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Strategic RNG ventures ramping up

A pair of joint ventures to develop RNG projects in the US – between Clean Energy Fuels Corp. and bp and TotalEnergies, respectively -- are expected to make first profits in the second half of this year, as projects come online and begin to generate environmental credits.

Over the next 12 to 24 months, investments made by Clean Energy Fuels and its global JV partners TotalEnergies and bp will start realizing earnings for the company, president and CEO Andrew Littlefair said in an earnings call today.

When these projects come online they have a period of nine to 12 months where the project is producing gas but not monetizing state and federal credits.

“This ramp-up period will have a negative drag on our financials in 2024, until we can monetize the RNG produced with environmental credits,” Littlefair said, adding that the company plans to store RNG until the credits can be claimed.

To date Clean Energy Fuels has invested $238m in the joint ventures established three years ago, Littlefair said. Another $35m is to be deployed into additional dairy RNG projects.

Clean Energy Fuels put $68m into its dairy RNG venture with bp late last year, Robert Vreeland, Clean Energy’s CFO, said in the call; $198m of cash infused into that JV is now all earmarked for dairy RNG development.

M&A can play a factor in Clean Energy Fuels’ RNG growth, Vreeland said. The company is open to acquiring projects to accelerate production volumes.

The RNG ventures will start producing revenues in the second half of this year, Vreeland said; 100% of net losses will occur in the first half of the year.

“You see the effects of the dairy-RNG joint ventures being in ramp-up mode,” Vreeland said. “We’ll start to see the effects of monetizing the RNG projects in the second half of the year.

A large project in Idaho with 37,000 cows will be complete in late 2024 or early 2025, Vreeland said. That project alone will be responsible for more than half of the earnings drag in 2024.

Six greenfield projects have completed construction and are in final commissioning, Littlefair said. Two projects are in or near construction and the company continues to evaluate new projects.

Clean Energy has the largest number of RNG fueling stations in the US, serving customers like Amazon. Some of the stations are customer owned and operated by Clean Energy, namely in Texas, Ohio and California.

Cummins new X15N engine will allow new fleets to adopt RNG, providing a catalyst for Clean Energy’s growth in commercial trucking and OEMs, he said.

Littlefare called the recent passage of a clean fuels standard in New Mexico a major win for RNG adoption, and noted positive signs that midwestern and northeastern states could pass their own standards soon.

Stonepeak committed $400m to Clean Energy Fuels in DecemberThe company recently made a $10m commitment to climate solutions start-up Rimere.

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