Q1 2020 Earnings Call
Please standby.
Good day and welcome to be Aemetis first quarter 2020 earnings Review conference call.
This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, today's call is being recorded.
Now my pleasure to introduce your host Mr., Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis. Mr. Walk you may begin.
Thank you Melinda welcome to the Aemetis first quarter 2020 earnings Review conference call.
We suggest visiting our website at a medicine contribute todays earnings press release update a corporate presentation.
With the Securities Exchange Commission recent press releases in previous earnings Conference calls.
This presentation is available for review or download on the Aemetis Dot com on page before we begin our discussions today I'd like to read the following disclaimer statement.
During today's call will be making forward looking statements, including without limitation statements with respect to our future stock performance plans opportunities in expectations.
And expectations with respect to.
[noise], two financing activities and execution of our business plan.
These statements must be considered in conjunction with the disclosure some cautionary warnings that appear in resi SEC filings.
Investors are cautioned that all forward looking statements made on this call involve risks and uncertainties and that future events may differ materially from the statements paid.
For additional information please refer to the company Security and Exchange Commission filings, which are posted on our website and are available from the company without charge.
Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on gap.
A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended.
On March 31, 2020, which is available on our website adjusted EBITDA is defined as net income or loss plus to the extent deducted in calculating such net income interest expense.
Loss on extinguishment income tax expense intangible another amortization expense accretion expense depreciation expense loss contingency on letters on litigation and share based compensation expense.
[noise] now I'd like to review the financial results for the first quarter 2020.
Revenue during the first quarter 2020.
$39.5 million compared to $41.9 million for the first quarter up 29 Ci.
North America volume of ethanol sold during the first quarter was 15.7 million gallons [noise].
Compared to 16.2 million gallons in the first quarter of 29 cheap.
At an average price of $1.56 per gallon compared to $1.60 per gallon.
India's bio diesel price was $786.
For a metric ton compared to 300 839 per metric ton.
With tons sold decreasing two or 3540.
Sorry 3000.
554 metric ton compared to 5100, maybe to John.
Gross loss for the first quarter 2020.
It was $433000.
Compared to EUR 351000 dollar loss during the first quarter 29 cheap.
Selling general and administrative expenses decreased from $4.2 million during the first quarter 2000 $19 million to $3.9 million during the first quarter 2020.
Operating loss decreased to $4.5 million for the first quarter 2020, compared to operating loss of $4.6 million for the same period and 2019.
Interest expense, including.
Excluding.
Accretion of series a preferred units in the Aemetis I hope gas LLC subsidiary was $6.9 million during the first quarter 2020 compared to $6.2 million during the first quarter 29 team.
Additionally, Ari medicine, I had a gas initiative recognized $960000 of accretion of the preference payment honest preferred stock during the first quarter 2020 compared to.
$449000 during the first quarter 29 cheap.
Net loss increased to $12.1 million for the first quarter 2020, compared to one that wassa $10.7 million for the first quarter 29 cheap.
Cash we ended the first quarter 2022.
There have been $3000 compared to $656000 at the close.
Core of 2019.
That completes our financial review.
Now I'd like to introduce the founder Chairman and Chief Executive Officer of Aemetis, Eric Mcafee for business update there. Thank you Todd [noise] Aemetis was founded in 2006, and we've grown into four lines of business focusing on supplying low carbon and below zero carbon renewable fuels biochemicals and byproducts.
To markets, including transportation renewable natural gas and carbon dioxide.
Recently, we began shipping hand, sanitizer alcohol and refined glycerin into the rapidly as span expanding anti viral sanitizer market.
We own and operate production facilities with more than 110 million gallons per year capacity in the U.S. and India included in our protect production portfolio is 60 million gallon per your capacity ethanol distillers grain and Cornwell plant located in keys, California near Modesto.
We also build own and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin biorefinery on the East Coast, India near the Port City of Kakinada.
As you May know high quality alcohol and refined glycerin are the two key ingredients in hand sanitizer.
Hey, Medis operates the largest production plant for high quality alcohol in California, and it's one of the largest refined blistering producers in India.
The global Cobot 19 crisis said began during Q1 to 2020 provided challenges to our business, including protecting the health of our employees, while continuing to operate our California ethanol plant to supply animal feed to more than 100000 dairy cows during a time period in which the demand for biofuels decreased significantly.
Hey, Medis operates in three of the federal a central critical infrastructures and has continued to operate our California ethanol plant and the construction of renewable natural gas project without interruption.
Two large extent the ability to continue to operate our California plant well fuel ethanol demand and prices declined significantly during Q1, and then recovered recently in Q2.
Has been due to our rapid conversion of our alcohol production to produce hand sanitizer alcohol.
In response to a severe lack of hand sanitizer in late March 2020, the FDA and the Treasury Department issued an approval to alcohol fuel producers to low ethanol plants to produce alcohol for sand hand, Sanitizers, we delivered our first same size or alcohol within a few days thereafter and instead.
The old upgrades to our California plant to produce higher quality ethanol for broader personal care and industrial markets.
To our knowledge Aemetis is now the largest producer alcohol for hand sanitizer in the western U.S.
In April Aemetis receded distilled spirits producers certification and we continue to invest in the upgrading of our production facilities to achieve U.S. pharma copia and food grade quality.
For our ethanol within a few months.
Our expanding production of high quality alcohol for the sanitizer market used for hand, sanitizer alcohol wipes and alcohol sprays is expected to be a long term growth market driven by the adoption of anti viral markets and products by governments schools private industry and consumers.
About a year ago, we signed a 30 million dollar equity funding and launched a renewable natural gas project to build biogas digesters at about a dozen local dairies near our ethanol plant in California.
Constructive pipeline connecting the digesters to our plant.
And installed gas conditioning to reduce carbon negative renewable natural gas to reduce the carbon content of our ethanol production and to displace diesel by fueling natural gas trucks.
We now signed participation agreements with 17, dairies built and tested to dairy lagoon digesters at a cost of about $5 million and of designs and permitted to four mile pipeline pipeline that is now under construction to connect the dairy digesters to our ethanol plant.
In 2019, we signed financing terms sheets to funded advanced ethanol production facility in California to convert waste, Georgia would another waste biomass into about 12 million gallons of cellulosic ethanol per year.
Now on the final engineering and procurement cycle prior to completion of project financing and commencement of construction of the plant.
The combination of these gross growth and cost reduction initiatives are expected to increase our revenue to more than $500 million per year, and annual cash flow to more than $130 million per year.
This projected growth in revenues and cash flow reflects certain planned and completed upgrades of existing plants as well as planned the completion of the new dairy renewable natural gas and waste would ethanol production facilities.
With a consistent supportive, California regulators and continued strong, California, low carbon fuel standard credit crisis.
Medicines made positive progress in each of our four businesses during the first quarter of 2020.
Let's first review our biodiesel business in India.
After two years of investment in construction, we completed the upgrade of our India plant in 2019, including installation of a pretreatment unit to process lower cost and waste feedstock into will.
The biodiesel and refine goes from plant is now fully commissioned using the new feedstock pretreatment unit, the new boiler unit and other upgrades that enabled expanded plant operations toward full plant capacity of 50 million gallons per year.
The stay at home order in India has restrict restricted our production, but we continue to ship biodiesel and refined glycerin from inventory. This month, we expect to begin production at the India plant to meet expanding biodiesel and refined glycerin needs in India.
Though the global price of diesel has declined along with the price of crude oil the domestic price of diesel in India has remained largely unchanged due to the increased India government taxes that offset crude oil price declines.
Since our biodiesel sold to the price linked to India domestic diesel prices are biodiesel prices in India have remained steady despite the significant decrease in the price of crude oil. In addition, refined glycerin prices have increased in response to the to the need for hand sanitizer another consumer products.
In may of last year, we announced our Universal Biofuels, India subsidiary was awarded a 23 million dollar biodiesel supply contract with the three India government owned oil marketing companies in the public tender process.
Additional oil marketing company purchased request for biodiesel have been issued for year 2020, and the award in supply agreements should occur in the next month, we expect to continue to participate as a key supplier under these biodiesel contracts.
During the months of December and January the primary constrained on biodiesel revenues growth in India is a seasonal colder weather from lower winter temperatures and the high cost of feedstock in late 2019 has now decreased significantly.
Our three businesses in the U.S. have achieved major milestones toward increasing revenues and sustained profitability.
Let's review, our California ethanol business.
Similar to our strategy in India, where we added a technology has allowed the use of the lower cost we used to beat stock to produce biofuels, we've been upgrading our keys, California ethanol plant to lower input costs reduce the carbon intensity of our biofuel and significantly increased the value of the ethanol we supplied to the 1.5 billion gallon, California.
Ethanol market and now the sanitizer alcohol market.
To produce higher quality ethanol for the sanitizer market.
Installed carbon filtered units and now we're doubling the amount of carbon filter systems. This week.
We are also engineering and planning to install upgrades to our distillation system in order to produce high quality of alcohol that exceeds U.S. pharma cobia and food grade standards in the third quarter of 2020.
The second upgrade to the Keyes plant has now been completed in early May we announced the completion of construction and commencement of commercial shipments of Seo to to the newly constructed messer gas plant next to our ethanol plant to capture and reuse carbon dioxide.
After three years of project development Messer leased about five acres owned by Aemetis adjacent to the Keyes ethanol plants to build a CEO to Liquification plant. We're now converting more than 150000 tons per year of renewable Seo to produce buyer ethanol plant into liquid Seo too for sale to local food.
Processors beverage producers and other CEO to industrial users.
Ethanol plants produce about 40% of the C or two in U.S.. So a significant national shortage of C. O. Two has occurred due to the shut down or idling of ethanol plants.
About 1.5 billion per year of cash is expected to be received from zero to sales and the land lease for the CEO to plant.
We also expect to qualify for Seo to carbon credit capture and reuse federal tax credit that we calculate isn't it initially worth about $4 million per year and gross to 6 million per year over the next five years under the IRS 45, Q rules. We're currently working on an arrangement to monetize the tax credits where they financial partner.
The third upgrade to the Keyes plant is the construction of an 8 million dollar membrane dehydration system financed by Mitsubishi chemicals, Japan, and a $1.5 billion PGT grant as a strategic implementation of the Mitsubishi Zebra ex technology for the first time at a corn ethanol plant.
The Mitsubishi unit Mitsubishi unit was delivered to the Keyes plant in late February 2020, edits and is in the installation process.
The ethanol dehydration unit is designed to significantly reduce petroleum natural gas usage and decrease the carbon intensity of our ethanol and once implemented is expected to generate an estimated $3 million per year of increased cash flow.
A fourth to upgrade to the Keyes plant is a solar micro way array and artificial intelligence energy management system that received an $8 million grant from the California Energy Commission. The solar system will decrease the carbon intensity of our biofuel through the use of solar energy to displace hydrocarbon energy sources.
This upgrade to the Keyes plant is a high efficiency heat exchanger project that was awarded a 1.3 million dollar specific gas and electric grant.
And the six to upgrade to the Keyes plant is mechanical vapor Cumbria compression system that was awarded a $6 million grant from the California Energy Commission that is expected to reduce natural gas use significantly.
These projects at the Keyes plant are targeted to reduce petroleum natural gas usage.
And costs by up to 80%, while increasing the number of low carbon fuel standard credits generated each year. The combined impact of these projects is expected to be a $30 million per year increase in operating cash flow at the Keyes plant not including any improvement in profit margins, they're expected to occur if.
The EPA decides to enforce existing federal Biofuels loss.
Let's briefly review, our impetus biogas dairy digester and pipeline project.
Methane, commonly known as natural gas is a potent greenhouse gas that is up to 30 times more powerful than carbon dioxide at carpe, capturing earth heat.
About 25% of California methane emissions are from the waste coupons on dairy farms to.
To reduce damaging methane emissions in late 2016, California passed a law known as Senate Bill 13, 83, the mandates the capture bio gas from dairies.
Methane source from dairies can be used to replace gasoline or diesel fuel and trucks and buses to significantly reduce carbon emissions and air pollution.
Along with the state mandate, California is funded about $75 million of annual matching grants to dairies to build biogas digesters and related systems.
We believe that capturing biogas dairies in converting it into renewable natural gas to generate negative carbon intensity biofuels is an excellent way to reduce climate change and create value for dairies, while lowering cost for diesel truck fleets and electric vehicles.
Based on our existing animal feed supply relationships with about 100, dairies and the ability to use bagasse in our plant until utility pipeline approvals are obtained and pipeline injection is completed we believe that a medicine is uniquely positioned as one of only three ethanol companies in California, who can use existing infrastructure in this manner.
After more than a year project development and financing were work last year, we announced $30 million equity Vance financing and a grant award from the California apartment food and agriculture of two matching grants for a total of $3 million to build the first two dairies in our biogas project.
Construction of the first two dairy Digesters is now completed and we are now building the four mile pipeline to connect the digesters with the Amedisys ethanol plant with an expectation of beginning renewable natural gas revenues during late Q2 2020.
We have signed 17 participation agreements with dairies and plan to complete construction of the next 15 lagoon digesters by approximately the end of year 2021.
Let's finish with an update on our below zero carbon Cellulosic ethanol project and Riverbanc, California.
We were pleased that the Amedisys advanced by our refinery under development and Riverbanc, California near Modesto was named as the number one waste devalue projects in the world by Biofuels Digest.
The world's largest daily Biofuels publisher.
The menace project earn its number one ranking as result of our fixed price.
Low cost almond and Walnut wood waste contracts for 20 years, where the cost of about $20 per ton for the first half the contract period.
Planned production of high value say look ethanol expect to be worth more than $5 per gallon.
As well as valuable fish meal and other by products.
And our use of the Pat did lanzatech gas microbe ethanol production technology.
The Lanzatech technology is now in full commercial operation at a plant that opened in 2018 in northern China that converts waste gases from a steel plant to produce ethanol.
During 2019, we announced three significant financings related to that Riverbanc project a.
Hey, $5 million, California Energy Commission Grant to fund the engineering and equipment.
$12.5 million tax waiver that offsets equity funding required for the project.
And the signing of a 125 million dollar US department of Agriculture conditional commitment letter for a 20 year debt financing under the nine 003 by refinery program.
We are working to update the U.S. da loan to match the current capital expenditure budget for the project.
We are focused on completing engineering of the plant required for the negotiation of the EGPC contract that will include a bonded maximum construction costs.
The Riverbanc Cellulosic ethanol plant is expected to generate more than $80 million of revenue in more than 50 million per year.
Positive cash flow by producing cellulosic ethanol from low cost waste Orchard vineyard forced in construction demolition of wood as feedstock.
Financial closing to begin construction of the Riverbanc plant is dependent on completing the engineering and procurement work required for the signing of the construction contract.
In summary, we believe that Aemetis holds a unique position with the production of both higher quality ethanol and refined glycerin for the rapidly expanding sanitizer market.
We also have diversified production of low carbon renewable fuels into attractive markets in California in India.
The profitability in hundred 20% revenue growth at our India plant. During 2019 was achieved while repaying 100% of our long term debt in the India subsidiary.
The increase margins from plant upgrades related to the keys by refinery are expected to beginning to begin to be realized in Q2 2020.
The Metis biogas dairy digester and pipeline project is expected to begin first gas production in late Q2, 2020, and our plan deployment of the patented Lanzatech Cellulosic ethanol technology at the Riverbanc plant has positioned aemetis to rapidly produce expanding positive cash flow from the production of low carbon clean burning.
Hi performance renewable fuels from abundant low cost waste biomass feedstock.
Now, let's take a few questions from our call participants Melinda.
Thank you Mr. Mcafee, we will now be conducting a question and answer session. If you do have a question. Please press star one on your telephone keypad to join the queue, if you're using a speakerphone. Please pick up your handset to provide the best sound quality again, ladies and gentlemen, if you do have a question or comment. Please proceed.
Well I'm not in your telephone keypad.
And then pause a moment to assemble the queue.
And it looks like our first question will come from Ed Woo with Ascendiant capital capital. Please go ahead.
Yeah. Thank you for taking my question. My question is on the file gas project, you mentioned that it's kind of start up.
And late second quarter, which is I guess the current corner on how quickly would that ramp up in terms of our revenue.
We are going to have two dairies online so our initial revenue would be.
Pretty rapid ramped to.
Roughly 20% of our projected revenue for the project.
It's about 18% of the project revenue and then as additional dairies come online over the next 18 months, we'll do this displacing a rapid ramp up that rapid ramp up starts in early 2021.
But.
We are we're awaiting an additional grant application we have filed that will.
We expect to have announced in September soon after that we will be it a full construction pace that really will be no.
Nothing we're waiting for to complete the remaining.
Dairies to end up with about a dozen dairies in this first phase.
Great and then I'll moving back to India, you mentioned that Youre flat.
I guess.
[laughter] dependent but you are expected to is now.
And now this month.
That's our current expectation they've relaxed a lot of the conditions and frankly they've they've.
Approved the.
Operation of our facility in India, So where are they in the process of just getting things organized in Bakken production. The demand for diesel is increased nicely in the price of course and never really decrease so it's an attractive market for us and we're looking forward to getting production going again.
And then in terms I mean again, not shutting down the line and starting to pop back up again is there any technical challenges that or is it has.
Once you start it you'll be able to get back up to full production pretty quickly.
Yeah, we actually have a maintenance cycle every winter already and we already did the re commissioning. So we're we're basically already.
Through that process of being ready to restart so it's a rather quick process.
Great and then.
Coming back to you I guess your ethanol plant congratulations on being about.
The change in skewed.
Hi, good market in ethanol Mark how difficult was it for you to be able onto.
Yes crop fuel ethanol into the hands as that market and haven't completely shut down 100% on your business or are you still selling.
Ethanol into a few market as well.
The shift is very difficult.
For fuel alcohol producers to do because there is a combination of.
A variety of qualities that that come out of the fuel ethanol plant nobody really cares what the owner of fuel ethanol is because you blended with gasoline obviously.
And so odor matters, a tremendous amount in this market as well as there are some carcinogenic and in a few alcohol.
Assets held the highs as one that has been focused on by the FDA.
And on April 15th after about two weeks of operations by the fuel alcohol business, the FDA actually issued a notice.
Stating that fuel alcohol producers could not produce for the fuel for the a hand sanitizer business.
Unless they went through three steps with the FDA, which included disclosing the composition of their product. The FDA then one about closing down plants that had higher levels of assets aldehyde, it's a carcinogenic and obviously not very good thing to have in hand, sanitizer, so having a consistent quality.
And being low assets held the highest another.
Components. The FDA is not interested in seeing enhance antennas or is not an easy task.
It's one of our reasons why we have doubled our carbon filtering capacity. This week, which is a another substantial investment we've made is to.
Achieve what we seek to be which is the highest quality alcohol fuel producer product and then within the next couple of months be in a position to be shipping the traditional F.D.A. quality medical quality.
And.
And food grade.
Alcohol. So we're basically through a going through a process of of a variety of changes that at every change improve the quality and consistency of our product and by mid summer are seeking to be.
At a very high high quality products, which actually open up more markets even beyond sanitizers. So it's a is expansion of the business into a an entirely new industry.
That is it's been done and completed really during the this the stay at home orders. So you can imagine the issues of launching a new industry, where you don't know who the customer is and conducting a substantial amount of.
Transactions without ever meeting them. So we've we've achieved that.
Continue continue along that path.
Just a clarification.
Sure.
The NOL currently meeting.
The requirement or will that meet.
Hi.
We currently meet the FDA and TTB requirement that were issued for alcohol fuel fuel producers there is a separate.
[music].
Set of rules that were in place prior to late March 2020 that we expect to meet over this of course this summer as we complete a distillation system upgrades et cetera. So then the temporary waiver, which ends December of 2020.
We'll no longer be relevant to us so our target is to try to be.
Six months ahead of the termination of the alcohol fuel producer quality standard and be producing at the food grade standard long before other companies might have a chance to make the investments to get to the standard.
Great.
Hi, My last question is just on.
Economics.
And now have you sell into the hand, sanitizer market comparable to selling into your market.
No it's definitely different market. So we are there's a lot of price discovery going on in that market and we will see see out matures because it will continue to change as we go toward the U.S.P. and FCC grid sets the pharmacopeia in food grid. So we'll see over the next.
This quarter or to how the the pricing matures.
Great and one last question if I may just love to hear your view on no oil market analysis.
Thanks, a lot.
<unk>.
I'm just curious what's your current year.
Current view is that we're going to see it rebounded gasoline demand, which we've already seen.
Dramatic increases in any other.
Market.
But.
There was a significant decline so the perception here will be of increasing gasoline demand at the same time, the Saudis I think it's finally.
I figured out that they can make more money selling 6 million barrels a day than they can making 12 merrell million barrels a day.
And so with that constrained in the market and other participants in opex participating along with them. We've we saw price oil went from $12 to $25 in a top 10 trading days. So my personal view as there's plenty of oil in the world.
That theres, they're shale oil available at $30, a barrel that will act as a lid on the market and so we're probably in a $30 oil market for quite a long time as the Saudis.
And the Russians constrain.
Production and the shale oil folks continue to produce and so 25 to $30 oil will probably be here for a while at the Saudis and others get serious about pricing of crude oil gasoline demand is absolutely recovery Theres no question about that and so sometime later this year.
Could be as early as a third quarter, but may be the fourth quarter. The Saudis, we'll be back in control of the price of oil that point in time, it would be not surprised at all to see a 40% to $6 price oil.
If the Saudis are very committed to this they'll get a $60 price oil, but they ended the year simply by putting a crimp on the the global supply of oil and forcing the shale guys.
To try to get more capital from the debt markets, which they will have a very difficult time doing so the play for the Saudis is to best the shale oil guys can't keep on running their rigs having scared the market so badly and I think that that will win.
So is the Saudis are serious will have 50 or $60 crude oil by the end of the year.
Because the shale oil guys, which have to have 70% to 80% decline rates in the first year. They have to invest a massive amount of capital to keep drilling more wells and we could see a rapidly increasing the prices of crude oil if the saudis decide to.
Great well, thank you and good luck.
Thank you appreciate it thanks it next.
I apologize next we go to Shane Martin with Stonegate Capital Partners. Please proceed.
Hey, guys. Thanks for taking my questions I'm, a quick follow up to I forget before me it looks like less than 3% of your revenue was from that high proof alcohol. This quarter and again kind of a quick follow up can you give me kind of an idea on how much output you guys would be targeting there and then also an idea.
You have maybe some of your customers in that market is it it had several kind of intermediaries right now or is it one singular purchaser at this time.
The there were only I think.
Two or three days in the first quarter that included alcohol shipments because the approval was on March 27.
And.
Our expectation is we're going to have a blend of sanitizer product and fuel product.
Until we get to a U.S.P. grade and FCC grid sometime this summer.
At which time, it's very possible that a large percentage of our product is actually going it sanitary thais or product line and a very small amount just mostly for balancing would be going to fuel ethanol. So I see it is a upward trend we have had.
A dozen or more customers probably by the customer list is probably more than.
Probably weren't 15 customers.
And so we do have some large customers, but we have an emerging market, which new.
New new markets are opening up for us that did not exist before and theres into our customer bases that are coming from those markets, including international markets. So I expect the business in the second quarter will will be maturing with sustained high quality products from us and then the third quarter when we hit you SP.
I think it's going to stabilize with a stable of probably 10 to 12 ongoing consistent customers and.
A much much of our production would probably be going to that market. If it matures the way we think it will.
Great and then my next question is you guys mentioned on the carbon dioxide capture system than it should benefit you know about one and a half million annually to you is there any sort of ramp up there and then again you know assuming that there's some sort of switch over in.
To.
The the alcohol market would you still expect to have kind of that sort of annual.
Annual revenue from it as well or what did decrease or increase.
Good questions the $1.5 billion under long term contracts and we don't expect that to change much. The we do get an additional $4 million tax credit that working on monetizing that grows pretty much every year for the next five years to a little over $6 million per year and so the.
The overall revenue opportunity irrs in excess of 75 million per year, but the.
Production of hand, sanitizer or ethanol does not really impact the amount of Seo too we produce.
It's all as the factories running at capacity, we produce the same amount of Seo too. It's it comes off the fermentation process.
Okay great.
And then kind of switching gears over to the India side can you give me a feel for what percentage of the sales volume decrease was due to the repairs that you guys have just kind of general scheduled maintenance.
And then what was attributable to the actual kobin related shutdowns any kind of color there.
I would say repairs, which were completed in early February would have not had a much impact. It was the inability of restarted in February and operate February and March that is largely the result of the volume.
Declines in India, and so we would have expected to have a tremendous amount of product flowing in late February and only through March literally at twice the rate of the prior year. If we wouldn't have not had this shutdown.
Okay, Great and then I'm just last question can you give me any color for this year on kind of working capital needs over this year, and then as well as any capex expectations that you guys have.
Working capital has.
Ben.
Well in one on one hand term operations were funding an increased amount of our working capital where we've been able to pay down several of our key vendors. India's is already debt free from the term loan perspective and sits.
Substantial amount of cash so we have in California kind of replicated what our status as in India and reduced our amount of.
Cash that our vendors have extended to us and in so doing have invested more in our working capital, but we've done that all through positive cash flow from operations.
And we're expecting to fund our capital expenditures from a combination of three things cash flow from operations as well as the $21 million for the grants we received and the 30 million of equity that is already in place and has already been.
Partially drawn about half of its been drawn already so at the current time were fund fully funded for all of our AR.
Activities, except for the Riverbanc project, which requires some additional.
Funding, which we've described in our our project financing.
Plans, but the the other activities we have.
Are largely in place.
I'd say largely because there they are subject to future financings to hasn't closed yet and we almost always should throwing the cobot 19 conditions and in talking about future financings.
Okay, great. Thanks for taking my question guys.
Sure. Thank you Shannon.
Next we go to private Investor Tom Watch. Please proceed.
Okay.
Thank you.
Great call.
Hi, really only one question everybody else covered.
Well I have.
Do you have any.
Get your refinancing plan.
Well that you're working on that you can talk about the site you'd be five.
I wouldn't say that he be five had as you saw on our earnings release. This morning, and the quote that I put in it had a major major breakthrough that should be.
Understood by all investors.
In the EB five program there as a category called National interest expedite that takes what is otherwise a up to three year process of industry are getting their application reviewed and then being able to move the U.S.
Down to a 90 day process, that's what the regulation says.
And so to be sitting in India, when a shutdown condition and have the prospect that within 90 days you could be approved to move the U.S. and since your kids to use schools and go spend time with your family members.
Yeah, it's a dramatic change in the attractiveness of our process and we have had a.
Several hundred new interested investors happen each investor is $900000 of investment by the way.
And so.
We in our job studies have 200 investors that we showed our our plant qualifies for and so if you just to do the math you could find its a tremendous amount of capital for our business at 0.25% interest rate and the first phase of our funding, which we raised.
Approximately 35 billion from largely happened in one week. If you really are following the company you'd notice notice that.
We went to China, and one week two sets of weekends, we oversubscribed that entire offering it was a window of time, which things lined up and though years and past we closed that large largely the entire 35 million in that one week.
This is not one week, but the pace of interest the pace of excitement the the cobot 19 shutdown restrictions in foreign countries and how it's affecting people.
Has definitely significantly increased the interest and the real activity of people investing and so I think investors should be fully aware of its of its impact on the company and that those funds flow directly to.
The reduction of our senior secured debt, which is a bridge financing we used to fund these projects.
Secondly.
The financing of our Riverbanc project, which has a you sta loan and also mentioned administers bond market.
Has a component of those proceeds it also reduces our our debt by refinancing it into 20 year.
Relatively low interest debt with no principal payments for.
Two year period, so that is as the impact of reducing our expensive senior debt, replacing it with.
Long term lower cost debt.
Other than that we do not see the bond markets or the high yield credit marks as being open to ethanol plants at this point in time and certainly if it was we would be very active there, but currently we don't see that those refinancing alternatives are available.
Very good.
Just a clarification.
The be five to financing was.
Post at $15 million.
Any that minimum required.
No that's not from 500000 900000, our investor.
And there are I believe.
You are qualified for up to 100.
Yeah, so hence the five phase two financing gone from 59 to 90 million.
We're actually in our what's called the exemplar, it's our business plan and project proposal that was approved by the government.
It's actually 200 investors, but theres a function of the market specifically the Chinese market.
That used to be the most aggressive funding of this 85.
Set of projects in which they wanted to have significant.
Coverage.
Because most projects never produced the number of jobs that were approved by the government.
And so a project like ours with 200 jobs being created.
I'm, sorry, 200 investors.
He be five opportunities being created when its market in China, you would typically go out and say.
We have 100 slots available and then just increased number of slots. After those hundreds are taking care of we did that in our first offering and increase the offering by about 20%.
The Chinese and no longer in this market really it's now primarily Indians in other countries and because we have a plant in India, we have a lot of credibility.
Compared to other other project developers and because we completed our first project completed all the jobs actually exceeded the number jobs. We originally projected and all those investors have now been approved in many of move to the U.S. were considered to be a proven developer, which opens up the opportunity for us to do 200 investors because.
We don't have to market the idea that we might not achieved the number of jobs available and at $900000.
I'd say as in additional amount of funding that.
Isn't under the more conservative.
Service model, so we're going through a gradual process of of obtaining investors filing with the U.S. government doing it the amendments as it grows and the project is is under construction. So you create jobs as happens which.
Contingent continues to build confidence so we're seeing a replication of what happened last time, but this national interest expedite.
Was a an effort that.
Took us about a year and a half and as now succeeded.
And we I believe are the only national interest expedite that we know up this been approved for last year or so except for a casino and Guam and it's considered to be in the national interest because it was a entertainment facility for military persons personnel that didn't have a lot of alternatives in Guam. So they got a small amount a proof.
As national interest expedite so it's a it's a major breakthrough that we worked on for for more than a year and a half and in spite of of many.
Lets call. It rejections, we were successful getting that achieved.
Hi, good that ends my questions. Thank you.
Sure. Thank you appreciate your time.
And we take our last question or comment from Masimo steel Rolla private Investor you May go ahead.
And loyalty.
Okay. So long I won't make my goal.
Yes.
So yeah I'll go ahead.
You bet we're.
All right did you cycle.
You bet Beagle that had been identical body and weight reduction by you.
Yeah I don't.
No.
Recall that.
Tom will catch up and I don't Goodbye.
Hey, Paul will perform when all that I'll.
No I'm not.
Topicals and Uh huh.
So.
Got a little well nominate building up.
So I will walk you know not from Bostco for how many.
No.
Okay, and then you cheap.
And then there.
Yeah.
The quarter.
Thank you Masimo good to hear from you.
We are definitely getting a higher price for the.
Sanitizer market than we are getting in the fuel ethanol market. There's a lot of price discovery going on in the marketplace. So the range of prices is quite wrought wide, you mentioned 50 to $100 and and actually that's true at retail.
Even discounted pricing is considered to be reasonable it sits in that 30 or $40 range and there's many prices that are in excess of 100, when you're buying it in a smaller product sizes, such as two to four ounces.
But this this is a market in which we are a major player in the western United States and Oh, we entered the market as a supplier of just the alcohol itself.
We see the market maturing in which we're partnering with major customers to make them successful in the market and that's really focusing on quality. So I think we're at the.
Phase in which upgrades to our plant and our ability to.
Sustain a high quality will have a big IP impact on our ability continue to supply the marketplace in the continued to be a leader. So we'll see as this quarter of completes and we report our financial returns.
How that market matures, but I really do think that the third quarter is when we become a.
Regular player because of the U.S.P., an FCC grades that we expect to be shipping at that point in time until then we're at a transitional market with a lot of up and down in terms of of.
Customers desire for product that really the alcohol producers don't make and so.
It's a it's a transitional quarter, we're in right now.
Regarding our.
Number gallons et cetera, it's it's very very volatile. So we will get to end the quarter and then report what it is and I think it's one of those things where you get out and you.
Ship, a lot of different customers and learned a lot about the market and we've done that very successfully.
And then in the third quarter I think we're going to stabilize by focusing on a small group of maybe it doesn't customers and longer term relationships that are coming out of that.
But they also from very nice how many gallo.
We feel like say manageable Alexa.
Yeah, it's pretty volatile so it's a day to day numbers are all the players.
Okay. So.
Based on that I want to ask you need somebody out there and what I'm going on.
Now back.
Sorry.
Yes.
I mean there.
He said we'd be complied now we'd be good when you go up.
Well being advanced in Boston.
Maybe not stocker overnight.
Yes.
I would.
No.
That's very very low.
No not like something.
Andy.
So you can be like what excess.
Both.
It means that.
You bet by banks like that.
Well good Shannon.
Sure I quoted will be will be but I got you know you manual to you will not be able to talk to you.
The GAAP.
And so I.
New product ROI.
Dan.
Well I.
According to bed Bath, <unk>, who I mean, you said you bet on that.
Hey, Bob.
Okay and buyback program.
Okay and couple of these won't repeat.
Paul do you and will improve these well now.
As it actually has gone well be well, they've really been Bakken and book usually right.
Sure.
Right NASDAQ has extended our time window passed the original time period of by an additional 90 days.
I have a large number of NASDAQ listed companies that due to the cobot 19.
Crisis.
Would be de listed off a NASDAQ so they have extended it voluntarily we didn't apply for that or anything it. They just gave us they gave US extension. So we're talking about approximately late August or so and we can apply for an extension after that so.
We're not currently concerned about the dollar price, we think just our performance will solve that pricing issue.
Okay and that both the but based on where you will go back and <unk>.
Well.
I'm, sorry, so that again.
Ben Ben Thanks.
Hi, good off mall.
Yes, I'd go back on that plan.
But that's all good I'm going to me you set out for Google So far I, maybe so I won't be.
Any sense that maybe you can do and bendeka.
Buyback of shares is absolutely in the shareholders' best interest.
At such a low stock price, we think the market largely doesn't understand.
What's happened in the fuel ethanol business and then of course in case of medicine doesn't fully comprehend the positive impacts of number of things, we're doing but I think they will come to understand it as they see the.
A combination of increased.
Cash flow from operations and a refinancing of debt so.
Our expectation is it appropriate time that a stock buyback would would absolutely being the best interest that shareholders and we are considering that.
As our our board of directors looks at a shareholder.
You increases that we could achieve certainly as a shareholder buyback will be something that what would cause a tremendous amount of shareholder.
Value to be created we're buying their shares at extremely low value low prices.
Okay. Thanks, Phil.
Sure. Thank you must smelled good luck with what you're doing in Italy.
Thanks.
There are no further questions at this time I'd like to turn the floor back over to management for closing comments.
Thank you Melinda I appreciate it very much.
Thanks to a matter shareholders analysts than others for joining us today, we look forward to talking with you to continue our dialogue about the growth opportunities at Aemetis.
Thank you for attending today's Aemetis earnings Conference call. Please visit our Investor section of the Medis website.
Where we will post a written version in an audio version of this Aemetis earnings review and business update Melinda.
This concludes our teleconference. You may disconnect your lines at this time. Thank you for your participation.
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