Good day, and thank you for standing by. Welcome to the OPAL Fuels First Quarter 2023 Earnings Call. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Todd Firestone. Please go ahead.

Thank you, and good morning, everyone. Welcome to the OPAL Fuels first quarter 2023 earnings conference call. With me today are Co-CEOs, Adam Comora and Jonathan Maurer; and Ann Anthony, OPAL’s Chief Financial Officer. OPAL Fuels released financial and operating results for the first quarter 2023 yesterday afternoon; those results are available on the Investor Relations section of our website. The presentation and access to the webcast for this call are also available on our website. After completion of today’s call, a replay will be available for 90 days. Before we begin, I’d like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements. Several factors that could cause or contribute to such differences are described in our presentation. These forward-looking statements reflect our views as of the date 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. A definition of non-GAAP measures used and reconciliation of these measures to the nearest GAAP measure is included in the appendix of the release and presentation. Adam will begin today’s call by providing an overview of the quarter’s results, recent highlights, and an update on our strategic and operational priorities. John will then give a commercial and business development update, after which Ann will review financial results for the quarter. Then we’ll open the call for questions. And now, I’ll turn the call over to Adam Comora, Co-CEO of OPAL Fuels.

Good morning, everyone, and thank you for being here for OPAL Fuels' first quarter 2023 earnings call. I’d like to highlight several points from this quarter’s results. First, we continue to execute on our strategic and operational priorities. Our first quarter RNG production volumes were consistent with our expectations and keep us on track to meet our full-year forecast of production from our operating facilities. OPAL Fuels continues to lead the RNG market with best-in-class facilities and operations, which is absolutely critical as landfill and other feedstock owners evaluate which companies they want to award gas rights to and partner with if they choose to invest capital. To that end, our advanced development pipeline continues to mature and grow, and we are pleased to share some details on two of these projects recently disclosed in 8-K filings. We recently announced two newly executed gas rights agreements on landfill RNG projects, which include one landfill with WM located in Illinois and another with a municipality in Florida. Both of these projects are greenfield new business wins where OPAL Fuels secured gas rights for RNG projects and not conversion of projects where OPAL Fuels had existing gas rights or an existing landfill gas to electric project. The WM project will be 100% owned by OPAL Fuels, and we expect it to have nameplate capacity in the range of 600,000 to 700,000 annual MMBtu. We are completing design and development work, including the pipeline interconnect, and are hopeful to put it into construction during the third quarter. This project had previously been included in our advanced development pipeline, but it is important to note that the most uncertain timing from a project moving from the advanced development pipeline into construction is typically finalized in the gas rights agreement. We are excited about this new project with WM. We have a good longstanding partnership with WM across our business segments and hope to continue to expand this relationship. We’re also excited to talk about our most recently executed gas rights agreement with the municipality in Florida. OPAL Fuels will own 100% of this project, and we expect the nameplate capacity to be slightly over 1 million annual MMBtus of production. This project has an accelerated development schedule with anticipated construction start next month and commercial operations starting towards the end of 2024. This project was not included in our previously disclosed advanced development pipeline and is a great example of OPAL Fuels continuing to find very attractive greenfield opportunities. These two projects give us confidence we’ll meet our guidance of placing at least 2 million MMBtus into construction during 2023. In addition, we have multiple projects with nationally recognized landfill owners and other partners that we anticipate moving forward in the coming months, and we look forward to giving you more color as those are finalized. As we discussed during our call in March, we see 2023 continuing to unfold as a contrast to 2022 when our new plant construction starts were slower than we would’ve liked, but we were experiencing a favorable environmental credit and commodity pricing environment. In contrast to 2022, we believe the progress we are making on these new projects underpin strong growth in 2024 and beyond, which should lead to long-term value creation for OPAL Fuels shareholders. As for the headwinds in 2023, I wanted to speak about the current RIN market and our current approach to monetizing our RINs, which has an impact on our reported GAAP results. As a reminder, GAAP does not allow us to record revenues on minted RINs and LCFS from RNG we produce and dispense until those credits are actually sold and transferred. Ann will go into a little more detail in the call, but we do believe it is important to highlight for investors in our adjusted EBITDA calculation what the value of stored gas and credits are that are placed or minted in the quarter but not sold, as it better matches the expenses recorded under GAAP in the quarter. The renewable fuel standard was created to encourage the growth of cellulosic biofuels, and the EPA continues to reiterate this goal throughout the language in the proposed set rule announced in December of last year. Despite this guiding principle, the proposed rule in December had volumes the market believed were too low compared to anticipated D3 RIN production, and prices suffered, dropping from the mid-$3 range for much of 2022 to hitting a low of around $1.90 in January of this year. Given the EPA has not yet finalized the set rule, which includes volume obligations for D3 RINs, effectively the demand side of D3 RINs, we are still cautiously optimistic they will revise the numbers higher in line with anticipated growth of RNG production when they issue the final rule expected in June. Given this view, we have taken a slower approach to selling our RINs in the first half of 2023 until there is better clarity in rule finalization. Holding some of our produced RIN credit inventory has the effect of dampening reported GAAP results in a given period and inflating quarterly results when they would be sold. We believe the adjusted EBITDA metric is helpful to better understand our current period earnings and reduce volatility from the actual timing of sales. In addition to finalizing the final RVO numbers, we also await final rule-making on the eRIN pathway, which could be a material tailwind to our existing portfolio projects and new landfill gas to electric projects. We also await the potential effects of multi-year RVOs, as it could lead to multi-year contracting opportunities and smoothing out year-to-year volatility in RIN prices. Current D3 RIN pricing has come off its lows and we’re recently trading at $2.15 per gallon. On LCFS, we remain optimistic on credit pricing and the direction that CARB is heading on proposed program changes to be finalized for 2024. CARB is giving clear signals to the market they would like to encourage more investment by supporting pricing, which will likely include stronger compliance targets creating incremental demand for LCFS credits. LCFS prices have begun to move higher in 2023 and now sit in the mid-$80 per credit. Finally, I want to add that demand for RNG continues to be very strong across multiple end markets, and we are particularly encouraged by how many new fleets are testing and talking about the 15-liter Cummins engine. Although material traction for adoption starts later in the year as fleets move through testing, we think this product has great potential to expand the market for RNG within the heavy-duty transportation market. We would remind everyone that the heavy-duty transportation market in the U.S. uses approximately 45 billion gallons of diesel per year, and RNG currently has just over 1% market share. We see great potential for demand in trucking to outpace supplies, which has positive future implications on pricing given RNG is currently priced at such a steep discount to diesel fuel with the sustainability benefits of zero Scope 1 and zero Scope 2 emissions. Separately, the voluntary market is evidencing increased interest with new growing mandates from regulatory authorities for RNG to be used in power generation. We think it’s a great time to be OPAL Fuels. The industry is still in the early innings of growth, and OPAL Fuels continues to be a partner of choice for new projects. There is growing customer interest and demand in the products we produce and sell, which bodes well for future pricing and economics. There are strong federal and state-level policies supporting investment in our industry, and there is increased knowledge and participation from capital providers across the balance sheet helping us capitalize on this exciting opportunity. With that, I’ll turn it over to Jon.

Thank you, Adam, and good morning, everyone. I want to start out by saying that we are very focused on executing our business plan, including maximizing output from our operating projects, commissioning our construction projects, moving other advanced development projects into construction, as well as adding to our prospective opportunities funnel. Our operating projects are performing well. We have seven projects in operation, representing approximately 4 million MMBtu of nameplate RNG capacity. At Noble Road, New River, and Pine Bend, three of our more recent landfill RNG projects to come online. Gas production continues to increase as the trash increases. As Adam said, we are meeting our output projections. Our construction projects are moving forward and are largely on track. We currently have six RNG projects in construction representing another 4.7 million MMBtu of nameplate capacity. Consistent with what we said last quarter, Emerald is expected to be online in the next several months and Prince William in the fourth quarter. The two dairy projects we expect to be commissioned in the first half of 2024 and the Northeast landfill later in 2024. We have experienced some delays associated with permitting. Sapphire’s COD is delayed into the first half of 2024 as a result of delays by permitting authorities. Our advanced development pipeline is growing. These projects are ones we have qualified and that we reasonably expect can be in construction within the next 12 to 18 months. We now have more than 9.3 million MMBtu of biogas across our 20 projects in our advanced development pipeline, which now includes our recently announced municipal project in Polk County, Florida. We expect to place Polk into construction next month. Our ADP includes opportunities for electric projects that are well positioned to take advantage of the recently announced eRIN pathway that is being finalized. Other ADP projects are advancing towards construction as well. We continue to expect to meet our goal of putting at least 2.0 million MMBtu of projects into construction this year. Our ADP does not include the additional opportunities we continue to evaluate and qualify. Polk County was recently on our prospective projects list until it jumped forward this past month to our ADP. We have added other opportunities to our prospective project lists as well. We are one of the larger and more experienced operators in the space, and our successful operating projects as well as our integrated platform continue to aid us in discussions as we scout new projects. All of the foregoing represent significant momentum for OPAL’s growth and provides visibility to continued production and earnings growth beyond 2024. In our Fuel Station Services segment, there are a couple of highlights to call out. First, there can be lumpiness in third-party fuel station construction revenues, as revenues are recorded on percentage completion, and timing of equipment delivery construction activity in a quarter can vary. Our contracted backlog remains very healthy at approximately $65 million, which we expect to be realized and completed over the next 12 months. We are also seeing the tail effects of inflationary pressures from 2022 on projects that are now being completed and see normalizing margins in this segment as we move through 2023. It should also be noted that the earlier effects we described from holding back RIN sales in stored gas also affects this segment. We’ll describe in a little more detail our reclass of this segment, which now includes fuel sales from stations we own and the RNG marketing and dispensing fees to stations received by dispensing the RNG. Of the $10.3 million stored gas and inventory credits we add back to adjusted EBITDA, approximately $2 million would be attributable to the Fuel Station Services segment. From an overall transportation fuel market perspective, we are all excited about the introduction of the new 15-liter engine. As this happens, we do expect to see a slight pause or slowdown in new fuel station construction order activity as the 12-liter engine is being phased out and fleets are putting together their order books with new engines. Our Fuel Station Service segment experiences similar challenges working with permitting authorities and utility providers, which have stretched out construction project timing in that segment. Right now, we are on track to commence construction on 39 fueling stations this year, approximately 16 OPAL Fuel zone stations, and another 23 for third parties. Our overall RNG fuel dispensing volumes are expected to grow to approximately 56 million gallons this year from nearly 30 million gallons in 2022. In our Renewable Power segment, we continue to focus on the potential opportunities stemming from the proposed eRIN pathway for our 17 landfill gas to electric projects, representing about 124 megawatts of nameplate capacity. We still see approximately six of these projects as candidates for conversion to RNG projects, while the majority are expected to remain electric projects. As we mentioned last quarter, the eRIN pathway stands to substantially increase the value of our landfill gas electric projects, ultimately depending on eRIN sharing arrangements and RIN prices. We expect updated guidance from the EPA on this topic next month. That said, we are accelerating preparation of our facilities to meet this market opportunity.

Thank you, Jon, and good morning to all the participants on today’s call. Last night, we filed our earnings press release, which detailed our quarterly results for the period ending March 31, 2023. We anticipate filing our 10-Q in the next few days. The biggest driver of the quarter’s results is our decision to defer selling some RINs in inventory as well as environmental attribute pricing, which has been lower year-to-date compared to the first quarter and full year 2022, resulting in lower GAAP results for the first quarter of 2023. Before we talk about first quarter results, I’d like to note that we are now presenting revenues and expenses associated with our CNG tolling business along with RNG marketing and dispensing revenues in the Fuel Station Services segment as opposed to the RNG Fuel segment where we reported them previously. Including dispensing results in the Fuel Station Services segment better aligns how we think about the business segments as it differentiates between our upstream and downstream portions of our business; this change facilitates easier comparisons to peers in our space. Each quarter, we will recast 2022 results to provide an apples-to-apples comparison to 2023. Now let’s talk about our results. For the first quarter, RNG production remained the same as the fourth quarter of 2022, coming in at 0.6 million MMBtus, which represents volume net to OPAL Fuels after adjusting for our equity ownership across projects. Compared to the first quarter of 2022, RNG production was up approximately 50%. Revenues for the quarter were $43 million, a 12% decrease compared to the first quarter of 2022. The primary drivers here are our decision to hold RINs in inventory along with the lower price we’ve seen primarily for RINs year-over-year offset by the higher production. In the first quarter of 2022, we sold RINs at an average price of $3.23. As we told you last month, we are only selling a portion of environmental credits at these price levels. During the first quarter, we transacted at a net average price of $2.38, which included a final forward sale contract we entered into last year, as well as a spot trade. The impact of lower prices, if production was held constant and we assume that we sell all available credits, equates to approximately $6 million of revenue that was not achieved based on the year-over-year price differential. Net loss for the first quarter before considering the impacts of preferred dividends was $7.3 million compared to $4.5 million for the first quarter of 2022. In addition to our strategic decision to limit the sales of credits that we just discussed. In our Fuel Station Services segment, we experienced a low revenue quarter compared to our backlog and continued to see inflationary pressures flow through stations and construction. We expect that these trends will reverse over the balance of the year. I’d also like to note that OPAL Fuels is not heavily exposed to the volatility of natural gas as some of our peers are. We do see benefits in our upstream revenues, which offsets higher operating expenses when the commodity cost rises, but we are not exposed to significant commodity volatility in our downstream fueling business as the cost of natural gas is a pass through to our customer along with other costs such as utilities and taxes. First quarter adjusted EBITDA was $8.7 million compared to $4.1 million last year. We have included a $10.3 million adjustment for the value of both stored gas and unsold environmental attributes at the market price as of March 31 to better illustrate the performance of the business when we match production and expenses occurring in the same period. The ultimate actual sale price of these environmental credits may be different than the quarter-end price used in adjusted EBITDA. As of March 31, we had $148.9 million in outstanding borrowings. In March, we repaid $22.8 million related to our renewable power project financing. Our second term loan, which we closed last August, and which we’ll finance a portion of RNG projects that are or shortly will be in construction, remains undrawn. As of March 31, our liquidity position was $181.8 million, including $33.3 million of cash and cash equivalents, $6.6 million of restricted cash, $37 million of short-term investments, and $105 million of undrawn capacity under our term loans. Restricted cash declined principally due to the settlement of the Meteora put last January, as well as continued investment in construction projects where we had to contribute our equity upfront and spend it as construction occurred as the condition to unlock capacity under the second term loan. We expect these existing sources of liquidity to be sufficient to fund the company’s construction and development capital needs for the next 12 months. As we wrap up, I want to reiterate what Adam and Jon have already said. We’re very pleased with production results in the first quarter along with our progress in the development of the Advanced Development Pipeline and that construction project timelines remain substantially in line with our prior expectations. We continue to focus on execution and anticipate environmental market conditions will continue to improve over the coming weeks. This will translate to continued growth in financial results in 2023 and beyond. With that, I’ll turn it back to Jon and Adam for concluding remarks.

Thank you, Ann. In closing, we remain committed to furthering OPAL’s vertically integrated mission to build and operate best-in-class RNG facilities and renewable power facilities that deliver industry-leading reliable and cost-effective renewable 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.

Thank you. At this time, we will conduct the question-and-answer session. Our first question comes from Derrick Whitfield from Stifel.

Good morning all and congrats on some nice additions to your development pipeline.

Good morning, Derrick. Thank you.

For my first question, I wanted to focus on the add-backs to adjusted EBITDA that has been an area of focus in investor discussions this morning. Could you perhaps elaborate on the accounting considerations for this calculation and comment on what the add-back would be at current environmental attribute pricing, which is noticeably higher for both D3 and LCFS?

Sure, Derrick, thanks for that question. It’s a little bit absurd in some respects that our auditors don’t allow us to account for all of this gas production that we do from our RNG projects until we physically sell the rent and deliver it to a counterparty. So when we make a choice, as we are now, based on the current market conditions to slow play our RINs out into the market as we see more opportunities for price to go up than down, it’s almost as if the gas doesn’t exist. If the auditors allowed us to show it as inventory, it would solve a lot of these issues. So we’re in the position of really trying to report through our adjusted EBITDA as opposed to in our revenue and net income what the effects of this gas production are. So you can see in our adjusted EBITDA calculation that we have a $10.3 million add-back. That is gas that relates to credits, that relates to gas for projects that have not yet been certified. It’s gas for credits associated with gas that we have not yet minted credits for. So for which we produce the gas, but not minted the credits, and it relates to credits that have been minted and are just being held in inventory. And we really do this to try to first off match as best as possible the value of our production in the quarter with the expenses, to mitigate any timing differential. You can imagine if we didn’t do this, we could have in one quarter, such as this, a very low revenue and net income, and then next quarter say we sell all of these extraordinarily high credits, which would make it very lumpy. So really that’s what we’re trying to do. I want to point out in our press release that we had a correction here, just some errors in putting numbers in that we reported in the results of operations section, RNG pending certification and unsold environmental credits, which is exactly what we’re talking about right now. $5.9 million RINs in credits pending certification. That number is $4.2 million, and we’ll issue an update to that to make sure that we get it right. The unsold credits of $5.1 million continue to be correct. It was really the $5.9 million that was incorrect, which should be $4.2 million. So to get from these RINs that are credits pending certification or just unsold to move that to EBITDA really we value that at the current quarter-end price. Then we deduct from that royalty amounts and amounts attributable to our partners that aren’t exactly OPAL pieces and the $10.3 million adjustment we have, which is correct. What results from those numbers? I’ll just add that to the extent that these unsold credits or credits pending certification are not sold next quarter, that will likely have some mark-to-market adjustments. But what we’re going to do for the next quarter and quarters to come is make sure we put this into a table, so it’s clearer for everybody exactly what these are. It’s not very different from what some of our competitors report, for example, Montauk does a similar type of calculation and others do as well, and it’s really just attributable to that accounting oddity of producing this valuable RNG but not being able to show it anywhere in our financial statements.

Terrific. Thanks. And that makes sense. For my follow-up, I wanted to lean into your prepared remarks on the progression of your backlog both near and medium-term. For 2023, it appears Emerald and Prince William are progressing on the schedule you laid out in Q4, and Sapphire is a smidge behind. With your reaffirmed guidance, would it be safe to assume Sapphire was expected to have minimal impact on 2023? And perhaps for the benefit of a more fulsome discussion, if we think about Sapphire being pushed modestly to the right and projects in Polk County and Illinois being added to the slate, could you offer a glimpse into how you’re positioned for 2024 on a plus-minus basis versus Q4 commentary?

Yes. Thanks for the question, Derrick. This is Adam here. I just want to touch quickly on Sapphire. It’s pretty interesting that for a lot of the landfills and at WasteExpo, a lot of the landfill or environmental service companies, we’re starting to talk about PFAS and looking at how PFAS regulations could be considered in the industry. Our Sapphire project is experiencing delays because permitting agencies are now looking at PFAS levels and how to measure and test them. Most of the PFAS that are being looked at are from the liquids that come out of landfills. These permitting agencies are starting to figure out how to test and measure it for RNG projects. We don’t think this will be tremendously impactful except for a slight couple of month delay. We’ve been engaged with that permit agency and feel good that progress is being made. They’re getting their arms around how to measure it from our flares to be certain that they’re measuring and tracking it. As it pertains to our Polk County project, which we’re really excited about and do see that coming online at the end of next year. We’re going to hold off right now on giving volume guidance for 2024. But certainly, you’re right; there are some positives and negatives between that project accelerating and the couple of month delay on Sapphire.

Perfect. Thanks for your time and comments.

Our next question comes from Matthew Blair from TPH.

Hey, good morning. Thanks for taking my questions. Adam and Jon, I was hoping you could talk a little bit more about the eRIN potential. Adam, I think you mentioned it could provide material upside. I believe our very rough estimate is anywhere from $50 million to $80 million of potential EBITDA. What’s the right framework to think about eRIN upside? And could you also talk about how far along you are in discussions with auto OEMs on the RIN-sharing agreements?

Yes. Thanks very much for the question. This is Adam, again. It’s pretty interesting. We do think that and we are very supportive of eRINs being included in the renewable fuel standard. We see it as a material tailwind both to our existing portfolio and the development of new landfill gas to electric projects. On the flip side of that, for 2023, we think that’s the reason why there’s been a downdraft in current D3 RIN pricing. The industry believes the EPA may have been too low in their estimated RINs created from eRINs and also low in their forecast volumes from RNG projects that are coming online. We remain constructive and do believe that the eRINs make sense and will be very supportive for our business. There has been some noise in the market, where it is still uncertain whether or not the eRINs will get approved in June. Whether or not the EPA may take several more months to finalize that piece for the rulemaking, that would likely have the effect of raising RIN prices. A lot of the oversupply concern was coming from. As far as our progress, we have been engaged with various OEMs and aligning ourselves to be able to participate should the eRIN get finalized and approved here in June. So, we’re pretty far along in those discussions and we would expect to participate if it does get finalized.

Matthew, let me just add one thing that I think can help people think about the value of eRINs. What’s under discussion is not really how they calculate the RINs kilowatt hour conversion. It’s really how they’re implementing the program, but a rough calculation is that at a $270 RIN price, the eRIN is worth about $330 a megawatt hour, sorry, a megawatt hour. That $330 obviously has to be shared with the OEM. So if you’re sharing at 50-50, you’re at $165 a megawatt hour. As you get more electric vehicles out in the market competing for what might be a limited amount of this renewable biogas-based electricity, that sharing we expect will go up over time, perhaps as much as to where RIN sharing is now with dispensing, which is about 90-10 or 85-15. And so once you start to look at those numbers, you can throw that value onto an electric project or an electric portfolio from landfill or other biogas sources to get a sense of value. So we agree that this is very promising, and we see a lot of additional value.

Sounds good. Yes. The $165 per megawatt hour net to OPAL would be above our expectations. Okay. And then my follow-up is on your Fuel Station Services segment. If I look at the gross margin of about $0.5 million and then add back the $2 million from the held-back RINs, that overall profitability was a little bit less than our expectations, and I think you mentioned that it doesn’t sound like your downstream fueling volumes or fueling profitability was affected by high natural gas prices in the quarter due to the pass-through. But could you talk a little bit more about profitability in this segment? Did it come in line with your expectations? Was it muted in Q1 and what’s the outlook going forward?

Sure. Thank you for your question, Matt. I think we’ve talked before about inflationary pressures. We discussed that in Q4, and we’ve seen a bit of that, call it, the tail end effects still flowing through the business. The other piece to remember is we had mentioned that we did see a little bit of a slower pace in terms of construction than what we had originally anticipated. This business is percentage of completion, so it can be chunky. Whether it’s utility delays, permitting delays, or a piece of equipment that doesn’t show up, that can impact how we show revenue and how that ripples through the P&L. Regardless, we’re firing on all cylinders, and we expect margins and revenues to continue to improve throughout the year-over-year, because we believe inflationary pressures are normalizing.

Thanks for your comments.

Our next question comes from Martin Malloy from Johnson Rice Company.

Good morning. I just wanted to ask about the 2023 full year guidance you provided on the last call. Is the guidance for adjusted EBITDA the $85 million to $95 million, and the CapEx guidance $220 million to $240 million? Is that still intact or has that been changed?

Yes. Thank you, Martin. This is Adam Comora here. We are not changing our guidance for 2023. As Jon had mentioned in the prepared comments, our operating projects are performing well and on track to meet our full-year targets. Another critical piece of our guidance and really what we believe is one of the long-term value drivers of our business is how many RNG projects we place into construction and our guidance of 2 million MMBtus into construction. We feel really good about the visibility on the first 1.75 million MMBtus and are excited about what’s happening in our advanced development pipeline and hope to be able to share some additional projects soon. I’d also say we remain cautiously optimistic regarding the environmental credit pricing environment both in terms of RIN pricing and LCFS pricing, as we believe that there are positive structural changes to be implemented in the LCFS program. We’re hopeful that the EPA is listening to the industry regarding where they set volumes. I’d also say, as Ann was just mentioning, we do see some improving trends in our Fuel Station Service segment throughout the year. If you look at our contracted backlog of roughly $65 million, typically that gets realized over 12 months, and we’re always signing up new business. You can look at that on a quarterly run rate and perhaps think that there could be a timing pickup in that segment of the business. One thing I would also caution against is that we are in the early stages of growth, and new projects that are coming online and commissioning—if you have a four, six, or eight-week delay in commissioning, that could potentially have what looks to be an outsized impact in a given quarter when in reality, it’s pretty immaterial to the long-term intrinsic value of this business, especially considering these are typically at least 20-year life assets. We love the recurring EBITDA and free cash flow nature once these projects are operational. So we feel good about how we started out the year and are not currently changing guidance.

Okay. And then for my follow-up question, I wanted to ask about the Cummins 15-liter engine. Could you maybe talk about the potential for that to add new customers for you all through your fuel stations and maybe what the impact is for some of your key customers in terms of the timing of how that enters their fleets?

Yes. It’s a good question. We’re really excited about the introduction. I should also say, we’re technologically agnostic to what trucks ultimately get adopted by our fleets. I think you guys are also aware that we’re building some hydrogen fueling stations, and the potential for the eRIN pathway could make renewable electricity very exciting for these fleets. We’re looking at what it would take to build large-scale electric charging stations. But as it pertains to the 15-liter engine, the reason why we’re so excited is we do think it opens up a large segment of the over-the-road and logistics trucking population. Quite frankly, the 12-liter engine has been an enormous success for a lot of our customers. We think the 15-liter likely improves upon that, both in terms of fuel economy. Some over-the-road trucking firms were concerned about driver satisfaction and didn’t want to move from a 15-liter diesel engine to a 12-liter engine. We think that a lot of those companies are testing and looking to expand. We see the potential for broader adoption as that happens, and we see more and more companies seeking out RNG for the sustainability benefits and operational benefits for running those trucks. There’s a real good opportunity to continue to expand into new customers, build out new fueling infrastructure, and quite frankly, the potential for pricing power given that RNG is currently priced at such a steep discount to diesel. We think a lot of that attraction will come in the second half of the year as people move through their testing, but we see a lot of new opportunities.

Great. Thank you. I’ll turn it back.

Thanks, Martin.

Our next question comes from Ryan Pfingst from B. Riley.

Hey, good morning, guys. Just to go back to something we spoke about a bit on the last call, are you able to provide any more color around the ITC embedded in your guidance for this year? And is starting construction on the Polk and WM projects basically net out against the pushout of the Sapphire project? Would that be a good way to think about it?

Hey Ryan, it’s Ann. We’re still waiting for final guidance from the IRS around the ITC. We prefer not to provide any additional color at this time. On your second question, you can only claim the ITC once the project is actually deemed to be in service. I think there’s guidance needed on exactly what that means from a facts and circumstances perspective. Given that we potentially would be putting it into construction in 2023, it wouldn’t be finished in 2023. So if anything, I think it potentially becomes additive in later years, but we won’t see that benefit this year.

But Ryan, this is Jon. I’ll just add that similar to what Derrick said at the top of the question and answer period, there is somewhat of an offset here by putting those projects into construction sooner. We’ll see some pickup there in timing relative to what we might have otherwise thought of someone offsetting Sapphire's delay from a pure operations point of view.

Right. So, all things equal, wouldn’t Sapphire moving to 2024 then reduce the potential you see benefit to be gained in 2023?

Yes.

In theory, yes.

Okay. Great. That’s all for me. I’ll turn it back.

Thanks, Ryan.

Our next question comes from William Grippin from UBS.

Great. Thanks very much. First question is just going back to the guidance: could you remind us what D3 RIN pricing assumption was embedded in the EBITDA guidance, and what would you need kind of to hit the lower end?

Yes. It’s $2.25, is what was embedded in the guidance.

Got it. All right. Appreciate that. And then just on the permitting delays, could you elaborate a little bit more on what the underlying issue is? Is there anything that can improve the permitting process going forward, either on your end, or do you see it improving naturally over time?

Yes. The one that impacted Sapphire’s timing was this issue of PFAS, which is relatively new for landfills. Given that our projects fit on landfills and process landfill gas, permitting agencies wanted to take a look. It really had to do with how to measure and test for PFAS coming off of our renewable natural gas facilities. I think it’s a bit of a learning curve with the specific permitting agencies, and it looks like progress is being made. So that’s what impacted that permit.

All right. I appreciate the time. Thank you.

Thanks, Will.

Our next question comes from Craig Shere from Tuohy Brothers.

Hi, thanks for taking the questions. So first on the eRINs opportunity, are there any PPAs on power projects that would need to be broken to convert to the eRIN opportunity? And would you then need to share some of the windfall with landfill gas hosts?

The final ruling about sharing with the landfill host is not really set. However, there’s no requirement that you have to break an existing PPA to get the RIN credit for eRINs, and it can stack on top of your existing PPA. We’re comfortable with the way that it has been written. We don’t see any change coming to that.

Great. Thanks for that. And did you see any temporary California gas market dislocation effect in the first quarter? And to what extent are you seeing improving downstream pricing and margin opportunity given this wide delta between gas and diesel?

Yes. This is Adam Comora here. Yes, I think, as Ann was describing earlier, we do not have any impacts from volatility in natural gas prices. We don’t have our downstream fueling contracts tied to a spread to diesel or any impact between those two commodities. Overall, our business benefits from rising natural gas prices because we still get the fossil brown commodity value on the gas that we produce. For the downstream business, we benefit when natural gas prices are lower because there’s a better economic incentive to switch from diesel over to CNG or RNG. Renewable natural gas is currently basically priced at fossil natural gas for transportation fuel customers. All the value we derive from these molecules is really by creating environmental credits and selling them to obligated parties. Given the differential in natural gas and oil on an energy equivalency basis, we feel like there’s little bit of pricing power and headroom as more fleets switch over and demand builds for RNG as transportation fuel.

Great. Thank you.

I would now like to turn it back to Adam Comora for closing remarks.

Okay. We thank everybody for joining us today and your participation in the OPAL Fuels first quarter 2023 earnings call. We look forward to continued engagement and dialogue, and I wish everybody a great day.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.