Hello, everyone, and welcome to the ReFuels presentation of the third quarter. Today I am here with the CEO and the CFO, Philip Fjeld and Baden Gowrie-Smith. So we'll go through the presentation. It will be about 15, 20, 25 minutes, and then we'll have a Q&A. So everyone is welcome to write your questions in the chat, and then we'll go through them after the presentation. So on to you, Philip.
Okay. Good morning to everyone who's watching this online. I will take us through... Here we are. So I'm just gonna start out, I think, just by reminding you all what we do. ReFuels is on a mission to decarbonize Europe's truck fleet. We will initially be doing this through putting biomethane or renewable and sustainable gas into vehicles and particularly into the heavy trucks. Currently, we've got 13 refueling stations, large public access refueling stations, operational in the U.K. We refueled more than or we are currently refueling more than 1,700 trucks every day. During the last three quarters, saved more than 120,000 tons of greenhouse gas emissions.
Once again, just a reminder of what we do, what it looks like. When someone hears, you know, a filling station, they might think a regular petrol forecourt, where you can go in and buy, you know, newspapers and a bottle of Coke, et cetera. That's not what we do. We develop very large public access, multi-user, truck-friendly refueling stations, where we can dispense huge quantities of biomethane into trucks. This is Newton Aycliffe that we opened in June 2023, can refuel as much as 80 trucks per hour. It's unmanned. Very, very efficient bit of energy dispensing infrastructure, and can cater for as many as 800 trucks per day. So some of the key highlights of the quarter, mass adoption is now really taking off.
We had a growth of 65% through 2023. Based on confirmed orders from our customer base, we're expecting approximately another 1,000 trucks to hit the road through calendar year 2024. We'll touch upon it later on, but also very excited by the introduction of the 6x2 CNG truck later on, and we would expect that to further accelerate growth. There is strong EBITDA growth coming off the station portfolio. Once again, look at that in a bit. And more importantly, we're now also starting to see scale effects, such as new electricity contracts, which provide a significant uplift to EBITDA. We've got five new sites, new stations, that we wanna build that are very attractive and will offer strong economics.
And finally, we have progressed discussions with Foresight, our current financing partner, to acquire and fully consolidate the existing station portfolio to bring it in under the ReFuels umbrella. This is again just showing the growth. Just on the right-hand side there, I just wanna highlight the... Looks like we've generated less certificates. Baden will address that later on, but that is purely a timing effect. Other than that, you can see that the growth continues and is reflective also of the comments I made on the previous slide. So I've already mentioned the word mass adoption once, and you'll probably hear it from me a number of times. We're now truly starting to see mass adoption.
In fact, our growth is being held back by the amount of stations we've got operational and stations that we've got in development. 65% growth last year, and that is a growth rate, whether it's 50%, 60%, 70%, year-on-year, that we're expecting going forward. For the first time here, we're actually highlighting also something called an MRU, Mobile Refueling Unit. What are they? Well, those are units that we take to customer locations, which means that we can front-load, and we can encourage adoption and order of customer vehicles before we have a grid-connected station operational. This is something that we developed and first deployed in 2020. We expected these to be not as popular and not as successful as they were.
We saw them as a stopgap for one specific application and one specific customer. So we originally built two of these. Now we've got seven in operation. We've got another one that's going into order and build soon, and we will continue to order more later this year. Once again, this gives us a unique skill set and a unique tool so that we can ensure that customers can place orders, because developing stations, unfortunately, is a quite lengthy process. And of course, customers, certain customers, don't want to wait to place orders, and therefore the MRUs are an efficient tool to do that. One MRU can typically do up to 100 trucks a day.
And the way they work is that the gas is brought in from our grid-connected stations on a swap-and-go basis, and we do all of that in-house. So as such, we control the entire value chain, if you want, with regards to how the MRUs are managed, deployed, and refueled. Then, if you look at the stations that we've just opened and the ones we've got on in construction, recently opened last year, we had Corby in Northamptonshire and our first in Wales, Bangor. And now we've got another two first in operation, if you want. Sorry, under construction, Aylesford, which will be our first in the southeast quadrant, if you want, of the U.K., which is an important one for unlocking demand and opening up that area.
And then we have Doncaster, in an incredibly busy logistics area, where we've been trying to get a station for a number of years. So how does a typical customer adoption journey look like? And, you know, how do we, how do we typically frame it, and, how would you typically expect orders to flow from that? Starting on the left here, you see that, you know, in year zero, if you want, there is a trial period. Clearly, they haven't ordered trucks yet. And then you get into year one and two, and you see that they're gradually gaining confidence. They're gradually ordering more trucks.
And then from year two, year three onwards, you see that you get into full flow with regards to truck replacement, where diesel trucks, when they come up for replacement, are then replaced with CNG trucks. A lot of the customers that we've got, on the left here, whether it is, you know, Tesco, Lidl, Amazon, Morrisons, Aldi, et cetera, Waitrose, John Lewis, are further along in the adoption journey. And that is also why you're starting now to see that there are more and more orders being placed, because they are no longer on the trial spectrum or year-one spectrum. They're further along in the journey, where this is no longer a dipping a toe in the water exercise.
This is business as usual, and as such, you typically see them replace, in certain locations, 15%, 20%, maybe as much as 50% of the fleet in one year. We sometimes get the question, "Okay, so the company's been around for 10 years. You've spent a long time, you know, building an industry, building confidence and taking customers along on the journey. But how do we know that CNG or Bio-CNG, putting biomethane into trucks, is the real deal? You know, is it just something... Is it a bit of a fad that is gonna go away?" Well, first of all, as a company, as an industry, as a sector, we've been tested over the last four, five, six years through almost every macro problem that you could throw at us.
First, we had Brexit, and along Brexit, we had issues around, you know, getting trucks into the country. There was uncertainty around how that would affect logistics in general. Then, of course, we had COVID, where we continued to grow through, and even during COVID, you know, we had supply issues on the truck side, you know, customers couldn't get a truck for 12 months. Then we got into the energy crisis that really kicked off second half of 2021. Gas prices shot through the roof, and for the first time ever, it cost our customers more to run a CNG truck than it did a diesel truck. Did they stop ordering? No. On the contrary, they started ordering more trucks. Did they stop... Did they park up their trucks? Did we see, you know, reduced utilization? Not at all.
And finally, you know, now we're into, or hopefully coming out of a period of high inflation. Once again, orders have just continued to go higher and higher and higher for every month. So we are firmly convinced this is the real deal. We've been tested through every imaginable adversity, I would say, from the external side of things. And if you look at where we are today for customers, today we're back to where we were historically with very strong economics of adopting CNG, and currently, the fuel cost savings, compared to diesel, are about 40%. If you then look at our station portfolio, yes, this is currently not being consolidated because of the structure we've currently got with Foresight, which I'll touch upon in a bit.
But if you look at utilization of that portfolio, just through the October to December quarter, we have a run rate now of about GBP 7 million in EBITDA. If you then, we believe, make the very conservative assumption that we, over time, achieve a 40% utilization across that network, then we're into GBP 14+ million pounds of EBITDA. And these figures, by the way, they don't, they don't include any scaling effects. As our stations become busier, as we become a larger, you know, we get scale benefits. This is not reflective of that. And then, of course, we have a full potential here of GBP 44 million, which is across our existing network and does not include any future stations that we're looking to build.
What I think is important to understand here is that we aren't necessarily relying on thousands and thousands and thousands of new trucks coming on here. We only basically need to see another approximately 2 thousand-2.5 thousand trucks on the road, and then we are up to somewhere north of 40% utilization and full potential. So we haven't got that long to go before this really starts to kick in. I mentioned in my opening remarks that we are, you know, have been in advanced discussions or are in advanced discussions with Foresight Group, but I'd like to take it just one step back first. We've communicated previously in our quarterly reports that we have a process ongoing to look at various financing options for continuing to build stations.
One of those options is also to refinance the stations and to bring them in-house under the ReFuels umbrella, 'cause currently they are under an off- you know, as part of an off-balance sheet finance arrangement. We are in advanced discussions, as I mentioned, with Foresight Group, to take those in-house. We have reached an agreement with them for an approximate GBP 145 million consideration. And that would include partial conversion to equity in ReFuels, of course, subject to finance. This isn't the only option we're looking at, but it is one that is advanced.
We are looking at other alternatives as well, and of course, looking at a mix, typically, of debt and equity to support these strategic initiatives and to support consolidating, and I would say, simplifying our structure compared to where we are today. I mentioned already, we are constrained, our growth is constrained by the amount of stations we've got. We now have the benefit of being a 10-year-old company. We have the benefit of having 1,700 trucks on the road, and so on and so forth. We have a large land team that sources sites. We've got more than 100 sites that we are looking at.
By basically high-grading that portfolio, if you want, taking the five most attractive sites and developing those, based on what we now know of expected orders for those sites, we would look at an IRR, unlevered IRR for those sites in the range of 25%-45%. It's important here also to understand that we have a lot of customers out there. We've got a lot of potential customers out there, who today cannot order as many trucks as they want, because we haven't got the stations in the right locations, and they're not yet open. As an example, like I mentioned, Tesco, the largest food retailer in the U.K., they've got 3,700 stores. They've got 600 diesel trucks across five locations.
You know, if we were to build those stations or these five stations that I mentioned, then all of a sudden, they have got an option on their doorstep, literally, which would mean that they can then continue their adoption journey. These five stations would then take us up to a total capacity of 13,000 HGVs, or more than 440,000 tons of Bio-CNG every year. With that, I'll hand it over to Baden.
Thank you very much, Philip. So yeah, consolidated revenue in the period was up to GBP 33.7 million from GBP 29.6 million last quarter. It's important to recognize, as Philip's already mentioned, there is no consolidation of the large amounts of EBITDA from the station portfolio that sits within the joint venture. The group actually recognized a gross profit in both of its major operating entities in CNG Fuels and in RTFS during the quarter. However, once these were brought together in a consolidation, due to the way that they are consolidated, this reduced the gross profit to GBP 2.6 million.
CNG Fuels recognized the gross profit in the quarter off the back of the ongoing development of the Doncaster site, and commencement of that EPC contract, and Renewable Transport Fuel Services, likewise, off the sale of RTFCs and activities during the quarter, even with the currently depressed RTFC price, the biomethane costs have also been coming down in the period, too. Core operating costs is something we've been working on. These, we started a number of initiatives last quarter to start bringing down these core operating costs, and that started to show in this quarter, and we believe that that'll have more of an effect in the quarters that follow this.
Including, for instance, a decrease in research and development costs on far-out pipeline, so that we can really focus our efforts on some of the near-term ones that we're bringing to development. These next five being a great example, where we, of course, have larger legal costs at the moment to bring them through, but that means that we've got a great near-term pipeline ready to go straight into development. RTFCs, when in the consolidation, unfortunately, the way they're consolidated is essentially on an invoice basis, instead of the accrual basis. So what this meant was, in this period, we bought a lot of biomethane. However, because of the timing around the issue of those RTFCs, the revenues will not be recognized until just after the end of the quarter.
So that that had quite a large knock-on effect to the straight-line EBITDA, as which I'll run you through on the next slide. Overhead costs, as we've previously indicated before, we have a huge amount of operating leverage with our existing base of employees and operations. We believe that with a 15%-20% increase in our overheads over the years ahead to the end of 2026, we'll be able to increase our network to 30-40 CNG stations with just a very moderate increase in the overhead.
Lastly, the profit and loss, it was, it was, is larger, it's, it, it is larger, this quarter due to, increase in, in amortization and depreciation, in addition, of course, to the, to the EBITDA, which was affected by the RTFCs. Thank you. So here you can see negative EBITDA, GBP 3.34 million. We obviously adjust, we can adjust this for share-based payments, based on warrants for, employees, fair, and fair value, measurements. We benefited excessively from the timings of EPC, revenues in the quarter because of the new Doncaster build. So whether some of those are not recognized yet, we can strip that out for the adjusted EBITDA.
But then, of course, with this very large RTFC timing issue, whereby the RTFCs were sold, invoiced just in the following quarter, and had a GBP 3.75 million negative knock-on effect to the EBITDA of the quarter. Which of course, we can then adjust out, bringing the adjusted EBITDA downwards. So, total assets in the group are GBP 213 million at the end of the quarter, including about GBP 147 million of intangibles and property, plant and equipment.
Current liabilities are now GBP 54 million, of which GBP 44 million is trade and other payables, which has been increasing due to which is also increasing with trade receivables and contract assets due to large growth in the underlying volumes, and the costs associated with, essentially, with fuel duty and working capital with those. Total equity at the end of the quarter was GBP 121 million, corresponding to an equity ratio of 57%. Net cash outflow from operating activities was GBP 6.5 million in the quarter due to a number of accrued large expenses, which won't be repeated in the next quarter.
We had net investment activities of GBP 0.9 million due to some of the sales of the SPVs into the Foresight joint venture. Net cash flow generated from financing activities was GBP 4.9 million. This was largely due to the operating subsidiary, CNG Fuels, agreeing a working capital facility with our existing funder, the Foresight Group, for GBP 10 million, of which we drew GBP 5 million in the period ending the December 31st. This is a relatively short-term facility, which is designed to be repaid through the financing activities we're currently undertaking, including the consolidation of those entities. Thank you.
Thank you, Baden. We'll take a look at the market. And the introduction of a six-by-two CNG truck as a mass-produced CNG truck is something that is really exciting. I'll first maybe just explain to you the difference between a four-by-two and a six-by-two. If you look at that slide, on your left-hand side, you will see one vehicle with a rear axle. That is a four-by-two. On your right-hand side, you will see a vehicle with two rear axles. That's a six-by-two. So what's the difference? They look quite similar. The four-by-two can typically run up to, on a combined basis, can operate up to 40 tons. Typically, it operates up to 38 tons, but you can push it to 40. The one in the right-hand side can operate up to 44 tons.
That doesn't sound like a big difference, you know, 38 versus 44 or 40 versus 44. It is a big difference because that, gives a lot more flexibility as to heavier loads, larger payloads, bigger double-deck trailers, and so on and so forth. Because of that, where we're at is that about 86% of the U.K. articulated truck market is the six-by-two market. If you look at our market penetration today, we today have 7.5%-8% of all four-by-two trucks today are CNG, and they go through our network. We expect by the end of this year, we'll probably have north of 10% of the four-by-two market. Then look at the six-by-two market, it's rather pathetic, isn't it? 'Cause it's 0.03% of the market today. Now, that we see as a huge opportunity. Why?
Because our customers have been crying out for a factory-built, cost-effective 6x2. IVECO has got one today, but it can only be produced in small numbers. IVECO is looking to really ramp up that production capacity going forward. Scania is bringing out a 6x2 factory-built model that can be built in large quantities from the second half of this year onwards. So here, for the first time, we have the opportunity to crack open the largest truck market in the U.K. Now, if we can just replicate the market share we've got with the 4x2s today in the 6x2 market alone, you can do the math. There is a huge opportunity for there, and we're very, very excited about that market going forward.
If you then look at how we're doing today with regards to number of trucks on the road, we've previously, you know, mentioned that there is a total estimated market size of in the range of 50,000-90,000 trucks, gas trucks, CNG trucks on the road by 2030. That, of course, needs the 6x2, which has now come to be truly unlocked. So where are we today? Well, we've got north of 1,700 trucks on the road that our customers are running today. We know our customers have ordered more than 950 trucks, and those are only the ones for delivery in the next 12 months, and those are only the ones that we know about. We find out every week about truck orders that we didn't know about.
For the first time here as well, we are now detailing also estimated future orders of 2,500. What does that mean? So we, of course, speak to our customers on an almost daily, weekly, monthly basis. There are no fleet operators that place firm orders for vehicles more than maybe 9-12 months in advance. So if you want a truck to be on the road second half, 2025, you won't order it before maybe second half 2024. But the customers speak to us, and they say, "Do you know what? We have plans of ordering, and we have plans on moving from diesel to CNG, and that means we will be ordering or we're planning to order this in 2025 and this in 2026," and that is what we have put in there.
The estimated future orders is purely orders that have been, or estimated orders that have been communicated to us from our existing customers. There is there is hardly any potential 6x2 demand in there for trucks, and there are no future customers in there either. Then if we look at how is the European biofuel market doing, we generate a lot of RTFCs. We have been affected, unfortunately, by the fact that we have had a dislocation, a market dislocation, where we've had a lot of alleged fraudulent Chinese biodiesel coming into Europe. That will take time to wash its way through the system. We're seeing encouraging signs now that that is starting to happen.
Biofuel, sorry, biodiesel futures have shifted from backwardation to contango, meaning that, you know, that the cost and the price of biodiesel in the future is now higher than it is today. We expect, as we've previously mentioned, this market to rebalance and RTFCs to firm up as we move through 2024. Just to highlight that, you know, at the current RTFC prices, this is not something that generates a large profit for the company, but we are heavily geared towards it. So we just need a moderate increase in pricing from where we are today, and that will have a huge impact on our gross profit, as we, as we go forward. Just a brief summary and outlook then before we, before we see if there are any questions.
There is no doubt, at least in our mind, that we are now truly into an age, if you want, of mass adoption of CNG. Our growth is not held back by the amount of customers who are interested in this, by the amount of trucks that can be delivered from the manufacturers. It is purely being held back by the amount of trucks that we... sorry, stations that we have in operation and in development as of today. We have a very strong CNG truck pipeline coming forward. We would expect that to accelerate significantly as the six-by-two market really opens up from the second half of this year onwards. And as I've already mentioned, we've got five new sites that we're very excited about, and that's only the start. We've got more sites beyond that, but let's focus on those five sites for now.
With that, we'll take some questions. Hmm.
Yes. So, we'll give it a couple of minutes to see if there are any questions that come through. In the meantime, I can ask one myself. So obviously, you're talking about big growth ambitions, gonna build a lot of new stations. There's also discussions with Foresight on the financing of these. The management are currently the largest shareholders, basically, in ReFuels. So the financing is obviously gonna be a question here for a lot of investors, and probably also the customers and partners. How do you see the holding of the management moving forward?
I mean, personally, I own about just shy of 20% of the company. I think Baden's just shy of 25% of the company, so combined, 45%. I think I can speak for both of us in saying that, how much we own of the company is kind of irrelevant. To put it bluntly, I'd rather own a small part of a much larger company than a large part of a small company. We know that this company will require a significant amount of funding going forward, but that is funding for a very good reason. It's funding for profitable growth going forward. As I highlighted, we today are holding back our own growth. We grew 65% in dispensed volume in calendar 2023.
We'd probably have gotten closer to 100% growth had we had more stations, because customers would have ordered more. If that means that we need to, you know, raise equity, raise debt, however we need to do it, and we end up with smaller parts of the company, smaller ownership stakes in the company, that's absolutely fine, because that means that we're generating or it is value creation for everyone involved, whether it is for us or for anyone else who's part of the company.
Thank you. So now some questions have started coming in here. You, you mentioned the five next stations, and also, I mean, you mentioned some long-term plans. However, in the short term, in, for example, 2024, what do you expect the station count to be going out 2024?
So we've got, we've got 13 stations, grid-connected stations. I'm not counting the MRUs now, which I highlighted. 13 grid-connected stations today in operations. We've got two more in construction. Realistically, if we start building a new station tomorrow, you know, we won't have it operational this year. So we will probably end 2024 on 15 stations, grid-connected stations, in operation. I mean, those stations have a lot of spare capacity today, so there's room for customers to continue to order trucks to fill those. But as I mentioned, we have customers today who can't fully, you know, order the amount of trucks they would want to because there are certain locations that we as of today, haven't built.
We want to get into construction as soon as possible on these five next stations, which would then take us to about or to 20 stations in mid-2025.
Yeah. Thank you. There's also some questions about the order book that you mentioned. So the quality of the current order book, well, you mentioned that there's around 1,000 trucks being delivered this year.
Yeah.
How confident are you on these figures?
Very confident. And I'll maybe just explain a bit how we operate. If you go back two or three years, we had probably 99.5% visibility on all CNG trucks that were ordered in the country, because no one would order trucks without first speaking to us, because they have to use our network. What's gradually happened, though, is that as this has become business as usual for companies and for our customers, we have customers who no longer tell us about orders, 'cause why should they?
They know our stations are there, they know they work, they know we've got future stations or other stations that they're not yet using, so therefore they'll just go and order a CNG truck as they do a diesel truck, and then they'll tell us a week before they turn up. So for the 950+ that we've got, that we know about, those are only the ones customers have communicated to us. In there... And those are firm orders that we know have been placed, and also that truck manufacturers have told us, "Yeah, they've been ordered," et cetera. Beyond that, of course, there is an unknown, because as I mentioned, we've got customers who don't tell us. We've got dealerships who sell customers trucks and don't tell us, et cetera. So there is an unknown in there. How big is that? Is it 50?
Is it 250? I don't know, but there's likely something on top. But on those 950, those aren't estimated orders, those are firm orders that we know have been placed and will be delivered within the next 12 months.
Yeah, thank you. A follow-up on that is, you also say that towards 2025 and 2026, there's an estimated 2,500 future orders.
Yeah.
Moving on from the confidence on the 1,000 in the next year, how confident are you on the 2,500, or elaborate on how you found that figure?
Yeah. Once again, we work very closely with our customers. They, you know, speak to us on a fairly open basis and say, "Do you know what? These are our plans. These are the distribution centers that we want to move from diesel to CNG over time, and, you know, this is the timeframe we want to do it within." On that basis, we then know, okay, these are your planned orders going forward. Does that mean that they necessarily will be placed? Of course, we have no guarantees for that. But I'd look, sort of take the flip side of that as well. We know today that we've had communicated to us for 2025 and 2026 of about 2,500 trucks that we, you know, put in the category of estimated orders.
What I think is important also to understand there is that when you look at our existing customer base, as we build more stations, they will be order- they will be able to order more trucks, which they haven't communicated to us yet, so, right? So that number will, will grow likely significantly from those five additional stations that we've got there. And of course, that doesn't include any future customers. We are today running a record number of trials. At any given time now, there are between six-eight vehicles on the road constantly doing trials. Some of the demo vehicles have a wait list of close to 12 months. So as that starts to feed through as well, of course, they will want to order trucks, so that's not in those numbers as well.
So there is likely a lot of upside to those numbers, but we wanna be conservative as of today and only give the numbers that we have good visibility of.
Another 6x2, new market, are they included in those numbers?
Pretty much no. Why? Because the interest in the 6x2 is off the charts, but it's too early today to say what the quantum of the orders are gonna be. So I'll put it into perspective. Out of the 950+ firm orders we've got today, I'd say there are probably about 100 6x2s, maybe a bit more. So let's say 10%, 12%, 13% of the order book today is 6x2s. Of course, when you know that the market is 14% 4x2 and 86% 6x2, as that 6x2 really starts to kick in, we would expect there, over time, to be a lot more 6x2 orders than there will be 4x2 orders. It will take time, of course, but in the next couple of years, we expect that to kick in. Yes.
Yep. So another one here, are there any improvements in the total cost of ownership with a Bio-CNG 6x2 compared to a 4x2, or are the benefits large, largely similar?
The benefits, sorry, are largely similar. If you look at the total cost of ownership for a 4x2 versus a CNG, sorry, versus a diesel, or a 6x2, diesel versus 6x2 CNG, depending on the mileage driven, the payback period is typically somewhere between one-two years. A vehicle is kept for five years, typically. Some keep them longer, some a bit shorter, but on average, about five years. So there is a very strong IRR and cash-on-cash savings from buying and running these vehicles. Of course, once you've bought a vehicle, the largest cost component of the vehicle is the fuel.
As of today, as of February pricing, last day of February, today, as of February pricing of CNG to our customers versus diesel, that is a saving of 40%, which is huge. And that has taken us back to where we have been historically. Historically, it's been about 30%, 30%-32%. Now we are at 40%, so we are above the historical fuel savings, if you want. And once again, that is a catalyst that we expect. And if you look at the futures market, it's expected to continue, and that's another catalyst that we'll expect will drive orders going forward.
... Yep, thank you. There's another one about the stations and the customers. So how dependent are the new stations to potential customers placing large orders, large truck orders? So I guess, which one comes first, kind of?
It's the, it's the classic chicken and egg, is it?
Yeah.
You can't order a CNG truck and run it on dreams and hope. You need to run it on actual fuel, and we don't wanna build a station without having the customers there. So the benefit we've got now is we've been around for 10 years. We've got a solid, blue chip, very deep customer base that is almost every month telling us, "Build more stations, build more stations." So those five sites, yes, they are dependent on certain existing customers ordering trucks. But not one single one of the stations we have built or will build in the future is ever dependent on one customer. These are multi-user facilities that we build in typical distribution hotspots, where you have a lot of existing and potential customers around.
So yes, there are some of our customers that will place large orders and use those stations, but by getting those stations, that also unlocks pockets of demand from potential new customers, or existing customers in other locations that want to adopt. So yes, there is a chicken and egg, but because we've already got 13 stations and have these deep relationships with the customers, that risk we see today as negligible. Yep.
There's a question here about the correlation between the biomethane price and the overall gas price.
Yeah.
And I think you could add to that how the RTFCs also come into that picture. So yeah, in terms of the rebalancing of the prices in the market.
Okay, so this is probably around RTFCs and how they are priced and so forth. So the biofuel market in Europe and the certificate market that then comes off that is essentially priced off the spread, so the cost difference between one liter of fossil diesel and one liter of biodiesel. Why? Because biodiesel is the marginal blend, biodiesel is the marginal fuel that is used by obligated parties, such as the oil majors, in order to generate certificates and generate or to put renewable fuel into transport. RTFCs are the same certificates. All right? You can generate RTFCs from bioethanol, biodiesel, biomethane, hydrogen, and some other fuels, but the certificate is the same.
However, the value and the price of that certificate is determined by the spread of biodiesel versus—because that is the marginal blend fuel that drives or that sets the price. Unfortunately, last year we had this major dislocation in the market that will take time to go through, and unfortunately, we are on the receiving end because we are a price taker of the RTFCs. Biomethane, as such, is not a price-setting fuel, it is a price-taking fuel, as of today. And that's just the way the certificate market market works. And as I say, we will then need to wait for the biodiesel market to rebalance.
You know, for those online or who are, you know, reading this, reading our reports, will have seen that we've spoken about sustainable aviation fuel in the past. People say, "Well, Philip, why sustainable aviation fuel? Why is putting green fuel into airplanes, why can that have a positive impact on RTFC pricing?" Because, as I mentioned, it's biodiesel that sets the marginal price for the RTFC. The feedstock that is used to produce biodiesel is typically used cooking oil or tallow. Both of those are feedstocks that are likely to be used to produce sustainable aviation fuel. So as the demand for sustainable aviation fuel kicks in, we expect the demand for the feedstocks that are used for biodiesel also to increase a lot and should drive up the price as well from 2025 onwards.
Does that mean that we don't think prices will recover before 2025? No, we're still confident and optimistic there will be price recovery later this year, but that's just to highlight the long-term price trend that we expect into the future.
Yeah. Is there a clear correlation between the price of biomethane and the price of gas in general, you know?
No, there isn't really.
Yeah.
Biomethane has a stronger correlation towards certificate markets than it has to the price of natural gas, really.
Yeah.
There isn't a strong correlation there.
Yep. Another one on the RTFCs. Just give me a minute. So, yeah. So, have there been any changes to the proportion of RTFCs you've sold forward in the quarter based on the continued low RTFC price?
There has been.
Yeah.
Yes.
Uh, and, uh, just, uh-
Oh, sorry. I'll let you finish.
Yeah. Should we expect more sales at spot price moving forward if the market is expected to tighten?
For the time being, we have chosen to remain, I would say, opportunistic, if you want, and basically sell RTFCs in the short to immediate term markets. That means the spot market, yes.
Yeah.
As prices start to, or when prices start to increase, of course, we will then also start to future sell again.
Yeah. There's a short question on the share price here.
... I'll let Baden take that one.
Whether you have any comments to the development of the share price?
Yeah.
You can do a short, short answer on that one.
Yeah, absolutely. So yeah, the, the share price, the shares are, by their very nature, very tightly held and illiquid at the moment. You know, what are we focused on? We are focused on shareholder value. And I think that comes in a number of forms. You know, that comes in, liquidity certainly is part of that. That's for current and future shareholders. Delivering growth and delivering shareholder value, and I think that probably fits in with what we are trying to do with the new stations, with the current financing process, with the potential consolidation. And, you know, long-term shareholder value and, and shareholder growth, of course, is part of all of our- is part of our decisions.
But the current share price, based on the development of this business and, you know, enormous growth it has, is not reflective yet. But, of course, these are, in the long term, is really where we're focused, and we look forward to delivering that.
Yeah. There's a couple of questions here on the new funding,
Yeah
... so I guess you could do some brief answers to that. There's... Yeah, that one and two more questions after that, so,
That's fine.
Yeah, but just, I guess some updates on the talks with the Foresight. This may have come in before the presentation as well.
Yeah, that's fine. So as we communicated four, five, six months ago, we have. We launched a process last year to look at how can we structure our future funding. We want to build a lot more stations, clearly, which we've explained why. Stations cost money, so we need, you know, a funding structure under that. We've been looking at a number of structures, and we continue to look at a number of structures. You know, we've had certain non-binding offers provided to us, and structures, and so on and so forth. As part of that process, we've also looked at how could we, and there aren't any guarantees here, but how could we potentially simplify our structure as well, as a company?
And then we have looked at how we could bring all the stations in-house under the ReFuels umbrella, consolidate it all, make our earnings, you know, not just basically RTFC-based to some extent, but also benefit from the strong growth we have at the stations. And there we've had some very constructive and, as we've said, advanced discussions with Foresight, where we would then look to reacquire, if you could say that, use that term, but acquire the stations, bring them back into under the ReFuels umbrella. And we believe that's going to solve a number of issues. First of all, we believe those stations have a lot of pent-up value, potential value in them for the future, so it's good value creation for our shareholders.
But it also simplifies the structure and makes it easier for us to fund the rollout going forward. So we are now also looking at how can we then fund, we've said GBP 145 million, how can we fund the acquisition of those stations? And that is, of course, part of the ongoing process we've got in looking at sources of funds, but most likely that would entail, you know, a mix of debt and equity.
Yeah. Thank you. Okay, so last two questions are on RTFCs. Or one of them is on RTFO. Any developments on the government side of things with regards to blending requirements or decarbonization mechanisms, et cetera, et cetera, to move adoption ahead more rapidly or to help lift RTFC prices?
For road transport, no. For aviation fuel, yes. And as I just mentioned, there is a sustainable aviation fuel mandate coming into play in the U.K. from the January 1st, 2025. The same with the E.U. The sheer quantum of fuel, or sorry, renewable, fuel that needs to go into that sector and will then take feedstocks out of the road transport sector, is something that we're quite excited about. And as such, there isn't anything the Department of Transport could do near term or nearer term in order to lift the RTFC prices as such. The sustainable aviation fuel mandate is coming, and that, we believe, is alone enough to drive and to rebalance the market, if that is required to rebalance the market.
Yep. And building onto that, what RTFC price levels will give a meaningful positive gross profit impact for ReFuels?
So our break even... Well, I'll let you-
So, yeah, we're not... So it's an interesting asymmetrical risk, really, with the RTFCs, because of course, at certain levels, you don't go and source additional biomethane, but and you can put it off over a mass balancing period of, you know, for instance, up to a year, depending on, depending on how it's done. So the risk really is, at what point do you start generating additional revenues in the knowledge that your losses are limited? When you see a sustained low RTFC price, then biomethane suppliers, of course, lower their expectations, and some of them, of course, have to offload the biomethane.
And so even at these low prices in the 15-16 pence range, we have been able to source some levels of biomethane profitably. If once you start going north of about 18 pence, then the market really starts to open up. And as you've seen from the chart we showed earlier, as you drift towards even the low, very low 20s, you can start seeing very large improvements in the gross profit of the business. You know, when we look where RTFCs were just a year and a half ago, you know, those levels are obviously yeah, provide for extremely large earnings profiles.
But really, I think the key point is here that we need very small increases from where we are at the moment to actually drive a very large additional gross profit. And, as I say, some of the risk is not symmetrical, it's an asymmetrical risk for us. So, yeah.
Yeah. Thank you. I think that concludes... Well, that's all the questions we've had. I guess if any more questions arise, Philip and Baden are happy to respond to those via email or in any meetings that you have later on.
Thank you.
Uh, yeah.
Thank you very much.
Thank you.