UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

June 30, 2023

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _______________ to

ARCLIGHT CLEAN TRANSITION CORP. II

____________


Commission File Number: 001-40272

OPAL FUELS INC.
(Exact name of registrant as specified in its charter)

Cayman IslandsDelaware001-4027298-1578357

(State or other jurisdiction of

incorporation or organization)

(Commission

File Number)

(I.R.S. Employer

Identification Number)

No.)

200 Clarendon Street, 55th Floor

Boston, MA

One North Lexington Avenue, Suite 1450

02116
White Plains, New York10601
(Address of principal executive offices)(Zip Code)

Registrant’s

(914) 705-4000
(Registrant's telephone number, including area code: (617) 531-6300

code)


Not Applicable

(Former name, or former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Trading

Symbol(s)

Name of each exchange

on which registered

Units, each consisting of one Class A Ordinary Share, $0.0001Common Stock, par value and one-fifth of one redeemable warrant$0.0001 per shareACTDUThe Nasdaq Stock Market LLC
Class A Ordinary Shares included as part of the unitsACTDThe Nasdaq Stock Market LLC
Redeemable warrants included as part of the units, each whole warrant exercisable for one Class A Ordinary Share at an exercise price of $11.50ACTDWOPALThe Nasdaq Stock Market LLC


Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒   No  ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller"smaller reporting company,”" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer  ☒Smaller reporting company☒
Emerging growth company☒



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☒☐     No  ☐

☒



As of May 20, 2021, 27,627,174August 11, 2023, a total of 27,694,332 shares of Class A ordinary shares,common stock, par value $0.0001 per share, and 6,810,326144,399,037 shares of Class B ordinary shares,D common stock, par value $0.0001 per share were issued and outstanding.



ARCLIGHT CLEAN TRANSITION CORP. II


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q

Table contains forward-looking statements within the meaning of Contents

Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. Words such as “estimates,” “projected,” “expects,” “estimated,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,” “future,” “propose,” “target,” “goal,” “objective,” “outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include:
• our ability to grow and manage growth profitably, maintain relationships with customers and suppliers and retain              key employees;
• our success in retaining or recruiting, our principal officers, key employees or directors;
•intense competition and competitive pressures from other companies in the industry in which we operate;
•increased costs of, or delays in obtaining, key components or labor for the construction and completion of LFG and livestock waste projects that generate electricity and renewable natural gas (“RNG”), compressed natural gas (“CNG”) and hydrogen dispensing stations;
•factors relating to our business, operations and financial performance, including market conditions and global and economic factors beyond our control;
•macroeconomic conditions related to the global COVID-19 pandemic;
•the reduction or elimination of government economic incentives to the renewable energy market;
•factors associated with companies, such as us, that are engaged in the production and integration of RNG, including (i) anticipated trends, growth rates and challenges in those businesses and in the markets in which they operate (ii) contractual arrangements with, and the cooperation of, landfill and livestock biogas conversion project site owners and operators and operators, on which we operate our LFG and livestock waste projects that generate electricity and (iii) RNG prices for Environmental Attributes (as defined below), LCFS credits and other incentives;
•the ability to identify, acquire, develop and operate renewable projects and fueling stations ("Fueling Stations");
•our ability to issue equity or equity-linked securities or obtain or amend debt financing;
•the demand for renewable energy not being sustained;
•impacts of climate change, changing weather patterns and conditions and natural disasters; and
•the effect of legal, tax and regulatory changes.
The forward-looking statements contained in this Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this Form 10-Q and in our Annual Report on Form 10-K filed on March 29, 2023. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.


TABLE OF CONTENTS

Page No.PAGE

PART I. FINANCIAL INFORMATION

Item

Financial Statements1
1
1
2
3
5
3
6
4
9
5
11

Item

Management’s Discussion and Analysis of Financial Condition and Results of Operations48
19

ItemITEM 3.

Quantitative and Qualitative Disclosures About Market Risk59
22

Item

Controls and Procedures59
23

PART II. OTHER INFORMATION

Item

Legal Proceedings62
23

Item

Risk Factors62
23

Item

Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities62
23

Item

Defaults Upon Senior Securities62
24

Item

Mine Safety Disclosures62
24

Item

Other Information63
24

Item

Exhibits63
24

65


PART I—FINANCIAL INFORMATION



Part I - Financial Information

Item 1. Financial Statements.

ARCLIGHT CLEAN TRANSITION CORP. II

UNAUDITED Statements

OPAL FUELS INC.
CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2021

Assets

  

Current assets:

  

Cash

  $2,797,895 

Prepaid expenses

   1,409,464 
  

 

 

 

Total current assets

   4,207,359 

Investments held in Trust Account

   311,163,203 
  

 

 

 

Total Assets

  $315,370,562 
  

 

 

 

Liabilities and Shareholders’ Equity:

  

Current liabilities:

  

Accounts payable

  $1,694,343 

Accrued expenses

   93,534 

Accrued expenses-related party

   10,000 
  

 

 

 

Total current liabilities

   1,797,877 

Deferred underwriting commissions

   10,890,707 

Derivative warrant liabilities

   14,724,600 
  

 

 

 

Total liabilities

   27,413,184 

Commitments and Contingencies

  

Class A ordinary shares; 28,295,737 shares subject to possible redemption at $10.00 per share

   282,957,370 

Shareholders’ Equity:

  

Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding

   —   

Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 2,820,568 shares issued and outstanding (excluding 28,295,737 shares subject to possible redemption)

   282 

Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 7,779,076 shares issued and outstanding

   778 

Additional paid-in capital

   5,318,731 

Accumulated deficit

   (319,783) 
  

 

 

 

Total shareholders’ equity

   5,000,008 
  

 

 

 

Total Liabilities and Shareholders’ Equity

  $315,370,562 
  

 

 

 

SHEETS

(In thousands of U.S. dollars, except per share data)

June 30,
2023		December 31,
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents (includes $906 and $12,506 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)$21,595 $40,394 
Accounts receivable, net (includes $846 and $966 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)26,821 31,083 
Accounts receivable, related party— 12,421 
Restricted cash - current (includes $228 and $6,971 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)228 32,402 
Short term investments16,955 64,976 
Fuel tax credits receivable3,213 4,144 
Contract assets12,513 9,771 
Parts inventory10,631 7,311 
Environmental credits held for sale (includes $29 and $0 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)4,184 1,674 
Prepaid expense and other current assets (includes $186 and $415 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)4,485 7,625 
Derivative financial assets, current portion365 182 
Total current assets100,990 211,983 
Capital spares3,056 3,443 
Property, plant, and equipment, net (includes $27,043 and $73,140 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)288,427 297,323 
Operating right-of-use assets11,441 11,744 
Investment in other entities202,409 51,765 
Note receivable - variable fee component2,101 1,942 
Derivative financial assets, non-current portion267 954 
Deferred financing costs— 3,013 
Other long-term assets1,489 1,489 
Intangible assets, net1,854 2,167 
Restricted cash - non-current (includes $2,790 and $2,923 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)5,303 4,425 
Goodwill54,608 54,608 
Total assets$671,945 $644,856 
Liabilities and Equity
Current liabilities:
Accounts payable (includes $384 and $4,896 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)13,494 22,679 
Accounts payable, related party (includes $1,108 and $433 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)3,707 1,346 
Fuel tax credits payable2,624 3,320 
Accrued payroll7,107 8,979 
Accrued capital expenses (includes $0 and $7,821 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)8,864 11,922 
Accrued expenses and other current liabilities (includes $272 and $646 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)12,698 9,573 
1



Contract liabilities6,220 8,013 
Senior Secured Credit Facility - term loan, current portion, net of debt issuance costs— 15,250 
Senior Secured Credit Facility - working capital facility, current portion— 7,500 
OPAL Term Loan, current portion27,732 27,732 
Sunoma Loan, current portion (includes $1,169 and $380 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)1,169 380 
Convertible Note Payable29,671 28,528 
Municipality Loan— 76 
Derivative financial liability, current portion— 4,596 
Operating lease liabilities - current portion681 630 
Other current liabilities— 1,085 
Asset retirement obligation, current portion1,296 1,296 
Total current liabilities115,263 152,905 
Asset retirement obligation, non-current portion5,165 4,960 
OPAL Term Loan63,210 66,600 
Sunoma Loan, net of debt issuance costs (includes $20,948 and $21,712 at June 30, 2023 and December 31, 2022, respectively, related to consolidated VIEs)20,948 21,712 
Operating lease liabilities - non-current portion10,924 11,245 
Earn out liabilities4,153 8,790 
Other long-term liabilities856 825 
Total liabilities220,519 267,037 
Commitments and contingencies
Redeemable preferred non-controlling interests143,754 138,142 
Redeemable non-controlling interests1,068,274 1,013,833 
Stockholders' deficit
Class A common stock, $0.0001 par value, 340,000,000 shares authorized as of June 30, 2023; 29,330,115 and 29,477,766 shares, issued and outstanding at June 30, 2023 and December 31, 2022, respectively3 3 
Class B common stock, $0.0001 par value, 160,000,000 shares authorized as of June 30, 2023; None issued and outstanding as of June 30, 2023 and December 31, 2022— — 
Class C common stock, $0.0001 par value, 160,000,000 shares authorized as of June 30, 2023; None issued and outstanding as of June 30, 2023 and December 31, 2022— — 
Class D common stock, $0.0001 par value, 160,000,000 shares authorized as of June 30, 2023; 144,399,037 and 144,399,037 shares issued and outstanding at June 30, 2023 and December 31, 202214 14 
Additional paid-in capital— — 
Accumulated deficit(749,912)(800,813)
Accumulated other comprehensive income4 195 
Class A common stock in treasury, at cost; 1,635,783 and 0 shares at June 30, 2023 and December 31, 2022, respectively(11,614)— 
Total Stockholders' deficit attributable to the Company(761,505)(800,601)
Non-redeemable non-controlling interests903 26,445 
Total Stockholders' deficit(760,602)(774,156)
Total liabilities, Redeemable preferred non-controlling interests, Redeemable non-controlling interests and Stockholders' deficit$671,945 $644,856 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ARCLIGHT CLEAN TRANSITION CORP. II

UNAUDITED


2



OPAL FUELS INC.
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE PERIOD FROM JANUARY 13, 2021 (INCEPTION) THROUGH MARCH 31, 2021

General and administrative expenses

  $128,476 
  

 

 

 

Loss from operations

   (128,476) 

Other income (expense)

  

Change in fair value of derivative warrant liabilities

   271,160 

Financing costs - warrant liabilities

   (462,620) 

Net gain on investments held in Trust Account

   153 
  

 

 

 

Total other income (expense)

   (191,307) 
  

 

 

 

Net loss

  $(319,783) 
  

 

 

 
Weighted average shares outstanding of Redeemable Class A ordinary shares subject to redemption, basic and diluted   28,282,899 
  

 

 

 

Basic and diluted net loss per ordinary share

  $0.00 
  

 

 

 
Weighted average shares outstanding of Non-Redeemable Class A and Class B ordinary shares, basic and diluted   7,243,737 
  

 

 

 

Basic and diluted net loss per ordinary share

  $(0.04) 
  

 

 

 

(In thousands of U.S. dollars, except per unit data)
(Unaudited)
Three Months Ended June 30,Six Months Ended
June 30,
 2023202220232022
Revenues:
RNG fuel (includes revenues from related party of $9,412 and $12,765 for the three months ended June 30, 2023 and 2022, respectively; $14,127 and $20,845 for the six months ended June 30, 2023 and 2022, respectively)$16,431 $16,459 $28,625 $31,508 
Fuel station services (includes revenues from related party of $2,440 and $4,027 for the three months ended June 30, 2023 and 2022, respectively; $3,933 and $8,843 for the six months ended June 30, 2023 and 2022, respectively)29,956 26,730 50,784 51,604 
Renewable Power (includes revenues from related party of $1,747 and $1,243 for the three months ended June 30, 2023 and 2022, respectively; $3,274 and $2,269, for the six months ended June 30, 2023 and 2022, respectively)8,655 10,028 18,590 19,152 
Total revenues55,042 53,217 97,999 102,264 
Operating expenses:
Cost of sales - RNG fuel7,884 8,457 15,407 16,171 
Cost of sales - Fuel station services27,476 23,630 47,768 43,293 
Cost of sales - Renewable Power8,761 7,540 17,139 15,948 
Selling, general, and administrative13,663 7,955 28,135 18,810 
Depreciation, amortization, and accretion3,628 3,325 7,195 6,721 
Total expenses61,412 50,907 115,644 100,943 
Operating (loss) income(6,370)2,310 (17,645)1,321 
Other (expense) income:
Interest and financing expense, net(956)(3,365)(1,597)(6,422)
Loss on debt extinguishment(1,895)— (1,895)— 
Change in fair value of derivative instruments, net1,160 92 5,093 328 
Other income123,109 — 123,041 — 
 (Loss) income from equity method investments(998)621 (293)(36)
Income (loss) before provision for income taxes114,050 (342)106,704 (4,809)
Provision for income taxes— — — — 
Net income (loss)114,050 (342)106,704 (4,809)
Net income (loss) attributable to redeemable non-controlling interests93,460 (1,803)85,227 (6,745)
Net loss attributable to non-redeemable non-controlling interests(183)(257)(480)(499)
Paid-in-kind preferred dividends (1)
2,849 1,718 5,612 2,435 
Net income attributable to Class A common stockholders$17,924 $— $16,345 $— 
Weighted average shares outstanding of Class A common stock:
Basic26,977,682 — 27,179,488 — 
Diluted27,248,639 — 27,556,700 — 
Per share amounts:
Basic (2)
$0.66 $— $0.60 $— 
Diluted (2)
$0.66 $— $0.59 $— 
3



(1)Paid-in-kind preferred dividend is allocated between redeemable non-controlling interests and Class A common stockholders based on their weighted average percentage of ownership. Please see Note.13 Redeemable non-controlling interests, redeemable preferred non-controlling interests and Stockholders' deficit for additional information.
(2) Income per share information has not been presented for the three and six months ended June 30, 2022 as it would not be meaningful to the users of these condensed consolidated financial statements,
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ARCLIGHT CLEAN TRANSITION CORP. II

UNAUDITED

4






OPAL FUELS INC.
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE PERIOD FROM JANUARY 13, 2021 (INCEPTION) THROUGH MARCH 31, 2021

   Ordinary Shares  Additional    Total 
   Class A  Class B  Paid-in Accumulated  Shareholders’ 
   Shares  Amount  Shares  Amount  Capital Deficit  Equity 

Balance - January 13, 2021 (inception)

   —    $—     —    $—    $—    $—    $—   

Issuance of Class B ordinary shares to Sponsor

   —     —     7,906,250   791   24,209   —     25,000 

Sale of units in initial public offering, less fair value of public warrants

   31,116,305   3,112   —     —     305,211,708   —     305,214,820 

Offering costs

   —     —     —     —     (17,138,390)   —     (17,138,390) 

Sale of private placement warrants to Sponsor less fair value of private warrants

   —     —     —     —     175,731   —     175,731 

Forfeiture of Class B ordinary shares from Sponsor

   —     —     (127,174)   (13)   13   —     —   

Shares subject to possible redemption

   (28,295,737)   (2,830)   —     —     (282,954,540)   —     (282,957,370) 

Net loss

   —     —     —     —     —     (319,783)   (319,783) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

  

 

 

 

Balance - March 31, 2021 (unaudited)

   2,820,568  $282   7,779,076  $778  $5,318,731  $(319,783)  $5,000,008 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

  

 

 

 

COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net income (loss)$114,050 $(342)$106,704 $(4,809)
Other comprehensive income (loss):
Effective portion of the cash flow hedge attributable to equity method investments109 — 109 — 
Reclassification adjustments included in earnings (1)
(1,147)— (1,147)— 
Net unrealized gain (loss) on cash flow hedges215 — (141)— 
Total comprehensive income (loss)113,227 (342)105,525 (4,809)
Net income (loss) attributable to Redeemable non-controlling interests95,851 (1,803)89,936 (6,745)
Other comprehensive loss attributable to Redeemable non-controlling interests(690)— (989)— 
Comprehensive loss attributable to non-redeemable non-controlling interests(183)(257)(480)(499)
Paid-in-kind preferred dividends458 1,718 903 2,435 
Comprehensive income attributable to Class A common stockholders$17,791 $— $16,155 $— 

(1) Represents the reclassification of the gain on termination of interest rate swaps on May 30, 2023. See Note 9 Derivative Financial Instruments for additional information. Additionally, there is $334 reclassification into earnings from our equity method investments.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ARCLIGHT CLEAN TRANSITION CORP. II

UNAUDITED


5



OPAL FUELS INC.
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIOD FROM JANUARY 13, 2021 (INCEPTION) THROUGH MARCH 31, 2021

Cash Flows from Operating Activities:

  

Net loss

  $(319,783) 

Adjustments to reconcile net loss to net cash used in operating activities:

  

General and administrative expenses paid by related party in exchange for issuance of Class B ordinary shares

   25,000 

General and administrative expenses paid by related party under promissory note

   26,800 

Change in fair value of derivative warrant liabilities

   (271,160) 

Financing costs - warrant liabilities

   462,620 

Net gain on investments held in Trust Account

   (153) 

Changes in operating assets and liabilities:

  

Prepaid expenses

   (1,409,464) 

Accounts payable

   1,442,343 

Accrued expenses

   23,534 

Accrued expenses-related party

   10,000 
  

 

 

 

Net cash used in operating activities

   (10,263) 
  

 

 

 

Cash Flows from Investing Activities:

  

Cash deposited in Trust Account

   (311,163,050) 
  

 

 

 

Net cash used in investing activities

   (311,163,050) 
  

 

 

 

Cash Flows from Financing Activities:

  

Proceeds from note payable to related party

   100 

Repayment of note payable to related party

   (171,742) 

Proceeds received from initial public offering

   311,163,050 

Proceeds received from private placement

   9,223,261 

Offering costs paid

   (6,243,461) 
  

 

 

 

Net cash provided by financing activities

   313,971,208 
  

 

 

 

Net increase in cash

   2,797,895 

Cash - beginning of the period

   —   
  

 

 

 

Cash - ending of the period

  $2,797,895 
  

 

 

 

Supplemental disclosure of noncash investing and financing activities:

  

Offering costs included in accounts payable

  $252,000 

Offering costs included in accrued expenses

  $70,000 

Offering costs paid by related party under promissory note

  $144,842 

Deferred underwriting commissions

  $10,890,707 

Initial value of Class A ordinary shares subject to possible redemption

  $282,777,640 

Change in value of Class A ordinary shares subject to possible redemption

  $179,730 

Forfeiture of Class B ordinary shares from Sponsor

  $13 

CHANGES IN REDEEMABLE NON-CONTROLLING INTEREST, REDEEMABLE PREFERRED NON-CONTROLLING INTEREST AND STOCKHOLDERS' (DEFICIT) EQUITY

(In thousands of U.S. dollars, except per unit data)
(Unaudited)
Class A common stockClass D common stockClass A common stock in treasuryMezzanine Equity
SharesAmountSharesAmountAdditional paid-in capitalAccumulated deficitOther comprehensive incomeNon-redeemable non-controlling interestsSharesAmountTotal Stockholders' EquityRedeemable Preferred non-controlling interestsRedeemable non-controlling interests
December 31, 202229,477,766 $3 144,399,037 $14 $— $(800,813)$195 $26,445 — $— $(774,156)$138,142 $1,013,833 
Net loss— — — — — (1,134)— (297)— — (1,431)— (5,915)
Other comprehensive loss— — — — — — (58)— — — (58)— (299)
Proceeds from non-redeemable non-controlling interest— — — — 1,722 — — 1,821 — — 3,543 — — 
Issuance of Class A common stock on warrant exchange49,633 — — — 338 — — — — — 338 — — 
Cancellation of fractional shares on warrant exchange(26)— — — — — — — — — — — — 
Exercise of put option forward purchase contract - Meteora— — — — — — — — (1,635,783)(11,614)(11,614)— — 
Forfeiture of Class A common stock(197,258)— — — — — — — — — — — — 
Stock-based compensation— — — — 157 — — — — — 157 — 814 
Change in redemption value of Redeemable non-controlling interests— — — — (2,217)(5,503)— — — — (7,720)— 7,720 
Paid-in-kind preferred dividend— — — — — (445)— — — — (445)2,763 (2,318)
March 31, 202329,330,115 3 144,399,037 14 — (807,895)137 27,969 (1,635,783)(11,614)(791,386)140,905 1,013,835 
Net income (loss)— — — — — 18,382 — (183)— — 18,199 — 95,851 
Other comprehensive loss— — — — — — (133)— — — (133)— (690)
Proceeds from non-redeemable non-controlling interest— — — — 1,234 — — 8,001 — — 9,235 — — 
Deconsolidation of entities (1)
— — — — (1,383)— — (34,662)— — (36,045)— — 
Distributions to non-redeemable non-controlling interests— — — — — — — (222)— — (222)— — 
Stock-based compensation— — — — 301 — — — — — 301 — 1,576 
Change in redemption value of Redeemable non-controlling interests— — — — (152)40,059 — — — — 39,907 — (39,907)
Paid-in-kind preferred dividend— — — — — (458)— — — — (458)2,849 (2,391)
June 30, 202329,330,115 $3 144,399,037 $14 — $(749,912)$4 $903 (1,635,783)$(11,614)$(760,602)$143,754 $1,068,274 
6



(1) As of May 30, 2023, two of our RNG facilities, Emerald and Sapphire (defined below) were deconsolidated and accounted for under equity method as per ASC 323. Please see Note 4 Investment in Other entities and Note 12 Variable Interest Entities for additional information.


7




Class A common stockClass D common stockMezzanine Equity
SharesAmountSharesAmountAdditional paid-in capitalRetained earningsNon-redeemable non-controlling interestsTotal Stockholders' EquityRedeemable preferred non-controlling interestsRedeemable non-controlling interests
December 31, 2021— $— 144,399,037 $14 $— $— $1,188 $1,202 $30,210 $63,545 
Net loss— — — — — (242)(242)— (4,225)
Contributions from non-redeemable non-controlling interest`— — — — 5,738 5,738 — (95)
Amortization on payment to acquire non-redeemable noncontrolling interest— — — — — — — — — (91)
Contributions from redeemable preferred non-controlling interests— — — — — — — — 25,000 (267)
Paid-in-kind preferred dividend— — — — — 717 (717)
Stock-based compensation— — — — — 160 
March 31, 2022— — 144,399,037 14 — — 6,684 6,698 55,927 58,310 
Net loss— — — — — — (257)(257)— (85)
Contributions from non-redeemable non-controlling interest— — — — — — 11,211 11,211 — 47 
Amortization on payment to acquire non-redeemable noncontrolling interest— — — — — — — — — (92)
Contributions from redeemable preferred non-controlling interests— — — — — — — — 75,000 — 
Paid-in-kind preferred dividend— — — — — — — — 1,718 (1,718)
Stock-based compensation— — — — — — — — — 160 
June 30, 2022— $— 144,399,037 $14 $— $— $17,638 $17,652 $132,645 $56,622 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ARCLIGHT CLEAN TRANSITION CORP. II

8



OPAL FUELS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
Six Months Ended
June 30,
 20232022
Cash flows from operating activities:
Net income (loss)$106,704 $(4,809)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Income from equity method investments293 36 
Provision for bad debts492 — 
Amortization of operating right-of-use assets303 382 
Depreciation and amortization6,990 6,566 
Amortization of deferred financing costs795 898 
Loss on debt extinguishment1,895 — 
Loss on warrant exchange338 — 
Gain on deconsolidation of VIEs(122,873)— 
Accretion expense related to asset retirement obligation205 155 
Stock-based compensation2,848 320 
Paid-in-kind interest income(159)(454)
Change in fair value of Convertible Note Payable1,143 2,110 
Unrealized gain on derivative financial instruments(4,906)(18)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable3,770 610 
Accounts receivable, related party12,421 — 
Fuel tax credits receivable931 1,257 
Capital spares387 (41)
Parts inventory(3,320)(3,255)
Environmental credits held for sale(2,510)(260)
Prepaid expense and other current assets3,121 (328)
Contract assets(2,742)(7,111)
Accounts payable1,257 (4,217)
Accounts payable, related party2,941 780 
Fuel tax credits payable(696)(1,295)
Accrued payroll(1,850)(3,242)
Accrued expenses3,125 5,398 
Operating lease liabilities - current and non-current(270)(382)
Other current and non-current liabilities(1,054)251 
Contract liabilities(1,793)(2,626)
Net cash provided by (used in) operating activities7,786 (9,275)
Cash flows from investing activities:
Purchase of property, plant, and equipment(72,009)(54,461)
Proceeds from sale of short term investments48,021 — 
Deconsolidation of VIEs, net of cash(11,948)— 
Distributions received from equity method investment7,756 — 
Net cash used in investing activities(28,180)(54,461)
Cash flows from financing activities:
Proceeds from Sunoma loan— 1,046 
Proceeds from OPAL Term Loan10,000 15,000 
Cash paid for purchase of shares upon exercise of put option(16,391)— 
Financing costs paid to other third parties— (3,216)
Repayment of Senior Secured Credit Facility(22,750)(1,221)
Repayment of OPAL Term Loan(13,866)(6,444)
Repayment of Municipality loan(76)(105)
9



Proceeds from sale of non-redeemable non-controlling interest12,778 16,901 
Reimbursement of financing costs by joint venture partner826 — 
Distribution to non-redeemable non-controlling interest(222)— 
Proceeds from sale of non-controlling interest, related party— 100,000 
Net cash (used in) provided by financing activities(29,701)121,961 
Net (decrease) increase in cash, restricted cash, and cash equivalents(50,095)58,225 
Cash, restricted cash, and cash equivalents, beginning of period77,221 42,054 
Cash, restricted cash, and cash equivalents, end of period$27,126 $100,279 
Supplemental disclosure of cash flow information
Interest paid, net of $3,785 and $0 capitalized, respectively$1,507 $2,860 
Noncash investing and financing activities:
Paid-in-kind dividend on redeemable preferred non-controlling interests$5,612 $2,435 
Accrual for purchase of Property, plant and equipment included in Accounts payable and Accrued capital expenses$8,864 $20,096 
Right-of-use assets for finance leases as of January 1, 2022 included in Property, plant and equipment, net$— $801 
Lease liabilities for finance leases as of January 1, 2022 included in Accrued expenses and other current liabilities$— $316 
Lease liabilities for finance leases as of January 1, 2022 included in Other long-term liabilities$— $485 
Fair value of contingent consideration to redeem the non-controlling interest included in Other long-term liabilities$— $183 
Accrual for deferred financing costs included in Accrued expenses and other current liabilities$— $1,750 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10


OPAL FUELS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—

(Unaudited)

1. Organization and Description of Business

OPAL Fuels Inc. (including its subsidiaries, the "Company", “OPAL,” “we,” “us” or “our”) is a renewable energy company specializing in the capture and conversion of biogas for the (i) production of RNG for use as a vehicle fuel for heavy and medium-duty trucking fleets, (ii) generation of Renewable Power for sale to utilities, (iii) generation and sale of Environmental Attributes associated with RNG and Renewable Power, and (iv) sales of RNG as pipeline quality natural gas. OPAL also designs, develops, constructs, operates and services Fueling Stations for trucking fleets across the country that use natural gas to displace diesel as their transportation fuel. The biogas conversion projects ("Biogas Conversion Projects") currently use landfill gas and dairy manure as the source of the biogas. In addition, we have recently begun implementing design, development, and construction services for hydrogen Fueling Stations, and we are pursuing opportunities to diversify our sources of biogas to other waste streams.
All amounts in these footnotes are presented in thousands of dollars except per share data.
COVID-19 Impact
In March 2020, the World Health Organization Business Operationscategorized the coronavirus disease 2019 ("COVID-19") as a pandemic and the President of the United States declared the COVID-19 outbreak as a national emergency. Management considered the impact of COVID-19 on the assumptions and estimates used and determined that, because the Company was deemed to be an essential business by the U.S. government and incurred neither layoffs of personnel nor a decline in its customer base or business operations. There was no material adverse impact on the Company's statement of position and result of operations as of, and for the three and six months ended June 30, 2023.
The future impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and its impact on our customers, all of which are uncertain and cannot be predicted.
2. Summary of Significant Accounting Policies
Basis of Presentation

ArcLight Clean Transition Corp. II (the “Company” and Principles of Consolidation

These condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") is a blank check company incorporated as a Cayman Islands exempted company on January 13, 2021. Theand includes the accounts of the Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses thatand all other entities in which the Company has not yet identifieda controlling financial interest: Fortistar Methane 3 LLC (“Business Combination”FM3”), Fortistar Methane 4 LLC, Beacon RNG LLC (“Beacon”) Sunoma Holdings, LLC (“Sunoma”), New River LLC (“New River”), Reynolds NRG LLC (“Reynolds”), Central Valley LLC (“Central Valley”), Prince William RNG LLC (“Prince William”), Cottonwood RNG LLC, Polk County RNG LLC (“Polk County”), Fortistar Contracting LLC, Fortistar RNG LLC, and OPAL Fuel station services LLC (“Fuel station services”).

As The Company’s condensed consolidated financial statements include the assets and liabilities of March 31, 2021,these subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The non-controlling interest attributable to the Company's variable interest entities ("VIE") are presented as a separate component from the Stockholders' deficit in the condensed consolidated balance sheets and as a non-redeemable non-controlling interests in the condensed consolidated statements of changes in redeemable non-controlling interests, redeemable preferred non-controlling interests and Stockholders' deficit.

The accompanying condensed consolidated financial statements reflect the activities of the Company, had not yet commenced operations. All activityits subsidiaries, and its equity method investments for the period from January 13, 2021 (inception) through March 31, 2021 relatesthree and six months ended June 30, 2023 and 2022. Investments in unconsolidated entities in which the Company can influence the operating or financial decisions are accounted for under the equity method. On May 30, 2023, the Company together with a third-party environmental solutions company formed a new joint venture holding company Paragon LLC ("Paragon"). The Company owns 50% of ownership interest in Paragon. Concurrent to the Company’s formation of Paragon, the Company contributed its 50% ownership interests in Emerald and Sapphire to Paragon. Upon the initial public offering (the “Initial Public Offering”), which is described below, and, since the closingexecution of the Initial Public Offering, a search for a business combination candidate. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.

The Company’s sponsor is ArcLight CTC Holdings II, L.P., a Delaware limited partnership (“Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on March 22, 2021. On March 25, 2021,above transaction, the Company consummatedreassessed its Initial Public Offering of 31,116,305 units (the “Units”equity interests in Emerald and with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), including the partial exercise of the underwriters’ option to purchase 3,616,305 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $311.2 million (see Note 3), Sapphire under ASC 810, Consolidation and incurring offering costs of approximately $17.6 million, of which approximately $10.9 million was for deferred underwriting commissions (see Note 6).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 9,223,261 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of approximately $9.2 million (see Note 4).

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

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares were recorded at a redemption value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law andthat the Company does not decidehave a controlling financial interest in Paragon

11


under ASC 810 because the governance of the joint venture is driven by a board jointly controlled by the joint venture partner and OPAL equally and there are substantive participating rights held by the joint venture partner in the significant activities of Paragon. Prior to hold a shareholder vote for business or other legal reasons,May 30, 2023, the Company will, pursuant toconsolidated these two entities in accordance with the amended and restated memorandum and articlesvariable interest entity model guidance under ASC 810, Consolidation.
As of association which will be adopted byJune 30, 2023, the Company uponaccounted for its ownership interests in Pine Bend RNG LLC ("Pine Bend"), Noble Road RNG LLC ("Noble Road"), Emerald RNG LLC (“Emerald”), Sapphire RNG LLC (“Sapphire”), Paragon RNG LLC ("Paragon") and GREP BTB Holdings LLC ("GREP") under the consummationequity method.
As of the Initial Public Offering (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a shareholder approval of the transactions is required by law, orDecember 31, 2022, the Company decides to obtain shareholder approvalaccounted for business or legal reasons, the Company will offer to redeem sharesits ownership interests in conjunction with a proxy solicitation pursuant to the proxy rulesPine Bend RNG LLC ("Pine Bend"), Noble Road RNG LLC ("Noble Road") and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the holders of the Founder Shares prior to this Initial Public Offering (the “Initial Shareholders”GREP BTB Holdings LLC ("GREP") agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination. In addition, the Company agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the Sponsor.

Notwithstanding the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Company’s Sponsor, executive officers and directors agreed not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association that would affect the substance or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.

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

In connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay dissolution expenses).

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Initial Shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the Trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability equity method. Please see Note 3. Investment in Other Entities, for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Liquidity and Capital Resources

As of March 31, 2021, the Company had approximately $2.8 million in its operating bank account and a working capital of approximately $2.4 million.

The Company’s liquidity needs up to March 31, 2021 had been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares (as defined below), the loan under the Note from the Sponsor of approximately $172,000 (see Note 5) to the Company, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Note from the Sponsor was repaid in full on March 26, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and Initial Shareholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 5). To date, there were no amounts outstanding under any Working Capital Loans.

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

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

additional information.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally acceptedthe instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission ("SEC"). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the United States (“U.S. GAAP”)rules and regulations of the SEC for interim financial information and Article 8 of Regulation S-X.reporting. Accordingly, they doit does not include all of the information and footnotes required by U.S. GAAP.necessary for a complete presentation of financial position, results of operations, or cash flows. The information herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's 2022 Annual Report on Form 10-K, which was filed with SEC on March 30, 2023. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, (consistingconsisting of a normal accruals) consideredrecurring nature, which are necessary for a fair presentation have been included. Operatingstatement of the financial position, operating results, and cash flows for the period from January 13, 2021 (Inception) through March 31, 2021 are not necessarily indicative of the results that may be expected for the period from January 13, 2021 (inception) through December 31, 2021.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its shareholder reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

periods presented.

Use of Estimates

estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statement. Making estimates requires management to exercise significant judgment. It is at least reasonably possible thatstatements and the estimatereported amounts of revenues and expenses during the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actualreporting period. Actual results could differ significantly from those estimates.

The significant estimates and assumptions of the Company include the residual value of the useful lives of our property, plant and equipment, the fair value of stock-based compensation, asset retirement obligations, the estimated losses on our trade receivables, percentage completion for revenue recognition, incremental borrowing rate for calculating the right-of-use assets and lease liabilities, the fair value of the Convertible Note Payable (as defined below), the impairment assessment of goodwill, the fair value of deconsolidated VIEs and the fair value of derivative instruments. Actual results could differ from those estimates.
The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.
Accounting Pronouncements adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses ("ASC 326"), with the objective of providing financial statement users information about the credit risk inherent in an entity’s financial statements as well as to explain management’s estimate of expected credit losses and the changes in the allowance for such losses. The accounting standard amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses will result in more timely recognition of such losses. The Company adopted the accounting standard using the prospective transition approach as of January 1, 2023. The cumulative effect upon adoption was not material to our condensed consolidated financial statements.
The adoption of ASC 326 primarily impacted our trade receivables and the Note receivable - variable fee component recorded on our condensed consolidated balance sheet as of June 30, 2023. Upon adoption of ASC 326, the Company assessed collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considered historical collectability based on past due status and made judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also
12


considered customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The carrying value of the Note receivable - variable fee component on the condensed consolidated balance sheet as of June 30, 2023 is based on discounted expected cash flows model which are adjusted on a quarterly basis. Therefore, the Company determined that the credit risk component is included in the carrying value at each reporting period. The adoption of ASC 326 did not have any material impact on our condensed consolidated financial statements.
The Company adopted ASC 842 "Leases" as of January 1, 2022 and evaluated all of its contracts and recorded right-of-use assets and corresponding lease liabilities on its consolidated balance sheet as of January 1, 2022. The Company adopted ASC 842 using the modified retrospective transition method of adoption. Under this method, the cumulative effect of applying the new lease standard is recorded with no restatement of any comparative prior periods presented. As provided by ASC 842, the Company elected to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption rather than in the earliest comparative period presented. The Company retrospectively adjusted the financial statements as of and for the three and six months ended June 30, 2022 to reflect the adoption of ASC 842.
Accounting Pronouncements not yet adopted
In March 2023, the FASB issued Accounting Standards Update No. 2023-01, Leases (Topic 842) (the "Update"). The Update requires the entities to classify and account for a leasing arrangement between entities under common control on the same basis as an arrangement with an unrelated party. The Update also requires leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset and account for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The amendments in this Update are effective for fiscal years beginning after December 15, 2023 including interim fiscal periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this Update on its condensed consolidated financial statements.
Emerging Growth Company Status
We are an emerging growth company as defined in the JOBS Act. The JOBS Act provides emerging growth companies with certain exemptions from public company reporting requirements for up to five fiscal years while a company remains an emerging growth company. As part of these exemptions, we need only provide two fiscal years of audited financial statements instead of three, we have reduced disclosure obligations such as for executive compensation, and we are not required to comply with auditor attestation requirements from Section 404(b) of the Sarbanes-Oxley Act regarding our internal control over financial reporting. Additionally, the JOBS Act has allowed us the option to delay adoption of new or revised financial accounting standards until private companies are required to comply with new or revised financial accounting standards.
Cash, and Cash Equivalents,

and Restricted Cash

Cash, cash equivalents, and restricted cash consisted of the following as of June 30, 2023 and December 31, 2022:
June 30,
2023		December 31,
2022
Current assets:
Cash and cash equivalents$21,595 $40,394 
Restricted cash - current (1)
228 32,402 
Long-term assets:
Restricted cash held as collateral (2)
5,303 4,425 
Total cash, cash equivalents, and restricted cash$27,126 $77,221 
(1) Restricted cash - current as of June 30, 2023 primarily relates to interest reserve on the Sunoma Loan. Restricted cash - current as of December 31, 2022 primarily consists of (i) $16,849 held in escrow to secure the Company's purchase obligations under the forward purchase agreement with Meteora (ii) $5,845 equity contribution to a joint venture in connection with the closing of OPAL Term Loan II (iii) $1,127 relates to interest reserve on the Sunoma Loan and (iv)
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$8,581 held in a restricted account for funding one of our RNG projects. The decrease in the Restricted cash relates to termination of the forward purchase agreement with Meteora and funds spent on construction of our RNG facilities.
(2) Restricted cash held as collateral represents the collateral requirements on our debt facilities.
Short term investments
The Company considers all short-termhighly liquid investments such as time deposits and certificates of deposit with an original maturity ofgreater than three months or less when purchasedat the time of purchase to be short term investments. The short term investments of $16,955 and $64,976 as of June 30, 2023 and December 31, 2022, respectively, consists of cash equivalents.

Investments Held in Trust Account

The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investmentsinvested in money market funds that investaccounts with maturities ranging between 1 and 12 months as of the reporting date. The amounts in U.S.these money market accounts are liquid and available for general use.

Our short term investments are generally invested in commercial paper issued by highly credit worthy counter parties and government securities, orbacked treasury bills. Investments are generally not FDIC insured and we take counter party risk on these investments.
Earnout Liabilities
In connection with the business combination completed in July 2022 and pursuant to a combination thereof.sponsor letter agreement, ArcLight CTC Holdings II, L.P. (the "Sponsor") agreed to subject 10% of its Class A common stock (received as a result of the conversion of its ArcLight Class B ordinary shares immediately prior to the closing) to vesting and forfeiture conditions relating to VWAP targets for the Company's Class A common stock sustained over a period of 60 months following the closing. OPAL Fuels equity holders are eligible to receive an aggregate of 10,000,000 shares of Class B and Class D common stock upon the Company achieving each earn-out event during the earn-out period. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheetearnout awards (the "Earnout Awards") were recognized at fair value on the closing date and classified as a liability which is remeasured at each balance sheet date and any change in fair value is recognized in the endCompany's condensed consolidated statement of each reporting period. Gains and losses resulting from theoperations as part of change in fair value of these securities is includedderivative instruments, net. For the three and six months ended June 30, 2023, the Company recorded a gain of $327 and $4,638 in net gain on investments, dividends and interest held in Trust Account in the accompanying unauditedits condensed consolidated statement of operations. As of June 30, 2023 and December 31, 2022, the Company recorded $4,153 and $8,790, respectively, on its condensed consolidated balance sheets.
Put option on forward purchase agreement
Prior to the closing of Business Combination, the Company entered into a forward purchase agreement with Meteora Capital Partners ("Meteora") pursuant to which Meteora agreed to purchase 2,000,000 shares of Class A common stock from shareholders who had previously tendered such shares for redemption but agreed to reverse their redemption and sell such shares to Meteora at the redemption price. The Company placed $20,040 in escrow at the closing of the Business Combination to secure its purchase obligation to repurchase these 2,000,000 shares at Meteora’s option for a price of $10.02 per share on the date that is six months after closing of the Business Combination. The put option written to Meteora on 2,000,000 shares of Class A common stock is recorded as a liability under Topic 480 Distinguishing Liabilities from Equity withthe change in the fair market value recognized in the statement of operations as part of change in fair value of derivative instruments, net.
On January 23, 2023, pursuant to the terms of the forward purchase agreement, Meteora exercised its option to sell back 1,635,783 shares to the Company. $16,391 of the funds held in escrow which were previously recorded as part of Restricted Cash - current on its consolidated balance sheet as of December 31, 2022 were released to Meteora excluding interest accrued. In connection with the above, the Sponsor forfeited 197,258 shares of Class A common stock on January 26, 2023 pursuant to the terms of certain letter agreement dated July 21, 2022. The Company treated the repurchased shares as treasury shares and recorded $11,614 representing the fair value of those shares at the closing share price of $7.01 as an adjustment to Stockholders' deficit. Additionally, the Company recorded $4,777 as an offset to the Derivative financial liability - current in its condensed consolidated balance sheet as of June 30, 2023.
Redeemable non-controlling interests
Redeemable non-controlling interests represent the portion of OPAL Fuels that the Company controls and consolidates but does not own. The Redeemable non-controlling interest was created as a result of the Business Combination and represents 144,399,037 Class D Units issued by OPAL Fuels to the prior investors. The Company
14


allocates net income or loss attributable to Redeemable non-controlling interest based on weighted average ownership interest during the period. The net income or loss attributable to Redeemable non-controlling interests is reflected in the condensed consolidated statement of operations.
At each balance sheet date, the mezzanine equity classified Redeemable non-controlling interests is adjusted up to their maximum redemption value if necessary, with an offset in Stockholders' equity. As of June 30, 2023, the maximum redemption value is $1,068,274.
Net income per share
The Company's basic earnings per share of Class A common stock is computed based on the average number of outstanding shares of Class A common stock for the period.
The Company's diluted earnings per share includes effects of the Company's outstanding equity awards under the 2022 Plan (as defined elsewhere in these financial statements), Redeemable non-controlling interests (OPAL Fuels Class B units), redeemable preferred non-controlling interests, Sponsor Earnout Awards and OPAL Earnout Awards.
Accounts Receivable, Net
The Company's allowance for doubtful accounts was $0 and $0 at June 30, 2023 and December 31, 2022.
Asset Retirement Obligation
The Company accounts for asset retirement obligations in accordance with FASB ASC 410, Asset Retirement and Environmental Obligations, which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and when a reasonable estimate of fair value can be made. The fair value of the estimated asset retirement obligations is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The discounted asset retirement costs capitalized amounts are accreted over the life of the sublease or site lease agreement. Asset retirement obligations are deemed Level 3 fair value measurements as the inputs used to measure the fair value are unobservable. The Company estimates the fair value of asset retirement obligations by calculating the estimated present value of the cost to retire the asset. This estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental, and political environments. In addition, the Company determines the Level 3 fair value measurements based on historical information and current market conditions.
As of June 30, 2023 and December 31, 2022, the Company estimated the value of its total asset retirement obligations to be $6,461 and $6,256, respectively.
The changes in the asset retirement obligations were as follows as of June 30, 2023:
June 30,
2023
Balance, December 31, 2022 - Current and non-current$6,256 
Accretion expense205 
Total asset retirement obligation6,461 
Less: current portion(1,296)
Total asset retirement obligation, net of current portion$5,165 
Revenue Recognition
The Company’s revenue arrangements generally consist of a single performance obligation to transfer goods or services. Revenue from the sale of RNG, CNG and, electricity is recognized by applying the “right to invoice” practical expedient within the accounting guidance for Revenue from Contracts with Customers that allows for the recognition of revenue from performance obligations in the amount of consideration to which there is a right to invoice the customer and when the amount for which there is a right to invoice corresponds directly to the value transferred to the customer. For
15


some public CNG Fueling Stations where there is no contract with the customer, the Company recognizes revenue at the point in time that the customer takes control of the fuel.
The Company also performs maintenance services throughout the country. Maintenance consists of monitoring equipment and replacing parts as necessary to ensure optimum performance. Revenue from service agreements is recognized over time as services are provided. Capacity payments fluctuate based on peak times of the year and revenues from capacity payments are recognized monthly as earned.
The Company has agreements with two natural gas producers ("Producers") to transport Producers' natural gas using the Company's RNG gathering system. The performance obligation is the delivery of Producers' natural gas to an agreed delivery point on an interstate gas pipeline. The quantity of natural gas transported for the Producers is measured at a certain specified meter. The price is fixed at contracted rates and the Producers pay approximately 30 days after month-end. As such, transportation sales are recognized over time, using the output method to measure progress.
The Company provides credit monetization services to customers that own renewable gas generation facilities. The Company recognizes revenue from these services as the credits are minted on behalf of the customer. The Company receives non-cash consideration in the form of RINs or LCFSs for providing these services and recognizes the RINs or LCFSs received as a current asset based on their estimated fair valuesvalue at contract inception. When the Company receives RINs or LCFSs as payment for providing credit monetization services, it records the non-cash consideration in environmental credits held for sale within the condensed consolidated balance sheet based on the fair value of investments heldRINs or LCFSs at contract commencement.
On November 29, 2021, the Company entered into a purchase and sale agreement with NextEra for the Environmental Attributes generated by the RNG Fuels business. Under this agreement, the Company plans to sell a minimum of 90% of the Environmental Attributes generated and will receive net proceeds based on the agreed upon price less a specified discount. A specified volume of Environmental Attributes sold per quarter will incur a fee per Environmental Attribute in addition to the specified discount. The agreement was effective beginning January 1, 2022. For the three months ended June 30, 2023 and 2022, the Company earned net revenues after discount and fees of $11,852 and $16,792, respectively under this contract which was recorded as part of Revenues - RNG fuel and Fuel Station Services. For the six months ended June 30, 2023 and 2022, the Company earned net revenues after discount and fees of $18,060 and $29,688, respectively.
Sales of Environmental Attributes such as RINs, RECs, and LCFS are generally recorded as revenue when the certificates related to them are delivered to a buyer. However, the Company may recognize revenue from the sale of such Environmental Attributes at the time of the related RNG or renewable power sales when the contract provides that title to the Environmental Attributes transfers at the time of production, the Company's price to the buyer is fixed, and collection of the sales proceeds occurs within 60 days after generation of the renewable power.
Management operating fees are earned for the operation, maintenance, and repair of the gas collection system of a landfill site. Revenue is calculated on the volume of per million British thermal units of LFG collected and the megawatt hours ("MWhs") produced at that site. This revenue is recognized when LFG is collected and renewable power is delivered.
The Company has various fixed price contracts for the construction of Fueling Stations for customers. Revenues from these contracts, including change orders, are recognized over time, with progress measured by the percentage of costs incurred to date compared to estimated total costs for each contract. This method is used as management considers costs incurred to be the best available measure of progress on these contracts. Costs capitalized to fulfill certain contracts were not material in any of the periods presented.
The Company owns Fueling Stations for use by customers under fuel sale agreements. The Company bills these customers at an agreed upon price for each gallon sold and recognizes revenue based on the amounts invoiced in accordance with the "right to invoice" practical expedient. For some public stations where there is no contract with the customer, the Company recognizes revenue at the point-in-time that the customer takes control of the fuel.
The Company from time-to-time enters into fuel purchase agreements with customers whereby the Company is contracted to design and build a Fueling Station on the customer's property in exchange for the Company providing CNG/RNG to the customer for a determined number of years. In accordance with the standards of ASC 840, Leases, the Company has concluded these agreements meet the criteria for a lease and are classified as operating leases. Typically, these agreements do not require any minimum consumption amounts and, therefore, no minimum payments. Upon
16


adoption of ASC 842, the Company adopted the practical expedient not to reassess the classification. For additional information on lease revenues earned, please see Note 8. Leases.
Disaggregation of Revenue
The following table shows the disaggregation of revenue according to product line:

Three Months Ended June 30,Six Months Ended
June 30,
 2023202220232022
Renewable power sales$8,392 $10,057 $17,996 $17,539 
Third party construction15,093 12,946 22,247 22,816 
Service4,000 4,038 8,904 8,430 
Brown gas sales7,821 6,452 15,351 10,968 
Environmental credits17,691 18,217 30,368 38,795 
Parts sales1,149 491 1,336 977 
Operating agreements— 308 — 893 
Other— 166 — 166 
Total revenue from contracts with customers54,146 52,675 96,202 100,584 
Lease revenue896 542 1,797 1,680 
Total revenue$55,042 $53,217 $97,999 $102,264 
For the three months ended June 30, 2023 and 2022, 27.4% and 24.3%, respectively of revenue was recognized over time, and the remainder was for products and services transferred at a point in time. For the six months ended June 30, 2023 and 2022, 22.7% and 22.3%, respectively of revenue was recognized over time, and the remainder was for products and services transferred at a point in time.
Other income
The following table shows the items consisting of items recorded as Other income:
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Loss on warrant exchange$— $— $(338)$— 
Gain on deconsolidation of VIEs (1)
122,873 — 122,873 — 
Gain on transfer of non-financial asset in exchange for services received (2)
236 — 506 — 
Other income$123,109 $— $123,041 $— 
(1) Represents non-cash gain on deconsolidation of Emerald and Sapphire on May 30, 2023.
(2) Represents the fair value of RINs transferred as consideration for services received.
Contract Balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers:
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 June 30,
2023		December 31,
2022
Accounts receivable, net$26,821 $31,083 
Contract assets:
Cost and estimated earnings in excess of billings$9,449 $7,027 
Accounts receivable retainage, net3,064 2,744 
Contract assets total$12,513 $9,771 
Contract liabilities:
Billings in excess of costs and estimated earnings$6,220 $8,013 
Contract liabilities total$6,220 $8,013 
During the six months ended June 30, 2023, the Company recognized revenue of $8,013 that was included in "Contract liabilities" at December 31, 2022. During the six months ended June 30, 2022, the Company recognized revenue of $9,785 that was included in "Contract liabilities" at December 31, 2021.
Backlog
The Company's remaining performance obligations ("backlog") represent the unrecognized revenue value of its contract commitments. The Company's backlog may significantly vary each reporting period based on the timing of major new contract commitments. At June 30, 2023, the Company had a backlog of $43,063 which is anticipated to be recognized as revenue in the Trust Accountnext 12 months.
Income Taxes
As a result of the Business Combination, the Company is the sole managing member of OPAL Fuels. OPAL Fuels is a limited liability company that is treated as a partnership for U.S. federal income tax purposes and for most applicable state and local income taxes. Any taxable income or loss generated by OPAL Fuels is passed through to and included in the taxable income or loss of its members, including the Company, on a pro-rata basis, subject to applicable tax regulations.
The Company accounts for income taxes in accordance with ASC Topic 740, Accounting for Income Taxes (“ASC Topic 740”), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of its assets and liabilities by applying the enacted tax rates in effect for the year in which the differences are determined using available market information.

expected to reverse. Such net tax effects on temporary differences are reflected on the Company’s condensed consolidated balance sheets as deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when the Company believes that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company calculates the interim tax provision in accordance with the provisions of ASC Subtopic 740-270, Income Taxes; Interim Reporting. For interim periods, the Company estimates the annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Significant Customers, Vendors and Concentration of Credit Risk

For the three and six months ended June 30, 2023, three customers accounted for 47% and 46% of the revenue. For the three and six months ended June 30, 2022, two customers accounted for 48.4% and 45% of the revenue. At June 30, 2023, two customers accounted for 24% of accounts receivable. At December 31, 2022, two customers accounted for 44% of accounts receivable.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and trade receivables. The Company places its cash with high credit quality financial institutions located in the United States of America. The Company performs ongoing credit evaluations of its customers.
As of June 30, 2023, two vendors accounted for 45% of the accounts payable. As of December 31, 2022, one vendor accounted for 19% of the accounts payable.

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3. Investment in Other Entities
The Company uses the equity method to account for investments in affiliates that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. The Company's investments in these nonconsolidated affiliates are reflected in the Company's condensed consolidated balance sheets under the equity method, and the Company's proportionate net (loss) income, if any, is included in the Company's condensed consolidated statements of operations as (loss) income from equity method investments.
Deconsolidation of Emerald and Sapphire
On May 30, 2023, the Company together with a third-party environmental solutions company formed a new joint venture holding company Paragon LLC ("Paragon"). The Company owns 50% of the ownership interest in Paragon. Concurrent to the formation of Paragon, the Company contributed its 50% ownership interests in Emerald and Sapphire to Paragon.
On May 30, 2023, OPAL Fuels Intermediate Holdco 2 LLC (“OPAL Intermediate Holdco 2”), a wholly-owned indirect subsidiary of the Company, assigned to Paragon its rights and obligations under its existing senior secured credit facility, OPAL Term Loan II.
Upon the execution of the above two transactions, the Company reassessed its equity interests in Emerald and Sapphire under ASC 810, Consolidation and determined that the Company does not have a controlling financial institution,interest in Paragon under ASC 810 because the governance of the joint venture is driven by a board jointly controlled by the joint venture partner and OPAL equally and there are substantive participating rights held by the joint venture partner in the significant activities of Paragon.
Based on the above analysis, the Company determined that it should account for its ownership interests in Paragon under the equity method of accounting pursuant to ASC 323, Investments Equity Method and Joint Ventures, prospectively, as the Company has the ability to exercise significant influence, but not control over the joint venture company.
Prior to May 30, 2023, the Company consolidated these two entities in accordance with the variable interest entity model guidance under ASC 810, Consolidation. Additionally, the Company deconsolidated $2,765 capitalized interest on these two projects. Upon deconsolidation, the Company remeasured the fair value of the retained investment and recognized a gain of $122,873 in the condensed consolidated statement of operations for the three and six months ended June 30, 2023 and a corresponding increase in its basis in Investment in Other Entities on its condensed consolidated balance sheet as of June 30, 2023. The Company determined that the gain on deconsolidation is attributable to the construction in progress and therefore will be amortized over the useful life of the asset beginning the date the asset is placed in service. The fair value of the retained investment was measured based on a discounted cash flows model in which at times, may exceed the Federal Depository Insurance Coveragefuture net cash flows from the two RNG facilities were discounted to their present value using a discount factor of $250,000,14%.
The following table shows the change in Investment in Other Entities:
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Pine BendParagonNoble RoadGREPTotal
Percentage of ownership50 %50 %50 %20 %
Balance at December 31, 2022$22,518 $— $25,165 $4,082 $51,765 
Deconsolidation of Emerald and Sapphire— 34,662 — — 34,662 
Deconsolidation of deferred financing costs and capitalized interest— 1,383 — — 1,383 
Net income from equity method investment (1)
318 (197)1,080 (436)765 
Reclassification of adjustments into earnings— — — (334)(334)
Distributions from return of investment in equity method investment(1,000)(3,585)(2,650)(521)(7,756)
Accumulated other comprehensive income— 109 — — 109 
Gain on deconsolidation of Emerald and Sapphire (2)
— 122,873 — — 122,873 
Amortization of basis difference (1)
(171)— (887)— (1,058)
Balance at June 30, 2023$21,665 $155,245 $22,708 $2,791 $202,409 
(1) Reflected in Income from equity method investments in the condensed consolidated statement of operations for the three and investments heldsix months ended June 30, 2023 and 2022.
(2) Recorded as part of Other income in Trust Account. At March 31,our condensed consolidated statement of operations for the three and six months ended June 30, 2023.
Note receivable
In August 2021, the Company hasacquired 100% ownership interest in Reynolds which held a note receivable of $10,450 to Biotown. The Note receivable had a maturity date of July 15, 2027 and carried an interest rate of 12.5% of which 8% is payable in cash on a quarterly basis from the inception of the loan and 4.5% payment-in-kind interest adding to the outstanding debt balance until the facility becomes operational.
On July 15, 2022, Biotown repaid the total amount outstanding under the Note receivable including paid-in-kind interest and prepayment penalty.
The Note receivable also entitles Reynolds to receive 4.25% of any revenue-based distributions made up to a maximum of $4,500 over the term of the debt. The Company recorded the fair value of the Note receivable — variable fee component of $1,538 as an allocation of the initial investment balance of $10,450 and recorded payment-in-kind interest income of $81 and $159 as a reduction to interest and financing expense, net in the condensed consolidated statement of operations for the three and six months ended June 30, 2023, respectively. The Company recorded $524 and $746 as a reduction to interest and financing expense, net in its condensed consolidated statement of operations for the three and six months ended June 30, 2022.
The Note receivable - variable fee component of $2,101 and $1,942 is recorded as a long-term asset on its condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively.
The following table summarizes the net income from equity method investments:


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Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Revenue$6,925 $4,793 $14,464 $5,089 
Gross profit8,225 2,603 9,876 1,612 
Net loss(2,686)(564)(2,899)(1,741)
Net (loss) income from equity method investments$(998)$621 $(293)$(36)


4. Property, Plant, and Equipment, Net
Property, plant, and equipment, net, consisted of the following as of June 30, 2023 and December 31, 2022:
June 30,
2023		December 31,
2022
Plant and equipment$204,215 $201,655 
CNG/RNG fueling stations44,057 34,567 
Construction in progress (1)
134,719 152,105 
Buildings2,585 2,585 
Land1,303 1,303 
Service equipment2,132 1,888 
Leasehold improvements815 815 
Vehicles255 313 
Office furniture and equipment307 307 
Computer software277 277 
Vehicles - finance leases1,287 1,236 
Other524 487 
 392,476 397,538 
Less: accumulated depreciation(104,049)(100,215)
Property, plant, and equipment, net$288,427 $297,323 
(1) Includes $4,101 and $3,081 of capitalized interest on our OPAL Term Loan facility as of June 30, 2023 and December 31, 2022.
As of June 30, 2023, the construction in progress balance consists of our investment in the construction of RNG generation facilities including, but not experienced losseslimited to Prince William, Central Valley RNG projects and RNG dispensing facilities. The majority of these facilities, for which costs are in construction in progress as of June 30, 2023, are expected to be operational during the fourth quarter of 2023 and early 2024. As of December 31, 2022, the construction in progress balance consists of our investment in the construction of RNG generation facilities such as Emerald, Sapphire, Prince William, Central Valley and other RNG dispensing facilities. The decrease in the balance represents deconsolidation of Emerald and Sapphire during the second quarter of 2023.
Depreciation expense on theseproperty, plant, and equipment for the three months ended June 30, 2023 and 2022 was $3,372 and $3,239, respectively. The depreciation expense for the six months ended June 30, 2023 and June 30, 2022 was $6,677 and $6,279, respectively.
5. Intangible Assets, Net
Intangible assets, net, consisted of the following at June 30, 2023 and December 31, 2022:

June 30, 2023
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CostAccumulated
Amortization		Intangible
Assets,
Net		Weighted
Average
Amortization
Period
(Years)
Power purchase agreements$8,999 $(7,762)$1,237 18.1
Transmission/distribution interconnection1,600 (995)605 15.1
Intellectual property43 (31)12 5.0
Total intangible assets$10,642 $(8,788)$1,854  
December 31, 2022
CostAccumulated
Amortization		Intangible
Assets,
Net		Weighted
Average
Amortization
Period
(years)
Power purchase agreements$8,999 $(7,488)$1,511 18.1
Transmission/distribution interconnection1,600 (971)629 15.1
CNG sales contract807 (799)8 10.0
Intellectual property43 (24)19 5.0
Total intangible assets$11,449 $(9,282)$2,167  
Amortization expense for the three and six months ended June 30, 2023 was $153 and $313, respectively. Amortization expense for the three and six months ended June 30, 2022 was $282 and $398, respectively. At June 30, 2023, estimated future amortization expense for intangible assets is as follows:
Six months ended December 31, 2023$235 
Fiscal year:
2024267 
2025267 
2026239 
2027238 
Thereafter608 
 $1,854 
6. Goodwill
The following table summarizes the changes in goodwill, if any, by reporting segment from the beginning of the period to the end of the period:
RNG FuelFuel Station ServicesTotal
Balance at December 31, 2022$51,155 $3,453 $54,608 
Balance at June 30, 2023$51,155 $3,453 $54,608 
7. Borrowings
The following table summarizes the borrowings under the various debt facilities as of June 30, 2023 and December 31, 2022:
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June 30, 2023December 31, 2022
Senior Secured Credit Facility, term loan$— $15,250 
Less: unamortized debt issuance costs— — 
Less: current portion— (15,250)
Senior Secured Credit Facility, term loan, net of debt issuance costs— — 
Senior Secured Credit Facility, working capital facility— 7,500 
Less: current portion— (7,500)
Senior Secured Credit Facility, working capital facility— — 
OPAL Term Loan92,224 96,090 
Less: unamortized debt issuance costs(1,282)(1,758)
Less: current portion(27,732)(27,732)
OPAL Term Loan, net of debt issuance costs63,210 66,600 
Sunoma Loan23,000 23,000 
Less: unamortized debt issuance costs(883)(908)
Less: current portion(1,169)(380)
Sunoma Loan, net of debt issuance costs20,948 21,712 
Convertible Note Payable29,671 28,528 
Less: current portion(29,671)(28,528)
Convertible Note Payable— — 
Municipality Loan— 76 
Less: current portion— (76)
Municipality Loan— — 
Non-current borrowings total$84,158 $88,312 
As of June 30, 2023, principal maturities of debt are expected as follows, excluding any subsequent refinancing transactions and any undrawn debt facilities as of the date of the condensed consolidated balance sheets:
OPAL Term LoanSunoma Loan
Convertible
Note Payable (1)
Total
Six months ending December 31, 2023$13,866 $380 $29,671 $43,917 
Fiscal year:
202427,732 1,608 — 29,340 
202550,626 1,743 — 52,369 
2026— 1,883 — 1,883 
2027— 17,386 — 17,386 
 $92,224 $23,000 $29,671 $144,895 
(1) The Convertible Note Payable is redeemable on demand at the option of the Company or the lender.
Senior Secured Credit Facility
On September 21, 2015, FM3, an indirect wholly-owned subsidiary of the Company, entered into a senior secured credit facility (the "Senior Secured Credit Facility") as a borrower and a syndicate of lenders, which provided for an aggregate principal amount of $150,000, consisting of (i) a term loan of $125,000, (ii) a working capital letter of credit facility of up to $19,000 and (iii) a debt service reserve and liquidity facility of up to $6,000. The Company paid $14,300 to the lenders in connection with the transaction.
The borrowings under the Senior Secured Credit Facility bear an interest rate of a fixed margin plus the secured overnight financing rate ("SOFR") for the relevant interest period. The fixed margin is 2.75% for the first four years, then 3.0% until October 8, 2021, and 3.25% thereafter.
23


On December 19, 2022, FM3 entered into an Omnibus and Consent Agreement (the “FM3 Amendment”). The FM3 Amendment amended the credit agreement, among other things, to (a) extend the maturity date of the obligations thereunder from December 20, 2022 to March 20, 2023, (b) permit OPAL Fuels to purchase the rights and obligations of certain exiting lenders at par, (c) prepay a portion of the outstanding loans made by the remaining lenders and (d) permit the release of certain project company subsidiaries of FM3 from the collateral securing the obligations under the credit agreement. Upon consummation of the FM3 Amendment, the Company repaid $54,929 of the outstanding term loan. On March 20, 2023, the Company repaid in full the remaining outstanding loan under this facility.
Patronage dividends
The Company is eligible to receive annual patronage dividends from one of its lenders, Cobank ACB under a profit sharing program made available to the borrowers. For the three and six months ended June 30, 2023 and 2022, the Company received cash dividends of $126 and $126, respectively, which were recorded as credits to interest expense in its condensed consolidated statements of operations. Additionally, the Company recorded $489 as a long-term asset on its condensed consolidated balance sheets at June 30, 2023 and December 31, 2022, which represents the Company's equity interest in Cobank SCB which will be redeemed for cash beginning in 2024.
OPAL Term Loan
On October 22, 2021, OPAL Fuels Intermediate Holding Company LLC (“OPAL Intermediate Holdco”), an indirect wholly-owned subsidiary of the Company, entered into a $125,000 term loan agreement (the "OPAL Term Loan") with a syndicate of lenders. Of the $125,000, the Company had $90,000 available for borrowing upon closing and the remaining $35,000 was made available as three more RNG facilities become operational. The OPAL Term Loan is secured by a pledge in the equity interest of Beacon Holdco LLC, OPAL Environmental Credit Marketing LLC, OPAL Fuel Station Services LLC (f/k/a Trustar Energy LLC), New River, OPAL Fuels Services LLC and the Company's share of ownership interests in Pine Bend and Noble Road along with cash bank accounts and management believesa security interest in the Company’s environmental credits. The proceeds of the OPAL Term Loan were used for general corporate purposes, including investments in RNG projects being developed by the Company.
As of June 30, 2023 and December 31, 2022, the outstanding loan balance (current and non-current) excluding deferred financing costs was $92,224 and $96,090, respectively. During the first quarter of 2023, the Company borrowed the remaining $10,000 under the debt facility.
The OPAL Term Loan matures April 22, 2025 and bears interest at 3.0% plus SOFR. In accordance with the terms of the facility, OPAL Intermediate Holdco is required to repay 1.79% or $1,611 per month beginning March 2022 and an additional $700 per month beginning September 2022.
The OPAL Term Loan contains customary warranties and representations and certain financial covenants which require OPAL Intermediate Holdco to maintain (i) minimum liquidity of $15,000 until March 31, 2022 and $10,000 thereafter and (ii) a leverage ratio not to exceed 4:1. As of June 30, 2023, the Company is in compliance with the financial covenants under the OPAL Term Loan. Additionally, the OPAL Term Loan contains restrictions on distributions and additional indebtedness.
Sunoma Loan
On August 27, 2020, Sunoma, an indirect wholly-owned subsidiary of the Company entered into a debt agreement (the "Sunoma Loan Agreement") with Live Oak Banking Company for an aggregate principal amount of $20,000. Sunoma paid $635 as financing fees. The loan bears interest at the greater of prime rate plus 3.50%, or 7.75%. The amounts outstanding under the Sunoma Loan are secured by the assets of Sunoma.
The Sunoma Loan Agreement contains certain financial covenants which require Sunoma to maintain (i) maximum debt to net worth ratio not exposed to exceed 5:1 (ii) a minimum current ratio not less than 1.0 and (iii) minimum debt service coverage ratio of trailing four quarters not less than 1.25. On July 19, 2022, Sunoma completed the conversion of the construction loan into a permanent loan and increased the commitment from $20,000 to $23,000.
The borrowings under the Sunoma Loan Agreement bear interest at a rate of 7.68% and have a maturity date of July 19, 2033. The Company is required to pay a quarterly amortization of principal of $380 beginning in October 2023. The Company paid $2,798 into interest and debt reserve accounts. This cash is recorded as Restricted cash - current and non-current under long term assets in the condensed consolidated balance Sheet as of June 30, 2023.
24


The significant risksassets of Sunoma are parenthesized in the condensed consolidated balance sheets as June 30, 2023 and December 31, 2022. See Note 12. Variable Interest Entities for additional information.
Convertible Note Payable
On May 1, 2021, the Company acquired the remaining ownership interests in Beacon and signed an unsecured, contingently convertible note (the "Convertible Note Payable") with Ares for a total aggregate amount for $50,000 at an interest rate of 8.00% per annum. The Company has the option to pay interest on such accounts.

the Convertible Note in cash on a quarterly basis or payment-in-kind. The Company chose the option of payment-in-kind interest.

The Convertible Note Payable matures on the earlier of December 31, 2026 or the date on which a change in control occurs as defined in the terms of the Convertible Note. Upon the consummation of the Business Combination, Ares was permitted to choose to convert the total amount outstanding under the Convertible Note to shares of Class A common stock based on a pre-determined conversion formula. Upon completion of the Business Combination in July 2022, Ares elected to convert 50% of the outstanding amount under the Convertible Note to shares of Class A common stock. Therefore the Company issued 3,059,533 shares of Class A common stock and redeemed outstanding debt of $30,595.
The Company elected to account for the Convertible Note Payable using the fair value option in accordance with ASC 820, Fair Value Measurement. The fair value was subsequently remeasured on each reporting date and the change in fair value recorded as interest expense in the condensed consolidated statement of operations for each reporting period. At June 30, 2023 and December 31, 2022, the Convertible Note was classified as a current liability in the condensed consolidated balance sheets at a fair value of $29,671 and $28,528, respectively, as it is redeemable on demand by the Company or Ares.
The Company recorded $580 and $1,143 for the three and six months ended June 30, 2023, respectively. The Company recorded $1,090 and $2,110 as change in fair value of Convertible Note Payable for the three months ended June 30, 2022, respectively as interest and financing expense, net.
Municipality Loan
FM3, an indirect wholly-owned subsidiary of the Company, entered into a loan agreement for the construction of an interconnection that was initially funded by the municipality. The Company made payments to a municipality in the amount of $1,600 plus interest at a fixed annual rate of 3.00% through April 1, 2023. The loan was fully repaid in April 2023.
OPAL Term Loan II
On August 4, 2022, OPAL Intermediate Holdco 2 entered into a new Senior Secured Credit Facility (the "OPAL Term Loan II") with a syndicate of lenders. The indebtedness is guaranteed by certain of the direct and indirect subsidiaries of OPAL Intermediate Holdco 2. The OPAL Term Loan II provides for an approximately two year delayed term loan facility (the "DDTL Facility") of up to a maximum aggregate principal amount of $100,000 and debt service reserve facility (the "DSR Facility") of up to a maximum aggregate principal amount of $5,000. 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 the DSR Facility are to be used solely to satisfy the balance to be maintained in the debt service reserve account. In connection with the transaction, the Company paid $2,200 as financing fees to the lenders and incurred $1,376 as third party fees.
On May 30, 2023, OPAL Intermediate Holdco 2 assigned to Paragon its rights and obligations under OPAL Term Loan II. The joint venture partner of Paragon reimbursed the Company $826 as its portion of the transaction costs incurred.
The Company expensed the remaining deferred financing costs of $1,895 as loss on debt extinguishment in its condensed consolidated statement of operations for the three and six months ended June 30, 2023. There were no amounts outstanding under the OPAL Term Loan II as of the date of the transaction.

Interest rates
25


2023
For the three and six months ended June 30, 2023, the weighted average effective interest rate including amortization of debt issuance costs on the Senior Secured Credit Facility was 5.6% including a margin plus SOFR. The debt was repaid in full in March 2023.
For the three and six months ended June 30, 2023, the weighted average effective interest rate including amortization of debt issuance costs on OPAL Term Loan was 9.2% and 8.8%.
For the three and six months ended June 30, 2023, the interest rate on the Sunoma Loan was 8.00%.
For the three and six months ended June 30, 2023, the payment-in-kind interest rate on Convertible Note Payable was 8.00%.
For the three and six months ended June 30, 2023, the weighted average interest rate on Municipality loan was 3.00%. The loan was fully repaid in April 2023.
2022
For the three and six months ended June 30, 2022, the weighted average effective interest rate on the Senior Secured Credit Facility including amortization of debt issuance costs on Senior Secured Credit Facility was 4.25% including a margin plus LIBOR.
For the three and six months ended June 30, 2022, the weighted average effective interest rate on OPAL Term Loan including amortization of debt issuance costs was 4.93%.
For three and six months ended June 30, 2022, the interest rate on the Sunoma loan was 7.75%.

For the three and six months ended June 30, 2022, the payment-in-kind interest rate on Convertible Note Payable was 8.0%.

The following table summarizes the Company's total interest expense for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
Senior Secured Credit Facility$— $862 $282 $1,442 
Convertible Note Payable mark-to-market580 1,090 1,143 2,110 
Sunoma Loan450 401 894 911 
OPAL Term Loan (1)
— 887 19 1,743 
Commitment fees and other finance fees184 103 312 204 
Amortization of deferred financing cost345 460 795 898 
Interest expense on finance leases21 7 37 13 
Interest income(624)(445)(1,885)(899)
Total interest expense$956 $3,365 $1,597 $6,422 
(1) Excludes $1,981 and $3,785 of interest capitalized and recorded as part of Property, Plant and Equipment for the three and six months ended June 30, 2023, respectively.

8. Leases
The following are the type of contracts that fall under ASC 842:
26


Lessor contracts

Fuel Provider agreements

Fuel provider agreements ("FPAs") are for the sale of brown gas, service and maintenance of sites. The Company is contracted to design and build a Fueling Station on the customer's property in exchange for the Company providing CNG/RNG to the customer for a determined number of years. These are considered to be operating leases with variable consideration. As per ASC 842, the revenue is recognized in the period earned.
Power Purchase agreements
Power purchase agreements ("PPAs") are for the sale of electricity generated at our Renewable Power facilities. All of our Renewable Power facilities operate under fixed pricing or indexed pricing based on market prices. Two of our Renewable Power facilities transfer the right to control the use of the power plant to the purchaser and are therefore classified as operating leases. The Company elected not to reassess the lease classification due to change in criteria under ASC 842 for these two PPAs. There were no amendments to these two contracts after the Adoption Date.
Included in Fuel Station Service revenues are $632 and $1,202 related to the lease portion of the FPAs for the three and six months ended June 30, 2023, respectively. It includes $526 and $1,050 related to the lease portion of the FPAs for the three and six months ended June 30, 2022, respectively.
Included in Renewable Power revenues are $264 and $595 related to the lease element of the PPAs for the three and six months ended June 30, 2023, respectively. Includes $16 and $630 related to the lease element of the PPAs for the three and six ended June 30, 2022, respectively.
Lessee contracts
Ground/Site leases
The Company through various of its indirectly owned subsidiaries holds site leases on landfills/dairy farms to build RNG generation facilities. Typically, the lease payments over the lease term are immaterial except for three of our RNG facilities - Beacon and two sites at our Central Valley project - MS Digester ("MS") and VS Digester ("VS").
– the lease at Beacon facility is for 20 years at a monthly rent of $11.
– the lease term for MD and VS is for a period of 20 years from their commercial operation date at a quarterly rent of $125.
Office lease
The Company entered into a lease for office and warehouse space that became effective upon the termination of the original lease term on January 31, 2018. The term of the lease renewal was 36 months and contained an option to renew for an additional 24 months. In September 2020, the Company exercised this option. In March 2022, the Company entered into an amendment to the lease which extended the lease term till January 2026. The rent for the lease is $26 per month with a built in escalation to $27 from February 1, 2022 to February 1, 2023, $43 from February 1, 2023 - February 1, 2024, $45 from February 1 2024 - February 1, 2025 and $46 for the remaining lease term. The Company accounted for the change in the lease term as a lease modification and reassessed the right-of-use assets and corresponding lease liabilities as of March 31, 2022.
The Company currently shares office space with Fortistar and reimburses Fortistar on a monthly basis at a predetermined rate. The Company determined that this is not a lease under ASC 842 as there is no identifiable asset and the Company does not have the right to control the use of the office space.
The Company determined that the three site leases and the one office lease are operating leases.
27


Under ASC 842, leases are classified as either finance or operating arrangements, with such classification affecting the pattern and classification of expense recognition in an entity's income statement. For operating leases, ASC 842 requires recognition in an entity’s income statement of a single lease expense, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Right-of-use assets represent a right to use the underlying asset for the lease term and the related lease liability represents an obligation to make lease payments pursuant to the contractual terms of the lease agreement.
Based on the above guidance, the lease expense for the site leases is included as part of Cost of sales - RNG Fuel in its condensed consolidated statement of operations for the three and six months ended June 30, 2023 and 2022. The lease expense for the office lease is recorded as part of Selling, general and administrative expenses in its condensed consolidated statement of operations for the three and months ended June 30, 2023 and 2022.
Vehicle leases
The Company leases approximately 65 vehicles in our FM3 and OPAL Fuel Station Services subsidiaries. The leases contain repurchase options at the end of the lease term and the sum total of the lease payments represents substantially the fair value of the asset.
Under ASC 842, the Company determined that the vehicle leases are finance leases. For finance leases, ASC 842 requires recognition of amortization of right-of-use asset as part of depreciation and amortization expense and the interest on the finance lease liability as interest expense in the income statement. The Company accordingly recognized its lease expense on the vehicle leases as part of Depreciation, amortization and accretion expense and interest and financing expense, net in its condensed statement of operations for the three and six months ended June 30, 2023 and 2022.
Lease Disclosures Under ASC 842
The objective of the disclosure requirements under ASC 842 is to enable users of an entity’s financial statements to assess the amount, timing and uncertainty of cash flows arising from lease arrangements. In addition to the supplemental qualitative leasing disclosures included above, below are quantitative disclosures that are intended to meet the stated objective of ASC 842.
Right-of-use assets and Lease liabilities as of June 30, 2023 and December 31, 2022 are as follows:
28


DescriptionLocation in Balance SheetJune 30, 2023December 31, 2022
Assets:
Operating leases (1):
Site leasesRight-of-use assets$10,251 $10,338 
Office leaseRight-of-use assets1,190 1,406 
11,441 11,744 
Finance leases (1):
Vehicle leasesProperty, plant and equipment, net1,287 1,236 
12,728 12,980 
Liabilities (1):
Sites leasesLease liabilities - current portion192 181 
Office leaseLease liabilities - current portion489 449 
Vehicle leasesAccrued expenses and other current liabilities455 449 
1,136 1,079 
Sites leasesLease liabilities - non-current portion10,065 10,135 
Office leaseLease liabilities - non-current portion859 1,110 
Vehicle leasesOther long-term liabilities856 825 
$11,780 $12,070 

(1)The Operating lease right-of-use asset and Operating lease liabilities represent the present value of lease payments for the remaining term of the lease. The discount rate used ranged from 2.30% to 5.40%.
The table below presents components of the Company's lease expense for the three and six months ended June 30, 2023 and 2022:
DescriptionLocation in Statement of OperationsThree Months Ended June 30,Six Months Ended June 30,
2023202220232022
Operating lease expense for site leasesCost of sales - RNG Fuel$263 $261 $526 $524 
Operating lease expense for office leaseSelling, general, administrative expenses121121242242
Amortization of right-of-use assets - finance leasesDepreciation, amortization and accretion expense14181281164
Interest expense on lease liabilities - finance leasesInterest and financing expense, net2173713
$546 $470 $1,086 $943 
The Company does not have material short term lease expense for the three and six months ended June 30, 2023 and 2022.
The Company did not enter into any operating leases greater than 12 months for the three months ended June 30, 2023.
29


Weighted average remaining lease term (years)June 30, 2023
Operating leases18.4 years
Financing leases2.9 years
Weighted average discount rate
Operating leases7.95 %
Financing leases6.17 %
The table below provides the total amount of lease payments on an undiscounted basis on our lease contracts as of June 30, 2023:
Site leasesOffice leasesVehicle leasesTotal
Discount rate upon adoption5.4 %2.3 %7.6 %
2023$522 $261 $519 $1,302 
20241,044 540 514 2,098 
20251,044 562 408 2,014 
20261,044 47 252 1,343 
2027 and beyond17,913 — 23 17,936 
21,567 1,410 1,716 24,693 
Present value of lease liability10,257 1,348 1,311 12,916 
Lease liabilities - current portion192 489 455 1,136 
Lease liabilities - non-current portion10,065 859 856 11,780 
Total lease liabilities$10,257 $1,348 $1,311 $12,916 
Discount based on incremental borrowing rate$11,310 $62 $405 $11,777 

9. Derivative Financial Instruments

and Fair Value Measurements

Interest rate swaps
During August 2022, the Company entered into two interest rate swaps for the notional amount of $61,926 of OPAL Term Loan II at a fixed interest rate of 2.47% to hedge the SOFR-based floating interest rate. On August 16, 2022, the Company entered into a swaption for a notional amount of $13,074 with fixed rate of 2.32% with a maturity date of May 31, 2023. The Company accounted for the swaption as an economic hedge and included the change in the fair market value in the condensed consolidated statement of operations.
The two interest rate swaps were designated and qualified as cash flow hedges. The Company uses interest rate swaps for the management of interest rate risk exposure, as an interest rate swap effectively converts a portion of the Company’s debt from a floating to a fixed rate. The interest rate swap is an agreement between the Company and counterparties to pay, in the future, a fixed-rate payment in exchange for the counterparties paying the Company a variable payment. The amount of the net payment obligation is based on the notional amount of the interest rate swap and the prevailing market interest rates. The Company may terminate the interest rate swaps prior to their expiration dates, at which point a realized gain or loss may be recognized, or may be amortized over the original life of the interest rate swap if the hedged debt remains outstanding. The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap.
30


The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet. The effective portion of the swap is recorded in Accumulated other comprehensive income.
On May 30, 2023, OPAL Intermediate Holdco 2, assigned to Paragon its rights and obligations under OPAL Term Loan II. Concurrently, the Company terminated the two interest rate swaps outstanding under this loan and received $812 as settlement from the swap counter party. Paragon entered into four interest rate swaps for a notional amount of $56,914 at a fixed interest rate of 3.52%. The Company terminated the swaption on the same date.
After the transaction, the Company recognized a gain of $812 in the condensed consolidated statement of operations for the three and six months ended June 30, 2023 as part of Change in fair value of derivative instruments. The Company received $136 as settlement from the swaption counter party and recognized $46 as loss on termination of the swaption as part of change in fair value of derivative instruments. Additionally, the Company recognized $109 as its share of the Accumulated other comprehensive income from Paragon and increased its basis in equity method investment on its condensed consolidated balance sheet as of June 30, 2023.
The following table summarizes the interest rate swaps in place as of June 30, 2023 and December 31, 2022:

Interest rate swap detailNotional Amount
Trade dateFixed rateStart dateEnd dateJune 30, 2023December 31, 2022
August 15, 20222.47 %June 28, 2024August 4, 2027$— 41,284 
August 15, 20222.47 %June 28, 2024August 4, 2027— 20,642 
$— $61,926 
The location and amounts of interest rate swaps and their fair values in the condensed consolidated balance sheets are:
June 30,
2023		December 31,
2022		Location of Fair Value Recognized in Balance Sheet
Derivatives designated as economic hedges:
Current portion of swaption$— $182 Derivative financial assets, current portion
Derivatives designated as cash flow hedges:
Long term portion of the interest rate swaps— 954 Derivative financial assets, non-current
$— $1,136 
The effect of interest rate swaps on the condensed consolidated statement of operations were as follows:

Three Months Ended June 30,Six Months Ended
June 30,		Location of (Loss) Gain Recognized in Operations from Derivatives
 2023202220232022
Interest rate swaps$— $7 $— $626  
Swaption20 — (46)— 
Net periodic settlements812 (571)812 (954) 
 $832 $(564)$766 $(328)Change in fair value of derivative instruments, net
The following table summarizes the fair value of derivative instruments on the Company's condensed consolidated balance sheets and the effect of netting arrangements and collateral on its financial position:
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 Gross Amounts
of Recognized
Assets		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Assets in the
Balance Sheet
Balance, June 30, 2023:
Interest rate swap asset$— $— $— 
Swaption asset— — — 
$— $— $— 
Balance, December 31, 2022:
Interest rate swap asset$954 $— $954 
Swaption asset182 — 182 
$1,136 $— $1,136 
Commodity swap contracts
The Company utilizes commodity swap contracts to hedge against the unfavorable price fluctuations in market prices of electricity. The Company does not apply hedge accounting to these contracts. As such, unrealized and realized gain (loss) is recognized as a component of Renewable Power revenues in the condensed consolidated statement of operations and Derivative financial asset — current and non-current in the condensed consolidated balance sheets. These are considered to be Level 2 instruments in the fair value hierarchy. By using commodity swaps, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counter party to perform under the terms of the swap contract. When the fair value of the swap contract is positive, the counter party owes the Company creating a credit risk. The Company manages the credit risk by entering into contracts with financially sound counter parties. To mitigate this risk, management monitors counterparty credit exposure on an annual basis, and the necessary credit adjustments have been reflected in the fair value of financial derivative instruments. When the fair value of the swap contract is negative, the Company owes the counterparty creating a market risk that the market price is higher than the contract price resulting in the Company not participating in the opportunity to earn higher revenues.
In December 2018, the Company signed an amendment that converted an existing PPA into a commodity swap contract to allow the Company flexibility to sell the capacity separately and schedule the sale of electricity to independent third parties. Following the amendment, the Company agreed to net settle the contract in cash on a monthly basis based on the difference between the contract price and market price. The contract has a default minimum of 34,554 MWh per year. Additionally, the Company entered into an ISDA agreement with a counterparty in November 2019. Pursuant to the agreement, the Company entered into swaps with contract prices ranging between $35.75 and $51.25 per MWh.
The following table summarizes the commodity swaps in place as of June 30, 2023 and December 31, 2022. There were no new commodity swap contracts entered during the three months ended June 30, 2023.

Trade DatePeriod FromPeriod ToNotional Quantity per Year (“MWh”)Average Contract Price (per MWh)
October 17, 2022January 1, 2023December 31, 202470,176 $68.50 
October 17, 2022January 1, 2023December 31, 202426,280 $65.50 
November 17, 2022January 1, 2023December 31, 202435,088 $81.50 

The following table summarizes the effect of commodity swaps on the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:


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Derivatives not designated as hedging instrumentsLocation of (loss) gain recognizedThree Months Ended June 30,Six Months Ended June 30,
2023202220232022
Commodity swaps - realized (loss) gainRevenues - Renewable power$509 $(224)$880 $(187)
Commodity swaps - unrealized gain (loss)Revenues - Renewable power(160)(102)762 (936)
Total realized and unrealized gain (loss)Revenues - Renewable power$349 $(326)$1,642 $(1,123)


The following table summarizes the derivative assets and liabilities related to commodity swaps as of June 30, 2023 and December 31, 2022:


Fair ValueLocation of Fair value recognized in Balance Sheet
June 30, 2023December 31, 2022
Derivatives designated as economic hedges
Current portion of unrealized gain on commodity swaps$365 $— Derivative financial asset, current portion
Non-current portion of unrealized gain on commodity swaps$267 $— Derivative financial asset, non-current portion
Current portion of unrealized loss on commodity swaps$— $(130)Derivative financial liability, current portion

Other derivative liabilities
The following table summarizes the effect of change in fair value of other derivative liabilities on the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:
Derivative liabilityThree Months Ended June 30,Six Months Ended June 30,Location of (Loss) Gain Recognized in Operations from Derivatives
2023202220232022
Put option to Meteora$— $— $(311)$— 
Sponsor Earnout Awards(172)— 138 — 
OPAL Earnout Awards500 — 4,500 — 
$328 $— $4,327 $— Change in fair value of derivative instruments, net
Fair value measurements
The fair value of financial instruments, including long-term debt and derivative instruments is defined as the price that wouldamount at which the instruments could be received for sale of an asset or paid for transfer ofexchanged in a liability, in an orderlycurrent transaction between market participants atwilling parties. The carrying amount of cash and cash equivalents, accounts receivable, net, and accounts payable and accrued expenses approximates fair value due to their short-term maturities.
The carrying value of the measurement date. U.S. GAAPCompany's long-term debt, which are considered Level 2 in the fair value hierarchy, of $84,158 and $88,312 as of June 30, 2023 and December 31, 2022, respectively, represents the total amount to be repaid if the debt has to be discharged in full and therefore approximates its fair value.
The Company follows ASC 820, Fair Value Measurement, regarding fair value measurements which establishes a three-tier fair value hierarchy whichand prioritizes the inputs used in measuringvaluation techniques that measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Level 1 — defined as observable inputs such as quoted prices for identical instruments in active markets;

33


Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets ormarket, quoted prices for identical or similar instruments in markets that are not active; and

active, or model-derived valuations for which all significant inputs are observable market data;

Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniquesassumptions.

Financial assets and liabilities are classified in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in itstheir entirety in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

As The Company's assessment of March 31, 2021, the carrying valuessignificance of cash, accounts payable and accrued expenses approximate their fair values duean input to the short-term nature of the instruments. The Company’s portfolio of investments held in the Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in money market funds that invest in U.S. government securities, or a combination thereof. The fair value for trading securities is determined using quotedmeasurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

The Company values its energy commodity swap contracts based on the applicable geographical market prices in active markets.

Derivative warrant liabilities

energy forward curve. The forward curves are derived based on the quotes provided by New York Mercantile Exchange, Amerex Energy Services and Tradition Energy. The Company does not use derivative instrumentsconsider that the pricing index used involves significant judgement on the part of management. Therefore, the Company classifies these commodity swap contracts within Level 2 of the valuation hierarchy based on the observable market rates used to hedge exposuresdetermine fair value.

The Company accounts for asset retirement obligations by recording the fair value of a liability for an asset retirement obligation in the period in which it is incurred and when a reasonable estimate of fair value can be made. The Company estimates the fair value of asset retirement obligations by calculating the estimated present value of the cost to retire the asset. This estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental, and political environments. In addition, the Company determines the Level 3 fair value measurements based on historical information and current market conditions. These assumptions represent Level 3 inputs, which can regularly change. As such, the fair value measurement of asset retirement obligations is subject to changes in these unobservable inputs as of the measurement date. The Company used a discounted cash flow market, or foreign currency risks.model in which cash outflows estimated to retire the asset are discounted to their present value using an expected discount rate. A significant increase (decrease) in the discount rate in isolation could result in a significantly lower (higher) fair value measurement. The Company evaluates allestimated the fair value of its financial instruments, including issued share purchase warrants,asset retirement obligations based on discount rates ranging from 5.75% to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

8.5%.

The Company issued an aggregate of 6,223,261 ordinary shares warrants associated with Units issued to investors in our Initial Public Offering andaccounts for the underwriters’ exercise of their overallotment option and we issued 9,223,261 Private Placement Warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilitiesConvertible Note Payable at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurementAs of June 30, 2023 December 31, 2022, the Company recorded the Convertible Note Payable at each balance sheet date until exercised,par plus accrued interest as it is payable on demand by either party and any change intherefore represents fair value is recognized in the Company’s statement of operations. value.
The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured at fair valueSponsor Earnout Awards as of June 30, 2023 was determined using a Monte Carlo simulationvaluation model with a distribution of potential outcomes on a daily basis over the four year post-close period. Assumptions used in the valuation are as follows:

• Current stock price — The Company's closing stock price of $7.46 as of June 30, 2023;
• Expected volatility —60% based on historical and subsequently,implied volatilities of selected industry peers deemed to be comparable to our business corresponding to the expected term of the awards;
• Risk-free interest rate — 4.30% based on the U.S. Treasury yield curve in effect at the time of issuance for zero-coupon U.S. Treasury notes with maturities corresponding to the expected 4.1 year term of the earnout period;
•Dividend yield - zero.

The fair value of the Private Placement warrants have been estimatedOPAL Earnout Awards as of June 30, 2023 was determined using a Monte Carlo simulationvaluation model each measurement date.with a distribution of potential outcomes for stock price and EBITDA over the 2-year period commencing on January 1, 2023 and ending on December 31, 2024. Assumptions used in the valuation are as follows:

• Current stock price — The fair valueCompany's closing stock price of Warrants issued in connection with$7.46 as of June 30, 2023;
•Weighted average cost of capital - 16% based on an average of historical volatilities of selected industry peers deemed to be comparable to our Initial Public Offering have subsequently been measuredbusiness.
•Expected volatility —55% based on historical and implied volatilities of selected industry peers deemed to be comparable to our business corresponding to the expected term of the awards;
• Risk-free interest rate — 5.4% based on the listed market price of such warrants.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Offering Costs Associated with the Initial Public Offering

Offering costs consisted of legal, accounting, underwriting and other costs incurred that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issuedU.S. Treasury yield curve in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A ordinary shares were charged to shareholders’ equity upon the completion of the Initial Public Offering.

Class A Ordinary Shares Subject to Possible Redemption

The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2021, 28,295,737 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statement. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Net Loss Per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted average number of shares of ordinary shares outstanding during the period excluding ordinary shares subject to forfeiture. An aggregate of 28,295,737 shares of Class A ordinary shares subject to possible redemption at March 31, 2021 has been excluded from the calculation of basic loss per share ordinary share, since such shares, if redeemed, only participate in their pro rata share of the trust earnings. The Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the Over-Allotment Units) and Private Placement to purchase an aggregate of 15,446,522 shares of the Company’s ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company’s statement of operations includes a presentation of income (loss) per share for Redeemable Class A ordinary shares in a manner similar to the two-class method of income (loss) per share. Net income per ordinary share, basic and diluted, for Redeemable Class A Ordinary Shares is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Ordinary shares subject to possible redemption outstanding since original issuance.

Net loss per share, basic and diluted, for Non-Redeemable Class A and Class B Ordinary Shares is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to Redeemable Class A Ordinary Shares, by the weighted average number of non-redeemable ordinary share outstanding for the period.

Non-Redeemable Class A and Class B Ordinary Shares includes Founder Shares and non-redeemable shares of ordinary shares as these shares do not have any redemption features. Non-Redeemable Class A and Class B Ordinary Shares participates in the income or loss on marketable securities based on non-redeemable ordinary shares’ proportionate interest.

The basic and diluted loss per common share is calculated as follows:

   For The Period from January 13, 2021
(inception) through March 31, 2021		 

Class A Ordinary shares subject to possible redemption

  

Numerator: Earnings allocable to Ordinary shares subject to possible redemption

  

Income from investments held in Trust Account

  $139 

Less: Company’s portion available to be withdrawn to pay taxes

   —   
  

 

 

 

Net income attributable

  $139 
  

 

 

 

Denominator: Weighted average Class A Ordinary shares subject to possible redemption

  

Basic and diluted weighted average shares outstanding

   28,282,899 
  

 

 

 

Basic and diluted net income per share

  $0.00 
  

 

 

 

Non-Redeemable Ordinary Shares

  

Numerator: Net Loss minus Net Earnings

  

Net loss

  $(319,783) 

Less: Net income allocable to Class A ordinary shares subject to possible redemption

   139 
  

 

 

 

Non-redeemable net loss

  $(319,922) 
  

 

 

 

Denominator: weighted average Non-redeemable ordinary shares

  

Basic and diluted weighted average shares outstanding, Non-redeemable ordinary shares

   7,243,737 
  

 

 

 

Basic and diluted net loss per share, Non-redeemable ordinary shares

  $(0.04) 
  

 

 

 

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncement if currently adopted would have a material effect on the Company’s financial statements.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 3—Initial Public Offering

On March 25, 2021, the Company consummated its Initial Public Offering of 31,116,305 Units, including the partial exercise of the underwriters’ option to purchase 3,616,305 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of approximately $311.2 million, and incurring offering costs of approximately $17.6 million, of which approximately $10.9 million was for deferred underwriting commissions.

Each Unit consists of one Class A ordinary share and one-fifth of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment (see Note 7).

Note 4—Private Placement

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 9,223,261 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of approximately $9.2 million.

Each whole Private Placement Warrant is exercisable for one whole share of Class A ordinary shares at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Note 5—Related Party Transactions

Founder Shares

On January 20, 2021, the Sponsor paid an aggregate of $25,000 for certain expenses on behalf of the Company in exchange for issuance of 7,187,500 Class B ordinary shares (the “Founder Shares”). On February 2, 2021, the Sponsor transferred 35,000 founder shares to each of Arno Harris, Ja-Chin Audrey Lee, Brian Goncher and Steven Berkenfeld, the Company’s independent directors. On March 22, 2021, the Company effected a share capitalization resulting in an aggregate of 7,906,250 Founder Shares issued and outstanding. The Sponsor agreed to forfeit up to an aggregate of 1,031,250 Founder Shares to the extent that the option to purchase additional units is not exercised in full by the underwriters, so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. On March 25, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 3,616,305 Units, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 127,174 Founder Shares were forfeited by the Sponsor upon the expiration of the over-allotment option.

The Initial Shareholders agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the closing price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Related Party Loans

On January 20, 2021, the Sponsor agreed to loan the Company up to $300,000 pursuant to a promissory note (the “Note”). The Note was non-interest bearing, unsecured and due upon the closing of the Initial Public Offering. For the period from January 13, 2021 (inception) through March 31, 2021, the Company borrowed approximately $172,000 under the Note and fully repaid the Note on March 26, 2021 (see Note 8).

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into up to 1,500,000 private placement warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of March 31, 2021, the Company had no borrowings under the Working Capital Loans.

Administrative Services Agreement

On March 25, 2021, the Company entered into an agreement that provided that, commencing on the date that the Company’s securities were first listed on Nasdaq through the earlier of consummation of the initial Business Combination and the liquidation, the Company agreed to pay the Sponsor $10,000 per month for office space, secretarial and administrative services provided to the Company. The Company incurred approximately $10,000 in expenses in connection with such services during the period from January 13, 2021 (inception) ended March 31, 2021 as reflected in the accompanying statement of operations and included in accrued expenses—related party in connection with such services.

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

Note 6—Commitments and Contingencies

Registration and Shareholder Rights

The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon the effective date of the Initial Public Offering. The holders of these securities were entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

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

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

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 7—Shareholders’ Equity

Class A Ordinary Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At March 31, 2021, there were 31,116,305 Class A ordinary shares issued or outstanding, including 28,295,737 Class A ordinary shares subject to possible redemption.

Class B Ordinary Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. On January 20, 2021, the Company issued 7,187,500 Class B ordinary shares. On March 22, 2021, the Company effected a share capitalization resulting in an aggregate of 7,906,250 Class B ordinary shares issued and outstanding. Of the 7,906,250 Class B ordinary shares outstanding, up to 1,031,250 Class B ordinary shares are subject to forfeiture, to the Company by the Initial Shareholders for no consideration to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the Initial Shareholders will collectively own 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. On March 25, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 3,616,305 Units with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 127,174 Founder Shares were forfeited by the Sponsor upon the expiration of the over-allotment option.

Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Except as described below, holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders except as required by law.

The Class B ordinary shares will automatically convert into Class A ordinary shares, which such Class A ordinary shares delivered upon conversion will not have any redemption rights or be entitled to liquidating distributions if the Company does not consummate an initial Business Combination, at the time of issuance for zero-coupon U.S. Treasury notes with maturities corresponding to the initial Business Combination or earlier at the optionexpected 2.0 year term of the holders thereof at a ratio such that the numberearnout period;

34


•Dividend yield - zero.

There were no transfers of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20%assets between Level 1, Level 2, or Level 3 of the sumfair value hierarchy as of (i) the total number of ordinary shares issuedJune 30, 2023.
The Company's assets and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the management team upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.

Preference Shares — The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001 per share. At March 31, 2021, there were no preference shares issued or outstanding.

Note 8—Derivative Warrant Liabilities

As of March 31, 2021, the Company has 6,223,261 and 9,223,261 Public Warrants and Private Placement Warrants, respectively, outstanding.

Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination; provided that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permit holders to exercise their warrants on a cashless basis under certain circumstances). The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business Combination, the

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Company will use commercially reasonable efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross. proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described under the caption “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00: Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):

in whole and not in part;

at a price of $0.01 per warrant;

upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

if, and only if, the last reported sale price (the “closing price”) of Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period.

Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00: Once the warrants become exercisable, the Company may redeem the outstanding warrants:

in whole and not in part;

at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of Class A ordinary shares to be determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares; and

if, and only if, the closing price of Class A ordinary shares equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and

if the closing price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

The “fair market value” of Class A ordinary shares for the above purpose shall mean the volume weighted average price of our Class A ordinary shares during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 Class A ordinary shares per warrant (subject to adjustment).

In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

Note 9—Fair Value Measurements

The following table presents information about the Company’s assetsliabilities that are measured at fair value on a recurring basis include the following as of MarchJune 30, 2023 and December 31, 2021 and indicates2022, set forth by level, within the fair value hierarchyhierarchy:

Fair value as of June 30, 2023
 Level 1Level 2Level 3Total
Liabilities:
Asset retirement obligation$— $— $6,461 $6,461 
Convertible Note Payable— 29,091 — 29,091 
Earnout liabilities— — 4,153 4,153 
Assets:
Short term investments16,955 — — 16,955 
Commodity swap contracts— 632 — 632 
Fair value as of December 31, 2022
 Level 1Level 2Level 3Total
Liabilities: 
Asset retirement obligation$— $— $6,256 $6,256 
Convertible Note Payable (1)
— 28,528 28,528 
Put option with Meteora— — 4,466 4,466 
Commodity swap contracts— 130 — 130 
Earnout liabilities— — 8,790 8,790 
Assets:
Short term investments64,976 — — 64,976 
Swaption— 182 — 182 
Commodity swap contracts— 954 — 954 
(1)The fair value of Convertible Note Payable as of December 31, 2022, represents the outstanding principal and paid-in-kind interest. Therefore it did not have any unobservable inputs which required the Company to develop its own assumptions. The methodology for calculating the fair value has changed as of December 31, 2022 as the prepayment penalty was cancelled upon consummation of Business Combination. Therefore, the Convertible Note Payable has been transferred from Level 3 to Level 2.

A summary of changes in the fair values of the valuation techniquesCompany’s Level 3 instruments, attributable to asset retirement obligations, for the six months ended June 30, 2023 is included in Note 2, Summary of Significant Accounting Policies.

10. Related Parties
Related parties are represented by Fortistar and other affiliates, subsidiaries and other entities under common control with Fortistar or NextEra.

Sale of non-controlling interests to Related Parties
On November 29, 2021, as part of an exchange agreement, OPAL Fuels issued 14 newly authorized common units and 300,000 Series A-1 preferred units to Hillman in return for Hillman’s non-controlling interest in four RNG project subsidiaries for total consideration of $30,000. Upon the consummation of the Business Combination, the Series A-1 preferred units have been converted to Redeemable preferred non-controlling interests. The Company recorded paid-in-kind preferred dividend of $675 and $1,330 for the three and six months ended June 30, 2023, respectively. The Company recorded paid-in-kind preferred dividend of $607 and $1,207 for the three and six months ended June 30, 2022,
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respectively. Please see Note 13. Redeemable non-controlling interests, Redeemable preferred non-controlling interests and Stockholders' Deficit, for additional information.

Issuance of Redeemable preferred non-controlling interests

On November 29, 2021, NextEra subscribed for up to 1,000,000 Series A preferred units, which are issuable (in whole or in increments) at the Company’s discretion prior to June 30, 2022. During the year ended December 31, 2022, the Company had drawn $100,000 and issued 1,000,000 Series A preferred units. The Company recorded paid-in-kind preferred dividend of $2,174 and $4,282 for the three and six months ended June 30, 2023, respectively. The Company recorded paid-in-kind preferred dividend of $1,111 and $1,227 for the three and six months ended June 30, 2022, respectively. Please see Note 13. Redeemable non-controlling interests, Redeemable preferred non-controlling interests and Stockholders' deficit, for additional information.

Purchase and sale agreement for environmental attributes

On November 29, 2021, the Company entered into a purchase and sale agreement with NextEra for the environmental attributes generated by the RNG Fuels business. Under this agreement, the Company plans to sell a minimum of 90% of the environmental attributes generated and will receive net proceeds based on the agreed upon price less a specified discount. A specified volume of environmental attributes sold per quarter will incur a fee per environmental attribute in addition to the specified discount. The agreement was effective beginning January 1, 2022. For the three and six months ended June 30, 2023, the Company earned net revenues after discount and fees of $11,852 and $18,060, respectively, under this contract which was recorded as part of Revenues - RNG fuel and Fuel Station Services. For the three and six months ended June 30, 2022, the Company earned net revenues after discount and fees of $16,792 and $29,688, respectively, under this contract which was recorded as part of Revenues - RNG fuel and Fuel Station Services. Please see Note 2. Summary of Significant Accounting Policies for additional information.

Commodity swap contracts under ISDA

The Company entered into an ISDA agreement with NextEra in November 2019. Pursuant to the agreement, the Company enters into commodity swap contracts on a periodic basis. As of June 30, 2023 and December 31, 2022, there were three commodity swap contracts outstanding. The Company records the realized and unrealized gain (loss) on these commodity swap contracts as part of Revenues - Renewable Power. Please see Note 9. Derivative Financial Instruments and Fair Value Measurements for additional information. The Company recorded $1,747 and $1,243 as revenues earned under the commodity swap contracts for the three months ended June 30, 2023 and 2022. The Company recorded $3,274 and $2,269 as revenues earned under the commodity swap contracts for the six months ended June 30, 2023 and 2022.

Purchase of investments from Related Parties
In August 2021, the Company acquired 100% of the ownership interests in Reynolds, an RNG production facility for $12,020 which was funded with cash on hand. Reynolds held an equity investment of 1,570 Class B units in GREP representing 20% interest for a cash consideration of $1,570 which owns 50% of Biotown, a power generation facility under development to convert to an RNG facility. The Reynolds transaction was an asset acquisition from an affiliate under common control. The Company accounts for its 20% equity investment in GREP under the equity method. The Company recorded a net loss of $566 and $460 as its share of net loss for the three months ended June 30, 2023 and 2022. The Company recorded a net loss of $436 and $556 as its share of net loss for the six months ended June 30, 2023 and 2022.

Sales contracts with Related Parties
In August 2020, OFSS contracted with Sunoma to dispense RNG and to generate and market the resulting RINs and LCFS credits created on behalf of the entity. Additionally, OFSS contracted with Pine Bend in December 2020 and Noble Road in March 2021 to provide the same services.
The term of these contracts each runs for a term of 10 years. The Company receives non-cash consideration in the form of RINs or LCFSs for providing these services and recognizes the RINs or LCFSs received as inventory based on their estimated fair value at contract inception. The Pine Bend and Noble road facilities came online in the first and third quarter of 2022. Sunoma came online in the fourth quarter of 2021. For the three months ended June 30, 2023 and 2022, the Company earned environmental processing fees of $555 and $242 net of intersegment elimination, under this agreement
36


which are included in Fuel Station Services revenues in the condensed consolidated statements of operations. For the six months ended June 30, 2023 and 2022, the Company earned environmental processing fees of $1,141 and $242 net of intersegment elimination, under this agreement which are included in Fuel Station Services revenues in the condensed consolidated statements of operations.
Service agreements with Related Parties
On December 31, 2020, OPAL Fuels signed a management, operations, and maintenance services agreement (“Administrative Services Agreement”) with Fortistar LLC ("Fortistar"), pursuant to which Fortistar provides management, operations, and maintenance services to the Company. The agreement expires on December 31, 2023, unless termination occurs earlier due to dissolution of the Company or the agreement is terminated by the Company’s secured lenders in certain circumstances. The agreement provides for payment of service fees based on actual time incurred at contractually agreed rates provided for in the Administrative Services Agreement, as well as a fixed annual payment of $580 per year adjusted annually for inflation. Additionally, the agreement provides for the Company to receive credits for any services provided by the Company's employees to Fortistar. For the three and six months ended June 30, 2023 and 2022, there have been no material services provided by the Company's employees to Fortistar.
In June 2021, the company entered into a management services agreement with Costar Partners LLC (“Costar”), an affiliate of Fortistar. Pursuant to the agreement, Costar provides information technology (“IT”) support services, software use, licensing services, management of third party infrastructure and security services and additional IT services as needed by the Company. The agreement provides for Costar to be compensated based on actual costs incurred and licensing fees per user for certain software applications. The agreement expires in June 2024 unless the termination occurs earlier due to dissolution of the Company or it is terminated by the Company’s secured lenders in certain circumstances.
The following table summarizes the various fees recorded under the agreements described above which are included in "Selling, general, and administrative" expenses:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Staffing and management services$412 $632 $987 $1,105 
Rent - fixed compensation164 91 329 274 
IT services731 546 1,457 1,085 
Total$1,307 $1,269 $2,773 $2,464 

As of June 30, 2023 and December 31, 2022, the Company had Accounts payable, related party in the amounts of $3,707 and $1,346, respectively.
11. Reportable Segments and Geographic Information
The Company is organized into four operating segments based on the characteristics of its renewable power generation, dispensing portfolio, and the nature of other products and services. During the first quarter of 2023, the Company changed its internal reporting to its executive leadership team ("Chief Operating Decision Makers"). The internal reporting was changed to provide more visibility into our RNG fuel production and operations and to align fuel dispensing revenues with construction and service of fuel dispensing stations.
Therefore, the Company reclassified the revenues and the corresponding cost of sales for CNG tolling business which were previously presented as part of Revenues - RNG Fuel and Cost of sales - RNG Fuel to Revenues - Fuel station services and Cost of sales - Fuel station services, respectively. The Company also adjusted the revenues and cost of sales for the prior year period presented for comparison purposes. The Company also reclassified general and administrative costs for RNG Fuel from Cost of sale - RNG Fuel to Selling, general and administrative expenses to make the margins across all segments comparable.
For the three months ended June 30, 2023 and 2022, the Company classified revenues from its fuel dispensing business of $9,400 and $9,214, respectively, as part of Revenues - Fuel station services. For the six months ended June 30,
37


2023, the Company classified revenues from fuel dispensing business of $18,251 and $19,307, respectively, as part of Revenues - Fuel station services.
For the three months ended June 30, 2023 and 2022, the Company classified cost of sales relating to fuel dispensing business of $8,302 and $7,940, respectively as part of Cost of sales - Fuel station services. For the six months ended June 30, 2023 and 2022, the Company classified cost of sales relating to the fuel dispensing business of $16,824 and $14,713, respectively as part of Cost of sales - Fuel station services.
We aligned our reportable segments disclosure to align with the information and internal reporting that is provided to our Chief Operating Decision Makers. Therefore, the Company reassessed its reportable segments and revised all the prior periods to make the segment disclosures comparable.
•RNG Fuel. The RNG Fuel segment relates to all RNG supply directly related to the generation and sale of brown gas and environmental credits, and consists of:

◦Development and construction – RNG facilities in which long term gas right contracts have been, or are in the process of being ratified and the construction of RNG generation facilities.
◦RNG supply operating facilities – This includes the generation, extraction, and sale of RNG - plus associated RINs and LCFSs from landfills.

     For the three and six months ended June 30, 2023 and 2022, the Company has accounted for its interests in Pine Bend, Reynolds and Noble Road under the equity method of accounting and the results of operations of Beacon, New River, Central Valley and Sunoma were consolidated in its condensed consolidated statement of operations. As of May 30, 2023, the Company deconsolidated Emerald and Sapphire. As a result, the Company consolidated Emerald and Sapphire for the period between January 1, 2023 and May 30, 2023 and recorded its ownership interests in Paragon which includes Emerald and Sapphire as equity method investment for the month of June 2023.
As of June 30, 2023, Central Valley, and Sapphire are not operational. Sunoma became operational in December 2021, Noble Road in January 2022, New River in April 2022 and Pine Bend in September 2022. Emerald completed construction in June 2023 and is expected to begin commercial operations in the third quarter of 2023.
•Fuel Station Services. Through its Fuel Station Services segment, the Company provides construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities including generation and minting of environmental credits. This segment includes:
◦Service and maintenance contracts for RNG/CNG fueling sites. Includes a manufacturing division that builds Compact Fueling Systems and Defueling systems.
◦Third Party CNG Construction of Fueling Stations - Design/build and serve as general contractor for typically Guarantee Maximum Price or fixed priced contracts for customers usually lasting less than one year.
◦RNG and CNG fuel dispensing stations for vehicle fleets - This includes both dispensing/sale of brown gas and the environmental credit generation and monetization. The Company operates Fueling Stations that dispense gas for vehicles. This also includes the development and construction of these facilities.

•Renewable Power Portfolio. The Renewable Power portfolio segment generates renewable power through methane-rich landfills and digester gas collection systems which is then sold to public utilities throughout the United States. The Renewable Power portfolio operates primarily in Southern California.

•Corporate. This segment consists of activities managed and maintained at the Company corporate level primarily including but not limited to:
◦Executive, accounting, finance, sales activities such as: payroll, stock compensation expense, travel and other related costs.
◦Insurance, professional fees (audit, tax, legal etc.).
The Company has determined that each of the four operating segments meets the characteristics of a reportable segment under U.S. GAAP. The Company's activities and assets that are not associated with the four reportable segments
38


are summarized in the "Other" category below. These include corporate investment income, interest income and interest expense, income tax expense, and other non-allocated costs.
Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
Revenues:
Renewable Power$8,672 $10,451 $18,590 $20,088 
RNG Fuel23,356 22,070 43,089 40,168 
Fuel Station Services34,138 27,822 58,730 51,992 
Other(1)
— 91 — 127 
Intersegment(4,199)(2,424)(7,946)(5,022)
Equity Method Investment(s)(6,925)(4,793)(14,464)(5,089)
 $55,042 $53,217 $97,999 $102,264 
____________
(1) Other includes revenues of Fortistar Contracting LLC.
Three Months Ended June 30,Six Months Ended
June 30,
 2023202220232022
Interest and Financing Expense, Net:
Renewable Power$6 $(1,202)$(258)$(2,119)
RNG Fuel(718)37 (1,373)(51)
Fuel Station Services83(8)93(14)
Corporate(327)(2,192)(59)(4,238)
 $(956)$(3,365)$(1,597)$(6,422)

Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
Depreciation, Amortization, and Accretion:
Renewable Power$1,449 $1,309 $2,901 $3,107 
RNG Fuel2,292 1,694 4,316 2,820 
Fuel Station Services848 637 1,638 1,303 
Other(1)
11 31 27 64 
Equity Method Investment(s)(972)(346)(1,687)(573)
 $3,628 $3,325 $7,195 $6,721 
(1)Other includes amortization of intangible assets and depreciation expense not allocated to any segment.




39


Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
Net income (loss)
Renewable Power$(741)$(91)$(1,644)$(2,169)
RNG Fuel7,291 14,188 8,468 16,106 
Fuel Station Services1,858 (3,605)1,899 950 
Corporate106,640 (11,455)98,274 (19,660)
Equity Method Investment(s)(998)621 (293)(36)
 $114,050 $(342)$106,704 $(4,809)

Six Months Ended
June 30,
20232022
Cash paid for Purchases of Property, Plant, and Equipment:
Renewable Power$— $1,300 
Fuel Station Services12,356 3,463 
RNG Fuel59,653 49,698 
 $72,009 $54,461 
 June 30,
2023		December 31,
2022
Total Assets:
Renewable Power$40,948 $43,468 
RNG Fuel282,854 347,750 
Fuel Station Services120,280 119,669 
Corporate and other25,454 82,204 
Equity Method Investment(s)202,409 51,765 
 $671,945 $644,856 
Geographic Information: The Company's assets and revenue generating activities are domiciled in the United States.
12. Variable Interest Entities
We determine whether we are the primary beneficiary of a VIE upon our initial involvement with the VIE and we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires judgment. Our considerations in determining the VIE's most significant activities and whether we have power to direct those activities include, but are not limited to, the VIE's purpose and design and the risks passed through to investors, the voting interests of the VIE, management, service and/or other agreements of the VIE, involvement in the VIE's initial design, and the existence of explicit or implicit financial guarantees. If we are the party with the power over the most significant activities, we meet the "power" criteria of the primary beneficiary. If we do not have the power over the most significant activities or we determine that all significant decisions require consent of a third-party, we do not meet the "power" criteria of the primary beneficiary.
We assess our variable interests in a VIE both individually and in aggregate to determine whether we have an obligation to absorb losses of or a right to receive benefits from the VIE that could potentially be significant to the VIE. The determination of whether our variable interest is significant to the VIE requires judgment. In determining the significance of our variable interest, we consider the terms, characteristics and size of the variable interests, the design and characteristics of the VIE, our involvement in the VIE, and our market-making activities related to the variable interests.

40



As of June 30, 2023, the Company held equity interests in six VIEs — Sunoma, GREP, Emerald, Sapphire, Paragon and Central Valley. On May 30, 2023, the Company together with a third-party environmental solutions company formed a new joint venture holding company Paragon LLC ("Paragon"). The Company owns 50% of ownership interest in Paragon. Concurrent with the formation of Paragon, the Company contributed its 50% ownership interests in Emerald and Sapphire to Paragon.
Upon the execution of the above the transaction, the Company reassessed its equity interests in Emerald and Sapphire under ASC 810, Consolidation and determined that the Company utilizeddoes not have a controlling financial interest in Paragon under ASC 810 because the governance of the joint venture is driven by an independent board jointly controlled by the joint venture partner and OPAL equally and there are substantive participating rights held by the joint venture partner in the significant activities of Paragon.
Based on the above analysis, the Company determined that it should account for its ownership interests in Paragon under the equity method of accounting pursuant to determineASC 323, Investments Equity Method and Joint Ventures, prospectively, as the Company has the ability to exercise significant influence, but not control over the joint venture company.
Prior to May 30, 2023, the Company consolidated these two entities in accordance with the variable interest entity model guidance under ASC 810, Consolidation. As of June 30, 2023, GREP and Paragon were presented as equity method investments and the remaining two VIEs Sunoma and Central Valley are consolidated by the Company.
At December 31, 2022, GREP has been presented as an equity method investment and the remaining four VIEs Sunoma, Emerald, Sapphire, and Central Valley are consolidated by the Company.
In 2020, the Company acquired a variable interest in Sunoma in a joint venture with a third-party who does not have any equity at risk but participates in proportionate share of income or losses, which may be significant. Additionally, the assets in Sunoma are collateralized under the Sunoma loan, the proceeds of which are used for partial financing of the construction of the Sunoma facility. Therefore, the significant assets and liabilities of Sunoma are parenthesized in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022.

The Company determined that each of these entities are VIEs and in its capacity as a managing member except for Emerald and Sapphire, the Company is the primary beneficiary. The Company is deemed as a primary beneficiary based on two conditions:
•The Company, as a managing member, has the power to order the activities that significantly impact the economic performance of the two entities including establishment of strategic, operating, and capital decisions for each of these entities; and
•The Company has the obligation to absorb the potential losses for the right to receive potential benefits, which could be significant to the VIE;
As a primary beneficiary, the Company consolidates these entities in accordance with the variable interest entity model guidance under ASC 810, Consolidation.
Our variable interests in each of our VIEs arise primarily from our ownership of membership interests, construction commitments, our provision of operating and maintenance services, and our provision of environmental credit processing services to VIEs.
The following table summarizes the major condensed consolidated balance sheet items for consolidated VIEs as of June 30, 2023 and December 31, 2022. The information below is presented on an aggregate basis based on similar risk and reward characteristics and the nature of our involvement with the VIEs, such as:
•All of the VIEs are RNG facilities and they are reported under the RNG Fuel Supply segment;
•The nature of our interest in these entities is primarily equity based and therefore carry similar risk and reward characteristics;
41


The amount of assets that can only be used to settle obligations of the VIEs are parenthesized in the condensed consolidated balance sheets and are included in the asset totals listed in the table below.
 As of
June 30,
2023		As of
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$906 $12,506 
Accounts receivable, net846 966 
Restricted cash - current228 6,971 
Environmental credits held for sale29 — 
Prepaid expenses and other current assets186 415 
Total current assets2,195 20,858 
Property, plant and equipment, net27,043 73,140 
Restricted cash, non-current2,790 2,923 
Total assets$32,028 $96,921 
 
Liabilities and equity
Current liabilities:
Accounts payable$384 $4,896 
Accounts payable, related party1,108 433 
Accrued capital expenses— 7,821 
Accrued expenses272 646 
Sunoma Loan- current portion1,169 380 
Total current liabilities2,933 14,176 
Sunoma loan, net of debt issuance costs20,948 21,712 
Total liabilities23,881 35,888 
Equity
Stockholders' equity7,244 34,588 
Non-redeemable non-controlling interests903 26,445 
Total equity8,147 61,033 
Total Liabilities and Equity$32,028 $96,921 



13. Redeemable non-controlling interests, Redeemable preferred non-controlling interests and Stockholders' Deficit

Common stock

As of June 30, 2023, there are (i) 29,330,115 shares of Class A common stock issued and outstanding, (ii) 144,399,037 shares of New OPAL Class D common stock issued and outstanding, (iii) no shares of Class B common stock, par value $0.0001 per share, of (“Class B common stock”) issued and outstanding ( Shares of Class B common stock do not have any economic value except voting rights as described below) and (iv) no shares of Class C common stock, par value $0.0001 per share, (“ Class C common stock”) issued and outstanding (shares of Class D common stock do not have any economic value except voting rights as described below)

During the first quarter of 2023, Meteora exercised the put option pursuant to the terms of the forward purchase contract. The Company repurchased 1,635,783 shares at a price of $10.02 per share. The Company recorded $11,614 representing the fair value.

value of the treasury stock as part of stockholders' deficit and $4,777 as an offset to the derivative financial liability, current on its condensed consolidated balance sheet as of June 30, 2023.

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS


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In March 2023, the Company issued 49,633 shares to certain warrant holders as consideration for their prior agreement to tender all warrants held by the warrant holders in the Company's voluntary exchange offer which closed on December 22, 2022. The Company recorded $338 representing the fair value of the shares issued based on the closing price on March 30, 2023 as part of Other income (expense), net.

Redeemable preferred non-controlling interests

On November 29, 2021, as part of an exchange agreement (“Hillman exchange”), the Company issued 300,000 Series A-1 preferred units to Hillman in return for Hillman’s non-controlling interest in four RNG project subsidiaries.

On November 29, 2021, Mendocino Capital LLC (“NextEra”) subscribed for up to 1,000,000 Series A preferred units, which are issuable (in whole or in increments) at the Company’s discretion prior to June 30, 2022. During the year ended December 31, 2021:

Description

  Quoted Prices
in
Active Markets
(Level 1)		   Significant Other
Observable
Inputs
(Level 2)		   Significant Other
Unobservable
Inputs
(Level 3)		 

Assets:

      

Investments held in Trust Account

  $311,163,203   $—     $—   

Liabilities:

      

Derivative warrant liabilities—public

  $—     $—     $5,801,650 

Derivative warrant liabilities—private

  $—     $—     $8,922,950 

Transfers to/from Levels 1, 2,2022, the Company had drawn $100,000 and 3 are recognizedissued 1,000,000 Series A preferred units.


Upon completion of Business Combination, the Company assumed Series A-1 preferred units and Series A preferred units which were issued and outstanding by OPAL Fuels. The Company recorded the Series A-1 preferred units and Series A preferred units as Redeemable preferred non-controlling interests. The Company has elected to adjust the carrying value of the preferred units to the redemption value at the end of each reporting period by immediately amortizing the issuance costs in the first reporting period. There were no transfers between levelsperiod after issuance of the preferred units.
The following table summarizes the changes in the redeemable preferred non-controlling interests which represent Series A and Series A-1 preferred units outstanding at OPAL Fuels level from December 31, 2022 to June 30, 2023:

Series A-1 preferred unitsSeries A preferred units
UnitsAmountUnitsAmountTotal
Balance, December 31, 2022300,000 $32,736 1,000,000 $105,406 $138,142 
 Series A units issued by OPAL Fuels— — — — — 
Paid-in-kind dividends attributable to OPAL Fuels— 1,105 — 3,556 4,661 
Paid-in kind dividends attributable to Class A common stockholders— 225 — 726 951 
Balance, June 30, 2023300,000 $34,066 1,000,000 $109,688 $143,754 


Terms of Redeemable preferred units

The Series A and Series A-1 preferred units (together the “Preferred Units”) have substantially the same terms and features which are listed below:

Voting: The Series A-1 preferred units to Hillman do not have any voting rights. The Series A preferred units issued to NextEra have limited rights to prevent the Company from taking certain actions including (i) major issuances of new debt or equity (ii) executing transactions with affiliates which are not at arm-length basis (iii) major disposition of assets and (iv) major acquisition of assets outside of the Company’s primary business.

Dividends: The Preferred Units are entitled to receive dividends at the rate of 8% per annum. Dividends begin accruing for each unit from the date of issuance and are payable each quarter end regardless of whether they are declared. The dividends are mandatory and cumulative. The Company is allowed to elect to issue additional Preferred Units ( paid-in-kind) in lieu of cash for the periodfirst eight dividend payment dates. The Company elected to pay the dividends to be paid-in-kind for all periods presented. In the occurrence of certain events of default, the annual dividend rate increases to 12%. Additionally, the dividend rate increases by 2% for each unrelated uncured event of default up to a maximum of 20%.

Liquidation preference: In the event of liquidation of the Company, each holder of a unit of Series A and Series A-1 is entitled to be paid on pro-rata basis the original issue price of $100 per unit plus any accrued and unpaid dividends out of
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the assets of the Company available for distribution after payment of the Company’s debt and liabilities and liquidation expenses.

Redemption: At any time after issuance, the Company may redeem the Redeemable preferred units for a price equal to original issue price of $100 per unit plus any accrued and unpaid dividends. Holders of the Preferred Units may redeem for an amount equal to original issue price of $100 per unit plus any accrued and unpaid dividends upon (i) occurrence of certain change in control event (ii) at the end of four years from January 13, 2021 (inception) throughthe date of issuance, except the Preferred Units issued to Hillman can only be redeemed 30 days after the fourth year anniversary of the first issuance of Preferred Units to NextEra. The maturity date is determined to be the date at which the holder’s redemption option becomes exercisable as this is the date in which both the Company and the holder may redeem the preferred units. The maturity date could be as early as November 29, 2025 but no later than June 30, 2026, depending on when the Series A units to NextEra are issued as previously detailed herein.

Conversion: Holder’s may elect to convert Preferred Units into common units in the limited chance that the Company fails to redeem the Preferred Units under an optional redemption, the annual dividend rate increases to 12% and is further increased to 14% after one year, and thereafter by 2% every 90 days up to a cap of 20%. The Company must also redeem all NextEra Series A preferred units on which the redemption option has been exercised prior to redeeming any Hillman Series A-1 preferred units. If elected, the holder may convert all or a portion of its Preferred Units into a number of common units equal to: (i) number of Preferred Units, multiplied by, (ii) $100 plus accrued and unpaid cash dividends, divided by, (iii) conversion price. The conversion price is equal to the value of the Company’s common units determined as follows, and reduced by a 20% discount if conversion occurs during the first year of delayed redemption, a 25% discount during the 2nd year, and a 30% discount thereafter:

1. Using 20-day volume-weighted average price (“VWAP”) of the Company's common shares.

2. Otherwise the estimated proceeds to be received by the holder of a common unit if the net assets of the Company were sold at fair market value and distributed.

Redeemable non-controlling interests

Upon consummation of Business Combination, OPAL Fuels and its members caused the existing limited liability company agreement to be amended and restated and in connection therewith, all of the common units of OPAL Fuels LLC issued and outstanding immediately prior to the closing were re-classified into 144,399,037 Class B Units. Each Class B Unit is paired with 1 non-economic share of Class D common stock issued by the Company. Each pair of Class B Unit and 1 share of Class D common stock is exchangeable to either 1 share of Class A common stock or 1 share of Class C common stock at the holder's option. Upon an exchange for Class A common stock, the Company has the option to redeem shares for cash at their market value.

Redeemable non-controlling interests have been presented as mezzanine equity in the condensed consolidated statements of change in Redeemable non-controlling interests, Redeemable preferred non-controlling interests and stockholders' equity. At each balance sheet date, the Redeemable non-controlling interests are adjusted up to their redemption value if necessary, with an offset in Stockholders' equity. As of June 30, 2023, the Company recorded $1,068,274 to adjust the carrying value to their redemption value based on a 5 day VWAP of $7.40 per share.
14. Stock-based compensation
The Company adopted 2022 Omnibus Equity Incentive Plan (the "2022 Plan") in 2022 which was approved by our shareholders on July 21, 2022. The purposes of the 2022 Plan are to (i) provide an additional incentive to selected employees, directors, and independent contractors of the Company or its Affiliates whose contributions are essential to the growth and success of the Company, (ii) strengthen the commitment of such individuals to the Company and its Affiliates, (iii) motivate those individuals to faithfully and diligently perform their responsibilities and (iv) attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the Company. The 2022 Plan allows for granting of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The Company registered 19,811,726 shares of Class A common stock that can be issued under this Plan.
44


On March 31, 2021.

Level 1 instruments include investments in money market funds2023, the Company issued 196,961 stock options, 888,831 restricted stock units and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources274,617 performance units to determinecertain employees of the fair value of its investments.

Company. The fair value of the Public Warrantsstock options was determined to be $5.26 based on Black Scholes model based share price of $6.97, exercise price of $6.97, expiration of 10 years, annual risk free interest rate of 4.04% and volatility of 65%. Additionally, the Company issued 135,583 restricted stock units to the board of directors. The total fair value of the equity awards was $6,955.

A summary of the equity awards under the 2022 Plan for the six months ended June 30, 2023 is as follows:
Number of Units outstandingWeighted Average Grant Date Fair ValueAggregate Fair Value (in thousands)
Restricted Stock Units:
Unvested awards as of December 31, 2022422,349 $7.94 
Granted1,038,347 6.98 
Forfeitures(41,664)7.49
Restricted Stock Units outstanding as of June 30, 20231,419,032 $7.25 $10,284 
Stock Options:
Unvested awards as of December 31, 2022— — 
Granted196,961 $5.26 
Stock Options outstanding as of June 30, 2023196,961 $5.26 $1,036 
Performance Stock Units:
Unvested awards as of December 31, 2022— 
Granted274,617 $6.97 
Forfeitures(4,089)$6.97 
Performance Stock Units outstanding as of June 30, 2023270,528 $6.97 $1,886 
Total unvested awards outstanding as of June 30, 20231,886,521 $7.00 $13,206 
Stock-based compensation expense for all stock awards included in Selling, general and administrative expenses:
Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
Stock-based compensation expense$1,877 $160 $2,848 $320 
 $1,877 $160 $2,848 $320 
Stock-based compensation expense related to unvested awards yet to be recognized as of June 30, 2023 totaled $9,726 and is expected to be recognized, on a weighted average basis, over 2.3 years.

15. Net Income (Loss) Per Share
The basic income per share of Class A common stock is computed by dividing the net income (loss) attributable to Class A common stockholders by the weighted average number of Class A common stock outstanding during the period.
45


The basic income per share for the three and six months ended June 30, 2023 does not include 1,635,783 shares in treasury, 763,908 shares issued and outstanding but are contingent on achieving earnout targets. During the first quarter of 2023, the put option was exercised and 197,258 shares of Class A common stock were cancelled.
Prior to the Business Combination, the membership structure of OPAL Fuels included common units which shared in the profits and losses of OPAL Fuels LLC. The Company analyzed the calculation of earnings per units for periods prior to the consummation of the Business Combination and determined that such information would not be meaningful to the users of these condensed consolidated financial statements. Therefore net income per share information has not been presented for the three and six months ended June 30, 2022.
The diluted income per share of Class A common stock for the three and six months ended June 30, 2023 does not include Redeemable preferred non-controlling interests and the Convertible Note Payable because the substantive contingency for conversion has not been met as of June 30, 2023. It does not include 144,399,037 OPAL Fuels Class B units representing Redeemable non-controlling interest as its impact is anti-dilutive. It does not include 763,908 Sponsor Earnout Awards and 10,000,000 OPAL Earnout Awards as their target share price and adjusted EBITDA contingencies have not been met as of June 30, 2023. The outstanding stock options issued under the 2022 Plan are not included as their impact is dilutive. The outstanding performance units under the 2022 Plan are not included as the performance conditions have not been met as of June 30, 2023.
The Class D common stock does not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class D common stock under the two-class method has not been presented.
The following table summarizes the calculation of basic and diluted net loss per share:
Three Months EndedSix Months Ended
June 30, 2023June 30, 2023
Net income attributable to Class A common stockholders17,924 $16,345 
Weighted average number of shares of Class A common stock - basic26,977,682 27,179,488 
Dilutive effect of stock options, restricted stock units, performance units, Convertible note payable, earnout shares, Redeemable preferred non-controlling interests, Redeemable non-controlling interests270,957 377,212 
Weighted average number of shares of Class A common stock - diluted27,248,639 27,556,700 
Net loss per share of Class A common stock
Basic$0.66 $0.60 
Diluted$0.66 $0.59 
16. Income taxes
As a result of the Company’s up-C structure effective with the Business Combination, the Company expects to be a tax-paying entity. However, as the Company has historically been loss-making, any deferred tax assets created as a result of net operating losses and other deferred tax assets for the excess of tax basis in the Company's investment in Opal Fuels would be offset by a full valuation allowance. Prior to the Business Combination, OPAL Fuels was organized as a limited liability company, with the exception of one partially-owned subsidiary which filed income tax returns as a C-Corporation. The Company accounts for its income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Judgment is required in determining the provisions for income and other taxes and related accruals, and deferred tax assets and liabilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. Additionally, the Company's
46


various tax returns are subject to audit by various tax authorities. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates.
For the three and six months ended June 30, 2023, the Company recorded zero income tax expense. The effective tax rate for the three and six months ended June 30, 2023 was 0%. The difference between the Company’s effective tax rate for the three and six months ended June 30, 2023 and the U.S. statutory tax rate of 21% was primarily due to a full valuation allowance recorded on the Company’s net U.S. deferred tax assets. The Company did not record a tax provision for the three and six months ended June 30, 2022 primarily due to OPAL Fuels' status as a pass-through entity for U.S. federal income tax purposes. The Company evaluates the realizability of the deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized.
17. Commitments and Contingencies
Letters of Credit
As of June 30, 2023 and December 31, 2022, the Company was required to maintain five and nine standby letters of credit totaling $1,498 and $2,292, respectively, to support obligations of certain Company subsidiaries. These letters of credit were issued in favor of a lender, utilities, a governmental agency, and an independent system operator under PPA electrical interconnection agreements, and in place of a debt service reserve. There have been no draws to date on these letters of credit.
Purchase Options
The Company has two contracts with customers to provide CNG for periods of seven and ten years, respectively. The customers have an option to terminate the contracts and purchase the Company's CNG Fueling Station at the customers' sites for a fixed amount that declines annually.
In July 2015, the Company entered into a ten year fuel sales agreement with a customer that included the construction of a CNG Fueling Station owned and managed by the Company on the customer's premises. At the end of the contract term, the customer has an option to purchase the CNG Fueling Station for a fixed amount. The cost of the CNG Fueling Station was recorded to Property, plant, and equipment and is being depreciated over the contract term.
On May 30, 2023, OPAL Intermediate Holdco 2 assigned to Paragon its rights and obligations under OPAL Term Loan II. Additionally, the Company signed an equity commitment letter up to a maximum of $2,100, to Paragon relating to its share of equity contribution towards any cost over runs in connection with the Public Offeringconstruction and Private Placement Warrants were initially measured at fair value usingcompletion of Emerald project.
Legal Matters
The Company is involved in various claims arising in the normal course of business. Management believes that the outcome of these claims will not have a Monte Carlo simulation modelmaterial adverse effect on the Company's financial position, results of operations or cash flows.

18. Subsequent events

Gas sale and subsequently, the fair valuepurchase agreement

On August 11, 2023, a wholly-owned subsidiary of the Private Placement Warrants have been estimated usingCompany entered into a Monte Carlo simulation model each measurement date.Third Amended and Restated Gas Sale and Purchase Agreement and a Third Amended and Restated Site Lease Agreement (collectively, the “Agreements”) with a leading environmental services company. The fair valueAgreements, which are effective as of Public Warrants issued in connectionAugust 11, 2023, provide the Company with the Initial Public Offering have been measured basedright to purchase landfill gas (“LFG”) from a landfill located in Massachusetts, for the purpose of combusting such LFG to generate renewable electricity at the facility (the “Facility”) located on the listed market price of such warrants, a Level 1 measurement, since March 2021. Forlandfill footprint. Per the period from January 13, 2021 (inception) through March 31, 2021, the Company recognized a charge to the statement of operations resulting from a decrease in the fair value of liabilities of approximately $271,000 presented as change in fair value of derivative warrant liabilities on the accompanying statement of operations.

The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary share warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

   March 22,
2021		  As of March 31,
2021		 

Share price

  $9.81  $9.81 

Volatility

   14.3%   14.0% 

Expected life of the options to convert

   6.53   6.50 

Risk-free rate

   1.23%   1.28% 

Dividend yield

   —     —   

The change in the fair value of the derivative warrant liabilities for the period from January 13, 2021 (inception) through March 31, 2021 is summarized as follows:

Derivative warrant liabilities at January 13, 2021 (inception)

  $—   

Issuance of Public and Private Warrants

   14,995,760 

Change in fair value of derivative warrant liabilities

   (271,160) 
  

 

 

 

Derivative warrant liabilities at March 31, 2021

  $14,724,600 
  

 

 

 

ARCLIGHT CLEAN TRANSITION CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 10—Revision to Prior Period Financial Statements

During the course of preparing the quarterly report on Form 10-Q for the period from January 13, 2021 (inception) through March 31, 2021, the Company identified a misstatement in its misapplication of accounting guidance related to the Company’s warrants in the Company’s previously issued audited balance sheet dated March 25, 2021, filed on Form 8-K on March 31, 2021 (the “Post-IPO Balance Sheet”).

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs���) (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since their issuance on March 21, 2021, the Company’s warrants have been accounted for as equity within the Company’s previously reported balance sheets. After discussion and evaluation, including with the Company’s independent registered public accounting firm and the Company’s audit committee, management concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.

The Warrants were reflected as a component of equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheet, based on the Company’s application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreementAgreements, the Company will make certain royalty and the Company’s application of ASC 815-40 to the warrant agreement.lease payments. The Company reassessed its accounting for Warrants issued on March 21, 2021, in lightterms of the SEC Staff’s published views. Based on this reassessment, management determined that the Warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company Statement of Operations each reporting period.

The Company concluded that the misstatement was not material to the Post-IPO Balance Sheet and the misstatement had no material impact to any prior interim period. The effect of the revisions to the Post-IPO Balance Sheet is as follows:

   As of March 25, 2021 
   As Previously
Reported		   Reclassification   As Reclassified 

Unaudited Condensed Balance Sheet

      

Total assets

  $314,189,950   $—     $314,189,950 
  

 

 

   

 

 

   

 

 

 

Liabilities and shareholders’ equity

      

Total current liabilities

  $525,842   $—     $525,842 

Deferred underwriting commissions

   10,890,707    —      10,890,707 

Derivative warrant liabilities

   —      14,995,760    14,995,760 
  

 

 

   

 

 

   

 

 

 

Total liabilities

   11,416,549    14,995,760    26,412,309 

Class A ordinary shares, $0.0001 par value; shares subject to possible redemption

   297,773,400    (14,995,760)    282,777,640 

Shareholders’ equity

      

Preference shares- $0.0001 par value

   —      —      —   

Class A ordinary shares - $0.0001 par value

   134    150    284 

Class B ordinary shares - $0.0001 par value

   791    —      791 

Additional paid-in-capital

   5,035,976    462,470    5,498,446 

Accumulated deficit

   (36,900)    (462,620)    (499,520) 
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

   5,000,001    —      5,000,001 
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

  $314,189,950   $—     $314,189,950 
  

 

 

   

 

 

   

 

 

 

Note 11—Subsequent Events

Management has evaluated subsequent events to determine if events or transactions occurring throughAgreements are 20 years from the date the financial statement were issued. There are no such events requiring potential adjustment to or disclosure in the financial statements and the Company has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.

Facility commences operations.


47



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ReferencesOperations

In this Management's Discussion and Analysis of Financial Condition and Results of Operations section, references to "OPAL", "we", "us", "our", and the “Company,” “our,” “us” or “we”"Company" refer to ArcLight Clean Transition Corp. IIOPAL Fuels Inc. and its consolidated subsidiaries. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company's unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022, and the audited consolidated financial statements and the notes thereto contained elsewhereincluded in this report. Certainthe Company's Annual Report on Form 10-K, which was filed with the SEC on March 29, 2023. In addition to historical information, contained in thethis discussion and analysis set forth below includes certain forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have basedwhich reflect our current expectations. The Company's actual results may materially differ from these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

Overview

We are a blank checkrenewable energy company incorporated on January 13, 2021specializing in the capture and conversion of biogas for the (i) production of RNG for use as a Cayman Islands exempted companyvehicle 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 purposecountry 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 effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”), thatthe biogas. In addition, we have not yet identified. Our sponsor is ArcLight CTC Holdings II, L.P., a Delaware limited partnership (our “Sponsor”).

Our registration statementhas recently begun implementing design, development, and construction services for our initial public offering (the “Initial Public Offering”) was declared effective on March 22, 2021. On March 25, 2021,hydrogen Fueling Stations, and we consummatedare pursuing opportunities to diversify its Initial Public Offeringsources of 31,116,305 units (the “Units”biogas to other waste streams. The term “Environmental Attributes” refers to federal, state and with respect to the Class A ordinary shares includedlocal government incentives in the Units being offered, the “Public Shares”), including the partial exercise of the underwriters’ option to purchase 3,616,305 additional Units (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $311.2 million, and incurring offering costs of approximately $17.6 million, of which approximately $10.9 million was for deferred underwriting commissions.

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

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

If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 25, 2023 (the “Combination Period”), we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a

per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay its income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

Results of Operations

Our entire activity since inception through March 31, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating incomeprovided in the form of interest income on cashrenewable identification numbers (“RINs,”) renewable energy credits (“RECs”), low carbon fuel standard (“LCFS”) credits, rebates, tax credits and cash equivalents.other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy. We expectseparately design, develop, construct, operate and service Fueling Stations for vehicle fleets across the country that dispense RNG and/or CNG to incur increased expensesdisplace diesel as a resultfleet transportation fuel.

Recent developments
On May 30, 2023, the Company together with a third-party environmental solutions company formed a new joint venture holding company Paragon RNG LLC ("Paragon"). The Company owns 50% of beingthe ownership interest in Paragon. Concurrent to the formation of Paragon, the Company contributed its 50% ownership interests in Emerald and Sapphire to Paragon.
On May 30, 2023, OPAL Fuels Intermediate Holdco 2 LLC (“OPAL Intermediate Holdco 2”), a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement of our warrant liabilities at each reporting period.

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

Liquidity and Capital Resources

As of March 31, 2021, we had approximately $2.8 million in its operating bank account and working capital of approximately $2.4 million.

Our liquidity needs up to March 31, 2021 had been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on behalfwholly-owned indirect subsidiary of the Company, in exchange forassigned to Paragon its rights and obligations under its existing senior secured credit facility, OPAL Term Loan II.

Upon the issuanceexecution of the Founder Shares (as defined below),above two transactions, the loanCompany reassessed its equity interests in Emerald and Sapphire under ASC 810, Consolidation and determined that the Note fromCompany does not have a controlling financial interest in Paragon under ASC 810 because the Sponsor of approximately $172,000 to us, and the net proceeds from the consummationgovernance of the Private Placement notjoint venture is driven by a board jointly controlled by the joint venture partner and OPAL equally and there are substantive participating rights held by the joint venture partner in the Trust Account. The Note from the Sponsor was repaid in full on March 26, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, our officers, directors and Initial Shareholders may, but are not obligated to, provide the Company Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.

significant activities of Paragon.

Based on the foregoing, management believesabove analysis, the Company determined that it should account for its ownership interests in Paragon under the equity method of accounting pursuant to ASC 323, Investments Equity Method and Joint Ventures, prospectively, as the Company has the ability to exercise significant influence, but not control over the joint venture company.
Construction Update

•The Polk County landfill RNG project, owned 100% by OPAL Fuels, started construction in June 2023 and we anticipate commercial operations beginning in the fourth quarter of 2024. This project represents approximately 1.1 million MMBtu of annual nameplate capacity.

•The Emerald RNG project completed construction and will be added to our in-operation portfolio in the third quarter as commissioning is completed. This project represents approximately 1.3 million MMBtu of OPAL Fuels' 50% ownership share of annual nameplate capacity.

48



•The Prince William RNG project is expected to commence commercial operations in the first quarter of 2024. This project represents approximately 1.7 million MMBtu of annual nameplate capacity which is owned 100% by OPAL Fuels.

•The Sapphire RNG project is expected to commence commercial operations in the first half of 2024. This project represents approximately 800,000 MMBtu for OPAL Fuels’ 50% ownership share of annual nameplate capacity.

•We have sufficientmoved our Northeast landfill RNG conversion project back to our Advanced Development Pipeline. It is being considered as a landfill gas to electric project. This project represents approximately 0.3 million MMBtu of annual nameplate capacity.

•OPAL Fuels’ updated share of annual nameplate capacity for our six projects in construction is approximately 5.4 million MMBtu.

Development Update

•We remain on track to place at least 2.0 million MMBtu of RNG projects (representing OPAL Fuels’ proportional ownership) into construction in 2023.

•Our Advanced Development Pipeline comprises of 8.1 million MMBtu of feedstock biogas per year, adjusted for Polk moving to our In-Construction portfolio and our Northeast landfill project moving to our Advanced Development Pipeline.
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 to Centers for Disease Control guidelines to maintain safe working capital and borrowing capacity from the Sponsor or an affiliateconditions for our employees. Some of the Sponsor, or certain ofprotocols we implemented include limiting in-person work to essential personnel and performing temperature checks. Since March 2020, where practicable, our officersemployees have worked remotely and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period,minimized travel and other non-essential contact. Additionally, we will be using these fundsare providing our employees with COVID-19 testing at no cost and personal protective equipment for paying existing accounts payable, identifyingtheir safety and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

We continue to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable aswell-being.

As of the date of this report, the balance sheet. 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 statement does not include any adjustments that might result fromcondition could potentially face material adverse effect(s) in the outcome of this uncertainty.

Contractual Obligations

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

COVID-19.

Critical Accounting Policies

This management’s

The discussion and analysis of our financial condition and results of operations is based onupon our interim unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles generally accepted in the United States ("U.S. GAAP") and the rules and regulations of America.the SEC, which apply to interim financial statements. The preparation of ourthose financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, and expenses and thewarrants and related disclosure of contingent assets and liabilities inat the date of our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions orand conditions. We have identified

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 following as itsdiscussion 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:

Class A Ordinary shares subjectpolicies normally included in consolidated financial statements. Accordingly, a detailed description of these critical accounting policies and the consolidated financial statements and notes thereto are included in the Company’s Annual Report on Form 10-K, which was filed with SEC on March 29, 2023.


Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to possible redemption

We accountmake 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, fair value of the

49



deconsolidated VIEs, the value of stock-based compensation and the fair value of derivatives including warrant liabilities, earnout liabilities, put option on a forward purchase agreement, interest rate swaps and commodity swap contracts.
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, Renewable Power, and associated Environmental Attributes, and access to suitable biogas production resources. Additional factors and trends affecting our business are discussed in "Risk Factors" elsewhere in this report.
Market Demand for RNG
Demand for our Class A Ordinary shares subjectconverted biogas and associated Environmental Attributes, including RINs and LCFS credits, is heavily influenced by United 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 possible redemptionincorporate 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 guidancemandates established by the Energy Independence and Security Act of 2007. The EPA set RVOs for 2023 and beyond and the EPA introduced a Set rule in ASC Topic 480 “Distinguishing LiabilitiesJune 2023. This is expected to reduce volatility in RIN pricing for the upcoming three years. On the state level, the economics of RNG are enhanced by low-carbon fuel initiatives, particularly well-established programs in California and Oregon (with several other states also actively considering LCFS initiatives similar to those in California and Oregon). 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 CO₂ and other climate-harming GHGs in the 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 Equity.” Class A Ordinary shares subject to mandatory redemption (if any) is classified as liability instrumentssales of RECs and are measured at fair value. Conditionally redeemable Class A Ordinary shares (including Class A Ordinary shares that features redemption rights that are either withinRenewable 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 concerning Renewable Power, landfill gas ("LFG"), or the controlsale of RECs could affect the market for, and the pricing of, the holder or subjectRECs that we generate through production at our Biogas Conversion Projects. We periodically evaluate opportunities to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A Ordinary shares are classified as shareholders’ equity. Our Class A Ordinary sharesfeature certain redemption rights that are consideredconvert existing biogas-to-Renewable Power projects to be outsideRNG 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 our controlRenewable Power off-takers to enter arrangements that would free up the LFG resource to produce RNG. Changes in the price we receive for RECs and subject toRenewable Power, together with the occurrence of uncertain future events. Accordingly, at March 31, 2021, 28,295,737 shares of Class A Ordinary shares subject to possible redemption is presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480revenue opportunities and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

We issued an aggregate of 6,223,261 ordinary share warrantsconversion costs associated with Units issuedconverting our LFG sites to investorsRNG 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 Initial Public Offering and the underwriters’ exercise of their overallotment option and we issued 9,223,261 Private Placement Warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Warrants issued in connection with our Initial Public Offering have subsequently been measured based on the listed market price of such warrants.

Net Loss Per Ordinary Share

Net income (loss) per share is computed by dividing net income by the weighted-average number of shares of ordinary shares outstanding during the period. We have not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 15,446,522 shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

Our statement of operations under the following captions:

•RNG Fuel. The RNG Fuel segment includes a presentationRNG supply as well as the associated generation and sale of income (loss) per sharecommodity 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; and
◦The Company's interests in both operating and construction projects.

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•Fuel Station Services. Through its Fuel Station Services segment, the Company provides construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities including generation and minting of environmental credits. This segment includes:

◦Manufacturing division that builds Compact Fueling Systems and Defueling systems;
◦Design/Build contracts where the Company serves as general contractor for Redeemable Class A Ordinary sharesconstruction of Fueling Stations, typically structured as Guarantee Maximum Price or fixed priced contracts for customers, generally lasting less than one year;
◦Service and maintenance contracts for RNG/CNG Fueling Stations; and
◦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.

•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 throughout the United States. The Renewable portfolio operates primarily in a manner similarSouthern 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 two-class methodproduction process, utilities, transportation, storage, and insurance; and depreciation of income (loss) per share. Net income per ordinary share, basicproduction facilities.
•Fuel Station Services. Includes equipment supplier costs; service provider costs; and diluted, for Redeemable Class A Ordinary shares is calculatedsalaries 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 dividing the proportionate sharean affiliate, and marketing costs.
Depreciation and amortization primarily relate to depreciation associated with property, plant, and equipment and amortization of income or loss on marketable securities held by the Trust Account, net of applicable franchiseacquired intangibles arising from PPAs and income taxes, by the weighted average number of ordinary shars subject to possible redemption outstanding since original issuance.

Net loss per share, basic and diluted, for Non-Redeemable Class A and Class B Ordinary shares is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to Redeemable Class A Ordinary shares, by the weighted average number of non-redeemable ordinary shares outstanding for the period.

Non-Redeemable Class A and Class B Ordinary shares includes Founder Shares and non-redeemable shares of ordinary shares as these shares do not have any redemption features. Non-Redeemable Class A and Class B Ordinary shares participates in the income or loss on marketable securities based on non-redeemable ordinary shares’ proportionate interest.

Recent Accounting Pronouncements

Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

JOBS Act

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

Additionally, we are in the process of evaluatingexpanding our RNG 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 six months ended June 30, 2023 and 2022:
Operational data
The following table summarizes the operational data achieved for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
RNG Fuel volume produced (Million MMBtus)0.6 0.5 1.2 0.9 
RNG Fuel volume sold (Million GGEs)11.0 7.2 19.3 13.3 
Total volume delivered (Million GGEs)35.5 26.9 67.9 52.5 
RNG projects
Below is a table setting forth the RNG projects in operation and construction in our portfolio:
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OPAL's Share of Design capacity (MMbtus per year) (1)
Source of bio gas
Ownership (2)
RNG projects in operation:
Greentree1,061,712 LFG100%
Imperial1,061,712 LFG100%
New River663,570 LFG100%
Noble Road (3)
464,499 LFG50%
Pine Bend (3)
424,685 LFG50%
Biotown (3)
48,573 Dairy10%
Sunoma192,350 Dairy90%
Sub total3,917,101 
RNG projects in construction:
Emerald (3) (4)
1,327,140 LFG50%
Prince William1,725,282 LFG100%
Hilltop255,500 Dairy100%
Vander Schaaf255,500 Dairy100%
Polk County1,060,000 LFG100%
Sapphire (3)
796,284 LFG50%
Sub total5,419,706 
Total9,336,807 
(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.
(3) We record our ownership interests in these projects as equity method investments in our condensed consolidated financial statements.
(4) Emerald completed construction in June 2023 and is expected to complete commissioning in the third quarter of 2023.

Renewable Power Projects
Below is a table setting forth the Renewable Power projects in operation in our portfolio:
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Nameplate capacity (MW per hour) (1)
RNG conversion candidateStage of RNG conversion
California 15.2 YesIn Development
California 33.0 NoN/A
California 43.2 NoN/A
California 51.8 NoN/A
California 61.6 NoN/A
California 76.5 NoN/A
California 86.5NoN/A
Florida2.9NoN/A
Massachusetts 23.6 NoN/A
Michigan 1E(2)
28.9 YesIn Construction
Michigan 36.3 YesN/A
New York5.9 NoN/A
North Carolina 114.4 YesIn Development
Pennsylvania8.0 NoN/A
Prince William 1E (3)
1.9 YesIn Construction
Prince William 2E (4)
4.8YesIn Construction
Virginia - Richmond8.0 YesIn Development
Total112.5 
(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) 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 2023.
(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 2023.








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Comparison of the Three and Six Months Ended June 30, 2023 and 2022
The following table presents the period-over-period change for each line item in the Company's statement of operations for the three and six months ended June 30, 2023 and 2022.

 Three Months Ended June 30,$
Change		%
Change		Six Months Ended June 30,$
 Change		%
Change
(in thousands)2023202220232022
Revenues:
RNG fuel$16,431 $16,459 $(28)— %$28,625 $31,508 $(2,883)(9)%
Fuel station services29,956 26,730 3,226 12 %50,784 51,604 (820)(2)%
Renewable Power8,655 10,028 (1,373)(14)%18,590 19,152 (562)(3)%
Total revenues55,042 53,217 1,825 3 %97,999 102,264 (4,265)(4)%
Operating expenses:
Cost of sales - RNG fuel7,884 8,457 573 7 %15,407 16,171 764 5 %
Cost of sales - Fuel station services27,476 23,630 (3,846)(16)%47,768 43,293 (4,475)(10)%
Cost of sales - Renewable power8,761 7,540 (1,221)(16)%17,139 15,948 (1,191)(7)%
Selling, general, and administrative13,663 7,955 (5,708)(72)%28,135 18,810 (9,325)(50)%
Depreciation, amortization, and accretion3,628 3,325 (303)(9)%7,195 6,721 (474)7 %
Total expenses61,412 50,907 10,505 (21)%115,644 100,943 14,701 (15)%
Operating (loss) income(6,370)2,310 (8,680)(376)%(17,645)1,321 (18,966)(1436)%
Other income (expense)
Interest and financing expense, net(956)(3,365)2,409 72 %(1,597)(6,422)4,825 75 %
Loss on debt extinguishment(1,895)— (1,895)(100)%(1,895)— (1,895)(100)%
Change in fair value of derivative instruments, net1,160 92 1,068 1161 %5,093 328 4,765 1453 %
Other income123,109 — 123,109 100 %123,041 — 123,041 100 %
(Loss) income from equity method investments(998)621 (1,619)(261)%(293)(36)(257)(714)%
Net income (loss) before provision for income taxes114,050 (342)114,392 33448 %106,704 (4,809)111,513 2319 %
Provision for income taxes— — — — %— — — — %
Net income (loss)114,050 (342)114,392 33448 %106,704 (4,809)111,513 2319 %
Net income (loss) attributable to redeemable non-controlling interests93,460 (1,803)95,263 5284 %85,227 (6,745)91,972 1364 %
Net loss attributable to non-redeemable non-controlling interests(183)(257)74 29 %(480)(499)19 4 %
Paid-in-kind preferred dividends2,849 1,718 1,131 66 %5,612 2,435 3,177 130 %
Net income attributable to Class A Common stockholders17,924 — 17,924 100 %16,345 — 16,345 100 %
Revenues
RNG Fuel
Revenue from RNG Fuel remained flat for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Revenue from RNG Fuel decreased by $2.9 million, or 9%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease is primarily due to a decrease of $12.6 million from lower volumes of RINs and LCFSs sold as the Company made a decision to hold the RINs and LCFSs as inventory at hand due to current pricing
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levels coupled with a decrease in brown gas sales due to lower pricing, offset by an increase in green attribute revenues of $9.7 million.
Fuel Station Services
Revenue from Fuel Station Services increased by $3.2 million, or 12%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to an increase in construction revenues by $2.0 million, $0.3 million in RIN and LCFS sales and service revenues, $0.4 million in brown gas sales and $0.5 million from sale of a compact fueling station.
Revenue from Fuel Station Services decreased by $0.8 million, or 2%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This was primarily attributable to decrease in fuel revenues by $1.8 million due to holding of all in house generated environmental credits minted but not sold in inventory as of June 30, 2023 offset by $0.4 million increase in service revenues from increase in number of sites and $0.6 million in construction revenues.

Renewable Power
Revenue from Renewable Power decreased by $1.4 million, or 14%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to loss of revenues of $1.0 million from the planned shut down of one Renewable Power facility in September 2022 and $0.4 million in operations and maintenance revenues from one Renewable Power facility.
Revenue from Renewable Power decreased by $0.6 million, or 3%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This change was attributable primarily to loss of revenues of from the planned shut down of one Renewable Power facility.
Cost of sales
RNG Fuel
Cost of sales from RNG Fuel decreased by $0.6 million, or 7%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to the decrease in start up costs in New river and Sunoma compared to the same period prior year.
Cost of sales from RNG Fuel decreased by $0.8 million, or 5%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily from decrease in royalty expense because of lower environmental credit sales.
Fuel Station Services
Cost of sales from Fuel Station Services increased by $3.8 million, or 16%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to an increase of $2.2 million in construction costs corresponding to the increase in construction revenues, $1.4 million in dispensing fees due to higher volumes from more dispensing contracts offset by $0.3 million decrease in fuel sales expenses due to lower market pricing of brown gas.
Cost of sales from Fuel Station Services increased by $4.5 million, or 10%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This change was attributable primarily to an increase in dispensing fees, service costs and increased fuel dispensing costs from market price on brown gas.
Renewable Power
Cost of sales from Renewable Power increased by $1.2 million, or 16%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to increase in major maintenance costs and unplanned maintenance at three of our Renewable Power facilities.
Cost of sales from Renewable Power increased by $1.2 million, or 7%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily due to increase in major maintenance costs and unplanned maintenance at 3 of our Renewable Power facilities.
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Selling, general, and administrative
Selling, general, and administrative expenses increased by a total of $5.7 million, or 72%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to an increase of $1.7 million in stock-based compensation expense, $0.4 million in insurance expense from directors and officers insurance after the Company went public in third quarter of 2022 and $1.2 million increase in compensation costs.
Selling, general, and administrative expenses increased by a total of $9.3 million, or 50%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily due to increase in costs from compensation and benefits by $2.9 million, bad debt of relying$0.5 million, stock-based compensation expense of $2.5 million, $0.3 million in legal fees and directors and officers insurance of $0.8 million.
Depreciation, amortization, and accretion
Depreciation, amortization, and accretion marginally increased by a total of $(0.3) million, or (9)%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Depreciation, amortization, and accretion marginally increased by a total of $0.5 million, or 7%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Interest and financing expense, net
Interest and financing expenses, net decreased by $2.4 million, or 72%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily due to savings in interest costs from repayment of outstanding debt under Senior Secured Facility and capitalization of interest on OPAL Term Loan on cash spent on construction of RNG facilities.
Interest and financing expenses, net decreased by $4.8 million, or 75%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily because of higher capitalization of interest on OPAL term loan of $3.8 million for RNG projects in 2023. Additionally, $54.9 million of Senior Secured Facility was repaid in fourth quarter of 2022 and the remaining balance was fully repaid in March 2023. The interest savings on the other reduced reporting requirements providedSenior Secured Facility was $1.8 million offset by an increase in amortization of deferred financing costs on OPAL Term Loan II of $0.5 million.
Loss on debt extinguishment
On May 30, 2023, OPAL Intermediate Holdco 2 assigned to Paragon its rights and obligations under OPAL Term Loan II. The joint venture partner of Paragon reimbursed the JOBS Act. SubjectCompany $826 as its portion of the transaction costs incurred.
The Company expensed the remaining deferred financing costs of $1,895 as loss on debt extinguishment in its condensed consolidated statement of operations for the three and six months ended June 30, 2023. There was no loss on debt extinguishment for the three and six months ended June 30, 2022.
Change in fair value of derivatives, net
Change in fair value of derivatives, net increased by $1.1 million, or 1161%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily attributable to $0.8 million gain recorded on termination of interest rate swaps on OPAL Term Loan II and $0.3 million gain on decrease in earnout liabilities.
Change in fair value of derivatives, net increased by $4.8 million, or 1453%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily attributable to $4.6 million change in fair of value of Earnout Liabilities offset by negative change in fair value of the Meteora put option by $0.3 million.
Other income
Other income increased by $123.1 million, or 100%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This is primarily attributable to $122.9 million gain recorded on deconsolidation of Emerald and Sapphire and $0.5 million higher gain on transfer of non-financial assets to a vendor.
Other income increased by $123.1 million, or 100%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This is primarily attributable to $122.9 million gain recorded on deconsolidation of VIEs and $0.5 million higher gain on transfer of non-financial assets to a vendor.
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(Loss) income from equity method investments
Net loss attributable to equity method investments increased by $1.6 million, or 261%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This change was attributable to net loss in Emerald, Sapphire, GREP, amortization of basis difference on Pine Bend and Noble Road partially offset by increase in net income from Pine Bend, Noble Road.
Net loss attributable to equity method investments increased by $0.3 million or 714% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This change was attributable to net loss in Emerald, Sapphire, GREP, amortization of basis difference on Pine Bend and Noble Road partially offset by increase in net income from Pine Bend and Noble Road.
Net income attributable to redeemable non-controlling interests
Net income attributable to redeemable non-controlling interests increased by $95.3 million or 5284%. The net income for the three months ended June 30, 2023 and 2022 reflects the portion of earnings belonging to OPAL Fuels equity holders.
Net income attributable to redeemable non-controlling interests increased by $92.0 million or 1364% and reflects the portion of earnings belonging to OPAL Fuels equity holders.
Net loss attributable to non-redeemable non-controlling interests
Net loss attributable to non-redeemable non-controlling interests for the three months ended June 30, 2023 decreased marginally compared to three months ended June 30, 2022. This reflects the joint venture partners' loss in certain conditions set forthRNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the three months ended June 30, 2023 and 2022, were Sunoma and Central Valley and two months of Emerald and Sapphire.
Net loss attributable to non-redeemable non-controlling interests for the six months ended June 30, 2023 decreased marginally compared to six months ended June 30, 2022. This reflects the joint venture partners' loss in certain RNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the six months ended June 30, 2023 and 2022, were Sunoma and Central Valley and five months of Emerald and Sapphire.
Paid-in-kind preferred dividends
On November 29, 2021, we entered into an exchange agreement with Hillman whereby Hillman exchanged its ownership interests in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our systemfour RNG projects of internal controls over financial reporting pursuant to Section 404, (ii) provide all$30.0 million into 300,000 series A-1 preferred units at a par value of $100 per unit and 1.4% of the compensation disclosurecommon units of OPAL 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 $2.8 million and $5.6 million for the three and six months ended June 30, 2023, respectively as to be paid-in-kind. The Company recorded the dividend payable of $1.7 million and $2.4 million for the three and six months ended June 30, 2022, respectively as to be paid-in-kind.

Liquidity and Capital Resources
Liquidity
As of June 30, 2023, our liquidity consisted of cash and cash equivalents including restricted cash of $27.1 million and $17.0 million of short term investments. This compares to $181 million at March 31, 2023, consisting of $39.8 million of Cash and cash equivalents, including restricted cash of $6.6 million, $37 million in short-term investments, and availability of $105 million under OPAL Term Loan II. The primary driver of this reduction is attributed to the assignment of the term loan facility to Paragon as part of the deconsolidation of the Emerald and Sapphire projects. This
57



also reflects a reduction of $11.9 million of cash that may be requiredis now excluded from consolidated Cash and cash equivalents as a result of non-emerging growth public companiesthe deconsolidation.
The cash that was deconsolidated and the available funds under the Dodd-Frank Wall Street Reformfacility remain available for these projects. Paragon was assigned the existing senior credit facility which is collateralized by these projects which with a two-year delayed term and Consumer Protection Act, (iii) complymaximum principal amount of $85.0 million and a debt reserve facility up to $10.0 million.
We expect that our available cash together with any requirement that mayour other assets, expected cash flows from operations, and access to expected sources of capital will be adopted by the PCAOB regarding mandatory audit firm rotation or a supplementsufficient to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will applymeet our existing commitments for a period of five years followingat least twelve months from the completiondate 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.
To fund future growth, we anticipate seeking additional capital through equity or debt financings. The amount and timing of our Initial Public Offeringfuture 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 untilat all. Our ability to access capital when needed is not assured and, if capital is not available when, and in the amounts, needed, we are no longercould 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 of June 30, 2023, we had total indebtedness excluding deferred financing costs of $144.9 million in principal amount which primarily consists of $29.7 million under the Convertible Note Payable, $92.2 million under the OPAL Term 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 7. Borrowings, to our condensed consolidated financial statements.
Cash Flows
The following table presents the Company's cash flows for the six months ended June 30, 2023 and 2022:
Six Months Ended June 30,
(in thousands)20232022
Net cash provided by (used in) from operating activities$7,786 $(9,275)
Net cash (used in) from investing activities(28,180)(54,461)
Net cash (used in) provided by from financing activities(29,701)121,961 
Net increase in cash, restricted cash, and cash equivalents$(50,095)$58,225 
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2023 was $7.8 million, an “emergingincrease of $17.1 million compared to net cash used in operations of $9.3 million for the six months ended June 30, 2022. The increase in cash provided by operating activities was attributable to an increase in net income and positive working capital changes primarily from decrease in accounts receivable.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2023 was $28.2 million, a decrease of $26.3 million compared to the $54.5 million used in investing activities for the six months ended June 30, 2022. This was primarily driven by decrease in cash invested in short term investments of $48.0 million, deconsolidation of VIEs net cash of $11.9 million and distribution from equity method investment of $7.8 million offset by payments made for the construction of various RNG generation and dispensing facilities of $72.0 million.
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Net Cash Provided by Financing Activities
Net cash used in financing activities for the six months ended June 30, 2023 was 29.7 million, a decrease of $151.7 million compared to the $122.0 million provided from financing activities for the six months ended June 30, 2022. This was primarily driven by repayments of $23.2 million of Senior Secured Facility, $13.8 million of the OPAL Term Loan, $16.4 million for repurchase of shares from the exercise of the put option offset by proceeds from OPAL Term Loan of $10.0 million. Additionally, the Company received $12.8 million from non-redeemable non-controlling interests and $0.8 million as reimbursement of deferred financing costs from a joint venture partner.
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 of June 30, 2023, we anticipate spending $115.4 million in capital expenditures for the next 12 months. These expenditures do not include any expected contributions from our joint venture and non-controlling interest partners and primarily relate to our development and construction of new renewable energy facilities and the purchase of equipment used in our Fueling Station services and Renewable 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 7. Borrowings and Note 8. Leases to our condensed consolidated financial statements for additional information.
We believe that our cash and cash equivalents on hand, anticipated cash flows from operations and our access to expected sources of capital will be sufficient to meet our anticipated funding needs. We continue to pursue additional funding opportunities for growth company,” whichever is earlier.

and streamlining of our capital structure.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are

The Company is not required to provide the information otherwise required underby this item.

Item as it is a “smaller reporting company.”


Item 4. Controls and Procedures


Evaluation of Disclosure Controls and Procedures

Under the supervision and


Our management, with the participation of our management, includingCo-Chief Executive Officers and our principalChief Financial Officer (our co-principal executive officerofficers and principal financial and accounting officer, we conducted an evaluationrespectively), evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on thisthat evaluation of our chief executive officerdisclosure controls and chief financial officer haveprocedures as of June 30, 2023, our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were
59



ineffective for the period covered by this report based on the material weakness in our internal control over financial reporting described below.

Previously Reported Material Weakness

In connection with the preparation and audit of our consolidated financial statements for each of the years ended December 31, 2022 and 2021, material weaknesses were identified in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim consolidated financial statements will not be prevented, or detected and corrected, on a timely basis.

The material weaknesses identified were as follows:

●    There is a lack of an adequate control environment, including internal communications, to allow for timeliness of reviews for the accounting and disclosures of significant and unusual transactions and contracts;

●    We did not have timely and effective reviews over standard account reconciliations and related accounting analysis which resulted in various audit adjustments that we corrected; and
●    Review controls over application of ASC-606 were not designed and implemented appropriately during the current year.
We performed additional analysis and procedures with respect to accounts impacted by the material weakness in order to conclude that our consolidated financial statements in this report, and for the three and six months ended June 30, 2023 and 2022, are fairly presented, in all material respects, in accordance with GAAP.

Under “Changes in Internal Controls over Financial Reporting” and “Remediation Plans” below, we describe our remediation plan to address the identified material weakness.

Management's Quarterly Report on Internal Control over Financial Reporting

This Quarterly Report on Form 10-Q does not include a report of management's assessment regarding internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.


Changes in Internal Controls over Financial Reporting

The design and implementation of internal controls over financial reporting for the Company subsequent to the Business Combination has required and will continue to require significant time and resources from management and other personnel. The changes to our internal control over financial reporting commenced during the period covered by this report our disclosure controls and procedures were not effective as of March 31, 2021.

Our internal control over financial reporting did not result in the proper accounting classification of certain of the Warrants we issued in March 2021 which, due to its impact on our financial statements, we determined to be a material weakness. This mistake in classification was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering in March 2021.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period from January 13, 2021 (inception) through March 31, 2021, covered by this Quarterly Report on Form 10-Q that hasafter will materially affected,affect, or isare reasonably likely to materially affect, our internal control over financial reporting other thanby establishing new controls and procedures appropriate to the remediation steps takenoperating business we have become as a result of the Business Combination.


Remediation Plans

We have developed and begun executing on a plan to addressremediate these material weaknesses. During 2022, we remediated one material weakness from the prior year. We hired additional accounting and financial reporting personnel with appropriate technical accounting knowledge and public company experience in financial reporting; we continue to implement formal processes, policies and procedures supporting our financial close process, including creating standard balance sheet reconciliation templates and journal entry controls; and designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills. Additionally, we strengthened our controls around segregation of duties, access controls in our financial reporting system and disabled the functionality for the same employee to prepare and post journal entries. We have implemented controls to ensure that account reconciliations are reviewed by an independent person who has technical knowledge and financial reporting competence.

    While we believe these efforts are likely to remediate the material weakness. Management has implementedweaknesses identified, we may not be able to complete our evaluation, testing or any required remediation steps to address the material weakness and to improvein a timely fashion, or at all. The effectiveness of our internal control over financial reporting. Specifically,reporting is subject to various inherent limitations, including cost limitations, judgments used in
60



decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we expandedare unable to remediate the material weaknesses identified, our ability to record, process and improvedreport financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, may adversely affect our review process for complexreputation and business and the market price of our securities, including the Class A common stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and related accounting standards. We planharm to further improve this process by enhancing access to accounting literature, identificationour reputation and financial condition, or diversion of third-party professionals with whom to consult regarding complex accounting applicationsfinancial and considerationmanagement resources from the operation of additional staff with the requisite experience and training to supplement existing accounting professionals.

PARTour business.




61



Part II – OTHER INFORMATION

- Other Information

Item 1. Legal Proceedings

None.


From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business, some of which may be material. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us. We do not believe that the outcome of any of our current legal proceedings will have a material adverse impact on our business, financial condition and results of operations.

Item 1A. Risk Factors.

Factors 


There have been no material changes from the risk factors“Risk Factors” previously disclosed in the Company’s most recent prospectusour Annual Report on Form 10-K for the Initial Public Offering asyear ended December 31, 2022, filed with the SEC on March 22, 2021.

29, 2023. The risks described in the Annual Report on Form 10-K for the year ended December 31, 2022 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities


Unregistered Sales

of Equity Securities


On January 3, 2021, our Sponsor paidMarch 30, 2023, we issued an aggregate of $25,00049,633 shares of Class A common stock to certain accredited entities and managed accounts for certain expenses on our behalf in exchangewhich Encompass Capital Advisors LLC exercises investment discretion (the “Investors”) pursuant to a securities purchase agreement (the “Purchase Agreement”) with the Investors. The shares of Class A common stock were issued to the Investors as consideration for issuance of 7,187,500 Class B ordinary shares (the “Founder Shares”). On February 2, 2021, our Sponsor transferred 35,000 Founder Sharestheir prior agreement to each of Arno Harris, Ja-Chin Audrey Lee, Brian Goncher and Steven Berkenfeld, our independent director nominees. On March 22, 2021, we effected a share capitalization resulting in an aggregate of 7,906,250 Founder Shares issued and outstanding. Up to 1,031,250 Founder Shares were subject to forfeituretender all warrants held by the Sponsor, to the extent that the option to purchase additional units was not exercisedInvestors in full by the underwriters, so that the Founder Shares would represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment optionour voluntary warrant exchange offer which closed on MarchDecember 22, 2021, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result, an aggregate of 127,174 Founder Shares were forfeited by the Sponsor upon the expiration of the over-allotment option.

No underwriting discounts or commissions were paid with respect to such sales.

Use of Proceeds

In connection with the Initial Public Offering and the underwriters of their over-allotment option, we incurred offering costs of approximately $15.9 million (including deferred underwriting commissions of approximately $9.8 million). Other incurred offering costs consisted principally of preparation fees related to the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the Initial Business Combination, if consummated) and the Initial Public Offering expenses, $277.5 million of the net proceeds from our Initial Public Offering and certain of the proceeds from the private placement of the Private Placement Warrants (or $10.00 per Unit sold in the Initial Public Offering) was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested2022, as described elsewhere in this Quarterly Report on Form 10-Q.

There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as isfurther described in the Company’s final prospectus relatedform of Purchase Agreement filed as Exhibit 10.1 to our Current Report on Form 8-K filed on April 5, 2023. The Class A common stock was sold and issued without registration under the Initial Public Offering.

Securities Act, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as a transaction not involving a public offering and Rule 506 promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.


Item 3. Defaults Upon Senior Securities


None.


Item 4. Mine Safety Disclosures


Not applicable.

62



Item 5. Other Information

None.


Rule 10b5-1 Trading Plans

During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Gas sale and purchase agreement

On August 11, 2023, a wholly-owned subsidiary of the Company entered into a Third Amended and Restated Gas Sale and Purchase Agreement and a Third Amended and Restated Site Lease Agreement (collectively, the “Agreements”) with a leading environmental services company. The Agreements, which are effective as of August 11, 2023, provide the Company with the right to purchase LFG from a landfill located in Massachusetts, for the purpose of combusting such LFG to generate renewable electricity at the facility (the “Facility”) located on the landfill footprint. Per the terms and conditions of the Agreements, the Company will make certain royalty and lease payments. The terms of the Agreements are 20 years from the date the Facility commences operations.

The representations, warranties and covenants contained in the Agreements were made solely for the benefit of the parties to the Agreements and may be subject to limitations agreed upon by the contracting parties. The foregoing description of the Third Amended and Restated Gas Sale and Purchase Agreement is qualified in its entirety by reference to the full text of the Third Amended and Restated Gas Sale and Purchase Agreement, a copy of which is filed as Exhibit 10.5 to this Quarterly Report on Form 10-Q and incorporated herein by reference.


Item 6. Exhibits.

Exhibits

Exhibit Index


63



Exhibit
Number

Description

3.1*
31.13.2*
10.1*
10.2†#*
10.3†#*
10.4*
10.5†#
31.1
31.2
31.2
31.3
32.1
32.1**
32.2**
32.2
32.3**
101.INS
101.INSInline XBRL Instance Document
101.SCH
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CAL
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document).


*Previously filed.
**This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
†Certain of the schedules and exhibits to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon its request.
#Certain confidential information contained in this document has been redacted in accordance with Item 601(b)(10)(iv) of Regulation S-K.
64



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 21st day of May, 2021.

authorized.
Date: August 14, 2023
ARCLIGHT CLEAN TRANSITION CORP. IIOPAL Fuels Inc.
By:

/s/ John F. Erhard

Jonathan Maurer
Name:John F. ErhardJonathan Maurer
Title:Co- Chief Executive Officer

25

OPAL Fuels Inc.
By:/s/ Adam Comora
Name:Adam Comora
Title:Co- Chief Executive Officer

OPAL Fuels Inc.
By:/s/ Ann Anthony
Name:Ann Anthony
Title:Chief Financial Officer

65