OPAL FUELS INC. In this Management's Discussion and Analysis of Financial Condition and Results of Operations section, references to "OPAL", "we", "us", "our", and the "Company" refer toOPAL Fuels Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements as ofSeptember 30, 2022 and for the three and nine months endedSeptember 30, 2022 and 2021, audited consolidated financial statements and notes thereto included in the Company's Current Report on Form 8K, which was filed withSecurities and Exchange Commission (the "SEC") onJuly 27, 2022 . In addition to historical information, this discussion and analysis includes certain forward-looking statements which reflect our current expectations. The Company's actual results may materially differ from these forward-looking statements.
Overview
We are a renewable energy company specializing in the capture and conversion of
biogas for the (i) production of renewable natural gas ("RNG") for use as a
vehicle fuel for heavy and medium-duty trucking fleets, (ii) generation of
electricity generated from renewable sources ("Renewable Power ") for sale to
utilities, (iii) generation and sale of Environmental Attributes (as defined
below) associated with RNG and Renewable Power , and (iv) sales of RNG as
pipeline quality natural gas. We also design, develop, construct, operate and
service Fueling Stations for trucking fleets across the country that use natural
gas to displace diesel as their transportation fuel. The Biogas Conversion
Projects currently use LFG and dairy manure as the source of the biogas. In
addition, we have has recently begun implementing design, development, and
construction services for hydrogen Fueling Stations, and we are pursuing
opportunities to diversify its sources of biogas to other waste streams. The
term "Environmental Attributes" refers to federal, state and local government
incentives in the United States , provided in the form of renewable
identification numbers ("RINs,") renewable energy credits ("RECs"), low carbon
fuel standard ("LCFS") credits, rebates, tax credits and other incentives to end
users, distributors, system integrators and manufacturers of renewable energy
projects, that promote the use of renewable energy.We separately design,
develop, construct, operate and service Fueling Stations for vehicle fleets
across the country that dispense RNG and/or compressed natural gas ("CNG") to
displace diesel as a fleet transportation fuel.
The Company was formerly known as Arclight Clean Transition Corp II
("Arclight"), which was a blank check company incorporated in Cayman Islands on
January 13, 2021 . Arclight was formed for the purpose of effecting a merger,
share exchange, asset acquisition, reorganization or similar business
combination with one or more businesses. OPAL Fuels LLC was formed in December
2020 as a wholly owned subsidiary of OPAL HoldCo under the laws of the State of
Delaware . On December 31, 2020 , Fortistar LLC and certain of its affiliated
entities contributed their respective ownership interests in the following legal
entities to OPAL Fuels in a common-control reorganization: TruStar Energy
Holdings LLC , Fortistar RNG LLC , Fortistar Methane 3 Holdings LLC , Fortistar
Methane 3 LLC, Fortistar Contracting LLC , and Fortistar Methane 4 LLC. On
December 2, 2021 , the Company, OPAL Holdco and OPAL Fuels entered into a
business combination agreement ("Business Combination Agreement").
Business combination
OnJuly 21, 2022 , we completed the Business Combination. After giving effect to the Business Combination, the redemption of public shares as described below, the consummation of the related PIPE investment, and the separation of the former ArcLight units, there are currently (i) 25,171,390 shares of our Class A common stock issued and outstanding, (ii) 144,399,037 shares of our Class D common stock issued and outstanding, (iii) no shares of Class B common stock, par value$0.0001 per share ("Class B common stock") issued and outstanding (shares of Class B common stock do not have any economic value but entitle the holder thereof to one vote per share) and (iv) no shares of our Class C common stock, par value$0.0001 per share, ("Class C common stock") issued and outstanding (shares of Class C common stock entitle the holder thereof to five votes per share). The Class A common stock and warrants commenced trading on the Nasdaq Global Select Market under the symbols "OPAL" and "OPALW," respectively, onJuly 22, 2022 . Recent developments Construction Update •The Company has begun construction on a renewable power to RNG conversion project in the Northeast bringing to seven the number of RNG facilities under construction as ofSeptember 30, 2022 , with anticipated aggregate nameplate capacity of 4.2 million MMBtu of landfill biogas and 0.6 million MMBtu of dairy biogas.
•Received RIN certification for
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•Emerald and Prince William RNG projects are expected to commence commercial
operations by mid-2023 and the Sapphire RNG project by early 2024. OPAL Fuels'
share of annual nameplate capacity for these landfill projects is 3.8 million
MMBtu.
•Construction is progressing at two Central Valley California dairy RNG projects with commercial operations anticipated in 2024.
Development Update
•The Company's Advanced Development Pipeline comprises 16 projects representing 7.4 million MMBtu of feedstock biogas per year consisting of 6.2 million MMBtu of landfill biogas, 0.5 million MMBtu dairy biogas, and 0.7 million MMBtu of food waste and wastewater biogas.
•The Company is evaluating nine of our existing renewable power projects comprising 3.2 million MMBtu per year of landfill biogas in light of the incentives in the Inflation Reduction Act.
•The Company's total number of RNG dispensing stations grew from 69 at
Impact of COVID-19
In response to the COVID-19 pandemic, we instituted a safety committee that oversees our compliance with federal, state, and local government mandates, and ensures that the Company adheres toCenters for Disease Control guidelines to maintain safe working conditions for our employees. Some of the protocols we implemented include limiting in-person work to essential personnel and performing temperature checks. SinceMarch 2020 , where practicable, our employees have worked remotely and minimized travel and other non-essential contact. Additionally, we are providing our employees with COVID-19 testing at no cost and personal protective equipment for their safety and well-being.
As of the date of this report, the COVID-19 pandemic has had a relatively minimal economic impact on our results of operations.
The duration and future economic severity of the COVID-19 remains uncertain, and our results of operations and financial condition could potentially face material adverse effect(s) in the future due to COVID-19.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our interim unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States ("U.S. GAAP") and the rules and regulations of theSEC , which apply to interim financial statements. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, expenses and warrants and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions. Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. As the discussion and analysis of our financial condition and results of operations are based upon our interim unaudited condensed consolidated financial statements, they do not include all of the information on critical accounting policies normally included in consolidated financial statements. Accordingly, a detailed description of these critical accounting policies should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Current Report on 8-K, which was filed withSEC onJuly 27, 2022 .
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the Company relate to the useful lives of property, plant and equipment, the value of stock-based compensation and the fair value of derivatives including warrant liabilities, earnout liabilities, put option on a 2 --------------------------------------------------------------------------------
forward purchase agreement, interest rate swaps and commodity swap contracts. Actual results could differ from those estimates.
Key Factors and Trends Influencing our Results of Operations
The principal factors affecting our results of operations and financial
condition are the markets for RNG,
Market Demand for RNG
Demand for our converted biogas and associated Environmental Attributes, including RINs and LCFS credits, is heavily influenced byUnited States federal and state energy regulations together with commercial interest in renewable energy products. Markets for RINs and LCFS credits arise from regulatory mandates that require refiners and blenders to incorporate renewable content into transportation fuels. The EPA annually sets proposed renewable volume obligations ("RVOs") for D3 (cellulosic biofuel with a 60% greenhouse gas ("GHG") reduction requirement) RINs in accordance with the mandates established by the Energy Independence and Security Act of 2007. TheEnvironmental Protection Agency's issuance of timely and sufficient annual RVOs to accommodate the RNG industry's growing production levels is necessary to stabilize the RIN market. The current authorization for theEPA's issuance of RVOs will expire beginning in 2023, and the EPA may issue RVOs under a modified system that has yet to be developed, which creates additional uncertainty as to RIN pricing. On the state level, the economics of RNG are enhanced by low-carbon fuel initiatives, particularly well-established programs inCalifornia andOregon (with several other states also actively considering LCFS initiatives similar to those inCalifornia andOregon ). Federal and state regulatory developments could result in significant future changes to market demand for the RINs and LCFS credits we produce. This would have a corresponding impact to our revenue, net income, and cash flow. Commercial transportation, including heavy-duty trucking, generates approximately 30% emissions of overall CO? and other climate-harming GHGs inthe United States , and transitioning this sector to low and negative carbon fuels is a critical step towards reducing overall global GHG emissions. The adoption rate of RNG-powered vehicles by commercial transportation fleets will significantly impact demand for our products.
We are also exposed to the commodity prices of natural gas and diesel, which serve as alternative fuel for RNG and therefore impact the demand for RNG.
Renewable Power Markets
We also generate revenues from sales ofRECs and Renewable Power generated by our biogas-to-Renewable Power projects. RECs exist because of legal and governmental regulatory requirements, and a change in law or in governmental policies concerningRenewable Power , landfill gas ("LFG"), or the sale of RECs could affect the market for, and the pricing of, the RECs that we generate through production at our Biogas Conversion Projects. We periodically evaluate opportunities to convert existing biogas-to-Renewable Power projects to RNG production. This strategy has been an increasingly attractive avenue for growth when RNG from landfills become eligible for D3 RINs. We have been negotiating with several of ourRenewable Power off-takers to enter arrangements that would free up the LFG resource to produce RNG. Changes in the price we receive forRECs and Renewable Power , together with the revenue opportunities and conversion costs associated with converting our LFG sites to RNG production, could have a significant impact on our future profitability.
Key Components of Our Results of Operations
We generate revenues from the sale of RNG fuel,Renewable Power , and associated Environmental Attributes, as well as from the construction, fuel supply, and servicing of Fueling Stations for commercial transportation vehicles using natural gas to power their fleets. These revenue sources are presented in our statement of operations under the following captions: •RNG Fuel. The RNG Fuel segment includes RNG supply and dispensing activities as well as the associated generation and sale of commodity natural gas and environmental credits, and consists of •RNG Production Facilities - the design, development, construction, maintenance and operation of facilities that convert raw biogas into pipeline quality natural gas •Included here are the Company's interests in both operating and construction projects. 3 -------------------------------------------------------------------------------- •RNG and CNG Fuel Dispensing Stations - This includes both the dispensing (or sale) of RNG, commodity natural gas, and environmental credit generation and monetization. The Company operates Fueling Stations that dispense both CNG and RNG fuel for vehicles. •Fuel Station Services. Through its Fuel Station Services segment, the Company provides construction and maintenance services to third-party owners of Fueling Stations. This segment includes: •Service and maintenance contracts for RNG/CNG Fueling Stations. •Manufacturing division that builds Compact Fueling Systems and Defueling systems. •Design/Build contracts where the Company serves as general contractor for construction of Fueling Stations, typically structured as Guarantee Maximum Price or fixed priced contracts for customers, generally lasting less than one year. •Renewable Power Portfolio.The Renewable Power portfolio segment generates renewable power through combustion of biogas from landfills and digester gas collection systems which is then sold to public utilities throughoutthe United States . The Renewable portfolio operates primarily inSouthern California .
Our costs of sales associated with each revenue category are as follows:
•RNG Fuel. Includes royalty payments to biogas site owners for the biogas we use; service provider costs; salaries and other indirect expenses related to the production process, utilities, transportation, storage, and insurance; and depreciation of production facilities.
•Fuel Station Services. Includes equipment supplier costs; service provider costs; and salaries and other indirect expenses.
•Renewable Power. Includes land usage costs; service provider costs; salaries and other indirect expenses related to the production process; utilities; and depreciation of production facilities.
Selling, general, and administrative expense consists of costs involving corporate overhead functions, including the cost of services provided to us by an affiliate, and marketing costs.
Depreciation and amortization primarily relate to depreciation associated with property, plant, and equipment and amortization of acquired intangibles arising from PPAs and interconnection contracts. We are in the process of expanding ourRNG and Renewable Power production capacity and expect depreciation costs to increase as new projects are placed into service.
Results of Operations for the three and nine months ended
Operational data
The following table summarizes the operational data achieved for the three and
nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
RNG Fuel volume produced (Million
MMBtus) 0.6 0.4 1.6 1.2
RNG Fuel volume sold (Million GGEs) 7.4 6.3 20.5 14.1
Total volume delivered (Million
GGEs) 30.7 23.1 82.6 68.8
RNG projects
Below is a table setting forth the RNG projects in operation and construction in our portfolio:
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Design capacity (MMbtus
per year) (1) Source of bio gas Ownership (2)
RNG projects in operation:
Greentree 900,000 LFG 100%
Imperial 900,000 LFG 100%
New River 600,000 LFG 100%
Noble Road 800,000 LFG 50%
Pine Bend 775,000 LFG 50%
Sunoma 200,000 Dairy 90%
Sub total 4,175,000
RNG projects in construction:
Biotown 375,000 Dairy 10%
Prince William 1,600,000 LFG 100%
Hilltop 250,000 Dairy 100%
Vander Schaaf 250,000 Dairy 100%
Emerald 2,100,000 LFG 50%
Sapphire 1,300,000 LFG 50%
New England 250,000 LFG 100%
Sub total 6,125,000
Total 10,300,000
(1) Design capacity may not reflect actual production of RNG from the projects,
which will depend on many variables including, but not limited to, quantity and
quality of the biogas, operational up-time of the facility, and actual
productivity of the facility.
(2) Certain projects have provisions that will adjust, or "flip," the percentage
of distributions to be made to us over time, typically triggered by achievement
of hurdle rates that are calculated as internal rates of return on capital
invested in the project.
Renewable Power Projects
Below is a table setting forth the
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Nameplate capacity (MW
per hour) (1) RNG conversion candidate Stage of RNG conversion
California 1 5.2 Yes In Development
California 2 6.1 No N/A
California 3 3.0 No N/A
California 4 3.2 No N/A
California 5 1.8 No N/A
California 6 1.6 No N/A
California 7 6.5 No N/A
California 8 6.5 No N/A
Florida 2.9 No N/A
New England 5.3 Yes In Construction
Massachusetts 2 3.6 No N/A
Michigan 1E(2) 28.9 Yes In Construction
Michigan 3 6.3 Yes In Development
New York 5.9 No N/A
North Carolina 1 14.4 Yes In Development
Pennsylvania 8.0 No N/A
Prince William 1E (3) 1.9 Yes In Development
Prince William 2E (4) 4.8 Yes In Development
Virginia - Richmond 8.0 Yes In Development
Total 123.9
(1) Nameplate capacity is the maximum permitted output for each facility and may
not reflect actual MW production from the projects, which depends on many
variables including, but not limited to, quantity and quality of the biogas,
operational up-time of the facility, and actual productivity of the facility.
(2) See RNG Projects Table above, reference "Michigan 1" under "RNG Projects In
Construction ." It is currently contemplated that the Michigan 1E renewable power
plant will continue limited operations on a stand-by, emergency basis through
March of 2031.
(3) See RNG Projects Table above, reference "Prince William" under "RNG Projects
In Construction ." It is currently contemplated that the Prince William 1E
renewable power plant will continue operations through approximately December
2022 .
(4) See RNG Projects Table above, reference "Prince William" under "RNG Projects
In Construction ." It is currently contemplated that the Prince William 2E
renewable power plant will continue operations through approximately December
2022 .
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Comparison of the Three and Nine Months Ended
The following table presents the period-over-period change for each line item in
the Company's statement of operations for the three and nine months ended
Three Months Ended September Nine Months Ended September
30, $ % 30, $ %
(in thousands) 2022 2021 Change Change 2022 2021 Change Change
Revenues:
RNG fuel $ 32,381 $ 17,892 $ 14,489 81 % $ 83,196 $ 37,066 $ 46,130 124 %
Fuel station services 23,227 18,387 4,840 26 % 55,524 35,560 19,964 56 %
Renewable Power 10,942 10,905 37 - % 30,094 32,342 (2,248) (7) %
Total revenues 66,550 47,184 19,366 41 % 168,814 104,968 63,846 61 %
Operating expenses:
Cost of sales - RNG fuel 20,959 11,973 8,986 75 % 51,843 23,053 28,790 125 %
Cost of sales - Fuel station
services 20,886 15,458 5,428 35 % 49,643 29,775 19,868 67 %
Cost of sales - Renewable power 7,645 6,064 1,581 26 % 23,593 23,952 (359) (1) %
Selling, general, and
administrative 15,751 7,922 7,829 99 % 34,561 19,107 15,454 81 %
Depreciation, amortization, and
accretion 3,258 2,613 645 25 % 9,816 6,672 3,144 47 %
Total expenses 68,499 44,030 24,469 56 % 169,456 102,559 66,897 65 %
Operating (loss) income (1,949) 3,154 (5,103) (162) % (642) 2,409 (3,051) (127) %
Other income (expense)
Interest and financing expense,
net (776) (2,354) 1,578 67 % (7,184) (5,659) (1,525) (27) %
Change in fair value of
derivative instruments, net (1,908) (27) (1,881) (6967) % (1,580) (10) (1,570) (15700) %
Other income 6,308 - 6,308 100 % 6,308 - 6,308 100 %
Income (loss) from equity method
investments 3,694 - 3,694 100 % 3,658 2,392 1,266 53 %
Gain on acquisition of equity
method investment - - - - % - 19,818 (19,818) 100 %
Net (loss) income before
provision for income taxes 5,369 773 4,596 595 % 560 18,950 (18,390) (97) %
Provision for income taxes - - - - % - - - - %
Net (loss) income 5,369 773 4,596 595 % 560 18,950 (18,390) (97) %
Net income (loss) attributable
to redeemable non-controlling
interests 4,161 - 4,161 100 % (2,584) - (2,584) 100 %
Net loss attributable to
non-redeemable non-controlling
interests (325) (216) (109) 50 % (824) (414) (410) 99 %
Paid-in-kind preferred dividends 2,658 - 2,658 100 % 5,093 - 5,093 100 %
Net income attributable to OPAL
Fuels - 989 (989) (100) % - 19,364 (19,364) 100 %
Net loss attributable to Common
stockholders $ (1,125) $ - (1,125) 100 % (1,125) $ - (1,125) 100 %
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Revenues RNG Fuel Revenue from RNG Fuel increased by$14.5 million , or 81%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was attributable primarily due to an increase in RIN sales and brown gas sales driven by additional volumes and higher prices. Revenue from RNG Fuel increased by$46.1 million , or 124%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 .$28.0 million of this increase was attributable primarily to the impact of nine months of Beacon revenues in 2022 versus only five months in 2021. Additionally, revenues increased by$12.0 million from the sale of environmental credits,$3.8 million due to higher brown gas sales and$3.2 million in fuel dispensing primarily due to increased volumes.
Fuel Station Services
Revenue from Fuel Station Services increased by$4.8 million , or 26%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was primarily attributable to an increase of$4.3 million in construction revenue from additional fuel station projects and an increase of$0.5 million from incremental service volumes from the addition of four new fueling service sites. Revenue from Fuel Station Services increased by$20.0 million , or 56%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This was primarily attributable to an increase of$18.8 million from fuel station construction projects which were delayed into 2022, coupled with an incremental$1.9 million as we built new fuel stations during the year.Renewable Power
Revenue from
Revenue fromRenewable Power decreased by$2.2 million , or 7%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to a decrease of$4.0 million from the reduction in energy capacity at one of our electricity generation facilities offset by positive mark to market change in commodity swaps of$2.0 million . Cost of sales RNG Fuel Cost of sales from RNG Fuel increased by$9.0 million , or 75%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was attributable primarily due to increase in costs of$3.4 million from new RNG facilities including but not limited to Emerald, Sunoma,New River and Sapphire. Additionally, there was an increase of$2.6 million due to increased royalty expense from increased RIN sales,$0.6 million write down charges relating to our brown gas inventory to its net realizable value due to decrease in prices and unplanned repairs at one of our RNG facilities. Cost of sales from RNG Fuel increased by$28.8 million , or 125%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to the introduction of Beacon's cost of sales upon consolidation inMay 2021 resulting in an increase of$12.9 million , a$1.9 million increase in development costs for building new RNG facilities,$2.9 million increase from new RNG facilities such as Sunoma andNew River ,$10.3 million increase relating to increased dispensing fees from an increased volume of environmental credits generated,$0.6 million write down charges relating to our brown gas inventory to its net realizable value due to decrease in prices and$1.8 million due to unplanned repairs. Additionally, there were savings of$0.8 million from deconsolidation of Pine Bend andNoble Road as ofDecember 31, 2021 . Fuel Station Services Cost of sales from Fuel Station Services increased by$5.4 million , or 35%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was primarily attributable to an increase of 8 --------------------------------------------------------------------------------
Cost of sales from Fuel Station Services increased by$19.9 million , or 67%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to an increase in costs of$18.2 million for third-party construction projects due to delays into 2022 and an increase of$1.7 million in service from higher volumes dispensed.
Cost of sales fromRenewable Power increased by$1.6 million , or 26%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase was primarily attributable to a$0.7 million in major maintenance at two of our facilities due to timing and a$0.3 million increase in unplanned maintenance, workers compensation expense of$0.1 million and increase of$0.2 million routine maintenance. Cost of sales fromRenewable Power marginally decreased by$0.4 million , or 1%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 .
Selling, general, and administrative
Selling, general, and administrative expenses increased by a total of$7.8 million , or 99%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was attributable primarily to an increase in insurance expense of$5.0 million related to a directors and officers tail policy for Arclight's former directors and new directors and officers policy for the Company's current management, higher employee headcount and related compensation and benefit expenses of$1.3 million to support our organic growth, an increase of$0.6 million in professional fees and audit fees relating becoming a publicly traded company, an increase of$0.7 million in IT- related expenses as we invested to improve our technology platforms and$0.2 million related to filing a registration statement for the resale of Class A common stock on behalf of certain of our equity holders. Selling, general, and administrative expenses increased by a total of$15.5 million , or 81%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to higher insurance expense of$5.1 million relating to the insurance policies for Arclight's former directors and the Company's current management, higher employee headcount and related compensation and benefit expenses of$6.6 million to support our organic growth year-over-year, a$2.6 million increase in professional fees related to audit, tax, legal and consulting fees, a$2.5 million increase in IT-related expenses and$0.2 million related to filing of the registration statement. These costs are related to setting up the administrative, compliance, and governance structure required for operating a public company which do not qualify for capitalization. The noted increases were partially offset by a gain of$1.5 million recorded as a reduction of Selling, general and administrative expenses relating to a legal settlement.
Depreciation, amortization, and accretion
Depreciation, amortization, and accretion increased by a total of$0.6 million , or 25%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was primarily due to increase in depreciation from the Sunoma and New River RNG facilities coming online. Depreciation, amortization, and accretion increased by a total of$3.1 million , or 47%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to the introduction of Beacon's property, plant and equipment balances upon consolidation in 2021 increasing our depreciation expense by$0.8 million , a$0.4 million increase from new downstream dispensing sites becoming operational, a$1.0 million increase from one additional RNG facility becoming operational during the fourth quarter of 2021 and$0.8 million increase due to accelerated depreciation on two facilities in ourRenewable Power business.
Interest and financing expense, net
Interest and financing expenses, net, decreased by$1.6 million , or 67%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was primarily due to an increase in interest income of$0.4 million due to interest earned on the short term investments (cash received from completion of Business Combination), a$0.7 million saving on interest on Convertible Note Payable as 50% of the debt was converted to equity onJuly 21, 2022 and change in fair value of Convertible note of$2.9 million . This was offset by an increase in outstanding debt from the OPAL Term Loan resulting in an increase in an interest expense of$1.1 million (including$0.4 million of amortization of deferred financing costs), a$0.2 million increase in commitment fees on our OPAL Term Loan 9 -------------------------------------------------------------------------------- II facility and a$0.7 million increase from the Sunoma Loan as the interest expense was expensed for the three months endedSeptember 30, 2022 whereas the interest was capitalized in the same prior-year period because the construction was completed during the first quarter of 2022. Interest and financing expenses, net increased by$1.5 million , or 27%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase is primarily attributable to the increase in outstanding debt versus the prior period. the$1.5 million increase was driven by a$1.2 million increase interest on Senior Secured Credit Facility,$2.9 million increase in interest on the OPAL Term Loan,$0.8 million increase in amortization of deferred financing costs,$1.3 million increase in Sunoma Loan( interest on Sunoma Loan was capitalized in 2021), partially offset by$2.4 million decrease on Convertible payable which includes a decrease of$2.9 million in change in fair market value, increase in interest income of$1.3 million from the Note receivable and short term investments and$0.5 million savings in interest on the Trustar revolver facility since it was repaid inOctober 2021 .
Change in fair value of derivatives, net
Change in fair value of derivatives, net increased by$1.9 million , or 6967%, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This change was attributable primarily to fair value adjustments on our Derivative warrant liabilities, earnout liabilities, put option on a forward purchase agreement and interest rate swaps. These liabilities were recorded in the condensed consolidated balance sheet upon completion of the Business Combination. Change in fair value of derivatives, net increased by$1.6 million , or 15700%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to fair value adjustments on our Derivative warrant liabilities, earnout liabilities, put option on a forward purchase agreement and interest rate swaps. These liabilities were recorded in the condensed consolidated balance sheet upon completion of the Business Combination.
Other income
Other income increased by$6.3 million , or 100%, for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . This change is primarily related$4.4 million recognized on reversal of a contingent payment to a non-controlling interest of one of our VIEs we consolidated in our financial statements as the applicable criteria for payment are no longer met as ofSeptember 30, 2022 and$1.9 million gain recognized on repayment of Note receivable.
Income from equity method investments
Net income attributable to equity method investments increased by$3.7 million , or 100%, for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 . This change was attributable primarily to an increase of$0.7 million from equity method investments in the Pine Bend,Noble Road and GREP. For the three months endedSeptember 30, 2021 , there was no income from equity method investments. Net income attributable to equity method investments increased by$1.3 million , or 53%, for the nine endedSeptember 30, 2022 compared to the nine endedSeptember 30, 2021 . This change was attributable primarily to the increase in net income fromNoble Road and GREP that exceeded income from Beacon during comparable period in 2021. Upon the step acquisition of the 56% of controlling interest in Beacon inMay 2021 , the results of Beacon were consolidated in the financial statements. Pine Bend andNoble Road were deconsolidated as ofDecember 31, 2021 .
Gain on acquisition of equity method investment
There was no gain on equity method investment for the three months ended
The gain on acquisition of equity method investment decreased by$19.8 million , or 100%, for the nine endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This change was attributable primarily to our step acquisition of the remaining interest in Beacon inMay 2021 .
Net loss attributable to redeemable non-controlling interests
Net loss attributable to redeemable non-controlling interests for the three and nine months endedSeptember 30, 2022 is$4.2 million and$2.6 million , respectively. The net loss for the three and nine months endedSeptember 30, 2022 reflects the portion of earnings belonging toOPAL Fuels equity holders prior to Business Combination for the periodJanuary 1, 2022 tillJuly 21, 2022 . 10 --------------------------------------------------------------------------------
Net loss attributable to non-redeemable non-controlling interests
Net loss attributable to non-redeemable non-controlling interests for the three months endedSeptember 30, 2022 increased by$0.1 million or 50%, compared to the three months endedSeptember 30, 2021 . This reflects the joint venture partners' loss in those entities we sold a portion of our membership interests in certain RNG facilities which are consolidated in our financial statements. These entities for the three months endedSeptember 30, 2022 , were Sunoma, Emerald, Sapphire andCentral Valley . The entities accounted for as non-redeemable non-controlling interests for the three months endedSeptember 30, 2021 were Pine Bend,Noble Road , Sunoma andCentral Valley . Net loss attributable to non-redeemable non-controlling interests for the nine months endedSeptember 30, 2022 increased by$0.4 million or 99%, compared to nine months endedSeptember 30, 2021 . This reflects the joint venture partners' loss in those entities we sold a portion of our membership interests in certain RNG facilities which are consolidated in our financial statements. These entities for the nine months endedSeptember 30, 2022 , were Sunoma, Emerald, Sapphire andCentral Valley . The entities accounted for as non-redeemable non-controlling interests for the nine months endedSeptember 30, 2021 were Pine Bend,Noble Road , Sunoma andCentral Valley .
Paid-in-kind preferred dividends
OnNovember 29, 2021 , we entered into an exchange agreement with Hillman whereby Hillman exchanged its ownership interests in the four RNG projects of$30.0 million into 300,000 series A-1 preferred units at a par value of$100 per unit and 1.4% of the common units ofOPAL Fuels . On the same day, we entered into a subscription agreement with NextEra for up to 1,000,000 Series A preferred units, which were issued to NextEra during first and second quarters of 2022 for total proceeds of$100.0 million . Upon completion of the Business Combination, these were converted to redeemable preferred non-controlling interests. Redeemable preferred non-controlling interests carry an interest of 8% dividend payable quarterly either in cash or paid-in-kind for the first eight quarters at the option of the Company. The Company recorded the dividend payable of$2.7 million and$5.1 million for the three and nine months endedSeptember 30, 2022 , respectively as to be paid-in-kind.
There was no paid-in-kind preferred dividend for the three and nine months ended
Liquidity and Capital Resources
Liquidity
As ofSeptember 30, 2022 , our liquidity consisted of cash and cash equivalents including restricted cash of$71.4 million and$146.9 million . Additionally, we entered into a Senior Secured Credit Facility which provides an approximately two year delayed term loan facility (the "DDTL Facility") of up to a maximum aggregate principal amount of$100.0 million and Debt Service Reserve facility (the "DSR Facility") of up to a maximum aggregate principal amount of$5.0 million . The proceeds of the DDTL Facility are to be used to fund a portion of the construction of the RNG projects owned, either in full or through a joint venture with a third party, by the subsidiary guarantors and the proceeds of DSR Facility are to be used solely to satisfy the balance to be maintained in the debt service reserve account. We have recently drawn$25.0 million under the OPAL Term Loan. Additionally, we have entered into an amendment to the OPAL Term Loan which extended commitment available date toMarch 2023 for the remaining$10.0 million . We expect that our available cash together with our other assets, expected cash flows from operations, available lines of credit under various debt facilities and access to expected sources of capital will be sufficient to meet our existing commitments for a period of at least twelve months from the date of this report. Any reduction in demand for our products or our ability to manage our production facilities may result in lower cash flows from operations which may impact our ability to make investments and may require changes to our growth plan. In connection with the Business Combination, holders of Arclight's Class A ordinary shares representing an aggregate redemption amount of$274,186,522 exercised their right to redeem their shares for cash. In addition, for the nine months endedSeptember 30, 2022 , we received revenue of approximately$168.8 million , which is lower than the revenue we expected to receive toward the full year numbers previously disclosed as part of the unaudited prospective financial information our management prepared and provided to the ArcLight board of directors in connection with the evaluation of the Business Combination (the "Prior Projections"). This has resulted primarily from lower than anticipated levels of gas collection at certain operating facilities, delays in completion of construction of certain RNG facilities, (which are now in commercial operation) and delays in commencement of construction of Fueling Stations. While the 11 -------------------------------------------------------------------------------- second half of 2022 has shown improvement to date and we expect revenue to be higher than that in the first half of the year, we currently anticipate that our full year revenue for 2022 will be lower than anticipated in the Prior Projections as a result of these factors. We are continuing to evaluate our business plan but we expect that the factors described above that we experienced during the nine months endedSeptember 30, 2022 will continue during 2023. In this regard, we remind investors that we have not updated the Prior Projections. Certain of the assumptions underlying the Prior Projections are no longer correct and, as a result, investors should not rely on the Prior Projections. Notwithstanding these developments, we continue to expect that our currently available cash on hand, together with expected cash flows from operations, available credit under existing debt facilities, as well as other sources of capital we expect to be accessible, will be sufficient to meet our existing commitments and anticipated capital expenditures associated with our growth plan for a period of at least twelve months from the date of this report. If we were to experience any significant further reduction in levels of gas collection, delays in commencement or completion of construction of our projects, adverse regulatory or price changes that affect the value of our environmental credits, or unplanned outages at our production facilities, it would result in lower cash flows from operations which could impact our ability to make investments or require changes to our growth plan. See "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." To fund future growth, we anticipate seeking additional capital through equity or debt financings. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our project development efforts. We may be unable to obtain any such additional financing on acceptable terms or at all. Our ability to access capital when needed is not assured and, if capital is not available when, and in the amounts, needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition, and operating results. As ofSeptember 30, 2022 , we had total indebtedness excluding deferred financing costs of$220.0 million in principal amount which primarily consists of$77.7 million under Senior Secured Credit Facility,$28.0 million under the Convertible Note Payable,$91.2 million under the OPAL Term Loan,$0.1 million under the Municipality loan and$23.0 million under Sunoma Loan.
As part of our operations we have arrangements for office space for our corporate headquarters under the Administrative Services Agreement as well as operating leases for office space, warehouse space, and our vehicle fleet.
We intend to make payments under our various debt instruments when due and pursue opportunities for earlier repayment and/or refinancing if and when these opportunities arise.
See Note 8. Borrowings, to our condensed consolidated financial statements.
Cash Flows
The following table presents the Company's cash flows for the nine months endedSeptember 30, 2022 and 2021: Three Months Ended September 30, (in thousands) 2022 2021 Net cash (used in) provided from operating activities$ (22,289) $ 28,897 Net cash used in investing activities (218,930) (69,763) Net cash provided from financing activities 270,525 52,729
Net increase in cash, restricted cash, and cash equivalents
Net Cash Provided by Operating Activities
Net cash used in operating activities for the nine months endedSeptember 30, 2022 was$22.3 million , a decrease of$51.2 million compared to net cash provided of$28.9 million for the nine months endedSeptember 30, 2021 . The decrease in cash provided by operating activities was primarily attributable to an increase in net operating losses year over year and negative working capital changes. 12 --------------------------------------------------------------------------------
Net cash used in investing activities for the nine months endedSeptember 30, 2022 was$218.9 million , an increase of$149.2 million thousand compared to the$69.8 million used in investing activities for the six months endedSeptember 30, 2021 . This was primarily driven by cash invested in short term investments of$146.9 million (cash received from Business Combination) , payments made for the construction of various RNG generation and dispensing facilities of$84.9 million offset by proceeds from repayment of Note receivable of$10.9 million and distribution from equity method investment of$2.1 million .
Net Cash Provided by Financing Activities
Net cash provided from financing activities for the nine months endedSeptember 30, 2022 was$270.5 million , an increase of$217.8 million compared to the$52.7 million provided from financing activities for the nine months endedSeptember 30, 2021 . This was primarily driven by proceeds received from consummation of Business Combination of$138.9 million , issuance of redeemable preferred non-controlling interests for total proceeds of$100.0 million , proceeds from OPAL Term Loan of$27.5 million , proceeds from Sunoma Loan$4.6 million, capital contribution from a joint venture$23.2 million offset by debt repayments of$3.7 million and$11.3 million on the Senior Secured Credit Facility and the OPAL Term Loan, respectively, and$8.5 million paid as financing costs.
Capital expenditures and other cash commitments
We require cash to fund our capital expenditures, operating expenses and working capital and other requirements, including costs associated with fuel sales; outlays for the design and construction of new Fueling Stations and RNG production facilities; debt repayments and repurchases; maintenance of our electrification production facilities supporting our operations, including maintenance and improvements of our infrastructure; supporting our sales and marketing activities, including support of legislative and regulatory initiatives; any investments in other entities; any mergers or acquisitions, including acquisitions to expand our RNG production capacity; pursuing market expansion as opportunities arise, including geographically and to new customer markets; and to fund other activities or pursuits and for other general corporate purposes. As ofSeptember 30, 2022 , we have budgeted for$412,342 thousand in capital expenditures for the next 12 months, of which$220,184 thousand is committed under existing contracts. These expenditures do not include any expected contributions from our joint venture and non-controlling interest partners and primarily relate to our development of new RNG facilities and the purchase of equipment used in ourFueling Station services andRenewable Power operations. In addition to the above, we also have lease commitments on our vehicle fleets and office leases and quarterly amortization payment obligations under various debt facilities. Please see Note 8. Borrowings and Note 9. Leases to our condensed consolidated financial statements for additional information.
We plan to fund these expenditures primarily through cash on hand, cash
generated from operations, and cash from the Business Combination and
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