Good morning, and welcome to the OPAL Fuels Fourth Quarter 2023 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, this event is being recorded. I would now like to turn the 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 fourth quarter and full year 2023 earnings conference call. With me today are Co-CEOs, Adam Comora and Jonathan Maurer, and Scott Contino, OPAL's Interim Chief Financial Officer. OPAL Fuels released financial and operating results for the fourth quarter and full year 2023 yesterday afternoon, and those results are available on the Investor Relations section of our website at opalfuels.com. 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 on Slides 2 and 3 of 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, the call will contain discussion of certain non-GAAP measures. A definition of non-GAAP measures used and the reconciliation of these measures to the nearest GAAP measure included in the appendix of the release and presentation. Adam will begin today's call by providing an overview of the quarter's results and recent highlights and an update on our strategic and operational priorities. John will then give a commercial and business development update, after which Scott will review financial results. We will then open the call for questions. And now, I'll turn the call over to Adam Comora, Co-CEO of OPAL Fuels.

Thank you, Todd. Good morning, everyone, and thank you for participating in OPAL Fuels fourth quarter and full year 2023 earnings call. OPAL Fuels continues to execute on its business plan and is well positioned to grow in our industry, which is experiencing strong market fundamentals and expanding tailwinds. I'd like to highlight several points from this quarter's results and recent developments. First, as expected, fourth quarter results benefited from stronger RIN prices. Adjusted EBITDA for the quarter was $32 million, an increase of 57% from 2022, marking the strongest quarter in OPAL's history and $52 million for the full year 2023, meeting our most recent guidance. The positive results in the fourth quarter were driven by continued improvement in our Fuel Station Service segment and the monetization of all environmental credits held for sale, including a portion from the third quarter. Second, Emerald, our 50/50 joint venture project with GFL and one of the largest RNG projects in North America, is showing production growth in line with expectations. We began generating and selling RIN from the project in December. Third, we continue to make good progress on our projects that are in construction, expecting to end the year with 8.8 million MMBtus of RNG design capacity in operation. At the end of 2023, we began construction of a new 2.4 megawatt renewable electricity facility at the Fall River landfill that will utilize approximately 0.2 million annual MMBtu of biomethane equivalent. Fourth, we are encouraged by recent treasury commentary on the ITC, which, although not finalized, we believe will include biogas conditioning and cleaning equipment as eligible for salable tax credits in the final rules. It should be noted that the support for this inclusion came not only from the industry through comment letters but also from a letter authored by IRA bill sponsor, Senator Brown, which was cosigned by numerous Senators and members of the House, stating clearly the intent of including this property in the Section 48 ITC provisions. We expect final rules to be published sometime after March 25, which will hopefully clarify a couple of remaining technical structural issues. Although not included in our adjusted EBITDA guidance for 2024, we have outlined our current thinking on how successful resolution of these rules would impact cash flows and resulting net income, approximately $40 million in 2024. I'd also like to add that our Downstream Fuel Station Service segment is set to have strong adjusted EBITDA growth in 2024, and we are encouraged by the increasing interest from major fleets testing the new Cummins 15-liter natural gas engine, which should continue this upward trajectory over the next several years. Jon and Scott will go into greater detail regarding our outlook for 2024. But needless to say, we are very excited about our opportunities. RNG production is expected to grow between 60% to 80%. Adjusted EBITDA is forecasted to range from $90 million to $100 million, up from $52 million in 2023. And we see continued growth in 2025 and beyond from annualizing the plants coming online this year, continued growth in fuel station services, and our significant opportunity set of new potential projects to put into construction. 2024 also has the potential to be a powerful year in education and advocacy, which can broaden bipartisan support for our industry. Capturing and converting biomethane emissions into low carbon intensity usable energy products has numerous societal and strategic benefits for all Americans, including fighting climate change, improving air quality and socioeconomically challenged communities, supporting the agricultural sector, driving investment, and providing economic value for countless municipalities that own landfills and wastewater treatment facilities, while also providing greater energy security for all Americans. With that, I'll turn it over to Jon.

Thank you, Adam, and good morning, everyone. We're proud of our accomplishments in the fourth quarter of 2023 and the 2023 year-end results. Importantly, the Emerald RNG project is online, and we now have eight RNG projects in operation with an annual design capacity of 5.2 million MMBtu, up from 2.3 million MMBtu at year-end 2021. Production was in line with expectations. RNG production was 2.7 million MMBtus for the 12 months ended December 31, 2023, which is a 23% increase year-over-year. That number is expected to increase significantly this year. Scott will give more detail on this year's guidance, but we're expecting roughly 4.6 million MMBtu of RNG production this year. In addition to our operating projects, we currently have six RNG projects in construction, representing an additional 4.4 million MMBtu of annual design capacity and a 12.4 megawatt landfill gas to electric project, which is 0.2 million annual MMBtu of biomethane equivalent. Construction of new projects is proceeding well. Prince William, one which we own 100% and represents 1.7 million MMBtu of design capacity, has reached mechanical completion. Commissioning of the plant will continue over the coming weeks as we approach the commencement of operations. Sapphire, which we operate in a 50/50 joint venture with GFL and representing 0.8 million MMBtu OPAL's share of design capacity, is on track to begin operations in the third quarter of 2024. Our Polk County, Florida project, where we also own 100% and which represents 1.1 million MMBtu of annual design capacity, is also on track to begin operations in the fourth quarter of this year. Atlantic, our first SJI joint venture RNG project, which we put into construction in the third quarter of 2023, is progressing and we continue to expect it to begin commercial operations in mid-2025. Atlantic will contribute 0.3 million MMBtu of annual design capacity net to OPAL. As I mentioned, we also began construction of our Fall River 2.4 megawatt renewable electricity project in the fourth quarter of 2023, which will utilize approximately 0.2 million MMBtu of biomethane equivalent and is slated to begin operations by year-end. Our two Central Valley dairy projects are delayed due to a contract dispute. We expect this dispute, which is proceeding through an arbitration process, to impact the timing of these two projects, and we plan to give further updates on timing as we move forward this year. Together, our operating and construction RNG projects represent almost 9.6 million MMBtu of design capacity. We expect to place at least 2.0 million MMBtu of RNG projects into construction this year. As OPAL executes on existing opportunities, growth in our relationships across the landfill sector is resulting in additional project opportunities that we believe will mature into continued growth in construction and operating projects in the foreseeable future. Last quarter, we started providing additional detail on how we measure the production output at our RNG and renewable power projects. We added two new metrics that measure design capacity utilization, which considers the percentage quantity of biogas available at the inlet of our facilities compared with the design capacity of these facilities for the relevant period. We generally expect our RNG facilities to begin somewhere in the 70% to 80% range of inlet design capacity utilization and expect increasing utilization rates as all of our RNG facilities are in open and growing landfills and we, along with our landfill partners, continue to make improvements in gas collection at the well fields. Utilization of inlet gas, the second new metric measures the productivity of converting the biogas coming into the RNG facility into product RNG. It's simply the volume of actual production for a given period divided by the volume of inlet gas. This metric should be relatively stable between 80% to 90%, with fluctuations based on the efficiency and availability of the system and the quality of the biogas. Both inlet design capacity utilization and the utilization of inlet gas were within their expected ranges, and we expect that to continue this year. With that, I'll turn it over to Scott to discuss the quarter's financial performance and provide additional detail regarding guidance.

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 quarter and year ending December 31, 2023. Our 10-K will be filed tomorrow. Looking at the fourth quarter results compared to the third quarter of 2023, RNG production increased to 0.8 million MMBtus from 0.7 million MMBtus. The increase is largely due to Emerald production coming online. Compared to the fourth quarter of 2022, production grew 0.2 million MMBtus due to a combination of same-store sales growth and Emerald coming online. RNG production was 2.7 million MMBtus for the 12 months ended December 31, 2023, compared to 2.2 million MMBtus for the comparable period last year. Revenue in the fourth quarter was $87 million as compared to $67 million in the fourth quarter of 2022. The main driver for the increase in revenues was the timing and pricing of environmental credit sales, including both RNG fuel and fuel station services, where we dispense all of the RNG for our projects as well as 100% for our joint venture projects and other third-party RNG supplies. Net income for the fourth quarter was $20.1 million, as compared to $0.3 million in the third quarter. The difference was primarily driven by the increase in revenues from the timing of environmental credit sales, but also recognition of Emerald coming online in equity method investments. Adjusted EBITDA was $32 million in the fourth quarter as mentioned, partially driven by the timing of environmental credit sales as well as improving margins in our Fuel Station Services segment. A reconciliation to GAAP results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website. The Fuel Station Services segment revenues increased to $46.9 million for the fourth quarter, as compared to $37.3 million in the third quarter. The increase in revenues was primarily the result of increased RNG marketing fees, concurrent RIN and LCFS sales, and improved margins. Adjusted EBITDA for this segment grew to $12 million in the fourth quarter versus $6.4 million in the third quarter. Renewable power revenues decreased to $11.3 million for the quarter from $13.7 million in the third quarter. This was primarily due to reduced operations at Arbor Hills as the biogas was diverted to the new Emerald RNG project. Last September, we entered into a $500 million senior secured credit facility. The credit agreement provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit. As of December 31, 2023, approximately $187 million was drawn down on the facility. As of December 31, 2023, liquidity was $348 million, consisting of $300 million of availability under the credit facility and $48 million of cash, cash equivalents, and short-term investments. As a result, we feel our liquidity and capital resources and access to other sources of capital are sufficient for our growth plans. Now, I'll turn to this year's guidance. For full year 2024 guidance, assuming $3 D3 RIN, $2 per MMBtu brown gas, and $65 per metric ton LCFS, we expect our full year 2024 adjusted EBITDA to be $90 million to $100 million, and RNG production to be 4.4 million to 4.8 million MMBtus. Our adjusted EBITDA guidance does not include several items of note: One, the potential of $40 million of cash proceeds and income in 2024 that would result from favorable ITC resolution. Two, RNG pending monetization increase of approximately $15 million. And three, project development and start-up costs of approximately $12 million which do not get capitalized. As we disclosed last quarter, we are no longer recognizing RNG pending monetization in our calculation of adjusted EBITDA, although we continue to provide detail on our inventory and credits sold each quarter as well as a period ending balance. A reminder that this represents the value of our December 2024 RNG production, where the costs have been recognized in our 2024 adjusted EBITDA results, but we have not yet sold and transferred the RINs or LCFS credits associated with that RNG, effectively having our 2024 results include revenues associated with December 2023 production, while recording our December 2024 production costs. This impact can be significant if a company has a large growth trajectory such as OPAL and obviously would not be as impactful if we weren't growing our production so significantly. One other item worth noting is that we are now breaking out our development and plant start-up costs as a separate line item on the income statement. We thought this disclosure was important to give investors a sense of steady state from our operating facilities. For 2024, development and plant start-up costs include a $12 million operating expense not added back to adjusted EBITDA from a virtual pipeline for Prince William that will be used until the permanent pipeline is operational. We also want to provide some color on the Fuel Station Services segment, where we anticipate adjusted EBITDA to grow by 75% to 90% compared to 2023. Results driven primarily by increasing RNG marketing revenues through our dispensing network, new OPAL fueling stations coming online, and continued improving trends and margins. We expect full year 2024 capital expenditures at wholly-owned and joint venture projects to total approximately $230 million, which includes approximately $41 million relating to equity method investments and approximately $28 million associated with downstream stations. Before I turn it back to Jon, I would just like to mention our press release earlier this week announcing that our controlling shareholder Fortistar has exchanged 71.5 million shares of high-vote stock to Class B shares that are entitled to a single vote. As our press release noted with Fortistar reducing a significant portion of its voting control, we anticipate that our publicly traded Class A common stock will become eligible for inclusion in certain stock market indices. Of course, there are no assurances that OPAL will be included in any indices. With that, I'll turn it back to Jon for concluding remarks.

Thank you, Scott. In closing, we are pleased with the continuing success in the execution of our business plan. We remain committed to furthering OPAL's vertically integrated mission to build and operate best-in-class biomethane capture and conversion projects that deliver industry leading, reliable and cost-effective low carbon intensity energy products that displace fossil fuel and mitigate climate change. And with that, I'll turn the call back over to the operator for Q&A. Thank you all for your interest in OPAL Fuels.

Our first question comes from John Annis with Stifel.

For my first one, how should we think about the timing of RIN sales this year with current D3 prices more favorable to start this year? Should we think about it being more equally weighted than last year?

This is Adam here, and thanks for the question. We are anticipating to be selling and transferring our RINs pretty uniformly as they're generated and minted throughout the year. And I would also add that thus far, we've hedged or sold forward approximately half of our production.

For my follow-up, the EBITDA guidance for the fuel station service implies strong growth this year. Could you offer some additional color on the drivers of this growth? And maybe related to that, what's the latest feedback you're hearing on the Cummins 15-liter?

As Scott was mentioning in the earlier prepared comments, we're excited about the Fuel Station Service segment, and 2024 is set up to be a really strong growth year for it. The primary drivers this year are really utilizing the dispensing network that we've set up and generating a lot more profitability in that segment as we're delivering more RNG fuel through that dispensing network. And it's not only from our production, but 100% from the JV projects and numerous third-party suppliers. Additionally, we are also benefiting from a number of OPAL Fuels owned fueling stations coming online and annualizing those that came online sort of mid-year last year. We're also seeing the continued improvement in the construction and service side of that business. So 2024 really looks to be a good year for it, and the results this year are not being driven solely by what we are hearing as good feedback on that 15-liter engine. That engine is still going through its testing periods, but the feedback has been very strong, and that will show up as new business development activity this year and drive growth in 2025 and beyond.

Our next question comes from Matthew Blair with TPH.

I had a question on CapEx. So I think at one point, this might have been a few years ago, you were guiding to CapEx that came out to, call it, roughly $40 per MMBtu for a landfill project, maybe about $160 per MMBtu for a dairy project. Could you give us a sense of where those numbers are today?

This is Scott Contino. I think we're going to have to get back to you on the dollars per MMBtu for CapEx.

Is it safe to say that there has been some inflation in just the unit cost?

This is Adam Comora here. I was just trying to do the math on the last two projects that we are looking at putting into construction here. There's no doubt that there has been some cost inflation over the last several years. We have seen that level out quite a bit over the last three to four months or so as we're putting together some project cost estimations. I see Jon working the calculator over there. We'll come back on what the ballpark figure is. But one of the things that we've also been doing here internally is looking at ways to perhaps do things a little differently from a construction standpoint and seeing where there are some opportunities to reduce some of those initial CapEx for MMBtu. So it is up from the $40; I don't want to give you an exact number right now. However, we have seen that level out and we still see extraordinarily good returns on capital projects while still seeing very good paybacks on these projects. And I know there's going to be a question coming up on ITC, but certainly, that also helps as we're looking at the projects we put into construction here.

Matthew, it's Jon Maurer. The costs that you're citing of about $140 to $160 is significantly higher than what we're experiencing for landfill projects. While that may be more appropriate for dairy where the cost might be similar, the output from dairy projects is substantially lower than landfill projects. Obviously, our focus is on landfill projects, and we're seeing costs that are well below $100 per MMBtu.

And then regarding the RNG production guidance of 4.4 to 4.8, so I think that implies growth of 1.7 to 2.1 in 2024. It looks like at least part of this 2024 growth is actually coming from higher utilization at your existing plants rather than just bringing on the new projects that you cited. Is that what you're seeing as well? And if so, what would be driving the higher utilization?

It goes to how we were thinking about our guidance for the whole year. So there may be some follow-ups there. When we put our production guidance at the midpoint of 4.6, about 3.6 of that is from projects that are operating today. If you look at that 3.6 over the 5.2 design capacity, you're looking at about 70% product output on the design capacity. As we've noted in our disclosures, we expect same-store sales growth at our projects as they're at open and growing landfills. We're always looking at ways to continue to improve gas collection with our landfill partners. Thus, we expect these facilities to continue to grow as they mature. When you look at our guidance this year, about a million of it comes from Prince William, Sapphire, and Polk, with the bulk of it really from Prince William, which we're happy to say has hit its mechanical completion and has entered the commissioning phase.

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

Adam, you mentioned you hedged or sold forward about half of your production. Could you share what the associated environmental attribute and gas prices are there?

So we have not yet sold forward the natural gas piece, which we are looking at. And on the environmental piece of it, we feel that you could look at the indices averages or something like that to try and get a feel for it.

And that leads into my follow-up. Could you just provide us with a refresher on how we should think about OPAL's average realized sales price compared to what we might see in index prices? Is there a general rule of thumb for how much of the RIN price you're able to realize?

Yes, I think we've got some disclosure regarding what typical brokerage or commission fees are for OPAL. We don't necessarily sell at the index price. We do pick pricing and transact on pricing. So we don't have index-based pricing, but you can assume that our average sales price is just over where we may have given our guidance for the year.

This is Jon. In terms of RIN price realization, it's important to keep in mind our vertically integrated business model where we capture really 100% of the output, both as a portion on the upstream side and the portion that would go to the fueling station on the downstream side of the business. We really capture the full value chain in there. Adam was addressing obviously what we might pay out in brokerage. Some of our trades are done directly without brokerage deductions, while others are done through third-party.

That's helpful to contextualize that piece. And then it looks like the advanced development pipeline wasn't included in the deck or the release this quarter. Is there any reason for excluding that here?

This is Jon. The concept was somewhat associated with our go public phase when we were a smaller company, and the conversion of our pipeline of projects was more meaningful. We're now at 5.2 million of nameplate, looking to exit 2024 with 8.8 million after the current RNG projects that are scheduled to be completed this year are completed. So the pipeline of projects is now less meaningful. We've also shown that our excellence in bringing projects online and that our ramp-up period and high availability operating factors really attract us to other partners, and that the development of those partnerships really adds more of an opportunity set. Combined with our vertical integration really gives us a front row seat at a lot of the opportunities that are out there in the marketplace. We are guiding to greater than 2.0 million of MMBtus into construction. We believe that the tailwinds that we're seeing in the industry will assist us in achieving those goals. But really, nothing has changed. The cadence that we've been doing over the last couple of years will continue with the guidance that we're giving here today.

Yes, the only thing I would add to that is that the delineation between prospective opportunities in the advanced development pipeline really doesn't capture the full opportunity set of stuff that we're looking at. If we've got prospective opportunities that are much greater than what we would call as the ADP, we just didn't feel like it was a meaningful metric and thought that delineation was a little unique to OPAL Fuels on how we were describing that.

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

I wanted to ask about Slide 17, and you mentioned also, I think, using biomethane for power generation in your prepared remarks. Could you maybe spend some time talking about that market, rough economics of that market, and how OPAL might play a role? I realize the early history of the company that power generation was fairly important to OPAL.

I think Slide 17 is important and it's really important in how we're really trying to communicate what OPAL Fuels does and why there are these policy tailwinds behind our company and what we do. We recognize that there is a holistic view of energy transition at this point. But what we do here at OPAL Fuels is capture harmful biomethane emissions and turn them into a low carbon intensity energy product. When you really think about it, it's starting to become a much broader issue for all Americans, and we really think that there is a lot of potential here for bipartisan support for our industry, which we're starting to see show up in a lot of different places. Whether or not we're going to talk about eRINs and other types of things that can support cellulosic electricity, we believe that this industry is starting to support this good, better, best strategy. We have countless thousands of landfills, small farms, and wastewater treatment facilities owned by municipalities where we're just not capturing biomethane. We think there's a lot of room to have this good, better, best strategy where the first thing we should be doing is capturing this biomethane. Not every biomethane source will be big enough or have access to a pipeline. Proven technology can turn it into renewable electricity, which is baseload and not dependent on intermittent sources like sun or wind, which is really good as you won't need battery storage. We think cellulosic electricity makes a lot of sense and is the right public policy. eRINs are one that already exists in the EPA regulations, and there's a really great legal argument made by Arnold & Porter on a partnership for the electric pathway website that I encourage folks to read. We believe eRINs hold promise, and perhaps it can show up in 45Z, where renewable electricity might qualify for those credits. We think it is the right public policy to support the capture of biomethane, and renewable electricity is certainly one product that could come from it.

And for my second question, I wanted to ask about Slide 20 and non-transportation fuel RNG demand. Could you maybe talk about how you see that market developing? Could we ever see OPAL look into selling into that market under longer-term contracts?

We see substantial demand outside of the transportation fuel sector. Currently, the transportation fuel sector is the highest value off-take opportunity. However, many gas pipeline utilities have promised their public utility commissions and regulatory commissions to add decarbonized gas to their pipelines. We see this with companies like Enbridge, NextEra, and SJI. They are all trying to find decarbonized gas for their pipeline and expand that capability. In addition to this, there is substantial demand for this low carbon product, and we will see more in the coming years. Currently, the price is significantly lower than the transportation fuel market. There are also opportunities in industry looking to decarbonize in the U.S. Furthermore, overseas markets like the European carbon markets appear potentially attractive for us. We have been participating in those markets and see them growing as potential end-use off-take areas. Additionally, there are maritime uses and probably a host of others that I haven't mentioned. When you aggregate all of these, there is substantial demand for this low carbon product, and we expect to see more of that developing in the coming years. Perhaps Adam, you would like to elaborate on that further.

Yes. I wanted to jump back into the policy tailwinds because I want to elaborate on why these are tailwinds. We had one other item on that slide talking about 70% of Americans wanting to do something about climate change. Breaking that down by party or age group reveals that there are over 90% of Democrats and 74% of Independents believing we should make progress. It's even more interesting considering recent testimonies from Republican senators asking for inclusion of RNG projects in Section 48. When you consider age demographics, you see support increasing as you move down in age. These are the tailwinds we are discussing. It's not only about the legislative initiatives for electricity policies but comes through the SEC now discussing greenhouse gas disclosure requirements. Our product has zero Scope 1 and zero Scope 2 emissions compared to diesel. These trends are robustly supportive, and we believe that cellulosic electricity is part of this solution, while voluntary markets continue to grow, which we always monitor closely.

Our next question comes from Paul Cheng with Scotiabank.

The first question is that just curious, the arbitration that in the two California projects dispute, what's the nature of those disputes, and what's the risk that in your other projects? You will face similar issues or potentially face similar issues? That's the first question.

The situation we have is where we have a fixed-price EPC contract for both the Hilltop and Vander Schaaf projects. The contractor has presented us with a series of change orders seeking to increase the price. We think the change orders are not warranted, and we substantially dispute the change orders that have been presented to us. We commenced an arbitration proceeding, and while it's ongoing, the contractor is required to continue work during the resolution period. The contract for each of the two projects is fully bonded by licensed sureties who are on notice of our claim. We believe our claims have substantial merit, but of course, this is an early stage, and we can't predict the outcome. I can say this is limited to these two projects; it is not affecting other projects, and we do not foresee that impacting future projects, Paul.

Jon, is this the first time you worked with this contractor or that you have worked with them before? And also, does this contractor have any other projects other than those two that they are working on with you?

This is the first time we're working with them. The contractor was developed and sourced by our co-developer in the project. They are a reputable counterparty and have various other projects in the industry, just not with us. We think this issue is very narrowly focused on these two projects and not broader than that.

And maybe this is for both Adam and Jon. Just curious, not just OPAL, but the industry has been having a tough year over the past 12 to 15 months. OPAL looks very expensive and attractive. When you talk to investors, where do you think the disconnection lies? What do people not understand about your business? Which part?

It's interesting that you say the industry has had a tough year. I assume you refer to stock prices because we see gathering tailwinds in the industry, as Adam was alluding to before. We are particularly well poised to benefit from those tailwinds, and we have a lot of optimism as we look forward. Regarding our stock price and that of our competitors, I can address ours directly, which is strictly a matter of a low float stock. Addressing our float will really help. Before getting to that section, I will say that we think the cadence of increasing projects into construction, increasing projects into operation, and increasing total output will significantly benefit us in terms of cash flow and company size. Our strategy is to stay focused, execute on our plan, and the growth that will emerge will reflect positively on our stock price. One last point worth noting is that we have seen some precedent transactions that give us confidence about the value of our company in relation to the stock price. For example, a similar private transaction by Enbridge for $1.2 billion showcased a comparable level of gas in operation but without a significant development pipeline or downstream dispensing, which validates our company's value today and the value we're creating soon.

Our next question comes from Adam Bubes with Goldman Sachs.

It looks like in Fuel Station Services, margins stepped up by over 800 basis points sequentially. Is that due to seasonality, or what's going on under the hood that drives that strong performance sequentially? As we think about the moving pieces, where are gross margins for dispensing, third-party construction, and O&M tracking respectively?

The fourth quarter did benefit from some additional RIN monetization and LCFS credit sales. As we mentioned, the fourth quarter in general benefited from it, and certainly, a portion of that flows through to Fuel Station Services. That said, we see gross margins improving in 2024 versus 2023. We're anticipating significant margins due to utilizing increased RNG through our dispensing network, as well as seeing improving margins from both the construction and service sectors. In 2023, we still had some lag effect in Fuel Station Services from inflation impacting our construction revenues, which we've now moved past.

And then separately, the U.S. Treasury and IRS still need to finalize 45Z guidance. So how and when do you see regulations playing out? At the same time 45Z comes online, I believe the alternative fuel excise tax credit will be phasing out. What's the magnitude of tailwind that you receive from the alternative fuel tax credit, or does that flow mostly to your partners?

Adam, I appreciate that because that was also one other thing I wanted to hit. I want to remind everyone in our Fuel Station Service segment that we have zero natural gas commodity price risk. That flows all the way through as a variable cost to our fleet customers. So we do not have any impact from the relationship between natural gas and oil prices. All the margin improvement we are discussing comes from increased RNG throughput from our dispensing network and the factors I previously mentioned. Concerning the AFTC side, we have negligible impact, as that was also a pass-through benefit to our fleet customers, representing under $1 million in profitability. In terms of timing on 45Z, I do not want to provide specific timelines from the treasury because each estimate has been a bit off. We're awaiting guidance on carbon intensity scoring for 45Z. I'm hopeful this will be available soon, as it is critical for us. This elimination of the alternative fuel excise tax credit does not significantly impact us. We have a negligible income from AFTC, as that primarily flows to our partners. We benefit more from dairy-related RNG and a portion of gas we're dispensing on that side.

And then maybe if I could just hit one more in here. Can you expand on the potential for greater than 2 million MMBtu going into construction this year? Just any color on specific project details and cadence would be great.

We've discussed a lot about our relationships, especially with GFL, WM, and SJI. A couple of the projects we've been discussing are associated with those relationships. While there is no detailed announcement for specific projects, we believe we have identified a bit of a backlog, and as we address that backlog, we will see new projects moving into construction. We are focused on growth in the landfill area, which is our main objective. We have confidence that improved relationships combined with our track record in delivering projects that operate reliably will enhance our opportunity set. Reflexively, our vertically integrated delivery into high-value off-take markets will continue to give us a significant head start in seizing new project opportunities.

Yes, the only thing I'd add is that these projects can be sizable or substantial. Timing can be bunched, so if you see a quarter where multiple projects go into construction, it doesn’t mean we're automatically on an 8 million MMBtu construction run rate. So, I just want to caution against those assumptions if we see a quarter with multiple projects.

That concludes the question-and-answer session. At this time, I would like to turn the call back over to Adam Comora for closing remarks.

Thank you very much for your participation and interest in OPAL Fuels. We look forward to continued engagement and dialogue and hope everyone has a great day.

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