Adam Comora: And as far as some of the other — this is Adam here. As far as some of the other public policy stuff that we see happening, in addition to the ITC, which we’ll get some clarity on, we’re also expecting in 2023 to get some clarity around the 45Z calculations and how carbon intensity scores maybe allocated. We think that’s going to be really impactful specifically for the heavy negative CI kind of gap but we need to see a little bit more clarity to really get a better understanding on that. The eRIN pathway we think is really interesting for our business and opens up all sorts of incremental profitability opportunities on our existing landfill gas to electric projects and how we think about some of the new project development and what kind of opportunities that may open up.
And it is a little uncertain and the timing of when they may finalize that rule. The EPA has received a number of comments back in February, so we’ll see whether or not they’re going to give that clarity in June. When we do expect perhaps we look at the RVO volumes, whether or not that’s going to include finalized rules on the eRINs or that may slip into later in 2023. As we think about it from a capital perspective on what makes an RNG project versus a landfill gas to electricity project, we like having the optionality for all these new end markets that are opening up that you mentioned whether or not the hydrogens or quite frankly a lot of export markets that are opening up. So we like the idea if we can see good risk adjusted returns on capital for an RNG project to continue to deploy capital and have that flexibility of off take, whether it’d be new fixed voluntary markets or strengthening voluntary markets.
So we see it as a big additive to our business overall. And on the landfill — existing landfill gas electric projects, obviously, that will be incremental profitability without having to invest new capital. So we’re excited about the prospects for it and we’ll see the timing for when they finalize that rule.
Operator: Our next question comes from the line of Ryan Todd of Piper Sandler.
Ryan Todd: Congrats on the result, and let me — I apologize that I conflict and missed some of your earlier comments, so I hope — I’m not sure if you addressed some of this earlier in the call. But it’s been a challenging stretch for many in the RNG industry in terms of project execution, getting volumes delivered on time and budget. What have been the biggest challenges for you on the project execution side, I guess, both on dairy and landfill, and are those things improving? Can you talk about how maybe parts of the supply chain and your ability to execute on your significant backlog is improving going forward and what has improved, if anything?
Jonathan Maurer: I’ll start with this one off. I think we reported last quarter that there was a slowdown in execution of contracts and movement through the pipeline as landfills realize the value of the RNG inherent in their landfills and each of the major landfills and many of as far took the opportunity to reassess how they wanted to approach that value proposition. So that resulted in a bit of delay. But I think they are through that process and we’re seeing a lot of movement through our advanced development pipeline and progress there. So conservatively, we think that we will put 2 million MMBtu into construction this year. Our overall pipeline, we have reported 8 million, we think there is great opportunity to accelerate that. But we want to stay conservative on the outset and really update our projections and guidance to you as we execute on those projects in that pipeline.
Ryan Todd: And is there anything on the supply chain side of things that is problematic at this point, or has that moderated to a level that it’s not an issue anymore?
Jonathan Maurer: No. In terms of acquiring equipment, there has been a little bit of a lead time affect. But most of that anticipated and that there is plenty of opportunity to get the equipment that we need to build out our projects. So nothing material there that we are seeing, Ryan.
Ryan Todd: Maybe shifting gears, from conversations with investors, liquidity in your stock remains a challenge, even for those that are positive on the story and the valuation. Can you talk about what options you may have to address current liquidity in the stock, what sort of timeline might be a possible? And how much of focus is this or is this an issue where we just have to grow the EBITDA and the earnings and move things along that way?
Adam Comora: I will say we hear similar questions when we have our investor meetings where people are really positively disposed to RNG and really like the OPAL story, and maybe would like to see more liquidity in our stock. I’ll answer it in a couple of different ways. One is we don’t need to do any primary share issuance. We have got enough liquidity in place and capital raising plans in place to continue to execute on our development pipeline. So there is no need to raise capital from a primary share issuance. From a secondary share issuance, I’d say, like most management teams, we feel our shares offer compelling value here. So I don’t know if there is a lot of interest currently on a secondary and we don’t have any immediate plans in place.
We do think that there could be some opportunities to increase the flow with smaller tuck-in acquisitions and perhaps increased liquidity and flows that way. We are going to spend continue to ratchet up time spent with investors and analysts and thinking about an analyst or investor day later in the year. So we will be visible and try and increase the visibility of OPAL Fuel, but we don’t currently have anything on the table for either a primary or a secondary.
Operator: Our next question comes from the line of Matthew Blair of Tudor, Pickering, Holt Company.
Matthew Blair: Could you share any thoughts on how Q1 is progressing? Seems like you’ve had some volume and potentially margin benefit from the startup of the Bio Town dairy, but then headwinds from lower D3 RIN prices as well as rolling off the locked in D3 RINs from last year. Does that sound about right, is there anything else that we should be thinking about in regards to Q1? And at this stage, can you say if Q1 EBITDA is likely to be higher or lower quarter-over-quarter?
Ann Anthony: So I can take that and then others can jump in. So obviously, we’re just reporting 2022 here and we’ve given initial guidance. We’ll be reporting Q1 in the, call it, next, I don’t know, six weeks or so. But I think everything that you said there I generally agree with. I think from our perspective, we are seeing gas production going in the right direction, right, it’s growing. The caveat — there are two caveats. First of all, Bio Town, we are a minority owner. So we will see an equity pickup in our results for that but it’s not under our direct control. The second piece is, as I highlighted in my comments, from a RIN and LCFS perspective, we anticipate in the first half of the year that we’ll be, I’ll call it minimal sellers, right, just enough to manage the business.
But clearly, we see value. So our results will be skewed to the latter half of €˜23. So I think just it’s important to keep those two things in mind. And we will continue, as I commented, to show the value of both stored gas and unsold environmental attributes as an adjustment to adjusted EBITDA. Again, so people can see kind of what’s pending right to be monetized, again, hopefully in the latter half of the year.
Adam Comora: I just want to follow up into that. It’s really key for us to do that to be able to match current period expenses versus what the value of the gas that we’re producing, holding in inventory and credits that we’re missing and holding in inventory. We do report current period expenses for all of that gas that is produced in credits that are in inventory.
Matthew Blair: So just to follow up on that. Ann, when you said that results will be skewed to the back half of the year, when you said that initially, I took it’s mean that your cash flows would be skewed to the back half of the year, but it sounds like you’re saying that that actual EBITDA would be skewed. Is that the right interpretation?
Ann Anthony: So, no. Again, we will be adding back the value in adjusted EBITDA. So we’ll be reporting it in each quarter. So to your point though cash will be skewed towards the latter half of the year, it may show up in lower revenues and lower net income.
Adam Comora: So when you report your GAAP and operating income, it will be lower in the first half to the second half and once we plan on monetizing the balance of RINs in RNG that’s in inventory. But from an adjusted EBITDA basis, it gets smoothed out.
Ann Anthony: Correct.