Q4 2023 Clean Energy Fuels Corp Earnings Call

Participants

Robert Vreeland; CFO; Clean Energy Fuels Corp

Andrew Littlefair; President, Chief Executive Officer, Director; Clean Energy Fuels Corp

Manav Gupta; Analyst; UBS Investment Bank

Eric Stine; Analyst; Craig-Hallum Capital Group LLC

Robert Brown; Analyst; Lake Street Capital Markets, LLC

Derrick Whitfield; Analyst; Stifel, Nicolaus & Company

Matthew Blair; Analyst; Tudor, Pickering, Holt & Co. Securities, LLC

Craig Shere; Analyst; Tuohy Brothers Investment

Pavel Molchanov; Analyst; Raymond James & Associates, Inc

Betty Jiang; Analyst; Scotiabank

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Clean Energy Fuels Fourth Quarter 2020 23 earnings conference call. At this time, all lines are in a listen only mode following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 27th, 2024.
I will now like to turn the conference over to Robert Realen, Financial Officer. Please go ahead.

Robert Vreeland

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and year ending December 31st, 2023. If you did not receive the release, it is available on the Investor Relations section of the Company's website at www.cleanenergyfuels.com. 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 Clean Energy's Form 10 Q and also on Form 10 K.
I will note here for 202310 K, which is due by Thursday, the 29th. We are waiting for the finalization of our internal review and an external and external audit procedures for a PSoC one report from one of our outside service providers. We just received the PSoC one report from the service provider this morning. Once we finish these procedures around the PSoC one report we will file our 10 K back to the forward-looking statements that are will appear on this conference call is forward looking statements speak only as the date of this release. The 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 that for these 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.

Andrew Littlefair

And thank you, Bob. I know the people on this call are aware that the overall renewable energy sector has experienced market volatility in recent months. This is not new to us. We have been in business for over 26 years and a public company for over 17. Despite these external factors, the fundamentals of our business remain strong. And so does our conviction in our strategy, I think 2024 and 2025 will be very exciting years at Clean Energy and set the stage for many good years thereafter.
As we start our new year, I would like to take a moment to reiterate the pillars of our business and the strategy we've put in place to grow our business. The first pillar is our belief that RNG is the most effective solution to decarbonize heavy duty transportation in North America. Rng is affordable available today and has the greatest positive impact of any form of renewable energy pipeline infrastructure to move the RNG from its source to customers is robust and in place, natural gas engine technology is currently available for regional trucks and a larger 15 liter engine for Class eight trucks that operate longer routes. The heavier loads is being added as we speak. The 15 liter engine also happens to be the largest segment within the trucking industry. Our industry's fuel infrastructure and vehicles are available today and have been proven over multiple decades. Emissions benefits of RNG. Both carbon and NOx are clear and they're supported by science and dairy. Rng is the only commercially available fuel with a negative lifecycle emissions factor.
The second pillar and one that sets us apart from virtually any other company is that Clean Energy has the leading network of RNG distribution stations in North America, which enable our customers to achieve their low-carbon goals by supplying RNG to their fleets. Many of our stations are strategically located on important trucking corridors with public fueling access for existing and future customers. And that number is growing with the opening of stations where Amazon operates as our anchor customer. Some of our stations are customer-owned, where we provide services and suppliers.
The third pillar of our business is how we work with our customers in many ways beyond just the sale of fuel. This includes education on the benefits of RNG and achieving emission goals, product procurement, operational support, station construction and servicing facility modification and navigating the complex world of sustainability reporting public policy and grant applications. Clean energy is also the largest distributor of third party RNG production to the transportation industry by our customers with RNG from over 100 different production sources. We are the largest off-taker and the business cannot be more pleased to extend our network and our service offerings to a vast group of fleets that will soon be able to adopt RNG vehicles.
Thanks to Cummins new X15 and engine, which is a catalyst for our growth feedback from the fleets operating the test units of this engine has been very positive. Back are as recently opened the order book for trucks equipped with the x15N. and commercial deliveries are expected in the early part of the second half of the year for OEMs have said they will follow suit and by offering the new engine in their models, the largest segment of the trucking market will soon have access to and RMG solution. And this could not come at a better time for our industry and costs. Rng as a transportation fuel is becoming more mainstream. During the last quarter, our customer base volumes grew with fleets that operate in the ports of L.A. and Long Beach like Lincoln transportation services, ecology, auto parts and cross border Express with transit agencies such as nice bus and Long Island and multiple refuse operator and hot off the press. We recently signed an agreement with SeaMex, one of the largest concrete companies in the world to fuel 40 of their cement trucks. The RNG industry recently not that significant victory with the Mexico passing legislation to status establish a low carbon fuel program. We believe this demonstrates the acceptance of these programs as a good way to address emissions issues that continue to expand. There are positive signs that other important states in the Midwest and Northeast could soon follow.
Three years ago, we established our fourth pillar with the formation of joint ventures with BP and Total Energies to invest directly in RNG production facilities at dairies in the U.S., we did this because we believe in RNG as a long-term solution and our industry needs more RNG to meet growing demand, saw an opportunity to invest our capital at attractive returns in these projects while augmenting the third party RNG supply.
I just mentioned, and we are doing just that today, Clean Energy has invested $238 million of our capital into these joint ventures and another $35 million of our own funds in the future. Our energy dairy projects, six projects have completed construction and are operating are at or are in final commissioning. New projects are in or near construction and we continue to evaluate others in our pipeline. Seeing these projects online is no small feat fires, complex engineering, construction operations and regulatory approvals. The world needs this ultra low carbon fuel and our industry needs to produce it more efficiently. We have the right platform and the right partners to take on this challenge. And we are on the path to achieving improvements in project cost and time. Bob will go into more detail. But when these projects come online, they have a ramp up period of about nine to 12 months where the project is producing gas, but not yet monetizing federal and state environmental credits. This brought five projects coming online at the beginning of this year. This ramp up period will have a negative drag on our financials in 2024 until we can monetize the RNG produced with environmental credits used to virtually store R&G until the regulatory pathways are certified to maximize revenue from environmental credits. This will create a lag in revenue recognition while operating costs are being recognized at the time we produce the renewable gas. This is an accounting and regulatory feature of our industry that we want investors understand and should not detract from our successful completion of dairy RNG projects, all producing ultralow emissions, fuel that we supply to our customer. This is also more amplified as we are starting from zero in the upstream production of RNG. As we bring more projects online, the glaring financial startup impact should be muted by projects operating at full financial capabilities. And the first pillar of our business strategy is the fact that we have a strong balance sheet to fund our continued growth in both stations and RNG projects. In December, we announced a $400 million term loan facility with Stonepeak, $300 million was funded at close and an additional $100 million can be drawn by us for a two year commitment period. We have secured the capital needed for our next phase of growth, and we are pleased to be partnered with a well-respected infrastructure investment firm like Stonepeak, our existing station footprint is well positioned to support additional volumes from new customers. We also expect opportunities to expand our network with new stations strategically positioned for our customers like our stations, we have built to benefit Amazon over the last three to four months. We've opened two stations for heavy-duty trucks in Texas, filling California, a second one in Ohio and others around the country, bringing the total in 2023 to 18 purpose-built stations. Amazon continues also utilize over 75 other Clean Energy stations on any given day.
Let me just close by repeating. We are very optimistic that over the next 12 to 24 months, you will see much of the strategy that we laid out several years ago, fall into place with the investments beginning to show the fruits of our labor at a time when more uncertainties continue to surround other alternatives, customer interest of RNG is increasing, especially with the introduction of the Cummins x 15. And in 2024, we will remain focused on the adoption of RNG fuel along with growing RNG production.
Thank you.
For your time today. And now I'll hand the call over to Bob.

Robert Vreeland

Thank you, Andrew, and good afternoon to everyone. I'll speak to our fourth quarter and year end 2022 through 23 results and then discuss our outlook for 2024.
For our fourth quarter and year end, results met our expectations with our annual results being within the range of our most recent guidance for the year ended 2023, GAAP net loss was $99.5 million versus our guidance of $98 million to $103 million, and our adjusted EBITDA for 2023 was $43.6 million versus our range of $42 million to $47 million. Keep in mind our annual results were significantly impacted by the $10 million in net incremental costs we incurred back in the first quarter from the historic run-up in California gas costs in January 2023 so that this $10 million gas cost anomaly, we would have more than beat our original guidance on GAAP net loss. And we would have landed in the middle of our original guidance for adjusted EBITDA, we had our full year expectations. We had to have a solid fourth quarter, which we did. We saw improved mix in our fuel gallons with more vehicles fueling and helping increase fuel margins. Our rental revenues continued to trend up with a 35% increase over our 2023 third quarter. Lcfs pricing on the other hand continued to be low, along with some delays in expected low CIR. and supply. So we actually lost some ground in the U.S. LCFS area in the fourth quarter and lastly, we were able to get some relief at our Texas LNG plant with some insurance recoveries that we had been working on in the second half of the year for reimburses for our losses through that plant being inoperable all year. These insurance recoveries helped true up the annual results for the Texas LNG plant and were recorded as a reduction in SG&A, which is largely why there is a drop in SG&A expenses in the fourth quarter, although there were also incremental costs in SG&A during the fourth quarter from some new fueling station activities. Importantly, all of these factors were considered in some form in our latest annual guidance for 2023, knowing there likely would be a mix of outcomes that help form our guidance range. We're pleased with the strong contributions of our vehicle fueling margins and glad that we're able to get some financial relief for our Texas LNG plant. The other big fourth quarter highlight was our financing transaction in December, which Andrew mentioned in his remarks after the debt financing transaction and then paying off the $150 million of prior debt and after contributing another $68 million into our dairy RNG JV with BP. in December, we ended the year with $263 million of unrestricted cash and investments. While there was another $198 million of cash down at the JV, we have with BP at the end of December, which is all earmarked for dairy projects.
I'll now turn my attention to 2024 and our outlook. First off, one of our goals of providing our 2024 outlook is to continue providing transparency into our model and level set our outlook, particularly as we move our dairy RNG projects into production. And we know the outlook in the dairy RNG area is nuanced with the timing of producing RNG and the time involved in ramping to steady-state operation and monetizing RNG. We appreciate, however, that what we laid out for 2024 can help form your thinking about 2025 and beyond. So where we can we'll answer questions about outer years, recognizing there is still significant clarity needed around the IRA and the production tax credit, for example, seeing the actual timing around dairy RNG production and the timing of revenue recognition and how that takes shape and where and when M&A fits into the equation. As we've said all along, we're willing to consider acquiring existing projects and even pipelines that meet our investment return requirements to help accelerate building our RNG production volumes for 2024, we're providing a breakdown of our results between our legacy fuel distribution business and the results we anticipate from our dairy RNG equity method investments, and we've referred to these equity method investments in the past as RNG supply. But just to avoid any confusion, this is our RNG supply that we are producing in our dairy RNG joint ventures with BP and Total Energies and the related net economics attributed to clean energy. Nothing has changed here from how we've been presenting information and discussing our business. But just to provide further clarity since we are breaking out this information and separate tables, I'll start with the net results and then go into some of our key assumptions for our guidance on 2024 Our consolidated GAAP net loss for 2024 is estimated to be in a range of $111 million to $101 million compared to our consolidated GAAP net loss of $99.5 million in 2023. The breakdown is $93 million to $87 million. Gaap net loss from the fuel distribution business and $18 million to $14 million GAAP net losses from our dairy RNG equity method investments. Our consolidated adjusted EBITDA is estimated to be in a range of $62 million to $72 million for 2024 compared to $43.6 million for 2023. Breakdown of adjusted EBITDA for 2024 is $76 million to $82 million from the fuel distribution business compared to $50 million in 2023 and a negative $14 million to negative $10 million from our dairy RNG equity method investments compared to a negative $6.7 million for 2023. As you can see, the fuels distribution business continues its financial improvement and you see the effects of the dairy RNG joint venture has been in ramp-up mode. I think this is where we have the biggest expectation gap on how quickly projects will produce at a positive earnings level our focus in 2024 is twofold with the R&D projects secured operationally and optimize revenue, however, possible. And we do have good optimization choices with our network and even outside the network, staying on the R., the G equity method investments and looking at the ramp, we're expecting nearly 100% of the net losses to occur in the first half of 2024. And then we'll start to see the effects of monetizing the RNG in the second half of the year. For us, there's risks involved from both the amount of gas produced and when it's produced and the end demand markets from a pricing standpoint, mainly also point out that there are large that we have a large project in Idaho with around 37,000 dairy cows that is estimated to be complete from the end of 24, maybe beginning of 25. That is responsible for over half of the earnings drag in 2024 for hydro project has certain operating expenses that are occurring as we separately build out the main project. And those operating expenses are reflected in our 2024 guidance. Those are also heavier in the first half of 2024.
Also, one other point to make is our recently announced investment in Rainier is being reflected as an adjustment out of adjusted EBITDA as we view the money that we are contributing into Rainier to be more of an investment, albeit reported as development cost in that JV.
Okay.
Now taking a step back for some of the assumptions in our 2024 guidance, we're looking at our guidance contemplates rent price staying around the $3 level, noting that we've seen that kind of bounce above and below the mark recently with a reason to be cautious here and the LCFS pricing, we have that considered remaining soft around the low $60 level, our RNG volume is estimated to be 245 million gallons or 8.4% above 2023. While this increase may seem a little light, although I'll note that we had around 13 million gallons of RNG that we dispensed in 2023 to assist some other participants in the market and meeting their demand. And we are not including a repeat of those gallons in our 2024 plan, not to say that that couldn't happen again, but we are not putting in our plan. The GAAP revenues are estimated to be in a range of $440 million to $450 million for estimating about $69 million in non-cash Amazon warrant charges for 2024, which reduces our GAAP revenue. Keep in mind here that there was about $22 million of Amazon warrant charges in our 2023 total warrant charges of $60.6 million at $22 million that won't reoccur in 2024 due to that, due to that portion of the warrant charge being fully amortized at the end of 23. Sg&a for 2024 is estimated to be in a range of $150 million to $120 million, including $80 million of stock based compensation, noting again that the Q4 run rate was low due to that LNG plant recoveries that were recorded in SG&A, our 2024 capital plan calls for $60 million of capital spending in the distribution business and $100 million in dairy RNG investments, noting again that there is $198 million in cash down at the dairy JV with BP.
Lastly, we're forecasting GAAP cash flow from operations of a range of $45 million to $55 million for 24. With that, operator, please open the call to questions.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, should you have a question, please press star followed by one on your touchtone phone. If you'd like to withdraw your question, please press star two. Please let me know if you're using a speakerphone before pressing any keys. One moment, please, for your first question. Your first question comes from Magnus Gupta from UBS. Please go ahead.

Manav Gupta

Congrats on a good fourth quarter. My question relates to little to the guidance. I think you have a strong case why it's slightly negative in the first half and then improve. I'm just trying to understand if you continue on this run rate and the volumes to ramp, would it be fair to say that exiting 2024 for Europe through your upstream EBITDA would actually be a decent positive number and will start making a contribution in year 2025? If you could talk a little bit about that.

Robert Vreeland

I would say, Manav, that we and we're being careful here that we expect the projects that we are going online this year, but their performance will ramp up and improve throughout 24. And there is certainly a good chance that base that they can produce EBITDA up. One caveat, I'm going to put out there as you've got the production tax credits, but we're not 100% reliant on the on that PTC. But frankly, that's where some of our as it faces just in quoting numbers on this stuff because we don't have the guidance. If that guidance comes out and it's clear, then we'll be able to speak to that. But we certainly know that the product is that we've put online so far, we're happy with their operation of their producing gas. We absolutely see a path forward that they will produce the gas that we anticipate and then you can start to do the math on those projects. It's like, well if you're producing that gas.
Then if we start to look at and then of course, you have to look at kind of what your view is on LCFS and ran some we're still were soft in 24, but 25. Let's hope that that yes, who knows that could come back, but those are other factors in there. So clearly, this is a long answer to, um, I'm optimistic.

Manav Gupta

Perfect. We are also optimistic. My quick follow-up here is there looks like New Mexico is moving ahead with its new LCFS program. And then there is some buzz out there that the reason at the workshop of LCFI. God workshop got delayed is because they might actually even be, you know, adding adding to the sand like making this an even more stringent. So help with the overall balance of carbon credits, any view you have or anything that Byrd would really help us out? Thank you.

Andrew Littlefair

Yes, Manav, I think you're exactly right on that makes my group nervous. So we've been we and the industry have been engaged with with carbon and others in state government to make them understand that it would be very important as we finalize these goals to do everything they can to tighten down the the obligation curve. And so I think there is some expectation that that's being received well, and while you know that the of the of the first release suggested that the curve would steepen or have deepened from 13% to 18.5%. There's some talk that that could go up into the end of the 20s, maybe mid 20s. So on, we believe that that the LCFS program can handle that, that there's plenty of RNG and plenty of low-carbon fuels to do that. And that this would be a good time for them to have to be aggressive. That, of course, spin-off, as you correctly point out, will begin to reduce the increase the obligation and reduce the of the oversupply of credits that are currently on the books and probably reduce that or supply faster than some people might think.

Robert Vreeland

So I think that that month delay is a bullish sign or the low carbon fuel standard and for credit pricing.

Manav Gupta

From the agri and hopefully do Mexico also kicks in and you can supply volumes over there also. Thank you. So no dynamically.

Andrew Littlefair

As you know, Manoj, if I can just to embellish a little bit. We are encouraged next week, Illinois as a Senate committee hearing on the Low Carbon Fuel Standard New York's a difficult one, right? The Gulf, there's negotiations there with the governor's office as we speak, as you know, that that's been passed various houses in New York and past sessions, New Jersey things seem to be going well, Pennsylvania, there's been a bill within the house and they're talking about introducing into the Senate and Michigan. I think if you were to look for a near term state to move maybe quicker. So these are large ones, of course, is probably Illinois. So say to.

Manav Gupta

Thank you somewhat identical lift. Thank you.

Andrew Littlefair

Thank you.

Operator

Your next question comes from Eric Stine from Craig-Hallum.
Please go ahead.

Eric Stine

Hey, so maybe just starting with Amazon. I'm curious, I know that their truck truck fleet build-out is underway. I know they're waiting on the 15 liter as well. Just curious if you have started discussions on potentially either the next round of stations or the next supply agreement for RNG?

Andrew Littlefair

Well, you know, boy, if there is ever a customer that doesn't want me talking about stuff like that. It's a it's my bank, my friends at Amazon so good dry, Eric, we are trying to just be in a weak moment, but let me say this on. We obviously supply a lot of fuel to them, barring was the important thing is our NG. all over the United States program has gone very well. And I believe Amazon has indicated they have over 2,500 and 12 liter trucks operating. I don't know if they've said it or not, but I believe it's been indicated that they've actually tested a 15 liter. So I take these all as good signs. We have a we have a sales manager that that is in constant contact with the team on the logistics side and the fuel side and the truck side and Amazon. So we're in constant. And I don't want say negotiations, constant contact with how we might augment stations that we've recently built, where some of their fleet will be deployed at existing locations and new locations. So it's really all I can say right now, Eric, of course, they're one of the larger fleets. Of course, we're talking to them. We think that the program has been such that it will likely be expanded and we're trying to do everything we can to be that company that helps them expand it.

Eric Stine

Understood. It was it was worth a shot on, but maybe you could articulate that and I don't know isn't good dry. I don't know if this is something you can answer, but I know that each location has the private, but also the public side. And anything you can talk about in terms of non Amazon volumes at those stations, maybe how those are trending. And I would think that those kind of like the rest of your network at this point that there's a lot of room for growth.

Andrew Littlefair

But there's a lot of room. I think it would be it's early to overstate the third party volume at these at these locations, right? Are they are all beautifully situated for third party volumes, right? So they're public access and gallons a minute, plenty of volume. They're all in warehouse district. I mean, they were picked because they're great locations. Most of those we have seen some additional volume come into the San Bernardino location and a few of those in California where we have more robust or fleet activity on. But we really are counting on the 15 liter that as these these fleets that are housed in the same locations, Amazon begin to bring 15 liter into their fleets. We expect that those will avail themselves to our public assets location.
And I hope Eric that the Amazon, while it's a little different because in many ways we've built, we built from ground up terminals for Amazon, right? A lot of the existing trucking fleet and the largest fleets. They have terminals already. So it's my expectation. When we can replicate the Amazon model, it will be at locations that will be faster to market with these with these stations, but it will be essentially the same design that will be public access and many of these locations. Some of it will be behind will be private and it will be both of fast fill and time fill. But we obviously many, many in the industry are looking at those Amazon locations, but they're beautiful to see a five acre location with 220 trucks.
You know, when I look at some of the other competing technologies, they can't park 220 trucks that take 80 gallons of trucks for 16,000 gallons a day in one location and then those trucks can go 1,000 miles or 800 miles. The other technologies aren't there yet and work, and we've done this now all over the country for ams our products.

Eric Stine

Right? So I mean, you obviously ideally longer-term would love to replicate Amazon with some of the bigger fleets. But but you don't need it right. You've got plenty of room, whether it's at the Amazon stations or other stations that you don't need that carrier, right?

Andrew Littlefair

I mean, we have 100 And I guess with this now my number has got about 118 to 120 up public truckstop locations in the country. And we have on the order of a couple of 100, maybe 250 million to 350 million gallons of excess capacity at those locations. So we are hard pressed to have to continue to build out now we'll want to, you know, for instance, my friends in Knight Swift, they have 26,000 power units. I believe they buy 5,000 units. They have terminals all over the United States, we want to put locations in. Typically these kind of fleets do about two thirds backlog, one-third on the public network. So we have a lot of the public network built for these lanes. We want it's very sticky if we're able to be the fuel provider at their terminals. And so I hope that's what we get to do. And of course, we're in discussions with a lot of those fleets that have already taken and tested the 15 liter and then some of whom have already put in orders right.

Eric Stine

Okay. Thank you to that.

Operator

Your next question comes from Rob Brown from Lake Street Capital Markets. Please go ahead.

Robert Brown

Good afternoon and thanks for all the color, and thanks for all the color on the outlook. I just wanted to get a little bit more on the ramp in the RNG facilities that you talked a little bit about some some timing of producing gas, but holding in inventory and waiting for the credits. But just wanted to clarify what how the hub timing of the ramp kind of plays out.

Andrew Littlefair

Yes, yes. Well, you you've got to meet I mean, essentially you're at about a six to nine month period where you're producing gas and operating, but you're not monetizing these saw the of the credits.
Okay. So you could you can maybe get there sooner if you but you've got to get temporary pathways. And so that's but that's about what it is. So as we have five of these coming online and five of these coming online. That's why you why we're seeing kind of the monetization of that happening toward the back end of the year because you've got to get to steady state, you've got to get steady-state operations, you know, of Yelp.
So Rob, let me help because if it's a little it'll can be a little confusing and nobody knows this. But I mean, maybe just to help everyone on the call you begin injecting we've been building this project for a year, right? You begin injecting gas. There's a commissioning which isn't like just turning on a switch, takes a little bit of time. There's a commissioning process that could take a month. You begin injecting gas and then there's a period where you get out the COB webs a little bit and you stabilize the production and you get it up to kind of a steady state. But that may take 30 to 60 days to get it to where you're really producing it at a stay at about that time.
Then you get you get you begin to keep very close track of your data and let's call it at the end of three months can be as long as four months, five months. You've got steady-state operations, you have really good data. That's when you go submitted to the EPA for their verification. Now that's quick. That could be 30 days and then you get a temporary, a provisional up a pathway at that point and you begin to I believe someone who sit around February or correct me if I'm wrong, I believe then you are able to get the rents at that point and then there's the LCFS. So I'm not there yet. And then during at that point, then you it's really after that you begin to put your obligation together for and frankly, you know, I've been very kind of hopes outspoken on this. The pathway process for the low-carbon fuel standard has been way too long. When we first started this business, it was four months, maybe a month or so longer than what the Feds were doing at the EPA stretched out now that anywhere between 12 months to 18 months. So it's ridiculous day and it's broken and they've outsourced to third parties. And there's this verification effect is not uncommon for those of us in the business have to put it in put in our application and wait six months, nothing happens and then they have the nerve to ask us to resubmit for another six month.
Wait and then maybe another. So that obviously has to get fixed and reduced. And there has to be some sort of compromise here where they allow us at least to a true up and produce our gas because otherwise this is a real penalty slide, building a so like building a skyscraper and then waiting around 18 months for anybody to move it. And and now I happen to feel pretty good about the fact that we have sound is that alarm and at the highest levels of government and at car. And I'm told that they hear us now and that we're going to be working to get reduced that time. So let's let's hope that's the case, but that that whole process between when you begin to inject when you can begin to get a store, a steady-state store when you can collect rents and but the but the low-carbon fuel standards takes substantially longer and you can't split those two things. So it takes so I really am strings you. So this is what we say. It's really six to nine months process after we begin steady-state. So I wish it was a lot sooner, and I'm hopeful that it will be and I feel like it will, but that's kind of the current situation. And that's why there's this drag with these projects that have come on that will come on this year and I think is or some were modeling our Company thinking that there would be much more contribution EBITDA contribution this year from these projects. It's just not the way it works. It's not unique to us. It's towards the process.

Robert Brown

Yes. Okay, great. Thank you for that. And then in terms of the ability to do the construction and sort of the activity in terms of cost of cost of the facility, product build and sort of the ability to we now get the get the gas you want it.
How is that going? Is that been in line with expectations? And is there any sort of uncertainty there?

Andrew Littlefair

But I think I think, Rod, I mean, we bought this a little bit. And I think you all know, as these projects have taken, I think it's not again unique to us and I'm not trying to to a high Buy and others I mean, these projects have tended in the industry to take a little bit longer than many of us thought now not years or months and ours that we thought that these projects would conclude in the third quarter and early fourth quarter and make it they took an extra three months of really kind of commissioning and getting them all done. So the time the time to finish these projects has taken a little bit longer. And I would say they've been up a little bit. Maybe it was the pandemic. Maybe was the supply chain. We saw an increase in costs in these projects from 10% to 15% to 18%. Now that stabilize, but we also know, Rob, that as we go forward, we're going to have to bring in. And then I feel certain we have a project team underway here at Clean Energy. We need to bring in these costs, right? We need to we need to systematize and make these more be able to replicate these projects without that kind of a hard work design at each one console customized, and we're working on that now and others in the industry have brought some new designs of how they might handle and the digesters, and it's such so we need to wring out some of the pricing and bring in the time to market of the construction, the permitting these things, and then certainly the pathway to begin to produce and collect monetize the credits. But there's work to be done. Good news is we're going to need this RNG. Look, if it goes the way we think and if it goes, if you look at what Cummins is saying, they believe they'll sell about [3000 and 13515] liters in 2024. They've suggested on their materials. These are not Mine 7,000 units next year. And then they say it could go up to somewhere between 8% and 15%. Penetration of the Class A. market plus a market, by the way, is about a quarter of 1 million engines. So that could be anywhere between, you know, 15,000 to 25,000 units in the 3rd year?
Well, in that you need 300 million gallons, 375 million gallons of RNG. Right years, you need 110 million or 115 million. So the industry needs are and G. So you're going to need to drop down, there will be many more landfills coming on into the market as well as dairies. And the dairies in the industry has done a pretty good job at tackling some of the largest dairies, but there are many thousands of other dairies that have smaller. So you're going to have to just lower the cost to be able to tackle the smaller dairies and I feel certain that the industry will be there.

Robert Brown

Okay, great. Thank you, turnover. Very good color.

Operator

Your next question comes from Derrick Whitfield from Stifel. Please go ahead.

Derrick Whitfield

Good afternoon, Andrew, Bob and team. Thanks for your time. They're taking a slightly different approach on your guidance. Could you offer some broader parameters around the amount of cash equivalent you'll have online at the end of 2024 and 2025 projects that are clearly under contract today. I didn't get the I think I didn't give guidance. I didn't neither Sure so the question was just could you offer on some broader parameters on the amount of wet coal equivalent you guys will have online in 2024 and 2025 with the projects that are under contract?

Andrew Littlefair

Yes. So let me let me kind of total appear. So about 29,500, what cloud of what Cal equivalent of the projects we just finished about another 8,500 that are in construction fell actually more than that. It's 8,500 plus 36,000 so almost 45,000 for a total of about 75,000 well count equivalent. And our then our pipeline, which which doesn't really which is just ones that we're looking at, is about another 115,000. But you know, I think it's a good point to top of the derrick as it may be a opportune time to mention. But, you know, we all of us in the industry have these pipelines, right? And we've traded documents with farmers and we even spend money on doing some of the early design work.
CI. investigation and this and that but you know, we've had we've been good stewards of our money. Some of the projects that we thought we were about to put in construction we've had to slip some of those based on several factors, right, based on the based on the LCFS credit pricing, based on some of the things that we saw coming out of carb, the fact that we didn't really have clarity on the PTC., so a little bit of a glitch on the ITC. because of the pricing of the prices of equipment and about two of the projects that we were literally getting ready to go into construction on here a month ago.
As you take a look at the potential of a Greek four model, which means you might have to if it goes the way they're talking about clean out the lagoon every year that throws a loop into the economics. And so look, none of these things are a game stoppers there. Just as we look at deploying precious capital, we have to be careful and there may be a better time, there may be a bit of opportunity where we get a little better view of the economics around the PTC. and other things that we would double the trigger so that so we continue to work on a robust pipeline. We continue to look at M&A opportunities, but we take all this into and I think our shareholders want us to they want. They are in the meanwhile, we're aggregating and bringing in more R&D than anyone else in the business. But when we deploy our capital, we want to make sure it's a very solid project that meets our thresholds and our partners thresholds. And so we've dropped a couple here for a second to make sure that we like the projects and we go forward.

Derrick Whitfield

That's great. And thanks for the added color. Makes complete sense, and that's what investors would want you guys to do. Maybe just take that hard. Taking part of your answer. When you look at the current M&A environment, maybe could you speak to the competitive landscape and your thoughts on what a dairy heavy RNG package might transact for on a dollars per MMBTU basis, or however you'd like to characterize it. And the reason I ask is we really haven't seen it dairy heavy packaged transact in Alaska quite a bit a while. So any color that you could offer on that would be greatly appreciated.

Robert Vreeland

I don't know that I'm going to be much help to you there, Derek, though we've looked at several. We've tried to make transactions on a couple, as you may or may not know. But I think I'd better stay away from that other than other than to say that that on. I think it's taken a while for some with maybe a maybe everyone in the industry to kind of come off of the fact that we no longer up to $200 LCFS prices and we're at $60. That makes a difference. By the way. I think it's important to note it doesn't make these projects negative. It just makes the bell that you no longer pride and it kind of makes you scratch your head a little bit on whether or not you want to embark on a 12% return, right so some of our friends in the business that packages that were maybe looking to transact still, we're looking at pricing as if we had $200 LCFS, we don't so as one of my investment banking friends says, well, they just need a little market therapy. So we'll see some of those transact at some point. And there was a time to where we were going to have year-ends, right? So a lot of people were thinking U.S. voluntary market and the CYREN.'s day, interesting that a lot most of the folks in the industry are now looking to come back to the transportation. So that puts us in a very nice position where the biggest off-taker, right. We have the big. We have the most end users, we have the most stations. And so we're talking all the suppliers in the business, and we're looking at several of these deals. So we are still very bullish on the need for RNG, optimistic about our role in it, and we'll be there kind of one is time.

Robert Brown

Thanks for your time. I certainly appreciate the challenges with the math that you guys having to run with all of the different variables type things.

Operator

Thanks for your comments that your next question comes from Matthew Blair from TPH. Please go ahead.

Matthew Blair

Thank you and good afternoon, Andrew and Bob, we thought the stuff in room revenue was pretty encouraging in Q4. Could you talk about what drove that was that simply just a higher price environment on the screen? Or were you able to capture a higher percentage of that revenue relative to your RNG gallons?

Andrew Littlefair

It was mostly mostly price driven on that?

Matthew Blair

I think the Okay side?

Robert Vreeland

Yes. I mean, I think there was the the take in all that was fairly steady, if you will, the minnow in the past we've seen it come down. So I think it's stabilized a little bit there.
So that was helpful.

Matthew Blair

Yes. Okay. And then on we've been hearing that new dairy RNG producers are having a hard time getting their gas into the California market, just simply due to how saturated is with RNG already? And does this present an opportunity for your downstream station network in California to perhaps capture a bigger pie, a piece of the pie of the economics going forward?

Robert Vreeland

Yes. So Tony, but a massive hit, and I think it's good for us it is good or are our wind when ours comes online to all of our stations in California are about almost 150. All of our stations in California are you are 100% RNG, but only about half of it's there, right? So there's still lots of room for us for third parties and for our own.

Andrew Littlefair

So that's why we're pretty bullish on the need for bringing low CI. And as I say, because we have long forward and our network supports the vehicles. Yes. So as far as the demand actually goes, right, then we've got certain certainly have capacity at the at our station and a good example.
Just the analysis sound Scott, just to bring it down, I mean, okay. So you open up a San Bernardino location for Amazon and they have 200 trucks there. They all want RNG, and we had a peak day the other day with these 15,000 gallons one night. So that if that's that is the kind of growth that I hope we will see a lot more of that that is ongoing.

Matthew Blair

Great. Thank you.

Operator

And your next question comes from Craig Shere from Tuohy Brothers. Please go ahead both.

Craig Shere

Thanks for taking the crush room also. I'm not sure I understand if you get a catch-up on rooms and LCFS credits. Once you finally get these certifications, will you effectively have a lot of bank credits on already executed RNG production by the end of 24 there's not a catch-up that's in play right now.

Robert Vreeland

There's some discussion of that. But no, that's one of the that's one. And that's part of that whole timing thing that Rob Brian was asking about and us having to make decisions on in effect kind of leading the Gasco at a provisional. But there is discussion have a clawback, if you will. I don't know what geopolitical once you once it goes in you and you and you either transact at the provisional with ran, then it's done and you're not you're not banking any of that if we want to virtually store within virtually store, but then you're not going to you at that point then. But you can't get store the gas longer than six months as kind of the issue is the gas has got to move after six months. So you get a little bit stuck where they happen to move that if they would allow and their have a reliable claw back that would be great because you can move that gas out of provisional and then you could go back and say, okay, it's not it was negative 150. It was really a negative 270 and make up that difference.

Andrew Littlefair

But that's not in place right now and that'll work on Craig and I think that's a reasonable, right, hey, allow us to produce it as if you were 250. I mean, we don't have to be ridiculous and then we'll come back and true it up actually 313 in our whatever it is right on.

Craig Shere

Okay. And up two other quick ones here, and I'm sorry, I know you said this in your prepared comments but I'm still confused about why this big Idaho dairy project. What contributed about half of 2024 for upstream losses if it's not completed on, why would you expense are the costs of a project that's still in development.
And then my final question is on the M&A opportunity. How do you think about hurdle rates for prospective acquisitions? And how do you handicap things like emission credit pricing, PTC regulation and other variables?

Robert Vreeland

Yes. Okay. Well, I'll start out on that on the Idaho. That is just it's unique to that project. That is a that project is really a massive project. It'll be well, one of the largest in the country when we're done with that. But it has some features to it that we are allowing our partners on. We are providing certain activities kind of around the around the farm in an area where we're constructing and that sort of thing that does not qualify for capitalization. So it's a little bit dumb, just kind of started that program a little bit. I mean, but it's not kind of capitalizable cost. So it's nothing that's kind of nonsensical? Or why would you do that at some point when you're doing a project that's of that magnitude there. As I look in the grand scheme of things, this is not I'm not a big material piece of that contract, but it is enough to our quarterly earnings and what we and what we put out there for the annual guidance for 24 that it was meaningful enough to just note that that relates to something that's kind of in progress. And I think the point there was really not I'm not wanting to have an impression that the five, the six projects that we'll have operating in 24 and how that can drive that kind of drag on a cycle. What why is there such a drag and then you say, Well, okay. Well, we do have a massive project where we've got some OpEx that's going on on concurrently with us building that out. So we're doing some sale.

Craig Shere

And or that just just to clarify this, this is unique for one of we shouldn't expect something similar in 25.

Robert Vreeland

Yes, right.
But we shouldn't expect well, we shouldn't expect we don't have another deal that's structured like this, but also we don't have another deal that is this large. I mean, is that like there's no process and there's an aggregate amount of maybe on one hand when you start talking about dealers that have that. So there are certain aspects of that deal that we factored all into how that how this economics will work. I will say that as we talked about these coming online and then when you really go into operating that with all the digesters that they have and the massive size of that bill, they'll likely be some drag from starting that project up, but it's not because of that how we're operating right now.

Andrew Littlefair

Okay. So as Greg, I'm not going to give you a hurdle rate on M&A, and I missed the last part of the question was at PTC.

Craig Shere

Well, how do we handicap sure that you're not just dealing with the entering into one of the analyses that are being well under Item nine.

Andrew Littlefair

I actually think and I want to say that I've been sort of we have sort of been right on this, I may and the capping the carb outcomes as positive for the industry. You remember the whiteboarding stuff, Craig, we've talked about a year ago, we were going to what we weren't going to have any dairy RNG was going to be excluded from the low carbon fuel grow. They weren't going to avoid and methane was out book and claim was going to crater the entire deal on and on all, none of that happens. All of that worked out well for us. All of it got grandfathered out for a long period of time. The last piece here is we're talking about is the obligation curve, and that looks like they've taken another month to steepen and some more that should work off a little bit of this bank. So, you know, just as the market started to say, well, look, there's an oversupply of credit for the next 2.5 years, I don't know, maybe not both from 18.5% to 23% or 24%, 25% that can make a material change in that. So so from a LCFS point of view, I'm feeling like we Dodge all the bullets and they've all come out rosy for the RNG business. So I like that on the PTC. And I think all of us got a little scared about the IRA because the ITC. was sort of bundled at Treasury for they disallowed some of the cleanup equipment such as you saw a week ago, they came out and said whoops, maybe we should include some of that. So that made me feel better about there was a political change going on there that it just was a complicated and it just got there was an oversight. And so when we look at the PTC., I feel like that legislation was clear that was designed to encourage low-carbon fuels. So while I fully understand them and spent time in Washington that a treasury secretary could to what he or she wants and could limit the size of that credit. I think the spirit of that was to encourage the lowest carbon fuel for transportation suitable for transportation. So I'm guessing you're going to see something that's on the higher side of I/O on the higher side of something contribution of credit per gallon tax credit per gallon. So and I'm an optimist by nature, but I'm guessing that's the way that's going to turn out.

Craig Shere

Got you. Thank you.

Andrew Littlefair

Starts out in the laws of CAD and as you know, depending on where you get on carbon intensity. There have been those that have suggested it could be worth, I don't know, $6 or $7 bucks. Again, I don't want to be greedy, but we'll see where it is where it lands PETER, etc.

Operator

Your next question comes from Pavel Molchanov from Raymond James. Please go ahead.

Pavel Molchanov

Well, thank you.
Yes, thanks for taking the question. On back to the fuel distribution business, $60billion-- $60 million of CapEx in 2024 for that kind of a meaningful increase from last several LEVELS, correct.

Robert Vreeland

What was $90 million last year? Actually, we ended about $100 million. So it's come down from last year. It is absolutely it is remaining a much higher than and I will say a couple of years back. And then a little before that where we were kind of in $80 million, although we are in design $95million.

Andrew Littlefair

Oh, yes, CRT, I mean, because where we are really we are also though, if you go back a decade, we had those three years where we ran $100 million, $85 million, $87 million as we're building out a lot of the network then we dropped it down. I think we ran about three years around $25 million, didn't like and are then then it ticked up. And then Amazon, of course, ticked it up.
Yes, it remains up. I mean, look, I don't know that we've ever had a backlog as big as we have this year.

Pavel Molchanov

So there's a little bit of Canada in there.

Andrew Littlefair

There's some candidate I am at because when we have a partner there.

Robert Vreeland

So that's our strength, right? But I mean, we're we've got like four more stations to build there and more on top of that. But so yes, it is some at least from a current run rate standpoint, we're kind of back up into that a bit higher number.

Pavel Molchanov

Right. I mean, I think between 2017 and 2022, it was a $20 million to $30 million a year. So that correct, you the you make a good point. It's come down versus last year, but still elevated.
So And geographically, where are you focused on on the build-out?

Andrew Littlefair

So Canada and there's four there's there's about a handful that are fairly large in California um, and then and then there's a there's a couple of big transit transit opportunities that we've got such a you know, it's it's it's not unlike always, we are probably more refuse of projects that we've ever had that are in the pipeline right now. And some of those are with our customer money, some of those with ours. So, you know, it's kind of depends, but it's all over the country.

Pavel Molchanov

Okay.

Andrew Littlefair

And then on megawatts, probably probably none in the Airport segment really that I think of on top of it.

Pavel Molchanov

Okay. And then just a kind of quick housekeeping point. When you begin to generate meaningful sales from the joint ventures, will you be publishing price times volume?

Robert Vreeland

Yes, we'll we will we will publish volume from those in exactly how we'll put it in, I mean and prevail in some of those, we may be maintaining those stations. So we're going to count that in our service gallons. But we are going on we will begin to report on what kind of gallons are coming off of the Yum, those production facilities.

Pavel Molchanov

Okay, perfect. Thanks very much.

Operator

Your next question comes from [Betty Jiang] from Scotiabank. Please go ahead.

Betty Jiang

Hi, Andrew, how binary? Thanks for a very long. Appreciate the new disclosure where we're breaking out the distribution and production and EBITDA. And I wanted to ask, could you help us with a bridge from the $50 million of EBITDA in 2023 to a midpoint of about $79 million in 24 you talk to the wins at $3 of CFS. at $60. So it seems like maybe a slight decline from the pricing we had in 2023, while auto rent is up a little bit. So is that mostly coming from higher volumes? Or I think you talked about in the past our fuel mix and just any color there?

Robert Vreeland

Yes.
I mean, it is continued growth in vehicle fueling, yes, as well as we are fairly consistent with our assumption on the spread of diesel to natural gas or oil than natural gas. So on of the what we saw kind of going on and really kind of in the second, third and fourth quarter of 23, we see that trend. We do see that trend moving into 24.

Andrew Littlefair

Very one of the things you and I have talked about this before, but one of the things, though, that I hope comes out.
Web Bob's breaking this out is I mean to see that the underlying strength of the fueling business, right? I mean, I noted today with $70 but $78 oil and $1.80 natural gas. I don't know that we've ever seen a spread further has been one, but a 43 to one difference between natural gas and oil. So the underlying our economics of our fuel and therefore the fuel margin and the discount that we can offer to our customers to help our customers and also have a nice margin ourselves has probably never been better. And I think that should come through as you look at the contribution of the fueling business distribution business this year.

Robert Vreeland

And you know that on our model, the design of the model is some is also helpful in any vehicles there, any vehicles that were fueling with us, but did not fuel for 12 months last year, but then they have a full 12 months this year and it kind of builds on itself like that. So that's like a built-in kind of gain that you get in addition to just adding new vehicles during the year.

Betty Jiang

Right, that makes sense on the following on to that, I'm wondering why the RNG volume guidance then isn't higher because like you said for those folks that maybe weren't feeling last year for the full year that they're seeing a full year and 24 on. So you're looking for about 245 million gallons and if you could maybe break that down between your own production versus third-party volumes?

Robert Vreeland

Yes. Well, I well, I don't know. I mean, part of the on a part of the new onset that you're seeing. There was some income if this is okay, but was the nuance that I spoke to in my comments right, where when I look at when we look at last year, there was 13 million gallons. It's meaningful on that. I would say it was not to say our vehicle fuel that, but we did move this RNG out to participants, and it was RNG volume. And so if you're kind of looking at a run rate from 23 up to 24, you would maybe handicap 23 and take out 13 million. So you're stepping up quite a bit from the mix of vehicle fuel is really what probably a time more difficult for you to see. But that's what's happening is now you can kind of get into that type of RNG gallons that are moving. And you really do want those to be all the way the vehicles and the growth you're seeing is that it doesn't have to be such a tremendous increase in just from just the volume number itself. It also matters, the type of volume that's going on there.

Betty Jiang

Got it.

Robert Vreeland

And then what was the what was the second part of your question? Or was there a second part there?

Betty Jiang

Yes. I was wondering if you could break out the 245 million gallons for 2024 between your own production and third party volumes?

Robert Vreeland

Yes. Well, I mean, most of it. We're looking at kind of higher single well single digits on our own production in a 6 million, 7 million, something like that of the.

Andrew Littlefair

Yes, and I think has done as per well, Ken, I didn't know. Those are not in the to 244 is our 245 is kind of our throughput of our G. So like I said, we are well, we will report it separately about what kind of volumes are being produced at our on all of those gallons come to us, but they're feeding into my 245 million gallons, if you will. And so yes, I guess you could say that seven of that comes from us and the rest of it comes from all the other 100 sources that we have of suppliers.

Betty Jiang

Okay. Thank you.

Robert Vreeland

Okay.

Operator

And there are no further questions at this time. I will turn the call back over to Andrew Littlefair, CEO for closing remarks.

Andrew Littlefair

Craig, you, operator, and thank you, everyone, for joining us. We look forward to talking with you next quarter.

Operator

And ladies Ladies and gentlemen, this concludes your conference call for today. Thank you for joining, and you may now disconnect your lines. Thank you.