Q2 2020 Aemetis Inc Earnings Call
[music].
Please standby.
Welcome to be Aemetis second quarter 2020 earnings Review conference call. At this time, all participants are in a listen only mode.
Brief question and answer session will follow with a formal presentation.
As a reminder, today's call is being recorded.
It is my pleasure to introduce your host Mr., Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis Inc. Mr. Waltz, you may begin.
Thank you Melinda welcome to the better second quarter 2020 earnings Review Conference call. We suggest visiting our website at Aemetis Dotcom to review today's earnings press release updated corporate presentation filing with the Securities Exchange Commission recent press releases and previous earnings Conference calls.
This presentation is available free viewer download on the Aemetis Dot Com home page before we begin our discussion today I'd like to read the following disclosure statement.
During today's call will be making forward looking statements, including without limitation statements with respect to our future stock performance plans opportunities and expectations with respect to financing activity and execution of our business plan.
These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our 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 made.
For additional information please refer to the company's Securities Exchange Commission filings, which are posted on our website 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 GAAP, a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release.
For the quarter ended.
At June 32020.
Which is also available on our website adjusted EBITDA as defined as net income or loss plus to the extent deductible in calculating such net income interest expense loss on extinguishment income tax expense tangible and other amortization expense accretion expense depreciation expense.
Loss contingency on litigation as share based compensation expense.
Now I'd like to review the financial results for the second quarter 2020.
Revenues were $47.8 million for the second quarter 2020, compared to $50.6 million for the second quarter 2019, driven by the entry into the high grade alcohol market, but slightly offset by the delay in the India government oil marketing company biodiesel bidding process gross.
Profit for the second quarter, 2020 rose to $14.1 million compared to a gross profit of $3.3 million during the second quarter 2019.
The North America segment accounted for $13.9 million the reported consolidated gross profit.
Selling general and administrative expenses were $4 million during the second quarter of 2020 compared to $3.9 billion during the second quarter 2019.
Operating income increased to $10 million during the second quarter 2020, compared to an operating loss of $762000 for the second quarter 2019.
Interest expense during the second quarter 2020.
Was $6.2 million, excluding accretion in connection with the series a preferred units in the Aemetis biogas LLC subsidiary compared to $6.6 million during the second quarter 2019.
The Aemetis biogas subsidiary recognized $1.4 million of accretion in connection with preference payments on its preferred stock.
Net income was $2.2 million for the second quarter 2020, compared to a net loss of $13.9 million for the second quarter 2019.
Adjusted EBITDA increased to $11.2 million for the three months ended June 32020.
Cash the end of the second quarter 2020 increased to $3.4 million compared to $600000 at the end of 2019.
That completes our financial review for the second quarter 2020, now I'd like to introduce the founder Chairman and Chief Executive Officer of Aemetis, Eric Mcafee for business update Eric Thanks, Doug.
Most was founded in 2006, we have grown into four lines of business, which were focused on supplying health products, including high grade alcohol refined glycerin blended hand, sanitizer gel and liquid as well as packaged sanitizer products.
Renewable fuels, including low carbon and below zero carbon ethanol biodiesel waste would ethanol and by products, including carbon dioxide and corn oil.
Dairy biogas, including renewable natural gas for transportation fuel and technology development to maximize the value of our products and processes, we own and operate production facilities with more than 110 million gallons per year of capacity in the U.S in India included in our production portfolio is 65 million gallon per year.
Great alcohol fuel ethanol distillers grain and corn oil plant located in keys, California near Modesto.
We also build own and operate a 50 million gallon per year capacity refined glycerin and distilled biodiesel by refinery on the East coast of India near the Port City of Kakinada.
Medis made positive progress toward increasing revenues and sustained profitability in each of our four businesses during the second quarter 2020.
Let's review, our new Aemetis health products business, which grew rapidly during the second quarter as well as our fuel ethanol business, which turns strong profit margins during the end of the second quarter.
In response to a national shortage of hand, sanitizer used to slow the spread of the code 19 virus.
In late March 2020, the FDA and the Treasury Department TTB agency issued temporary regulations, allowing fuel ethanol plants to produce alcohol for hand sanitizer.
Responding to this approval and the spike in demand for sanitizer products Aemetis delivered our first sometimes or alcohol within a few days thereafter through and post processing arrangement. There was formed with the local wine and spirits producer.
Then installed upgrades at our California plant to produce higher quality ethanol for broader personal care and industrial markets.
Very quickly renal route we realize that a major differentiator between our company and other ethanol producers is that they would have to transportation transport alcohol for sanitizer from the Midwest to California, using fuel ethanol trailers on railcars, which are often contaminated with benzene and other dangers chemicals.
From the gasoline that is used the DNA trend in fuel ethanol.
We quickly ranged a 2.1 million dollar lease purchase a 15, new bulk trailers with our trucking company to be used solely for the transport of Aemetis high grade alcohol, allowing us to deliver up to 30 loads per day of alcohol to California, Blenders and bottlers from our Central Valley plant without using any trailers.
Dedicated fuel ethanol or gasoline.
In addition to using new both trailers are California high grade alcohol plant location is about 2000 miles closer to customers in California.
Aemetis has a permanent cost advantage over Midwest ethanol producers due to our close proximity to western use markets, especially when government agencies researcher restrict the use of railcars.
And tanker trucks that previously carried petroleum products.
As you May now high quality alcohol and refined glycerine are the two key ingredients in hand sanitizer another sanitizer products.
During Q2, we began shipping large quantities of hand, sanitizer alcohol from our plant in California, and refine Glus run from our plant in India.
Into the rapidly growing sanitizer and personal care markets.
To expand our product line and supported growing list of customers in the U.S and Canada.
We recently launched the Amedisys health product subsidiary to manage the development production and marketing of our sanitizer products.
After implementing a number of upgrades at the California ethanol plant, we believe that Aemetis now operates the largest production plant for high quality sanitizer alcohol in the Western US while also owning and operating one of the largest pharma copia grade refined clusterin production plants in Asia.
The global Cobot 19 crisis that began during Q1 2020 and caused operational shutdowns for many businesses. During Q2 2020 also provided challenges to our business protecting the health of our employees, while continuing to operate our California ethanol plant to supply animal feed to more than 100000 dairy cows occurred during.
Time period in which the demand for Pete Biofuels decreased significantly due to the steep decline in gasoline consumption during shelter in place orders.
However, and Aemetis operates in three of the federal essential critical infrastructures and continued during both Q1 and Q2 to operate our California ethanol plant in order to provide transportation fuel one alcohol for Senator for 10 sanitizer products, while continuing the construction of plant upgrades and.
Building, our dairy renewable natural gas project without interruption.
Two large extent the ability to continue to operate our California plant, while fuel ethanol demand and price declined significantly during Q1.
Was due to our rapid conversion of ethanol production to produce hand sanitizer alcohol.
Followed by a late Q2 strong recovery in the price of fuel ethanol.
In April and Metis receded distilled spirits producer DSP permit from the TV.
With the DSP permit a mediscan sell high grade alcohol into other markets in June we began to produce food chemical code us kodak's known as FCC food grade quality alcohol at our Modesto plant, we began shipments of FCC grid alcohol to Canada during Q2, and we continue to invest.
In the upgrading of our production facilities that we believe will allow us to achieve use pharmacopeia grade alcohol in Q1 2021.
Our total investment at upgrades for the production in storage of high grade USPI alcohol is expected to be approximately $15 million of which more than $12 million has already been funded or will or will be reimbursed by grant funding.
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 products by governments schools private industry and consumers.
To increase the value of our high grade and fuel ethanol and to reduce the cost of operation of our production plant.
We are currently implementing several upgrade projects related to the California plant, including.
Number one.
Building, two new distillation columns and related systems to produce high purity us pharmacopeia, great alcohol for Sanitizers known as you SP grade.
Number two installing five new segregated stainless steel tanks for us PE high grade alcohol storage and loadout, increasing our storage capacity by more than 250000 gallons number three.
Completing the installation of the new 7 million dollar zeolite membrane dehydration unit from Mitsubishi to reduce natural gas use at the alcohol plant by replacing our molecular service with electrically powered equipment, which will reduce the carbon intensity of our fuel ethanol and is partially funded by a $1.5 million energy.
The efficiency grant.
Number four adding high efficiency heat exchangers to reduce natural gas use at the alcohol plant reimbursed by $1.3 million energy efficiency Grant.
Number five installing a solar panel micro grid array with battery backup and an artificial intelligence Teligent energy management system to replace natural gas with solar electricity, while optimizing energy used throughout the alcohol plant, primarily funded by an $8 million, California Energy Commission Grant.
Number six designing and building a mechanical vapor re compression or known as MVR system to significantly reduce petroleum natural gas use partially funded by a $6 million, California Energy Commission grant.
Number seven constructing a dairy biogas digester cluster and pipeline to deliver renewable natural gas to the alcohol plant from an initial two dairies. This year with plant expansion to an additional 15 dairies next year, along with an interconnection to the utility gas pipeline.
This project is planned to generate approximately $25 million per year of operating cash flow as being primarily funded with $55 million of automatically redeemed preferred equity issued by the Aemetis biogas subsidiary.
When completed these upgrades are designed to eliminate nearly 100% of the petroleum natural gas use at the alcohol plant saving up to $7 million per year of natural gas pipeline costs replaced by carbon negative dairy biogas to provide the gas required to generate steam for use of the plant.
The by refinery will primarily operate using high efficiency electric motors and pumps powered by solar energy and renewable power sources optimized by the AI system provides insights to the energy use of each of the systems in the alcohol plant.
As a review of the milestones achieved in Q2.
In early May we announced the completion of construction and commencement of commercial shipments of carbon dioxide to the newly constructed Messrs Cotwo gas plant that was built next to our ethanol plant to capture and reuse carbon dioxide.
After three years of project development and contract negotiations Messer leased about five acres owned by Amedisys adjacent to the Keyes ethanol plant to build as CEO to liquid location plant.
We are now converting approximately 150000 tons per year of renewable Seo to produced by our ethanol plant into liquid cotwo for sale to local food and beverage producers and other CEO to industrial users.
Ethanol plants produced about 40% of the Seo too in the us and a significant national shortage of Seo to occurred due to the cobiz related shutdown 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 ASU, two carbon capture and reuse federal tax credit that we calculate is 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.
The construction of the $7 million membrane dehydration system financed by Mitsubishi Chemical, Japan, and a $1.5 billion energy efficiency Grant is currently in the installation process, but was significantly blade by the cobot 19 crisis due to travel restrictions and local contractors stopping work under shelter in place orders.
The ethanol dehydration unit is designed to significantly reduce patrolling 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.
These projects at the Keyes plant are targeted to significantly 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 potential combined impact of these projects is expected to be in approximately $30 million increase in operating cash flow each year.
At the Keyes plant.
Not including any improvement in profit margins that are expected from high grade alcohol products.
Let's briefly review, our Amedisys biogas dairy by 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 capturing hurts heat about 25% of California methane emissions come from the waste ponds on dairy farms to reduce damaging methane emissions in late 2000.
In 16, California passed a law known as Senate Bill 13, 83 that mandates a significant reduction in methane emitted by dairy logins.
Biomethane source from dairies can be used to replace gasoline or diesel fuel in cars trucks and buses to significantly reduce carbon emissions and air pollution, along the state mandate, California is funded up to $75 million per year of matching grants to dairies to build biogas digesters and related systems.
We believe that capturing biogas from dairies in converting it into renewable natural gas to generate negative carbon intensity transportation fuel is an excellent way to reduce climate change create value for dairies and reduce costs for diesel truck fleets and potentially for electric vehicles by conversion of dairy renewable natural gas too.
Chris witty for transportation use.
Based on our existing animal feed supplier relationships with about 100, dairies and the ability to use biogas and our plant until our planned pipeline interconnection depletion in the first quarter of 2021.
We believe that Aemetis is uniquely positioned as one of only two ethanol companies in California, who are using existing infrastructure in this manner.
After more than a year of project development financing work last last year, we announced $30 million of equity financing and the Grant award from the California Department food that culture for two matching grants for a total of $3 million to build died biogas adjustors at the first dairies in our biogas project.
Construction of the first two debt dairy digesters, the four mile pipeline and the boiler unit at the Keyes plant is nearly completed will be commissioned in the next month, we expect to begin renewable natural gas revenues during September 2020.
We also signed 17 total agreements with theirs and plan to complete construction of the next 15 lagoon Digesters by the end of year 2021 subject to potential cobot 19 delays.
Aemetis owns 100% of the common stock of the Amedisys biogas subsidiary.
The dairy biogas project has been funded by a preferred stock issuance by the Amedisys biogas subsidiary to a fund managed by third eye capital, which we expect to expand to $55 million a funding along with grants from state and federal programs.
There is no dilution to Amedisys parent company shareholders for the biogas project and the Metis received 25% of cash generated by biogas project operations.
The preferred stock is automatically repurchased.
At three times original issuance price using 75% of biogas operating cash flow.
After the preferred stock as redeemed aemetis as a sole common shareholders will own 100% of the cash flow and assets of the biogas digester and pipeline system.
Let's review, our biodiesel business in India.
After two years of investment in construction, we completed the upgrade of our India plant in 2018, including installation of a pretreatment unit to process lower costs and waste feedstock into oil.
The biodiesel refined closer and plant is fully commissioned using the new feedstock pretreatment unit that new boiler unit and other upgrades that enabled expanded plant operations toward full plant capacity of 50 million gallons per year.
The shelter in place order in India has restricted our production, but we continue to ship biodiesel and refining Clusterin from inventory in June we began production at the India plant to meet expanding biodiesel and refined glycerin needs in India.
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 at a 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 glisten prices, having increased new sponsor the need for hand, sanitizer and other consumer products.
In may of last year, we announced that our unit reversal Biofuels, India subsidiary was award date awarded a 23 million dollar biodiesel supply contract with the three India government owned oil marketing companies in a public tender process.
The year 2020, India oil marketing company purchased request for biodiesel were issued and the negotiation award of supply car agreements should occur in the next month, we expect to continue persists space as a key supplier hundred these biodiesel contracts.
Lets business with an update on our below zero carbon cellulose ethanol project and Riverbanc, California.
We were pleased that the Amedisys advanced by refinery under development in Riverbanc, California near Modesto.
Was named as the number one waste devalue project in the world by Biofuels Digest, the world's largest daily Biofuels publication.
The Medis project earned its number one ranking as a result of our fixed price low cost almond and walnut wood waste contract.
Planned production of high value Cellulosic ethanol as well as valuable fish meal and other byproducts.
Using the patented lanzatech gas microbe ethanol production technology.
The Lanzatech technology is now in full commercial operation at a plant 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 the Riverbanc project.
A $5 billion, California Energy Commission Grant to fund engineering equipment.
At $12.5 million tax waiver that offsets equity funding required for the project and the signing of $125 million Us da conditional commitment letter for a 20 year debt financing under the nine 003 by refinery program.
We are working to update you Sta loan to match the current capital expenditure budget for the project.
We're also focused on completing the engineering of plant required for the negotiation of EPC contract that will include a bonded maximum construction costs.
The Riverbanc Cellulosic ethanol plant is expected to generate more than $80 million at revenue each year and more than $50 million.
Each per year of positive cash flow by producing cellulosic ethanol from low cost waste Orchard Vineyard force and construction demolition would as feedstock.
The 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.
We are now in the final engineering and preparing for the procurement cycle. Prior prior to the completion of project financing and commencement of construction of the plant.
Let's wrap up with a quick review of the key milestone achieved by our technology development group.
Our technology development team worked with the federally funded joint Bio Energy Institute in Berkeley, California for three years in the development of processes to use low cost waste Orchard force would feedstocks to produce high value Sailosi Biofuels, a $3 million, California Energy Commission Grant was awarded to Jay.
And the emeritus, which partially funded years of collaborative work and lab testing with a medicine Jay Bay.
In Q2 2020 resulted in the production of the first carbon negative fuel ethanol from California Orchard would using ionic liquids.
This patent pending process.
Allows the sugar component of low cost waste would to be used to produce both high grade alcohol as well as cellulosics fuel off of ethanol that are each currently valued at more than $5 per gallon in.
Importantly, this innovation could be implemented at our existing California ethanol plant decreasing the cost of corn feedstock and substantially increasing the value of our alcohol.
We expect to move forward with a pilot plant to extract triggers from waste wood and thereby enabled the production of high margin high grade alcohol and Cellulosic ethanol at the Keyes plant by displacing corn feedstock.
In summary.
We believe that Aemetis hold a unique position with the production of both high grade ethanol and refined glycerin from our India operation for the rapidly expanding sanitizer market.
And Matt This has a geographic and strategic advantage incentives or alcohol production.
With lower cost and higher quality delivery to customers a diversified production of low carbon renewable fuels into attractive markets in California, India.
The $6 million, a positive cash flow and 120% revenue growth that our India plant during 2019, which was achieved while repaying 100% of our long term debt in the India subsidiary.
Well 2020 revenues from the government contract did not even occurred yet due to cover 19 delays.
The increased profit margins from plant upgrades related to the keys by refinery began in Q2 2020, the Amedisys biogas dairy debt digester and pipeline project is expected to begin first gas production in September 2020, and our planned deployment of the patented Lanzatech Cellulosic ethanol technology. The Riverbanc plant has.
Physician they met us to rapidly produce expanding positive cash flow from the production of high grade sanitizer alcohol as well as low carbon clean burning high performance renewable fuels from abundant low cost waste biomass feedstocks.
Now, let's take a few questions from our call participants.
Operating Mr. Oh I apologize. Thank you Mr. Mcafee will be will now be conducting our question and answer session. If you do have a question. Please press Star then 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 press Star then one not your telephone keypad at this time.
And first we go to Ed Woo Ascendiant capital. Please go ahead Sir.
Yes, yes, congratulations on the quarter, obviously, it was a very us special quarter in terms of the high demand for.
Any type of prepay protection type devices, including now hand, Sanitizers, how sustainable do you think thats going to be heading into the back half of issuance cost green to next year.
As we launch them as health products. It was a strategic decision to expand our exposure to the sense has or alcohol market by not only selling bulk alcohol, but also selling blended liquid and gel products, which have a additional margin.
Because of the value added component there and also the launch packaged which basically in this case is mostly bottled products under both the other companies names as well as are our own and we're anticipating that second half of this year is going to become more of a stable operating environment rather than the.
Okay.
Spike in demand that we experienced in the in Q2, but we're also seeing a significant reduction in competitor products has over 100 products that have been.
Recalled or.
Basically been taken out of the market by the FDA and the health Canada regulations.
A lot of that was.
Product from Mexico, containing methanol, but also products that contain a high levels of assets aldehyde, which is a cancer, causing component.
That can be fine at founded in fuel ethanol and also this restriction on the transportation of of high grade up ethanol that you can't hold around fuel ethanol tanks is is a significant constraint and as those rules are actually more and more and more enforced I think we're going to find that there's fewer suppliers in the March.
But.
So the second half of 2020 is going to at the end market rationalization phase. What we're seeing is continued substantial demand we have direct relationships with with very large.
Customers and retailers and there is a sustained.
Demand for high grade alcohol that as it does occurring and you'll see other suppliers of hybrid alcohol are announcing long term contracts that they put in place. Many of them are actually sold out for this this current year and so.
It's definitely an opportunity for us too.
Continue to upgrade process and complete the construction of our USPI great facility that will make us roughly a 5 million gallon per month supplier and be very uniquely positioned as the.
Certainly the largest capacity.
Supplier in the western United States by by a long shot I mean, there. The number two is is really going to be non consequential to us. So we see this solidifying of that strategic position.
Over the next six months and certainly going to market with these higher margin generating products.
Is going to be.
And expansion that will see over the course Q3 in Q4.
Great.
What percentage of your ethanol output is for.
Hand, sanitizer market today.
It is a volatile business. So it is expanding and we're anticipating that.
As we supply into our own Medis health products.
Subsidiary, we will see better visibility in terms of what the total volumes are over time, especially since some of the contracts are bidding on federal government kind of product contracts tend to be longer and more stable and so at the current time.
We're seeing a an opportunity to expand our commitment there, but we are continuing to ship fuel ethanol.
Until we get.
Our own Pratt packaged products in the marketplace at which time, it's very possible that our fuel ethanol.
Production capacity is going be curtailed significantly I could anticipate a time, which we would not have any fuel ethanol production capacity at all.
Now whether that occurs in the next six months occurs in the next 18 months and not quite sure, but we'll certainly be positioned for that from a technology perspective, because our upgrades are being implemented to convert all 5 million gallons per month to this USPI highgrade alcohol.
Just.
Clarify am I understanding so once you start converting it to these.
Hi quality.
Ethanol or for other uses can you still produce few ethanol or is that once you make the shift you cannot get anymore.
We will still be able to produce fuel ethanol.
Great well, that's all the questions I have definitely congratulations on the quarter again. Thank you.
Thank you Ed.
Next we go to the line of Marco Rodriguez with Stonegate capital. Please go ahead.
Good afternoon. Thank you for taking my questions.
I was wondering if you can maybe talk a little bit about the margin profile on the high grade alcoholic kind of looks like just looking at your numbers that.
It might be somewhere in the 60% plus range can you give us a sense of that if thats correct and then also of whether or not on that kind of a normalized run rate from the margin.
We have.
A couple different entry points in the market, we have our bulk alcohol business, we have a blended gel and liquid alcohol business and that we have our packaged.
Ill call business and what you'll see in industry is the bulk alcohol business ranges from.
Low numbers to moderate numbers, so it's going to be somewhere in the 20% to 50% range in of bulk alcohol business.
In the gel in the liquid business largely the same range again depends on volume, 20% to 50% probably would be.
Accurate and then and packaged products.
Because we have 30 the supplier of in in the liquid sand Santander basically 98% of what costs any money inside the bottle as it comes from our plant.
The margins are are usually in excess of 50% so.
Largely determined by volume.
The the smaller volume customers tend to be the higher margin customers and the inverse of course with larger volume customers.
Great and then also you mentioned, obviously have a competitive advantage versus a lot of other high grade alcohol producers given year location on from a shipping aspect can you give us a sense as far as who are the I guess the competitors pre coated that were in the market has declined.
In General Pacific Ethanols peak in Illinois plant was a major producer.
We also have MGP in the Midwest, It's played a significant role.
There are some other players in markets that are not disclosing their their level of participation but.
ATM and and the couple of the other traditional ethanol players have some USPI production.
But the the there will probably be another I'm going to guess.
Half a dozen ethanol producers that during the course 2020 will make the substantial investment of both company and as well as time to upgrade USBC. So there was an estimate about six players were in the market in January and we'll probably exit the year be with probably nine or 10 play.
Layers and then by early next year probably.
A dozen players.
And of those doesn't players one will be west of Iowa, and all the other 10 or 11 are in the upper Midwest, Minnesota level down to Kansas. So there's really no ethanol plants in Texas, it's really not much going on the southeast and out in the us.
Western use.
It's basically us as the only announced handsets has or producer so.
Thats going to be largely.
Upper Midwest, Iowa, Minnesota kind of.
In Illinois kind of a kind of a location, which is 2000 miles away from less units that.
Got it thanks, a lot of really appreciate the time.
Sure. Thank you.
Our next question or comment comes from the line private Investor Tom Roberts. Please go ahead.
Thank you.
Fair.
I'm wondering if we can provide color on.
Youre right time horizon for than on the targets.
Greetings and column.
And then bring.
Well apparel market.
Great.
Okay.
We would categorize those into categories. One is the systems required for us peak production and those roll.
Structured to be completed by Q1 of two 2021, so we would be able to ship the higher grade alcohols into these markets.
In that timeframe.
The solar array power system, and the MDR, which is essentially changing the the use of steam so we reuse. It therefore don't have to produce as much.
Those projects are stretch out over the next year.
Into the third and fourth quarter of next year for for solar.
It seems like with some of the changes in the market. The solar guys might be able to work a lot quicker because of the lack of other projects that used to be delaying the thing. So we'll see we'll probably see the solar project group relatively quickly and then the MTR project would be taking us into probably 2022 for completion.
It is.
Okay.
It at a change in using our renewable natural gas that that is is remarkable and it is a very strong financial impact in the company, but the design and engineering phase is going to take most address this year. So.
2021 would be a construction here and I would I currently we expect to be 2022, we get the NVR installed, though that might be accelerated again, because some of the other construction contracts.
So down and us moving forward.
As has gotten a lot more attention from the contractors engineer's than we otherwise we're getting.
Alright very good.
In regards to the engineering on the favor pickup in all plant.
I know you've been working on hard on their engineering.
For cars.
More than two years now arms for you're looking for that.
And in all right moment.
Now that the target date for finishing engineering plan and.
Our submitting to the year armed agriculture.
Yes, much of our engineering is around permitting so in order to close our project financing, we need what's known as an authority to construct permit its from the air Board and so much of our engineering and simply responding to the air boards.
Let's call it.
Process of reviewing emissions et cetera, and in California, we have what's called sequel, other California, Environmental quote quality Act.
Which has to be completed before the issue the authority construct so we are.
Working through the last steps of that sequence and.
Permitting process and so when I say engineering, it's not necessarily just a bunch guys sitting around saying, here's what we're going to design, it's more stringent than that it's really a very.
Active process with a group of consultants on these permitting issues, which.
You'd probably are in California is pretty strict about these things, it's where essentially building in oil refinery and so to get to the point of which are almost getting approval for the authority construct.
Literally in the next quarter I would expect we could get that approved is quite remarkable achievement as soon as that's achieved we can then close up our MPC agreement and complete the project financing. So we're currently anticipating project financing as Q1 of next year and all these.
Plants can be impacted by new orders for.
Shutdown or.
Stay at home orders or something like that but.
In general our current process would enable financing close in Q1 to 2021.
Hey, good.
Can you add some more color to your financing plans for the framework ethanol plant I know you talked about the U.S department of agriculture.
Loan potentially some maybe five.
But you also.
And your Q1 conference call.
You mentioned something about a municipal bond.
Thank you for listen the Q1 actually I was wondering whether bidding actually heard that.
There are two bit venues for us to receive 20 year of bond financing. One is our commitment letters already signed with US department of agriculture.
That provides 80% of project financing a medicine has largely funded the other 20% or receive grants for the balance. So we're well positioned to move forward and close that that the amount of that you'll see a financing will be adjusted depending on the final APC contract. The the one that has the.
The maximum price construction will go back through one more cycle DSD.
Parallel to that though.
There have been a couple of projects that have been funded by principal bond tax refinancing.
That have successfully raised substantial amount of funding several hundred million dollars per project and so.
We are working with investment bankers have negates council and are well along the process of.
Closing a municipal bond financing.
That is attractive because of the lower cost obtained through a tax refinancing and it's a fixed interest rate. So if the municipal bond market is available to us kind of runs hot and cold and as you can imagine with the current confusion in the market, it's it's going through a bit of a transition but.
If it is.
It is open we would expect to move forward. When this will bond financing, which is a substantial decrease in interest costs over the life of the Khan of the of the project. So we are proceeding with both of them, having essentially already they a commitment from the US department of AG.
It gives us an opportunity to focus on this little bond market and if it doesn't work that we can disclose at the last year.
Thank you.
One final question.
I'm seeing a record number of company area.
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Thanks, Rick virtual reality link.
And we see it going on a lot around the world now.
With all those restrictions on like travel.
Have you guys exploring bad at all.
The smart glasses that we use is called iPhone face time.
And.
[laughter].
So I do think though you're correct in that.
Remote distant communication and collaboration is definitely a rapidly growing segment and running at production plant in which people can't communicate it face to face as you can imagine is a bit of transition for even our company I think we've adopted well because we were already global company in already.
I had the disciplined in place for how we collaborate collaborate across time zones et cetera, but.
Certainly tools.
That can allow people to essentially is participate as if they were there, we'll we'll see a growing application and industry.
I've been in Watsonville company that Nick virtual reality.
Mark.
Sure.
Yes.
Called.
And.
Really.
Going through the roof.
Mark I imagine.
I think again.
I think it Tom appreciate your questions.
Thank you very much about yeah. Thank you.
Thank you next we go to Caroline Massimo stay around that private Investor. Please go ahead.
Hello, well first of all I won't go deep Michael implement proteomics out I want the really impact.
Good I'm lime that meant that name plate capacity and they're like youre compared to what our model last update.
So I am very glad that sit on the who see that operationally you are doing very well and out people also point out before you out like that day only play yet met all the way.
Maybe say like maybe to five book than what we'd be book based out of could you see govan bandwidth.
Hi, good color and Tonight is that so I guess and really glad doubled the crucial nickel money, yes somewhere some debt.
But.
I will imply.
Hello.
No you few provide like E.
On the segment fell 20 grand be about EBITDA and that a bit but I'm not sure.
We do anticipate that our production rates, which you correctly pointed out are very high.
Especially.
Being that in the United Western United States were probably the highest production rate of of any plant by large margin.
I do not have a EBITDA production projection for the third fourth quarter, I know that Pacific ethanol announced a.
A range of EBITDA that was very strong for the second half of 2000 and they are.
Obviously in a similar business plan has us which is expanding production of high grade alcohol.
They are already a USPI producer.
We are producing a high grade alcohol, but will not be at U.S.P. grade until early next year.
So we see this is a transition.
Period.
In which us obtaining higher margins through value added products, such as blended gel, which has a very very high demand right now and.
Branded frankly packaged.
Products enable us to.
Pain much the margin otherwise might be obtained by us.
So over the next couple of quarters, we'll see these his transition growth orders for us.
And then I wouldn't be surprised at all to see long term contracts be announced as we get into the quarter in the first quarter and end up feats basically in a similar position as Pacific ethanol.
Well.
Okay. Thanks, a lot I want to know another question. So I see in sub lease them back that you forecast like that don't level today, when you will you'll gossip in September 2000.
Right.
I'm, sorry, how much I didn't hear that.
I had a bet that you spoke about deal got that May have a new and used all good back that you being gay defense gone that will drive in September.
Correct, Yes, yes, correct, yes, biogas projects is being commissioned and it will start generating revenue next month.
Faster and they want them bound to and we can be she said that back that look we're not that bad and Debbie coupled this project.
We would anticipate that would start to impact Q4 revenues we are currently.
Being restricted by some of the.
The international travel restrictions or frankly impacting our ability condition the project and so over the next couple of months, we expect to get that.
Yes, Ben Ben area like my biggest watering abode pick all funny like anymore, they're going to not the quote better well not definitely seeing Bob I see that now we looked at I got them in one go not so not the issue anymore and they brought about that day.
Call that because the company because you out exact incumbent fault.
Interest today, so I would like to mall and worked on the OXXO. Mick you are going to do about day decrease in golf.
Both back you know if you seem to have it a bit makes lot that cash flow soil.
Okay, So you've got bad debt.
To be carried aftermarket you'd be fine.
Hey, Matt maybe don't so you're getting on bad debt.
Okay and pay back nine loans will be.
To do about the AG type of that.
We have already raised $39 million of Ebfive funding, which is approximately 1% interest rate and we have I believe announced that we received the national interest expedite.
Yeah.
Which is unusual identification that our project is strategic to the government in United States ads that national interest expedite allows our ebfive investors to have their applications reviewed and adjudicated in a three to six month time period that of approximately a three to five year time period for all.
Other project and so we've seen in a substantial increase.
And the number of interested investors and are proceeding forward.
And expect to cash deposits to occur this quarter.
And the total number of investors that are job studies shows that we could have is a totaled 200 investors the average amount or not average the amount per investors $900000 professor. So as we proceed forward we have a substantial fundraising opportunity with.
200, investors and $900000 per Investor we've already closed beta investors that occurs in 2019, and we anticipate to close.
As large number more as we continue to work with our new process.
Okay.
Okay, Yes. The last two question because some wonderful cities on Beagle JCB may or may be things like.
That.
Because the whole I believe in UN billable diminish unit, but yet we are very glad about summit and give us out the segment.
Thank you can bet that light.
Documenting the electric got mockery, but unlike some company Nike capstone.
Backing that out.
Use of runway so on the it'd be gone like the new enrollment of Manby supporting the light electric Taksta saw billing hi from a net the U.S. government Apostolic so as.
Well Anthony you did that and then depuy Soffa Agri Lang they made but you can't among those two them on them.
Not the I've only been do you anticipate Bob I had the net that out like Tom Mcfall Navy program like you don't pasta and they feed docket inputs mantech and nobody that it's also happy monochrome they've been in California at day. So you won't be below last year on view about.
Do you say fancy bowling deaves of debt that and maybe it will be given their today. Thanks.
That's a very good question actually and if you have the answer please email me after the call.
The reality is that no one really knows yet.
What the incentives are going to before.
Ethanol in the United States. There is a proposal for our 45 cents per gallon.
Funding.
That would come from the United States Department of AG. It has not pass through Congress, yet, but would probably be an item that wouldn't be included in this current cobot nights team.
Economic recovery pattern of package, but I Wouldnt say with a high degree of confidence that's going to occur since our plant produced approximately 5 million gallons per month throughout this entire cycle.
45 cents per gallon for let's say a three month period.
I would be.
Significant amount of money, we'd be talking seven or $8 million so of funding programs such as that.
Separately have probably more relevance to our underlying business incipient Smith of the could that fuel standard and granting waiver to oil companies, especially highly profitable total company.
Not comply with bi fuel blending and that is pending right now at the EPA and I would expect between.
Now in the ended the year, we'll see some developments in terms of whether the federal government.
In courses the cable fuel standard.
By enforced the RFS.
We end up with a fundamental market access that we don't have.
Well refiners are allowed to discontinue using.
Gasoline and not blending biofuels.
And and essentially in California for example, even 90% mandate for petroleum, which in the inverse means a 10%.
As an all blend and on National basis. These 15 approved if we can see enforcement of the renewable fuel standard, we'll see a growing market, which we have not seen particularly for five years due to these.
Early to enforce.
So it is not really cash.
[noise] funding that the ethanol industry deserves I think we just deserved market access we need to wonder pumps that allow consumers to decide whether they want lower cost domestically produced.
Renewable low carbon fuel oil, whether they want to use imported high cost high carbon including.
Material from some foreign entity and that choice is currently be made by government bye.
Okay blocking the use of Biofuels in United States, not using one tops.
And then it's possible that you have equates on about yep. So.
Eight was appointed thousand before China light, if not only on animals.
Could you talk now like a bank we booked Immunome people, maybe is one of whom you cume from Pacific Adam a wild Roma category and only you a are producing.
Time, you deem that a on the MTT that total active.
You because you are.
Okay data I wanted to know any yes, indeed, a huge market would be going over the banff more than one medium Ebola why don't you do the same being that you did you have is 10 homes, we need yet you start to produce also at a.
A high quality bought him some either because they have the basket fees that you Jim.
The India market is an export market opportunity for us and because we are probably the largest biodiesel producer in the country and certainly.
Easily one of the largest refined Lucerne producers, we have we have very good market access to India.
Currently the Netbacks to our plant from export in India are not as attractive as selling our high grade ethanol right here in California, but certainly I agree with you theres multiple markets that have high margin for a U.S.P. grade.
Sanitizer alcohol and.
The export markets are very attractive, but we have to be in probably the most attractive Santander markets. The world right here in California, we have leading supplier so thats one focusing our efforts.
Pass pet John Locke lock and so another theme that I won't really right that you or like we saw a.
Adam will apply to 2.6 dollars per gallon Goldman vehicle Bad you also and animal Dr. After you talk to you, but then let me go data at all.
Employed.
It was very good for me because it means that you saw.
Well good luck.
Yes.
Jeff who have been Dan you value and all that do you know Jack to satellite model as the same quality data by your June we seem to be stable being Vipin July you at all with the with increased also be goes do you ever.
Hey dominated soup, except CBC. So big company, you know who can be brought W. Two satellite ELAD may or may join that well be like get frame or like you at all this compares to an May June because you mentioned before you get them provide dumps that I don't I would call body, but Doug cool and then.
Deeper more domains that gap down bad at all.
About a bit paid so I can do come up on my own.
The.
Spring of 2020 had a very large spike in demand.
April may which were two of the three months of 2020 allowed our company pieces fit in as you go in March we were not allowed to participate in making incentives or until the 27th of margin, which trend. The rules change. So we really only about two months out of the.
The second quarter.
In that in the spring only a few months really April and May and which.
The the rules were very lacks starting June one the FDA set out standards for high grade ethanol alcohol, which substantially reduced the number of suppliers supply into the industry and we mentioned that we started food grade alcohol shipments in the month of June to Canada as well as.
The customers, new us and so we see a transition happening and which will be producing more of value added products, such as blended gels and liquids.
Shifting totes rather than coal.