Overview

OPAL Fuels Inc. is a vertically integrated leader in the capture and conversion of biogas into low carbon intensity Renewable Power and Renewable Natural Gas (RNG). The company is also a leader in the marketing and distribution of RNG to heavy duty trucking and other hard to decarbonize industrial sectors.

OPAL Fuels has participated in the biogas-to-energy industry for over 20 years. The company’s principal sources of biogas are landfill gas and dairy manure, which is processed through anaerobic digesters. As of December 31, 2024, OPAL Fuels owned and operated 26 projects, 11 of which are RNG projects and 15 of which are Renewable Power projects.

Financial Performance

For the year ended December 31, 2024, OPAL Fuels reported total revenues of $299.9 million, an increase of 17% compared to the prior year. This was driven by strong performance across the company’s business segments:

Segment	2024 Revenue	2023 Revenue	$ Change	% Change
RNG Fuel	$88.4 million	$66.3 million	$22.1 million	33%
Fuel Station Services	$166.9 million	$135.0 million	$31.9 million	24%
Renewable Power	$44.7 million	$54.8 million	$(10.1) million	(18%)

The increase in RNG Fuel revenue was primarily due to a $21.1 million increase in Environmental Attribute sales, driven by higher prices and volumes. Fuel Station Services revenue grew 24% due to a $31.0 million increase in RNG marketing revenues, including higher RIN and LCFS minting and sales. Renewable Power revenue declined 18% due to lower electricity sales and Environmental Attribute revenues, as some facilities were converted to RNG production.

On the cost side, OPAL Fuels saw increases in cost of sales across its business segments, with RNG Fuel up 20%, Fuel Station Services up 12%, and Renewable Power down 11%. Project development and startup costs increased significantly by $14.2 million or 293%, primarily due to virtual pipeline costs and transaction expenses. Selling, general and administrative expenses increased 4%, while depreciation, amortization and accretion rose 23% with new assets coming online.

The company recorded a $2.0 million impairment loss on a Renewable Power facility in 2024. Income from equity method investments increased $7.7 million or 140%, driven by the Emerald RNG facility’s first full year of operations.

Interest and financing expenses rose $10.3 million or 111%, due to higher outstanding debt and related fees. The change in fair value of derivatives decreased $5.8 million or 78%, as the prior year saw a larger gain on the earnout liabilities. Other income declined $122.3 million or 98%, as the prior year included a large one-time gain on deconsolidation of VIEs.

Overall, OPAL Fuels reported net income of $14.3 million in 2024, down significantly from $127.0 million in 2023, primarily due to the absence of the large one-time gain.

Strengths and Weaknesses

Key strengths of OPAL Fuels’ business model include:

• Vertically integrated platform spanning biogas capture, RNG production, Renewable Power generation, and fuel distribution
• Diversified portfolio of RNG and Renewable Power projects, providing revenue stability
• Strong market position and growth opportunities in the RNG and alternative fuel sectors
• Established relationships with landfill owners, dairy farms, and commercial transportation fleets
• Expertise in project development, construction, and operations

Weaknesses and risks include:

• Exposure to regulatory changes in environmental incentive programs like RINs and LCFS credits
• Reliance on biogas feedstock availability and quality, which can be variable
• Potential construction and operational challenges with new project development
• Significant capital requirements to fund growth, with potential liquidity constraints
• Legal proceedings related to construction contracts, which could impact operations and finances

Outlook and Future Prospects

Looking ahead, OPAL Fuels is well-positioned to capitalize on the growing demand for low-carbon fuels and renewable energy. The company has a robust pipeline of RNG projects in construction and development, which should drive continued growth in its RNG Fuel segment.

The company is also exploring opportunities to diversify its biogas feedstock sources beyond landfills and dairy, which could further expand its RNG production capacity. OPAL Fuels is additionally pursuing the design, development, and construction of hydrogen fueling stations, positioning it to participate in the emerging hydrogen economy.

However, the company faces regulatory uncertainty around environmental incentive programs, which are critical to the economics of its RNG and Renewable Power projects. Any adverse changes to policies like the Renewable Fuel Standard or state low-carbon fuel standards could negatively impact demand and pricing for OPAL Fuels’ products.

Additionally, the company’s ongoing legal proceedings related to construction contracts could create operational and financial challenges if not resolved favorably. Careful management of these risks will be crucial as OPAL Fuels executes on its growth strategy.

Overall, OPAL Fuels appears to be a leading player in the rapidly evolving renewable fuels and power generation sectors. Its vertically integrated business model, diversified asset base, and development pipeline position it well for continued growth, though regulatory and operational risks will need to be closely monitored.