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OPAL Fuels Reports Fourth Quarter and Full Year 2023 Results

OPAL

OPAL Fuels Inc. (“OPAL Fuels” or the “Company”) (Nasdaq: OPAL), a vertically integrated leader in the capture and conversion of biogas into low carbon intensity renewable natural gas (RNG) and renewable electricity, today announced financial and operating results for the three and twelve months ended December 31, 2023.

“OPAL Fuels continues to progress on its strategic and operational goals,” said Co-CEO Jonathan Maurer. “Over the last two years, we have more than doubled RNG production and significantly expanded our fueling station network while continuing to organically grow our project pipeline with industry leading partners. We are pleased with our results as we leverage the benefits of our vertically integrated platform.”

“Fourth quarter and full year 2023 financial and operational results were in-line with our most recent guidance,” said Maurer. “These results, coupled with achieving strategic initiatives such as closing on our $500 million credit facility and advancing industry partnerships, put us in a position to capitalize on favorable industry fundamentals in 2024.”

“We now have 5.2 million MMBtu of annual design capacity online at eight RNG facilities. We anticipate ending the year with 8.8 million MMBtu of RNG capacity online, adding 3.6 million MMBtu in 2024 as Prince William, Sapphire and Polk County (Florida) projects begin operations. We also anticipate bringing online 2.4 MW of renewable power nameplate capacity (0.2 million MMBtu of biomethane equivalent per year) as our Fall River project commences operations in the fourth quarter. Further, we expect several additional RNG projects to enter construction this year and see increasing momentum in Fuel Station Services, supporting growth beyond 2024.”

“The tailwinds from the capture and conversion of biogas into low carbon intensity energy products that replace fossil fuels continue to be strong. Constructive domestic and international policy support continues to broaden, and demand for RNG is increasing as positive feedback continues from heavy duty fleets testing RNG,” said Co-CEO Adam Comora. “Our business model is designed to position us to take advantage of these tailwinds and drive growth.”

Financial Highlights

  • Revenue for the three and twelve months ended December 31, 2023, was $87.0 million and $256.1 million, respectively, up 30% and 9%, compared to same periods last year.
  • Net income for the three and twelve months ended December 31, 2023, was $20.1 million and $127.0 million, respectively, compared to $32.0 million and $32.6 million, in the comparable periods last year.
  • Basic net earnings per share attributable to Class A common shareholders for the three and twelve months ended December 31, 2023, was $0.11 and $0.70, respectively compared to $0.18 and $0.13 in the comparable periods last year.
  • Adjusted EBITDA1 for the three and twelve months ended December 31, 2023, was $32.0 million and $52.0 million, respectively, compared to $20.4 million and $53.4 million in comparable periods last year.
  • At December 31, 2023, RNG Pending Monetization totaled $18.5 million.

Operational Highlights

  • We exited 2023 with an aggregate annual design capacity of our operating RNG projects of 5.2 million MMBtu.2,3
  • RNG produced was 0.8 million and 2.7 million MMBtu, for the three and twelve months ended December 31, 2023, an increase of 33% and 23% compared to the prior-year periods.
  • RNG sold as transportation fuel was 13.5 million and 43.8 million GGEs, respectively, for the three and twelve months ended December 31, 2023, an increase of 44% and 49% compared to the prior-year periods.
  • The Fuel Station Services segment sold, dispensed, and serviced an aggregate of 35.3 million and 133.2 million GGEs of transportation fuel for the three and twelve months ended December 31, 2023, an increase of 8% and 15% compared to the prior-year periods.

____________________________
1 This is a non-GAAP measure. A reconciliation of non-GAAP financial measure to comparable GAAP measure has been provided in the financial tables included in this press release. An explanation of this measure and how it is calculated is also included below under the heading “Non-GAAP Financial Measures."
2 Design capacity is the annual design output for each facility and may not reflect actual production from the projects, which depends on many variables including, but not limited to, quantity and quality of the biogas, operational up-time of the facility, and actual productivity of the facility.
3 Represents OPAL Fuels' proportional share with respect to RNG projects owned with joint venture partners.

Construction Update

  • The Prince William RNG project is mechanically complete and in commissioning. The project will commence commercial operations in the coming weeks. This project, owned 100% by OPAL Fuels, represents approximately 1.7 million MMBtu of annual design capacity.
  • We anticipate commencing commercial operations at our Sapphire RNG project in the third quarter of 2024. This project represents approximately 0.8 million MMBtu for OPAL Fuels’ 50% ownership share of annual design capacity.
  • We expect the Polk County (Florida) RNG project to commence commercial operations in the fourth quarter of 2024. This project, owned 100% by OPAL Fuels, represents approximately 1.1 million MMBtu of annual design capacity.
  • Completion of construction at two dairy projects in California (Hilltop and Vander Schaaf) has been delayed due to a dispute with the Engineering, Procurement and Construction contractor over a series of change order requests.4
  • The Atlantic RNG project is expected to commence commercial operations in mid-2025. This project represents approximately 0.3 million MMBtu for OPAL Fuels’ 50% ownership share of annual design capacity.
  • The Fall River project is a renewable power project that is expected to commence operations at the end of 2024. This project represents 2.4 MW of renewable power nameplate capacity (0.2 million MMBtus of biomethane equivalent per year) and is 100% owned by OPAL Fuels.

____________________________________________
4 For more information, please see the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2023.

2024 Guidance

  • The Company currently estimates that Adjusted EBITDA for the full year 2024 will range between $90 million and $100 million. Adjusted EBITDA does not include:
    • Approximately $40 million of potential ITC cash proceeds from Emerald and the three landfill RNG projects coming online this year, which would be included in net income in 2024;
    • An increase of approximately $15 million from RNG pending monetization in 2024, which represents the time lag between the recognition of RNG production costs compared with the associated revenues; and
    • An adjustment for development and project start up expenses5 of approximately $12 million in 2024, which is predominantly the Prince William virtual pipeline expense.
  • We anticipate Adjusted EBITDA from our Fuel Station Services segment to grow by 75%-90% compared to 2023.
  • We expect 2024 RNG production to range from 4.4 to 4.8 million MMBtu.
  • We expect full year 2024 capital expenditures at wholly-owned and joint venture projects to total approximately $230 million. This total includes approximately $28 million for Fuel Station Services and $41 million relating to equity method investments in RNG projects.
  • We anticipate putting into construction at least 2.0 million annual MMBtu of RNG design capacity in 2024 which is included in our 2024 capital expenditure guidance.
  • 2024 guidance assumes a weighted average annual price for D3 RINs of approximately $3.0/gallon, natural gas price of $2.00/MMBtu, and an LCFS credit price of $65.0/metric ton.

___________________
5Project development and start up expenses will be presented as a separate line item on the Income Statement in 2024.

Results of Operations

($ thousands of dollars)

Three Months Ended December 31,

Twelve Months Ended December 31,

(Unaudited)

(Unaudited)

2023

2022

2023

2022

Revenue

RNG Fuel

$

28,824

$

24,343

$

66,292

$

73,158

Fuel Station Services

46,923

30,039

135,012

117,415

Renewable Power

11,261

12,335

54,804

44,958

Total Revenue

$

87,008

$

66,717

$

256,108

$

235,531

Net income

$

20,093

$

32,019

$

127,024

$

32,579

Adjusted EBITDA (1)

RNG Fuel

23,280

14,791

48,703

43,374

Fuel Station Services

12,034

7,235

22,847

21,603

Renewable Power

3,865

8,155

26,132

22,221

Corporate

(7,160

)

(9,803

)

(45,732

)

(33,797

)

Consolidated Adjusted EBITDA (1)

$

32,019

$

20,378

$

51,950

$

53,401

RNG Fuel volume produced (Million MMBtus)

0.8

0.6

2.7

2.2

RNG Fuel volume sold (Million GGEs)

13.5

9.4

43.8

29.4

Total volume delivered (Million GGEs)

35.3

32.8

133.2

115.9

(1) This is a non-GAAP measure. A reconciliation of non-GAAP financial measure to comparable GAAP measure has been provided in the financial tables included in this press release. An explanation of this measure and how it is calculated is also included below under the heading “Non-GAAP Financial Measures."

Landfill RNG Facility Capacity and Utilization Summary

Three Months Ended December 31,

Twelve Months Ended December 31,

2023

2022

2023

2022

Landfill RNG Facility Capacity and Utilization(1)(2)(3)(4)

Design Capacity (Million MMBtus)

1.3

0.9

4.1

3.2

Volume of Inlet Gas (Million MMBtus)

1.0

0.7

3.2

2.4

Inlet Design Capacity Utilization %

80

%

75

%

78

%

75

%

RNG Fuel volume produced (Million MMBtus)

0.7

0.6

2.6

2.0

Utilization of Inlet Gas %

79

%

84

%

83

%

86

%

(1) Design Capacity for RNG facilities is measured as the volume of feedstock biogas that the facility is capable of accepting at the inlet and processing during the associated period. Design Capacity is presented as OPAL’s ownership share (i.e., net of joint venture partners’ ownership) of the facility and is calculated based on the number of days in the period. New facilities that come online during a quarter are pro-rated for the number of days in commercial operation.

(2) Inlet Design Capacity Utilization is measured as the Volume of Inlet Gas for a period, divided by the total Design Capacity for such period. The Volume of Inlet Gas varies over time depending on, among other factors, (i) the quantity and quality of waste deposited at the landfill, (ii) waste management practices by the landfill, and (iii) the construction, operations and maintenance of the landfill gas collection system used to recover the landfill gas. The Design Capacity for each facility will typically be correlated to the amount of landfill gas expected to be generated by the landfill during the term of the related gas rights agreement. The Company expects Inlet Design Capacity Utilization to be in the range of 75-85% on an aggregate basis over the next several years. Typically, newer facilities perform at the lower end of this range and demonstrate increasing utilization as they mature and the biogas resource increases at open landfills.

(3) Utilization of Inlet Gas is measured as RNG Fuel Volume Produced divided by the Volume of Inlet Gas. Utilization of Inlet Gas varies over time depending on availability and efficiency of the facility and the quality of landfill gas (i.e., concentrations of methane, oxygen, nitrogen, and other gases). The Company generally expects Utilization of Inlet Gas to be in the range of 80% to 90%.

(4) Data not available for the Company's dairy projects, i.e., Sunoma and Biotown. Total RNG fuel design capacity for the three and twelve months ended December 31, 2023 is 1.3 million MMBtu and 4.3 million MMBtu, respectively. Including Sunoma and Biotown, RNG fuel volume produced is 0.8 and 2.7 million MMBtu for the three and twelve months ended December 31, 2023, respectively.

RNG Pending Monetization Summary

Three Months Ended

(In 000's)

December 31, 2023

RNG Fuel

Fuel Station Services

Total

Stored Gas Metrics (1)

Beginning balance Stored RNG as of September 30, 2023

264

54

318

Add: RNG production (MMBtus)

776

57

833

Less: Current period RNG volumes dispensed

(804

)

(53

)

(857

)

Ending Balance Stored RNG (MMBtus) as of December 31, 2023

236

58

294

Value of ending balance Stored RNG using quarter end price (1) (2)

$

12,127

$

6,101

$

18,228

RIN Metrics

Beginning balance as of September 30, 2023

3,854

1,132

4,986

Add: Generated in current period

8,343

2,134

10,477

Less: Sales

(12,197

)

(3,244

)

(15,441

)

Ending RIN credit balance (Available for sale) as of December 31, 2023

22

22

D3 price per RIN at quarter end

$

3.18

$

3.18

$

3.18

Value of RINs using quarter end price (2)

$

$

70

$

70

LCFS Metrics

Beginning balance (net share) as of September 30, 2023

73

73

Add: Generated in current period

5

30

35

Less: Sales

(5

)

(102

)

(107

)

Ending LCFS credit balance (Available for sale) as of December 31, 2023

1

1

LCFS credit price at quarter end

$

$

103.40

$

103.40

Value of LCFSs using quarter end price (2)

$

$

103

$

103

Value of RECs using quarter end price

$

57

Other Metrics

Average realized sales price - RIN

$

2.83

Average realized sales price - LCFS

$

72.30

Total Value of RNG Pending Monetization at quarter end

$

12,127

$

6,274

$

18,458

(1) Reflects OPAL’s ownership share of Stored RNG (i.e., net of joint venture partners’ ownership) including equity method investments

(2) Reflects OPAL’s ownership share of RIN and LCFS credits (i.e., net of joint venture partners’ ownership) including equity method investments and presented net of discounts and any direct transaction costs such as dispensing fees, third-party royalties and transaction costs as applicable.

Liquidity

As of December 31, 2023, we have drawn approximately $186.6 million, and utilized $13.8 million of our revolver availability to issue letters of credit, under the $500 million senior secured credit facility we entered into in September 2023.

As of December 31, 2023, our liquidity was $347.8 million, consisting of $299.6 million of availability under the above referenced credit facility, and $48.2 million of cash, cash equivalents, and short-term investments.

We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs.

Capital Expenditures

During the twelve months ended December 31, 2023, OPAL Fuels invested $113.8 million across RNG projects in construction and OPAL Fuels proprietary fueling stations in construction as compared to $131.4 million in the prior year.

In addition, for the twelve months ended December 31, 2023, the Company's portion of capital expenditures in unconsolidated entities was $20.6 million. This represents our share of capital expenditures incurred by Paragon for the Emerald and Sapphire projects post deconsolidation.

Earnings Call

A webcast to review OPAL Fuels’ Fourth Quarter and Full Year 2023 results is being held tomorrow, March 14, 2024 at 11:00AM EDT.

Materials to be discussed in the webcast will be available before the call on the Company's website.

Participants may access the call at https://edge.media-server.com/mmc/p/igoxez25. Investors can also listen to a webcast of the presentation on the company’s Investor Relations website at https://investors.opalfuels.com/news-events/events-presentations.

_____________________

Glossary of terms

“Environmental Attributes” refer to federal, state, and local government incentives in the United States, provided in the form of Renewable Identification Numbers, Renewable Energy Credits, Low Carbon Fuel Standard credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects that promote the use of renewable energy.

“GGE” refers to Gasoline gallon equivalent. The conversion ratio is 1MMBtu of natural gas equal to 7.74 GGE.

“LFG” refers to landfill gas.

“MMBtu” refers to British thermal units.

“Renewable Power” refers to electricity generated from renewable sources.

“RNG” refers to renewable natural gas.

“D3” refers to cellulosic biofuel with a 60% GHG reduction requirement.

“RIN” refers to Renewal Identification Numbers.

“EPA” refers to Environmental Protection Agency.

About OPAL Fuels Inc.

OPAL Fuels Inc. (Nasdaq: OPAL) is a leader in the capture and conversion of biogas into low carbon intensity renewable electricity and renewable natural gas (RNG). OPAL Fuels is also a leader in the marketing and distribution of RNG to heavy duty trucking and other hard to de-carbonize industrial sectors. RNG is chemically identical to the natural gas Americans use to cook with, heat homes, and fuel natural gas engines, with one significant difference: RNG is produced by recycling harmful methane emissions created by decaying organic waste as opposed to fossil natural gas which is pumped from the ground. For additional information please visit www.opalfuels.com.

Forward-Looking Statements

Certain statements in this communication may be considered forward-looking statements within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts and generally relate to future events or OPAL Fuels’ (the “Company”) future financial or other performance metrics. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by the Company and its management, as the case may be, are inherently uncertain and subject to material change. Factors that may cause actual results to differ materially from current expectations include various factors beyond management’s control, including but not limited to general economic conditions and other risks, uncertainties and factors set forth in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in the Company's annual report on Form 10K filed on March 29, 2023, and other filings the Company makes with the Securities and Exchange Commission. Nothing in this communication should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements in this communication, which speak only as of the date they are made and are qualified in their entirety by reference to the cautionary statements herein. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions, or circumstances on which any statement is based.

Disclaimer

This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy, any securities, nor shall there be any sale, issuance or transfer or securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

OPAL FUELS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except per share data)

December 31, 2023

December 31, 2022

Assets

Current assets:

Cash and cash equivalents (includes $166 and $12,506 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

$

38,348

$

40,394

Accounts receivable, net (includes $33 and $966 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

27,623

31,083

Accounts receivable, related party

18,696

12,421

Restricted cash - current (includes $4,395 and $6,971 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

4,395

32,402

Short term investments

9,875

64,976

Fuel tax credits receivable

5,345

4,144

Contract assets

6,790

9,771

Parts inventory (includes $29 and $— at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

10,191

7,311

Environmental credits held for sale

172

1,674

Prepaid expense and other current assets (includes $107 and $415 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

6,005

7,625

Derivative financial assets, current portion

633

182

Total current assets

128,073

211,983

Capital spares

3,468

3,443

Property, plant, and equipment, net (includes $26,626 and $73,140 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

339,493

297,323

Operating right-of use assets

12,301

11,744

Investment in other entities

207,099

51,765

Note receivable - variable fee component

2,302

1,942

Derivative financial assets, non-current portion

954

Deferred financing costs

3,013

Other long-term assets

1,162

1,489

Intangible assets, net

1,604

2,167

Restricted cash - non-current (includes $1,850 and $2,923 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

4,499

4,425

Goodwill

54,608

54,608

Total assets

$

754,609

$

644,856

Liabilities and Equity

Current liabilities:

Accounts payable (includes $744 and $4,896 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

13,401

17,649

Accounts payable, related party (includes $1,046 and $433 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

7,024

6,376

Fuel tax credits payable

4,558

3,320

Accrued payroll

9,023

8,979

Accrued capital expenses (includes $0 and $7,821 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

15,128

11,922

Accrued expenses and other current liabilities (includes $647 and $646 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

14,745

9,573

Contract liabilities

6,314

8,013

Senior Secured Credit Facility - term loan, current portion, net of debt issuance costs

15,250

Senior Secured Credit Facility - working capital facility, current portion

7,500

OPAL Term Loan, current portion

27,732

Sunoma loan, current portion (includes $1,608 and $380 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

1,608

380

Convertible Note Payable

28,528

Municipality Loan

76

Derivative financial liability, current portion

4,596

Operating lease liabilities - current portion

638

630

Other current liabilities (includes $92 and $— at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

92

1,085

Asset retirement obligation, current portion

3,860

1,296

Total current liabilities

76,391

152,905

Asset retirement obligation, non-current portion

2,868

4,960

OPAL Term Loan, net of debt issuance costs

176,532

66,600

Sunoma loan, net of debt issuance costs (includes $20,010 and $21,712 at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

20,010

21,712

Operating lease liabilities - non-current portion

11,824

11,245

Earn out liabilities

1,900

8,790

Other long-term liabilities (includes $211 and $— at December 31, 2023 and December 31, 2022, respectively, related to consolidated VIEs)

7,599

825

Total liabilities

297,124

267,037

Commitments and contingencies

Redeemable preferred non-controlling interests

132,617

138,142

Redeemable non-controlling interests

802,720

1,013,833

Stockholders' (deficit) equity

Class A common stock, $0.0001 par value, 340,000,000 shares authorized as of December 31, 2023; 29,701,146 and 29,477,766 shares, issued and outstanding at December 31, 2023 and December 31, 2022, respectively

3

3

Class B common stock, $0.0001 par value, 160,000,000 shares authorized as of December 31, 2023; None issued and outstanding as of December 31, 2023 and December 31, 2022

Class C common stock, $0.0001 par value, 160,000,000 shares authorized as of December 31, 2023; None issued and outstanding as of December 31, 2023 and December 31, 2022

Class D common stock, $0.0001 par value, 160,000,000 shares authorized as of December 31, 2023; 144,399,037 issued and outstanding at December 31, 2023 and December 31, 2022

14

14

Additional paid-in capital

Accumulated deficit

(467,195

)

(800,813

)

Accumulated other comprehensive (loss) income

(15

)

195

Class A common stock in treasury, at cost; 1,635,783 and — shares at December 31, 2023 and December 31, 2022, respectively

(11,614

)

Total Stockholders' (deficit) equity attributable to the Company

(478,807

)

(800,601

)

Non-redeemable non-controlling interests

955

26,445

Total Stockholders' (deficit) equity

(477,852

)

(774,156

)

Total liabilities, Redeemable preferred, Redeemable non-controlling interests and Stockholders' (deficit) equity

$

754,609

$

644,856

OPAL FUELS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per unit data)

Twelve Months Ended

December 31,

2023

2022

Revenues:

RNG fuel (includes revenues from related party of $56,069 and $58,185 for the years ended December 31, 2023 and 2022, respectively)

$

66,292

$

73,158

Fuel station services (includes revenues from related party of $28,468 and $18,735 for the years ended December 31, 2023 and 2022, respectively)

135,012

117,415

Renewable Power (includes revenues from related party of $6,614 and $5,495 for the years ended December 31, 2023 and 2022, respectively)

54,804

44,958

Total revenues

256,108

235,531

Operating expenses:

Cost of sales - RNG fuel

32,028

32,367

Cost of sales - Fuel station services

115,322

98,845

Cost of sales - Renewable Power

36,550

31,580

Project development and start up costs

4,866

6,438

Selling, general, and administrative

51,262

51,386

Depreciation, amortization, and accretion

14,565

13,136

Income from equity method investments

(5,525

)

(5,784

)

Total expenses

249,068

227,968

Operating income

7,040

7,563

Interest and financing expense, net

(9,306

)

(6,640

)

Change in fair value of derivative instruments, net

7,346

33,081

Other income

124,472

1,943

Loss on debt extinguishment

(2,190

)

Loss on warrant exchange

(338

)

(3,368

)

Income before provision for income taxes

127,024

32,579

Provision for income taxes

Net income

127,024

32,579

Net income attributable to redeemable non-controlling interests

97,426

22,409

Net loss attributable to non-redeemable non-controlling interests

(349

)

(1,153

)

Dividends on Redeemable preferred non-controlling interests (1)

11,011

7,932

Net income attributable to Class A common stockholders

$

18,936

$

3,391

Weighted average shares outstanding of Class A common stock :

Basic

27,148,538

25,774,312

Diluted

27,494,016

26,062,398

Per share amounts:

Basic

$

0.70

$

0.13

Diluted

$

0.69

$

0.12

OPAL FUELS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of U.S. dollars)

Twelve Months Ended

December 31,

2023

2022

Cash flows from operating activities:

Net income

$

127,024

$

32,579

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Income from equity method investments

(5,525

)

(5,784

)

Distributions from equity method investments

12,242

Loss on exchange of Warrants

338

3,368

Depreciation and amortization

14,043

13,015

Amortization of deferred financing costs

1,720

1,943

Amortization of operating lease right-of-use assets

643

770

Loss on debt extinguishment

2,190

Accretion expense related to asset retirement obligation

521

121

Stock-based compensation

5,904

1,469

Provision for bad debts

518

499

Paid-in-kind interest income

(360

)

(286

)

Change in fair value of Convertible Note Payable

1,579

413

Change in fair value of the earnout liabilities

(6,890

)

(37,111

)

Unrealized gain on derivative financial instruments

(270

)

3,867

Gain on repayment of Note receivable

(1,943

)

Gain on deconsolidation of VIEs

(122,873

)

Changes in operating assets and liabilities:

Accounts receivable

2,942

(6,191

)

Accounts receivable, related party

(6,275

)

(12,421

)

Proceeds received on previously recorded paid-in-kind interest income

288

Fuel tax credits receivable

(1,201

)

(1,751

)

Capital spares

(25

)

(418

)

Parts inventory

(2,880

)

(2,168

)

Environmental credits held for sale

1,502

(1,288

)

Prepaid expense and other current assets

2,200

(3,108

)

Contract assets

2,981

(1,287

)

Accounts payable

6,184

10,143

Accounts payable, related party

1,228

1,180

Fuel tax credits payable

1,238

1,342

Accrued payroll

66

127

Accrued expenses

3,775

3,237

Operating lease liabilities - current and non-current

(613

)

(640

)

Asset retirement obligations

(49

)

Other current and non-current liabilities

(1,910

)

452

Contract liabilities

(1,699

)

(1,772

)

Net cash provided by (used in) operating activities

38,268

(1,355

)

Cash flows from investing activities:

Purchase of property, plant, and equipment

(113,826

)

(131,410

)

Deconsolidation of VIEs, net of cash

(11,947

)

Proceeds (purchase) of short term investments

55,101

(64,976

)

Cash paid for investment in other entities

(8,314

)

(597

)

Proceeds received from repayment of Note receivable

10,855

Distributions received from equity method investment

4,840

2,100

Net cash used in investing activities

(74,146

)

(184,028

)

Cash flows from financing activities:

Proceeds from Sunoma loan

4,593

Proceeds from OPAL Term Loan

196,617

40,000

Proceeds received from Business Combination

138,850

Financing costs paid to other third parties

(10,264

)

(8,321

)

Repayment of Senior Secured Credit Facility

(22,750

)

(58,603

)

Repayment of Convertible Note Payable

(30,107

)

Repayment of OPAL Term Loan

(106,090

)

(18,910

)

Repayment of Sunoma Loan

(546

)

Repayment of Municipality loan

(76

)

(202

)

Repayment of finance lease liabilities

(993

)

Proceeds from equipment loan

303

Proceeds from sale of non-redeemable non-controlling interest, related party

12,753

23,143

Reimbursement of financing costs by joint venture partner

842

Payment of paid-in-kind preferred dividends

(16,536

)

Cash paid for taxes related to net share settlement of equity awards

(896

)

Cash paid for purchase of shares upon exercise of put option

(16,391

)

Distribution to non-redeemable non-controlling interest

(333

)

Proceeds from issuance of shares of Class A common stock under the ATM program, net

366

Proceeds from issuance of redeemable preferred non-controlling interests, related party

100,000

Contributions from members

Net cash provided by financing activities

5,899

220,550

Net (decrease) increase in cash, restricted cash, and cash equivalents

(29,979

)

35,167

Cash, restricted cash, and cash equivalents, beginning of period

77,221

42,054

Cash, restricted cash, and cash equivalents, end of period

$

47,242

$

77,221

Supplemental disclosure of cash flow information

Interest paid, net of $5,475 and $3,678 capitalized, respectively

$

6,929

$

7,013

Noncash investing and financing activities:

Fair value of Class A common stock issued for redemption of Convertible Note Payable

$

$

30,595

Fair value of Class A common stock issued for redemption of Public and Private warrants

$

338

$

25,919

Fair value of Derivative warrant liabilities assumed related to Business Combination

$

$

13,524

Fair value of Earnout liabilities related to Business Combination

$

$

45,900

Fair value of put option on a forward purchase agreement related to Business Combination

$

$

4,600

Paid-in-kind dividend on redeemable preferred non-controlling interests

$

2,617

$

7,932

Right-of-use assets for finance leases included in Property, Plant and equipment, net

$

9,048

$

801

Lease liabilities for finance leases included in Accrued expenses and other current liabilities

$

1,398

$

316

Lease liabilities for finance leases included in Other long-term liabilities

$

7,388

$

485

Accrual for purchase of Property, plant and equipment included in Accounts payable and Accrued capital expenses

$

15,570

$

11,922

Non-GAAP Financial Measures (Unaudited)

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. We believe these measures provide important supplemental information to investors to use in evaluating ongoing operating results. We use these measures, together with accounting principles generally accepted in the United States ("GAAP" or "U.S. GAAP"), for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations, that when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide give a more complete understanding of factors and trends affecting our business. We strongly encourage you to review all of our financial statements and publicly filed reports in their entirety and to not solely rely on any single non-GAAP financial measure.

Non-GAAP financial measures are limited as an analytical tool and should not be considered in isolation from, or as a substitute for, the Company's GAAP results. The Company expects to continue reporting non-GAAP financial measures, adjusting for the items described below (and/or other items that may arise in the future as the Company's management deems appropriate), and the Company expects to continue to incur expenses, charges or gains like the non-GAAP adjustments described below. Accordingly, unless expressly stated otherwise, the exclusion of these and other similar items in the presentation of non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent, or non-recurring. These Non-GAAP financial measures are not recognized terms under GAAP and do not purport to be alternatives to GAAP net income or any other GAAP measure as indicators of operating performance. Moreover, because not all companies use identical measures and calculations, the Company's presentation of Non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. We strongly encourage you to review all of our financial statements and publicly filed reports in their entirety and to not solely rely on any single non-GAAP financial measure.

Adjusted EBITDA

To supplement the Company's unaudited condensed consolidated financial statements presented in accordance with GAAP, the Company uses a non-GAAP financial measure that it calls adjusted EBITDA ("Adjusted EBITDA"). This non-GAAP measure adjusts net income for interest and financing expense, net, loss on debt extinguishment, net (income) loss attributable to non-controlling interests, depreciation, amortization and accretion expense, adjustments to reflect Adjusted EBITDA from equity method investments, loss on warrant exchange, unrealized (gain) loss on derivative instruments, non-cash charges, one-time non-recurring expenses, major maintenance on renewable power and gain on deconsolidation of VIEs.

Management believes this non-GAAP measure provides meaningful supplemental information about the Company's performance, for the following reasons: (1) it allows for greater transparency with respect to key metrics used by management to assess the Company's operating performance and make financial and operational decisions; (2) the measure excludes the effect of items that management believes are not directly attributable to the Company's core operating performance and may obscure trends in the business; (3) the measure better aligns revenues with expenses; and (4) the measure is used by institutional investors and the analyst community to help analyze the Company's business. In future quarters, the Company may adjust for other expenditures, charges or gains to present non-GAAP financial measures that the Company's management believes are indicative of the Company's core operating performance.

Non-GAAP financial measures are limited as an analytical tool and should not be considered in isolation from, or as a substitute for, the Company's GAAP results. The Company expects to continue reporting non-GAAP financial measures, adjusting for the items described below (and/or other items that may arise in the future as the Company's management deems appropriate), and the Company expects to continue to incur expenses, charges or gains like the non-GAAP adjustments described below. Accordingly, unless expressly stated otherwise, the exclusion of these and other similar items in the presentation of non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent, or non-recurring. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to GAAP net income or any other GAAP measure as an indicator of operating performance. Moreover, because not all companies use identical measures and calculations, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.

The following table presents the reconciliation of our Net income to Adjusted EBITDA:

Reconciliation of GAAP Net income to Adjusted EBITDA

For the Three and Twelve Months Ended December 31, 2023 and 2022

(In thousands of dollars)

Three Months Ended December 31, 2023

Twelve Months Ended December 31, 2023

RNG Fuel

Fuel Station Services

Renewable Power

Corporate

Total

RNG Fuel

Fuel Station Services

Renewable Power

Corporate

Total

Net income (loss) (1)

$

12,726

$

10,479

$

1,888

$

(5,000

)

$

20,093

$

22,203

$

17,908

$

12,472

$

74,441

$

127,024

Adjustments to reconcile net income (loss) to Adjusted EBITDA

Interest and financing expense, net

4,352

(14

)

20

466

4,824

8,968

(134

)

280

192

9,306

Loss on debt extinguishment (2)

(658

)

(658

)

2,190

2,190

Net (income) loss attributable to non-redeemable non-controlling interests

(182

)

(182

)

349

349

Depreciation, amortization and accretion

1,314

1,175

1,178

(36

)

3,631

5,268

3,730

5,567

14,565

Adjustments to reflect Adjusted EBITDA from equity method investments (3)

2,658

2,658

5,912

5,912

Loss on warrant exchange

338

338

Unrealized (gain) loss on derivative instruments (4)

(30

)

(3134

)

(3,164

)

(763

)

(7140

)

(7,903

)

Non-cash charges (5)

174

1,123

1,297

174

6,003

6,177

One-time non-recurring charges (6)

2,412

220

45

79

2,756

6,003

1,169

1,336

1,117

9,625

Major maintenance for Renewable Power

764

764

7,240

7,240

Gain on deconsolidation of VIEs

(122,873

)

(122,873

)

Adjusted EBITDA

$

23,280

$

12,034

$

3,865

$

(7,160

)

$

32,019

$

48,703

$

22,847

$

26,132

$

(45,732

)

$

51,950

Three Months Ended December 31, 2022

Twelve Months Ended December 31, 2022

RNG Fuel

Fuel Station Services

Renewable Power

Corporate

Total

RNG Fuel

Fuel Station Services

Renewable Power

Corporate

Total

Net income (loss) (1)

$

7,831

$

4,521

$

3,367

$

16,300

$

32,019

$

32,114

$

18,245

$

4,681

$

(22,461

)

$

32,579

Adjustments to reconcile net income (loss) to Adjusted EBITDA

Interest and financing expense, net

(240

)

871

1,702

(2,905

)

(572

)

899

5,261

480

6,640

Net loss attributable to non-redeemable non-controlling interests

329

329

1,153

1,153

Depreciation, amortization and accretion

1,362

230

1,413

30

3,035

6,469

846

5,696

125

13,136

Adjustments to reflect Adjusted EBITDA from equity method investments (3)

1,095

1,095

2,073

2,073

Loss on warrant exchange

3,368

3,368

3368

3,368

Unrealized (gain) loss on derivative instruments (4)

260

(30,822

)

(30,562

)

512

(28,719

)

(28,207

)

Non-cash charges (5)

844

207

515

1,566

844

207

2,109

3,160

One-time non-recurring charges (6)

3,570

1,406

1,370

3,711

10,057

6,481

1,406

1,370

11,301

20,558

Major maintenance for Renewable Power

43

43

4,701

4,701

Gain on repayment of Note Receivable and reversal of liability to non-redeemable non-controlling interest

(5,760

)

(5,760

)

Adjusted EBITDA

$

14,791

$

7,235

$

8,155

$

(9,803

)

$

20,378

$

43,374

$

21,603

$

22,221

$

(33,797

)

$

53,401

(1) Net income (loss) by segment is included in our quarterly report on Form 10 K. Net loss for RNG Fuel includes our portion of net income on our equity method investments.

(2) Loss on debt extinguishment relates to assignment of our senior secured credit facility to Paragon and debt restructuring related to OPAL Term Loan.

(3) Includes interest, depreciation, amortization and accretion on equity method investments.

(4) Unrealized (gain) loss on derivative instruments includes change in fair value of interest rate swaps, commodity swaps, earnout liabilities and put option on a forward purchase agreement.

(5) Non-cash charges include stock-based compensation expense, certain expenses included in selling, general and administrative expenses relating to employee benefit accruals, inventory write down charges included in cost of sales - RNG fuel and loss on disposal of assets.

(6) One-time non-recurring charges include (i) certain expenses related to development expenses on our RNG facilities such as lease expenses and virtual pipeline costs, incurred during construction phase that could not be capitalized per GAAP for the year ended December 31, 2023, and (ii) transaction costs relating to the Business Combination for the year ended December 31, 2022.