Executive Summary / Key Takeaways

• OPAL Fuels is a vertically integrated leader in the capture and conversion of biogas into Renewable Natural Gas (RNG) and renewable electricity, primarily targeting the heavy-duty transportation sector, a market ripe for decarbonization.
• The company is executing a disciplined growth strategy, demonstrated by a significant increase in operating RNG facilities (from 2 to 11 since 2022) and a robust pipeline of projects in construction (2.1 million MMBtu annual design capacity) and development (securing rights for 1.5 million MMBtu in new JVs).
• Recent financial performance shows strong growth, with Q1 2025 Adjusted EBITDA up over 30% year-over-year to $20.1 million, significantly driven by the Fuel Station Services segment (EBITDA up 80% to $12.5 million), which provides stable cash flow and strategic off-take for RNG production.
• Management maintains full-year 2025 guidance of $90 million to $110 million Adjusted EBITDA and 5.0 to 5.4 million MMBtu of RNG production, supported by expected sequential production increases and assuming a $2.60/gallon D3 RIN price, while anticipating approximately $50 million in ITC sales bolstering cash flow.
• While facing near-term uncertainties from macro conditions and regulatory clarity delays (45z, RFS Set Rule 2), OPAL benefits from strong long-term market fundamentals, bipartisan support for RNG, and the potential acceleration of heavy-duty trucking adoption driven by new engine technology like the Cummins 15-liter.

Unlocking Value from Waste: OPAL Fuels' Integrated Approach

OPAL Fuels Inc. operates at the nexus of waste management and clean energy, transforming harmful biogenic methane emissions from organic waste into valuable, low-carbon intensity energy products. Founded in 1998, the company has evolved into a vertically integrated player focused on Renewable Natural Gas (RNG) for transportation and renewable electricity generation. Its core mission is to displace fossil fuels and mitigate climate change by capturing methane that would otherwise be released into the atmosphere, utilizing proven and cost-effective technologies.

The heavy-duty trucking sector represents a significant market opportunity for OPAL. Natural gas, particularly RNG, offers a cleaner and often cheaper alternative to diesel fuel, yet currently fuels only about 2% of this market in the U.S. This presents an "enormous opportunity to cost-effectively decarbonize that sector," especially as other zero-emission technologies continue to face challenges meeting the operational demands of heavy transport. OPAL's strategy is built on capturing this potential through its integrated platform, spanning biogas capture, RNG production, and fuel dispensing.

Competitive Positioning and Technological Edge

In the competitive landscape of RNG and clean transportation fuels, OPAL faces rivals ranging from specialized RNG producers and distributors like Clean Energy Fuels (CLNE) to large environmental services companies such as Republic Services (RSG) and Waste Management (WM), and even integrated energy majors like BP plc (BP). While larger players like CLNE boast extensive fueling station networks (estimated 40-50% market share) and waste giants like RSG and WM leverage their vast infrastructure (estimated 20-25% and 15-20% share in waste-to-RNG, respectively), OPAL carves out its position through vertical integration and specialized technology.

OPAL's vertical model, encompassing both upstream production and downstream dispensing, provides a strategic advantage. This integration is stated to maximize the value of produced RNG and makes OPAL an attractive partner for new business development. Operationally, OPAL's specialized biogas capture and conversion processes are estimated to achieve 10-15% lower operating costs per unit of RNG produced compared to some peers, potentially offering 5-10% greater energy efficiency in methane capture and 15-20% faster biogas-to-RNG conversion times due to advanced purification technology. This technological focus also contributes to an estimated 10-15% lower emissions intensity for its RNG and 5-10% faster scaling of projects compared to more generalized approaches.

While OPAL's aggregate market share in RNG is estimated at 10-15%, trailing CLNE's distribution dominance and the scale of RSG/WM, its operational efficiencies provide a competitive moat. The company's ability to build and operate highly reliable fueling stations, replicating a diesel-like experience with nationwide construction and service capabilities, is a key differentiator in the downstream segment. This contrasts with some competitors who may rely more heavily on third-party services or have less specialized infrastructure. OPAL also invests in R&D, including hydrogen fueling stations, positioning itself for potential future shifts in the clean fuel landscape, though this is a smaller focus compared to its core RNG business.

However, OPAL's smaller scale relative to giants like WM or RSG can result in higher per-unit costs in certain areas, potentially exposing it to pricing pressure. The high regulatory and capital expenditure barriers to entry in the RNG market favor established players like OPAL but also pose challenges for rapid growth against larger, more financially robust competitors.

A History of Growth and Operational Execution

OPAL's journey since going public in 2022 highlights a period of significant expansion. The company has grown its operating landfill RNG facilities from just two to eleven, more than tripling its annual design capacity in operation and more than doubling its production and adjusted EBITDA over this timeframe. This growth has been fueled by securing new gas rights, accounting for the majority of its recent projects, and strategically converting existing landfill gas-to-electric sites.

In 2024, OPAL successfully commissioned three large landfill RNG projects – Prince William, Sapphire, and Polk – adding a combined 3.6 million MMBtu of annual design capacity. The company also demonstrated its ability to grow organically by placing approximately 1.8 million MMBtu of initial design capacity into construction with the Cottonwood, Burlington, and Kirby projects. This track record of execution in bringing projects online and securing new development opportunities is central to its growth narrative.

Recent Performance and Operational Dynamics

OPAL's first quarter 2025 results were in line with expectations, showcasing solid performance across its business segments. Adjusted EBITDA for the quarter reached $20.1 million, representing over 30% growth compared to the same period in 2024. This growth was significantly driven by the Fuel Station Services segment, which saw its EBITDA climb approximately 80% year-over-year to $12.5 million. This segment is highlighted as providing steady, predictable, and growing cash flow that enhances overall business returns and helps mitigate commodity price volatility.

RNG fuel production in Q1 2025 was 1.1 million MMBtus, a nearly 40% increase from Q1 2024 and within management's expectations. This increase reflects the continued ramp-up of facilities commissioned in late 2024. While Q1 production was described as relatively flat sequentially compared to Q4 2024, it was impacted by factors such as an unusually cold winter affecting landfill gas collection and some availability issues at virtual pipeline projects, which are noted as generally less reliable than direct connect sites. Management expects sequential production growth throughout 2025 as newer projects continue to ramp and existing facilities see improvements, including landfill gas collection expansions typically occurring in warmer months.

Full year 2024 results saw adjusted EBITDA of $90 million, meeting guidance, and Fuel Station Services EBITDA of $40.2 million, up 76% year-over-year and within its segment guidance. However, 2024 RNG production of 3.8 million MMBtus was slightly below initial guidance, primarily due to longer-than-expected ramp-up timelines at newly commissioned facilities like Polk and Sapphire, although the gas resource at these sites is proving to be somewhat higher than projected.

The Renewable Power segment, a smaller contributor to overall EBITDA, is expected to see an approximately $10 million decline in 2025 compared to 2024. This is attributed to the cessation of Europe certifying U.S. biogas for its regulatory programs as of November 2024, impacting the export market for renewable power.

Project Pipeline and Future Growth Drivers

OPAL maintains a robust pipeline of growth opportunities. Currently, four landfill RNG projects are in construction: Atlantic, Burlington, Cottonwood, and Kirby, representing an aggregate 2.1 million MMBtu of annual design capacity. Atlantic is expected to commence commercial operations in the third quarter of 2025, with the other three slated for completion during 2026. The company also secured development rights on four new landfill RNG projects through joint ventures, representing an additional 1.5 million MMBtu of aggregate annual design capacity (OPAL's 50% share), with construction anticipated over 2025. Management is maintaining its guidance to place 2 million MMBtu of new capacity into construction in 2025.

The Fuel Station Services segment is also poised for continued expansion, with 45 stations currently in construction, 19 of which are OPAL-owned. Management is guiding for 30% to 50% adjusted EBITDA growth in this segment in 2025. This growth is expected from new OPAL-owned stations, strong performance in the construction and service businesses, and increasing throughput. Long-term adoption in heavy-duty trucking is seen as increasingly supported by the availability of the Cummins (CMI) 15-liter engine, with Freightliner now moving into production and delivery, and a new regulatory outlook that acknowledges the challenges of zero-emission vehicles for this sector, potentially expanding the market for RNG/CNG.

Financial Strength and Outlook

OPAL's financial position appears solid, with total liquidity of $240 million as of March 31, 2025, including over $40 million in cash and short-term investments and substantial undrawn capacity under its credit facility. Capital expenditures totaled $17 million in Q1 2025, including equity method investments.

The company expects approximately $50 million in total Investment Tax Credit (ITC) sales in 2025, following an $8 million monetization in Q1 2025. These ITC sales, while excluded from adjusted EBITDA guidance, are expected to significantly bolster operating cash flow and earnings per share, providing ample liquidity to fund the existing capital plan and near-term growth initiatives.

Management maintains its full-year 2025 adjusted EBITDA guidance of $90 million to $110 million, supported by the RNG production target of 5.0 to 5.4 million MMBtu. This guidance is based on an assumption of $2.60 per gallon for D3 RINs for the year, a figure management notes is lower than the price realized in Q1 2025 ($2.71) and likely to result in a lower sequential RIN price in Q2. They highlight the sensitivity of their EBITDA to RIN prices, with every $0.10 shift impacting guidance by approximately $5 million to $6 million. The company has sold forward about 50% of its expected 2025 RIN production.

OPAL views its business model as a "free cash flow machine" once projects are operational, characterized by low maintenance capital expenditures. This inherent flexibility allows the company to either deploy capital into attractive new growth projects or potentially return cash to shareholders through dividends or buybacks, depending on the opportunity set and market conditions.

Risks and Challenges

Despite the positive outlook, OPAL faces several risks. The uncertain macro and regulatory environments pose challenges. Recent trade policy uncertainties have caused some delays in investment decisions among logistics and trucking fleet customers, impacting the pace of heavy-duty CNG/RNG adoption, although this is not currently expected to alter the Fuel Station Services growth guidance for the year.

Regulatory clarity remains a key factor for the RNG fuel segment. The industry is awaiting finalization of 45z tax credit implementation rules, EPA rulings on the proposed partial waiver for RFS volumes, and details from the upcoming Set Rule 2 regarding volumes and market mechanisms. While there is strong bipartisan support for American biofuels and RNG, the timing and specifics of these policies could impact market dynamics and investment decisions.

Operational risks include the variability in ramp-up timelines for new facilities and potential availability issues at virtual pipeline projects, which can affect production volumes as seen in past quarters. The cessation of European certification for U.S. biogas also impacts the Renewable Power segment's contribution. The pace of adoption for new engine technologies like the Cummins 15-liter is also subject to factors like vehicle cost, residual values, and fleet contract lengths, which could influence the growth trajectory of the Fuel Station Services segment.

Conclusion

OPAL Fuels is executing a clear strategy centered on its vertically integrated platform to capitalize on the growing demand for low-carbon intensity fuels derived from waste. The company's recent performance demonstrates solid growth, particularly in its high-margin Fuel Station Services segment, which provides crucial off-take for its expanding RNG production base. With a robust pipeline of projects in construction and development, OPAL is well-positioned for continued increases in production and EBITDA in 2025 and beyond, supported by favorable long-term market trends in decarbonizing heavy transport and increasing focus on methane abatement.

While navigating regulatory uncertainties and the inherent variability in project ramp-ups, OPAL's technological capabilities, disciplined execution, and strong financial flexibility, bolstered by expected ITC monetization, underpin its investment thesis. The company's ability to leverage its integrated model and compete effectively against larger players positions it to capture a meaningful share of the growing RNG market, offering investors exposure to a sector with compelling environmental and economic tailwinds.