OPAL Fuels Inc.

Good day and thank you for standing by. Welcome to the Opal Fuels first quarter 2023 earnings call. At this time, participants are in a listed only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Todd Firestone. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Opal Fuels First Quarter 2023 Earnings Conference Call. With me today are co-CEOs Adam Camora and Jonathan Moore, and Anne Anthony, Opal's Chief Financial Officer. Opal Fuels released financial and operating results for the first quarter of 2023 yesterday afternoon. Those results are available in 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 today's call, a replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements. Several factors that could cause or contribute to such differences are described on slides 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 in the reconciliation of these measures to the nearest gap measure is included in the appendix of the release and presentation. Adam will begin today's call by providing an overview of the quarter's results, recent highlights, and update on our strategic and operational priorities. John will then give a commercial and business development update, after which, and review financial results for the quarter. We'll then open the call for questions. And now, I'll turn the call over to Adam Kamara, co-CEO of Opal Fuel.

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