OPAL Fuels Inc
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
OPAL$1.45+5.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001842279-24-000032
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001842279-24-000044
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 141 previous paragraphs and 153 current paragraphs.
82 unchanged; 32 reworded; 39 added; 25 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
Critical Accounting Policies and Estimates
Current report
Results of Operations for the three and six months ended June 30, 2024 and 2023:
Current report
(7) The construction of the Cottonwood project began in the second quarter of 2024 and is expected to be completed on a time frame consistent with our other RNG projects - approximately 18-20 months.
Current report
Revenue from RNG Fuel increased by $8.8 million or 83% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily from a $4.0 million increase from higher volume of sales of RINs, $2.0 million from higher volume of LCFSs sales and a $2.5 million increase from higher RIN pricing compared to the same period prior year.
Current report
Revenue from RNG Fuel increased by $19.8 million, or 114%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase of $9.3 million from higher volumes of RINs sold as the Company made a decision to hold the RINs as inventory at hand in 2023, $8.0 million due to higher RIN pricing year over year after the EPA Set Rule was finalized in the second half of 2023, $2.3 million from the sale of LCFSs and an $0.6 million increase in management fees earned from providing services to equity method entities offset by lower brown gas sales due to a decrease in volumes year over year.
Current report
Revenue from Fuel Station Services increased by $9.3 million, or 31%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to an increase in revenues from RIN and LCFS minting services of $5.0 million from higher volumes (Emerald, Biotown), a $7.1 million increase in third party RIN sales due to increases in volumes and RIN pricing, a $0.6 million increase in third party sales of LCFSs, an increase of $2.5 million in brown gas sales due to increases in price and volumes, a $0.8 million increase from service revenues offset by a decrease in construction revenues of $6.7 million.
Current report
Revenue from Fuel Station Services increased by $25.6 million, or 50%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase in revenues from RIN and LCFS minting services of $9.9 million from higher volumes from new supply from facilities coming online (Emerald, Biotown), a $13.3 million increase in third party RIN sales due to increases in volumes and RIN pricing, an $0.7 million increase in third party sales of LCFSs, an increase of $3.7 million in brown gas sales due to increases in price volumes, $1.0 million increase from service revenues offset by decrease in construction revenues of $2.8 million.
Current report
Revenue from Renewable Power decreased by $2.2 million, or 15%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to loss of revenues of $1.3 million from the conversion of two of our Renewable Power facilities into RNG facilities, $1.3 million from decrease in electricity pricing year over year, an $0.6 million decrease in revenues from sale of ISCC carbon credits offset by increase of $1.0 million revenues from higher volumes at one of our Renewable Power facilities.
Current report
Revenue from Renewable Power decreased by $7.5 million, or 25%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This change was attributable primarily to loss of revenues of $2.9 million from the conversion of two of our Renewable facilities into RNG facilities and planned shut down of one of our facilities, $2.3 million of lower revenues from sale of ISCC Carbon Credits and RECs, $2.5 million from decrease in electricity pricing offset by higher volumes.
Current report
Cost of sales from RNG Fuel increased by $0.7 million, or 9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to Prince William coming online in second quarter of 2024.
Current report
Cost of sales from RNG Fuel increased by $2.5 million, or 18%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to a $1.0 million increase from royalties on higher environmental credit sales, $0.7 million from Prince William coming online in second quarter of 2024, and an $0.8 million increase in operating expenses such as consumables, gas flare expenses and routine maintenance in the current year compared to prior year.
Current report
Cost of sales from Fuel Station Services increased by $3.5 million, or 13%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to an increase of $8.8 million in higher dispensing fees due to higher environmental credit sales offset by savings of $5.5 million in equipment, parts and construction costs, which are in line with the decrease in construction revenues.
Current report
Cost of sales from Fuel Station Services increased by $13.5 million, or 28%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase of $15.4 million in higher dispensing fees due to higher environmental credit sales offset by savings of $2.3 million in equipment, parts and construction costs, in line with the decrease in construction revenues.
Current report
Cost of sales from Renewable Power increased by $0.1 million, or 2%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Current report
Cost of sales from Renewable Power increased by $1.0 million, or 6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase in major maintenance costs and unplanned maintenance at one of our Renewable Power facilities offset by savings from conversion of two of our Renewable Power facilities into RNG facilities and lower royalties and non labor costs.
Current report
Project development and startup costs
Current report
Project development and startup costs increased by $1.8 million, or 163%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to virtual pipeline costs for Prince William offset by deconsolidation of Emerald and Sapphire in the second quarter of 2023.
Current report
Project development and startup costs increased by $0.7 million, or 24%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to virtual pipeline costs for Prince William offset by deconsolidation of Emerald and Sapphire in the second quarter of 2023.
Current report
Selling, general, and administrative expenses increased by a total of $0.5 million, or 2%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase in compensation costs.
Current report
Depreciation, amortization, and accretion marginally increased by a total of $0.8 million, or 11%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to depreciation expense on Prince William which became operational in the second quarter of 2024.
Current report
Income (loss) from equity method investments
Current report
Net income attributable to equity method investments increased by $8.3 million or 2832% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily attributable to Emerald coming online in the second half of 2023 and higher net income from Pine and Noble Road.
Current report
Interest and financing expenses, net increased by $4.0 million, or 422%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to an increase of $3.5 million in interest expense on the OPAL Term Loan due after the refinancing in third quarter of 2023 resulting in higher borrowing and lower capitalized interest, an $0.3 million increase in amortization of deferred financing costs, and higher interest on finance leases.
Current report
Interest and financing expenses, net increased by $7.4 million, or 460%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily due to an increase of $6.3 million in interest expense on the OPAL Term Loan due after the refinancing in third quarter of 2023 resulting in higher outstanding debt balance and lower capitalized interest, a $1.1 million increase in commitment fees and other fees, an $0.6 million increase in interest on finance leases and amortization of deferred financing costs, $0.8 million of lower interest income offset by savings of $1.1 million of interest on a convertible note payable which was repaid in full in the third quarter of 2023 and savings of $0.3 million of interest on the Senior Secured Credit Facility as the loan was repaid in full in first quarter of 2023.
Current report
Loss on debt extinguishment
Current report
On May 30, 2023, OPAL Intermediate Holdco 2 assigned to Paragon its rights and obligations under the OPAL Term Loan II. The joint venture partner of Paragon reimbursed the Company $826 as its portion of the transaction costs incurred.
Current report
The Company expensed the remaining deferred financing costs of $1,895 as loss on debt extinguishment in its condensed consolidated statement of operations for the three and six months ended June 30, 2023. There was no loss on debt extinguishment for the three and six months ended June 30, 2024.
Current report
Change in fair value of derivatives, net decreased by $0.4 million, or 33%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily attributable to $0.8 million of gain recorded on termination of interest rate swaps in June 2023 offset by $0.4 million of lower gain on earnout liabilities in June 2024.
Current report
Change in fair value of derivatives, net decreased by $3.9 million, or 77%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily attributable to $3.4 million lower gain on earnout liabilities year over year, an $0.8 million gain recorded on termination of interest rate swaps in 2023 offset by $0.3 million of lower loss on a put option.
Current report
Other income decreased by $122.7 million, or 100%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily attributable to $122.9 million gain recorded on deconsolidation of Emerald and Sapphire in 2023 offset by $0.3 million higher gain on transfer of non-financial assets to a vendor.
Current report
Other income decreased by $121.9 million, or 99%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This is primarily attributable to $122.9 million gain recorded on deconsolidation of VIEs in 2023, offset by $0.7 million higher gain on transfer of non-financial assets to a vendor, and $0.3 million lower loss on warrant exchange compared to prior year.
Current report
Net (loss) income attributable to redeemable non-controlling interests
Current report
Net income attributable to redeemable non-controlling interests decreased by $94.2 million, or 101%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The net income for the three months ended June 30, 2024 and 2023 reflects the portion of earnings belonging to OPAL Fuels equity holders. The decrease is primarily attributable to lower net income in the current period compared to the same prior-year period.
Current report
Net income (loss) attributable to non-redeemable non-controlling interests
Current report
Net income (loss) attributable to non-redeemable non-controlling interests increased by $0.4 million, or 207%, for the three months ended June 30, 2024 compared to three months ended June 30, 2023. This reflects the joint venture partners' income (loss) in certain RNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the three months ended June 30, 2024 were Sunoma and Central Valley. The entities for the three months ended June 30, 2023 were Sunoma, Central Valley and two months of Emerald and Sapphire. The increase was primarily attributable to higher net income earned by Sunoma and lower net loss upon deconsolidation of Emerald and Sapphire in May 2023.
Current report
Net income (loss) attributable to non-redeemable non-controlling interests for the six months ended June 30, 2024 increased by $0.7 million or 141%, compared to six months ended June 30, 2023. This reflects the joint venture partners' income (loss) in certain RNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the six months ended June 30, 2024 were Sunoma and Central Valley. The entities for the six months ended June 30, 2023 included Sunoma and Central Valley for the full six months and Emerald and Sapphire up to May 30, 2023. The increase was primarily attributable to higher net income earned by Sunoma and lower net loss upon deconsolidation of Emerald and Sapphire in May 2023.
Current report
Redeemable preferred non-controlling interests decreased by $0.4 million for the six months ended June 30, 2024 compared to six months ended June 30, 2023. They carry an 8% dividend payable quarterly. This decrease is primarily due to lower interest accrued on paid-in-kind interest in the current period compared to the same prior-year period as the dividends are being paid quarterly instead of being paid-in-kind.
Current report
Net cash provided by financing activities for the six months ended June 30, 2024 was 15.0 million, an increase of $44.7 million compared to the net cash used in financing activities of $29.7 million for the six months ended June 30, 2023. This increase was primarily driven by a $15.0 million increase in proceeds from the OPAL Term Loan, a decrease of $36.6 million in repayments on the Senior Secured Facility and the OPAL Term Loan facilities, a decrease of $16.4 million paid on termination of put options in 2023, offset by an increase of $7.9 million in payments of preferred dividends, a decrease in proceeds from non-controlling interests of $12.8 million, an increase of $0.8 million in repayment on the Sunoma Loan, an increase of $0.6 million in taxes paid on vesting of equity awards, and a decrease of $0.8 million in reimbursement of financing costs by a joint venture partner.
Current report
We believe that our cash and cash equivalents on hand, anticipated cash flows from operations and our access to expected sources of capital will be sufficient to meet our anticipated funding needs. We continue to pursue additional funding opportunities for growth and streamlining of our capital structure.
Removed paragraphs (25)
Previous report
Recent Developments
Previous report
Inflation Reduction Act
Previous report
The Inflation Reduction Act (the "IRA") was signed into law on August 16, 2022. The bill invests nearly $369 billion in energy and climate policies. The provisions of the IRA are intended to, among other things, incentivize domestic clean energy investment, manufacturing, and deployment. The IRA incentivizes the deployment of clean energy technologies by extending and expanding federal incentives such as ITCs and the PTC. We view the enactment of the IRA as favorable for the overall business climate for the renewable energy industry. However, there is uncertainty related to the applicability of the IRA to our current and planned projects and the scope of the IRA and its interpretations may change if there is a change in the U.S. administration or if government agencies’ authority to interpret federal law is restricted as a result of the Supreme Court’s review of the Chevron doctrine under which federal government agencies have been awarded board authority to interpret broad or ambiguous legislation. We may also continue to experience a delay in our sales cycles and new award activity as our customers consider the applicability of the IRA and as financing projects may take longer as result of this uncertainty. The IRA may increase the competition in our industry and as such increase the demand and cost for labor, equipment and commodities needed for our projects.
Previous report
On November 17, 2023, the Treasury and the IRS proposed regulations regarding ITCs on renewable energy projects where IRS specified certain types of RNG equipment are ineligible for ITCs which could negatively impact the profitability of our RNG business and our ability to finance our RNG projects. On February 16, 2024, the Treasury and the IRS released a correction to the proposed regulations clarifying that certain of such equipment may be eligible for ITCs. These regulations are merely proposed, and Treasury and the IRS are collecting and reviewing comments received regarding the proposed regulations. The proposed regulations also contain provisions that we believe create uncertainty relating to the ownership, installation or modification of equipment and property on which ITCs can be claimed.
Previous report
If the final regulations are enacted in a form that limits, in whole or in part, the amount of ITCs for certain of our construction costs, this would reduce the amount of ITCs available and thus could have a material adverse effect on our operations and our business.
Previous report
Critical Accounting Policies
Previous report
Project development and start up costs includes certain development costs such as legal, consulting fees for joint venture structuring, royalties to the landfill owner, fines, settlements, site lease expenses and certification costs on our RNG projects under construction. Additionally, the Company also incurs certain expenses on new RNG projects that went operational for the first two years such as virtual pipeline costs (incurred until a physical interconnect pipeline is built) and ramp up costs incurred during the certification period.
Previous report
Revenue from RNG Fuel increased by $11.0 million, or 163%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to an $11.1 million increase in revenue from Environmental Attributes, driven by a $5.4 million increase in the realized price of RINs and a $5.7 million increase in the volume of RIN and LCFS credits sold.
Previous report
Revenue from Fuel Station Services increased by $16.3 million, or 78%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This was primarily attributable to an $11.2 million increase in dispensing and RNG marketing due to higher RIN and LCFS volumes and RIN pricing, a $3.8 million increase in construction projects, and a $1.2 million increase in OPAL owned stations due to higher volumes from 7 new fueling sites.
Previous report
Revenue from Renewable Power decreased by $5.3 million, or 34%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Within Renewable Power, Electricity Sales revenues decreased by $3.6 million, due to a $1.2 million decrease in market energy prices and a $0.9 million decrease in the volume of MWh sold at same-store facilities, and a $1.7 million decrease related to the shutdown and conversion of our Arbor Hills and Prince William Renewable Power projects into RNG Fuel projects. Additionally within Renewable Power, revenues from Environmental Attributes decreased $1.7 million, as a $3.2 million decrease related to the Arbor Hills was partially offset by a $1.6 million increase in revenues from same-store operations.
Previous report
Cost of sales from RNG Fuel increased by $2.3 million, or 38%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to higher royalty expense related to the increased Environmental Attribute revenues above and generic escalation on operating expenses at same-store facilities.
Previous report
Cost of sales from Fuel Station Services increased by $10.0 million, or 49%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This was primarily due to a $6.9 million increase in costs related to generation of additional environmental credits, a $3.0 million increase in third party construction costs.
Previous report
Cost of sales from Renewable Power increased by $0.9 million, or 11%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is due to $1.5 million of major maintenance and generic cost escalations at same-store facilities, partially offset by a $0.6 million decrease in cost of sales related to the Arbor Hills and Prince William transition to RNG Fuels.
Previous report
Project development and start up costs
Previous report
Project development and start up costs decreased by $1.1 million, or 58%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This is primarily due to decrease in virtual pipeline costs incurred on New River in the first quarter of 2023 which were not incurred thereafter.
Previous report
Income from equity method investments
Previous report
Interest and financing expenses, net increased by $3.3 million, or 518%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily attributable to interest expense and commitment fees related to the OPAL Term loan.
Previous report
Change in fair value of derivatives, net decreased by $3.5 million, or 90%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This is primarily attributable to decrease in gain recognized on change in fair value of earnout liabilities.
Previous report
Other income increased by $0.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This change is primarily related to an increase of gain $0.4 million recognized on fair value of
Previous report
RINs transferred as consideration for services provided by OFSS and loss of warrant exchange of $0.3 million recorded in first quarter of 2023.
Previous report
Net loss attributable to redeemable non-controlling interests
Previous report
Net loss attributable to non-redeemable non-controlling interests
Previous report
Net loss attributable to non-redeemable non-controlling interests for the three months ended March 31, 2024 increased by $0.3 million or 101% compared to three months ended March 31, 2023. The increase is primarily related to an increase in net income allocated to non-redeemable non-controlling interests on Sunoma and a decrease in loss on Emerald and Sapphire as they were deconsolidated in May 2023.
Previous report
Net cash used in financing activities for the three months ended March 31, 2024 was $6.6 million, a decrease of $26.0 million compared to the $32.7 million provided from financing activities for the three months ended March 31, 2023. This decrease was primarily driven by decrease in repayment of $22.7 million of Senior Secured Facility, $6.9 million of the OPAL Term Loan, $16.4 million for repurchase of shares from the exercise of the put option offset by proceeds from OPAL Term Loan of $10.0 million and $3.5 million of proceeds from non-redeemable non-controlling interests in 2023. Additionally, the Company paid $5.2 million as dividends on redeemable preferred non-controlling interests.
Previous report
We plan to fund these expenditures primarily through cash on hand, cash generated from operations, and cash from the Business Combination and PIPE Investment.
Reworded paragraphs (32)
Previous wording
In this Management's Discussion and Analysis of Financial Condition and Results of Operations section, references to "OPAL", "we", "us", "our", and the "Company" refer to OPAL Fuels Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, and the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, which was filed with the SEC on March 15, 2024. In addition to historical information, this discussion and analysis includes certain forward-looking statements which reflect our current expectations. The Company's actual results may materially differ from these forward-looking statements.
Current wording
In this Management's Discussion and Analysis of Financial Condition and Results of Operations section, references to "OPAL", "we", "us", "our", and the "Company" refer to OPAL Fuels Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, and the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, which was filed with the SEC on March 15, 2024. In addition to historical information, this discussion and analysis includes certain forward-looking statements which reflect our current expectations. The Company's actual results may materially differ from these forward-looking statements.
Previous wording
Biogas is generated by microbes as they break down organic matter in the absence of oxygen, and comprised of non-fossil waste gas, with high concentrations of methane, which is the primary component of RNG and the source for combustion utilized by Renewable Power plants to generate electricity. Biogas can not only be collected and processed to remove impurities for use as RNG (a form of high-Btu fuel) and injected into existing natural gas pipelines as it is fully interchangeable with fossil natural gas, but partially treated biogas can be used directly in heating applications (as a form of medium-Btu fuel) or in the production of Renewable Power. Our principal sources of biogas are (i) landfill gas, which is produced by the decomposition of organic waste at landfills, and (ii) dairy manure, which is processed through anaerobic digesters to produce the biogas.
Current wording
Biogas is generated by microbes as they break down organic matter in the absence of oxygen. Biogas is comprised of non-fossil waste gas, with high concentrations of methane, which is the primary component of RNG and the source for combustion utilized by Renewable Power plants to generate electricity. Biogas can be collected and processed to remove impurities for use as RNG (a form of high-Btu fuel) and injected into existing natural gas pipelines as it is fully interchangeable with fossil natural gas. Partially treated biogas can be used directly in heating applications (as a form of medium-Btu fuel) or in the production of Renewable Power. Our principal sources of biogas are (i) landfill gas, which is produced by the decomposition of organic waste at landfills, and (ii) dairy manure, which is processed through anaerobic digesters to produce the biogas.
Previous wording
As of March 31, 2024, we owned and operated 23 projects, eight of which are RNG projects and 15 of which are Renewable Power Projects. As of that date, our RNG projects in operation had a design capacity of 5.2 million MMBtus per year and our Renewable Power Projects in operation had a nameplate capacity of 105.8 MW per hour. In addition to these projects in operation, we are actively pursuing expansion of our RNG-generating capacity and, accordingly, have a portfolio of RNG projects in construction as well as a portfolio of projects in development, with six of our current Renewable Power Projects being considered candidates for conversion to RNG projects in the foreseeable future.
Current wording
As of June 30, 2024, we owned and operated 24 projects, nine of which are RNG projects and 15 of which are Renewable Power projects. As of that date, our RNG projects in operation had a design capacity of 5.2 million MMBtus per year and our Renewable Power projects in operation had a nameplate capacity of 105.8 MW per hour. In addition to these projects in operation, we are actively pursuing expansion of our RNG-generating capacity and, accordingly, have a portfolio of RNG projects in construction as well as a portfolio of projects in development, with six of our current Renewable Power projects being considered candidates for conversion to RNG projects in the foreseeable future.
Previous wording
The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and the rules and regulations of the SEC, which apply to interim financial statements. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, expenses and warrants and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Current wording
The discussion and analysis of our financial condition and results of operations is based upon our interim unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and the rules and regulations of the SEC, which apply to interim financial statements. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Previous wording
Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a detailed description of all our accounting policies, see Note 2. Summary of Significant Accounting Policies, to our condensed consolidated financial statements included herein and the section titled “Critical Accounting Estimates” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a detailed description of all our accounting policies, see Note 2. Summary of Significant Accounting Policies, to our condensed consolidated financial statements included herein and the section titled “Critical Accounting Policies and Estimates” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Demand for our converted biogas and associated Environmental Attributes, including RINs and LCFS credits, is heavily influenced by United States federal and state energy regulations together with commercial interest in renewable energy products. Markets for RINs and LCFS credits arise from regulatory mandates that require refiners and blenders to incorporate renewable content into transportation fuels. The EPA annually sets proposed renewable volume obligations ("RVOs") for D3 (cellulosic biofuel with a 60% greenhouse gas (“GHG”) reduction requirement) RINs in accordance with the mandates established by the Energy Independence and Security Act of 2007. In June 2023, the EPA set RVOs for 2023 through 2025 via a new Set rule. This 3 year RVO is expected to reduce volatility in RIN pricing for the associated period. On the state level, the economics of RNG are enhanced by low-carbon fuel initiatives, particularly well-established programs in California and Oregon (with several other states also actively considering LCFS initiatives similar to those in
Current wording
Demand for our converted biogas and associated Environmental Attributes, including RINs and LCFS credits, is heavily influenced by United States federal and state energy regulations together with commercial interest in renewable energy products. Markets for RINs and LCFS credits arise from regulatory mandates that require refiners and blenders to incorporate renewable content into transportation fuels. The EPA annually sets proposed renewable volume obligations ("RVOs") for D3 (cellulosic biofuel with a 60% greenhouse gas (“GHG”) reduction requirement) RINs in accordance with the mandates established by the Energy Independence and Security Act of 2007. In June 2023, the EPA set RVOs for 2023 through 2025 via a new Set rule. This 3 year RVO is expected to reduce volatility in RIN pricing for the associated period. On the state level, the economics of RNG are enhanced by low-carbon fuel initiatives, particularly well-established programs in California and Oregon (with several other states also actively considering LCFS initiatives similar to those in California, Washington and Oregon). Federal and state regulatory developments could result in significant future changes to market demand for the RINs and LCFS credits we produce. This would have a corresponding impact to our revenue, net income, and cash flow.
Previous wording
We generate revenues from the sale of RNG fuel, Renewable Power, and associated Environmental Attributes, as well as from the construction, fuel supply, and servicing of Fueling Stations for commercial transportation vehicles using natural gas to power their fleets. These revenue sources are presented in our statement of operations under the following captions:
Current wording
We generate revenues from the sale of RNG Fuel, Renewable Power, and associated Environmental Attributes, as well as from the construction, fuel supply, and servicing of Fueling Stations for commercial transportation vehicles using natural gas to power their fleets. These revenue sources are presented in our condensed consolidated statements of operations under the following captions:
Previous wording
•Fuel Station Services. Through our Fuel Station Services segment, we provide construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities including generation and minting of environmental credits. This segment includes:
Current wording
•Fuel Station Services. Through its Fuel Station Services segment, we provide construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities including generation and minting of environmental credits. This segment includes:
Previous wording
◦Design/Build contracts where we serve as general contractor for construction of Fueling Stations, typically structured as Guarantee Maximum Price or fixed priced contracts for customers, generally lasting less than one year;
Current wording
◦Design/Build contracts where the Company serves as general contractor for construction of Fueling Stations, typically structured as Guarantee Maximum Price or fixed priced contracts for customers, generally lasting less than one year;
Previous wording
•Renewable Power. The Renewable Power segment generates Renewable Power and associated Environmental Attributes such as ISCC Carbon Credits and RECs through combustion of biogas from landfills which is then sold to public utilities throughout the United States.
Current wording
•Renewable Power Portfolio. The Renewable Power segment generates Renewable Power and associated Environmental Attributes such as ISCC Carbon Credits and RECs through combustion of biogas from landfills which is then sold to public utilities throughout the United States.
Previous wording
•Renewable Power. Includes royalty payments, land usage costs; service provider costs; salaries and other indirect expenses related to the production process; utilities; and depreciation of production facilities.
Current wording
•Renewable Power. Includes land usage costs; service provider costs; salaries and other indirect expenses related to the production process; utilities; and depreciation of production facilities.
Previous wording
The following table summarizes the operational data achieved for the three months ended March 31, 2024 and 2023:
Current wording
The following table summarizes the operational data achieved for the three and six months ended June 30, 2024 and 2023:
Previous wording
(5) Utilization of Inlet Gas % is lower for the three months ended March 31, 2024 primarily due to Emerald RNG project which is in the start up phase as it commenced operations in fourth quarter of 2023.
Current wording
(5) Utilization of Inlet Gas (%) is lower for the three and six months ended June 30, 2024 primarily due to Emerald RNG project which is in the start up phase as it commenced operations in the fourth quarter of 2023.
Previous wording
Below is a table setting forth the RNG projects in operation and construction in our portfolio:
Current wording
Below is a table setting forth the RNG projects in operation and construction in our portfolio as of June 30, 2024:
Previous wording
(4)Prince William completed construction and commenced the start-up phase of operations in April 2024.
Current wording
(4)Prince William commenced the start-up phase of operations in April 2024.
Previous wording
(4)It is expected to complete construction in fourth quarter of 2024.
Current wording
(4)It is expected to complete construction in the fourth quarter of 2024.
Previous wording
Comparison of the Three Months Ended March 31, 2024, and 2023
Current wording
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
The following table presents the period-over-period change for each line item in the Company's statement of operations for the three months ended March 31, 2024 and 2023.
Current wording
The following table presents the period-over-period change for each line item in the Company's statement of operations for the three and six months ended June 30, 2024 and 2023.
Previous wording
(1)Revenues from Environmental Attributes in RNG Fuel segment and RNG marketing in Fuel Station Services segment relate to revenues earned from sales of RINs and LCFSs.
Current wording
(1)Revenues from Environmental Attributes in the RNG Fuel segment relate to revenues earned from sales of RINs and LCFSs. Revenues from RNG marketing in the Fuel Station Services segment relate to fees associated with generation and sales of RINs and LCFSs.
Previous wording
(2)Revenues from Environmental Attributes in Renewable Power segment include revenues earned from sales of ISCC carbon sales and RECs.
Current wording
(2)Revenues from Environmental Attributes in the Renewable Power segment include revenues earned from sales of ISCC Carbon Credits and RECs.
Previous wording
Selling, general, and administrative expenses decreased by a total of $0.9 million, or 6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This is primarily due to higher expenses related to professional fees in the first quarter of 2023.
Current wording
Selling, general, and administrative expenses increased by a total of $0.9 million, or 7%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to an increase of $0.5 million in compensation expense and $0.4 million in corporate expenses such as marketing and professional fees.
Previous wording
Depreciation, amortization, and accretion marginally increased by a total of $0.1 million, or 4%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
Depreciation, amortization, and accretion marginally increased by a total of $0.6 million, or 18%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily due to depreciation expense on Prince William which became operational in the second quarter of 2024.
Previous wording
Net income attributable to equity method investments increased by $4.0 million, or 561%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This is largely due to the impact of our Emerald RNG facility, which commenced commercial operations in September of 2023, as well as the same-store contribution of our Pine Bend and Noble Road facilities, which both experienced higher RIN pricing and volume.
Current wording
Net income attributable to equity method investments increased by $4.8 million, or 481%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This is primarily attributable to Emerald coming online in the second half of 2023 and higher net income from Pine and Noble Road.
Previous wording
Net loss attributable to redeemable non-controlling interests increased by $6.6 million or 80%. The net loss for the three months ended March 31, 2024 and 2023 reflects the portion of earnings belonging to OPAL Fuels equity holders.
Current wording
Net (loss) income attributable to redeemable non-controlling interests decreased by $87.6 million, or 103%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, and reflects the portion of earnings belonging to OPAL Fuels equity holders. The decrease is primarily attributable to lower net income in the current period compared to the same prior-year period.
Previous wording
Redeemable preferred non-controlling interests decreased by $0.1 million for the three months ended March 31, 2024 compared to three months ended March 31, 2023. They carry an interest of 8% dividend payable quarterly.
Current wording
Redeemable preferred non-controlling interests decreased by $0.2 million for the three months ended June 30, 2024 compared to three months ended June 30, 2023. They carry an 8% dividend payable quarterly. This decrease is primarily due to lower interest accrued on paid-in-kind interest in the current period compared to the same prior-year period as the dividends are being paid quarterly instead of being paid-in-kind.
Previous wording
As of March 31, 2024, our liquidity consisted of cash and cash equivalents including restricted cash of $32.7 million and $6.0 million of short term investments. Additionally, we have availability of $263.4 million under the delayed draw term loan and $36.4 million under the revolver facility under the OPAL Term Loan.
Current wording
As of June 30, 2024, our liquidity consisted of cash and cash equivalents including restricted cash of $22.4 million and $8.6 million of short term investments. Additionally, we have availability of $238.4 million under the delayed draw term loan and $36.3 million under the revolver facility under the OPAL Term Loan.
Previous wording
As of March 31, 2024, we had total indebtedness excluding deferred financing costs of $208.7 million in principal amount which primarily consists of $186.6 million under the OPAL Term Loan and $22.1 million under Sunoma Loan.
Current wording
As of June 30, 2024, we had total indebtedness excluding deferred financing costs of $233.3 million in principal amount which consists of $211.6 million under the OPAL Term Loan and $21.7 million under Sunoma Loan.
Previous wording
The following table presents the Company's cash flows for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents the Company's cash flows for the six months ended June 30, 2024 and 2023:
Previous wording
Net cash provided by operating activities for the three months ended March 31, 2024 was $13.7 million, an increase of $9.5 million compared to $4.2 million for the three months ended March 31, 2023. The increase in cash provided by operating activities was attributable to higher revenues from RIN sales offset by decrease in working capital changes primarily from increase in contract assets.
Current wording
Net cash provided by operating activities for the six months ended June 30, 2024 was $14.3 million, an increase of $6.5 million compared to $7.8 million for the six months ended June 30, 2023. The increase in cash provided by operating activities was attributable to higher operating income year over year driven by increase in revenues, increase of $8.7 million from distributions from equity method investments offset by negative working capital changes.
Previous wording
Net cash used in investing activities for the three months ended March 31, 2024 was $21.6 million, a decrease of $12.7 million compared to the $8.9 million used in investing activities for the three months ended March 31, 2023. This was primarily driven by a decrease in cash invested in short term investments of $24.1 million, and an increase of $1.5 million for contribution to equity method investments offset by a decrease of $12.0 million in capital expenditures for the construction of various RNG generation and dispensing facilities and $0.8 million increase in distributions from equity method investments.
Current wording
Net cash used in investing activities for the six months ended June 30, 2024 was $54.1 million, an increase of $25.9 million compared to the $28.2 million used in investing activities for the six months ended June 30, 2023. This was primarily driven by decrease in cash invested in short term investments of $46.7 million, a $4.8 million decrease in distributions from equity method investments ($8.7 million recorded as part of cash flows from operating activities), $8.6 million in contributions to equity method investments offset by a decrease in cash from deconsolidation of VIEs of $11.9 million in 2023, and lower payments made for the construction of various RNG generation and dispensing facilities of $22.3 million in 2024 compared to 2023.
Previous wording
As of March 31, 2024, we anticipate spending approximately $189.6 million in capital expenditures for the next 12 months for projects and fuel stations currently under construction and our share of contributions in our equity method investment projects. These expenditures do not include any expected contributions from our joint venture partners and primarily relate to our development and construction of new renewable energy facilities and the purchase of equipment used in our Fueling Station services and Renewable Power operations.
Current wording
As of June 30, 2024, we anticipate spending approximately $237.4 million in capital expenditures for the next 12 months for projects and fuel stations currently under construction and our share of contributions in our equity method investment projects. These expenditures do not include any expected contributions from our joint venture partners and primarily relate to our development and construction of new renewable energy facilities and the purchase of equipment used in our Fueling Station services and Renewable Power operations.
Previous wording
The Company is not required to provide the information required by this Item as it is a “smaller reporting company.”
Current wording
The Company is not required to provide the information required by this Item because it is a “smaller reporting company.”
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
California, Washington and Oregon). Federal and state regulatory developments could result in significant future changes to market demand for the RINs and LCFS credits we produce. This would have a corresponding impact to our revenue, net income, and cash flow.
Previous report — wording carried elsewhere
Results of Operations for the three months ended March 31, 2024 and 2023: