OPAL FUELS INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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In this Management's Discussion and Analysis of Financial Condition and Results
of Operations section, references to "OPAL", "we", "us", "our", and the
"Company" refer to OPAL Fuels Inc. and its consolidated subsidiaries. The
following discussion and analysis should be read in conjunction with the
Company's unaudited condensed consolidated financial statements as of
September 30, 2022 and for the three and nine months ended September 30, 2022
and 2021, audited consolidated financial statements and notes thereto included
in the Company's Current Report on Form 8K, which was filed with Securities and
Exchange Commission (the "SEC") on July 27, 2022. In addition to historical
information, this discussion and analysis includes certain forward-looking
statements which reflect our current expectations. The Company's actual results
may materially differ from these forward-looking statements.

Insight

We are a renewable energy company specializing in the capture and conversion of
biogas for the (i) production of renewable natural gas ("RNG") for use as a
vehicle fuel for heavy and medium-duty trucking fleets, (ii) generation of
electricity generated from renewable sources ("Renewable Power") for sale to
utilities, (iii) generation and sale of Environmental Attributes (as defined
below) associated with RNG and Renewable Power, and (iv) sales of RNG as
pipeline quality natural gas. We also design, develop, construct, operate and
service Fueling Stations for trucking fleets across the country that use natural
gas to displace diesel as their transportation fuel. The Biogas Conversion
Projects currently use LFG and dairy manure as the source of the biogas. In
addition, we have has recently begun implementing design, development, and
construction services for hydrogen Fueling Stations, and we are pursuing
opportunities to diversify its sources of biogas to other waste streams. The
term "Environmental Attributes" refers to federal, state and local government
incentives in the United States, provided in the form of renewable
identification numbers ("RINs,") renewable energy credits ("RECs"), low carbon
fuel standard ("LCFS") credits, rebates, tax credits and other incentives to end
users, distributors, system integrators and manufacturers of renewable energy
projects, that promote the use of renewable energy.We separately design,
develop, construct, operate and service Fueling Stations for vehicle fleets
across the country that dispense RNG and/or compressed natural gas ("CNG") to
displace diesel as a fleet transportation fuel.

The Company was formerly known as Arclight Clean Transition Corp II
("Arclight"), which was a blank check company incorporated in Cayman Islands on
January 13, 2021. Arclight was formed for the purpose of effecting a merger,
share exchange, asset acquisition, reorganization or similar business
combination with one or more businesses. OPAL Fuels LLC was formed in December
2020 as a wholly owned subsidiary of OPAL HoldCo under the laws of the State of
Delaware. On December 31, 2020, Fortistar LLC and certain of its affiliated
entities contributed their respective ownership interests in the following legal
entities to OPAL Fuels in a common-control reorganization: TruStar Energy
Holdings LLC, Fortistar RNG LLC, Fortistar Methane 3 Holdings LLC, Fortistar
Methane 3 LLC, Fortistar Contracting LLC, and Fortistar Methane 4 LLC. On
December 2, 2021, the Company, OPAL Holdco and OPAL Fuels entered into a
business combination agreement ("Business Combination Agreement").

Trade suit

On July 21, 2022, we completed the Business Combination. After giving effect to
the Business Combination, the redemption of public shares as described below,
the consummation of the related PIPE investment, and the separation of the
former ArcLight units, there are currently (i) 25,171,390 shares of our Class A
common stock issued and outstanding, (ii) 144,399,037 shares of our Class D
common stock issued and outstanding, (iii) no shares of Class B common stock,
par value $0.0001 per share ("Class B common stock") issued and outstanding
(shares of Class B common stock do not have any economic value but entitle the
holder thereof to one vote per share) and (iv) no shares of our Class C common
stock, par value $0.0001 per share, ("Class C common stock") issued and
outstanding (shares of Class C common stock entitle the holder thereof to five
votes per share). The Class A common stock and warrants commenced trading on the
Nasdaq Global Select Market under the symbols "OPAL" and "OPALW," respectively,
on July 22, 2022.

Recent developments

Construction Update

•The Company has begun construction on a renewable power to RNG conversion
project in the Northeast bringing to seven the number of RNG facilities under
construction as of September 30, 2022, with anticipated aggregate nameplate
capacity of 4.2 million MMBtu of landfill biogas and 0.6 million MMBtu of dairy
biogas.

• Obtaining RIN certification for new river in October and expect to receive RIN certification for Pine Bend by the end of 2022.

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•Emerald and Prince William RNG projects are expected to commence commercial
operations by mid-2023 and the Sapphire RNG project by early 2024. OPAL Fuels'
share of annual nameplate capacity for these landfill projects is 3.8 million
MMBtu.

• Construction is progressing at two dairy RNG projects in Central Valley, California with commercial operations expected in 2024.

Development Update

•The Company's Advanced Development Pipeline comprises 16 projects representing
7.4 million MMBtu of feedstock biogas per year consisting of 6.2 million MMBtu
of landfill biogas, 0.5 million MMBtu dairy biogas, and 0.7 million MMBtu of
food waste and wastewater biogas.

•The company is evaluating nine of our existing renewable energy projects involving 3.2 million MMBtu per year of landfill biogas in light of the Inflation Reduction Act incentives.

• The Company’s total number of RNG distribution stations increased from 69 to December 31, 2021at 123 at September 30, 2022

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 conditions for our employees. Some of the protocols we
implemented include limiting in-person work to essential personnel and
performing temperature checks. Since March 2020, where practicable, our
employees have worked remotely and minimized travel and other non-essential
contact. Additionally, we are providing our employees with COVID-19 testing at
no cost and personal protective equipment for their safety and well-being.

As of the date of this report, the COVID-19 pandemic has had a relatively minimal economic impact on our results of operations.

The future duration and economic severity of COVID-19 remain uncertain, and our results of operations and financial condition could potentially face material adverse effects in the future due to COVID-19.

Critical accounting policies


The discussion and analysis of our financial condition and results of operations
is based upon our interim unaudited condensed consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles in the United States ("U.S. GAAP") and the rules and regulations of
the SEC, which apply to interim financial statements. The preparation of those
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets and liabilities, revenues, expenses and warrants and
related disclosure of contingent assets and liabilities at the date of our
financial statements. Actual results may differ from these estimates under
different assumptions and conditions.

Critical accounting policies are those that reflect significant judgments of
uncertainties and potentially result in materially different results under
different assumptions and conditions. As the discussion and analysis of our
financial condition and results of operations are based upon our interim
unaudited condensed consolidated financial statements, they do not include all
of the information on critical accounting policies normally included in
consolidated financial statements. Accordingly, a detailed description of these
critical accounting policies should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Current Report
on 8-K, which was filed with SEC on July 27, 2022.

Use of estimates


The preparation of the condensed consolidated financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The significant estimates and
assumptions of the Company relate to the useful lives of property, plant and
equipment, the value of stock-based compensation and the fair value of
derivatives including warrant liabilities, earnout liabilities, put option on a
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forward purchase contract, interest rate swaps and commodity swap contracts. Actual results could differ from these estimates.

Key Factors and Trends Affecting Our Results of Operations

The primary factors affecting our results of operations and financial condition are the RNG markets, Renewable energy, and associated environmental attributes, and access to appropriate biogas production resources. Other factors and trends affecting our business are discussed in the “Risk Factors” section elsewhere in this report.

Market demand for RNG

Demand for our converted 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 incorporate renewable content
into transportation fuels. The EPA annually sets proposed renewable volume
obligations ("RVOs") for D3 (cellulosic biofuel with a 60% greenhouse gas
("GHG") reduction requirement) RINs in accordance with the mandates established
by the Energy Independence and Security Act of 2007. The Environmental
Protection Agency's issuance of timely and sufficient annual RVOs to accommodate
the RNG industry's growing production levels is necessary to stabilize the RIN
market. The current authorization for the EPA's issuance of RVOs will expire
beginning in 2023, and the EPA may issue RVOs under a modified system that has
yet to be developed, which creates additional uncertainty as to RIN pricing. On
the state level, the economics of RNG are enhanced by low-carbon fuel
initiatives, particularly well-established programs 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 CO? 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 an alternative fuel for RNG and therefore impact the demand for RNG.

Renewable Energy Markets

We also generate revenues from sales of RECs and Renewable Power generated by
our biogas-to-Renewable Power projects. RECs exist because of legal and
governmental regulatory requirements, and a change in law or in governmental
policies concerning Renewable Power, landfill gas ("LFG"), or the sale of RECs
could affect the market for, and the pricing of, the RECs that we generate
through production at our Biogas Conversion Projects. We periodically evaluate
opportunities to convert existing biogas-to-Renewable Power projects to RNG
production. This strategy has been an increasingly attractive avenue for growth
when RNG from landfills become eligible for D3 RINs. We have been negotiating
with several of our Renewable 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 Renewable Power, together with the revenue opportunities and conversion
costs associated with converting our LFG sites to RNG production, could have a
significant impact on our future profitability.

Key elements of our operating results

We generate revenues from the sale of RNG fuel, Renewable Power, and associated
Environmental Attributes, as well as from the construction, fuel supply, and
servicing of Fueling Stations for commercial transportation vehicles using
natural gas to power their fleets. These revenue sources are presented in our
statement of operations under the following captions:
•RNG Fuel. The RNG Fuel segment includes RNG supply and dispensing activities as
well as the associated generation and sale of commodity natural gas and
environmental credits, and consists of

•RNG Production Facilities - the design, development, construction, maintenance
and operation of facilities that convert raw biogas into pipeline quality
natural gas
•Included here are the Company's interests in both operating and construction
projects.
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•RNG and CNG Fuel Dispensing Stations - This includes both the dispensing (or
sale) of RNG, commodity natural gas, and environmental credit generation and
monetization. The Company operates Fueling Stations that dispense both CNG and
RNG fuel for vehicles.

•Fuel Station Services. Through its Fuel Station Services segment, the Company
provides construction and maintenance services to third-party owners of Fueling
Stations. This segment includes:

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

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

Our costs of sales associated with each revenue category are as follows:

•RNG Fuel. Includes royalty payments to biogas site owners for the biogas we
use; service provider costs; salaries and other indirect expenses related to the
production process, utilities, transportation, storage, and insurance; and
depreciation of production facilities.

• Service station services. Includes equipment vendor costs; service provider costs; and salaries and other indirect expenses.

•Renewable Power. Includes land usage costs; service provider costs; salaries
and other indirect expenses related to the production process; utilities; and
depreciation of production facilities.

Selling, general and administrative expenses include expenses related to general business functions, including the cost of services provided to us by an affiliate, and marketing expenses.

Depreciation and amortization primarily relate to depreciation associated with
property, plant, and equipment and amortization of acquired intangibles arising
from PPAs and interconnection contracts. We are in the process of expanding 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 nine months ended September 30, 2022 and 2021:

Operational data

The following table summarizes the operational data achieved for the three and nine months ended September 30, 2022 and 2021:

                                                    Three Months Ended September 30,                         Nine Months Ended September 30,
                                                  2022                             2021                           2022                            2021

RNG Fuel volume produced (Million
MMBtus)                                              0.6                               0.4                   1.6                                1.2
RNG Fuel volume sold (Million GGEs)                  7.4                               6.3                  20.5                               14.1
Total volume delivered (Million
GGEs)                                               30.7                              23.1                  82.6                               68.8


RNG projects

Below is a table showing the RNG projects in operation and under construction in our portfolio:

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                                                     Design capacity (MMbtus
                                                          per year) (1)            Source of bio gas             Ownership (2)
RNG projects in operation:
Greentree                                                        900,000                  LFG                         100%
Imperial                                                         900,000                  LFG                         100%
New River                                                        600,000                  LFG                         100%
Noble Road                                                       800,000                  LFG                         50%
Pine Bend                                                        775,000                  LFG                         50%
Sunoma                                                           200,000                 Dairy                        90%
Sub total                                                      4,175,000

RNG projects in construction:
Biotown                                                          375,000                 Dairy                        10%
Prince William                                                 1,600,000                  LFG                         100%
Hilltop                                                          250,000                 Dairy                        100%
Vander Schaaf                                                    250,000                 Dairy                        100%
Emerald                                                        2,100,000                  LFG                         50%
Sapphire                                                       1,300,000                  LFG                         50%
New England                                                      250,000                  LFG                         100%
Sub total                                                      6,125,000

Total                                                         10,300,000


(1) Design capacity may not reflect actual production of RNG from the projects,
which will depend on many variables including, but not limited to, quantity and
quality of the biogas, operational up-time of the facility, and actual
productivity of the facility.

(2) Certain projects have provisions that will adjust, or "flip," the percentage
of distributions to be made to us over time, typically triggered by achievement
of hurdle rates that are calculated as internal rates of return on capital
invested in the project.

Renewable energy projects

Below is a table showing the Renewable energy projects in operation in our portfolio:

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                                            Nameplate capacity (MW
                                                 per hour) (1)          RNG conversion candidate           Stage of RNG conversion

California 1                                               5.2                     Yes                         In Development
California 2                                               6.1                     No                                N/A
California 3                                               3.0                     No                                N/A
California 4                                               3.2                     No                                N/A
California 5                                               1.8                     No                                N/A
California 6                                               1.6                     No                                N/A
California 7                                               6.5                     No                                N/A
California 8                                                    6.5                No                                N/A
Florida                                                         2.9                No                                N/A
New England                                                5.3                     Yes                         In Construction
Massachusetts 2                                            3.6                     No                                N/A
Michigan 1E(2)                                            28.9                     Yes                         In Construction
Michigan 3                                                 6.3                     Yes                         In Development
New York                                                   5.9                     No                                N/A
North Carolina 1                                          14.4                     Yes                         In Development
Pennsylvania                                               8.0                     No                                N/A
Prince William 1E (3)                                      1.9                     Yes                         In Development
Prince William 2E (4)                                           4.8                Yes                         In Development
Virginia - Richmond                                        8.0                     Yes                         In Development
Total                                                    123.9


(1) Nameplate capacity is the maximum permitted output for each facility and may
not reflect actual MW production from the projects, which depends on many
variables including, but not limited to, quantity and quality of the biogas,
operational up-time of the facility, and actual productivity of the facility.

(2) See RNG Projects Table above, reference "Michigan 1" under "RNG Projects In
Construction." It is currently contemplated that the Michigan 1E renewable power
plant will continue limited operations on a stand-by, emergency basis through
March of 2031.

(3) See RNG Projects Table above, reference "Prince William" under "RNG Projects
In Construction." It is currently contemplated that the Prince William 1E
renewable power plant will continue operations through approximately December
2022.
(4) See RNG Projects Table above, reference "Prince William" under "RNG Projects
In Construction." It is currently contemplated that the Prince William 2E
renewable power plant will continue operations through approximately December
2022.







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Comparison of the three and nine month periods ended September 30, 2022and 2021

The following table presents the period-to-period variation of each line item of the Company’s income statement for the three and nine months ended
September 30, 2022 and 2021.


                                        Three Months Ended September                                               Nine Months Ended September
                                                    30,                          $                  %                          30,                          $                  %
(in thousands)                             2022              2021             Change             Change               2022              2021              Change             Change
Revenues:
RNG fuel                               $  32,381          $ 17,892          $ 14,489                  81  %       $  83,196          $ 37,066          $ 46,130                  124  %
Fuel station services                     23,227            18,387             4,840                  26  %          55,524            35,560            19,964                   56  %
Renewable Power                           10,942            10,905                37                   -  %          30,094            32,342            (2,248)                  (7) %
Total revenues                            66,550            47,184            19,366                  41  %         168,814           104,968            63,846                   61  %
Operating expenses:
Cost of sales - RNG fuel                  20,959            11,973             8,986                  75  %          51,843            23,053            28,790                  125  %
Cost of sales - Fuel station
services                                  20,886            15,458             5,428                  35  %          49,643            29,775            19,868                   67  %
Cost of sales - Renewable power            7,645             6,064             1,581                  26  %          23,593            23,952              (359)                  (1) %
Selling, general, and
administrative                            15,751             7,922             7,829                  99  %          34,561            19,107            15,454                   81  %
Depreciation, amortization, and
accretion                                  3,258             2,613               645                  25  %           9,816             6,672             3,144                   47  %
Total expenses                            68,499            44,030            24,469                  56  %         169,456           102,559            66,897                   65  %
Operating (loss) income                   (1,949)            3,154            (5,103)               (162) %            (642)            2,409            (3,051)                (127) %
Other income (expense)
Interest and financing expense,
net                                         (776)           (2,354)            1,578                  67  %          (7,184)           (5,659)           (1,525)                 (27) %
Change in fair value of
derivative instruments, net               (1,908)              (27)           (1,881)              (6967) %          (1,580)              (10)           (1,570)              (15700) %
Other income                               6,308                 -             6,308                 100  %           6,308                 -             6,308                  100  %
Income (loss) from equity method
investments                                3,694                 -             3,694                 100  %           3,658             2,392             1,266                   53  %
Gain on acquisition of equity
method investment                              -                 -                 -                   -  %               -            19,818           (19,818)                 100  %
Net (loss) income before
provision for income taxes                 5,369               773             4,596                 595  %             560            18,950           (18,390)                 (97) %
Provision for income taxes                     -                 -                 -                   -  %               -                 -                 -                    -  %
Net (loss) income                          5,369               773             4,596                 595  %             560            18,950           (18,390)                 (97) %
Net income (loss) attributable
to redeemable non-controlling
interests                                  4,161                 -             4,161                 100  %          (2,584)                -            (2,584)                 100  %
Net loss attributable to
non-redeemable non-controlling
interests                                   (325)             (216)             (109)                 50  %            (824)             (414)             (410)                  99  %
Paid-in-kind preferred dividends           2,658                 -             2,658                 100  %           5,093                 -             5,093                  100  %
Net income attributable to OPAL
Fuels                                          -               989              (989)               (100) %               -            19,364           (19,364)                 100  %
Net loss attributable to Common
stockholders                           $  (1,125)         $      -            (1,125)                100  %          (1,125)         $      -            (1,125)                 100  %


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Revenues

RNG Fuel

Revenue from RNG Fuel increased by $14.5 million, or 81%, for the three months
ended September 30, 2022 compared to the three months ended September 30, 2021.
This change was attributable primarily due to an increase in RIN sales and brown
gas sales driven by additional volumes and higher prices.

Revenue from RNG Fuel increased by $46.1 million, or 124%, for the nine months
ended September 30, 2022 compared to the nine months ended September 30, 2021.
$28.0 million of this increase was attributable primarily to the impact of nine
months of Beacon revenues in 2022 versus only five months in 2021. Additionally,
revenues increased by $12.0 million from the sale of environmental credits, $3.8
million due to higher brown gas sales and $3.2 million in fuel dispensing
primarily due to increased volumes.

Gas station services

Revenue from Fuel Station Services increased by $4.8 million, or 26%, for the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021. This change was primarily attributable to an increase of
$4.3 million in construction revenue from additional fuel station projects and
an increase of $0.5 million from incremental service volumes from the addition
of four new fueling service sites.

Revenue from Fuel Station Services increased by $20.0 million, or 56%, for the
nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021. This was primarily attributable to an increase of $18.8
million from fuel station construction projects which were delayed into 2022,
coupled with an incremental $1.9 million as we built new fuel stations during
the year.

Renewable Power

Income from Renewable energy remained stable for the three months ended
September 30, 2022 compared to the three months ended September 30, 2021.

Revenue from Renewable Power decreased by $2.2 million, or 7%, for the nine
months ended September 30, 2022 compared to the nine months ended September 30,
2021. This change was attributable primarily to a decrease of $4.0 million from
the reduction in energy capacity at one of our electricity generation facilities
offset by positive mark to market change in commodity swaps of $2.0 million.

Cost of sales

RNG Fuel

Cost of sales from RNG Fuel increased by $9.0 million, or 75%, for the three
months ended September 30, 2022 compared to the three months ended September 30,
2021. This change was attributable primarily due to increase in costs of $3.4
million from new RNG facilities including but not limited to Emerald, Sunoma,
New River and Sapphire. Additionally, there was an increase of $2.6 million due
to increased royalty expense from increased RIN sales, $0.6 million write down
charges relating to our brown gas inventory to its net realizable value due to
decrease in prices and unplanned repairs at one of our RNG facilities.

Cost of sales from RNG Fuel increased by $28.8 million, or 125%, for the nine
months ended September 30, 2022 compared to the nine months ended September 30,
2021. This change was attributable primarily to the introduction of Beacon's
cost of sales upon consolidation in May 2021 resulting in an increase of $12.9
million, a $1.9 million increase in development costs for building new RNG
facilities, $2.9 million increase from new RNG facilities such as Sunoma and New
River, $10.3 million increase relating to increased dispensing fees from an
increased volume of environmental credits generated, $0.6 million write down
charges relating to our brown gas inventory to its net realizable value due to
decrease in prices and $1.8 million due to unplanned repairs. Additionally,
there were savings of $0.8 million from deconsolidation of Pine Bend and Noble
Road as of December 31, 2021.

Fuel Station Services

Cost of sales from Fuel Station Services increased by $5.4 million, or 35%, for
the three months ended September 30, 2022 compared to the three months ended
September 30, 2021. This change was primarily attributable to an increase of
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$5.0 million construction of additional projects and an increase in $0.4 million increased service from higher volumes.

Cost of sales from Fuel Station Services increased by $19.9 million, or 67%, for
the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021. This change was attributable primarily to an increase in
costs of $18.2 million for third-party construction projects due to delays into
2022 and an increase of $1.7 million in service from higher volumes dispensed.

Renewable energy

Cost of sales from Renewable Power increased by $1.6 million, or 26%, for the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021. The increase was primarily attributable to a $0.7 million in
major maintenance at two of our facilities due to timing and a $0.3 million
increase in unplanned maintenance, workers compensation expense of $0.1 million
and increase of $0.2 million routine maintenance.

Cost of sales from Renewable Power marginally decreased by $0.4 million, or 1%,
for the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021.

Selling, general and administrative expenses

Selling, general, and administrative expenses increased by a total of $7.8
million, or 99%, for the three months ended September 30, 2022 compared to the
three months ended September 30, 2021. This change was attributable primarily to
an increase in insurance expense of $5.0 million related to a directors and
officers tail policy for Arclight's former directors and new directors and
officers policy for the Company's current management, higher employee headcount
and related compensation and benefit expenses of $1.3 million to support our
organic growth, an increase of $0.6 million in professional fees and audit fees
relating becoming a publicly traded company, an increase of $0.7 million in IT-
related expenses as we invested to improve our technology platforms and $0.2
million related to filing a registration statement for the resale of Class A
common stock on behalf of certain of our equity holders.

Selling, general, and administrative expenses increased by a total of $15.5
million, or 81%, for the nine months ended September 30, 2022 compared to the
nine months ended September 30, 2021. This change was attributable primarily to
higher insurance expense of $5.1 million relating to the insurance policies for
Arclight's former directors and the Company's current management, higher
employee headcount and related compensation and benefit expenses of $6.6 million
to support our organic growth year-over-year, a $2.6 million increase in
professional fees related to audit, tax, legal and consulting fees, a $2.5
million increase in IT-related expenses and $0.2 million related to filing of
the registration statement. These costs are related to setting up the
administrative, compliance, and governance structure required for operating a
public company which do not qualify for capitalization. The noted increases were
partially offset by a gain of $1.5 million recorded as a reduction of Selling,
general and administrative expenses relating to a legal settlement.

Depreciation, amortization and accretion

Depreciation, amortization, and accretion increased by a total of $0.6 million,
or 25%, for the three months ended September 30, 2022 compared to the three
months ended September 30, 2021. This change was primarily due to increase in
depreciation from the Sunoma and New River RNG facilities coming online.

Depreciation, amortization, and accretion increased by a total of $3.1 million,
or 47%, for the nine months ended September 30, 2022 compared to the nine months
ended September 30, 2021. This change was attributable primarily to the
introduction of Beacon's property, plant and equipment balances upon
consolidation in 2021 increasing our depreciation expense by $0.8 million, a
$0.4 million increase from new downstream dispensing sites becoming operational,
a $1.0 million increase from one additional RNG facility becoming operational
during the fourth quarter of 2021 and $0.8 million increase due to accelerated
depreciation on two facilities in our Renewable Power business.

Interest and finance charges, net

Interest and financing expenses, net, decreased by $1.6 million, or 67%, for the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021. This change was primarily due to an increase in interest
income of $0.4 million due to interest earned on the short term investments
(cash received from completion of Business Combination), a $0.7 million saving
on interest on Convertible Note Payable as 50% of the debt was converted to
equity on July 21, 2022 and change in fair value of Convertible note of $2.9
million. This was offset by an increase in outstanding debt from the OPAL Term
Loan resulting in an increase in an interest expense of $1.1 million (including
$0.4 million of amortization of deferred financing costs), a $0.2 million
increase in commitment fees on our OPAL Term Loan
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II facility and a $0.7 million increase from the Sunoma Loan as the interest
expense was expensed for the three months ended September 30, 2022 whereas the
interest was capitalized in the same prior-year period because the construction
was completed during the first quarter of 2022.

Interest and financing expenses, net increased by $1.5 million, or 27%, for the
nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021. The increase is primarily attributable to the increase in
outstanding debt versus the prior period. the $1.5 million increase was driven
by a $1.2 million increase interest on Senior Secured Credit Facility, $2.9
million increase in interest on the OPAL Term Loan, $0.8 million increase in
amortization of deferred financing costs, $1.3 million increase in Sunoma Loan(
interest on Sunoma Loan was capitalized in 2021), partially offset by $2.4
million decrease on Convertible payable which includes a decrease of $2.9
million in change in fair market value, increase in interest income of $1.3
million from the Note receivable and short term investments and $0.5 million
savings in interest on the Trustar revolver facility since it was repaid in
October 2021.

Change in fair value of derivatives, net

Change in fair value of derivatives, net increased by $1.9 million, or 6967%,
for the three months ended September 30, 2022 compared to the three months ended
September 30, 2021. This change was attributable primarily to fair value
adjustments on our Derivative warrant liabilities, earnout liabilities, put
option on a forward purchase agreement and interest rate swaps. These
liabilities were recorded in the condensed consolidated balance sheet upon
completion of the Business Combination.

Change in fair value of derivatives, net increased by $1.6 million, or 15700%,
for the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021. This change was attributable primarily to fair value
adjustments on our Derivative warrant liabilities, earnout liabilities, put
option on a forward purchase agreement and interest rate swaps. These
liabilities were recorded in the condensed consolidated balance sheet upon
completion of the Business Combination.

Other income

Other income increased by $6.3 million, or 100%, for the three and nine months
ended September 30, 2022 compared to the three and nine months ended
September 30, 2021. This change is primarily related $4.4 million recognized on
reversal of a contingent payment to a non-controlling interest of one of our
VIEs we consolidated in our financial statements as the applicable criteria for
payment are no longer met as of September 30, 2022 and $1.9 million gain
recognized on repayment of Note receivable.

Income from equity method investments

Net income attributable to equity method investments increased by $3.7 million,
or 100%, for the three months ended September 30, 2022, compared to the three
months ended September 30, 2021. This change was attributable primarily to an
increase of $0.7 million from equity method investments in the Pine Bend, Noble
Road and GREP. For the three months ended September 30, 2021, there was no
income from equity method investments.

Net income attributable to equity method investments increased by $1.3 million,
or 53%, for the nine ended September 30, 2022 compared to the nine ended
September 30, 2021. This change was attributable primarily to the increase in
net income from Noble Road and GREP that exceeded income from Beacon during
comparable period in 2021. Upon the step acquisition of the 56% of controlling
interest in Beacon in May 2021, the results of Beacon were consolidated in the
financial statements. Pine Bend and Noble Road were deconsolidated as of
December 31, 2021.

Gain on acquisition of an investment accounted for using the equity method

There were no gains on the investment under the equity method for the three months ended
September 30, 2022 and 2021.

The gain on acquisition of equity method investment decreased by $19.8 million,
or 100%, for the nine ended September 30, 2022 compared to the nine months ended
September 30, 2021. This change was attributable primarily to our step
acquisition of the remaining interest in Beacon in May 2021.

Net loss attributable to refundable non-controlling interests

Net loss attributable to redeemable non-controlling interests for the three and
nine months ended September 30, 2022 is $4.2 million and $2.6 million,
respectively. The net loss for the three and nine months ended September 30,
2022 reflects the portion of earnings belonging to OPAL Fuels equity holders
prior to Business Combination for the period January 1, 2022 till July 21, 2022.
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Net loss attributable to non-refundable non-controlling interests

Net loss attributable to non-redeemable non-controlling interests for the three
months ended September 30, 2022 increased by $0.1 million or 50%, compared to
the three months ended September 30, 2021. This reflects the joint venture
partners' loss in those entities we sold a portion of our membership interests
in certain RNG facilities which are consolidated in our financial statements.
These entities for the three months ended September 30, 2022, were Sunoma,
Emerald, Sapphire and Central Valley. The entities accounted for as
non-redeemable non-controlling interests for the three months ended
September 30, 2021 were Pine Bend, Noble Road, Sunoma and Central Valley.

Net loss attributable to non-redeemable non-controlling interests for the nine
months ended September 30, 2022 increased by $0.4 million or 99%, compared to
nine months ended September 30, 2021. This reflects the joint venture partners'
loss in those entities we sold a portion of our membership interests in certain
RNG facilities which are consolidated in our financial statements. These
entities for the nine months ended September 30, 2022, were Sunoma, Emerald,
Sapphire and Central Valley. The entities accounted for as non-redeemable
non-controlling interests for the nine months ended September 30, 2021 were Pine
Bend, Noble Road, Sunoma and Central Valley.

Preferred dividends paid in kind

On November 29, 2021, we entered into an exchange agreement with Hillman whereby
Hillman exchanged its ownership interests in the four RNG projects of $30.0
million into 300,000 series A-1 preferred units at a par value of $100 per unit
and 1.4% of the common units 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 $2.7
million and $5.1 million for the three and nine months ended September 30, 2022,
respectively as to be paid-in-kind.

There were no preferred dividends paid in kind for the three and nine month periods ended
September 30, 2021.

Cash and capital resources

Liquidity

As of September 30, 2022, our liquidity consisted of cash and cash equivalents
including restricted cash of $71.4 million and $146.9 million. Additionally, we
entered into a Senior Secured Credit Facility which provides an approximately
two year delayed term loan facility (the "DDTL Facility") of up to a maximum
aggregate principal amount of $100.0 million and Debt Service Reserve facility
(the "DSR Facility") of up to a maximum aggregate principal amount of $5.0
million. The proceeds of the DDTL Facility are to be used to fund a portion of
the construction of the RNG projects owned, either in full or through a joint
venture with a third party, by the subsidiary guarantors and the proceeds of DSR
Facility are to be used solely to satisfy the balance to be maintained in the
debt service reserve account. We have recently drawn $25.0 million under the
OPAL Term Loan. Additionally, we have entered into an amendment to the OPAL Term
Loan which extended commitment available date to March 2023 for the remaining
$10.0 million.

We expect that our available cash together with our other assets, expected cash
flows from operations, available lines of credit under various debt facilities
and access to expected sources of capital will be sufficient to meet our
existing commitments for a period of at least twelve months from the date of
this report. Any reduction in demand for our products or our ability to manage
our production facilities may result in lower cash flows from operations which
may impact our ability to make investments and may require changes to our growth
plan.


In connection with the Business Combination, holders of Arclight's Class A
ordinary shares representing an aggregate redemption amount of $274,186,522
exercised their right to redeem their shares for cash. In addition, for the nine
months ended September 30, 2022, we received revenue of approximately $168.8
million, which is lower than the revenue we expected to receive toward the full
year numbers previously disclosed as part of the unaudited prospective financial
information our management prepared and provided to the ArcLight board of
directors in connection with the evaluation of the Business Combination (the
"Prior Projections"). This has resulted primarily from lower than anticipated
levels of gas collection at certain operating facilities, delays in completion
of construction of certain RNG facilities, (which are now in commercial
operation) and delays in commencement of construction of Fueling Stations. While
the
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second half of 2022 has shown improvement to date and we expect revenue to be
higher than that in the first half of the year, we currently anticipate that our
full year revenue for 2022 will be lower than anticipated in the Prior
Projections as a result of these factors. We are continuing to evaluate our
business plan but we expect that the factors described above that we experienced
during the nine months ended September 30, 2022 will continue during 2023. In
this regard, we remind investors that we have not updated the Prior Projections.
Certain of the assumptions underlying the Prior Projections are no longer
correct and, as a result, investors should not rely on the Prior Projections.

Notwithstanding these developments, we continue to expect that our currently
available cash on hand, together with expected cash flows from operations,
available credit under existing debt facilities, as well as other sources of
capital we expect to be accessible, will be sufficient to meet our existing
commitments and anticipated capital expenditures associated with our growth plan
for a period of at least twelve months from the date of this report. If we were
to experience any significant further reduction in levels of gas collection,
delays in commencement or completion of construction of our projects, adverse
regulatory or price changes that affect the value of our environmental credits,
or unplanned outages at our production facilities, it would result in lower cash
flows from operations which could impact our ability to make investments or
require changes to our growth plan. See "Risk Factors" and "Cautionary Statement
Regarding Forward-Looking Statements."

To fund future growth, we anticipate seeking additional capital through equity
or debt financings. The amount and timing of our future funding requirements
will depend on many factors, including the pace and results of our project
development efforts. We may be unable to obtain any such additional financing on
acceptable terms or at all. Our ability to access capital when needed is not
assured and, if capital is not available when, and in the amounts, needed, we
could be required to delay, scale back or abandon some or all of our development
programs and other operations, which could materially harm our business,
prospects, financial condition, and operating results.

As of September 30, 2022, we had total indebtedness excluding deferred financing
costs of $220.0 million in principal amount which primarily consists of $77.7
million under Senior Secured Credit Facility, $28.0 million under the
Convertible Note Payable, $91.2 million under the OPAL Term Loan, $0.1 million
under the Municipality loan and $23.0 million under Sunoma Loan.

As part of our operations, we have arrangements for office space for our head office under the Administrative Services Agreement as well as operating leases for office space, warehouses and our fleet of vehicles. .

We intend to make payments under our various debt instruments as they come due and seek early redemption and/or refinancing opportunities if and when such opportunities arise.

See Note 8. Borrowings, to our condensed consolidated financial statements.

Cash flow

The following table presents the Company's cash flows for the nine months ended
September 30, 2022 and 2021:

                                                                     Three Months Ended September 30,
(in thousands)                                                           2022                2021
Net cash (used in) provided from operating activities                $  (22,289)         $  28,897
Net cash used in investing activities                                  (218,930)           (69,763)
Net cash provided from financing activities                             270,525             52,729

Net increase in cash, restricted cash and cash equivalents $29,306 $11,863

Net cash from operating activities

Net cash used in operating activities for the nine months ended September 30,
2022 was $22.3 million, a decrease of $51.2 million compared to net cash
provided of $28.9 million for the nine months ended September 30, 2021. The
decrease in cash provided by operating activities was primarily attributable to
an increase in net operating losses year over year and negative working capital
changes.
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Net cash used in investment activities

Net cash used in investing activities for the nine months ended September 30,
2022 was $218.9 million, an increase of $149.2 million thousand compared to the
$69.8 million used in investing activities for the six months ended September
30, 2021. This was primarily driven by cash invested in short term investments
of $146.9 million (cash received from Business Combination) , payments made for
the construction of various RNG generation and dispensing facilities of $84.9
million offset by proceeds from repayment of Note receivable of $10.9 million
and distribution from equity method investment of $2.1 million.

Net cash provided by financing activities

Net cash provided from financing activities for the nine months ended September
30, 2022 was $270.5 million, an increase of $217.8 million compared to the $52.7
million provided from financing activities for the nine months ended September
30, 2021. This was primarily driven by proceeds received from consummation of
Business Combination of $138.9 million, issuance of redeemable preferred
non-controlling interests for total proceeds of $100.0 million, proceeds from
OPAL Term Loan of $27.5 million, proceeds from Sunoma Loan$4.6 million, capital
contribution from a joint venture $23.2 million offset by debt repayments of
$3.7 million and $11.3 million on the Senior Secured Credit Facility and the
OPAL Term Loan, respectively, and $8.5 million paid as financing costs.

Investments 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 September 30, 2022, we have budgeted for $412,342 thousand in capital
expenditures for the next 12 months, of which $220,184 thousand is committed
under existing contracts. These expenditures do not include any expected
contributions from our joint venture and non-controlling interest partners and
primarily relate to our development of new RNG facilities and the purchase of
equipment used in 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 8. Borrowings and Note 9. Leases to our
condensed consolidated financial statements for additional information.

We expect to fund these expenditures primarily through cash on hand, cash generated from operations and cash from the business combination and Investment PIPE.

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