Pavel Molchanov: All right, thanks very much, guys.
Operator: Thank you. And your next question comes from Manav Gupta from UBS. Please go ahead.
Manav Gupta: Thanks for squeezing me in. I almost thought I won’t get in today. As far as 45Z is concerned, can you help us understand how you benefit from the 45Z as it is in current form where a negative RNG kind of gives you a high dollar amount versus a landfill RNG if you can talk through that?
Andrew Littlefair: Sure, Bob. Go ahead, Bob.
Robert Vreeland: Yes, I mean, if the scales that we look at, and considering the low CI, when you get into the negative 250, which many of these farms are at that or lower, then you’re looking at potentially $5 to $7, maybe even $8, we’ve seen, per gallon of a 45Z PTC credit. That would be on top of the economics that are already there prior to that with just the actual sharing and the credits. So that will be significant, that’s 2025. That’s why the clarity from the IRS coming couldn’t come really any sooner.
Andrew Littlefair: I mean, Bob, you might just speak to it. The law says that it’s on-highway — suitable for on the highway and that it’s base level is a dollar and then depending on the go ahead.
Robert Vreeland: Yes, right, exactly. So the lower, it’s for on-highway transportation. Depending on the CI score, you could be at $5, $6 a gallon credit off of the PTC. And that will relate to our production dairy investments that we have going on and the gallons that we project to produce there. It runs for three years, ‘25, ‘26, ‘27. It will be, I think when we get that clarity, people can kind of start to do a little better math on this thing because it will be significant.
Manav Gupta: Second question here is, we did get updated staff proposal from CARB, but we’re still building a lot of credits. And when do you actually expect some improvement in LCFS prices? Because the way things are, it’s not looking very good even for 2024, unless the LCFS price start to move up. So trying to understand, when can we start seeing some improvement in LCFS prices?
Andrew Littlefair: You know, Manav, you might have missed it. I kind of touched on this. I mean, look, we don’t have a crystal ball, but it looks to us like that you could have some continued softness in 2024 as you work off the credit bank. Now what I mentioned is there is, and now look, there’s a lot of ifs here, but the new rules will have an automatic ratchet, not automatic, will have a ratchet mechanism to increase the compliance curve. Now, those don’t go into effect right away. So I think, but they can go into effect fairly quickly. But I think that we might prepare ourselves for a little bit of tough sledding in ‘24. Those — that should come much better in balance in ‘25. But it wouldn’t surprise me if we bang around the lower end of the range in ‘24.
Now, on the other hand, you might start getting some folks to be buying these credits and putting a little pressure on. I don’t think that’s happening either, and that can happen. It’s not that liquid of a market.
Manav Gupta: Thank you.
Operator: Thank you. And your next question comes from Ivy Sinha from Northland Capital. Please go ahead.
Ivy Sinha: Yes, hi, thanks for squeezing me in. Most of my questions has been answered. Just wanted to get on the modeling part. So on the LCFS pricing and the RIN pricing, what did you factor in in the earlier guidance and what did you realize versus what are you factoring in now for the new guidance?
Andrew Littlefair: Yes, we were, well, we were looking at around $3 on the RIN. And then at that time, the LCFS was really had come up. It was kind of in the low-80s with an expectation of possibly even some more [Indiscernible] on the hat with some of the news maybe coming out of CARB with maybe a better strengthened compliance curve and that sort of thing. And there was a little bit of that, but then the market kind of quickly changed from that. So it came off of the 80s, and so I was in that range. And I just mentioned here, we’ve moved the RIN up a bit, probably closer to three and a quarter or something. And the LCFS, I think I’ve — I don’t know how low to go on it, but it seems like each day I put it out there, it comes up maybe a little lower. It’s in the 68, 67, somewhere in there is what I factored into all that guidance.
Ivy Sinha: Sure. Thank you. And then the last one I have is what’s the acquisition for CapEx for 2023?
Andrew Littlefair: For 2023, we’re on par to do about $90 million in the base distribution business. And we could spend up to $40 million of additional investment into the dairy RNG production side.
Ivy Sinha: Got it. Perfect. Thank you very much, everyone.
Operator: Thank you. And your last question comes from Jason Gabelman from TD Cowen. Please go ahead.
Jason Gabelman: Yes, hey, good afternoon. Thanks for taking my questions. You talked about the ramp up in the 15-liter Cummins engine. And I know in your kind of five year plan, you have a ramp up in your own distribution volumes. And I’m wondering how much market share of that 15-liter engine business would you need to have in order to hit that guidance? And is that kind of the way you look at the market opportunity, the market share of those Cummins engines?
Andrew Littlefair: Yes, I think, Jason, it’s a good question. It’s interesting. I mean, I think what you’re asking is on that when we laid out our RNG day, you know, a couple of years, almost a couple years ago, and we said, well, we need 545 million gallons. Boy, that didn’t have this kind of robust, that didn’t have sort of that 10%, 375 million gallon bogey in it at all. I mean, I think we never got above 3,000 incremental heavy duty engines, so 3,500 maybe. So, you know, we just, at the time, we’re trying to be conservative. And so, you know, you would need, so I don’t have a percentage of where the market, but you know, if it goes the way we think, by the time you get out there to what we have, what we thought we need 545, you need another couple hundred million gallons or more.
Yes, so I think on the easy. Because by the time you get to ‘27, you’re creating almost all the gallons that we’re doing right now every year And you know the industry can provide that. We’ll all have to get busier. But you know we as a country can get there. And I think that if you look at the resource base for a landfill, for wastewater, for food waste, I mean, you can easily be in a 10 billion gallon dairy, a 10 billion gallon market. Now, lots of money will be spent. It’ll be a good thing for a lot of people. A lot of money will be spent to get there. But over a 10-year period, you can get there.
