Good day, everyone, and welcome to today's Clean Energy Fuels First Quarter 2024 Earnings Conference Call. Please note, this call may be recorded. It is now my pleasure to turn the conference over to Mr. Robert Vreeland, Chief Financial Officer. Please go ahead.

Thank you, operator. Earlier this afternoon Clean Energy released financial results for the first quarter ending March 31, 2024. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of the Clean Energy's Form 10-Q filed today. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information. A definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Thank you, Bob. I am pleased to say that we kicked off 2024 with a strong first quarter. Our base business of fueling fleets, constructing and maintaining stations for those fleets, and providing other services that keep trucks, shuttles, and buses operating on a clean fuel performed well. We also made good progress in our business of developing renewable natural gas dairy projects. I'll expand with a few more details on both in a moment. The 8.6% year-over-year growth in RNG fuel volumes is a testament to the stability and growth in our base business. In addition, it reflects the significant RNG volume that is now flowing through the new state-of-the-art fueling stations that we have built and opened over the last 2 years where we have an anchor customer in Amazon. We are also seeing other vehicles begin to fuel at these stations, which helps our fuel margins. As always, Bob will give you more details about our financial results, but I would be remiss in not calling out the $12.8 million in adjusted EBITDA for Q1 compared to minus $4 million in Q1 of last year. The significant upswing is attributed to the growth in our core business that I just mentioned, as well as circumstances that we found ourselves in during the beginning of last year with historically high natural gas prices in California that impacted our bottom line. Our balance sheet remains strong with almost $250 million of cash and investments on hand, and you should see continued improved adjusted EBITDA results through this year. I'd like to take a moment to address the environmental credit situation because I think some might tie the ups and downs of those prices a little too tightly to our overall business. Of course, we're not pleased with where the California LCFS prices have been trading as of late. During the first quarter of 2024, the federal D3 RIN prices remained strong and positively impacted our results. We have witnessed a volatile LCFS credit price for quite some time. So we went into 2024 planning for that to continue. And it's our strong view that a higher LCFS credit price is needed over time to support the robust pace of low-carbon energy investment necessary to achieve California's emissions targets. And we believe that members of the California Air Resources Board and staff understand this and are working with all stakeholders on a solution. But like most policy matters, it requires time and process. Ultimately, we believe the compliance curve will be strengthened and will help. Let me drill down a little further. Our fueling station and RNG distribution business generates margin from D3 RIN credits, LCFS credits, California and Oregon volumes, federal alternative fuel tax credits, and margin on fuel sales. Using RNG instead of diesel results in lowering fueling costs and lower emissions for our customers. It also contributes to a solid base margin for us. The credits are additive to this base margin. On the RNG production side, our dairy projects generate revenue from RIN credits, LCFS credits, and RNG sales. The financial return of these projects is further enhanced by credits that will be generated under the Inflation Reduction Act through the investment tax credit and beginning in 2025, the 45Z production tax credit. These projects produce ultra-low carbon intensity fuel for customers while also providing a solution for our partners in the agriculture sector. Let me return to the growth in our core business for a moment, which is providing fuel and reliable services to our fleet customers. Over the last few months, we have signed agreements with municipalities across the country that demonstrate the continued confidence in the reliability and emission benefits of operating with RNG. These agreements included everything from Long Beach Transit for about 1.5 million gallons of RNG a year to operate their fleet of city buses, to the vehicles at the Port of Seattle, and to Atlantic County Utilities Authority in New Jersey that is expected to use 0.5 million gallons of RNG for their waste collection vehicles. Another deal that we just recently signed is one that I know our sales team and I, particularly proud of, and that is Harris County METRO, which services the Greater Houston area. Houston METRO is one of the largest transit agencies in the country that operates their fleet of buses primarily on diesel. Well, that's about to change, and they're making the switch with Clean Energy. We will be building a new state-of-the-art station for up to 120 of the first buses operated on natural gas. All told, the close to $15 million contract to construct a new station and to modify their facilities for natural gas fueling represents one of the largest transit agreements we've made in many years. These municipalities are on the hook to their constituents to keep the buses running on time and the trash picked up. They must depend on vehicles that operate not only sustainably but reliably as well. RNG is the cleanest fuel available and is the most reliable performer of any other alternative. And no other company in the country keeps those stations, which provide that fuel, operating better than Clean Energy. Another unique advantage that Clean Energy holds over virtually every other fuel provider is that we now produce our own ultra-low carbon RNG at dairies. This is in addition to the approximately 78 different offtake agreements we have with RNG suppliers to provide the largest natural gas fueling infrastructure in North America. We deliver RNG to 454 different stations daily, and RNG now represents 88% of the transportation fuel we sell. This allows us to give RNG customers the greatest level of assurance that they will receive this clean fuel without interruption. Others try to match one RNG production project with one contract fleet customer. The customers, especially national fleets, want to know that providers and operators of their stations have a portfolio of supply in case there's an interruption in any one supplier. No other company provides that confidence the way Clean Energy does. In fact, we recently won the deal to service Fort Collins Transit by beating out 12 other competitors, including 2 global energy majors because of the agency's confidence in our ability to keep the RNG flowing 24/7. And we apply this strength across all transportation sectors, whether it's for municipalities or the world's largest logistics operators like UPS, for which we provide RNG in over 25 states, and Amazon for which we have constructed 19 state-of-the-art RNG stations over the last several years that provide fast fill and time fill options for thousands of heavy-duty trucks. On a daily basis, Amazon trucks are fueling at Clean Energy stations in 26 different states. We feel good in our positioning at this critical time as the Cummins X15N engine hits the heavy-duty truck market. Reviews of the new engine by those fleets that have been testing it have remained stellar. Pivoting to our RNG production business, we've had a busy first part of the year, completing a series of digester projects in dairies across the Midwest with our partner, BP. These projects began injecting RNG into the pipeline a few months later than what we had originally hoped, but we remain pleased with the overall outcome and continue to learn with every project. 2023 was one of the worst markets in decades for our friends in the U.S. dairy business. A combination of low milk prices and high feed costs created very challenging financial conditions for dairy farms, including some of the farms we partner with for our RNG projects. To that point, a dairy in Idaho that hosts one of our 50-50 joint venture projects with BP filed for Chapter 11 bankruptcy protection in April. The proceedings are at an early stage, so we're not able to comment on the details of the process, but we are of course monitoring the situation very closely. Importantly, the dairy is still operating while the reorganization proceeds. And our RNG project creates an important operational, environmental and financial solution for the farm once the project is completed. Despite some challenges, our view on dairy RNG remains intact. These long-term projects produce the lowest carbon fuel for the customers. And they provide an important solution for our farm partners, all while capturing methane from animal waste and removing it from the atmosphere. As an example of our commitment to adding to our low-carbon RNG supply, I'm pleased to say that we are expanding our current relationship with Maas Energy Works, with whom we have RNG offtake contracts by signing a new development partnership to construct RNG digesters at a handful of dairies across the country. Daryl Maas and his team are some of the best developers in the business, and we're excited about this development agreement. But we just signed it yesterday. So we will be formally announcing it with the press release early next week with more details. The other recent partnership that we have formalized is with Frank Brand, owner of South Fork Dairy in Dimmitt, Texas. You might remember, it's Frank's dairy that experienced a tragic fire last year. Frank lived up to his reputation as one of the best in the business by overcoming this horrible situation, rebuilding his barn and replacing his large herd in less than a year. He is also committed to working with Clean Energy and building an RNG digester for all the business and environmental reasons it allows. We couldn't be prouder to call Frank our partner. I hope I've left you with the impression that we remain optimistic about our future. The fundamentals of our business of producing and selling RNG to the transportation industry are strong and growing despite some external forces that might not always seem to go our way. We believe we put the best team in place to execute our strategy, and they prove that every day. And with that, I'll turn the call over to Bob.

Thank you, Andrew. And good afternoon to everyone. We had a solid first quarter of 2024 with revenue of $103.7 million, a GAAP loss of $0.08 per share, non-GAAP loss of $0.01 a share, and adjusted EBITDA of $12.8 million. All the earnings metrics are much improved from a year ago and were better than our expectations for the first quarter of 2024. Recall that the first quarter of 2023 was significantly impacted by the historically high natural gas prices in California, which ultimately was a drag on earnings but was a big positive on revenue since much of that increase in gas costs was reflected in our pricing to customers. And that's actually the main reason you see a year-over-year decline in our revenues because of that run-up in the natural gas costs in California last year. Having said that, our net results for the first quarter of 2024 certainly got off to a better start than a year ago, which puts us in a good position to remain confident in maintaining our annual guidance for 2024. First quarter results for 2024 can be summed up by saying we had continued growth in RNG volumes. RIN revenues exceeded our expectations, which helped to offset certain LCFS credit sales that moved into the second quarter. We experienced lower net losses than expected from our RNG equity method investments, while the rest of the business, including our underlying fuel margins, formed in line with expectations. To shed some light on this, in the first quarter of 2024, the upside in RIN revenue was principally due to an average RIN price realized of $3.12, plus we saw better net economics to us from our RNG supply offtakes. Our LCFS revenues were slightly negative for the first quarter of 2024 because we sold $2.25 million of LCFS credits in the first week of April that we ordinarily would have sold within the first quarter. Those LCFS revenues of $2.25 million will show up in our second quarter results. We would expect to get back into a normal LCFS credit sale timing cadence for the end of the second quarter with a plan to transact all of our LCFS sales in the second quarter. And finally, the lower net loss than expected from our RNG equity method investments is principally related to the timing of finalizing construction and placing the dairy projects into service and the ramp-up of operations. We ended the first quarter with approximately $249 million, $250 million in unrestricted cash and investments. We maintain our capital expenditure guidance of $60 million for our distribution business. We are raising our forecast for our dairy RNG investments to $120 million, up from $100 million, principally due to the Maas Energy RNG deal that Andrew mentioned. With that, operator, please open the call to questions.

And our first question will come from Eric Stine with Craig-Hallum.

So just starting with the 15-liter. I know that Cummins has had some pretty nice targets out there for adoption here in '24, '25 and '26. And I know we're getting closer; OEMs are starting to talk about production dates and that sort of thing. Just curious what your thoughts are or what you're hearing and what your expectation is throughout the remainder of '24 and then '25, '26.

Yes. Eric, I don't have any feel right at this point with the numbers, and I'm guessing you'll have to get those from Cummins. I have been recently to Cummins. One of the things that impressed me is, back in Indiana, they're very pleased and excited about this engine. I really feel like the technology and what they've been able to bring to this engine is really impressive. And so they're excited. So that makes me excited. I do know, as we keep up with customers that are testing the engines, the feedback continues to be very strong and the excitement is high. So the expectation is that this engine is going to be very well received as those orders begin to come in. One update is that some of the validation units, which is kind of a term of art in the engine business, is the next batch of trucks that have been built and these engines are now making their way to customers. In fact, we'll get one here shortly that we'll be using for our customers. And our customers, if it's any indication, Eric, we booked that truck out in 1-week and 2-week tests for real loads, for real deliveries for our customers in those trucks for the next several months. So the excitement, I think, is good for this product, and I'm just hoping that we'll know more here in the early part of the summer about how these orders are going.

Got it. And I won't ask you, which I have in the past, about maybe future plans with Amazon, but maybe you can talk about, you mentioned some of the volumes you're starting to see at those Amazon stations from other fleets. I'm curious again, coming back to the 15-liter. How did that play into those conversations?

Yes, obviously those stations have been built with time fill, if you're familiar with 4 of the Amazon trucks. And of course Amazon avails themselves to the fast fill as well. But each of those stations has pumps kind of on the front part of those facilities that can fuel outside fleets. And it's been nice to see. For instance, the other day, I have a picture that one of our salesmen sent from San Bernardino, which is a large station that has, I think, almost 200 Amazon trucks at it out in the Inland Empire. There were 4 different unrelated heavy-duty vehicles from other fleets. So we're beginning to see that happen. And of course, the X15N will be important to this, right, because as those other 15-liter trucks become available to other fleets, these locations are all in the perfect area. That's why they've been placed there by Amazon. They're in warehouse districts. And so it should be very well-suited as these engines come to market. So we're glad to see that. We're beginning to see those volumes ramp up, and it's as we hoped.

Our next question will come from Manav Gupta with UBS.

Congrats on the strong start to the year. My first question is policy-related. If 45Z is implemented in the current form, then you with negative CI RNG could be a major beneficiary of it. Just trying to understand. I think 40E guidance is out, 40B guidance is out, but anything you have got on 45Z is the plan still that goes into effect in 2025? So if you could help us understand the impact on you and what you're hearing in terms of when the government could be out with it.

You're breaking up a little bit, Manav. But if I understood your question, 45Z is moving through these different things at Treasury. It is our understanding that 45Z should come out here sometime later this year; I'm hoping earlier is better sometime maybe later this summer. But we haven't really heard anything definitive, Manav, so far.

Perfect, a quick follow up.

Yes, go ahead, Manav.

So a quick follow-up there would be, can you update us on the number of dairies you already have online? And how should we think about modeling the number of dairies online by year-end 2024?

We have 5 dairies that are injecting gas right now, and the 6th is completed, but we're just going through kind of a punch list with the farmers, so that would make 6. By the end of the year, those first 5 should be all producing, injecting, and creating credits. The 6th one could slip into 2025, and that's really for no other reason, Manav, other than just the length of time that it takes to get through the certification process. Otherwise, those first 5 are storing gas as we speak.

Our next question comes from Rob Brown with Lake Street Capital Markets.

I would like to know more about the Maas Energy partnership, specifically any updates regarding RNG. Are they focusing on different areas or regions, and what does this partnership involve?

Maas is really one of the biggest and best developers; you've got 60 projects. And so we're very excited. We work closely with Daryl and have for a long time. As I mentioned in my remarks, we're taking gas RNG from him now. These projects will be scattered out in 7 different states. There's actually 6 projects, but the way that the dairies align themselves will actually be in 7 states. I'd say for the most part it's Midwest and in the South. And so we're excited about that. I'm going to try to hold off getting into all the detail on that because we're going to talk a lot more about that next week. But it's an exciting development, and it should kind of boost our development program.

Okay. And then on the Amazon rollout, how many more stations are sort of set to go there or in the original, I guess, first wave?

There are two more to complete. One is almost ready and the other is pending approval from a city in Northern California for stormwater management. Once we receive that approval, that project will also be ready to proceed. We've made significant progress, having completed 17 of the original 19 projects, and in fact, we've completed even more than that.

Our next question comes from Derrick Whitfield with Stifel.

Regarding the Maas partnership, and I get you guys want to hold off on the details at some level. First, congrats on that because, as you mentioned, he's one of the more active developers in the industry. But maybe specific to Clean, how should we think about the partnership's implications for your development approach and cost? Like are you guys going to do more of the covered lagoon versus complete mix? And I guess just trying to understand the application and how it could potentially change your cost structure.

Well, one, I think Daryl is a proven cost-effective developer. And we've seen that over time. He's a no-nonsense, tight-fisted operator, so we like that. These dairies will be smaller, and many of them will be covered lagoons. I think it will be a little bit different than some of the ones that we've recently completed. But Daryl has an awful lot of experience on that, and we're looking forward to working with him on it.

And then my follow-up, could you perhaps update us on the project pipeline? I know that it's been fairly steady and you guys are working to convert that. Any color you can provide just on the depth of advanced type developments that you guys have right now would be greatly appreciated.

Well, obviously, this Maas thing factors into that. And these projects ebb and flow. But I'd say that one of the things, the pipeline is robust and a lot of the projects that we've had over the last year, 1.5 years are continuing to be looked at or continue to wrestle with. As we look at the pricing of the low carbon fuel credit and other sort of uncertainties woven into it, some of these projects don't look as attractive as they once did. So we have to think that will all come around. The cost of some of these projects, as we all know, and the time to market has been somewhat challenging for certain of these projects. They haven't gone away; it's just whether or not those are is where we want to deploy our precious capital right now. When we get an opportunity to do a program like Maas with the structure you'll see next week, we think that kind of moves to the top of our pipeline list. We continue to know that we need more RNG. The industry needs more RNG. We want to be good stewards of capital as we launch these projects. Of course, the one that I mentioned in my remarks is Frank Brand. Now that one we sort of talked about, but that's getting ready to go into production. Well, I should say production with Frank Brand is going into construction.

Questions of production

Our next question comes from Matthew Blair with TPH.

You noted that the first quarter exceeded your expectations, which we found quite impressive given that the LCFS credits were pushed into the second quarter. Was there anything from the second quarter or the latter half of the year that was moved into the first quarter?

No.

Okay, no. And you reiterated your guidance. I guess all things equal, this would make you feel more confident about hitting the 2024 guidance. Is that the right read-through?

Yes. Yes.

We have volatility there, right?

What I think it points to a little bit, especially with the LCFS going into the second quarter, is it shows that the underlying business, the fueling business, is strong and healthy.

Indeed. And then do you have an update on the Total JV? I believe that your 6 current dairy RNG projects, I think they're all with BP. Is that correct? And could you provide an update on how things are going for the Total JV? We saw that they're working with another counterparty as well. So where do things stand with Total?

Yes. So we have one project that was our first project with Total. In fact, our Board of Directors is going to inspect that next week. It's in the Texas Panhandle. We're pleased with that and our partner there is. So that one is producing well. We continue to, as we just discussed earlier a couple of questions ago, we have a pipeline. So we work, we show different deals to our partners. Of course, we do that with Total. I'm sure that here in the near future there will be some that will go into the Total call.

Our next question comes from Betty Zhang with Scotiabank.

First question on LCFS. Just curious what you guys are seeing there. Is the expectation still that we'll be getting the updated program starting in 2025?

Yes. Betty, look, this has been a difficult one to pin down in terms of timeline. Our view is, and we're working very closely with the CARB staff and CARB board members, the industry is. We tend to believe that the program that we got a preview of at the last meeting should come before the Board probably in July. If all goes well, then it would be adopted for implementation in 2025. We believe that that will include kind of the 9% step down, the accelerator in terms of rationing down the compliance curve depending on market conditions. Some of the other more constructive points that we've talked about before in terms of constructive interpretations, avoiding methane, and book and claim and some of those things that were a little up in the air earlier in this process. But we need to get this done. I think that's the view of staff as well.

Okay. Great. And then in terms of what you mentioned about the dairy farms and how there are some challenges financially, do you think that could have any impact on your RNG volumes?

The situation in Idaho might experience some timing delays, but the rest of our projects are progressing well. We're currently producing and injecting gas, and we're in the early ramp-up phase for all of them. Overall, as these initiatives develop, they offer a revenue stream to the farmers and are beneficial for the dairies. However, there could be some delay for that one particular project.

Our next question comes from Pavel Molchanov with Raymond James.

Thanks for taking the question. I remember a year ago you provided this math that for every, I think it was 3,000 trucks, Class A trucks running on RNG, your fuel sales would go up by 10% or something like that. Is that sensitivity still accurate given everything that's happened since then?

3,000 trucks represent 45 million gallons, which is part of the 250 to 300 million gallons we process. This aligns with the discussion about the importance of the 3,000 trucks. We're currently not handling that many with Amazon, but that volume is consistent with my earlier points. Cummins has indicated that they anticipate around 3,000 orders in the first year for the X15N. I believe we'll capture a larger share of that volume due to our extensive network, and we hope to see those numbers increase in the following years. It's crucial to understand that these heavy-duty trucks with the new engines, particularly the 15-liter ones, will consume 15,000 gallons each. Even reaching 10,000 trucks would represent minimal penetration in the 0.25 million Class A trucks sold annually, which would result in 150 million gallons. We hold a significant market share in that area, making it very important for us. This outlook reinforces our optimism about the business and the increasing demand for RNG. We're on the cusp of seeing these engines enter the market, and I'm hopeful for the anticipated uptake.

Okay. Let me follow up with more of a conceptual question. With this AI data center euphoria, there is more and more talk about biogas going into the data center space as gas, right, without being turned into RNG first. What are your thoughts on that?

Well, the best use of RNG is certainly low carbon, low CI RNG is in transportation, which is a hard-to-carbonize market. I understand that everyone is striving for benign fuel as they can, as lowest carbon fuel as they can. It's not necessarily the most economical and wisest place to put your most coveted low CI gas. It should go into transportation, where it generates the most amount of credits. Some landfill gas may end up opting into the stationary market. But we're talking to all the different producers now, and you'd be surprised that many of them that used to talk a lot about stationary sources want to bring RNG to the transportation market. Eventually, they want to bring it to the transportation market for hydrogen, not only for RNG for the vehicle. There will be a lot of pressure on RNG. The good news is there's probably 7 million to 10 billion gallons of RNG that's, I think, eventually over the next decade will come to the market. The lowest of that CI gas will come to the transportation market; it won't be going into AI fixed power centers. I thought where you were headed, Pavel, and I was saying, wow, he's going to throw me a softball. This just puts more pressure on the electric situation. We didn't already have enough power for the heavy-duty trucks to go to battery. I think the market is beginning to understand that. So I'm so excited about being in the position we are with RNG that can act today in a heavy-duty truck. Because when you suddenly increase the demand for electricity in the United States by 20%, you just used up what you needed for heavy-duty trucks. It’s just making the situation worse for power in America to be able to do all things, every light-duty vehicle, every heavy-duty vehicle, and now 20% for AI. You don't have the power. Just read the Wall Street Journal; they had a pretty good story out yesterday. So I like how we're positioned relative to using a battery in a heavy-duty truck.

Our next question comes from Craig Shere with Tuohy Brothers.

So you point out that there are higher costs. It takes longer to complete projects. Obviously, for now at least the LCFS cash flows are much lower than anticipated, 12, 24 months ago. I have kind of back-of-the-envelope guesstimated that we're looking at projects maybe in the 7x EBITDA when they're finally online now, and that doesn't count the cost of capital during construction. You've acknowledged all of this. I'm a little confused about a few things though. The first is, obviously you're a strong hand, you have good relationships, and I don't think any of us expect LCFS to stay where they are. But is this Mass relationship taking away your interest in direct acquisitions because it seems like in the market I just described that there are some weaker players that just have to fold and they can't last another 12 to 24 months.

I think you're right. I think you're right —

Okay. So are you looking for that?

But Maas doesn't take away from that. We'll get a crack at some of those. There needed to be some — just being candid, Craig, there needed to be some market therapy, which I think is going on. Some of those projects will come forward. We know all of them; we've looked at them. But we will get a shot at those too.

Okay. And then the next part to the question, because it was interesting, because it sounded like Maas was additive. I heard you say — I forget who asked the question, but saying that basically Maas is moving to the top of the list. I'm wondering if because of the economics, you're starting to slow walk what you had expected to be doing with BP and Total 12 to 18 months ago.

No, that's the — I mean the activity within those JVs is constant and hasn't changed. We're also able to do some of these on our own if that's the way it works. I think all of it is kind of firing on all cylinders really to get more volume. I wouldn't read any more into it other than it's additive. It's just a great opportunity, and we've been working with a well-known, very good developer. We talked to them for a long time about doing it, and we finally were able to get this together, and we're excited about it.

And your JV partners, they have a right but not an obligation to do the projects that you guys have kind of been circling up together. Is that right? So to the degree they say, no, I think we're going to take a pass for the next 6 months until the market settles out, you can pursue it on your own.

We're able to pursue them on our own. Yes.

And are the — recognizing there's a difference sort of where the ball is and where it's going, but is that roughly 7x EBITDA in current market conditions after a delayed completion process versus what was expected a couple of years ago is that roughly where we are and given your stable economic position, are you comfortable independently investing on that basis, thinking there's just no way CARB is going to leave LCFS at $50 to $60, 18 months from now?

Well, let me — I guess I'm not going to use your EBITDA number, okay. But let me talk about the second part of the question first. I think it would be safe to say that we believe that the LCFS price will normalize and will be higher in the future than it is currently. We are not modeling these projects thinking that we're getting ready to have a 20-year $50 LCFS price. We do believe that they're going to correct the obligation curves, which should begin to work off the overproduction, the oversupply of credits, and we'll see those credits strengthen. So, we've got that factored in as do our partners that we're working with. We're optimistic about the way that's going to sort out.

Yes. I mean all these deals are — they are — have their unique aspects to all of the deals that are out there in the market. So it's not really prudent to —

Craig, I think the way to look at it, and maybe I'll just do it simply, is, while you started your question by saying, I said that the project is a little bit more expensive, takes a little longer, blah, blah, blah that kind of thing. We saw a little bit of inflation. And all of that's true. On the other hand, we didn't have the IRA and we didn't have the PTC, and we didn't have the ITC. So, all things — now look, if you were to tell me that it was going to be $50 LCFS for — over the long haul, then this wouldn't apply. But, if you think that that's going to normalize at something higher than that, then all things kind of being equal, these projects are similar. The economics are similar to what they were when we started this. Not quite to where they were when you had $200 LCFS, but in the kind of similar ballpark. We have a threshold with our partners and with our Board of how we deploy the capital, and it has to meet that. Otherwise, we don't do it. So you should assume that these Maas projects meet that threshold. So that's why we're moving forward with them right now.

Sounds good. Hopefully a quick one here. In terms of the delayed coming online and actually getting cash flows because of when the carbon impact is certified and you can sell LCFS and whatnot. Is getting — is the timeline for major equipment procurement and availability of major equipment procurement, of accreditation for the credits, connectivity of pipelines. Is this — in your view, say, in the last 6 months, is this now stable starting to improve or still getting worse?

Yes. No, I think the — well, what I was hearing you saying, I mean the long lead items and some of the pressure that we saw because of the supply chain, that's normalized. We are working really — okay, so that's one. The pathway is still too long, right? The certification process is still way too long. We are working hand in glove with the staff at CARB to get that shortened. We've had meetings at the highest levels of government to talk about that. I don't think we have any pushback on that. I think all want to shorten that up, and it needs to come in dramatically. I'm hopeful that here in the next few months, it will become clear that they've made some changes to the process and we'll shorten up that timeline, which will be helpful for everybody because what we've got right now just is not workable. You don't do that in anything else. You don't build a skyscraper and then keep it vacant for 1.5 years. It's crazy. So I think though that's generally understood now, is just kind of getting that backlog worked off and changing the process to bring it in to something that makes a lot more sense.

And physical pipeline connectivity?

That kind of depends on how far you are and who you're working with and which utility and which pipeline. And that's never as fast as you like, but that shouldn't be a gating factor on these projects. You're not going to change that. I mean, we — I'm looking down the table at one of my fellows that has built 200 fueling stations. We run into that problem with utilities making meters, okay? That’s just the way it is. So I would say your pipeline connectivity is 6 months to a year, and that's never going to change. But that should be within the timeline of the construction project. When it's way outside of that, then you got a hot case.

Our next question comes from Jason Gabelman with TD Cowen.

The first one is just on upstream EBITDA cadence. This quarter was a bit better than expected, but you didn't change full-year guidance. It sounds like it's related to — I couldn't really tell if it was project construction getting delayed or something else. So should we expect that EBITDA to move more negatively in 2Q as you ramp up construction activities and other things going on in that segment? And then does the — this Maas joint venture have any impact on that?

No, Jason, we should see an increased kind of ramping throughout the year on the distribution side of the business, so we're not entirely —

Sorry, I wasn't — yes, not the distribution side, the upstream side of the business.

Okay. So what the —

Drag, drag getting worse.

Yes. Well, it will — we will see some of that. Yes. Yes. We talked about on our last call that a lot of that loss would be in the first part of the year. So it's going to move out a little bit, so you'll see some of it in the second quarter.

Got it. And no change from this Maas joint venture to that guidance?

Correct. No.

Okay. And then my second one is just the 15-liter engine order book. It sounds like the orders aren't going to come in really until the middle of this year. I think on prior calls you had suggested that sales could be kind of 3,400 in 2024. Maybe that was Cummins' commentary, not yours, but it sounds like the sales are being pushed out a little bit. So can you just maybe talk about when you expect to see those volumes materialize on the road in your distribution segment? Is that more of a 2020 —

Sure. Yes, those are Cummins' numbers, not mine; I got browbeaten around here by not using numbers anymore. Those are Cummins' numbers. But I would say this, it was always contemplated. I mean, the production never happened until June or July anyway. So I don't know that I'm sitting here saying that it's slipped or this and that, but it was always the second half. And we always figured by the time that made its way — by the way, these get produced, they get sent to the dealer, they get sent to the customer, they get stenciled, and the vehicles take a while to hit the road. We always figured that the volume for 2024 for us would be relatively small, and it would be way back-end loaded. The way we've always thought that it typically wouldn't be until September, October, November, way late in the year. It will really be a 20 — we'll get a stub. Even if they did the 3,500 or 3,000 that Cummins talked about, we stand to gain a large part of that market share, I'd like to think. It will be in the fourth quarter, and that will really be — we'll see that volume in 2025. We've always thought that. But I still want to see those orders come through and then those engines built. That's key.

There are no additional questions at this time. I'd like to now turn the conference back to Mr. Andrew Littlefair for any closing remarks.

Yes. Thank you, operator. Thank you, everyone, for joining today, and we look forward to filling you in on our progress next quarter. Have a good day.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.