OPAL Fuels (US:OPAL)2023-03-28 19:25Financial Data and Key Metrics Changes - The company reported a revenue increase of 42% year-over-year for Q4, driven by higher volumes produced and sold in the RNG fuel segment, as well as higher prices for brown gas and RINs under forward sales contracts [51] - Adjusted EBITDA for Q4 was $20.1 million, down from $25.5 million in Q3, primarily due to a $3 million gain from the Bio Town debt and seasonal impacts on downstream fueling customers [70] - For the full year 2022, adjusted EBITDA was $60.7 million, benefiting from higher environmental attribute pricing and commodity pricing, offset by increased costs [70] Business Line Data and Key Metrics Changes - The RNG fuels segment was the biggest driver of growth, with significant contributions from projects that came online in 2022 [51] - The company expects to grow RNG production by more than 50% in 2023, with a production range of 3.2 million to 3.6 million MMBtus [48][52] - The company plans to commence construction of 53 fueling stations in 2023, with expected growth in RNG fuel dispensing volumes to approximately 55 million gallons [67] Market Data and Key Metrics Changes - The company anticipates clarity around the 45Z calculations and carbon intensity scores in 2023, which could significantly impact profitability [2] - The EPA's proposed eRIN pathway is expected to add substantial value to existing projects, potentially increasing EBITDA from the landfill gas to electric projects [67] - The company is optimistic about the demand for RNG, driven by utilities' mandates for power generation and increasing demand in European and Asian markets [68] Company Strategy and Development Direction - The company aims to be the premier vertically integrated RNG company, focusing on maximizing the value of produced RNG and capitalizing on new off-take markets and public policy initiatives [48][62] - The company is seeing improvements in project development conditions, with expectations to place at least 2 million MMBtus of output capacity into construction in 2023 [50] - The company is focused on attracting long-term investors by effectively deploying capital and demonstrably growing earnings power [72] Management's Comments on Operating Environment and Future Outlook - Management noted that 2023 is expected to be a good year, contrasting with 2022, as new project developments are gaining momentum despite lower near-term commodity prices [49] - The company is limiting RIN sales in the first half of 2023 while awaiting updated EPA rules, which will skew revenue and net income to the latter half of the year [73] - Management expressed confidence in the long-term value of RNG and the positive momentum in the industry towards decarbonization [41][43] Other Important Information - The company has a liquidity position of $257.2 million, which is expected to be sufficient to fund construction and development capital needs for the next 12 months [71] - The company does not have exposure to Silicon Valley Bank or Signature Bank, avoiding distractions faced by other growth companies [71] Q&A Session Summary Question: What have been the biggest challenges for project execution? - Management acknowledged a slowdown in contract execution due to landfill owners reassessing the value of RNG, but noted improvements and movement through the advanced development pipeline [6] Question: Is there anything on the supply chain side that is problematic? - Management indicated that while there has been some lead time for equipment acquisition, there are no material issues affecting project execution [7] Question: Can you talk about options to address current liquidity in the stock? - Management stated that there are no immediate plans for primary or secondary share issuance, but they are focused on increasing visibility and engagement with investors [9] Question: How is Q1 progressing? - Management agreed that Q1 results may be impacted by lower D3 RIN prices and noted that cash flows would be skewed to the latter half of the year [12][14] Question: Can you share thoughts on the renewable power portfolio? - Management confirmed that a project lost gas rights but does not foresee risks affecting other projects in the near future [18][22] Question: What are the expectations for cost per MMBtu? - Management indicated that costs have not changed materially, remaining in the high single digits for landfill and low 20s for dairy [26] Question: How do you assess pricing for RINs in adjusted EBITDA? - Management stated that they will make assumptions around pricing for RINs as they progress through each quarter [38]