References to the "Company," "our," "us" or "we" refer to ArcLight Clean Transition Corp. II. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements



This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act, and Section 21E of the Exchange Act. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,"
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Such statements
include, but are not limited to, possible business combinations and the
financing thereof, and related matters, as well as all other statements other
than statements of historical fact included in this Form 10-Q. Factors that
might cause or contribute to such a discrepancy include, but are not limited to,
those described in our other Securities and Exchange Commission ("SEC") filings.

Overview

We are a blank check company incorporated on January 13, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the "Business Combination"), that we have not yet identified. Our sponsor is ArcLight CTC Holdings II, L.P., a Delaware limited partnership (our "Sponsor").

Our registration statement for our initial public offering (the "Initial Public Offering") was declared effective on March 22, 2021. On March 25, 2021, we consummated our Initial Public Offering of 31,116,305 units (the "Units" and, with respect to the Class A ordinary shares included in the Units being offered, the "Public Shares"), including the partial exercise of the underwriters' option to purchase 3,616,305 additional Units (the "Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of approximately $311.2 million, and incurring offering costs of approximately $17.6 million, of which approximately $10.9 million was for deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement ("Private Placement") of 9,223,261 warrants (each, a "Private Placement Warrant" and collectively, the "Private Placement Warrants"), at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of approximately $9.2 million.

Upon the closing of the Initial Public Offering and the Private Placement, approximately $311.2 million of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account ("Trust Account") with Continental Stock Transfer & Trust Company acting as trustee and invested in United States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.



If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 25, 2023 (the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to us to pay its income taxes, if any (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then-outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the
case of clauses (ii) and (iii), to the Company's obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law.

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Proposed Business Combination

On December 2, 2021, the Company, Opal HoldCo LLC, a Delaware limited liability company ("Opal HoldCo"), and Opal Fuels LLC, a Delaware limited liability company ("Opal Fuels"), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the "Business Combination Agreement").



The Business Combination Agreement and the transactions contemplated thereby
(collectively, the "Business Combination") were unanimously approved by the
boards of directors of Company and Opal Fuels, and also approved by Opal Holdco,
the sole member of Opal Fuels. The Business Combination Agreement provides for,
among other things, the following transactions: (i) each outstanding Class B
ordinary share, par value $0.0001 per share, of the Company will convert into
one Class A ordinary share, par value $0.0001 per share, of the Company;
(ii) the Company will change the jurisdiction of its incorporation by
deregistering as an exempted company in the Cayman Islands and domesticating to,
and continuing as a corporation incorporated under the laws of, the State of
Delaware (the "Domestication") and, in connection with the Domestication,
(A) the Company's name will be changed to "Opal Fuels Inc." ("New Opal"), (B)
each outstanding Class A ordinary share of the Company will become one share of
Class A common stock, par value $0.0001 per share, of New Opal (the "New Opal
Class A Common Stock"), (C) each outstanding warrant to purchase one Class A
ordinary share of the Company will become a warrant to purchase one share of New
Opal Class A common stock and (D) New Opal will file its certificate of
incorporation and adopt bylaws to serve as its governing documents in connection
with the Domestication; and (iii) (A) Opal Fuels will cause its existing limited
liability company agreement to be amended and restated, (B) Opal Fuels will
cause all of its limited liability company interests existing immediately prior
to the closing of the Business Combination (the "Closing") to be
re-classified
into a number of common units (collectively, the "Opal Units") based on a
pre-transaction
equity value for Opal equal to $1,501,870,000, less all principal and accrued
interest outstanding immediately after the Closing pursuant to that certain
convertible promissory note, dated as of May 1, 2021 (as amended, including that
certain First Amendment to Convertible Note, dated November 29, 2021, the "Ares
Note"), held by ARCC Beacon LLC, a Delaware limited liability company ("Ares"),
(C) the Company will contribute the (x) the amount of cash in the Trust Account
established by the Company with the proceeds from its initial public offering as
of immediately prior to the Closing (and before, for the avoidance of doubt,
giving effect to the exercise of redemption rights by any of the Company's
shareholders (the "Public Share Redemptions")), minus (y) the aggregate amount
of cash required to fund the ACT Share Redemptions and any other obligations to
be funded from the Trust Account, plus (z) the aggregate cash proceeds actually
received in respect of the PIPE Investment (as defined below) and (E) New Opal
will issue to Opal Fuels, and Opal Fuels will in turn distribute to Opal HoldCo
and Hillman RNG Investments, LLC ("Hillman") a number of shares of Class D
common stock, par value $0.0001 per share, of New Opal (the "New Opal Class D
Common Stock"), and distribute to Ares (together with Opal HoldCo and Hillman,
collectively, the "Opal Equityholders") shares of Class B common stock, par
value $0.0001 per share, of New Opal (the "New Opal Class B Common Stock")
(neither of which will have any economic value but will entitle the holder
thereof to five votes per share or one vote per share, respectively), equal to
the number of Opal Units held by each of the Opal Equityholders.

In addition, if New Opal's annual EBITDA for the calendar year 2023 exceeds $238,000,000 (the "First Earnout Triggering Event"), New Opal will issue to Opal HoldCo, Ares and Hillman (collectively, the "Earnout Participants") an aggregate of 5,000,000 shares of New Opal Class B Common Stock and New Opal Class D Common Stock and corresponding Opal Units (collectively, the "First Earnout Tranche") in accordance with the allocations set forth in the Business Combination Agreement. Additionally, if New Opal's annual EBITDA for the calendar year 2024 exceeds $446,000,000 (the "Second Earnout Triggering Event"), New Opal will issue to the Earnout Participants an aggregate of 5,000,000 additional shares of New Opal Class B Common Stock and New Opal Class D Common Stock and corresponding Opal Units (collectively, the "Second Earnout Tranche") in accordance with the allocations set forth in the Business Combination Agreement. In the event that the First Earnout Triggering Event does not occur but the Second Earnout Triggering Event does occur, New Opal will be obligated to issue both the First Earnout Tranche and the Second Earnout Tranche upon the occurrence of the Second Earnout Triggering Event.

The Business Combination is expected to close late in the first half of 2022, following the receipt of the required approval by the Company's shareholders and the fulfillment of other customary closing conditions.

PIPE Financing (Private Placement)

Concurrently with the execution of the Business Combination Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, including, among others, an affiliate of the Company, as well as additional third-party investors. Pursuant to the Subscription Agreements, each investor agreed to subscribe for and purchase, and the Company agreed to issue and sell to such investors, immediately prior to the Closing, an aggregate of 12,500,000 shares of the Company's common stock for a purchase price of $10.00 per share, for aggregate gross proceeds of $125,000,000 (the "PIPE Investment"). Effective as of May 11, 2022, PIPE Investors representing $110,806,000 of the original PIPE Investment entered into the Amended Subscription Agreements, whereby the termination rights described in the Subscription Agreements were amended to extend the term of each Amended Subscription Agreement by 60 days to July 29, 2022.


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The closing of the PIPE Investment is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. The Subscription Agreements provide that the Company will grant the investors in the PIPE Investment certain customary registration rights.

Investor Rights Agreement

The Business Combination Agreement contemplates that, at the Closing, each of Opal Fuels, Ares, Hillman, the independent directors of the Company and the Sponsor (collectively, the "New Opal Holders") will enter into an Investor Rights Agreement (the "Investor Rights Agreement"), pursuant to which, among other things, (i) the Company and the Sponsor will agree to terminate the Registration and Shareholder Rights Agreement, dated as of March 25, 2021, entered into by them in connection with the Company's initial public offering, (ii) New Opal will provide the New Opal Holders certain registration rights with respect to certain shares of New Opal Class A common stock held by them or otherwise issuable to them pursuant to the Business Combination Agreement, Second A&R LLC Agreement or the certificate of incorporation of New Opal and (iii) the New Opal Holders will agree not to transfer, sell, assign or otherwise dispose of their shares of New Opal Class A common stock for up to 180 days following the Closing, subject to certain exceptions.

Results of Operations



Our entire activity since inception through March 31, 2022 relates to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate
non-operating
income in the form of interest income on cash and cash equivalents and
non-operating
income in the form of interest and investment income on investments held in
Trust Account from the proceeds derived from the Initial Public Offering. We
expect to incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses. Additionally, we recognize
non-cash
gains and losses within other income (expense) related to changes in recurring
fair value measurement of our warrant liabilities at each reporting period.

For the three months ended March 31, 2022, we had a net income of approximately $3.9 million from changes in the value of derivative warrant liabilities of approximately $5.3 million and a gain on investments held in Trust Account of approximately $25,000 partially offset by approximately $1.4 million in general and administrative costs.

For the period from January 13, 2021 (inception) through March 31, 2021, we had a net loss of approximately $320,000 from changes in the value of derivative warrant liabilities of approximately $271,000, offset by financing costs attributable to the warrant liabilities of approximately $463,000 and approximately $128,000 in general and administrative costs.

Liquidity and Capital Resources

As of March 31, 2022, we had approximately $559,000 in our operating bank account and working capital of approximately $1.1 million.

Our liquidity needs up to March 31, 2022 had been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares (as defined below), a loan under a promissory note from our Sponsor of approximately $172,000 (the "Note"), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Note was repaid in full on March 26, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, our officers, directors and Initial Shareholders may, but are not obligated to, provide the Company with Working Capital Loans. On May 16, 2022, we entered into a non-interest bearing promissory note with the Sponsor for $1,000,000 (see Note 11).

Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.


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We continue to evaluate the impact of the
COVID-19
pandemic and has concluded that the specific impact is not readily determinable
as of the date of the condensed balance sheet. The financial statement does not
include any adjustments that might result from the outcome of this uncertainty.

Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an administrative services agreement to pay our Sponsor $10,000 per month for office space, secretarial and administrative services provided to us.

Registration and Shareholder Rights

The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration and shareholder rights agreement. At any time on or after the date the Company consummates a Business Combination, the holders of these securities will be entitled to make up to three demands, excluding short form demands, that we will register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement



We granted the underwriters a
45-day
option from the date of the prospectus to purchase up to 4,125,000 additional
Units at the Initial Public Offering price less the underwriting discounts and
commissions. On March 25, 2021, the underwriters partially exercised the
over-allotment option to purchase an additional 3,616,305 Units. The remaining
unexercised over-allotment option expired at the conclusion of the
45-day
option period.

The underwriters were entitled to an underwriting discount of $0.20 per unit, or approximately $6.2 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $10.9 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes the Business Combination, subject to the terms of the underwriting agreement.

Administrative Services Agreement

On March 25, 2021, we entered into an agreement that provided that, commencing on the date that our securities were first listed on Nasdaq through the earlier of consummation of the initial Business Combination and the liquidation, we agreed to pay the sponsor $10,000 per month for office space, secretarial and administrative services provided to us. We incurred $30,000 and $10,000 in expenses in connection with such services for the three months ended March 31, 2022 and for the period from January 13, 2021 (inception) through March 31, 2021, respectively, which are reflected in the accompanying statements of operations.


In addition, the sponsor, officers and directors, or their respective affiliates
will be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf, such as
identifying potential target businesses and performing due diligence on suitable
Business Combinations. Our audit committee will review on a quarterly basis all
payments that were made by us to the sponsor, executive officers or directors,
or their affiliates. Any such payments prior to an initial Business Combination
will be made using funds held outside the Trust Account.

Deferred Legal Fees

We entered into an engagement letter to obtain legal advisory services, pursuant to which our legal counsel agreed to defer the payment of their fees until the closing of the initial Business Combination. As of March 31, 2022 and December 31, 2021, the Company recorded an aggregate of approximately $4.9 million and $4.0 million, respectively, in connection with such arrangement as deferred legal fees in the accompanying condensed balance sheets.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our condensed financial statements in Part I, Item 1 of this


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Quarterly Report. Certain of our accounting policies are considered critical, as
these policies are the most important to the depiction of our unaudited
condensed financial statements and require significant, difficult or complex
judgments, often employing the use of estimates about the effects of matters
that are inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our 2021 Annual Report on Form
10-K
filed with the SEC on March 9, 2022. There have been no significant changes in
the application of our critical accounting policies during the three months
ended March 31, 2022.

Recent Accounting Pronouncements

See Note 2 to the unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.



Off-Balance
Sheet Arrangements

As of March 31, 2022, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

JOBS Act



The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for
non-emerging
growth companies. As a result, the unaudited condensed financial statements may
not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.

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