Clean Energy Fuels Corp (CLNE) 2024 Q1 法說會逐字稿

Good day, everyone, and welcome to today's Clean Energy Fuels first quarter 2024 earnings conference call. (Operator Instructions) Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Mr. Robert Vreeland, Chief Financial Officer. Please go ahead.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ended March 31, 2024. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com. for the call is also being webcast. There will be a replay available on the website for 30 days.

Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements.

Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of the Clean Energy's Form 10-Q filed today. This forward looking statements speak only as of the date of this release. Company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results.

The directly comparable GAAP information reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today.

With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Thank you, Bob. It pleases me to say that we kicked off 2024 with a strong first quarter. Our base business of fueling fleets constructing and maintaining station for those fleets and providing other services that keeps trucks, shuttles and buses operating on a clean fuel performed well. We also made good progress in our business of developing renewable natural gas dairy projects. I'll expand with a few more details on both in a moment.

The 8.6% year-over-year growth in RNG fuel volumes is a testament to the stability and growth in our base business. In addition, it reflects the significant RNG volume that is now flowing through the new state of the art fueling stations that we have built and opened over the last two years where we have an anchor customer in Amazon. We are also seeing other vehicles begin to fuel these stations, which helps our fuel margin.

As always, Bob will give you more details about our financial results, but I would be remiss not calling out the $12.8 million in adjusted EBITDA for Q1 compared to minus $4 million of Q1 of last year. A significant upswing is attributed to the growth in our core business that I just mentioned as well as circumstance, which we found ourselves during the beginning of last year with historically high natural gas prices in California that impacted our bottom line.

Our balance sheet remains strong with almost $250 million of cash and investments on hand and you should see continued improved adjusted EBITDA results through this year. I'd like to take a moment to address the environmental credit situation because I think some might tie the ups and downs of those prices a little too tightly to overall business. Of course, we're not pleased with where the California LCFS prices have been trading as of late.

During the first quarter of 2024, the federal D3 rent prices remained strong and positively impacted our results. We have witnessed a volatile LCFS credit price for quite some time. So we went into 2024 planning for that to continue.

And as to our strong view that a higher LCFS credit prices needed over time to support the robust pace of low carbon energy investment necessary to achieve California's ambitious targets. And we believe that members of the California Air Resources Board and staff understand this and are working with all stakeholders on a solution, but like most policy matters that requires time and process. Ultimately, we believe the compliance curve will be strengthened and will help.

Let me drill down a little further. Our fueling station and RNG distribution business generates margin from the D3 RIN credits, LCFS credits, California and Oregon volumes, federal alternative fuel tax credits and margin on the fuel cell itself. Using RNG instead of diesel results in lowering fueling costs and lower emissions for our customers. It also contributes to a solid base margin for us. The credits are additive to this base margin.

On the RNG production side, our dairy projects generate revenue from RIN credits, LCFS credits and RNG sales. The financial return of these projects is further enhanced by credits that will be generated under the inflation reduction act through the investment tax credit and beginning in 2025, the 45 Z production tax credit.

These projects produce ultra low carbon intensity fuel for customers while also providing a solution for our partners in the agriculture sector. Let me return to the growth in our core business for a moment, which is providing fuel and reliable services to our fleet customers.

Over the last few months, we have signed agreements with municipalities across the country, demonstrates the continued confidence in the reliability and emission benefits of operating with RNG. These agreements included everything from Long Beach transit for about 1.5 million gallons of RNG a year to operate their fleet of city buses, for the vehicles at the Port of Seattle and through Atlantic County utilities authority in New Jersey that is expected to use 0.5 million gallons of RNG for their waste collection vehicles.

Another deal that we just recently signed is one that I know our sales team and myself, particularly proud of and that is Harris County Metro, which services the greater Houston area. Houston Metro is one of the largest transit agencies in the country that operates their fleet of buses primarily on diesel. Well, that's about to change and then making the switch with clean energy.

We will be building a new state-of-the-art station for up to 120 of the first buses operate on natural gas. All told the close to $15 million contract to construct a new station and modify their facilities for natural gas fueling represents one of the largest transit agreements we've made in many years.

These municipalities are on the hook by their constituents to keep the buses running on time and the trash picked up. It must depend on vehicles that operate not only sustainability but reliably as well. RNG is the cleanest fuel available and as the most reliable performer of any other alternative and no other company in the country keeps those stations which provides that fuel operating better than clean energy.

Another unique advantage that clean energy holds over virtually every other fuel provider is that we now produce our own ultra-low carbon RNG dairies. This is in addition to the approximately 78 different offtake agreements we have with RNG suppliers provide the largest natural gas fueling infrastructure in North America. We deliver RNG to 454 different stations daily, and RNG now represents 88% of the transportation fuel we sell.

This allows us to give RNG customers the greatest level of assurance that they will receive this clean fuel without interruption. Others trying to match one RNG production project with one contract fleet customer. The customers, especially national fleets, want to know that providers and operators of their stations have a portfolio of supply in case there's interruption in any one supplier. No other company provides that confidence the way Clean Energy does.

In fact, we recently won the deal the service of Fort Collins transit by beating our 12 other competitors, including two global energy majors because of the agency's confidence in our ability to keep the RNG flowing 24/7. And we apply this strength across all transportation sectors, whether it's for municipalities or the world's largest logistics operators like UPS for which we provide RNG in over 25 states and Amazon for which we have constructed 19 state at the RNG stations over the last several years that provide fast bill and time fill offer -- options for thousands of heavy-duty trucks.

On a daily basis, Amazon trucks are fueling at Clean Energy stations in 26 different states. We feel good in our positioning at this critical time as the Cummins X15 and engine hits the heavy duty truck market. Reviews of the new engine by those fleets that have been testing it have remained stellar.

Pivoting to our RNG production business, we have had a busy first part of the year, completing a series of digester projects. It varies across the Midwest with our partner, BP. These projects began injecting RNG into the pipeline a few months later than what we had originally hoped, but we remain pleased with the overall outcome and continue to learn with every project.

2023 was one of the worst markets in decades for our friends in the US dairy business. Combination of low milk prices and high feed costs created very challenging financial conditions for dairy farms, including some of the farms we partner with for RNG projects. To that point, a dairy in Idaho that hosts one of our 50/50 joint venture projects with BP filed for Chapter 11 bankruptcy protection in April.

The proceedings are at an early stage, so we're not able to comment on the details of the process. So we have are, of course, monitoring this situation very closely. Importantly, the dairy is still operating, while the reorganization proceeds. In our RNG project creates an important operational, environmental and financial solution for the farm once the project is completed.

Despite some challenges, our view on dairy RNG remains intact. These long-term projects produce the lowest carbon fuel for the customer and they provide an important solution for our farm partners, all while capturing methane from animal waste and removing it from the atmosphere.

As an example of our commitment to adding to our low carbon RNG supply, I'm pleased to say that we are expanding our current relationship with mass energy works with whom we have RNG offtake contracts by signing a new development partnership to construct RNG digesters at a handful of areas across the country.

Carol Moss and his team are some of the best developers in the business, and we're excited about this development agreement, but we just signed it yesterday. So we will be formally announcing it with the press release early next week with more details.

The other recent partnership that we have formalizes with [Frank] brands owner ourselves for very Dimmitt, Texas, who might remember, it's Frank's dairy that experienced a tragic fire last year. Frank lived up to its reputation as one of the best in the business by overcoming this horrible situation, rebuilding is barn and replacing is large herd in less than a year. He's also committed to working with Clean Energy and building an RNG digester for all the business and environmental reasons it allows. We couldn't be prouder to call Frank, our partner.

I hope I've left you with the impression that we remain optimistic about our future. The fundamentals of our business of producing and selling RNG to the transportation industry is strong and growing despite some external forces that might not always seem to go our way. We believe we put the best team in place to execute our strategy and they prove that every day.

And with that, I'll turn the call over to Bob.

Thank you, Andrew, and good afternoon to everyone. We had a solid first quarter of 2024 with revenue of $103.7 million, a GAAP loss of $0.08 per share, non-GAAP loss of 1p a share and adjusted EBITDA of $12.8 million. All the earnings metrics are much improved from a year ago and were better than our expectations for the first quarter of 2024.

The call that the first quarter of 2023 was significantly impacted by the historically high natural gas prices in California, which ultimately was a drag on earnings, but was a big positive on revenue since much of that increase in gas costs was reflected in our pricing to customers. That's actually the main reason you see a year-over-year decline in our revenues because of that run-up in the natural gas costs in California last year.Having said that our net results for the first quarter of 2024 certainly got off to a better start than a year ago, which puts us in a good position to remain confident in maintaining our annual guidance for 2024.

First quarter results for 2024 can be summed up by saying we had continued growth in RNG volumes, Green revenues exceed our expectations, which helped to offset certain LCFS credit sales that moved into the second quarter. We experienced lower net losses than expected from our RNG equity method investments while the rest of the business, including our underlying fuel margins, performed in line with expectations.

To shed some light on this in the first quarter of 2024, the upside in RIN revenue was principally due to an average rent price realized of $3.12, plus we saw better net economics to us from our RNG supply offtakes. Our LCFS revenues were slightly negative for the first quarter of 2024 because we sold $2.25 million of LCFS credits in the first week of April, that we ordinarily would have sold within the first quarter.

Those LCFS revenues of $2.25 million will show up in our second quarter results. We would expect to get back into a normal LCFS credit sale timing cadence for the end of the second quarter with a plan to transact all of our LCFS sales in the second quarter.

And finally, the lower net loss than expected from our RNG equity method investments is principally related to the timing of finalizing construction and placing the dairy projects into service and the ramp up of operations.

We ended the first quarter with approximately $249million, $250 million in unrestricted cash and investments. We maintain our capital expenditure guidance of $60 million for our distribution business. We are raising our forecast for our dairy RNG investments to $120 million, up from $100 million, principally due to the Moss energy RNG deal that Andrew mentioned. With that, operator, please open the call to questions.

(Operator Instructions) Eric Stine, Craig-Hallum.

Hi, Andrew and Bob. So just starting with the 15 liter, I know that Cummins has had some pretty nice targets out there for adoption here in '24, '25 and '26. And I know we're getting closer OEMs, certainly talking about production dates and that sort of thing. Just curious what your thoughts are and what you're hearing and kind of what your expectation is throughout the remainder of '24 and then '25, '26?

Yeah, Eric, I don't have any feel right at this point with the numbers, and I'm guessing you'll have to get those from Cummins. I have been recently to Cummins. I mean, and one of the things that impressed me is back in Indiana and one of the things is they're very pleased and excited about this engine. It really feel like the technology and what they've been able to bring this engine is really impressive. And so they're excited. So that makes me excited.

I do know as we keep up with customers that are testing engines, the feedback continues to be very strong and the excitement high. So the expectation is that is going to be very well received as those orders begin to come in. One update is some of the validation units, it's kind of a term of art in the engine businesses is the next batch of trucks has been built coming down the line and those engines are now making their way to customers.

In fact, we'll get one here shortly that we'll be using to -- for our customers and our customers and presenting indication, Eric. We've booked that truck out in one week and two week test for real loads, real deliveries for a product for our customers in those trucks for the next several months. So the excitement, I think, is good for this product. And I'm just hoping that we'll know more here in the early part of the summer of how these orders are going.

Got it. And I won't ask you more time in the past about maybe future plans with Amazon, but maybe you can talk about the -- you mentioned some of the volumes you're starting to see at those Amazon stations from other fleets. Curious again, coming back to the $15 million how does that other into those conversations.

As you know that, that's obviously those stations have been built with time Phil, as you're familiar with for the Amazon trucks and of course, Amazon have built themselves to the fast fill as well. But each of those stations has pumps kind of on the front part of the -- of those facilities that can that can fuel outside fleets.

And it's been nice to be see, for instance, the other day of a picture that one of our salesman sent me from San Bernardino, which large station has, I think, almost 200 Amazon trucks out in the Inland Empire and there were four different unrelated heavy duty vehicles from other fleet. So we're beginning to see that happen. And of course, you know the X15N will be important to this ride because as those other 15 leader the trucks become available to other fleets.

These locations are all in the perfect areas why they've been put there by Amazon. They're in warehouse districts. And so it should be very well suited as these engines come to market. So we're glad to see that we're beginning to see those volumes ramp up in its notes as we hoped.

All right. Thank you very much.

Manav Gupta, UBS.

Good morning, guys. Congrats on start to the year. And my first question is policy related. If 45 V is implemented in its current form than you with negative [CI RNG] could be a major beneficiary of it. I'm just trying to understand, I think for the guidance is out 40 V guidance, but any color would be helpful if you have heard on 45 V, is the plan still that it goes into effect V25 so if you could help us understand the impact on you and what you are hearing in terms of then the government could be out with it.

You're breaking up a little bit, Manav. But if I understood your question and your 45V, yeah, (multiple speakers) Okay. So Z is, in fact I was I was at a conference earlier this week were John to a [desk] who is responsible at the White House for kind of shepherding all of the IRA, actually talked about that they're moving through these different things at Treasury. And so it's our understanding that 45 Z should come out here sometime later this year. I'm hoping earlier is better sometime maybe later this summer. But we haven't really heard anything definitive, Manav, so far.

Yeah, go ahead, Manav.

So a quick follow up there would be can you update us on the number of dairies you already have in line? And how should we think about modeling the number of days online by year-end 2024?

We have five dairies that are injecting gas right now, and the sixth one is completed, but we're just going through kind of a punch list with the farmers that would make six. So by the end of the year, those first five should be all producing and injecting and creating credits. Sixth one could slip into 2025. That's really, for no other reason, Manav, other than just, the length of time that it takes to get through the certification process, otherwise, those first fiber, storing gas and steam.

Thank you. I'll turn it over. Thank you.

Rob Brown, Lake Street Capital Markets.

Good afternoon. I'm just wondering on the mass energy partnership, additional development, I guess, on RNG, are they focused in different areas or different geographies or what sort of the piece of that partnership adds?

[Moss] is really one of the biggest and best and a developer. You've got 60 projects. And so we're very excited. We work closely with Daryl and have for a long time. As I mentioned in my remarks, we're taking gas RNG from them him. Now, these projects will be scattered out in seven different states. It's actually six projects, but the way that the dairies align themselves will actually be in seven states. I'd say for the most part, it's Midwest and in the south.

And so we're excited about that. I'm going to I'm not trying to hold off giving enough detail on that because we're going to talk a lot more about that next week, but it's an exciting development and it should kind of use our development program.

Okay, thank you. And then on the Amazon rollout, how many more stations are sort of had to go there or in the original, I guess first wave?

There's two more to go and there one is real close and the others waiting on. I won't bore you with it, Rob, but it's -- we're waiting on Northern California City to approve stormwater and soon as we get that done and that window will be ready to roll. So we've made good progress on that we've completed 17 of 90. Actually, we've completed more of that work. But of the original 19, we've got 17 completed

Okay, thank you. I'll turn it over.

Derrick Whitfield, Stifel.

Good afternoon all and thanks for your time.

Good afternoon.

Regarding the mass partnership and I guess you guys want to hold off on the details on at some level first, congrats on that because, as you mentioned, is one of the more active developers in the industry, but maybe specific to clean, how should we think about the partnerships implications to your development approach and cost, like are you guys going to do more of the covered lagoon versus complete mix? And I guess just trying to understand the application and how it could potentially change your cost structure?

Well, one, I think Daryl's of proven cost effective development, and we've seen that over time. This is no nonsense of take this to the operator. So we like that of these dairies will be smaller and many of them will be covered lagoons, and so, I think it'll be a little bit different than some of the ones that we've recently completed. The Daryl, as that -- has off a lot of experience on that, and we're looking forward to working with them on.

And as my follow-up, could you perhaps update us on the project pipeline? I know that it's been fairly steady and you guys are working to convert that. But any color that you can provide just on the depth of advance type developments that you guys have right now, will be greatly appreciated.

Well, obviously, this must think factors into that and these projects ebb and flow. But I but I'd say, one of the things the the pipeline is robust in a lot of the projects that we've had over the last year, year and a half are continued to be looked at kind of continue to wrestle with. But, look, as we look at the pricing of the low carbon fuel credit and other sort of uncertainties worked in those, some of these projects don't look as attractive as they once did, so we have to think that all come around, the cost of some of these projects, as we all know and the time to market has been somewhat challenging for certain of these projects.

And so of these projects have gone away. It's just whether or not those are is where we wanted to deploy our precious capital right now. And so when we get an opportunity to do like a boss program with the structure you'll see next week. We think that's kind of moves to the top of our pipeline list. And so we continue to know that we need for RNG, the industry needs more RNG.

We want to be good stewards of capital, though, as we launch these projects. Of course, the one that I mentioned in my remarks, the strength brand now that one sort of talked about, but that's getting ready to go into production and so we're busy.

Terrific. Thanks for your time?

Well, I should say production with Frank [brand] is going into construction -- question on production.

Matthew Blair, TPH.

Thank you and good afternoon. You mentioned that in my first quarter -- you mentioned the first quarter was better than your expectations, which we thought was pretty impressive considering the LCFS credits that slipped into the second quarter. Was there anything from the second quarter or back half of the year pulled in for the first quarter and then --

No.

Okay. No. And you reiterated your guidance, I guess all things equal, this would make you feel more confident about hitting the 2024 guidance. Is that the right read through?

Yes, (multiple speakers) We have volatility there, right? What I think it points to a little bit, especially with the LCFS going into the second quarter as it shows that in the wine business, fueling business strong, healthy.

Indeed. And then do you have an update on the total JV, I believe that your six current dairy RNG projects, I think they're all with BP, is that correct? And could you provide an update on how things are going into the total JV? We saw that they're working with another counterparty as well. So where do things stand with total?

Yes. So we know we have one project that's was our first project with Total. In fact, our Board of Directors going to out to inspect that next week. It's in the Texas, Panhandle. We're pleased with that, our partner there, our dairyman Rocky. So that was a producing well. We continue to -- as we just discussed earlier a couple of questions ago, we have pipeline. So we work, we show different deals to our partners. And of course, we do that with total. And so I'm sure that here in the near future there will be some that will kind of go into the total column.

Great. Thanks for your comments.

Okay. Thank you.

Betty Jiang, Scotiabank.

Thanks. Hey, Andrew, hey Bob. I think first question on LCFS. I'm just curious what you guys are seeing there, is the expectations still that we'll be getting the updated program starting in 2025?

Yeah, a better outlook -- this has been a difficult one to pin down in terms of time line. But our view is we're working very closely with [CarpX] staff, car Board members in the industry is. We tend to believe -- we believe that the program that we -- got a preview of at the last meeting should come before the Board probably July.

And if all goes well, then it would be adopted for implementation in 2025. And we believe that'll include kind of the 9% step down the accelerator in terms of rationing down the compliance curve depending on market conditions and some of the other more constructive points that we've talked about before in terms of our constructive interpretations on avoids methane and book and claim and some of those things that used were a little up in their earlier in this process, but we need to get this done. I think that's the view staff as well.

Okay, great. Thank you. And then on in terms of what you mentioned about the dairy farms and how there are some challenges financially? Do you think that could have any impact on your RNG volumes?

Well, I mean the Idaho situation, that I mean, they're going to have some timing delay push out. The rest of it, no. I mean, we're proceeding, we're producing, we're injecting gas, we're kind of in that early ramp-up stage on all those.

So no, In fact, really on as these things get going on, you're providing a revenue stream to the farmer. So I mean, these are really actually a good thing for the dairies. So there may be some delay there for the one project.

Got it. Thank you.

Pavel Molchanov, Raymond James.

Thanks for taking the question. I remember a year ago you provided this math that for every -- I think it was 3,000 trucks Class 8 trucks running on RNG, your fuel sales would go up by 10% or something like that. Is that sensitivity still accurate, given everything that's happened since then?

Well, Pavel. 3,000 trucks is 45 million gallons. 45 million gallons on the 250 million, 300 million gallons that we do. So economics that's in that range. I mean, that's the kind of -- that's sort of backs up of 3,000 trucks are important, right. We're doing not quite that many Amazon. That's volume sort of consistent with what I just mentioned. I think what we talked about is what Cummins has said is that they expect that it could be in the 1 year of orders that the X15 and could see something on the order of 3,000 orders.

Probably what I shared with you, Pavel or others is that we'll get a disproportionate share of that volume because of our network. And we hope that, in subsequent years the numbers go up, I mean, the way to think about it is these heavy duty trucks with these new engines, especially with 15 liter, will use 15,000 gallons per truck. So you get up to 10,000 trucks, which would be a very small penetration.

It was called out in a couple of years now, very small penetration on the quarter million Class 8 trucks that are sold on an annual basis. That's that generates 150 million gallons, and we have very high market share of that. So that's really meaningful for us to what keeps us is we're very optimistic about our business and why we'll need more and more RNG. So we're just beginning to see these engines come to market. And so I'm very hopeful that we'll see the uptake like we hope.

Okay. Let me follow up with more of a kind of a conceptual question with this AI data center euphoria, there is more and more talk about bio gas going into the data center space as gas, right, without being turned into RNG first. What are your thoughts on that?

Well, the best use of RNG is certainly low carbon, low CIR RNG is in transportation, which is our decarbonized market. And I understand what everybody is striving for is they obviously bringing on these power draw, the power sink of the AIS breadth is breathtaking. And so they want to have as benign fuel as they can as lowest carbon fuels they can.

It's not necessarily the most economic in the wisest place to put your most coveted low CI gas. It should go in transportations where generates the most amount of credit. So yes, some landfill gas, a lot of landfill gas may end up operating into the stationary market, but we're talking to all the different producers now and you'd be surprised of RNG, many of them that used to talk a lot about stationary sources. I want to bring it to the to the transportation and eventually we want to bring into the transportation market for hydrogen, not only for RNG for vehicles.

So there will be a lot of pressure on RNG. The good news is there's probably 7 billion to 10 billion gallons of RNG that's I think eventually over the next decade will come to the market. The lowest of that CI gas will come to the transportation market won't be going into AI fixed power centers, but I thought where you were headed, Pavel, obviously, while you see you still throw me a softball. This just puts more pressure on the electric situation. If we didn't already have enough power for the heavy duty trucks to go to battery, I think that the market is beginning to understand.

So I'm so excited about being in the position we are with RNG that can act today in the heavy duty truck. Because when you all of a sudden increase the demand of electricity United States by 20%, you just use up what you needed for heavy-duty trucks. And so it's just making the situation worse for power in America to be able to do all things every light duty vehicle, every heavy duty vehicle and now [20%] for AI, you don't have the power and that's we just read the Wall Street Journal, they have pretty good story out yesterday. So I like how we're positioned relative to using a battery and a heavy-duty truck.

All right. Thanks very much.

Okay.

Craig Shere, Tuohy Brothers.

Hi, guys, good afternoon. Thanks for taking questions. I'm Craig. So you point out that there are higher costs, it takes longer to complete projects, obviously, for now at least the LCFS cash flows are much lower than anticipated 12 months, 24 months ago. I have kind of back of the envelope guesstimated that we're looking at projects maybe in the 7 times EBITDA when they're finally online now, and that doesn't count, cost of capital during construction.

So since you've acknowledged all this, I'm a little confused about a few things, though. The first is obviously, you're strong and you have good relationships. And I don't think any of us expect LCFS to stay where they are, but is this new moss relationship taking away your interest in direct acquisitions? Because it seems like in the market I just described that there are some weaker players that just have to fold and they can't last another 12 months to 24 months.

I think you're right, (multiples speakers) but much doesn't take away from that. We'll get a crack at some of those. I think you're right, some of those will come to market. There needed to be some just being candid, Craig, there needed to be some market therapy, which I think is going on and some of those projects will come forward and we know all of them. We've looked at them, but we'll get a crack at those two.

Okay. And then the next part of the question because it was interesting just because it sounded like moss was additives, the nitrous I heard you say, and I forget who asked the question, but saying that basically moss is moving the top of the list. And I'm wondering if because of the economics you're starting to slow walk what you had expected to be doing with PB and [Total] 12 months to 18 months ago?

No. That's the -- I mean, the activity within those JVs is constant and it hasn't changed. We're just -- we're also able to do some of these, on our own, if that's the way it works. So I think, all of us kind of firing on all cylinders really to get more volume.

It's just I wouldn't read any more into it other than it's additive. It's just great opportunity that's working with the well-known, very good, a developer. We've talked to them for a long time of doing it. And we finally were able to get this together and we're excited about.

And your JV partners, they have a rights, but not an obligation to do the projects that you guys have tons and circling up together? Is that right? So to the degree they say, I think we could take a pass for the next six months until the market settles out, you can pursue it on your own.

We're able to pursue them on our own.

Yeah.

And are the recognizing there's a difference from where the ball is and where it's going, but is that roughly seven times EBITDA on current market conditions after, delayed completion process versus what was expected a couple of years ago. Is that roughly where we are? and given your stable economic position, are you comfortable independently investing on that basis thinking there's just no way Carv is going to leave LCFS of $50 to $60, 18 months from now?

Well, let me I guess I'm not going to use your EBITDA number, okay. But let me talk about the second part of the question first, I think it would be safe to say that we believe that the LCFS price will normalize and will be higher in the future than it is currently. And we don't -- we're not modeling these projects thinking that we're going to [ready] to have 20 year or $50 LCFS price.

We do believe that they're going to correct the obligation curves, we should begin to work off the overproduction -- oversupply of credits, and we'll see those credit strength. And so we've got that factored in as do our partners that we're working with. And so we're optimistic about the way that's going to sort out.

Yeah.

I mean, all these deals are -- they are have their own unique aspects to all of the deals are out there in the market. So it's not really prudent.

Craig, I think the way to look at it and maybe I'll just do it simply is while you started your question by saying, and I said that the projects a little bit more expensive, take a little longer, that kind of thing. We saw a little bit of inflation and all that's true.

On the other hand, we didn't have the IRA. We didn't have the IRA and we didn't have the PTC, we didn't have the ITC. So, all things, not look. If you were to tell me that it was going to be $50 LCFS -- further over the long haul, then this wouldn't apply. But if you think that that's going to normalize at something higher than that then all things being equal, these projects are similar, the economics are similar to what they were when we started, not quite to where they were when you had $200 LCFS, but in the kind of the similar ballpark.

We have a threshold with our partners and with our Board of how we deploy the capital and the asset. It has to meet that and otherwise, we don't do it. So you should presume that this mode these loss projects meet that threshold and so that's why we're moving forward with them right now.

Sounds good, hopefully, quick one here. In terms of the delayed coming online and actually getting cash flows because of one -- carbon impact is certified and you can sell LCFS and whatnot. Is getting -- is the time line for major equipment, procurement and it's availability of major equipment procurement of accreditation for the credits, connectivity, pipelines, is this, in your view, say in the last six months, is this now stable starting to improve or still getting worse?

I have no, I think the -- well, if I was hearing you saying, I mean, in the long lead items and some of the pressure that we saw because of supply chain, that's normalize. We are working really, okay, so that's one, the pathway is still too long, right?

The certification process is still way too long. We are working hand in glove with the staff of the car to get that shortened and we've made -- we've had meetings, the highest levels of government to talk about that. I don't think we have any pushback on that. I think we all want to shorten that up and it needs to come in dramatic.

And so I'm hopeful that here in the next few months, we'll -- you will become clear that they've made some changes to the process and will shorten up that time line, which will be helpful for everybody because what we've got right now just it's not workable. I mean, you don't do that and anything else you don't build skyscraper and then you've been vacant for a year and a half, it's crazy, right.

So I think though that's generally understood now is just kind of getting that backlog worked off and kind of changing the process to bring that in to something that makes a lot more sense.

And physical pipeline connectivity?

That kind of depends on who, how far you are and who you're working with, which utility and which pipeline and that's never as fast as you like, but that's -- that should be shouldn't be a gating factor on these projects. Can be -- you're not going to change that I mean, look, I'm looking down the table one of my fellows this bill at 200 fueling stations, we'd run into that problem with utilities making meters, okay and that's just the way it is.

And so I would say your pipeline connectivity is six months a year, and that's never going to change, but that should be within the time line of the construction project. And when it's way outside of that, then you got pot case.

That's helpful. Thank you.

Jason Gabelman, TD Cowen.

Thanks for taking my questions. The first one, just on upstream EBITDA cadence. This quarter was a bit better than expected, but you didn't change full-year guidance, it sounds like it was related to -- I couldn't really tell if it was project construction getting delayed or something else.

So should we expect that EBITDA to move more negative in 2Q as you ramp up construction activities and other things going on in that segment. And then does the this the smallest, our joint venture have any impact to that?

No, Jason we should see some increase kind of ramping throughout the year on that on the distribution side of the business.

Sorry, not the distribution side, the upstream side of the business.

Okay. So the drag, yes, drag it worse. Well will see some of that. Yeah. So as we talked about on our last call, that a lot of that loss would be in the first part of the year. So it's going to move out a little bit. So you'll see some of it in the second quarter.

Got it. And no change from the small strain joint venture to that guidance?

correct. No.

Okay. And then my second one is just the 15 liter engine order book on. I mean, it sounds like the orders aren't going to come in really until the middle of this year. I think on prior calls you had suggested and that sales could be kind of 3,400 in 2024. Maybe that was comments commentary, not yours but it sounds like the sales are being pushed out a little bit. So can you just maybe talk about when you expect to see those volumes materialize on the road and your just distribution segment, is that more of a 22 --

Yeah, those are comments numbers that, I got broadbeater around here but not using numbers anymore. Those are comments numbers, but I would say this, it was always contemplate. I mean, the production never up until June or July anyway. So I don't know that I'm so I'm sitting here saying that it's slipped or this and that but he was always the second half and we always figured by the time that made its way, by the way these get produced, they get sent to the dealer, they get sensitive of the customer, they get -- since sold and the vehicles take a while to hit the road.

We always figured that the volume for 2024 for us, would be relatively small and it would be way back end loaded. I mean that we would really wouldn't see much volume into September, October, November way late in the year.

So it's -- it'll really be a 20 -- we'll get a stub. And even if they did the 3,500 or 3,000, that Cummins talked about, we stand to gain a large part of that market share. I'd like to think, it will be in the fourth quarter, and that will really be we'll see that volume for in 2025. We've always thought that, but I still want to see those orders come through and those those engines built.

Yes. Understood. Great. Thanks for the clarifications.

Yeah. Thank you.

Thank you. There are no additional questions at this time. I'd like to now turn the conference back to Mr. Andrew Littlefair for any closing remarks.

Yes, thank you, operator, and thank you, everyone, for joining today, and we look forward to fill you in on our progress next quarter. Have a good day.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.