OPAL Fuels (US:OPAL)2025-08-07 21:21PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025 Condensed Consolidated Balance Sheets Total assets grew to $905.5 million, and the stockholders' deficit improved significantly to $(22.3) million as of June 30, 2025 | Balance Sheet Items (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $123,486 | $117,188 | | Property, plant, and equipment, net | $477,063 | $458,258 | | Total assets | $905,537 | $881,077 | | Total current liabilities | $98,233 | $103,596 | | Total liabilities | $432,291 | $416,045 | | Redeemable non-controlling interests | $365,548 | $482,863 | | Total Stockholders' deficit | $(22,302) | $(147,831) | Condensed Consolidated Statements of Operations Q2 2025 revenue increased to $80.5 million, but higher expenses resulted in an operating loss, though net income was boosted by a tax benefit | (In thousands, except per share data) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $80,456 | $70,950 | $165,863 | $135,902 | | Operating (loss) income | $(827) | $5,689 | $(2,769) | $9,259 | | Income tax benefit | $13,686 | $— | $21,723 | $— | | Net income | $7,559 | $1,908 | $8,843 | $2,585 | | Net income (loss) attributable to Class A | $800 | $(153) | $565 | $(469) | | Diluted EPS | $0.03 | $(0.01) | $0.02 | $(0.02) | Condensed Consolidated Statements of Cash Flows Net cash from operations for H1 2025 increased to $21.8 million, while cash used in investing decreased due to lower capital expenditures | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,805 | $14,251 | | Net cash used in investing activities | $(36,026) | $(54,080) | | Net cash provided by financing activities | $18,498 | $15,036 | | Net increase (decrease) in cash | $4,277 | $(24,793) | Notes To Condensed Consolidated Financial Statements Key disclosures cover operating segments, revenue disaggregation, borrowings, related party transactions, and significant legal proceedings - The company is organized into three operating segments: RNG Fuel, Fuel Station Services, and Renewable Power63 - On May 9, 2025, the Company acquired a 70% interest in CMS RNG LLC, a new joint venture to operate an RNG facility, which is consolidated as a VIE5960 - During Q1 and Q2 2025, the company sold transferable Investment Tax Credits (ITCs) for net proceeds of $21.7 million, recorded as an income tax benefit8688 - The company is involved in a significant legal dispute with contractor CEI Builders over the Central Valley RNG projects, proceeding with arbitration183187 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management analyzes financial results, highlighting revenue growth drivers, operational metrics, liquidity, and capital expenditure plans Overview and Key Factors The company's vertically integrated business converts biogas into RNG and Renewable Power, with performance driven by regulatory incentives - The company is a vertically integrated leader in capturing and converting biogas into low-carbon Renewable Power and RNG, and distributing RNG to heavy-duty trucking sectors198 - As of June 30, 2025, the company owned and operated 26 projects: 11 RNG projects with a design capacity of 8.8 million MMBtus/year and 15 Renewable Power projects with a nameplate capacity of 105.8 MW/hour201 - Key business drivers include demand for RNG and Environmental Attributes (RINs, LCFS credits), which are heavily influenced by federal and state energy regulations206 Results of Operations Q2 2025 revenue rose 13% YoY to $80.5 million, driven by RNG Fuel and Fuel Station Services, despite a decline in Renewable Power | Revenue by Segment (In thousands) | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | RNG Fuel | $25,130 | $19,445 | $5,685 | 29% | | Fuel Station Services | $47,026 | $39,257 | $7,769 | 20% | | Renewable Power | $8,300 | $12,248 | $(3,948) | (32)% | | Total revenues | $80,456 | $70,950 | $9,506 | 13% | - The increase in RNG Fuel revenue was driven by higher brown gas sales and contributions from the new Prince William and Polk facilities, partially offset by lower RIN prices230 - The decrease in Renewable Power revenue was primarily due to a $3.2 million loss of revenue from the termination of an ISCC contract in late 2024235 - Project development and startup costs increased 157% in H1 2025 compared to H1 2024, mainly due to virtual pipeline costs for new facilities245 Liquidity and Capital Resources The company reports total liquidity of $203.2 million and anticipates capital expenditures of approximately $185.0 million over the next year - Total liquidity as of June 30, 2025, was $203.2 million, consisting of $29.3 million in cash and cash equivalents and $173.9 million of unused capacity under its credit facilities263 - The company anticipates spending approximately $185.0 million in capital expenditures over the next 12 months for RNG projects and fuel stations287 - On March 3, 2025, the company amended its Credit and Guarantee Agreement, extending the availability period for delayed draw term loans to March 5, 2026269271 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exempt from this disclosure requirement as a smaller reporting company - As a "smaller reporting company," OPAL Fuels is exempt from this disclosure requirement290 ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025291 - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal controls were identified during the quarter292 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company details the ongoing arbitration with CEI Builders and related litigation concerning the Central Valley RNG projects - The company is engaged in a material legal dispute with contractor VEC Partners, Inc. (CEI Builders) regarding two RNG projects in California's Central Valley295297298 - The company has also filed a lawsuit against its former development partner, Sierra Renewable Organics Management, LLC, for issues related to the same Central Valley projects305 ITEM 1A. RISK FACTORS The company highlights its dependence on government incentives and risks from potential legislative changes affecting clean energy tax credits - The company's financial performance is highly dependent on government incentives like Investment Tax Credits (ITCs), the Renewable Fuel Standard (RFS), and Low Carbon Fuel Standard (LCFS) programs307 - A new law, the "One Big Beautiful Bill," signed on July 4, 2025, may accelerate the termination of certain clean energy tax credits308 - There is ongoing uncertainty regarding proposed IRS regulations for ITCs under the IRA, which could negatively impact project profitability309 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No unregistered sales of equity securities or use of proceeds were reported during the period - None314 ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities were reported - None315 ITEM 4. MINE SAFETY DISCLOSURES This disclosure is not applicable to the company's operations - Not applicable316 ITEM 5. OTHER INFORMATION A subsidiary entered a new joint venture on May 9, 2025, to develop and operate an RNG facility, with the company holding a 70% stake - On May 9, 2025, the company formed a new joint venture with a leading environmental solutions company to develop and operate an RNG facility, with the company owning 70% of the venture317 ITEM 6. EXHIBITS This section lists filed exhibits, including corporate documents, officer certifications, and the agreement for the new RNG joint venture - The list of exhibits includes corporate governance documents, certifications by the Co-CEOs and CFO, and the Limited Liability Company Agreement for the new RNG joint venture323