-liter year engine. There will be some testing units out there in the beginning first quarter next year and people will be testing those trucks throughout next year, and it goes into earnest commercial production by the end of next year. And people are really excited about that. And we think there is a very strong chance that we are going to see accelerating deployments of these natural gas combustion engines running on RNG and that's going to put us in a very unique position to; A build out large scale national deployments for those fleets. And B, vertically integrated so that they can get visibility and reliable renewable natural gas. And couple those two things together and if they are really going to be using this fuel to achieve their sustainability targets, that's where you start thinking about where there going be potentially pricing power and with $5 and $6 diesel as a pretty big sort of advanced deal in progress.

Thank you. At this time, I would like to turn the conference back to Adam Comora for closing remarks.

All right. Thank you very much for participating in OPAL Fuels third quarter earnings call. We look forward to continued engagement and dialogue. And if you want to learn more about OPAL Fuels, please reach out to Todd Firestone, our VP of Investor Relations, and everyone have a great day.

Thank you, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.