Clean Energy Fuels Corp
NASDAQ:CLNE
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Clean Energy Fuels Corp
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Greetings and welcome to Clean Energy Fuels Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Robert Vreeland, Chief Financial Officer. Please go ahead.
Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2023. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com where the call is also being webcast. There will be a replay available on the website for 30 days.
Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy's Form 10-Q filed today. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.
The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information reasons why management uses non-GAAP information. A definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today.
With that, I will turn the call over to our President and Chief [Technical Difficulty].
Good afternoon, everyone, and thank you for joining us. If you haven't seen it yet, I'll note that we changed the format of our earnings press release a bit that will hopefully make it easier to quickly see important data and highlights for the quarter. We know that many of you on this call are juggling multiple companies' earnings, so we want to make it as easy as possible. And in that vein, I'm going to also make my opening remarks a little more concise, allowing us to get to your questions quicker. So, let's jump in.
Fortunately, the issue of historically high natural gas prices being charged by California utilities began to normalize in the second quarter, allowing our adjusted EBITDA to improve to $12.1 million. Not only was this a $16 million rebound from the first quarter, it was over 20% higher than Q2 of last year.
Thanks in part to the opening new stations anchored by our customer Amazon, our RNG fuel volumes climbed over 17% in the quarter compared to a year ago to over 58 million gallons. We expect nice growth to continue through this year with planned openings in the third quarter of additional key stations in Southern California, Texas, Washington State, Michigan and Maryland. And as I've said before, it's great to have a large anchor customer in Amazon, but these stations are strategically located in areas around distribution centers and can easily handle additional fleets.
Revenue for the second quarter was $90 million. Remember, this was impacted by $14 million of non-cash Amazon warrant charges. It’s also slightly down from a year ago due to lower environmental credit prices, but those began to increase in the quarter and has held up nicely since. The alternative fuel tax credit reinstated for three years and the Inflation Reduction Act increased revenue by $5 million in the quarter. The rebound in our adjusted EBITDA, growth in the RNG business including upward trends in environmental credit prices and $192 million in cash and investments has kept our balance sheet strong and supports our positive outlook for the remainder of the year and into 2024.
The strong demand for RNG continues, not only through our newly built stations, but we're adding customers at our existing fueling infrastructure. For instance, Liberty Coca-Cola, which is one of the country's largest Coke bottlers, signed a deal to fuel trucks in several of our stations in the Northeast. Electrolux, a large appliance company and Channel Islands Dairy Farms have begun operating RNG heavy-duty trucks for the first time and are fueling at our California stations. Campbell's Trucking Company is deploying heavy-duty trucks that will fuel at a Clean Energy station in Washington State, which has its new low-carbon fuel program in place.
I told you on the last call about our recently signed partnership with Tourmaline, one of Canada's leading energy companies. And over the last three months, we have hit the ground running on the plan to build a network of stations throughout Western Canada. By partnering with such a recognized and respected Canadian company, we believe this to be the foundation for a significant surge in natural gas fueling by the heavy-duty trucking market and other Canadian fleets. We couldn't be more enthusiastic about this relationship.
Our core Refuse and Transit business saw additional growth with new and the extension of larger contracts. [Technical Difficulty] waste company expanded their relationship with us at multiple California stations. Several big transit agencies continue to grow their RNG fueling with new deals in the second quarter including Big Blue Bus in Santa Monica and Gold Coast Transit in Oxnard, California.
Also during the second quarter, US EPA provided a vote of confidence for RNG fueling when it announced the final renewable volume obligation or RVO manned targets with an average 30% increase for the next three years. Both RNG customers, as well as investors and additional RNG supply should be heartened with the significant increase in targets. Our own RNG production projects continue to move forward with the Del Rio Dairy in Texas now operational and we're in the final commissioning on three projects that we expect to have online in Q3 with two more by year end.
As I said, I'm trying to tighten up my prepared remarks. So I'll just end by saying we believe there are many signs pointing in a positive direction. You've heard me several times about our excitement for the new Cummins 15-liter natural gas engine that is currently being tested by important fleets. So I will only add that when it hits the broader market sometime next year, the timing couldn't be better. Not only will we and the entire industry have the significantly greater volume of low CI RNG available, but fleets will have a new choice and a tested larger engine produced by one of the most reliable manufacturers in the world. This comes at a time of continued uncertainty and cost with other new technologies and their lack of reliable fueling infrastructures. We are pleased with our progress.
And with that, I'll turn the call over to Bob.
Thank you, Andrew, and good afternoon to everyone. As Andrew mentioned, our second quarter financial results bounced back significantly from the first quarter. Our second quarter results for 2023 were largely in line with our expectations with the only notable negative variance on the quarter being a GAAP operating loss of $1.4 million or negative $1 million in EBITDA attributed to our Texas LNG plant, that was and remains under repair.
Normally, we could see $300,000 or more per quarter of positive EBITDA from this plant and of course, we're working diligently to bring it back online, but due to long lead item parts needed for repairs, we may not get that back into operations in 2023, but it did have a -- it did have an impact on the -- on the quarter for sure.
Our improved financial results for the second quarter of 2023 were principally driven by the three factors we mentioned on our previous earnings call, starting first with the ramping up of RNG fuel volumes largely coming from our trucking sector. Second, we saw favorable retail fuel margins at the pump driven by low underlying natural gas commodity costs in relation to oil and really the price of retail diesel. And then the third item we saw increase is in environmental credit prices, albeit we did not see the full effect of the run-up in the RIN prices, which occurred in late June.
And to put that into perspective, our weighted average RIN price realized for the second quarter was $2.16 versus the more recent pricing that's been around $3.05. We're anticipating that these three factors continue to positively impact our results in 2023. So we're maintaining our 2023 annual financial guidance.
Now looking at our year-over-year results, our GAAP operating loss of $13.1 million for the second quarter of 2023, compares to an operating loss of $11.9 million a year ago in the second quarter. On the downside, compared to a year ago, the second quarter of 2023 includes $9.1 million of incremental non-cash Amazon warrant charges and $6.1 million in lower RIN and LCFS revenues due to the lower credit prices.
On the upside, compared to a year ago, the second quarter of 2023 benefited by $4.7 million from the non-cash change in fair value of our fuel hedge and by $5.1 million in additional revenue due to the reinstatement of the alternative fuel tax credit. Our adjusted EBITDA of $12.1 million in the second quarter of 2023 compares to adjusted EBITDA of $10 million for the second quarter of 2022 or 21% improvement.
And while the lower 2023 RIN and LCFS prices negatively impacted the second quarter of '23 when compared to '22, and that was by the $6.1 million I just mentioned, our underlying base fuel margins, service margins, and the alternative fuel tax credit in 2023 more than offset the effect of the lower credit prices as well as some higher operating and joint venture costs that's associated with our growth plans around the RNG efforts. So effectively, we improved our adjusted EBITDA by 21% over last year. I think that's a testament to our diverse financial model where we have multiple drivers of margin, where one component can compensate for another.
As we did last quarter and will continue going forward, we have disclosed the EBITDA components of our RNG supply business, particularly as dairy projects are being placed into service. So having said that, our adjusted EBITDA of $12.1 million for the second quarter of 2023 breaks down as $13.5 million coming from the distribution business, and a negative $1.4 million coming from our RNG supply business.
I've included a consolidating table of adjusted EBITDA in our company presentation that's posted on our website. And then lastly, I'll say, we remain on plan with our capital spending, which call for about $90 million in the distribution business and $40 million in the RNG supply business for 2023. Although, I'll note that we have a little over $100 million that's related to the JVs that's off our balance sheet that's also available to us in that RNG supply business.
And with that, operator, please open the call to questions.
Thank you. We will now be conducting a question-and-answer session. [Operator Instruction] And our first question comes from Eric Stine with Craig Hallum. Please go ahead.
Hi, Andrew. Hi, Bob.
Hey, Eric.
Hey. So hoping you could just give an update. You did a little bit in the prepared remarks on the upstream RNG. So it sounds like you expect to have six operating by year-end. Just curious beyond that, I think in the past you've given a number of under construction engineering phase and then also what your pipeline is looking like.
Right, right. That's right, Eric. So you'll have six that are kind of in the final throes of construction now. And then in the kind of the next what's called level 2 engineering and term sheets signed and kind of Phase 1 engineering, there's another seven, that number that I've used before. And so, those will go into construction in early '24. And then we have about four more behind that, that are in level 1 due diligence and development engineering. And then of course our pipeline continues to be robust. I mean, everybody has a large pipeline. There's just upwards of another 15 projects that are in the pipeline that are earlier, that we're continuing to work on and the team is trying to bring those forward. We continue to feel good about it. Some of these projects have taken a little bit longer than we thought six, eight, nine months ago, but we're making very good progress on all these projects.
And just curious, I mean, is the thought still, I think you've talked about 105 million gallons as kind of maybe an interim target and with the RVO and credit prices better, I mean is there any -- is there any expansion to that number with you?
No I think that's still, that's still the working number that we're using, Eric. As we, Bob, and I've said often is that we also believe there'll be opportunities to acquire projects, bring them in from others and we continue to work on that in terms of M&A, perhaps bringing forward some projects that have -- are under -- either under development by other developers. And so we like that number and we feel confident that we can get there.
Got it. Maybe last one from me. Just on the Amazon stations, good color on the build out there and that those were in places where other fleets certainly are using those. I'm curious, though, how Amazon is positioning that with their supplier. I mean, is this -- are you seeing instances of them either strongly urging or demanding that their suppliers use natural gas as well as part of their, I guess, what is it Scope -- Scope 2 or Scope 3 emissions?
Right. Well, I'm going to let Amazon really speak for any more advanced discussions that we're having with their third-party AFP haulers, but we have said in the past that, that they have had very constructive conferences where they've introduced the RNG to their different haulers. And so, we, and we've worked with them on that. So we feel optimistic that they'll continue to bring the RNG heavy-duty trucks into their fleet with those that haul for them. So we're kind of, time will tell on how that exactly all plays out, but I know it's something that they continue to work with their haulers.
Okay. Thank you.
Our next question comes from Rob Brown with Lake Street Capital. Please go ahead.
Good morning, Andrew and Rob, or good afternoon. Excuse me.
Good afternoon, Rob.
Just wanted to get a little bit more detail on the Amazon rollouts, sort of, how would you say that's -- where is that in terms of your plan? How many kind of stations are now fully running and how many are kind of yet to go for the year and into next year?
Hey, Rob. Let me, let me do a little thinking here while -- we have -- what we announced with Amazon almost a year ago was in 19 stations and what I've said this year so far is that by the end of this year, we would have all if maybe less one open. So we're still on track for that. This is very important time. We have a lot of stations that are opening right now and that will open the remainder of this year. We fuel a lot of trucks in the network right now. And I've said that before is that we have 85 different stations that are accommodating Amazon heavy-duty trucks in the network now. And though we're very excited about these stations, they come online because they get immediately really overnight loaded with trucks that will kind of redeploy from other parts of the network, that we may or may not be fueling now, that'll be base loaded at these stations.
So the program is kind of working as Amazon, and we wanted it to. I think Amazon has said that they've fielded as many as 2,000 or more trucks. And you can tell by the volumes that we're seeing in our trucking going up, those trucks are coming online. So it's an exciting thing. We're also very mindful of the fact that this is -- I like to think that the Amazon deployment is one that will be used with other significant fleets as they begin to look at how they would deploy these Cummins 15-liter, that's what I'm very excited about. That's what our sales force is working hard on with these different fleets that are now in customer introduction and testing this summer with the 15-liter. It's to develop some like programs for these other significant national fleets as they begin to bring the 15-liter into their fleet.
Thank you. Thanks for the overview there. And then on the RVO kind of specifics being settled. What sort of the impact on your business do you see sort of better -- kind of better RIN pricing or do you see more RNG volume kind of demand coming through?
Well, I'll let Bob help here. But obviously, the first impact you saw is, I mean, I saw the -- the initial program, you remember, called for perhaps some regulation, that might incent RNG to go to electric vehicles. That, as you know, didn't make the final rules that went into place. Now that may, the [e-rent] (ph) thing they come back at some point we'll see. However I should see it is, it was real a strong endorsement for using renewable natural gas for heavy duty transportation, I think there is no way around that, that there was a recognition that this is very powerful and something that can be happen and be put into place right now.
The first thing we saw is immediate overnight strengthening of the RIN price, right, from something around $2 to something closer to $3.10, that settled back into around $3.5. So that was significant, in terms of strengthening. And then when you look at the RVO, so that's the obligations, the increase of RNG that'll be required going forward over the next three years, that -- often, Rob, you will remember that they used to kind of grow that obligation about 12%, something in that neighborhood. And because there are so many projects in the works, they move that up to 30%. So there's kind of a 30% growth rate over the next three years. So to me, you put all this together, it's very strong for RNG and in transportation and in generation as well.
Okay. Great. Thank you. I'll turn it over.
Our next question comes from Dushyant Ailani with Jefferies. Please go ahead.
Hi, guys. Thanks for taking my question. I actually just have one question. I wanted to stick with the RVO. With the -- with the run-up in pricing, what do you think about the guidance, your -- the full-year guidance compared to what you had initially given? Do you think that there is any potential upside if RIN pricing stay where they are?
Yeah. Well, certainly it's, Dushyant, it's very helpful. I'm being a little cautious on that because we had some headwinds there with the California situation and I think that, that was one reason why we were able to maintain our guidance, because there were some question as to how we could weather a storm like that from -- in the first quarter. But this -- the RIN was factored in and frankly, the fact that it's may be gone up more than what we would have factored in is within our range.
Got it. Thank you. I'll turn it over.
Our next question comes from Manav Gupta with UBS. Please go ahead.
Hey, Bob and Andrew. So first question on the CARB side. There is growing chatter that within the next few weeks, there would be meetings and then even if the final regulation doesn't come up, there is a very strong possibility that CARB is looking at the reset of the program and a higher reset, which helps everybody out. So on that front, you obviously talked to CARB. Do we have any kind of insights from you on that front?
Manav, I think you're right. The chatter is that the kind of the new program, if you will, the new outlook, the new regulations are kind of in the works. Not altogether clear, the timetable of that. It’s been suggested that could happen, go forward, be published here in the next two weeks or at the end of the month. So I think it's -- obviously it's coming. Then, then as you know, Manav, probably then there has to be kind of a period for comment and then it will go forward late in the year, hopefully to the CARB Board for approval. That could even move into the early part of 2024 and then those rules will be in effect sometime, I believe late in 2024.
Our view is in the -- a lot of the commentary has been that this is a great opportunity. I think there is a general understanding that the -- that the low carbon fuel standard in California has worked and it's been very effective. And so there has been, as you remember the choices were would you increase the obligation from a reduction of carbon from 20% to 25%, 30% or 35%. There's studies and there's commentary from the industry that -- that there is enough RNG available, there's enough renewable fuels available. Lower carbon fuels that could actually make it so that the state could actually go beyond 35%.
I'm not speculating whether or not they do that here, but I think for me, it looks like CARB is beginning to tend to understand that this is a great opportunity to increase the targets, increase the obligation curve. Lower the carbon, that's being used in the state. And then, so I'm thinking that you could see something on the aggressive side, closer to the -- on the 35%. Now, this would mean that you would -- it would be I think tremendous for all of us. I think it'd be great for the state, but it will be tremendous for those of us that are in the RNG business. The state will need all the RNG can get. That should be constructive to LCFS pricing going forward.
And I think likely once if it goes this way Manav and the targets go to on the aggressive side, I would guess you would see kind of a market response early. And then of course, I think the LCFS would have been strengthened out into next year, as it becomes clear what this is going to mean to be able to four obligated parties. So our fingers are crossed. We're working hard. Our teams are working. We're fully engaged with the ARB staff, Board members, those in government regulators to make them understand that we have a fuel that's ready to go today and can help the State move toward its stated goals of being a 45% reduction by 20 -- I think that's 2040. So it's necessary for them to be aggressive if they're going to hit their own stated targets.
I agree with you. I have -- the one question that keeps popping up and we don't agree with it is that, somewhere somebody says, well, CARB is not going to be supportive of RNG, or kick out RNG. I know you have addressed this in the past, but have you heard anything on that side because we firmly believe RNG should be part of the CARB program and should not be kicked out under any circumstances.
Well, Manav, you and I see eye to eye. And that there are some that do believe that methane, that's captured dairy, you should somehow not be in the program, the low carbon fuel standard program and those have suggested that it should be eliminated. I think this would mean that you would have a renewable diesel program in the State of California. I'm not sure that that's exactly what ARB wants. And I'm not sure it's all together clear you can hit the targets that they want, if you eliminate our fuel, which is so low, low in carbon.
So I'm not saying that there aren't -- those would want that, but I kind of believe we believe, I think the industry's feeling better about the fact that ARB is recognized. And has said so at these different workshops that renewable natural gas is an important part of the low carbon fuel standard program. So I think you’ll see that end up -- I don't believe you'll end up seeing that be the case.
I agree with you. My last question here is, when we, sometimes people don't give you enough credit for something which is your third-party volume growth, so could you just remind everybody, how your third party RNG volumes are growing in '23, '24 and '25. How is the pipeline looking on that front?
Yeah. Well, I would -- it's looking as we've planned it. Most -- well all of our volume this year and is third party. So we've kind of laid out, that growth rate on the third-party and that's looking good and there's a lot of work that goes behind that securing, we've got over 60 suppliers, and we continue to tap into the RNG sources as they come online. We have good partners that are in that space, particularly BP, with their recent acquisitions. So we're feeling good about.
Manav, It's a fair point though, I mean we, we bring in -- we still account for about 50% or 60% of all the RNG in transportation. So, we source from almost every RNG provider that's out there. So we have a team that works really hard, cultivating those relationships and bringing on those contracts. And yeah, we have good growth on that front and we're going to need it. Even at the end of 2026, if you looked at our plan that we laid out that we -- that we're sticking with is, it called for about 100 million, little over as was mentioned earlier on the call, 105 million gallons of our own equity supply, but we still need and with the growth that we see in the trucking area, we need another almost 400 million gallons of third-party RNG. So it's an important part of our business going forward.
Thank you so much.
Our next question comes from Derrick Whitfield with Stifel. Please go ahead.
Good afternoon, Andrew and team, and thanks for taking my question.
Sure. You bet, Derrick.
With regard to your pipeline, it's been in kind of at that 15 to 20 level for a few quarters. What do you see is the greatest impediment to advancing those opportunities into the contractual engineering phases?
Well, I don't know if it's an impediment, Derrick. I think they are just reality that these take some engineering, right, and there's a lot of considerations in terms of the interconnects and each dairy is little bit different on what needs to be solved in terms of the cleanup and the composition of the newer and how it's handled. And so there's just a lots of things that go into. I wish these projects and I happen to believe that over time, we'll be able to make these a little bit less custom, if you will, but there's just a lot that has to go into it. And we're still learning as we go. Now we're gaining a lot of experience with our construction folks and our engineering teams, and we've built out a bigger team here now to be able to handle it.
I don't know that it's any particular impediment. It's not necessarily equipment. We saw that a year ago where we had some long lead time situations with certain cleanup technologies and some steel. But I think that's generally resolved itself now. But going forward, we'll get better at it and bring these things on, but they do take, they take some time to get through the engineering phase and it's probably time well spent to make sure that you have a project that can meet, bring on the fuel at the carbon intensity as designed and meet the returns that we've figured on.
Great. That makes sense. And maybe shifting over to policy for my follow-up. Now that we have full rulemaking in place around the ITC, how should we think about the CapEx implications for your upstream business over the next few years?
Okay. Well, Derrick, I would say we're motivated to accelerate whatever CapEx within the ITC period. And so we're -- we are managing -- we're managing our projects to under kind of mandate, right, to take advantage of it. First and foremost, I mean we were fortunate that we had a number of projects in place before the Inflation Reduction Act. So that was kind of gravy ready on top of the returns, but now as it's kind of end and we're definitely part of the conversation is timing on starting the construction by the end of '24 on that. So, I mean, we're basically trying to take advantage of that as much as possible.
Maybe just a follow-up to that. Do you see it more in the 30% to 40% range as the potential benefit for you?
Yes. Yeah. There is -- going from the $30 million to $40, you can -- there are some nuances there with domestic content and a number of things, but frankly they-- I think the projects are looking pretty good on that front in that range.
That's great. Thanks for your time.
Our next question comes from Michael Blair with TPH. Please go ahead.
Hey, good afternoon, Andrew and Bob. It looks like you're RNG share of total volumes rose to a record 81%. So congrats on that. However, your capture of RINs revenue these past two quarters has been lower on a percentage-based system, what we saw in 2022. Is it just timing related, or have there been any structural changes in how much RIN revenue you're receiving for these RNG volumes?
No, nothing structural Matthew, I think, just kind of normal market dynamics, but we have -- you have to also look at LCFS. I mean, we look at both kind of together on that. So, but I think it's just -- we look at it together with the LCFS and just seeing their normal activity on our -- from our standpoint. There is no structural changes going on there. And it's still good money and we're comfortable with all that. Yeah.
Sounds good. And then, Bob, I think you mentioned the Texas LNG plant may stay down for the remainder of 2023. If that happens, what's the total EBITDA headwind approximately in 2023 from this outage?
So -- I mean this quarter, I won't say they will necessarily sustain what happened this quarter. I mean, we're going to really try to have equipment going in to capitalize it, but there's still work that we're testing on some of that. So we were -- what I said is that that plant could generate $300,000 or more in that neighborhood in a quarter of EBITDA. And if that depends on how you want to look at it, if you, if you come up with a negative then, frankly, that's $1.3 million effect, which is really what it was to our second quarter in my view, because it was negative $1 million and we should have made about $300,000. So the rest of the year could be a couple of million bucks or more. And we factored that, again, I'm looking at our guidance and just all things considered, that little -- that was enough of a headwind and it's kind of binary. It's like, that plant's either operating or it's not. So it’s a little -- that doesn't just kind of get absorbed into the normal activity, so we called it out. So we'll get a repair and get that flowing in, but that will have some impact.
Great. Thank you.
Our next question comes from Pavel Molchanov with Raymond James. Please go ahead.
Thanks for taking the question. We had a lot of questions on CARB policy, also literally today, there was a statement by Governor Newsom about a new hydrogen strategy for California. Might be a little early for you guys to comment on specifically that statement but can you just talk more broadly about your approach to kind of the green hydrogen economy?
Yeah. Pavel, thanks. I don't have a comment on what the Governor may have announced today though. We actually had a Board member, who has since rotated off our Board, who is kind of, I would say on the cutting edge of hydrogen policy in the state of California so often on our Board meetings, we discuss this with our Board of Directors, how we would participate. We've been kind of clear Pavel, and I think you and I've talked a lot about this, I mean, we have hydrogen fueling station and have that for almost 10 years, we actually got into the hydrogen and what we call it at that time, hythane. Years ago in Canada, we built a station now twice at our LAX Station. We've recently brought on a new state-of-the-art hydrogen fueling station for one of our customers. We’re out with RFPs for three or four of our transit properties right now where we would build them stations and provide hydrogen.
We see that RNG could likely be one of the most elegant solutions for a low carbon feedstock for hydrogen in the future. Now having said that, while we understand high pressure fuel, we believe that RNG running through the pipeline reformed at the station could be just kind of my way to be able to deliver hydrogen to fuel cell vehicles in the future, but there is more work there that needs to be done. And don't count on us to go out, expect a hydrogen fueling locations yet. We need to see some, we need to see the industry be able to come along with vehicles, but we are working with some of the largest industrial hydrogen companies in the country and have ongoing discussions with them. We have to think that RNG we'll be a player in that. We have a -- we have a 49% ownership in a compressor company that's in Canada and Italy.
We have acquired a hydrogen compressor company and bolted that on there that's doing very well right now. So we're gaining lots of understanding about how our network will be ready to go to deliver hydrogen in the future, but it's out. There are always a little bit, Pavel. We are trying to learn about our RNG might be available if you will, or be participate in the low-carbon fuel standard program, because I think there will be money made there to provide super low carbon hydrogen. So, I think there'll be a play for us there as well, but we're kind of in early innings on how clean energy will participate in the hydrogen economy. Though, I think we're as well positioned as anybody because we have the infrastructure to be able to deliver it.
Understood. And then maybe shifting north a bit to your recent deal with Tourmaline, still obviously early days in that, but do have a sense of how big that fuel station network in Western Canada can ultimately become?
Well, just a couple of things. And, Bob, at our company is actually the chairman of that joint development committee for our company. So I'll let him speak to it a little bit. But I've been involved in Canada almost for 25 years, got a couple of important things. Well, first off, you've got a huge resource base of natural gas in Canada. And you have pretty expensive diesel in Canada as compared to. So you have very good economics, you have a very important -- largest gas producer in Canada is our partner. And so we have some stations on some of the highly traveled corridors in Eastern Canada.
Now, this focus would firmly, we're going to start out in Western Canada, where they have long, a lot of truck activity that goes from Calgary West and I think that joint venture program right now contemplates building 15 stations to start. We'll start -- let's be clear, we're going to start with four or five and then we'll, depending on demand, we'll move to 15. And then eventually, I think, our friends at Tourmaline believe that you could need as many as 30 stations out there in Western Canada.
So it's exciting, but it's going to take a little bit of time. We'll get those first four stations up, we're working with the largest fleets now. We're already fueling one of the largest trucking companies at our Edmonton and we've just purchased land for our station in Calgary. So we're excited about the potential. We'll get those first four up and then we'll begin to gauge how quickly we need to bring more stations online.
The roadmap is there. The Tourmaline is, it's nice working with them and seeing their motivation to displace diesel as the fuel there, and frankly, can be with natural gas. And we start -- the initial agreement was $70 million Canadians. So $35 million each to kind of start this first wave. And the timing is good because the synced up with the 15-liter engine, which is very important in Canada.
And so we are going about as fast as we can, just to get these stations before station one is up and running and then the remaining three. And I will coincide really with the 15-liter truck coming in which -- look -- is going to be kind of coming in mid to late '24, and not really necessarily big meaningful volumes, but, so you're kind of looking into '25 on some of this. But the progress that we will make from between now and then will be really important to talk about.
Last question. This is a little bit below the radar, I think more recently for you. Two years ago, you started participating in this Adopt-a-Port project, I guess on Long Beach, maybe somewhere else on kind of the marine space. How is that going?
No, it's good. Thank you, Pavel. That just for those that may not be familiar, this is where we -- there's been a in-year effort and we've been involved in it from the beginning to, the dirtiest air quality in the air shed in Southern California is the port. The ships, the haulers in and around the port. And so there's been effort a couple of renditions of clean air trucking programs at the port. And this program, what we call adopter port with Chevron, is where Chevron has put up money which we've largely spent now and it will be, will be topped off with a new tranche, where we have, working with Chevron using their balance sheet, if you will.
We've made grants to our trucking customers in the port that may have some public grants as well to purchase new natural gas trucks, and then the deal here is that we'll buy RNG from Chevron. They are our supplier at our stations. And those trucking customers then, are obligated to buy certain amounts of fuel from us at our stations. That's the Chevron. So it's kind of a win-win-win, which is brand new, super low carbon RNG trucks into the port. I think we have almost 400 trucks that have participated in the program. We've got another couple of hundred that are kind of in the queue to get funded and kind of get through that. I've talked to Chevron about topping off the money that's in there to add to it. I think they're -- they've been very supportive of program and we'll probably expand it.
It's not -- it takes a while because you have to buy new truck and there's a lot of grant and public things you've got to go through. So it's not as fast as any of us would like it, but it's been successful. I mean at the same time, Pavel, there's probably been 15, 20, 30 electric trucks. With all of those public statements about that we're going to zero trucks, zero electric trucks in the port, I don't know, there's probably 30 operating down there, maybe 15 apart. We've got 480, 500 RNG trucks operating every day in the port. So I think it's been a huge success.
Thanks very much.
Thanks, Pavel.
Our next question comes from Ryan Todd with Piper Sandler. Please go ahead.
Thanks. Maybe if I could just follow up on a couple of comments from earlier. There was a question earlier on the ITCs and I know the IRS provided some guidance on transfer pricing for the ITCs. What are your -- what do you understand, like, what's your expectation in terms of what the timing might look like for you to start monetizing some of those? Do you need to wait until, is that clearly a 2024 event? Can you start monetizing some of the stuff earlier? What are the bottlenecks to you guys monetizing some of these -- some of the ITCs at this point as far as you understand it?
There's not really bottlenecks, Ryan, I would say. We're going through the process of qualifying all the expenditures at the locations. So we're kind of following the process, I've got teams, the folks that are coming up with what are the qualified CapEx expenditures, and then works, and then we're frankly, we're kind of putting our feelers out on the market in terms of what the transfer market looks like. I believe that it will be more of a '24. I'm not in a rush to need capital, but that doesn't mean we're taking our time. I'm going through the process. And making, making sure that we understand it all, and what kind of clawbacks there are and when you go through a transfer like that. So we kind of want to have it all buttoned down. And we're counting on the money principally for this first wave of projects in '24.
Okay, thank you.
With our partners, we get 50% of the value that we, the capital that goes into the total project, but we intend to likely transfer ours and monetize it.
Okay, perfect. That's helpful. And then you mentioned earlier some of the early tests ongoing on the 15-liter engine. Have you heard any early signs of feedback on anything there? And any thoughts on maybe how the timing or milestones might play out over the next year in terms of testing and feedback, and when you might -- when do you think you might see like the earliest signs of around visibility around potential uptake of that engine?
Well, you know, I think it's important first, Ryan, to just kind of remind everybody. Well, this is a new engine. It's not exactly new right? I mean we've had -- they've had great success with this natural gas heavy-duty engine in China. And I think last year they sold 35,000 of these in China. So now this engine has improved on that engine, but it's essentially it's, in many ways the same. So I think it's important for those listening to understand, that this isn't a test of a brand new -- heretofore untested product. This isn't alpha, this is really a fleet introduction.
So -- and Cummins is very careful about the way they do these things, that are not in a rush. They want to make sure that everybody -- that they've got it right, because that's their name after all. And they do this on diesel. So -- I used to hear about the five testing gates of hell or whatever Cummins just talk about. But I think it's important that they have lined up some of the largest fleets in Americas. So this is -- this is Amazon and UPS and FedEx and Walmart. So they're not, they're not planning on stepping their tail here because they've got all the boys and girls that can really buy big trucks are involved, Knight-Swift and Werner and J. B. Hunt. So, I feel that's really important, and I think there's 40-some that will be in this introduction phase this summer and those are out there happening now.
Now, we've heard anecdotal stories and I don't want to get ahead of Cummins here, but we've heard good things from the driver acceptance so far. We know that some of those are being tested in the sort of the toughest topographies over the Grapevine in California and Rocky Mountain. So yeah, I think that's great. We’ve heard there's been an improvement in the fuel economy which is what Cummins said would be the case. So I think that's great. I don't know that I have the latest, other than we know that this always takes a little longer than we think, the order book was supposed to be maybe opened in Q3, Q4. I'm not sure how that's going. I think it's safe to say though that when if you're looking for milestones, it will be how did it go? What is the feedback? And we'll get that at some point here for some of these big fleets. It will be late this year, though, and then you'll begin to have serious order book open up. I'm guessing either late in '23 or early '24. Don't look for those orders to get built into sometime in Q2 of '24 is my guess. And -- but it will be interesting to see what those initial orders look like.
I think we've moved past and I know that Cummins and I put words in their mouth here now, is anticipating if these will be more substantial orders, I think we're past the days. Years ago, when we did the first, 11.9-liter, 12-liters, it was fleets saying that they would take two. We're now doing with fleets that can buy substantially more than that. And so I think we're thinking it's going to be orders of hundreds not, not five. And so that's good news. And finally we've guided to those that buy a lot of trucks every year, have big turnover and that's what excites us that. Finally, we've got an engine -- after all the 15-liter engine accounts for something like 75% of the diesel engines that are sold, and we haven't had it. So I think this is important for the industry.
Great, thanks, that's great color.
Our next question comes from Patty Zhang with Scotiabank. Please go ahead.
Great. Thank you. Hey, Andrew. Hey, Bob. Good afternoon and thanks for taking my questions. So my first question is just on kind of trucking demand. So, we've heard of softer e-commerce, weaker industrial production and so on having some impact on shipping demand and other logistics. So I was just curious if that's had any impact on your volumes at all?
We really haven't. We haven't really seen that. I mean oftentimes the natural gas engines are the ones that get used the most. So if there is going to be a little back down on some of that, it's, they're not going to pull natural gas engines out of the mix.
Sorry, I mean our trucking volume is up. I'm not doubting that that's been the case. We just haven't seen it in our numbers [indiscernible] limited exposure to it.
Not something we are managing around or through right now.
Perfect. Got it. Great. Great. And then second question on kind of your full-year guidance you've kept that the same, and we're going to need about $47 million in the back half of the year to reach the midpoint there. So at least $20 million a quarter. Can you maybe give us a bit more color on what gives you the confidence to reach that? And then I know you mentioned ramping RNG volumes, favorable margins and favorable credit pricing, maybe can you talk about what you're assuming for credit pricing specifically for the remainder of the year? Thank you.
Yeah. Well I'm kind of -- well I'm assuming that the RIN kind of stays maybe up around where it is right now. It possibly could go higher, but I'm not, I'm not going there on that. So I think that RIN jump was good and, and that kind of keeps us there. And we feel that the LCFS could go higher than where it is right now, too. Now, it's, it's quite a bit higher than what we had initially in our forecast, if you will, for this year, which was around the low 60s, like 62, 63. So you're already kind of, we're already seeing some improvement from that.
The biggest driver on that is, as we've talked about, will be volume. So all the factors are very important. Absolutely. They are meaningful, but I mean ultimately as we open more stations, and that's really where the, that's really what drives the margin the most, but all those, the RIN, the credit are definitely meaningful. I mean, you're talking about multiple millions of dollars that helps us get there, I mean, frankly, the disappointment is we're trying to recover from a bit of a dinger there in the first quarter, but we -- the external environment looks all around favorable in our view. So that would really, the volume, and it's a ramp-up. So you don't necessarily divide the balance for the year by two. We'll continue, we'll see a ramp, but that's how we get there.
Great. Thank you.
Our next question comes from Jason Gabelman with Cowen. Please go ahead.
Yeah, hey. It's Jason Gabelman. Good afternoon.
Hi, Jason.
I wanted to go back to the RNG upstream volumes as they are beginning to ramp up, sounds like limited earnings contribution this year. But can you just remind us the sort of -- the timing for the certification process on the LCFS and the RINs, and when do you expect those gallons to start contributing positively to earnings. And I guess tied to that, maybe, frame the dollar per gallon potential in given the current credit prices that we see out there. And then finally, if you could comment on potential uplift from the clean fuel producer tax credit and your outlook for when we should hear about that. And I'll leave it there. Thank you.
You got those, Bob?
Yeah. On the -- well, you're right, Jason, on the contribution, not really meaningful. In fact, really, maybe a little bit of net drag from that in '23 from the RNG supply, because of that certification process. So we're going to look into later into '24, before we're going to really be able to monetize that and that's been, I mean that's assuming we get these commissioned as we are stating here, and then taking the time on the LCFS that can be 12 months. So that's kind of puts us towards that latter half of '24. So the contribution in '24 will be minor, I'll say, but there'll be contribution in '24, from the projects that go into, that we commissioned this year.
I don't want to give '24, guidance right now. On specifically what the numbers are going to be. But I mean, where things stand with our construction and what's injecting DAS and then the certification process, you're going to, you're going to go into '24 before, you're monetizing that from RIN, LCFS standpoint. Well we're always evaluating optimization of, at what point is the best time and makes sense to monetize, because there is different markets out there that will take that. So this is where I get into, we're -- will be steady in '24 and what we want to do with the gas that we're producing, right. Maybe we don’t store it all. And then we don't -- and then we don't have to wait for the certification process as long, if we get an appropriate price.
Got it. And then just thoughts on the greenfield producer tax credit, if you've heard anything from inside the Beltway on -- if it comes in at the high-end or low-end in terms of allowing negative carbon intensity without a lower bound and timing on when we could hear an update.
Okay. We haven't heard anything on that, not with that. So, well, we can -- we're listening to others that know that, negative 250 and beyond, the production tax credit gets, get large per gallon that $5, $6 a gallon kind of category. We'll see if that, we'll see how that plays out, but I don't have anything meaningful on the -- on that 45.
We haven't heard anything on the timing of that or when that might be promulgated or when the Secretary would deal with that.
No, we haven't heard that yet, Jason. We're listening and we've -- we have our tentacles out, but we haven't gotten -- picked up anything on that yet.
Understood. Thanks for the answers. Appreciate it.
There are no further questions at this time. I would like to turn the floor back over to Andrew Littlefair for closing comments. Please go ahead.
Thank you, operator. And thank you, everyone, for joining us today and we look forward to filling you in on our progress next time. Thank you. Good evening.
This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation and have a good day.