OPAL Fuels Q3 2025 Earnings Report

OPAL Fuels EPS Results

• Actual EPS: $0.05
• Consensus EPS: $0.14
• Beat/Miss: Missed by -$0.09
• One Year Ago EPS: N/A

OPAL Fuels Revenue Results

• Actual Revenue: $83.36 million
• Expected Revenue: $98.03 million
• Beat/Miss: Missed by -$14.67 million
• YoY Revenue Growth: N/A

OPAL Fuels Announcement Details

• Quarter: Q3 2025
• Date: 11/7/2025
• Time: After Market Closes
• Conference Call Date: Friday, November 7, 2025
• Conference Call Time: 11:00AM ET

OPAL Fuels (NASDAQ:OPAL) is a renewable fuels and energy company that develops and operates infrastructure for converting organic waste into lower-carbon energy. Its activities focus primarily on renewable natural gas (RNG), a fuel produced from biogas captured at landfills, wastewater treatment facilities, and other waste sites.

The company develops, constructs, owns, and operates RNG production facilities and related gas upgrading systems. Its RNG can be used as a transportation fuel, injected into natural gas pipelines, or sold through environmental and renewable energy markets. OPAL Fuels also develops renewable electricity projects that use landfill gas or other biogas to generate power.

In addition to producing renewable energy, OPAL Fuels provides fueling and infrastructure solutions for fleets, including the development and operation of vehicle fueling stations designed to support the use of RNG and other lower-carbon fuels. The company’s projects are primarily located in the United States and are intended to reduce emissions associated with waste disposal and transportation while creating productive uses for landfill and other waste-derived gas.

OPAL Fuels Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: RNG production reached 1.3 million MMBTU in Q3 (up ~30% YoY) with October and September at record rates, and Opal added the Atlantic project bringing the fleet to 12 operating facilities (9.1M MMBTU design capacity).
• Negative Sentiment: Q3 adjusted EBITDA was $19.5M versus $31.1M a year ago, pressured by a lower realized D3 RIN price ($2.15 vs. $3.13) and the expiration of the ISCC pathway.
• Positive Sentiment: Opal has monetized ~$43M of investment tax credits YTD (expect ~ $50M for 2025), and ended the quarter with $184M total liquidity (including ~$30M cash and sizable undrawn term capacity) to fund projects under construction.
• Positive Sentiment: Downstream fuel station services are expanding (47 operating stations, 41 under construction; 63 Opal-owned in operation/construction) to provide recurring, per‑gallon economics less tied to environmental credit volatility.
• Neutral Sentiment: Management will begin recognizing 45Z production tax credits in Q4 and expects a full-year benefit in 2026, but timing and magnitude depend on GREET models and potential delays from the government shutdown.

Presentation

[Operator]

Good morning and welcome to the OPAL Fuels Third Quarter 2025 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. As a reminder, this event is being recorded. I would now like to turn the call over to Todd Firestone, Vice President of Investor Relations, to begin. Please go ahead.

[Todd Firestone, VP of Investor Relations at OPAL Fuels]

Thank you and good morning, everyone. Welcome to the OPAL Fuels third quarter 2025 earnings conference call. With me today are Co-CEOs Adam Comora and Jonathan Maurer, as well as Kazi Hasan, OPAL's Chief Financial Officer. OPAL Fuels released financial and operating results for the third quarter 2025 yesterday afternoon, and those results are available on the Investor Relations section of our website at opalfuels.com. The presentation and access to the webcast for this call are also available on our website. After completion of today's call, a replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements which involve risks, uncertainties, and assumptions. These forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements.

[Todd Firestone, VP of Investor Relations at OPAL Fuels]

Several factors that could cause or contribute to such differences are described on slides two and three of our presentation. These forward-looking statements reflect our views as of the date of this call, and OPAL Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion of certain non-GAAP measures, a definition of non-GAAP measures used, and a reconciliation of these measures to the nearest GAAP measures, including the appendix of the release and presentation. Adam will begin today's call providing an overview of the quarter's results, recent highlights, and an update on our strategic and operational priorities. Jon will give a commercial and business development update, after which Kazi will review financial results. We'll then open the call for questions.

[Todd Firestone, VP of Investor Relations at OPAL Fuels]

Now, I'll turn the call over to Adam Comora, Co-CEO of OPAL Fuels.

[Adam Comora, Co-CEO at OPAL Fuels]

Thank you, Todd. Good morning, everyone, and thank you for participating in OPAL Fuels Third Quarter 2025 Earnings Call. The third quarter was another quarter of consistent operational progress in line with our expectations, and we are maintaining our full-year guidance. RNG production was 1.3 million MMBtu, representing both sequential growth and an increase of approximately 30% compared to the third quarter of last year. Importantly, due to all the operational improvements we are making, October production was the highest rate in OPAL's history, following a record performance in September. These production rates are in line with the levels required to achieve the low end of our full-year production guidance we set at the beginning of the year. The trajectory here is clear, and the operating base is performing with greater consistency and reliability. We also continue to advance our growth plans.

[Adam Comora, Co-CEO at OPAL Fuels]

At the end of the third quarter, we brought the Atlantic project online, and we are very pleased with its initial ramp. This is our first project with our partner, South Jersey Industries. This project brings us to 12 operating RNG facilities with a combined 9.1 million MMBtu of annual design capacity. In addition, we began construction at our CMS RNG project in North Carolina, representing 1.0 million MMBtu of annual design capacity net to OPAL. We are continuing to advance a number of attractive new project opportunities within our pipeline and feel confident we have the ability to meet our target of 2.0 million MMBtu of annual design capacity into construction in 2025. On the financial side, we completed our fourth investment tax credit monetization to date and third for this year, bringing our total gross proceeds to $43 million year to date.

[Adam Comora, Co-CEO at OPAL Fuels]

We expect that we will complete a fourth sale by year-end or in early 2026. These ITC sales continue to be an effective tool to offset capital requirements and support our development program, and as a reminder, are not included in our adjusted EBITDA calculation. Our third quarter adjusted EBITDA was $19.5 million, lower compared to the same period last year, impacted by a lower RIN price environment. While RIN prices were lower in the third quarter, recent pricing trends have been constructive. Given the increasing production performance, the growth of fuel station services segment, and beginning to recognize 45Z production tax credits in the fourth quarter, we remain confident in delivering operating and financial results in line with our full-year guidance. As we look towards the future, we remain encouraged. Our growth will continue in 2026 and beyond.

[Adam Comora, Co-CEO at OPAL Fuels]

We have a robust opportunity set to continue to build our RNG production platform and see an increasing need for energy infrastructure assets to support CNG and RNG adoption for heavy-duty trucking. CNG and RNG is being recognized as the most cost-effective and operationally sound fuel choice to replace diesel. To capture some of the building momentum we're seeing in the downstream, we continue to invest in our team and the fuel station service segment as it becomes more of a focus in our capital allocation strategy. OPAL's vertically integrated model is continuing to show its strength to capitalize on this opportunity, bringing the most value to biogas feedstock hosts and providing fleets with a partner that can deliver a full solution to decarbonize their fleet at a lower cost than diesel. With that, I'll turn it over to Jon. Jon.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

Thank you, Adam, and good morning, everyone. Our third quarter operational performance reflects continued growth across the platform. As Adam mentioned, we brought the Atlantic Project online during the quarter, our first under our joint venture with South Jersey Industries, adding approximately 0.33 million MMBtu of annual design capacity. This brings us to 12 operating RNG facilities with a combined 9.1 million MMBtu of annual design capacity, up from just two facilities when we became a public company in 2022. Atlantic's commissioning was delivered consistent with our guidance and is performing well in its first weeks of operation. Landfill gas resource is above expectations, and we expect production to steadily increase over the coming months. RNG production was 1.3 million MMBtu in the quarter, a 30% increase year-over-year driven by the continued ramp of Sapphire and Polk, as well as improving uptime across the base portfolio.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

The key here is consistency. The operating fleet is performing in a more repeatable manner along with the growing production. This improvement in performance is a direct result of the investments we are making in our operational team. We expect this trend to continue. Turning to development and construction, we are advancing the next wave of projects. With CMS now in construction, our in-construction landfill RNG portfolio now totals 2.8 million MMBtu of annual design capacity and is progressing in line with our expectations. This in-construction portfolio, combined with our operating facilities, will bring us to approximately 12.0 million MMBtu across 16 projects. Burlington and Cottonwood remain on track for 2026 commissioning and Kirby thereafter. We continue to see a pipeline of organic development opportunities with secured gas rights. We evaluate each project within a disciplined capital allocation framework, ensuring alignment with returns, liquidity, and balance sheet priorities.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

We are developing a number of investment opportunities that meet these criteria for 2026 and beyond. On the downstream side, our fuel station services business continues to perform well, while 2025 has had a difficult backdrop for logistics and transportation firms, which has slowed down all truck purchases and investment decisions, including the X15 CNG tractor. We expect to meet the lower end of the 30%-50% segment EBITDA growth target, despite the lower RIN price impact. We currently have 47 operating fueling stations and 41 stations under construction, 16 of which are OPAL-owned, bringing total OPAL-owned fueling stations in operation and construction to 63. Owning and operating fueling infrastructure allows us to participate directly in long-term contracted per-gallon economics that are largely independent of environmental credit pricing and provide recurring cash flow.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

This is strategically important as it provides access to the most valuable offtake market and allows us to scale our upstream RNG production platform. Additionally, the fuel station services segment provides a return profile largely uncorrelated to environmental credit prices, contributing to a more balanced and durable overall earnings mix. I'll now turn the call over to Kazi to discuss the quarter's financial performance. Kazi?

[Kazi Hasan, CFO at OPAL Fuels]

Thank you, Jon, and good morning to everyone joining today's call. This quarter showed continued operational progress across the platform. We issued our earnings press release, posted an updated investor presentation on our website, and expect to file our Form 10-Q shortly. Revenue for the quarter was $83 million, and adjusted EBITDA was $19.5 million, compared to $84 million and $31.1 million for the same period last year due to lower realized RIN pricing and the expiration of ISCC pathway, partially offset by higher RNG production. Our realized RIN price was $2.15 versus $3.13 last year. We expect that the improvements in production and uptime we experienced through the quarter will continue and translate into improving financial performance of our upstream portfolio.

[Kazi Hasan, CFO at OPAL Fuels]

This quarter's result reflects a more normalized G&A environment compared with last quarter, which saw non-recurring expense items in support of our investments in advocacy and technology for our operating platform. Turning to liquidity and capital deployment, we ended the quarter with $184 million of total liquidity, which includes $29.9 million of cash and short-term investments, $138.4 million of undrawn capacity under our term facility, and $15.5 million of revolver availability. Capital expenditure for the quarter was $16.4 million. These capital expenditures relate to new RNG facilities and new OPAL-owned fueling stations. Maintenance investments for operating assets are expensed in our income statement. In the quarter, we monetized approximately $17 million of investment tax credits this quarter, and we remain on track to achieve approximately $50 million in gross ITC monetization for the full year.

[Kazi Hasan, CFO at OPAL Fuels]

The liquidity position, together with operating cash flow and ITC monetization, supports the projects currently under construction. As Adam mentioned, we expect to be within our full-year 2025 guidance. For the fourth quarter, higher RIN pricing compared to last quarter, sequential production growth, expected fuel station services performance, and contribution from 45Z tax credits support our adjusted EBITDA expectation, although likely towards the lower end of the range. Finally, we are working on refinancing of our preferred equity with Nexterra. With our expected access to capital and existing liquidity resources, we will address the term of the existing preferred in the coming months. Stepping back, our financial strategy is clear. We are disciplined in investing capital within the capacity of our operating cash flow, balance sheet strength, and capital market access. OPAL is generating an increasingly balanced and durable earnings base with flexibility to accelerate growth while returns justify it.

[Kazi Hasan, CFO at OPAL Fuels]

With that, I'll turn the call back over to Jon for closing remarks.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

In closing, we remain well-positioned for continued disciplined execution of our strategic growth objectives and the expansion of OPAL's vertically integrated platform. With that, I'll turn the call over to the operator for Q&A. Thank you all for your interest in OPAL Fuels.

[Operator]

Please wait while we assemble the roster. Our first question comes from Derrick Whitfield with Texas Capital.

[Derrick Whitfield, Managing Director at Texas Capital]

Good morning, all, and thanks for your time.

[Adam Comora, Co-CEO at OPAL Fuels]

Good morning.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

Hey, Derrick.

[Derrick Whitfield, Managing Director at Texas Capital]

Wanted to start with your RNG production trajectory. As you highlighted in your prepared commentary, the trajectory is continuing to grow and appears to be pacing at about a 0.1 million MMBtu growth level per quarter. I guess first, is that the right pacing level to think about kind of the growth through year-end based on your October commentary? And then second, could you help me frame how this projects into 2026 based on the projects under construction now?

[Jonathan Maurer, Co-CEO at OPAL Fuels]

Yeah, Derrick, that's right. We've seen great sequential growth in our projects. A lot of that comes from the discipline of the team that we've put in place over the course of the last year that has updated and revised, really, the data-driven approach to our project operations, both in terms of the landfill gas collection from a capacity inlet utilization point of view, as well as from the efficiency and availability of the projects that are operating with the landfill gas they receive. We've seen good sequential growth in all of these metrics, and that's resulted in same-store sales growth from the projects that we're operating. Yes, I think we'll continue to see that trajectory move forward during the course of the rest of this year and into next year is our expectation. Maybe, Adam, you want to add to that?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. Good morning, Derrick. Just as we're thinking about 2026, we're obviously not providing our full-year guidance for 2026 or what all the different KPIs are that we track for it. We see a strong growth coming in 2026, and it's going to be supported by another year of strong production growth and a couple of other components as well, including a full year of 45Z. I'm sure there's going to be some other questions as we look into 2026. There's probably some seasonality factors that we're going to be highlighting as well and maybe doing a job of explaining to folks across the different business segments. We see 2026 to be another strong year of production growth for us.

[Derrick Whitfield, Managing Director at Texas Capital]

Terrific. For my follow-up, I'll stay with you, Adam, and focus on the regulatory environment. In light of the government shutdown and your recent engagement with the administration, what are your timing and expectations for a final RVO? Importantly, do you think there's an appetite from the administration to increase the D3 RVO based on the strength of recent RIN generation reports?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah, both very good questions. I think the final RVO rules, it is being impacted by this government shutdown, and it's difficult to ascertain exactly how long it will take for them to issue the final set rule two once they reopen. I do think that they're looking at volumes across the categories. It's really important to note that we believe what RNG does receive bipartisan support. We've seen it in the tax policy, and we have been speaking with a number of folks on the Republican side of things as it pertains to D3 volumes. You have to remember that a lot of these RNG projects are in red and rural areas. They're municipal-owned facilities, and cellulosic corn kernel ethanol is also a growing piece of the D3 category. We do feel the support is there, and maybe it'll take 30 days.

[Adam Comora, Co-CEO at OPAL Fuels]

Maybe it'll take 45 days after they reopen. There has been a lot of pressure on the EPA to stick with their timelines, but we remain cautiously optimistic that the administration, just like we've seen across the House and the Senate, will continue to support RNG.

[Derrick Whitfield, Managing Director at Texas Capital]

Perfect. Thanks for your time. I'll leave it there.

[Operator]

Our next question comes from Matthew Blair with TPH.

[Matthew Blair, Managing Director and Equity Research Analyst at TPH]

Thank you, and good morning. Adam and Jon, you've highlighted in the past that your landfill RNG assets have very strong free cash flow generation once they're up and running. We don't really see that in the OPAL financial metrics because of all the growth spending. Could you talk about the balance there? Is there any sort of thought to slowing down the growth, slowing down the CapEx in order to just show a stronger free cash flow, really illuminate that underlying free cash flow generation that you do have?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah, this is Adam here and appreciate that question. What we're trying to continue to highlight is that the maintenance CapEx that we have on our facilities is included in our operations and our operating cash flow. When you look at the CapEx on our balance sheet, that is solely on new RNG projects, facilities, and also new OPAL-owned fueling stations. When you look at our cash flow statement and you look at our financial metrics, what comes out of operating cash flow will be the discretionary free cash flow for OPAL Fuels. Hopefully, investors understand that metric, and we're going to continue to try and help illuminate that for the investor community.

[Matthew Blair, Managing Director and Equity Research Analyst at TPH]

Sounds good. You mentioned that 2026, I think you said would include the full year of 45Z. Can you talk about how much 45Z, if any, you've received in the third quarter and how much you might get in the fourth quarter? If you could perhaps illuminate a range of 45Z contribution in 2026, is this something that helps out your landfill plants in addition to your dairy exposure as well?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah, this is Adam again. Just a couple of things on 45Z. One is we're pleased that we've now registered all of our facilities starting in the fourth quarter for 45Z generation. We are aware that there have been some transactions in the marketplace where folks have been monetizing their 45Z. We continue to finalize documentation and work through the mechanics for it. There already are existing GREET models to generate those 45Z credits. To an earlier question on the government shutdown, there is also a chance that there will be another 45Z GREET model that gets issued once the government reopens. What we've thought about and what we're including in our thinking on the fourth quarter is just the existing GREET models and whether or not there's going to be any improvements to that.

[Adam Comora, Co-CEO at OPAL Fuels]

Certainly, we could be taking advantage of that as well. As we—and when you think about our sequential ramp into the fourth quarter, Kazi highlighted four different elements. One is increasing production, like we've talked about and are expecting here in the fourth quarter. We've also got that RIN price lift in the fourth quarter versus what we experienced in the third quarter. There is also some fuel station services seasonality, which we'll get, I'm sure, some future questions on where our LCFS credit sales typically occur after we've aggregated them over a two-quarter period. We will get a lift of that in the fourth quarter, as well as just good base underlying growth in fuel station services. The fourth piece is the 45Z credits that we'll begin recognizing here in the fourth quarter.

[Adam Comora, Co-CEO at OPAL Fuels]

When you look at all four of those pieces, they're fairly evenly distributed amongst those four items. We'll see a full year of that contribution from 45Z as we move into 2026, and quite frankly, for the next through 2029.

[Matthew Blair, Managing Director and Equity Research Analyst at TPH]

Great. Thank you.

[Operator]

Our next question comes from Adam Bubes with Goldman Sachs.

[Adam Bubes, VP of Equity Research at Goldman Sachs]

Hi, good morning. Just a finer point on the Q4 implied guide. I think at the low end, it's around $34 million. So sharp sequential ramp, as you alluded to. Just could you put a finer point on the D3 RIN price step up? What are you seeing for Q4, and how much of the 45Z is contributing as well?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. In the fourth quarter, I think most people are aware that the price has risen to around $2.40 for the D3 RINs. If you do the math on our production, there are some royalties that you take out of that. That is a—I do not think we are going into the quite granularity of each one of those pieces, but that is part of that sequential lift. We are also going to see an improved performance in fuel station services. There will be some component to 45Z. I think those are fairly even distributed amongst those factors. The production lift would be the other piece.

[Adam Bubes, VP of Equity Research at Goldman Sachs]

For 2026, can you just comment? Have you started to lock in D3 RIN volumes in the sort of contracted market? And if so, what are those contracts looking like?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. Not just yet on 2026. I think obligated parties, which is really the chunkier volume of transactions in the RIN market, the obligated parties we feel like are still hanging back on 2026 until there are some final rules that get issued. The 2026 pricing is around where the 2025 is, but we haven't seen a lot of volumes in the marketplace just yet. I think there was an earlier question as well around the regulatory outlook. Just as we're thinking about RIN pricing as we move forward into 2026 and 2027, the D3 RIN market can get tightened one of two ways. One is we can see a boost in RVO volumes, which a lot of folks have been advocating, and we feel like there is some support for.

[Adam Comora, Co-CEO at OPAL Fuels]

The other way that D3 RINs can tighten is if RNG producers decide to move volumes out of the RFS and transportation fuel. That is a possibility as well. We have not begun selling forward in any serious magnitude in 2026, but we expect that market to develop shortly once the rules are finalized.

[Adam Bubes, VP of Equity Research at Goldman Sachs]

Last one for me, I think based on the data we're looking at, natural gas vehicle consumption already uses almost entirely renewable natural gas. What is your outlook on potential for increasing natural gas vehicle adoption over the next couple of years? Do you view the bottleneck from here as more so the infrastructure or willingness to purchase the vehicles?

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. I know we and others in the industry keep expressing optimism around natural gas deployment to replace diesel. We are really optimistic that we are starting to see that traction take hold and really excited about some of the fleets that we are talking to on this. I would highlight for folks as well some of the recent team additions that we have had here at OPAL Fuels, both at the board level and with the team leadership, with a new Chief Revenue Officer on fuel station services. It has become the clear choice for fleets to decarbonize and reduce their cost of diesel.

[Adam Comora, Co-CEO at OPAL Fuels]

We had a confluence of factors in the beginning of 2025 between a model changeover, equipment pricing on CNG adoption, and some macro headwinds, whether it be tariffs and some other things where we felt like a lot of fleets were really interested in it, liked it in concept, but were not really ready to pull the trigger yet. The industry has been addressing some of those equipment pricing issues, residual values, leasing programs, that sort of thing. We really feel good that some fleets are starting to be ready to make some of these deployment decisions. What I would also say as we look into 2026 for OPAL Fuels, we do see good growth from across our business segments. A lot of those deployment decisions, though, there is a lag for when the fuel stations get built and trucks get delivered.

[Adam Comora, Co-CEO at OPAL Fuels]

As we look forward into 2026, we really do think that there's going to be some fleet deployment decisions, which then translates into 2027. We have other factors that we think will lead to some fuel station service growth in 2026, but we've certainly been preparing for what we see is an open-ended growth trajectory for not only RNG, but CNG. When we talk about natural gas for heavy-duty trucking here, this is something that we think makes a lot of sense across the aisle where when a lot of folks are focused on energy dominance, disinflationary types of policies, natural gas fits the bill quite well. You also get some of those other environmental benefits that come along with it in terms of air quality and that sort of thing.

[Adam Comora, Co-CEO at OPAL Fuels]

We think CNG is going to have a very interesting growth trajectory as we work through some of the equipment pricing issues, which have been going down, and some of these other kind of issues. Fleets and logistic firms have adjusted to those macros, right? You go through that first quarter or two when you're just trying to deal with some of that macro backdrop, and then you start operating under it, and you start moving forward with some of those parameters.

[Adam Bubes, VP of Equity Research at Goldman Sachs]

Terrific. Thanks so much.

[Operator]

Our next question comes from Ryan Pfingst with B. Riley.

[Ryan Pfingst, Senior Equity Research Analyst at B. Riley]

Hey, guys. Thanks for taking my questions. Curious what you've been seeing or hearing broadly in the voluntary market and if you're weighing any opportunities there today?

[Adam Comora, Co-CEO at OPAL Fuels]

This is Adam again here. One voluntary market that we've been interested in and potentially excited about is marine fuel. There was a delay on some marine fuel adoption out of that IMO read. There will be a play for RNG in that marine fuel market. I feel like it's been pushed out a little bit because of that delayed approach to how they're going to be using renewable methanol as marine fuel. There are a couple of states that are starting to think about RNG and how they achieve their objectives on decarbonizing their fuel mix. We have not seen yet where it makes sense to transact and commit some of our RNG into those voluntary markets.

[Adam Comora, Co-CEO at OPAL Fuels]

We're still of the opinion that there's a little bit of a misunderstanding or a misconception around the reg risk of RNG in the transportation fuel market and the renewable fuel standard. Up until this point, it still hasn't quite made sense to us to transact in those voluntary markets until we see some of those other things open up and we get a little bit more to offtake parity for what, again, we consider a little bit of mispriced reg risk or regulatory uncertainty. We kind of feel like that's the case across OPAL Fuels and how people think about RNG.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

Yeah. In addition, I'd just add that some of our competitors have reported committing to voluntary markets. Not sure exactly what volumes, but that would have the effect of really opening up a little bit of the dispensing and helping.

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. The only thing also I would add there is I also think that's a function of our business model. The fact that we're vertically integrated and we've got that visibility into the highest offtake market. I don't know if others feel like maybe they're sort of pushed into those markets because they don't have that same vertical integration that we have. We still continue to believe we're going to make the most money for our shareholders continuing to tap into the most valuable offtake market.

[Ryan Pfingst, Senior Equity Research Analyst at B. Riley]

Got it. Yeah. No, that makes sense. Appreciate all that detail. Good segue to my next question, which is, has competition for RNG project development picked up or have more players entered the market following the one big beautiful bill and the more positive policy environment that you have today?

[Jonathan Maurer, Co-CEO at OPAL Fuels]

I think that access to capital and limited access to dispensing has really put a little bit of a limit on what competitors are able to do in the market. Yeah, you saw a big kind of go-go push, especially leading into the $3 RIN period after the RFS first set rule. And now, with the uncertainty from the EPA waiver last year, use of their general waiver, I think that that's caused a little bit of a lid on D3 pricing, limited access to capital.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

To your earlier question, I really do not think that the voluntary market is that deep, or at least we have not seen it being that deep. Without access to offtake, I think it is really limiting what other developers are able to do. Sure, you will still see other projects coming online, but I think sequentially you will see it maybe a little bit slower.

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. If you do not mind, I just want to go back because I do not think I answered the second part to an earlier question on the free cash flow generation and slowing down growth and that sort of thing. I just want to stress that we are extraordinarily disciplined here at OPAL Fuels in terms of our capital deployment. If we are not seeing paybacks of that four- to five-year period on new RNG project development, we are not going to develop those projects. We do have a strong advanced development pipeline of projects that meet our investment criteria. We are going to continue to be disciplined and invest in those projects that we think are going to generate long-term value for our shareholders.

[Adam Comora, Co-CEO at OPAL Fuels]

We will continue to try and do a better job highlighting discretionary free cash flow and that CapEx on our cash flow statement solely associated to new projects, RNG projects or fuel stations, or maybe an IT platform or something like that we are investing in. We have always been disciplined in terms of the projects that meet that investment criteria. We are going to continue to methodically find those projects that hit our investment criteria.

[Ryan Pfingst, Senior Equity Research Analyst at B. Riley]

Great. I appreciate all that detail, guys. I'll turn it back.

[Operator]

Our next question comes from Betty Zhang with Scotiabank.

[Betty Zhang, Associate Director of Equity Research at Scotiabank]

Thanks. Good morning. Thanks for taking my question. I wanted to ask about what seems to be a shift to focus more on the downstream fuel distribution. Just wondering if you could elaborate a bit more on how you're thinking about the strategy, what factors are driving that, and what that would entail? Is that just building more stations or what else? If you could share a bit more.

[Kazi Hasan, CFO at OPAL Fuels]

Sure. Let me take that one. The downstream segment, if Adam mentioned, Jon mentioned before, even in our prepared remark, we do see a cash flow stream that is coming uncorrelated with the RFS market and RIN volume or prices. It allows us to create a business segment that potentially will provide a lot more balanced earnings profile going forward, including cash flow profile. That is what we are looking towards to add value to our shareholders. That is the overall objective. Our business model also allows us to deploy capital with a very healthy cushion over our cost of capital in the downstream segment. Our business model, we have worked with the fleet owners, operators, and have them to convert their diesel to CNG and RNG. This is where we are going.

[Kazi Hasan, CFO at OPAL Fuels]

We are going to create a balanced portfolio which allows us to take advantage of both RFS market and the downstream CNG RNG market.

[Adam Comora, Co-CEO at OPAL Fuels]

Yeah. I would just say it's where we see a really attractive opportunity in terms of some open-ended growth. I know we spent a lot of time talking about RNG, but if you think about the diesel market here in the U.S., it's 45 billion gallons. Natural gas is a billion of it today. We think this is going to make sense for a lot of fleets. We think the fuel station service segment will have a life of its own past RNG as once we start getting some of these early fleet adopters in there, and we understand the attractiveness of RNG because it not only saves money, but it also allows folks to achieve some sustainability goals. We're going to see more folks on the equipment side of things, economies of scale there, the premium of that tractor going down.

[Adam Comora, Co-CEO at OPAL Fuels]

CNG is going to make a lot of economic sense for a lot of folks. If you go back to when the 9 and the 12-liter engine came out, those things were priced much closer to diesel from a tractor perspective. When that starts happening, it's going to be an interesting market for CNG versus diesel.

[Jonathan Maurer, Co-CEO at OPAL Fuels]

I would just add that it's just also more to the point that our vertically integrated business model presents opportunities on the upstream and downstream side where growth in one area supports the other and vice versa. That's the condition we're seeing today, Betty.

[Betty Zhang, Associate Director of Equity Research at Scotiabank]

Great. Thank you for that. Lastly, if I could ask you to discuss your capital position and how you're thinking about funding needs over the medium term.

[Kazi Hasan, CFO at OPAL Fuels]

Yeah. That's, again, I think Adam already touched on it before. Our committed capital are within what we can afford from our operating cash flow and our existing liquidity resources. If we look at our growth profile and the amount we have committed, you can actually look through our operating cash flow and available capital. All the new projects that we are going to be doing, we will be securing new capital in order for us to commit to new capital projects. In general, we are very prudent of where we are committing our capital.

[Betty Zhang, Associate Director of Equity Research at Scotiabank]

Thank you.

[Operator]

That concludes today's question and answer session. I'd like to turn the call back to Adam Comora for closing remarks.

[Adam Comora, Co-CEO at OPAL Fuels]

All right. We thank everybody for your interest in OPAL Fuels and hope you have a great rest of the day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Adam Comora, Co-CEO
• Kazi Hasan, CFO
• Todd Firestone, VP of Investor Relations
• Jonathan Maurer, Co-CEO

Analysts

• Betty Zhang, Associate Director of Equity Research at Scotiabank
• Matthew Blair, Managing Director and Equity Research Analyst at TPH
• Adam Bubes, VP of Equity Research at Goldman Sachs
• Derrick Whitfield, Managing Director at Texas Capital
• Ryan Pfingst, Senior Equity Research Analyst at B. Riley