Good morning, and welcome to the OPAL Fuels Third Quarter 2022 Earnings Call and Webcast. 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 the 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, a replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks on this call, including answering your questions, contain forward-looking statements that involve risks, uncertainties, and assumptions. Forward-looking statements do not guarantee performance, and actual results could differ materially from those 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 discussions 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 to nearest GAAP measures is 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 an 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 operators in the renewable biogas space, with 38 projects in operation, construction, or advanced development, aggregating to over 19 million MMBtu of production. All of these figures are representative of OPAL Fuels' proportionate ownership share of the projects. Year-to-date revenue for the nine months is up 61% from last year. Year-to-date adjusted EBITDA is up 78% from last year. We are guiding to a $60 million to $63 million adjusted EBITDA for 2022. Annual earnings power is approximately $190 million from our operating and in-construction projects which we will touch on later in this call. RNG operating facilities have increased to six from two, bringing total annual RNG nameplate capacity to 3.9 million MMBtu. We've added a seventh project into construction. Together our in-construction projects are designed to contribute an additional 4.8 million MMBtu of annual RNG nameplate capacity. Our RNG dispensing network has grown to 123 fueling stations from 69, including 43 stations owned by OPAL Fuels that are either operating or in construction. Our advanced development pipeline, those we reasonably expect can enter construction in the next 12 to 18 months, has grown to 16 projects representing another 7.4 million MMBtu of biogas resource available. As is to be expected, we also experienced some challenges this year, primarily relating to unexpected drops in gas collection, as well as the delays in commencement and completion of certain construction projects. Although we have identified root causes for these challenges and have addressed many, we will be delayed in the timing of achieving the financial objectives previously disclosed as part of the going public process. We will provide updated guidance for 2023 during our next earnings release in March 2023. Despite these challenges, we feel quite positive about where we're headed. We view our existing projects in operation and under construction as a solid base for future growth. As we will discuss in more detail on this call, we view the annual earnings power from this group of projects to be approximately $190 million, which does not include numerous strengthening tailwinds that have developed over the year, and we'll discuss during this call. Let me touch on annual earnings power further. Annual earnings power from our RNG projects in operation and construction is meant to provide visibility to the steady state earnings that are anticipated to be generated by these projects as they complete ramp-up periods and regulatory certification processes. The annual earnings power metric helps normalize ramp-up periods in partial years of production, smooth out the potential lumpiness of large releases of stored gas after LCFS certification, and provide some visibility on the future contribution of RNG projects under construction. If you refer to the presentation materials we've posted, you can see the general assumptions that underpin the estimated annual earnings power. Our operating projects, when operating for a full year at a steady state, are anticipated to generate annual earnings power of approximately $90 million. When we add in our in-construction projects, the annual earnings power would be about $190 million. Importantly, this annual earnings power does not include additional growth from our advanced development pipeline, public policy initiatives that we intend to benefit from, or additional growth in our other business segments. The passage of the IRA, which will likely add significant profitability for the next five years in the form of new ITC credits, should more than offset inflationary pressures and the new biofuel tax credit known as the 45 Z from the production and sale of renewable biofuels. The potential for a new RIN pathway in the RFS could lead to incremental profitability in our renewable power portfolio and/or our RNG projects. The increasing price of diesel provides more upside potential in the pricing power for RNG as a transportation fuel. It is important to note that these four potential upside opportunities to annual earnings power would not require material incremental capital investment. We also continue to grow our earlier stage development pipeline, which we believe will support future growth of our annual earnings power, as many of them are expected to progress through the development funnel to become advanced development pipeline over the course of 2023. It is worth noting these earnings are long term. Typically, our gas rights agreements are for a minimum of 20 years. To remind everyone, unlike traditional energy companies, we don't have to drill for our resource or incur material capital expenditures for our annual RNG production once these projects are in operation. I am also pleased to report we have the liquidity required in place to complete these construction projects with room left over to fund additional development. In addition to cash and short-term investments on hand, access to existing credit facilities and future cash generated from the business, we are also confident in our ability to raise future capital to continue to develop and build projects from our pipeline. The upsides and optionality associated with RNG are a key reason we think it has been a good idea to minimize entering into fixed price contracts, which can be up to 50% lower than the transportation fuel market. Where fixed price contracts are today, you would lock in a RIN price at less than half the current market price. You would also lose the optionality associated with fossil gas commodity prices, pricing power of RNG, and other regulatory initiatives. One area I want to emphasize is the pricing power built into our vertically integrated business model. Current RNG prices to transportation fleets are nearly $3 per gallon below diesel prices. This discount is far higher than the $1.30 to $1.50 discount which is typically needed to spur adoption. We view this price differential as potential incremental pricing power. Given the progress we've made and where the industry stands, we're very excited about the leading position we think OPAL Fuels is in. With that, I'll turn it over to Jon.

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 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 months of the year, we commissioned three RNG projects: the Noble Road project in Ohio, the New River project in Florida, and the Pine Bend project in Minnesota. These projects join our existing operating projects of Imperial, Greentree, and the Dairy Project Sonoma. OPAL Fuels proportionate share of annual nameplate capacity for these projects is 3.9 million MMBtu per year. Our first dairy project for the Sonoma project has been operating for nearly a year now, and we continue to await provisional certification for its LCFS credits. Green credits in the brown gas are being sold, and the LCFS credits are sold pursuant to the temporary pathway of negative 150 carbon intensity, while we wait for our estimated provisional certification of an expected minus 238 carbon intensity. Turning to the Noble Road project. This project was commissioned early in the year and received EPA certification for its RIN in the second quarter. This project was a significant contributor to the lower gas collection we experienced earlier this year. But these gas issues are being remedied, and we expect that Noble Road will grow to its full capacity during 2023. The New River project in Florida commenced operations ahead of schedule in the second quarter and is now through its shake-out period, and operating at its full capability. The project achieved EPA certification in October after the end of the quarter, and all stored gas was sold and RINs monetized pursuant to contracts entered into months ago. The Pine Bend project is our latest project to be commissioned, having come online in August after a few months of delay. The project is proceeding well through its ramp-up period. We held a ribbon-cutting there last month with some of our key stakeholders. The project will take a few months more to get EPA certification and start recording income, which we expect to occur in the fourth quarter. In the meantime, the product gas is being stored, and the future earnings associated with the stored gas are being added to our adjusted EBITDA. Turning to our construction projects. We have added the 7th project in the northeast to our portfolio of RNG projects in construction. In addition, we continue to make good progress with the construction of our three landfill projects: Emerald, Prince William, and Sapphire; as well as our three dairy projects: Bio Town, Hilltop, and Vander Schaaf. These projects will be commissioned beginning in the first quarter next year and regularly through mid-2024. Regarding our advanced development and other identified projects pipeline, as Adam mentioned, we have added to our advanced development pipeline and now have 16 projects in our advanced development pipeline, representing over 7 million MMBtu of biogas. Six million of which is landfill, 500,000 dairy, and nearly 700,000 of food waste and wastewater. These projects are ones we have qualified and that are reasonably expected to begin construction within the next 12 to 18 months. In addition, our advanced development pipeline does not include nine renewable power projects, which produce 3.2 million MMBtu of biogas, which we are evaluating for RNG conversions or ERI Pathway. Being one of the largest RNG players in the sector, we tend to see most of the projects in the marketplace, all of which makes our pipeline dynamic and growing as we screen for the best opportunities. So there's been significant industry consolidation that we're seeing in our industry and this activity in the RNG space we think is a validation of both the RNG as a renewable fuel and the OPAL Fuels business model. The transactions represent an acknowledgment by some of the world's largest strategic and financial players that demand growth for renewable solutions, especially RNG with its obvious sustainability benefits and drop-in attributes is only set to grow in the coming years, and companies that have secured production and which have a solution for getting that production to market are poised to come out ahead. Before I turn the call over to Ann, I want to reiterate that we have the best, most seasoned team in the industry with a long track record of disciplined capital stewardship, and long-term value creation. With our portfolio of projects in operation and construction as well as our advanced development pipeline, we continue our focus on executing and driving the annual earnings power of OPAL Fuels while upholding continued operational excellence and remaining good stewards of the capital we employ. Ann?

Thank you, John, and good morning to all of the participants on today's call. Last night, we filed our third quarter 10-Q and 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 storing gas while it waits for certification for RINs from the EPA and LCFS from CARB. 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; now 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. On a year-to-date basis, revenue was up 61% compared to the 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 gas and electricity prices and gains from changes in the fair value of warrant derivatives. We also benefited from a one-time realized gain from an equity investment in the Bio Town project. These benefits were partially offset by higher cost of sales due to higher electric utility costs and employee costs to support our growth, as well as higher royalties driven by higher RNG revenues. G&A costs for the third quarter totaled $15.8 million, reflecting transaction and other costs, of which $8.2 million is considered one-time, principally associated with our going public transaction. For the nine months to date, we achieved net income of $560,000 reflecting the standalone results for OPAL Fuels, LLC and our Clean Transition Corp through the closing of our business combination on July 21, plus the combined operations since then. Consistent with the results we saw in the third quarter, we've benefited from strong pricing for environmental attributes that we have locked in via forward sales earlier this year, coupled with higher commodity prices. The flip side to higher commodity prices is that this also results in higher utility costs and royalties paid to hosts along with higher dispensing fees to our fleet customers. Obviously, we've also seen significant transaction costs throughout 2022, again, principally associated with our going public transaction, a significant portion of which is one-time. It is also important to note that the nine-month net income for 2021 includes the impact of a $19.8 million one-time non-cash gain related to the acquisition of the remaining interest in the Imperial and Greentree projects from our project partner. We reported adjusted EBITDA of $25.5 million for the third quarter and $40.6 million for the nine months ended September 30, 2022. Adjusted EBITDA benefited from the same drivers we discussed above: higher environmental attribute pricing and commodity pricing offset by higher cost of sales and higher royalties. We also had a number of one-time costs during the third quarter and throughout 2022, which are excluded from adjusted EBITDA. Third quarter adjusted EBITDA also includes two line items, which aggregate to approximately $7.6 million to capture the impact of stored gas from which we will generate RINs once we achieve certification in the fourth quarter for which we have forward sales in place during the remainder of 2022. New River achieved Q-RIN certification in October, and we expect that Pine Bend will receive certification later this quarter. At the time of certification, the stored gas is released, and the RINs will be generated and monetized under existing forward sales contracts. A portion of the stored gas was produced in the second quarter, but the bulk of the gas was produced in the third quarter. As a reminder, under generally accepted accounting principles, revenue is only recognized when an environmental attribute is delivered and accepted by the purchasing counterparty. This presentation of adding the value of the stored gas to adjusted EBITDA better allows us to match the timing of environmental attribute revenue with the recording of production costs and demonstrates the value we would have recognized if certification had been in place. You will see the same approximately $7.6 million reported in our GAAP revenue and net income in the fourth quarter, but then it will be removed from our adjusted EBITDA calculation. Now let's spend a minute on the balance sheet. As of September 30th, we had $217.1 million of outstanding borrowings, including $125 million of outstanding borrowings under our term loan, as well as $77.6 million related to our renewable power project financing. The second term loan which we closed on in August and which will finance the portfolio of RNG projects that are or soon will be in construction remains undrawn. As of September 30, our liquidity position was $328.6 million, including $25.3 million of cash and cash equivalents, $41.4 million of restricted cash, $146.9 million of short-term investments, and $115 million of undrawn capacity under our term loans. Between our cash on hand, our short-term investments, our future operating cash flow, and our existing credit facilities, our liquidity is sufficient to fund the company's construction commitments and the anticipated development capital needs for the next 12 months. We also anticipate that significant capital continues to be available for deployment in the RNG space. As a newly public company, we are very focused on how best to attract long-term investors. Obviously, the most powerful way to do this is to execute and to also deploy capital effectively and remarkably grow annual earnings power. Before turning the call over for Q&A, I'd like to discuss our 2022 guidance. I will note that all guidance is current as of the published date and is subject to change. We anticipate our full year 2022 adjusted EBITDA guidance range to be $60 million to $63 million. In addition, we are updating our RNG production sold guidance range to 2.2 million to 2.3 million MMBtu. As we've noted earlier, our production numbers are already adjusted for OPAL Fuels’ proportional ownership of the RNG produced. Finally, we are also assuming that we sell our environmental credits at an average price of $3.20 during the fourth quarter, again, under previously signed forward sales contracts. John, I'll turn it back to you for concluding remarks.

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, potential e-RINs, and 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 know-how 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 deliver 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.

Our first question comes from Derrick Whitfield from Stifel.

I wanted to discuss your capital expenditure run rate compared to earlier projections with my first question. Throughout the earnings call, we've seen a general trend of project delays across the industry. While your projects are making progress and you're adding new construction projects to your backlog, the pace of capital deployment is falling behind, as mentioned in your prepared comments. With that in mind, can you identify one or two common factors that are causing the delays? Additionally, can you provide insights on the expected timing effects for your projects that are currently under construction?

For that question, hold on one second. There seems to be some background noise that we're trying to eliminate here. 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 putting our projects into construction and completing those. And yes, you see that in our lower CapEx. There are really a couple of key reasons for this. Starting in the middle to later part of last year, we saw most of the major landfill owners and some of the dairy owners take some time off to reassess their pipeline of projects. You probably have seen that there have been a number of RFPs as these landfill owners sought to organize the development of their projects. Included in that is an evaluation of taking equity interests in some of these projects. I think overall, that process has really been the principal source of the delay. You see similar situations on the dairy side; it's more fragmented, but there was a very high LCFS price, which prompted a lot of people to enter the market. That price is obviously much lower today, but the dairy owners continue to seek the best opportunities. You have market entrants who may not possess the skills and background of OPAL Fuels. With our 20 years of experience in the industry, we remain disciplined in trying to enter the field by offering higher value to the counterparties. In addition to the landfills and the dairies evaluating this, some of our development activities have been delayed to a lesser degree due to permitting delays, which I think are somewhat related to COVID, and pipeline interconnections where some of the pipelines appeared to have adequate capacity but ultimately did not. We have been working to mitigate those issues, and most of them have been addressed. Lastly, we have the IRA benefits, which present a double-edged sword here. On one hand, they have caused people to reevaluate the total potential of the projects, which has taken a bit of time. On the other hand, they offer tremendous value to our business. We feel the logjam is breaking, and we are on track to get to where we need to be regarding getting our projects back in the queue for starting construction. As I mentioned, the IRA benefits present significant upside to these projects. The industry consolidation we have been witnessing is validating the value of our business model and the value of our RNG. So, our overall earnings power targets are valid, but somewhat delayed. I want to emphasize that we feel our advanced development pipeline, which consists of projects that we believe can proceed to construction in the next 12 to 18 months, is stronger than ever. We feel we are in a better position now than we were in the past.

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 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. 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 I'll just touch 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 is on maximizing shareholder value. 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. Overall, we feel we have noticed it and we think it's a good validation of what we are doing.

Your next question comes from 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 liquidated and monetized some, given the many forward sales contracts at LCFS. So once gas is captured, that came in and we added to our adjusted EBITDA. But that was about $2 million. I wouldn't necessarily consider that recurring. 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 RIN certification when we had those forward sales. In our third quarter number, there was an additional $1 million headwind from the second quarter; how we've 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 use 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 period, with a higher hold output and higher energy prices associated with it. So yes, it’s obviously would be a big driver of that.

Got it. And then Ann, I think you mentioned that 2022 results have been helped out by locking in some RINs 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. I think a lot of people are waiting for what that new guidance looks like out of the EPA. So as of now, we have been waiting and holding off on some of that forward sale activity.

And then the last question, I thought the assumptions were interesting that you laid out for your annual earnings power. I believe that the D3 RIN 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 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 $2.70 RIN assumption in that annual earnings power, and it is below what we were able to achieve in sales in 2022. 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 how RINs can play into that. 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 65 days because they're 15 days later already. The RIN has a lot of interesting potential for our business. We could see incremental RINs created from our renewable power portfolio. Again, just to create a RIN, it has to be AUL source; you don't get it from solar or wind. It would just be from biogas burning into electricity. We're discussing in the industry with the EPA about it being terrific to add this new pathway and how they're going to manage around those additional RINs that could potentially get created. I think it'll be a large benefit for our business. We're hopeful the EPA understands that they should be setting up mechanisms in place to handle the potential for additional RINs that come out of the electricity pathway. And the last piece I think you asked about was the LCFS pricing, which we used a $100 credit in our annualized earnings power, which is slightly above the market. We think that's actually a conservative number as you look out over the balance and the lifecycle of these projects. We believe CARB is looking to continue to incentivize new RNG production from dairy sources and continue accelerate targets with what has been a successful program and that'll likely play out over the next 12 months or so. There is a space for them to potentially increase the demand for the credits starting in 2024, and we'll see how that plays out. It does feel like CARB could be supported and constructed there. And there are other LCFS markets opening up between Oregon and Washington. I've seen estimates that that could be as much as 20% to 30% of the total credits being used in California right now. So that could be an interesting one. And just the last thing I would say on LCFS pricing is, I know a lot of investors really look at dairy projects and low CI projects here in the US and really tie them into the LCFS price in California to judge what that project can really generate. I would just say that markets are evolving all over the world, and we think that that negative 250 CI gas may find additional value in different markets, and there are ways to transport it overseas. Now you have to look at that, whether or not you're giving up the RIN in the RFS when you do that here. But there are other markets that are developing. So we certainly understand and use the LCFS price in California as really our benchmark, but there are other options for this gas as you move forward.

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 $100 floor for LCFS. Obviously, as dairy projects come on over time, 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'm 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, continue to operate them efficiently, and continue to maximize the value of the RNG. Specifically, as the market currently sits in transportation fuel, that annual earnings power recently translates into predominantly free cash flow. 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. I appreciate the question.

Okay, got it. I appreciate that. I mean, it's a good situation to be in, having a strong trajectory independently. But I'm sure also having quite a few phone calls. Just seeing what's going on in the 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 the 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 that. This is Adam here. That's one of the things that we will likely highlight in terms of granularity when we do provide guidance in '23 and beyond. It should be noted that these IRA benefits have at least five years of life of them, between the ITC, which is stated at about 30% of the capital cost of the tax credit. You get that after you complete commissioning at the plant. There likely will be some friction costs when you try and modify and monetize those tax credits, but more able to sell them. 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% of your costs on projects. And the rules around that are that it has to not be in operation by the end of this year, so it's all market-structured project, and anything that enters construction by the end of 2024. With that, we are going to be sprinting as fast as we can. We have already motivated to these projects with construction. That's how that ITC works. There is also a 45C, which is a tax credit for the 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, there's room for between $5 a gallon of tax credits. And it's also interesting, why one of the reasons we like to sort of hold our RNG open to the transportation market is so we can take advantage of these additional incentives as they come up over time. 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 can qualify for hydrogen. We didn't really talk about in our prepared remarks, but we are still doing partnerships with renewal and fueling stations. We still think it's an interesting potential end-market, but haven't really seen commercial viability to determine whether or not it could replace what we could get in the transportation market.

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

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 it's definitely been helpful offsetting inflationary cost pressures that we've seen on build multiples that 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 at which you’re able to progress and execute projects here?

Development is characterized by projects that surge forward and those that fall back. A lot of elements of project development have to do with items that are not strictly under our control but dealing with third parties. It is not capital availability; it's really just getting all the caps, if you will, and getting all of it together in a condition, in a disciplined manner 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. However, development 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 were not in our pipeline at the beginning of the year. And as a reminder, when we talk about the 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, 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 helpful. Maybe on a follow-up on construction, I mean, you have roughly 5 million MMBtu of RNG projects under construction at present, seven projects I think 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? Back-end 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. As said earlier, I really feel we all feel that our earnings power targets are valid if somewhat delayed, but the IRA tailwinds and the industry consolidation provide validation of what we're doing. But in terms of the projects themselves, we think 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 MMBtu of nameplate 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. It's funny; we've got what I think is a pretty interesting business embedded in our RNG business. There is really some traction happening right now. 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 you look at this part of the business, with elevated diesel prices, it's getting a lot of attention, and the benefits of RNG, quite frankly, just make a lot of sense for some of these companies. We are seeing a lot of interest in this covenant introduced 15-liter year engine. There will be some testing units out there at the beginning of the 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. People are really excited about that. 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. 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 is potential pricing power with $5 and $6 diesel as a pretty big deal.

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

Thank you very much for participating in OPAL Fuels third quarter earnings call. We look forward to continued engagement and dialogue. 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.