OPAL Fuels Inc.

Global Fuels Fourth Quarter and Full Year 2022 Earnings Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star 11 on your telephone. As a reminder, today's conference call is being recorded. I will now turn the conference to your host, Mr. Todd Firestone, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Good morning. Welcome to the Opal Fuels fourth quarter and full year 2022 earnings conference call. With me today are co-CEOs Adam Kimora, Jonathan Moore, and Anne Anthony, Opal's chief financial officer. Opal Fuels released financial and operating results for the fourth quarter and 12 months year-to-date of 2022 yesterday afternoon, and those results are available on the investor relations section of our website at opalfuels.com. The presentation and access to the webcast for this call are also available on our website. After completion of this call, a replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks on this call, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements. Several factors that could cause or contribute to such differences are described on slide two and three of our presentation. These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion of certain non-GAAP measures, including but not limited to adjusted EBITDA, a definition of non-GAAP measures used, and a reconciliation of these measures to the nearest GAAP measure included in the appendix of the release and presentation. Adam will begin today's call by providing an overview of the fourth quarter results, recent highlights, and the update on our strategic and operational priorities. John will then give a commercial and business development update, after which Ann will review financial results and full year 2023 guidance. We'll then open up the call for questions. And now, I will turn the call over to Adam Camora, co-CEO of Opal Fuel.

Thank you, Todd. Good morning, everyone, and thank you for being here for Opal Fuel's fourth quarter and year-end 2022 earnings call. 2022 was a remarkable year for Opal Fuels, filled with many achievements for our company, as well as positive developments for the R&G industry as a whole. We are proud of what we've accomplished and we remain steadfast in our focus on executing on our plan. I'd like to highlight several points. First, we continue to execute on our strategic and operational priorities. We believe our integrated platform is a powerful model in delivering renewable, low carbon RNG to the marketplace. Strategically, our goal is to continue to grow our RNG production and to maximize the value of that RNG, which currently remains the U.S. transportation fuel market as the highest value distribution. Operationally, we remain committed to be the premier vertically integrated RNG company in the industry. one that excels at providing value to not only our shareholders, but also our customers and partners. Importantly, we think our visible and tangible growth profile is a differentiating factor in the marketplace. We grew our RNG output by more than a third this past year. As we disclosed in our 2023 outlook, we expect growth to accelerate this year by greater than 50% over 2022 to more than 3.4 million MMBTUs at the midpoint of our guidance. Our projects and construction remain on track, which provides visibility to accelerating production growth once again in 2024 from 2023. In addition to production, our advanced development pipeline continues to grow and mature. And as John will touch on later, we have seen some of the development delays from 2022 ease, and we expect to place at least 2 million MMBTUs of output capacity into construction in 2023. I want to touch on our vertical integration business model and our current views on environmental credit pricing. We continue to believe our business model both maximizes the value of our produced RNG and provides important flexibility and optionality in the future to capitalize on RNG tailwinds, both new offtake markets and public policy initiatives as those evolve and strengthen. The U.S. transportation fuel market continues to be the highest value offtake. averaging twice the value of fixed price contracts, and again, leave us the option in the future to explore new end markets and test incremental pricing power with fleet customers. We do get a lot of questions on this merchant model, and Ann will speak later about some of our business segments, fuel station services and renewable power, and the long-term contract and nature of those business segments, which mutes some of the volatility by remaining merchant on our RNG production. Having said that, let's dive into some of the recent dynamics in both D3 RIN pricing and LCFF credits. On D3 RIN dynamics, we see the recent drop in price being driven by the potential oversupply of cellulosic D3 RIN volumes in the proposed set rule introduced by the EPA in December of 2022, with rule finalization expected to occur in June of this year. This potential oversupply is driven by two factors. continued growth in RNG production capacity, and additional supply from the proposed eRIN pathway. It is important to note that Opal Fuels will see strong benefits from this eRIN pathway, as our existing renewable power segment will be able to participate and generate significant incremental RINs without investing new capital. We will be providing more clarity around this potential as the rules get finalized. On the demand side of D3 RINs, we remain optimistic that EPA RVO targets could be adjusted higher to account for both cellulosic supply additions as well as anticipated eRIN volumes as those rules become finalized. It is the clear intent of both the original RFS and proposed rule commentary to support and grow the cellulosic category. The original law stated the cellulosic D3 category was targeted to be 16 billion D3 RINs. and the EPA administration is meant to support growth up to that figure. With updated industry production actuals over the past six months and demonstrated new supply growth coming online, the EPA has the support to raise volumes and has opened the door for future reenactment of the waiver credit over the multi-year set period. It is important to remember why the law and EPA are so supportive of the cellulosic category. The source of this category of biofuels is capturing harmful methane emissions, the single most important thing we can do to combat climate change. Another interesting feature of the proposed set rule is the multi-year RVOs. We believe that feature may dampen volatility in the future and perhaps open up two- to four-year contracts for RINs now that obligated parties will have visibility into their volume obligations for multi-year periods. So from our perspective, we believe OPWL will ultimately create more value from existing and future projects from the eRIN pathway. And structurally, we may see new contracting opportunities from the multi-year RVOs. Given this outlook, we are currently limiting our 2023 RIN sales in the first half of the year as rules are finalized. And Anne will touch on later how that will roll through our financials and reporting. As you see in our guidance sensitivities, we have much less exposure to LCFS pricing. Our Sonoma project has an offtake contract with a floor of $100 per credit, and we have much less dairy production currently online versus landfill. On LCFS, though, we remain very optimistic on credit pricing and the direction that CARB has intimated it is heading to on proposed program changes to be finalized over the balance of 2023 for 2024. CARB is giving clear signals to the market they would like to encourage more investment by supporting pricing, which will likely include stronger compliance targets, creating incremental demand for LCFS credits starting next year. As we look to this year, we are introducing our 2023 adjusted EBITDA guidance, which we expect to range from $85 to $95 million. Our RNG production range from 3.2 to 3.6 million MMBTUs, and capital expenditures to range from 220 to 240 million. Anne will provide more detail, but we expect an $8 million change to 2023 adjusted EBITDA for every 25 cent gallon change in D3 RIN prices. We continue to benefit from substantial and broad-based developments in our industry. First, I'd like to provide some insight into how our thinking on the IRA has evolved over the last several months. While we still await the final guidance from Treasury, we are confident that the ITC provisions will apply to landfill RNG projects, thus encompassing nearly all of our in-construction and advanced development pipeline projects. While we are still determining the exact level of ITC benefit, we have been in advanced discussions with the appropriate advisors and counterparties to believe we will benefit significantly. Second, the 45Z credits are set to be impactful as well, And we expect clarity from Treasury in the coming months on that front. We expect to begin realizing these benefits in 2023 and see them growing in 2024 and throughout the next five years. 2023 is set to be a very good year for Opal Fuels. To some degree, a bit of a contrast from 2022. In 2022, we saw very good commodity environmental credit pricing, but saw some near-term headwinds in the development of our new project pipelines. In 2023, we have begun the year with lower near-term commodity and environmental credit pricing, but see the positive momentum beginning with our new project development, which is ultimately the long-term value driver of our business. With that, I'll turn it over to John. John?