3. OPAL Fuels Inc. (NASDAQ: OPAL)
Number of Hedge Fund Holders: 14
OPAL Fuels Inc. (NASDAQ: OPAL) is a fully integrated firm that together with its subsidiaries engages in the production of low-carbon intensity renewable natural gas. The company operates a waste-to-energy model that combines the upstream production and downstream distribution approach to decarbonize the heavy-duty transportation industry. With over 20 years of experience, the experts in OPAL Fuels Inc. (NASDAQ: OPAL) capture methane emissions at their source, purify it, and offer a scalable and low-cost RNG resource that can replace diesel and other high-carbon fossil fuels.
OPAL Fuels Inc. (NASDAQ: OPAL) reported solid growth in revenue in the first quarter of 2024 as the results are aligned with expectations, the company is on track to meet its full-year guidance. The company generated a revenue of $65 million up by 51% compared to $43 million same period last year. This growth was driven by an increase in production and higher environmental credit sales including RNG fuel, Fuel station services, joint venture projects, and third-party RNG supplies.
In addition, the company became profitable as it reported a net income of $0.7 million, a robust improvement from a net loss of $7.3 million in Q1 2023. This significant development in net income was primarily driven by the increase in revenue from the timing of environmental credit sales. In addition, the Emerald RNG project gained recognition as it came online and attracted investments giving the revenue a much-needed boost.
Last year, on June 12 2023 OPAL Fuels and GFL Environment Inc. announced the completion of their largest landfill gas to RNG production facility called Emerald RNG. The facility is said to have a nameplate capacity of 10,000 SCFM (Standard Cubic Feet Per Minute). Emerald RNG is poised to restore naturally occurring biogas from the decomposition of organic matter and will refine it into low-carbon RNG. The facility can efficiently generate over 2.5 million MMBtu (Metric Million British thermal units).
Landfill gas to RNG is a relatively cleaner source of energy and is a proven solution to reduce emissions across the transportation ecosystem. The drastic effects of climate change have led the world economies to look for alternative or cleaner sources of energy to lower the global carbon imprint.
In the wake of climate change, the Renewable Natural Gas industry can grow significantly, for instance in 2022, the global RNG market size was over $8 billion and is projected to reach over $215 billion by 2031, exhibiting a CAGR of 44%. These growth figures are encouraging for investors looking to benefit from the long-term growth of companies like OPAL Fuels Inc. (NASDAQ: OPAL).
Furthermore, the company recently announced the 9th RNG facility called the Prince William has commenced operations and has begun construction on the 15th RNG project at the Cottonwood landfill which has 0.7 million MMBtu design capacity. In addition, Sapphire and Polk RNG construction projects remain on track to begin operations in the 3rd and 4th quarters. All these combined projects are poised to bring out the aggregate portfolio of operating and in-construction RNG projects to 10.3 million annual MMBtu of design capacity.
Though the company is benefitting from industrial tailwinds that encourage the production of RNG, the firm is still awaiting the Internal Revenue Service (IRS) clarification to govern the ITC eligibility for landfill gas to RNG projects. Therefore, this important point should be factored in to forecast the company’s future earnings.
Furthermore, there are some ongoing disputes currently in arbitration related to EPC contractors and owners for the California Dairy Biogas projects. In addition, the renewal power revenue decreased from $15.4 million in Q1 2023 to $10.1 million in Q1 2024 because the Emerald RNG project used up gas available for renewable power. Despite positive results, the recent ramp-up of the Emerald project reduced the firm’s utilization of inlet gas from 86% down to 81% YoY.
According to Insider Monkey’s database, 14 hedge funds held stakes in OPAL Fuels Inc. (NASDAQ: OPAL).
