Clean Energy Fuels Corp.

Greetings and welcome to Clean Energy for second quarter 2023 on your conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Vreeland, Chief Financial Officer. Please go ahead.

Thank you, operator.

Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2023. If you did not receive the release, it is available on the investor relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the risk factor section of Clean Energy's Form 10-Q filed today. These forward-looking statements, equally as the date of this release, the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our president and chief executive.

Bob, good afternoon, everyone, and thank you for joining us. If you haven't seen it yet, I'll note that we changed the format of our earnings press release a bit that will hopefully make it easier to quickly see important data and highlights for the quarter. We know that many of you on this call are juggling multiple companies' earnings, so we want to make it as easy as possible. And in that vein, I'm going to also make my opening remark a little more concise, allowing us to get to your questions quicker. So let's jump in. Fortunately, the issue of historically high natural gas prices being charged by California utilities began to normalize in the second quarter, allowing our adjusted EBITDA to improve to $12.1 million. Not only was this a $16 million rebound from the first quarter, it was over 20% higher than Q2 of last year. Thanks in part to the opening of new stations anchored by our customer, Amazon, our RNG fuel volumes climbed over 17% in the quarter compared to a year ago to over 58 million gallons. We expect nice growth to continue through this year with planned openings in the third quarter of additional key stations in Southern California, Texas, Washington State, Michigan, and Maryland. As I've said before, it's great to have a large anchor customer in Amazon, but these stations are strategically located in areas around distribution centers and can easily handle additional fleets. Revenue for the second quarter was $90 million. Remember, this was impacted by $14 million of non-cash Amazon warrant charges. It's also slightly down from a year ago due to lower environmental credit prices, But those began to increase in the quarter and have held up nicely since. The alternative fuel tax credit reinstated for three years in the Inflation Reduction Act increased revenue by $5 million in the quarter. The rebound in our adjusted EBITDA, growth in the R&G business, including upward trends in environmental credit prices, and $192 million in cash and investments has kept our balance sheet strong and supports our positive outlook for the remainder of the year and into 2024. The strong demand for RNG continues, not only through our newly built stations, but we're adding customers at our existing fueling infrastructure. For instance, Liberty Coca-Cola, which is one of the country's largest Coke bottlers, signed a deal to fuel trucks in several of our stations in the Northeast. Electrolux, a large appliance company, and Channel Island Dairy Farms have begun operating RNG heavy-duty trucks for the first time and are fueling at our California stations. Campbell's Trucking Company is deploying heavy-duty trucks that will fuel at a clean energy station in Washington State, which has its new low-carbon fuel program in place. I told you on the last call about our recently signed partnership with Tourmaline, one of Canada's leading energy companies. Over the last three months, we have hit the ground running on the plan to build a network of stations throughout Western Canada. By partnering with such a recognized and respected Canadian company, we believe this could be the foundation for a significant surge in natural gas fueling by the heavy-duty trucking market and other Canadian fleets. We couldn't be more enthusiastic about this relationship. Our core refuse in transit business saw additional growth with new and the extension of larger contracts. Apology Waste Company expanded their relationship with us at multiple California stations. Several big transit agencies continue to grow their RNG fueling with new deals in the second quarter, including Big Blue Bus in Santa Monica and Gold Coast Transit in Oxnard, California. Also during the second quarter, US EPA provided a vote of confidence for RNG fueling when it announced the final Renewable Volume Obligation, or RVO, demand targets with an average 30% increase for the next three years. Both RNG customers as well as investors in additional RNG supply should be heartened with this significant increase in targets. Our own RNG production projects continue to move forward with the Del Rio Dairy in Texas now operational And we're in the final commissioning on three projects that we expect to have online in Q3, with two more by year end. As I said, I'm trying to tighten up my prepared remarks, so I'll just end by saying we believe there are many signs pointing in a positive direction. You've heard me several times about our excitement for the new Cummins 15-liter natural gas engine that is currently being tested by important fleets. So I will only add that when it hits the broader market sometime next year, the timing couldn't be better. Not only will we and the entire industry have a significantly greater volume of low CI RNG available, but fleets will have a new choice in a tested larger engine produced by one of the most reliable manufacturers in the world. This comes at a time of continued uncertainty and cost with other new technologies and their lack of reliable fueling infrastructure. We are pleased with our progress. And with that, I'll turn the call over to Bob.

Thank you, Andrew, and good afternoon to everyone. As Andrew mentioned, our second quarter financial results bounced back significantly from the first quarter. Our second quarter results for 2023 were largely in line with our expectations. with the only notable negative variance on the quarter being a gap operating loss of $1.4 million or negative $1 million in EBITDA attributed to our Texas LNG plant that was and remains under repair. Normally we could see $300,000 or more per quarter of positive EBITDA from this plant, and of course we're working diligently to bring it back online. But due to long lead item parts needed for repairs, we may not get that back into operations in 2023. But it did have an impact on the quarter for sure. Our improved financial results for the second quarter of 2023 were principally driven by the three factors we mentioned on our previous earnings call, starting first with the ramping up of R&G fuel volumes largely coming from our trucking sector. Second, we saw favorable retail fuel margins at the pump driven by low underlying natural gas commodity costs in relation to oil and really the price of retail diesel. And then the third item is we saw increases in environmental credit prices, albeit we did not see the full effect of the run-up in the REN prices which occurred in late June. And to put that into perspective, our weighted average rent price realized for the second quarter was $2.16 versus more recent pricing that's been around $3.05. Now, we're anticipating that these three factors continue to positively impact our results in 2023, so we're maintaining our 2023 annual financial guidance. Looking at our year-over-year results, our gap operating loss of $13.1 million for the second quarter of 2023 compares to an operating loss of $11.9 million a year ago, the second quarter. On the downside compared to a year ago, the second quarter of 2023 includes $9.1 million of incremental non-cash Amazon warrant charges and $6.1 million in lower RIN and LCFS revenues due to the lower credit prices. On the upside compared to a year ago, the second quarter of 2023 benefited by $4.7 million from the non-cash change in fair value of our fuel hedge and by $5.1 million in additional revenue due to the reinstatement of the alternative fuel tax credit. Our adjusted EBITDA of $12.1 million in the second quarter of 2023 compares to adjusted EBITDA of $10 million for the second quarter of 2022 for a 21 percent improvement. And while the lower 2023 RIN and LCFS prices negatively impacted the second quarter of 23 when compared to 22, and that was by the $6.1 million I just mentioned, our underlying base fuel margins, service margins, and the alternative fuel tax credit in 2023 more than offset the effect of the lower credit prices as well as some higher operating and joint venture costs that's associated with our growth plans around the RNG efforts. So effectively, we improved our adjusted EBITDA by 21% over last year. I think that's a testament to our diverse financial model where we have multiple drivers of margin where one component can compensate for another. As we did last quarter, and we'll continue going forward, we have disclosed the EBITDA components of our RNG supply business, particularly as these dairy projects are being placed into service. So having said that, our adjusted EBITDA of $12.1 million for the second quarter of 2023 breaks down as $13.5 million coming from the distribution business and a negative 1.4 million coming from our RNG supply business. I've included a consolidating table of adjusted EBITDA in our company presentation that's posted on our website. And then lastly, I'll say we remain on plan with our capital spending, which called for about $90 million in the distribution business and $40 million in the RNG supply business for 2023. although I'll note that we have a little over $100 million that's related to the JVs that's off our balance sheet that's also available to us in that R&D supply business. And with that, operator, please open the call to questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star key. One moment, please, while we pull for questions. And our first question comes from Eric Stein with Craig Hallam. Please go ahead.

Hi, Andrew. Hi, Bob.

Hey, Eric.

Hey, so hoping you could just give an update. You did a little bit in the prepared remarks on the upstream RNG. So it sounds like you expect to have six operating by year end. You know, just curious beyond that. I think in the past you've given a number of under construction engineering phase and then also what your pipeline is looking like.

Right. Right. That's right, Eric. So you'll have six that are, you know, in kind of in the final throes of construction now. And then in the kind of the next of what's called level two engineering and term sheet signed and kind of the phase one engineering, there's another seven. It's that number that I've used before. And so those will go into construction in early 24. And then we have about four more behind that that are in level one, due diligence and development, engineering. And then, of course, our pipeline continues to be robust. I mean, everybody has a large pipeline. There's just upwards of another 15 projects that are in the pipeline that are earlier. you know, that we're continuing to work on and the team is trying to bring those forward. We continue to, you know, feel good about it. Some of these projects have taken a little bit longer than we, you know, thought six, eight, nine months ago, but we're making very good progress on all of these projects.

And just curious, I mean, is the thought still, I think you've talked about 105 million gallons is kind of a, maybe an interim target and with the RVO and credit prices better? I mean, is there any expansion to that number?

I think that's still the working number that we're using, Eric. As we, Bob and I, have said often is that we also believe there will be opportunities to acquire projects, bring them in, from others. And we continue to work on that in terms of M&A, you know, perhaps bringing forward some projects, you know, that are either under development by other developers. And so we like that number and we feel confident that we can get there.

Got it. Maybe last one for me, just on the Amazon stations, you know, good color on on the build out there and that, you know, those were in places where other fleets, you know, certainly are using those. I'm curious, though, you know, how Amazon is positioning that with their suppliers. I mean, are you seeing instances of them, you know, either strongly urging or demanding that their suppliers use natural gas as well as part of their, you know, I guess, what is it, scope two or scope three emissions?

Right. Well, I'm going to let Amazon really speak for any more advanced discussions they're having with their third-party AFP haulers. But we have said in the past that they have had very constructive conferences where they've introduced the RNG to their They're different haulers, and we've worked with them on that. So we feel optimistic that they'll continue to bring the R&G heavy-duty trucks into their fleet with those that haul for them. So time will tell on how that exactly all plays out, but I know it's something that they continue to work with their haulers.

Okay, thank you.

Our next question comes from Rob Brown with Lake Street Capital. Please go ahead.

Good morning, Andrew and Bob. Good afternoon. Excuse me. Good afternoon, Rob. Just wanted to get a little bit more detail on the Amazon rollout. Sort of how would you say that's – where's that in terms of your plan? How many kind of stations are now fully running and how many are kind of yet to go for the year and into next year?

Okay, Rob, let me do a little thinking here.

You know, what we announced with Amazon almost a year ago was 19 stations. And what I've said this year so far is that, you know, by the end of this year, we would have all if maybe less one open. So we're still on track for that. This is a very important time. We have a lot of stations that are opening right now, and that will open the remainder of this year. You know, we fuel a lot of trucks in the network right now, and I've said that, you know, before, is that we have 85 different stations that are accommodating Amazon heavy-duty trucks, you know, in the network now. And though we're very excited about these stations, they come online because they get immediately, really overnight, loaded with trucks that will – kind of redeploy from other parts of the network that we may or may not be fueling now that'll be base loaded at these stations. So, you know, the program's kind of working as Amazon and we wanted it to. You know, I think Amazon has said that they've fielded as many as 2,000 or more trucks. And you can tell by the volumes that we're seeing in our trucking going up that those trucks are coming online. So it's an exciting thing. You know, we're also very mindful of the fact that this is, you know, I like to think that the Amazon deployment is one that will be used with other significant fleets as they begin to look at how they would deploy these, you know, the Cummins 15 liter trucks. That's what I'm very excited about. That's what our sales force is working hard on with these different fleets that are now in customer introduction and testing this summer with the 15 liter. It's to develop some like programs for these other significant national fleets as they begin to bring the 15 liter into their fleet.

Thank you.

Thanks for the overview there. And then on the RVO, kind of specifics being settled, what's sort of the impact in your business? Do you see sort of better written pricing or do you see more RNG volume kind of demand coming through?

Well, I'll let Bob help here, but obviously the first impact you saw is, I mean, I saw the initial program you remember called for perhaps some regulation that might incent rng to go to electric vehicles that as you know didn't make the final uh uh the the final rules that went in went into place now that may you know the erin thing may come back at some point we'll see uh however uh i should see it is it was real a strong endorsement for using renewable natural gas for heavy duty transportation i think there's no way around that that that there was a recognition that this is, uh, uh, very powerful and something that can be have to happen and, you know, be put into place, uh, right now. The, the first thing we saw, uh, is, uh, uh, immediate overnight strengthening of the, of the rent price, right. From something around $2 to something closer to $3 and 10 cents that settled back into around $3 and five. So that was significant in terms of, uh, strengthening and then when you look at the rvo so that's the the obligations the the increase of of rng that'll be required uh going forward over the next three years that you know often uh rob you'll remember that that used they used to kind of grow that obligation about 12 something like in that neighborhood and because there's so many projects And, you know, in the works, they move that up to 30%. So there's kind of a 30% growth rate over the next three years. So, you know, to me, you put all this together, it's very strong for R&G in transportation and in generation as well.

Okay, great. Thank you. I'll turn it over.

Our next question comes from Dushyant Ilani with Jefferies. Please go ahead.

Hi, guys. Thanks for taking my question. I actually just have one question. I wanted to stick with the RVO. With the run-up in pricing, what do you think about the guidance, you know, your fully guidance compared to what you had initially given? Do you think that there's any potential upside if rent pricing stays where they are?

yeah um well certainly it's joshua it's very helpful um i'm being a little cautious on that because you know we had some headwinds there with the california situation and and i think that um that was one reason why we were able to maintain our guidance because there were some questions as to how we could weather a storm like that from our uh in the first quarter but this the uh the rim was factored in and And frankly, you know, the fact that it's maybe gone up more than what we would have factored in is within our range.

Got it. Thank you. I'll turn it over.

Our next question comes from Manav Gupta with UBS.

Please go ahead.

Hey, Bob and Andrew. So first question on the CARB side. There is growing chatter that within the next few weeks there would be meetings and then even if the final regulation doesn't come up, there is a very strong possibility that CARB is looking at reset of the program and a higher reset which helps everybody out. So on that front, you obviously talked to CARB. Do we have any kind of insights from you on that front?

But I think you're right. You know, the the chatter is that, you know, the kind of the new program, if you will, the new outlook, the new regulations are kind of in the works, not altogether clear the timetable of that, you know, it's been suggested that could happen, go forward, be published here in the next two weeks or the end of the month. So I think it's, you know, it's, So obviously it's coming. Then, as you know, Manav, probably then there has to be kind of a period for comment, and then it'll go forward, you know, late in the year, hopefully to the CAR Board for approval. That could even move into the early part of 2024, and then those rules will be in effect sometime, I believe, late in 2024. You know, our view is, and a lot of the commentary has been that this is a great opportunity. You know, I think there's a general understanding that the low carbon fuel standard in California has worked and has been very effective. And so, you know, there's been, as you remember, the choices were would you increase the obligation from a, you know, a reduction of carbon from 20% to 25%, 30% or 35%. There are studies and there's commentary from the industry that there's enough RNG available, there's enough renewable fuels available, lower carbon fuels that could actually make it so that the state could actually go beyond 35%. I'm not speculating whether or not they do that here, but I think, to me, it looks like CARB is beginning to – that tend to understand that this is a great opportunity to increase targets, increase the obligation curve, you know, lower the carbon that's being used in the state. And then so I'm thinking that you could see something on the aggressive side, you know, closer to the, on the 35. Now, this would mean that you would, it would be, I think, tremendous for all of us, I think it'd be great for the state, but it'll be tremendous for those of us that are in the RNG business. The state will need all the RNG it can get. That should be constructive to LCFS pricing going forward. And I think, you know, likely once, you know, if it goes this way, Manav, and the targets go to on the aggressive side, I would guess you would see kind of a market response early and then of course I think the LCFS would then strengthen out into the next year as it becomes clear what this is going to mean to be able to you know for obligated parties so you know our fingers are crossed we're working hard our teams are working we're fully engaged with the ARB staff board members those in government, air regulators, to make them understand that we have a fuel that's ready to go today and can help the state move toward its stated goals of being a 45% reduction by 20... Oh, I think that's 2040. So, you know, it's necessary for them to be aggressive if they're going to hit their own stated targets.

I agree with you. I have... question that keeps popping up and we don't agree with it is that somewhere somebody says, well, CARB is not going to be supportive of RNG or kick out RNG. I know you have addressed this in the past, but have you heard anything on that side? Because we firmly believe RNG should be part of the CARB program and should not be kicked out under any circumstances.

Well, Manav, you and I see eye to eye on that. There are some, you know, that believe that, you know, methane that's captured at dairy should somehow not be in the program, the low carbon fuel standard program. And there's those that have suggested that it should be eliminated. I think this would mean that you would have a renewable diesel program in the state of California. I'm not sure that that's exactly what ARB wants. And I'm not sure it's altogether clear you could hit the targets that they want if you eliminate our fuel, which is so low in carbon. So You know, I'm not saying that there aren't those that would want that, but I kind of believe, we believe, I think the industry is feeling better about the fact that ARB is recognized and has said so at these different workshops that renewable natural gas is an important part of the low carbon fuel standard program. So I don't believe you'll see that end up, I don't believe you'll end up seeing that be the case.

I agree with you. My last question here is when we, sometimes people don't give you enough credit for something which is your third party volume growth. So could you just remind everybody how your third party RNG volumes are growing in 23, 24, and 25? How is the pipeline looking on that front?

Yeah, well, it's looking, you know, as we've planned it, you know, most, well, all of our volume this year and you know, is third party. So we've kind of laid out that, uh, growth rate on the third party and, um, and that's looking good. And, and, you know, there's a lot of work that goes behind that securing, you know, we've got over 60 suppliers and, um, you know, we continue to, um, tap into the RNG sources as they come online. We have good partners that are, um, in that space, uh, particularly BP with their recent acquisition. So,

we're feeling good about. You know, Manav, it's a fair point, though. I mean, we bring in, you know, we still account for about 50% or 60% of all the R&G in transportation. So, you know, we source from almost every R&G provider that's out there. So we have a team that works really hard cultivating those relationships and bringing on those contracts. And, yeah, we have good growth on that front. And we're going to need it. You know, even at the end of 2026, if you look at our plan that we laid out that we're, you know, sticking with is, you know, it called for about 100, a little over, as was mentioned earlier on the call, 105 million gallons of our own, you know, equity supply. But we still need, and with the growth that we see in the trucking area, we need another almost 400 million gallons of third-party RNG. So it's an important part of our business going forward.

Thank you so much.

Our next question comes from Derek Whitfield with CFO.

Please go ahead.

Good afternoon, Andrew and team, and thanks for taking my question.

Eric, you bet, Derek.

With regard to your pipeline that's been kind of at that 15 to 20 level for a few quarters, what do you see as the greatest impediment to advancing those opportunities into the contractual and engineering phases?

Well, I don't know if it's an impediment, Derek. I think there's this reality that these take some engineering, right? And there's a lot of considerations in terms of the interconnects and the each dairy is a little bit different on what needs to be solved in terms of, uh, you know, the cleanup and, uh, and the composition of the manure and how it's handled. And so there's just lots of things that go into, you know, I wish these projects and I, and I happen to believe that over time we'll be able to, um, you know, make these a little bit less, uh, um, custom, if you will. Uh, but there's just a lot that has to go into it. And, uh, we're still learning as we go. Now we're gaining a lot of experience with our, with our construction folks and our engineering teams. And we've built out a bigger team here now to be able to handle it. I don't know that it's any particular impediment. It's not necessarily equipment, uh, You know, we saw that a year ago where we had some long lead time, you know, situations with certain cleanup technologies and some steel, but I think that's generally resolved itself now. But, but, you know, going forward, we'll get better at it and bring these things on, but they do take, they take some time to get through the, the the engineering phase and, and It's probably time well spent to make sure that you have a project that can, you know, meet, bring on the fuel at the carbon intensity as designed and meet the, you know, the returns that we've figured on.

Great. That makes sense. And maybe shifting over to policy for my follow-up. Now that we have full rulemaking in place around the ITC, How should we think about the CapEx implications for your upstream business over the next few years?

Well, Derek, I would say we're motivated to accelerate whatever CapEx within the ITC period. And so we are managing our projects under kind of that – mandate, right, to take advantage of it, first and foremost. I mean, we were fortunate that we had a number of projects in place before the Inflation Reduction Act. So that was kind of gravy on top of the returns. But, you know, now as it's kind of in, then we're definitely part of the conversation is timing on, you know, starting the construction by the end of 24 on that. So, I mean, we're basically trying to take advantage of that as much as possible.

And maybe just to follow up to that, do you see it more in the 30 to 40% range as a potential benefit for you?

Yes. Yeah.

You know, there's going from the 30 to 40 can, you know, there's some nuances there with domestic content and a number of things, but But frankly, I think the projects are looking pretty good on that front and in that range.

That's great.

Thanks for your time.

Our next question comes from Michael Blair with TPH.

Please go ahead.

Hey, good afternoon, Andrew and Bob. It looks like your RNG share of total volumes rose to a record 81%, so congrats on that. However, your capture of RINs revenue these past two quarters has been lower on a percentage basis than what we saw in 2022. Is this just timing related, or have there been any structural changes in in how much RIN revenue you're receiving for these RNG volumes?

No, nothing structural, Matthew. I think just kind of normal market dynamics. But, you know, you have to also look at LCFS. I mean, we look at both kind of together on that. So, you know, but I think it's just, you know, We look at it together with the LCFS and just seeing their normal activity from our standpoint. There's no structural changes going on there. There's still good money, and we're comfortable with all that, yeah.

Sounds good. And then, Bob, I think you mentioned the Texas LNG plant may stay down for the remainder of 2023. If that happens, what's the total EBITDA headwind approximately in 2023 from this outage?

Well, you know, I mean, this quarter, I won't say they will necessarily sustain what happened this quarter. I mean, we're going to really try to have equipment going in to capitalize it. But, you know, there's still work that we're, you know, testing on some of that. So, yeah. we were, what I said is that that plant could, you know, generate 300 K or more, you know, in that neighborhood in a quarter of EBITDA. And if that depends on how you want to look at it, if you, if you come up with a negative, then, you know, frankly, that's $1.3 million effect, uh, which is really what it was to our second quarter in my view, because it was negative a million and we should have made about 300,000. So, um the rest of the year could be a couple million bucks or more and we factored that you know again i'm looking at our guidance and just all things considered we've you know that little that was enough of a headwind and it's kind of binary it's like you know that plant's either operating or it's not so it's a little that that doesn't just kind of get absorbed into the normal activity so we called it out um so we'll get a repair and i get that flowing in, but that'll have some impact.

Great. Thank you.

Our next question comes from Pavel Moshenov with Raymond James.

Please go ahead. Thanks for taking the question. We had a lot of questions on CARB policy Also, literally today, there was a statement by Governor Newsom about a new hydrogen strategy for California. Might be a little early for you guys to comment on specifically that statement. Can you just talk more broadly about your approach to kind of the green hydrogen economy?

Yeah, Pavel, thanks. I don't have a comment on what the governor may have announced today, though, you know, we actually had a board member who has since rotated off our board who is kind of, I would say, on the cutting edge of hydrogen policy in the state of California. So, Often at our board meetings, we discuss this at our board of directors, how we would participate. Now, we've been kind of clear, Pavel, and I think, you know, you and I have talked a lot about this. I mean, we have a hydrogen fueling station and have had for almost 10 years. We actually got into the hydrogen, what we called at the time, hyphene. Years ago in Canada, we built a station now twice at our LAX station. We recently brought one on a new state of the art hydrogen fueling station for one of our customers. We're out with RFPs for three or four of our transit properties right now where we would build them stations and provide hydrogen. We see that RNG could likely be one of the most elegant solutions for a low-carbon feedstock for hydrogen in the future. Now, having said that, while we understand high-pressure fuel, we believe that RNG running through the pipeline reformed at the station could be just a dynamite way to be able to deliver hydrogen to fuel cell vehicles in the future. But there's more work there that needs to be done. And don't count on us to go out and inspect hydrogen fueling locations yet. We need to see the industry be able to come along with vehicles. But we are working with some of the largest industrial hydrogen companies in the country. and we'll have ongoing discussions with them. We happen to think that R&G will be a player in that. You know, we have a 49% ownership in a compressor company that's in Canada and Italy. We have acquired a hydrogen compressor company and bolted that on there. That's doing very well right now. So we're gaining lots of understanding about how our network will be ready to go to deliver hydrogen in the future. But it's out there a ways a little bit, Pavel. We are trying to learn about how our RNG might be available, if you will, or participate in the low carbon fuel standard program, because I think there will be money made there to provide you know, super low carbon hydrogen. So I think there'll be a play for us there as well. But we're kind of in early innings on how clean energy will participate in the hydrogen economy. Though I think we're as well positioned as anybody because we have the infrastructure to be able to deliver it.

Understood. And then maybe shifting north a bit to your recent deal with Thermaline. still obviously early days in that. But do you have a sense of how big that fuel station network in Western Canada can ultimately become?

Well, you know, just a couple of things. And Bob, you know, at our company is actually the chairman of that joint development committee for our company. So I'll let him speak to a little bit. But, you know, I've been involved in Canada almost for 25 years. Got a couple of important things that work. Well, first off, you've got a huge resource base of natural gas in Canada and you have pretty expensive diesel, uh, in Canada as compared to, so you have very good economics. You have a very important largest gas producer in Canada is our partner. And, uh, and so the, you know, we have some stations on some of the highly, uh, traveled corridors in eastern canada now this focus would normally we're going to start out in western canada where they have long a lot of truck activity that goes from you know calgary uh west uh and um i think you know that joint venture uh program right now contemplates building 15 stations you know to start We'll start, now let's be clear, we're going to start with four or five and then we'll, depending on demand, we'll move to 15 and then eventually I think our friends at Tourmaline believe that you could need as many as 30 stations out there in Western Canada. So it's exciting, but it's going to take a little bit of time. We'll get those first four stations up. We're working with the largest fleets now. You know, we're already fueling one of the largest trucking companies at our, uh, Edmonton and, uh, and we've, uh, just are purchased, uh, uh, land for our station in Calgary. So we're excited about the potential. We'll get those first four up and then we'll begin to, uh, gauge how quickly we need to bring more stations online.

Yeah.

The roadmap is the roadmap is there.

I, the, um, tourmaline is, um, it's nice working with them and seeing their motivation to, um, Displaced diesel as the fuel there and frankly can be with natural gas and you know, we start the initial Agreement was 70 million dollars Canadian. So 35 million each to kind of start this first wave and you know, the timing is good because the Synced up with a 15 liter engine, which is very important in Canada. And so We are going about as fast as we can just to get these few stations, the four stations, one's up and running and then the remaining three. And it'll coincide really with the 15 liter truck coming in, which look is going to be kind of coming in mid to late 24 and not really necessarily big meaningful volumes. But so you're kind of looking into 25 on some of this, but The progress that we will make from between now and then will be really important, you know, to talk about.

Last question. This is a little bit below the radar, I think, more recently for you. Two years ago, you started participating in this Adopt the Port project, I guess, on Long Beach, maybe somewhere else on kind of the marine space. How is that going?

No, it's good. Thank you, Pavel. You know, that, just for those that may not be familiar, this is where we, you know, there's been a 10-year effort, and we've been involved in it from the beginning. The dirtiest air quality in the airshed in Southern California is the port. The ships, the haulers in and around the port, And so there's been effort, a couple renditions of clean air trucking programs at the port. And this program, what we call the adopt-a-port with Chevron, is where Chevron has put up money, which we've largely spent now, and it'll be topped off with a new tranche, where we have, working with Chevron, using their balance sheet, if you will. We've made grants to our trucking customers in the port that may have some public grants as well to purchase new natural gas trucks. And then the deal here is that we'll buy RNG from Chevron, they're our supplier, at our stations. And those trucking customers then are obligated to buy certain amounts of fuel from us at our stations. That's the Chevron. So it's kind of a win-win-win. Puts brand-new, super low-carbon RNG trucks into the port. I think we have almost 400 trucks that have participated in the program. We've got another couple hundred that are kind of in the queue to get funded and kind of get through that. I've talked to Chevron about topping off the money that's in there to add to it. I think they've been very supportive of the program. We'll probably expand it. It's not, you know, it takes a while because you have to buy a new truck and there's a lot of, There's a lot of grant and public things you've got to go through, so it's not as fast as any of us would like it, but it's been successful. I mean, you know, at the same time, Pavel, there's probably been 15, 20, 30 electric trucks. With all those, you know, public statements about that we're going to zero trucks, zero electric trucks in the port, I don't know, there's probably 30 operating down there, maybe 15 are parked. We've got 480, 500 trucks. R and G trucks operating every day in the port. So I think it's been a huge success.

Thanks very much.

Thanks. Our next question comes from Ryan Todd with Piper Sandler.

Please go ahead.

Thanks. Maybe if I could just, um, follow up on a couple of comments from earlier, um, There was a question earlier on the ITCs, and I know the IRS provided some guidance on transfer pricing for the ITCs. What are your – what do you understand is – or like what's your expectation in terms of what the timing might look like for you to start monetizing some of this? Do you need to wait until – is that clearly a 2024 event? Can you start monetizing some of this stuff earlier? What are the – What are the bottlenecks to you guys monetizing some of the ITCs at this point, as far as you understand it?

There's not really bottlenecks.

Ryan, I would say we're going through the process of qualifying all the expenditures at the location, so we're kind of following the process. I've got teams of folks that are you know, coming up with what are the qualified CapEx expenditures, and then we're, you know, and then we're, you know, frankly, we're kind of putting our feelers out on the, you know, on the market in terms of what, you know, the transfer market looks like. I believe that it'll be more of a 24. I'm not in a rush to need capital but that doesn't mean we're taking our time i'm going through the process um and making you know making sure that we understand it all and what kind of clawbacks there are and um you know when you go through a transfer like that so we kind of want to have it all buttoned down and we're we're counting on the money principally for this first wave of projects in 24. We split that with our partners. We get 50% of the value of the capital that goes into the total project, but we intend to likely transfer ours and monetize it.

Okay, perfect. That's helpful.

And then you mentioned earlier some of the early tests ongoing on the 15 liter engine. Have you heard any early signs of feedback on anything there and any thoughts on, you know, maybe how the timing or milestones might play out over the next year in terms of, um, in terms of testing and feedback and when you might, you know, any, when you think you might see like the earliest signs of around visibility around potential uptake of that engine.

Well, you know, I think it's important first, Ryan, to just kind of remind everybody, while this is a new engine, it's not exactly new, right? I mean, they've had great success with this natural gas heavy-duty engine in China. And I think last year they sold 35,000 of these in China. So now this engine is improved on that engine, but it's essentially in many ways the same. I think it's important for those listening to understand that this isn't a test of a brand-new, you know, heretofore untested product. This isn't an alpha. This is really a fleet introduction. And Cummins is very careful about the way they do these things. They're not in a rush. They want to make sure that everybody, you know, that they've got it right because that's their name after all. And they do this on diesel. So I used to hear about the 550. testing dates of hell or whatever, uh, come just talk about, but, uh, you know, I think it's important that they have lined up some of the largest fleets in America. So this is, you know, this is, uh, uh, this is Amazon and UPS and FedEx and Walmart. So, you know, they're not, they're not playing on stubbing their tail here because they've got all the boys that, uh, boys and girls that can really buy big trucks are involved. Knight Swift and Werner and J.B. Hunt. So I feel that that's really important, and I think there's 40 some odd that are in this introduction phase this summer, and those are out there happening now. Now, we've heard anecdotal stories, and I don't want to get ahead of Cummins here, but we've heard good things from the driver acceptance so far. We know that some of those are being tested in sort of the toughest topographies. over the grapevine in California and Rocky Mountains. So, yeah, I think that's great. We've heard there's been an improvement in the fuel economy, which is what Cummins said wouldn't be the case. So I think that's great. I don't know that I have the latest, other than we know that this always takes a little longer than we think. The order book was supposed to be, you know, maybe open in Q3, Q4. I'm not sure how that's going. I think it's safe to say, though, that um when if you're looking for milestones it'll be you know how did it go what is the feedback and we'll get that some point here for some of these big fleets uh it'll be late this year though and then you'll begin to have serious order book open up i i'm guessing either late in 23 or early 24 but you know don't look for those orders to get built until sometime in you know q2 of 24 is my guess But it'll be interesting to see what those initial orders look like. I think we've moved past, and I know that Cummins, and I'll put words in their mouth here now, is anticipating that these will be more substantial orders. I think we're past the days. Years ago when we did the first 11.9, the 12 liters, it was a fleet saying that they would take two. we're now dealing with uh fleets that can buy substantially more than that and so i think we're thinking it's going to be orders of hundreds and not and not you know uh five uh and so that's good news and you know finally we've gotten to those that that buy a lot of trucks every year have you know big turnover and that's what excites us uh that finally you know we've got a An engine, you know, after all, the 15-liter engine accounts for something like 75% of the diesel engines that are sold, and we haven't had it. So I think this is important for the industry.

Great. Thanks. That's great, Keller.

Our next question comes from Patty Zane with Scotch Bank.

Please go ahead.

Great, thank you. Hey, Andrew. Hey, Bob. Good afternoon. Thanks for taking the questions. So my first question is just on kind of trucking demand. So we've heard of softer e-commerce, weaker industrial production, and so on having some impact on shipping demand and other logistics. So just curious if that's had any impact on your volumes at all.

We really haven't. We haven't really seen that.

No, I mean, it's, you know, oftentimes the natural gas engines are the ones that get used the most, you know, so if there's going to be a little, uh, you know, back down on some of that, it's, they're not going to pull the natural gas engines out of the mix.

I mean, our trucking volumes up, but I, you know, I, I'm not doubting that that's been the case. We just haven't seen it in our, in our numbers and our limited, you know,

exposure to it not something we're managing around or through right now okay great great and then a second question on um kind of your full year guidance you've kept that the same um and you know we're going to need about 47 million in the back half of the year to reach the midpoint there so at least 20 million a quarter Can you maybe give us a bit more color on what gives you the confidence to reach that? And then I know you mentioned, you know, ramping R&G volumes, favorable margins, and favorable credit pricing. Maybe can you talk about what you're assuming for credit pricing specifically for the remainder of the year? Thank you.

Yeah. Well, I'm kind of, well, I'm assuming

that the RIN kind of stays maybe up around where it is right now. It possibly could go higher, but I'm not going there. So I think that RIN jump was good, and that kind of keeps us there. And we feel that the LCFS could go higher than where it is right now, too. Now, it's quite a bit higher than what we had initially in our forecast, if you will, for this year, which was around, you know, the low 60s, like 62, 63. So you're already kind of, you know, we're already seeing some improvement from that. The biggest driver on that is, as we've talked about, will be volume. So all the factors are very important, absolutely. They're meaningful, but, I mean, ultimately, as we open more stations, I mean, that's really where the – That's really what drives the margin the most. But all those, the rent, the credit are definitely meaningful. I mean, you're talking about multiple millions of dollars that, you know, helps us get there. I mean, frankly, the, you know, the disappointment is we're trying to recover from, you know, a bit of a dinger there in the first quarter. But we, the external environment looks all around favorable in our view. So, yeah. that would really the volume and it's a ramp up. So, you know, you don't necessarily divide the balance of the year by two. Um, we'll, we'll continue. We'll see her, you know, a ramp, but, um, that's how we get there.

Great. Thank you. Our next question comes from Jason government with calling.

Please go ahead.

Yeah. Hey, it's Jason Gableman. Good afternoon.

Hi, Jason. Hi, Jason.

I wanted to go back to the RNG upstream volumes as they're beginning to ramp up. Sounds like limited earnings contribution this year, but can you just remind us the timing for the certification process on the LCFS on the RINs and when you expect those gallons to start contributing positively to earnings? And I guess tied to that, maybe frame the dollar per gallon potential given the current credit prices that we see out there. And then finally, if you could comment on potential uplift from the clean fuel producer tax credit and your outlook for when we should hear about that. And I'll leave it there. Thank you.

You got those, Bob? Yeah.

On the – well, you're right, Jason, on the contribution, not really meaningful. In fact, really, there's maybe a little bit of, you know, net drag from the – in 23 from the R&D supply because of that certification process. So we're, you know, we're going to look into – you know later in the 24 before we're going to really be able to monetize that and that's being a little you know I mean that's assuming we get these commissioned as we are stating here and then taking the time on the LCFS that can be you know 12 months all right so that kind of puts us toward the latter half of 24 so the contribution You know, and 24 will be minor, I'll say, but there'll be contribution in 24 from the projects that go into, that we commissioned this year. I don't want to give 24 guidance right now, you know, on specifically what the numbers are going to be, but, I mean, where things stand with our construction and what's injecting gas, And then the certification process, you're going to go into 24 before you're, you know, monetizing that from a RIN LCFS standpoint. But we'll, we're always evaluating, you know, optimization of, you know, at what point is the best time and makes sense to monetize because there's different markets out there that will take that. So, this is where I, you know, get into, we're, know we'll be studying 24 and what we want to do with the gas that we're producing right because you know maybe we don't store it all and then we don't and then we don't have to wait for the certification process as long if we get an appropriate price um yes got it and then just thoughts on the clean fuel producer tax credit um

if you've heard anything from inside the Beltway on if it comes in at the high end or low end in terms of allowing negative carbon intensity without a lower bound and timing on when we could hear an update.

Oh, yeah. Okay. We haven't heard anything on that. So what we can, you know, we're listening to others that know that at you know, negative $250 and beyond that production tax credit gets to get large per gallon, you know, that $5, $6 a gallon kind of category. We'll see if that – we'll see how that plays out.

But I don't have anything meaningful on the –

We haven't heard anything on the timing of that or when that might be promulgated or when the secretary would deal with that. We haven't heard that yet, Jason. We're listening.

We have our tentacles out, but we haven't gotten picked up anything on that yet. Understood. Thanks for the answers. Appreciate it. Are you...

There are no further questions at this time. I would like to turn the floor back over to Andrew Littleford for closing comments. Please go ahead.

Thank you, Operator. Thank you, Operator. And thank you, everyone, for joining us today. And we look forward to filling you in on our progress next time. Thank you. Have a good evening.

This concludes today's conference call. You may disconnect your lines at this time.

Thank you for your participation and have a good day. Hey, well, after... Thank you. Thank you. Thank you. Thank you. Thank you. © transcript Emily Beynon Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. you music music Thank you. Thank you.

Greetings and welcome to Clean Energy for second quarter 2023 on your conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Robert Vreeland, Chief Financial Officer. Please go ahead.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2023.

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

Bob, good afternoon, everyone, and thank you for joining us. If you haven't seen it yet, I'll note that we changed the format of our earnings press release a bit that will hopefully make it easier to quickly see important data and highlights for the quarter. We know that many of you on this call are juggling multiple companies' earnings, so we want to make it as easy as possible. And in that vein, I'm going to also make my opening remark a little more concise, allowing us to get to your questions quicker. So let's jump in. Fortunately, the issue of historically high natural gas prices being charged by California utilities began to normalize in the second quarter, allowing our adjusted EBITDA to improve to $12.1 million. Not only was this a $16 million rebound from the first quarter, it was over 20% higher than Q2 of last year. Thanks in part to the opening of new stations anchored by our customer, Amazon, our RNG fuel volumes climbed over 17% in the quarter compared to a year ago to over 58 million gallons. We expect nice growth to continue through this year with planned openings in the third quarter of additional key stations in Southern California, Texas, Washington State, Michigan, and Maryland. As I've said before, it's great to have a large anchor customer in Amazon, but these stations are strategically located in areas around distribution centers and can easily handle additional fleets. Revenue for the second quarter was $90 million. Remember, this was impacted by $14 million of non-cash Amazon warrant charges. It's also slightly down from a year ago due to lower environmental credit prices, But those began to increase in the quarter and have held up nicely since. The alternative fuel tax credit reinstated for three years in the Inflation Reduction Act increased revenue by $5 million in the quarter. The rebound in our adjusted EBITDA, growth in the R&G business, including upward trends in environmental credit prices, and $192 million in cash and investments has kept our balance sheet strong and supports our positive outlook for the remainder of the year and into 2024. The strong demand for RNG continues, not only through our newly built stations, but we're adding customers at our existing fueling infrastructure. For instance, Liberty Coca-Cola, which is one of the country's largest Coke modelers, signed a deal to fuel trucks in several of our stations in the Northeast. Electrolux, a large appliance company, and Channel Island Dairy Farms have begun operating RNG heavy-duty trucks for the first time and are fueling at our California stations. Campbell's Trucking Company is deploying heavy-duty trucks that will fuel at a clean energy station in Washington State, which has its new low-carbon fuel program in place. I told you on the last call about our recently signed partnership with Tourmaline, one of Canada's leading energy companies. Over the last three months, we have hit the ground running on the plan to build a network of stations throughout Western Canada. By partnering with such a recognized and respected Canadian company, we believe this could be the foundation for a significant surge in natural gas fueling by the heavy-duty trucking market and other Canadian fleets. We couldn't be more enthusiastic about this relationship. Our core refuse in transit business saw additional growth with new and the extension of larger contracts. Apology Waste Company expanded their relationship with us at multiple California stations. Several big transit agencies continue to grow their RNG fueling with new deals in the second quarter, including Big Blue Bus in Santa Monica and Gold Coast Transit in Oxnard, California. Also during the second quarter, US EPA provided a vote of confidence for RNG fueling when it announced the final Renewable Volume Obligation, or RVO, demand targets with an average 30% increase for the next three years. Both RNG customers as well as investors in additional RNG supply should be heartened with this significant increase in targets. Our own RNG production projects continue to move forward with the Del Rio Dairy in Texas now operational And we're in the final commissioning on three projects that we expect to have online in Q3, with two more by year end. As I said, I'm trying to tighten up my prepared remarks, so I'll just end by saying we believe there are many signs pointing in a positive direction. You've heard me several times about our excitement for the new Cummins 15-liter natural gas engine that is currently being tested by important fleets. So I will only add that when it hits the broader market sometime next year, the timing couldn't be better. Not only will we and the entire industry have a significantly greater volume of low CI RNG available, but fleets will have a new choice in a tested larger engine produced by one of the most reliable manufacturers in the world. This comes at a time of continued uncertainty and cost with other new technologies and their lack of reliable feeling of We are pleased with our progress. And with that, I'll turn the call over to Bob.

Thank you, Andrew, and good afternoon to everyone. As Andrew mentioned, our second quarter financial results bounced back significantly from the first quarter. Our second quarter results for 2023 were largely in line with our expectations. with the only notable negative variance on the quarter being a gap operating loss of $1.4 million or negative $1 million in EBITDA attributed to our Texas LNG plant that was and remains under repair. Normally we could see $300,000 or more per quarter of positive EBITDA from this plant, and of course we're working diligently to bring it back online. But due to long lead item parts needed for repairs, we may not get that back into operations in 2023. But it did have an impact on the quarter for sure. Our improved financial results for the second quarter of 2023 were principally driven by the three factors we mentioned on our previous earnings call, starting first with the ramping up of R&G fuel volumes largely coming from our trucking sector. Second, we saw favorable retail fuel margins at the pump driven by low underlying natural gas commodity costs in relation to oil and really the price of retail diesel. And then the third item is we saw increases in environmental credit prices, albeit we did not see the full effect of the run-up in the REN prices, which occurred in late June. And to put that into perspective, our weighted average rent price realized for the second quarter was $2.16 versus more recent pricing that's been around $3.05. Now, we're anticipating that these three factors continue to positively impact our results in 2023, so we're maintaining our 2023 annual financial guidance. Looking at our year-over-year results, our gap operating loss of $13.1 million for the second quarter of 2023 compares to an operating loss of $11.9 million a year ago, the second quarter. On the downside compared to a year ago, the second quarter of 2023 includes $9.1 million of incremental non-cash Amazon warrant charges and $6.1 million in lower RIN and LCFS revenues due to the lower credit prices. On the upside compared to a year ago, the second quarter of 2023 benefited by $4.7 million from the non-cash change in fair value of our fuel hedge and by $5.1 million in additional revenue due to the reinstatement of the alternative fuel tax credit. Our adjusted EBITDA of $12.1 million in the second quarter of 2023 compares to adjusted EBITDA of $10 million for the second quarter of 2022 for a 21 percent improvement. And while the lower 2023 RIN and LCFS prices negatively impacted the second quarter of 23 when compared to 22, and that was by the $6.1 million I just mentioned, our underlying base fuel margins, service margins, and the alternative fuel tax credit in 2023 more than offset the effect of the lower credit prices as well as some higher operating and joint venture costs that's associated with our growth plans around the RNG efforts. So effectively, we improved our adjusted EBITDA by 21% over last year. I think that's a testament to our diverse financial model where we have multiple drivers of margin where one component can compensate for another. As we did last quarter, and we'll continue going forward, we have disclosed the EBITDA components of our RNG supply business, particularly as these dairy projects are being placed into service. So having said that, our adjusted EBITDA of $12.1 million for the second quarter of 2023 breaks down as $13.5 million coming from the distribution business and a negative 1.4 million coming from our RNG supply business. I've included a consolidating table of adjusted EBITDA in our company presentation that's posted on our website. And then lastly, I'll say we remain on plan with our capital spending, which called for about $90 million in the distribution business and $40 million in the RNG supply business for 2023. although I'll note that we have a little over $100 million that's related to the JVs that's off our balance sheet that's also available to us in that R&D supply business. And with that, operator, please open the call to questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star key. One moment, please, while we pull for questions. And our first question comes from Eric Stein with Craig Hallam. Please go ahead.

Hi, Andrew. Hi, Bob.

Hey, Eric.

Hey, so hoping you could just give an update. You did a little bit in the prepared remarks on the upstream RNG. So it sounds like you expect to have six operating by year end. You know, just curious beyond that. I think in the past you've given a number of under construction engineering phase and then also what your pipeline is looking like.

Right. Right. That's right, Eric. So you'll have six that are, you know, in kind of in the final throes of construction now. And then in the kind of the next of what's called level two engineering and term sheet signed and kind of the phase one engineering, there's another seven. It's that number that I've used before. And so those will go into construction in early 24. And then we have about four more behind that that are in level one, due diligence and development, engineering. And then, of course, our pipeline continues to be robust. I mean, everybody has a large pipeline. There's just upwards of another 15 projects that are in the pipeline that are earlier. you know, that we're continuing to work on and the team is trying to bring those forward. We continue to, you know, feel good about it. Some of these projects have taken a little bit longer than we, you know, thought six, eight, nine months ago, but we're making very good progress on all of these projects.

And just curious, I mean, is the thought still, I think you've talked about 105 million gallons is kind of a, maybe an interim target and with the RVO and credit prices better? I mean, is there any expansion to that number?

I think that's still the working number that we're using, Eric. As we, Bob and I, have said often is that we also believe there will be opportunities to acquire projects, bring them in, from others. And we continue to work on that in terms of M&A, you know, perhaps bringing forward some projects, you know, that are either under development by other developers. And so we like that number and we feel confident that we can get there.

Got it. Maybe last one for me, just on the Amazon stations, you know, good color on on the build out there and that, you know, those were in places where other fleets, you know, certainly are using those. I'm curious, though, you know, how Amazon is positioning that with their suppliers. I mean, are you seeing instances of them, you know, either strongly urging or demanding that their suppliers use natural gas as well as part of their, you know, I guess, what is it, scope two or scope three emissions?

Right. Well, I'm going to let Amazon really speak for any more advanced discussions they're having with their third-party AFP haulers. But we have said in the past that they have had very constructive conferences where they've introduced the RNG to their They're different haulers, and we've worked with them on that. So we feel optimistic that they'll continue to bring the R&G heavy-duty trucks into their fleet with those that haul for them. So time will tell on how that exactly all plays out, but I know it's something that they continue to work with their haulers.

Okay, thank you.

Our next question comes from Rob Brown with Lake Street Capital. Please go ahead.

Good morning, Andrew and Bob. Good afternoon. Excuse me. Good afternoon, Rob. Just wanted to get a little bit more detail on the Amazon rollout. Sort of how would you say that's – where's that in terms of your plan? How many kind of stations are now fully running and how many are kind of yet to go for the year and into next year?

Okay, Rob, let me do a little thinking here.

You know, what we announced with Amazon almost a year ago was 19 stations. And what I've said this year so far is that, you know, by the end of this year, we would have all if maybe less one open. So we're still on track for that. This is a very important time. We have a lot of stations that are opening right now, and that will open the remainder of this year. You know, we fuel a lot of trucks in the network right now, and I've said that, you know, before, is that we have 85 different stations that are accommodating Amazon heavy-duty trucks, you know, in the network now. And though we're very excited about these stations, they come online because they get immediately, really overnight, loaded with trucks that will – kind of redeploy from other parts of the network that we may or may not be fueling now that'll be base loaded at these stations. So, you know, the program's kind of working as Amazon and we wanted it to. You know, I think Amazon has said that they've fielded as many as 2,000 or more trucks. And you can tell by the volumes that we're seeing in our trucking going up that those trucks are coming online. So it's an exciting thing. You know, we're also very mindful of the fact that this is, you know, I like to think that the Amazon deployment is one that will be used with other significant fleets as they begin to look at how they would deploy these, you know, the Cummins 15 liter trucks. That's what I'm very excited about. That's what our sales force is working hard on with these different fleets that are now in customer introduction and testing this summer with the 15 liter. It's to develop some like programs for these other significant national fleets as they begin to bring the 15 liter into their fleet.

Thank you. Thanks for the overview there.

And then on the RVO, kind of specifics being settled, what's sort of the impact in your business? Do you see sort of better written pricing or do you see more RNG volume kind of demand coming through?

Well, I'll let Bob help here, but obviously the first impact you saw is, I mean, I saw the initial program you remember called for perhaps some regulation that might incent rng to go to electric vehicles that as you know didn't make the final uh uh the the final rules that went in went into place now that may you know the erin thing may come back at some point we'll see uh however uh i should see it is it was real a strong endorsement for using renewable natural gas for heavy duty transportation i think there's no way around that that that there was a recognition that this is, uh, uh, very powerful and something that can be happened and, you know, be put into place, uh, right now. The, the first thing we saw, uh, is, uh, uh, immediate overnight strengthening of the, of the rent price, right. From something around $2 to something closer to $3 and 10 cents that settled back into around $3 and five. So that was significant in terms of, uh, strengthening. And then when you look at the RVO, so that's the obligations, the increase of RNG that'll be required going forward over the next three years, that, you know, often, Rob, you'll remember that they used to kind of grow that obligation about 12%, something like in that neighborhood. And because there's so many projects And, you know, in the works, they move that up to 30%. So there's kind of a 30% growth rate over the next three years. So, you know, to me, you put all this together, it's very strong for R&G in transportation and in generation as well.

Okay, great. Thank you. I'll turn it over.

Our next question comes from Dushyant Ailani with Jefferies. Please go ahead.

Hi, guys. Thanks for taking my question. I actually just have one question. I wanted to stick with the RVO. With the run-up in pricing, what do you think about the guidance, your fully guidance compared to what you had initially given? Do you think that there's any potential upside if rent pricing stays where they are?

yeah um well certainly it's joshua it's very helpful um i'm being a little cautious on that because you know we had some headwinds there with the california situation and and i think that um that was one reason why we were able to maintain our guidance because there were some questions as to how we could weather a storm like that from our uh in the first quarter but this the uh the rim was factored in and And frankly, you know, the fact that it's maybe gone up more than what we would have factored in is within our range.

Got it. Thank you. I'll turn it over.

Our next question comes from Manat Gupta with UBS.

Please go ahead.

Hey, Bob and Andrew. So first question on the CARB side. There is growing chatter that within next few weeks there would be meetings and then even if the final regulation doesn't come up, there is a very strong possibility that CARB is looking at reset of the program and a higher reset which helps everybody out. So on that front, you obviously talked to CARB. Do we have any kind of insights from you on that front?

I think you're right. You know, the chatter is that, you know, the kind of the new program, if you will, the new outlook, the new regulations are kind of in the works, not altogether clear the timetable of that. You know, it's been suggested that could happen, go forward, be published here in the next two weeks or the end of the month. So I think it's, you know, it's So, obviously, it's coming. Then, as you know, Manav, probably then there has to be kind of a period for comment, and then it'll go forward, you know, late in the year, hopefully to the CAR Board for approval. That could even move into the early part of 2024, and then those rules will be in effect sometime, I believe, late in 2024. You know, our view is, and a lot of the commentary has been that this is a great opportunity. You know, I think there's a general understanding that the low carbon fuel standard in California has worked and has been very effective. And so, you know, there's been, as you remember, the choices were would you increase the obligation from a, you know, a reduction of carbon from 20% to 25%, 30% or 35%. There are studies and there's commentary from the industry that there's enough RNG available, there's enough renewable fuels available, lower carbon fuels that could actually make it so that the state could actually go beyond 35%. I'm not speculating whether or not they do that here, but I think, to me, it looks like CARB is beginning to that tend to understand that this is a great opportunity to increase targets, increase the obligation curve, you know, lower the carbon that's being used in the state. And then, so I'm thinking that you could see something on the aggressive side, you know, closer to the, on the 35. Now, this would mean that you would, it would be, I think, tremendous for all of us, I think it'd be great for the state, but it'll be tremendous for those of us that are in the RNG business. The state will need all the RNG it can get. That should be constructive to LCFS pricing going forward. And I think, you know, likely once, you know, if it goes this way, Manav, and the targets go to on the aggressive side, I would guess you would see kind of a, a market response early, and then, of course, I think the LCFS would then strengthen out into the next year as it becomes clear what this is gonna mean to be able to, you know, for obligated parties. So, you know, our fingers are crossed. We're working hard. Our teams are working. We're fully engaged with the ARB staff, board members, those in government, air regulators, to make them understand that we have a fuel that's ready to go today and can help the state move toward its stated goals of being a 45% reduction by 20... Oh, I think that's 2040. So, you know, it's necessary for them to be aggressive if they're going to hit their own stated targets.

I agree with you. I have... question that keeps popping up, and we don't agree with it, is that somewhere somebody says, well, CARB is not going to be supportive of RNG or kick out RNG. I know you have addressed this in the past, but have you heard anything on that side? Because we firmly believe RNG should be part of the CARB program and should not be kicked out under any circumstances.

Well, Manav, you and I see eye to eye on that. There are some, you know, that believe that, you know, methane that's captured at dairy should somehow not be in the program, the low carbon fuel standard program, and there's those that have suggested that it should be eliminated. I think this would mean that you would have a renewable diesel program in the state of California. I'm not sure that that's exactly what ARB wants, and I'm not sure it's altogether clear you could hit the targets that they want if you eliminate our fuel, which is so low in carbon. So You know, I'm not saying that there aren't those that would want that, but I kind of believe, we believe, I think the industry is feeling better about the fact that ARB is recognized and has said so at these different workshops that renewable natural gas is an important part of the low carbon fuel standard program. So I don't believe you'll see that end up, I don't believe you'll end up seeing that be the case.

I agree with you. My last question here is when we, sometimes people don't give you enough credit for something which is your third party volume growth. So could you just remind everybody how your third party RNG volumes are growing in 23, 24, and 25? How is the pipeline looking on that front?

Yeah, well, it's looking, you know, as we've planned it, you know, most, well, all of our volume this year and you know, is third party. So we've kind of laid out that, uh, growth rate on the third party and, um, and that's looking good. And, and, you know, there's a lot of work that goes behind that securing, you know, we've got over 60 suppliers and, um, you know, we continue to, um, tap into the RNG sources as they come online. We have good partners that are, um, in that space, uh, particularly BP with their recent acquisition. So, we're feeling good about.

You know, Manav, it's a fair point, though. I mean, we bring in, you know, we still account for about 50% or 60% of all the R&G in transportation. So, you know, we source from almost every R&G provider that's out there. So we have a team that works really hard cultivating those relationships and bringing on those contracts. And, yeah, we have good growth on that front. And we're going to need it. Even at the end of 2026, if you look at our plan that we laid out that we're sticking with, it called for about 100, a little over, as was mentioned earlier on the call, 105 million gallons of our own equity supply. But we still need, and with the growth that we see in the trucking area, we need another almost 400 million gallons of third-party RNG. So it's an important part of our business going forward.

Thank you so much.

Our next question comes from Derek Whitfield with CFO.

Please go ahead.

Good afternoon, Andrew and team, and thanks for taking my question.

Eric, you bet, Derek.

With regard to your pipeline that's been kind of at that 15 to 20 level for a few quarters, what do you see as the greatest impediment to advancing those opportunities into the contractual and engineering phases?

Well, I don't know if it's an impediment, Derek. I think there's this reality that these take some engineering, right? And there's a lot of considerations in terms of the interconnects and the each dairy is a little bit different on what needs to be solved in terms of, uh, you know, the cleanup and, uh, and the composition of the manure and how it's handled. And so there's just lots of things that go into, you know, I wish these projects and I, and I happen to believe that over time we'll be able to, um, you know, make these a little bit less, uh, um, custom, if you will. Uh, but there's just a lot that has to go into it. And, uh, we're still learning as we go. Now we're gaining a lot of experience with our, with our construction folks and our engineering teams. And we've built out a bigger team here now to be able to handle it. I don't know that it's any particular impediment. It's not necessarily equipment, uh, You know, we saw that a year ago where we had some long lead time, you know, situations with certain cleanup technologies and some steel, but I think that's generally resolved itself now. But, but, you know, going forward, we'll get better at it and bring these things on, but they do take, they take some time to get through the, the the engineering phase and, and It's probably time well spent to make sure that you have a project that can, you know, meet, bring on the fuel at the carbon intensity as designed and meet the, you know, the returns that we've figured on.

Great. That makes sense. And maybe shifting over to policy for my follow-up. Now that we have full rulemaking in place around the ITC, How should we think about the CapEx implications for your upstream business over the next few years?

Well, Derek, I would say we're motivated to accelerate whatever CapEx within the ITC period. And so we are managing our projects under kind of that – mandate, right, to take advantage of it, first and foremost. I mean, we were fortunate that we had a number of projects in place before the Inflation Reduction Act. So that was kind of gravy on top of the returns. But, you know, now as it's kind of in, then we're definitely part of the conversation is timing on, you know, starting the construction by the end of 24 on that. So, I mean, we're basically trying to take advantage of that as much as possible.

And maybe just to follow up to that, do you see it more in the 30 to 40% range as a potential benefit for you?

Yes. Yeah.

You know, there's going from the 30 to 40 can, you know, there's some nuances there with domestic content and a number of things, but But frankly, I think the projects are looking pretty good on that front and in that range.

That's great. Thanks for your time.

Our next question comes from Michael Blair with TPH.

Please go ahead.

Hey, good afternoon, Andrew and Bob. It looks like your RNG share of total volumes rose to a record 81%, so congrats on that. However, your capture of RINs revenue these past two quarters has been lower on a percentage basis than what we saw in 2022. Is this just timing related, or have there been any structural changes in in how much RIN revenue you're receiving for these RNG volumes?

No, nothing structural, Matthew. I think just kind of normal market dynamics. But, you know, you have to also look at LCFS. I mean, we look at both kind of together on that. So, you know, but I think it's just, you know, We look at it together with the LCFS and just seeing their normal activity from our standpoint. There's no structural changes going on there. That was still good money, and we were comfortable with all that, yeah.

Sounds good. And then, Bob, I think you mentioned the Texas LNG plant may stay down for the remainder of 2023. If that happens, what's the total EBITDA headwind approximately in 2023 from this outage?

Well, you know, I mean, this quarter, I won't say they will necessarily sustain what happened this quarter. I mean, we're going to really try to have equipment going in to capitalize it. But, you know, there's still work that we're, you know, testing on some of that. So, yeah. we were, what I said is that that plant could, you know, generate 300 K or more, you know, in that neighborhood in a quarter of EBITDA. And if that depends on how you want to look at it, if you, if you come up with a negative, then, you know, frankly, that's $1.3 million effect, which is really what it was to our second quarter in my view, because it was negative a million and we should have made about 300,000. So, Um, the rest of the year could be a couple million bucks or more. And we factored that, you know, again, I'm looking at our guidance and just all things considered we've, you know, that little, that was enough of a headwind of, and it's kind of binary. It's like, you know, that plant's either operating or it's not. So it was a little, that, that doesn't just kind of get absorbed into the normal activity. So we called it out. Um, so we'll get a repair and I get that. flowing in, but that'll have some impact.

Great. Thank you.

Our next question comes from Pavel Moshenov with Raymond James.

Please go ahead. Thanks for taking the question. We had a lot of questions on CARB policy Also, literally today, there was a statement by Governor Newsom about a new hydrogen strategy for California. Might be a little early for you guys to comment on specifically that statement. Can you just talk more broadly about your approach to kind of the green hydrogen economy?

Yeah, Pavel, thanks. I don't have a comment on what the governor may have announced today, though, you know, we actually had a board member who has since rotated off our board who is kind of, I would say, on the cutting edge of hydrogen policy in the state of California. So, Often at our board meetings, we discuss this at our board of directors, how we would participate. Now, we've been kind of clear, Pavel, and I think, you know, you and I have talked a lot about this. I mean, we have a hydrogen fueling station and have had for almost 10 years. We actually got into the hydrogen, what we called at the time, hyphene. Years ago in Canada, we built a station now twice at our LAX station. We recently brought one on a new state of the art hydrogen fueling station for one of our customers. We're out with RFPs for three or four of our transit properties right now where we would build them stations and provide hydrogen. We see that RNG could likely be one of the most elegant solutions for a low-carbon feedstock for hydrogen in the future. Now, having said that, while we understand high-pressure fuel, we believe that RNG running through the pipeline reformed at the station could be just a dynamite way to be able to deliver hydrogen to fuel cell vehicles in the future. But there's more work there that needs to be done. And don't count on us to go out and inspect hydrogen fueling locations yet. We need to see some, you know, we need to see the industry be able to come along with vehicles. But we are working with some of the largest industrial hydrogen companies in the country. and we'll have ongoing discussions with them. We happen to think that RNG will be a player in that. You know, we have a 49% ownership in a compressor company that's in Canada and Italy. We have acquired a hydrogen compressor company and bolted that on there. That's doing very well right now. So we're gaining lots of understanding about how our network will be ready to go to deliver hydrogen in the future. But it's out there a ways a little bit, Pavel. We are trying to learn about how our RNG might be available, if you will, or participate in the low carbon fuel standard program, because I think there will be money made there to provide you know, super low carbon hydrogen. So I think there'll be a play for us there as well. But we're kind of in early innings on how clean energy will participate in the hydrogen economy. Though I think we're as well positioned as anybody because we have the infrastructure to be able to deliver it.

Understood. And then maybe shifting north a bit to your recent deal with Thermaline. still obviously early days in that, but do you have a sense of how big that fuel station network in Western Canada can ultimately become?

Well, you know, just a couple of things, and Bob, you know, at our company is actually the chairman of that joint development committee for our company, so I'll let him speak to it a little bit, but, you know, I've been involved in Canada almost for 25 years. Got a couple of important things that work. Well, first off, you've got a huge resource base of natural gas in Canada and you have pretty expensive diesel, uh, in Canada as compared to, so you have very good economics. You have a very important, largest gas producer in Canada is our partner. And, uh, and so the, you know, we have some stations on some of the highly, uh, traveled corridors in eastern canada now this focus would normally we're going to start out in western canada where they have long a lot of truck activity that goes from you know calgary uh west uh and um i think you know that joint venture uh program right now contemplates building 15 stations you know to start We'll start, now let's be clear, we're going to start with four or five and then we'll, depending on demand, we'll move to 15 and then eventually I think our friends at Tourmaline believe that you could need as many as 30 stations out there in Western Canada. So it's exciting, but it's going to take a little bit of time. We'll get those first four stations up. We're working with the largest fleets now. You know, we're already fueling one of the largest trucking companies at our, uh, Edmonton and, uh, and we've, uh, just are purchased, uh, uh, land for our station in Calgary. So we're excited about the potential. We'll get those first four up and then we'll begin to, uh, gauge how quickly we need to bring more stations online.

Yeah.

The roadmap is the roadmap is there.

I, the, um, tourmaline is, um, it's nice working with them and seeing their motivation to, um, Displaced diesel as the fuel there and frankly can be with natural gas and you know, we start the initial Agreement was 70 million dollars Canadian. So 35 million each to kind of start this first wave and you know, the timing is good because the Synced up with a 15 liter engine, which is very important in Canada. And so We are going about as fast as we can just to get these few stations, the four stations, one's up and running and then the remaining three. And it'll coincide really with the 15 liter truck coming in, which look is going to be kind of coming in, you know, mid to late 24, you know, and not really necessarily big meaningful volumes. But so you're, you're kind of looking into 25 on some of this, but The progress that we will make from between now and then will be really important to talk about.

Last question, a little bit below the radar, I think more recently for you. Two years ago, you started participating in this Adopt the Port project, I guess on Long Beach, maybe somewhere else on kind of the marine space. How is that going?

No, it's good. Thank you, Pavel. You know, that, just for those that may not be familiar, this is where we, you know, there's been a 10-year effort, and we've been involved in it from the beginning. The dirtiest air quality in the airshed in Southern California is the port. The ships, the haulers in and around the port, And so there's been effort, a couple renditions of clean air trucking programs at the port. And this program, what we call the adopt-a-port with Chevron, is where Chevron has put up money, which we've largely spent now, and it'll be topped off with a new tranche, where we have, working with Chevron, using their balance sheet, if you will. We've made grants to our trucking customers in the port that may have some public grants as well to purchase new natural gas trucks. And then the deal here is that we'll buy RNG from Chevron, they're our supplier, at our stations. And those trucking customers then are obligated to buy certain amounts of fuel from us at our stations. That's the Chevron. So it's kind of a win-win-win. Puts brand-new, super low-carbon RNG trucks into the port. I think we have almost 400 trucks that have participated in the program. We've got another couple hundred that are kind of in the queue to get funded and kind of get through that. I've talked to Chevron about topping off the money that's in there to add to it. I think they've been very supportive of the program. We'll probably expand it. It's not, you know, it takes a while because you have to buy a new truck and there's a lot of, There's a lot of grant and public things you've got to go through, so it's not as fast as any of us would like it, but it's been successful. I mean, you know, at the same time, Pavel, there's probably been 15, 20, 30 electric trucks. With all those, you know, public statements about that we're going to zero trucks, zero electric trucks in the port, I don't know, there's probably 30 operating down there, maybe 15 are parked. We've got 480, 500 trucks. R and G trucks operating every day in the port. So I think it's been a huge success.

Thanks very much. Thanks.

Our next question comes from Ryan Todd with Piper Sandler.

Please go ahead.

Thanks. Maybe if I could just, um, follow up on a couple of comments from earlier, um, There was a question earlier on the ITCs, and I know the IRS provided some guidance on transfer pricing for the ITCs. What are your – what do you understand is – or like what's your expectation in terms of what the timing might look like for you to start monetizing some of this? Do you need to wait until – is that clearly a 2024 event? Can you start monetizing some of this stuff earlier? What are the – What are the bottlenecks to you guys monetizing some of the ITCs at this point, as far as you understand it?

There's not really bottlenecks.

Ryan, I would say we're going through the process of qualifying all the expenditures at the location, so we're kind of following the process. I've got teams of folks that are uh you know coming up with what are the qualified capex expenditures and then um works you know and then we're you know frankly we're kind of putting our feelers out on the you know on the market in terms of what you know the transfer market looks like um i'm i believe that it'll be more of a 24 i'm not in a in a rush to need capital but that doesn't mean we're taking our time i'm going through the process um and making you know making sure that we understand it all and what kind of clawbacks there are and um you know when you go through a transfer like that so we kind of want to have it all buttoned down and we're we're counting on the money principally for this first wave of projects in 24. We split that with our partners. We get 50% of the value of the capital that goes into the total project, but we intend to likely transfer ours and monetize it.

Okay, perfect. That's helpful.

And then you mentioned earlier some of the early tests ongoing on the 15 liter engine. Have you heard any early signs of feedback on anything there and any thoughts on, you know, maybe how the timing or milestones might play out over the next year in terms of, in terms of testing and feedback and when you might, you know, any, when you think you might see like the earliest signs of around visibility around potential uptake of that engine.

Well, you know, I think it's important first, Ryan, to just kind of remind everybody, while this is a new engine, it's not exactly new, right? I mean, they've had great success with this natural gas heavy-duty engine in China. And I think last year they sold 35,000 of these in China. So now this engine is improved on that engine, but it's essentially in many ways the same. I think it's important for those listening to understand that this isn't a test of a brand-new, you know, heretofore untested product. This isn't an alpha. This is really a fleet introduction. And Cummins is very careful about the way they do these things. They're not in a rush. They want to make sure that everybody, you know, that they've got it right because that's their name after all. And they do this on diesel. So I used to hear about the 5G. testing dates of hell or whatever comes to talk about. But, you know, I think it's important that they have lined up some of the largest fleets in America. So this is, you know, this is Amazon and UPS and FedEx and Walmart. So, you know, they're not playing on stubbing their toe here because they've got all the boys and girls that can really buy big trucks are involved. Knight Swift and Werner and J.B. Hunt. So I feel that that's really important. And I think there's 40 some odd that are in this introduction phase this summer. And those are out there happening now. Now, we've heard anecdotal stories, and I don't want to get ahead of Cummins here, but we've heard good things from the driver acceptance so far. We know that some of those are being tested in sort of the toughest topographies. over the grapevine in California and Rocky Mountains. So, yeah, I think that's great. We've heard there's been an improvement in the fuel economy, which is what Cummins said wouldn't be the case. So I think that's great. I don't know that I have the latest, other than we know that this always takes a little longer than we think. The order book was supposed to be, you know, maybe open in Q3, Q4. I'm not sure how that's going. I think it's safe to say, though, that if you're looking for milestones, it'll be, you know, how did it go? What is the feedback? And we'll get that at some point here for some of these big fleets. It'll be late this year, though, and then you'll begin to have serious order book open up. I'm guessing either late in 23 or early 24. But, you know, don't look for those orders to get built until sometime in, you know, Q2 of 24 is my guess. But it'll be interesting to see what those initial orders look like. I think we've moved past, and I know that Cummins, and I'm putting words in their mouth here now, is anticipating that these will be more substantial orders. I think we're past the days. Years ago when we did the first 11.9, the 12 liters, it was a fleet saying that they would take two. we're now dealing with uh fleets that can buy substantially more than that and so i think we're thinking it's going to be orders of hundreds and not and not you know uh five uh and so that's good news and you know finally we've gotten to those that that buy a lot of trucks every year have you know big turnover and that's what excites us uh that finally you know we've got a An engine, you know, after all, the 15-liter engine accounts for something like 75% of the diesel engines that are sold, and we haven't had it. So I think this is important for the industry.

Great. Thanks. That's great, Keller.

Our next question comes from Betty Zane with Scotch Bank.

Please go ahead.

Great, thank you. Hey, Andrew. Hey, Bob. Good afternoon. Thanks for taking the questions. So my first question is just on kind of trucking demand. So we've heard of softer e-commerce, weaker industrial production, and so on having some impact on shipping demand and other logistics. So just curious if that's had any impact on your volumes at all.

We really haven't. We haven't really seen that.

No, I mean, it's, you know, oftentimes the natural gas engines are the ones that get used the most, you know, so if there's going to be a little, uh, you know, back down on some of that, it's, they're not going to pull the natural gas engines out of the mix.

I mean, our trucking volumes up, but I, you know, I, I'm not doubting that that's been the case. We just haven't seen it in our, in our numbers and our limited, you know,

exposure to it not something we're managing around or through right now okay great great and then a second question on um kind of your full year guidance you've kept that the same um and you know we're going to need about 47 million in the back half of the year to reach the midpoint there so at least 20 million a quarter Can you maybe give us a bit more color on what gives you the confidence to reach that? And then I know you mentioned, you know, ramping R&G volumes, favorable margins, and favorable credit pricing. Maybe can you talk about what you're assuming for credit pricing specifically for the remainder of the year? Thank you.

Yeah. Well, I'm kind of, well, I'm assuming

that the RIN kind of stays maybe up around where it is right now. It possibly could go higher, but I'm not going there. So I think that RIN jump was good, and that kind of keeps us there. And we feel that the LCFS could go higher than where it is right now, too. Now, it's quite a bit higher than what we had initially in our forecast, if you will, for this year, which was around, you know, the low 60s, like 62, 63. So you're already kind of, you know, we're already seeing some improvement from that. The biggest driver on that is, as we've talked about, will be volume. So all the factors are very important, absolutely. They're meaningful, but, I mean, ultimately, as we open more stations, I mean, that's really where the – That's really what drives the margin the most. But all those, the rent, the credit, are definitely meaningful. I mean, you're talking about multiple millions of dollars that helps us get there. I mean, frankly, the disappointment is we're trying to recover from a bit of a dinger there in the first quarter. But the external environment looks all around favorable in our view. that was really the volume and it's a ramp up. So, you know, you don't necessarily divide the balance of the year by two. Um, we'll, we'll continue, we'll see, you know, a ramp, but, um, that's how we get there.

Great. Thank you. Our next question comes from Jason government with calling.

Please go ahead.

Yeah. Hey, it's Jason Gableman. Good afternoon. Hi, Jason.

Hi, Jason.

I wanted to go back to the RNG upstream volumes as they're beginning to ramp up. Sounds like limited earnings contribution this year, but can you just remind us the timing for the certification process on the LCFS on the RINs and when you expect those gallons to start contributing positively to earnings? And I guess tied to that, maybe frame the dollar per gallon potential given the current credit prices that we see out there. And then finally, if you could comment on potential uplift from the clean fuel producer tax credit and your outlook for when we should hear about that. And I'll leave it there. Thank you.

You got those, Bob? Yeah.

On the – well, you're right, Jason, on the contribution, not really meaningful. In fact, really, there's maybe a little bit of, you know, net drag from the – in 23 from the R&D supply because of that certification process. So we're, you know, we're going to look into – you know, later in the 24 before we're going to really be able to monetize that. And that's being a little, you know, I mean, that's assuming we get these commissioned as we are stating here and then taking the time on the LCFS that can be, you know, 12 months. All right, so that kind of puts us toward the latter half of 24. So the contribution, You know, and 24 will be minor, I'll say, but there'll be contribution in 24 from the projects that go into, that we commissioned this year. I don't want to give 24 guidance right now, you know, on specifically what the numbers are going to be, but, I mean, where things stand with our construction and what's injecting gas And then the certification process, you're going to go into 24 before you're, you know, monetizing that from a RIN LCFS standpoint. But we'll, we're always evaluating, you know, optimization of, you know, at what point is the best time and makes sense to monetize because there's different markets out there that will take that. So this is where I, you know, get into, we're, know we'll be studying 24 and what we want to do with the gas that we're producing right because you know maybe we don't store it all and then we don't and then we don't have to wait for the certification process as long if we get an appropriate price um yes got it and then just thoughts on the clean fuel producer tax credit um

if you've heard anything from inside the Beltway on if it comes in at the high end or low end in terms of allowing negative carbon intensity without a lower bound and timing on when we could hear an update.

Oh, yeah. Okay. We haven't heard anything on that. So what we can, you know, we're listening to others that know that at you know, negative $250 and beyond that production tax credit gets to get large per gallon, you know, that $5, $6 a gallon kind of category. We'll see if that – we'll see how that plays out.

But I don't have anything meaningful on the –

on that 45. We haven't heard anything on the timing of that or when that might be promulgated or when the secretary would deal with that. No. We haven't heard that yet, Jason. We're listening.

We have our tentacles out, but we haven't gotten picked up anything on that yet. Understood. Thanks for the answers. Appreciate it.

There are no further questions at this time.

I would like to turn the floor back over to Andrew Littleford for closing comments. Please go ahead.

Thank you, operator. Thank you, operator. And thank you, everyone, for joining us today. And we look forward to filling you in on our progress next time. Thank you. Have a good evening.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation and have a good day.