OPAL Fuels Inc. (“OPAL Fuels” or the “Company”) (Nasdaq: OPAL), a leading vertically integrated producer and distributor of renewable natural gas (RNG), today announced financial and operating results for the three and twelve months ended December 31, 2022.

“OPAL Fuels has continued to execute on its strategic and operational goals,” said Co-CEO Adam Comora. “After bringing three RNG projects online in 2022, we now have seven in operation, six under construction and a growing Advanced Development Pipeline.

“RNG production in 2022 grew 38% compared to 2021, and we are forecasting production growth to accelerate to over 50% in 2023. We also expect accelerated production growth in 2024 as our projects in construction become operational. In addition, as projects continue to move into and through our Advanced Development Pipeline (ADP) and into construction, we are setting the foundation for meaningful production growth over the coming years.

“The RNG industry continues to benefit from tailwinds as the potential benefits of the Inflation Reduction Act (IRA) become clearer. Additionally, new pathways under the Renewable Fuel Standard (RFS) such as eRINs are being considered and new offtake markets are developing.

“More importantly, the flexibility of OPAL Fuels’ vertically integrated business platform continues to maximize value for stakeholders, reduces volatility from environmental credit pricing and provides optionality as public policy and markets continue to evolve. We expect that in the second half of 2023 we will begin to see the benefits of the IRA’s Investment Tax Credits (ITC) provisions. Additionally, guidance on the 45Z production tax credits, and clarification on the proposed eRIN pathway under the RFS program should be available. This should add to the industry tailwinds, providing meaningful benefits to our vertically integrated business.”

“We anticipate putting at least 2.0 million MMBtu of RNG projects into construction this calendar year,” said Co-CEO Jonathan Maurer. “We also continue to expand our Advanced Development Pipeline¹. Recently we added 0.8 million MMBtu of anticipated nameplate capacity to ADP, and now have a total of approximately 8.3 million MMBtu, across 19 projects.

“In addition, as we continue to evaluate projects across the sector, we expect our pipeline of opportunities to grow. We are pleased that some of the development headwinds we experienced in 2022 have begun to subside.”

Financial Highlights

• Revenue for the three and twelve months ended December 31, 2022, was $66.7 million and $235.5 million, respectively, up 9% and 42%, compared to prior-year periods.

• Net income for the three and twelve months ended December 31, 2022, was $32.0 million and $32.6 million, respectively, compared to $21.8 million and $40.8 million, in the same period last year.

• Adjusted EBITDA² for the three and twelve months ended December 31, 2022, was $20.2 million and $60.7 million, respectively, up 13% and 50%, compared to prior-year periods.

Operational Highlights

• Produced 0.6 million and 2.2 million MMBtu of RNG, for the three and twelve months ended December 31, 2022, up 49% and 38%, compared to prior-year periods.

• Fuel Station Services segment sold, dispensed, and serviced an aggregate of 33.3 million and 115.9 million GGEs of transportation fuel for the three and twelve months ended December 31, 2022, up 21% and 20%, compared to prior-year periods. This volume includes 8.9 million and 29.4 million GGEs of RNG dispensing for the three and twelve months ended December 31, 2022, up 33% and 41%, compared to prior-year periods.

• Recently renewed agreement with UPS to provide operations and maintenance services for 51 fueling stations for an additional ten years.

• During 2022, signed long-term agreements for sales of 10.6 million annual GGE for 17 new OPAL Fuels stations, which are now under construction.

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¹ The Company's Advanced Development Pipeline ("ADP") comprises projects that have been qualified and are reasonably expected to be in construction within the next twelve to eighteen months. The MMBtu associated with these projects is presented as anticipated nameplate capacity. Anticipated nameplate capacity is the Company’s currently anticipated 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.

² Adjusted EBITDA is a non-GAAP measure. A reconciliation of GAAP Net Income to Adjusted EBITDA 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."

• As of December 31, 2022, the Company had 137 fueling stations in its dispensing network, of which 26 are under construction. As part of its dispensing network, OPAL Fuels owns 46 fueling stations including 20 sites under construction.

Construction Update

• BioTown dairy RNG project commenced commercial operations in February 2023.
  
  
  
  
• Anticipate three landfill gas projects to commence operations in 2023
  
  - Emerald RNG in mid-2023, as well as Prince William RNG and Sapphire RNG in the fourth quarter of 2023.
  
  
  
  
• OPAL Fuels’ share of annual nameplate capacity³ for Emerald, Prince William, and Sapphire projects is approximately 3.8 million MMBtu.

Development Update

• Anticipate placing at least 2.0 million MMBtu of RNG projects (representing OPAL Fuels’ proportional ownership) into construction in 2023.

• Added 0.8 million MMBtu of anticipated nameplate capacity to the Company’s Advanced Development Pipeline⁴, bringing it to approximately 8.3 million MMBtu across 19 projects, which are primarily landfill gas projects.

• The Advanced Development Pipeline includes four landfill gas-to-electric projects that are candidates for conversion to RNG.

• The Advanced Development Pipeline excludes 12 landfill gas-to-electric projects in our portfolio, which may be available to generate eRINs from a potential new RFS pathway proposed by the EPA in their proposed set rule.

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³ Nameplate 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.

⁴ The Company's Advanced Development Pipeline comprises projects that have been qualified and are reasonably expected to be in construction within the next twelve to eighteen months. The MMBtu associated with these projects is presented as anticipated nameplate capacity. Anticipated nameplate capacity is the Company’s currently anticipated 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.

2023 Guidance Expectations

• The Company currently estimates that Adjusted EBITDA⁹ for the full year 2023 will range between $85 and $95 million. This guidance assumes an average annual price of $2.25/gallon for a D3 RIN, $3.00/MMBtu brown gas, and $90/MT LCFS credit pricing and is based off the midpoint of the expected range of expected RNG production. ⁵

• RNG produced for the full year 2023 is anticipated to range between 3.2 million MMBtu and 3.6 million MMBtu compared with 2.2 million MMBtu in 2022.⁶

• RNG dispensing volume is anticipated to range between 53 million GGEs and 57 million GGEs, compared with 29.4 million GGEs in 2022, an increase ranging from 80% to 94%.⁷

All guidance is current as of the date of this release and is subject to change.

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⁵ Estimated 2023 annualized commodity and environmental attribute sensitivities to 2023 Estimated Adjusted EBITDA are as follows: approximately $8 million change for every $0.25/gallon change in D3 RIN price, a $1.4 million change for every $0.50/MMBtu change in natural gas price, and a $0.4 million change for every $10/MT change in LCFS credit price.

⁶ Reflects OPAL Fuels proportional ownership with respect to RNG projects owned with joint venture partners.

⁷ Includes volumes sold in OPAL Fuel's proprietary dispensing network as well as third party stations that are serviced and maintained by OPAL Fuels.

⁸ RNG Production reflects OPAL Fuels' proportional share with respect to RNG projects owned with joint venture partners.

⁹ Estimated Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of the full year estimated Adjusted EBITDA to net income, the closest GAAP measure, cannot be provided due to the inherent difficulty in quantifying certain amounts including but not limited to changes in fair value of the derivative instruments and other items, due to a number of factors including the unpredictability of underlying price movements, which may be significant.

Results of Operations

Revenue for the three months ended December 31, 2022, was $66.7 million, an increase of 9%, or $5.6 million, compared to $61.2 million in the prior year. While two of our three business segments experienced growth during the year, the increase was primarily driven by the RNG Fuel segment. Total revenue for the twelve months ended December 31, 2022, was $235.5 million compared to $166.1 million in the prior-year period.

Net income for the three months ended December 31, 2022, was $32.0 million, compared to $21.8 million in the prior year. The fourth quarter includes $33.1 million of change in derivative instruments primarily attributable to our earnout liabilities assumed after the closing of the business combination.

Net income for the twelve months ended December 31, 2022, was $32.6 million compared to $40.8 million for the prior year. Full year 2022 net income was impacted by lower margins reducing our operating income year-over-year and higher transaction costs associated with becoming a public company, offset by change in fair value of derivative instruments.

Adjusted EBITDA² for the three months ended December 31, 2022, was $20.2 million, reflecting an increase of 13%, compared to $17.8 million for the prior-year period. Adjusted EBITDA for the twelve months ended December 31, 2022, was $60.7 million compared to $40.6 million in the prior-year period.

Timing of Sales of RINs for Gas in Storage

Under generally accepted accounting principles (“GAAP”), the timing of revenue recognition for stand-alone RIN sales contracts is tied to the delivery of the RIN to our counterparties and not the production of the RIN. To better align timing of when costs are recognized for the production of RNG in a current period, in Adjusted EBITDA, we include the value of that RNG, and environmental credits held in inventory.

At December 31, 2022, the Company had biogas in storage from fourth quarter production that was pending certification for generation of environmental credits for the Sunoma dairy RNG project and other third-party supply. Upon completion of certification, RINs and LCFS credits associated with this stored biogas will be monetized under a blend of forward and merchant sales contracts.

Adjusted EBITDA as of December 31, 2022, includes adjustments for $7.4 million of environmental credits that are anticipated to be generated from this stored RNG and other environmental credits held in inventory. Conversely, $7.5 million related to stored gas and environmental credits that was included in third quarter Adjusted EBITDA has been subtracted from fourth quarter Adjusted EBITDA for consistency of presentation.

Segment Revenues

RNG Fuel

Revenue from RNG Fuel was $43.6 million, an increase of $10.3 million, or 31%, for the three months ended December 31, 2022, compared to the three months ended December 31, 2021. This change was attributable primarily due to an increase in environmental credits and brown gas sales driven by additional volumes and higher prices.

For the twelve months ended December 31, 2022, revenue from RNG Fuel increased by $56.5 million, or 80%, compared to the year ended December 31, 2021. This increase was attributable primarily to the impact of a full year of Beacon revenue in 2022 versus only eight months in 2021, an increase from brown gas sales and the sale of environmental credits.

Fuel Station Services

Revenue from Fuel Station Services was $13.7 million, a decrease of $1.2 million, or 8%, for the fourth quarter of 2022, compared to the three months ended December 31, 2021. Revenues from fuel station construction for third parties are recognized on a percentage of completion basis and can fluctuate based on equipment deliveries and the incurrence of the construction expenses.

For the year ended December 31, 2022, revenue from Fuel Station Services increased by $18.8 million, or 37%, compared to the year ended December 31, 2021. This was primarily attributable to an increase from fuel station construction projects which were completed into 2022, coupled with an increase in volumes at existing and new service sites and from the sale of portable fueling stations. We also signed $61 million in third-party fuel station construction contracts during 2022. Third-party construction revenue backlog was approximately $65.7 million at December 31, 2022.

Renewable Power

Revenue from Renewable Power was $9.4 million, a decrease of $3.6 million, or 28%, for the quarter ended December 31, 2022, compared to the fourth quarter of 2021. This is primarily due to the shutdown of one of our electricity generation facilities as our gas rights agreement concluded.

For the twelve months ended December 31, 2022, revenue from Renewable Power decreased by $5.9 million, or 13%, compared to the prior year. In addition to the shut down at the end of the third quarter of one of our electricity generation facilities as our gas rights agreement concluded, this change was attributable to a decrease from the conversion of one of our electricity generation facilities into an RNG facility.

Liquidity

As of December 31, 2022, our liquidity is $257.2 million consisting of cash and cash equivalents of $40.4 million, restricted cash of $36.8 million, plus an additional $65.0 million in short-term investments maturing within 90 days. Our liquidity includes aggregate availability of $105 million senior secured credit facilities after a drawdown of $10.0 million in March 2023.

We believe that our available cash, anticipated cash flows from operations, available lines of credit under existing debt facilities, and access to expected sources of capital will be sufficient to meet our existing commitments and funding needs.

Capital Expenditures

During the year ended 2022, OPAL Fuels invested $108.3 million¹⁰ across six RNG projects and 21 owned fueling stations in construction as compared to $30.2 million in 2021.

Earnings Call

A webcast to review OPAL Fuels’ Fourth Quarter and Full Year 2022 results is being held tomorrow, March 28, 2023 at 11:00AM Eastern Time.

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/wi45x8o3, and a live webcast will also be available at https://investors.opalfuels.com/news-events/events-presentations.

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¹⁰ Capital Expenditures reflect net investment in RNG projects net of proceeds received from our non-redeemable non-controlling interests. We received $23.1 million and $59.4 million from such parties for the year ended December 31, 2022 and 2021, respectively. These amounts have been excluded to reflect only capital expenditures attributable to OPAL Fuels.

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. It is used to measure the total volume of RNG production that OPAL Fuels expects to dispense each year. The conversion ratio is 1MMBtu 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 leading vertically integrated renewable fuels platform involved in the production and distribution of renewable natural gas (RNG) for the heavy-duty truck market. RNG is a proven low-carbon fuel that is rapidly decarbonizing the transportation industry now while also significantly reducing fuel costs for fleet owners. OPAL Fuels captures harmful methane emissions at the source and recycles the trapped energy into a commercially viable, lower-cost alternative to diesel fuel. The company also develops, constructs, and services RNG and hydrogen fueling stations. As a producer and distributor of carbon-reducing fuel for heavy-duty truck fleets for more than a decade, OPAL Fuels delivers complete renewable solutions to customers and production partners. To learn more about OPAL Fuels and how it is leading the effort to capture North America’s harmful methane emissions and decarbonize the transportation industry, please visit https://opalfuels.com/ and follow the company on LinkedIn and Twitter at @OPALFuels.

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 quarterly report on Form 10Q filed on November 14, 2022, 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.

⁽¹⁾ Retroactively restated for the reverse capitalization upon completion of Business Combination.

⁽¹⁾ Paid-in-kind preferred dividend is allocated between redeemable non-controlling interests and Class A common stockholders basis their weighted average percentage of ownership.

⁽²⁾ Income per share information has not been presented for the year ended December 31, 2021 as it would not be meaningful to the users of these consolidated financial statements.

Non-GAAP Financial Measures (Unaudited)

To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company uses a non-GAAP financial measure that it calls adjusted EBITDA (“Adjusted EBITDA”). This non-GAAP Measure adjusts net income for realized and unrealized gain on interest rate swaps, net loss attributable to non-redeemable non-controlling interests, transaction costs and one time non recurring charges, non-cash charges, major maintenance for renewable power, unrealized loss (gain) for derivative instruments, loss on warrant exchange, non cash gain on reversal of a liability to non redeemable non-controlling interests, gain on redemption of Note receivable, environmental credits associated with renewable biogas that has been produced and is in storage pending completion of certification of the relevant environmental attribute pathway(s), such credits to be monetized under a blend of forward and merchant sales contracts, and gain on acquisition of equity method investment. 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; and (3) 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:

⁽¹⁾ Includes depreciation, amortization and accretion on equity method investments.

⁽²⁾ Unrealized loss on derivative instruments includes change in fair value of interest rate swaps, commodity swaps, earnout liabilities, warrant liabilities, contingent liability to non-controlling interest and put option on a forward purchase agreement.

⁽³⁾ Non-cash charges includes 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.

⁽⁴⁾ Transaction costs relate to consulting and professional fees incurred in connection with the Business Combination that could not be capitalized per GAAP. One time non-recurring charges include certain expenses related to development expenses on our RNG facilities such as lease expenses incurred during construction phase that could not be capitalized per GAAP and shutdown costs on two of our Renewable Power facilities.

⁽⁵⁾ Gain on repayment of Note receivable excludes $0.5 million of prepayment penalty received in cash.

⁽⁶⁾ Represents stored biogas anticipated to generate RINs and LCFSs upon completion of certification. These RINs will be monetized under a blend of forward and merchant sales contracts.

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