Q4 2020 Gevo Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby and thank you for your patience.
[music].
Welcome to give us fourth quarter 2020 earnings Conference call. My name is kind of in and I'll be your operator for today's call and this time all participants are in and they see 90, Mount Veeder root from them.
And Duck a question and answer session. Please note that today's conference is being recorded.
I'll now turn the call and elected Jeff Williams Jones, Vice President General Counsel and Secretary. Please go ahead and selenium.
Good afternoon, everyone and thank you for joining <unk> fourth quarter 2020 earnings conference call I would like to start by introducing today's participants from the company.
US today is Patrick Gruber, <unk>, Chief Executive Officer, and Carolyn Romero <unk>, Chief Accounting Officer.
Earlier today, we issued a press release that outlines the topics we plan to discuss today.
A copy of this press release is available on our website at Www Dot Cheever with Dot com.
I would like to remind our listeners that this conference call is open to the media and that we are providing a simultaneous webcast of this call to the public.
A replay of today's call will be available on <unk> website.
On the call today and on this webcast you will hear discussions of certain non-GAAP financial measures.
Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with cash.
Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release distributed today, which is posted on our website.
We will also make certain forward looking statements about events and circumstances that have not yet occurred, including but not limited to projections about <unk> business development plans and operating activities for 2021 and beyond.
These forward looking statements are based on management's current beliefs expectations and assumptions and are subject to significant risks and uncertainty, including those disclosed in <unk> form 10-K for the year ended December 31, and 2020 that was filed with the U S Securities and Exchange Commission and and subsequent reports and.
Other filings made with the SEC by <unk>.
So including G. Those quarterly reports on form 10-Q.
Investors are cautioned not to place undue reliance on any such forward looking statements.
Such forward looking statements speak only as of today's date and gibeau disclaims any obligation to update information contained in these forward looking statements.
As a result of new information future events or otherwise.
On today's call Pat will begin with a discussion of <unk> business development and then Carolyn will review <unk> financial results for the fourth quarter of 2020.
Following the presentation, we will open up the call for questions and I'll now turn the call over to Pat.
Thanks, Jeff and Hello, everyone.
I'm going to keep this relatively short today, because tomorrow, we're doing and other fireside chat.
Those who join US, we'll hear Lynne and I discuss more and for more information around the financing projects, how to think about them et cetera.
But back to reporting on this year.
We have quite a change from a year ago.
So I'm going to run through a partial list.
Now we sold out the capacity to a large commercial plant using take or pay contracts that are suitable for use and backing of project debt financing. How these contracts add up to more than 45 million gallons per year of hydrocarbons.
That offtake caused us to think bigger sooner.
We also paid off all of the white box debt.
And we advanced the development of our renewable natural gas project.
Figure how to make net zero hydrocarbon products by using a mix of renewable energy with our process and of course, that's targeted for our net zero plant.
And our target for Lake Western South Dakota.
We have $530 million of cash and the balance sheet and no material debt.
And that money and enable us to develop multiple plants and make a full equity investment and our net zero one plan rather than being dependent upon a third party.
We also have the cash and the balance sheet that should allow us to sponsor significant equity investments and future net zero plants, such as that sort of to our net zero three projects.
We've worked with Citigroup.
You're out and they have figured out and vetted a potential bond offering.
That we may use.
To finance our debt for the net zero one project that's taken a lot of work to actually work through that and the assets have a really attractive solution and line. We have work to do to get ready for it still.
Now, we shut down our ethanol plant and lost money given that the market.
Very good and it wasn't a strategic focus for us.
We've been told by some new investors that they now understand that we arent and ethanol company well that's good that eliminates confusion.
We arent and ethanol company and we're all about.
And the renewable energy and energy gas liquids.
Carbon net zero footprint.
We developed our customer pipeline.
It's grown quite a lot from last year, and it's growing even more sense.
Partly we proved that we can establish pricing and take or pay contracts that works for our customers and ourselves and result in meaningful take or pay contracts. These take or pay contracts are backed by the balance sheets or letters of credit.
From our customers, that's a big deal and a big accomplishment.
We announced our net zero one project. This project slated for late press and South Dakota, where produced roughly 400 million pounds per year value added protein rich animal feed.
Roughly 30 million pounds of corn oil 45 million gallons per year of energy dance liquid hydrocarbons. These hydrocarbons are dropping gasoline and jet fuel products that when burned have a net zero greenhouse gas emission across the whole of their lifecycle.
Measuring all the way from capturing the Cotwo atmosphere accounting for the farming and agriculture accounted for all the energy sources and transportation of the products.
The hydrocarbon products produced at our plant are expected to be more than minus 70 and their carbon footprint score.
When burned as a fuel for transportation.
The whole cycle would be net zero. According to the leading science based lifecycle model called greet that's been developed by Argonne National Lab.
So how does it get to net zero saw about two things paying attention to how things are grow that is the growing practices, such as low til and hotel.
Along with precision and agricultural techniques, where farmers only apply the chemicals that are needed and not access and to eliminating dirty electricity and fossil based natural gas from our production processes.
Net zero has been designed to be off the grid from dependence on fossil based energy.
We are putting in a water treatment plant that is expected to generate enough biogas.
To meet the thermal demands.
Of the plant and provide enough excess gas, we can generate about 30% of all electricity with a combined heat and power unit.
We plan on meeting the need for the other 70% of our electricity from a related wind project that we were developing with dual energy.
We don't want Dirty electricity, that's typical of the grid in this country, we don't want it.
We also expect to use our green electricity and generate green hydrogen for our production processes.
We haven't decided yet if we'll make excess hydrogen to take to the marketplace.
Our negotiating power has strengthened as well this means that strategic approach us differently now and we expect that if and when we work with strategics will be able to make a more balanced deal.
That's a major change from our previous position and we had our had and our hands.
Yeah. Several parties are in discussion with US no we can't give more detail at this point.
So what's going to happen this coming year and 2021.
We expect to sign more take or pay customer contracts and support net zero two and net zero three we already have attractive production sites chosen and option for under LOI and we expect to announce the specifics for these sites. After we announced the next set of off take contracts.
We expect that net zero, two and net zero three with look a lot like net zero one.
We expect to start construction of our renewable natural gas projects with a size of 355000 million Btu's. This project would take manure for more than 20000, dairy cows and converted to renewable natural gas. This project will cost about $75 million and we project return of more than 30% IRR.
Using conservative estimates.
The project is expected to come on line and start generating profit and the fourth quarter of next year and a nurse near term the gas to be sold to the California market. Once net zero. One starts up we may take a portion of that gas up there to drive the carbon score is either more or maybe we just keep on supplying and California market that's the future.
And this optimization question.
And in order to close the project finance deal for net zero, one we need to have the capital cost estimates to the plus or minus 10% or so level.
Engineering work and.
And design work is underway our engineering partners have upwards of 50 people working on our design and capital cost we are grateful to have the money to do it properly.
The capital cost of net zero. One is currently expected to be about $650 million inclusive of the production plants water treatment plants and energy complex on a fully installed project finance basis. The project total would be roughly $800 million because of the interest during construction and the reserves and such.
That are required to do a debt financing.
Or could this $800 million project is expected to be better than about 20%.
We need to get the engineering design work done and.
And pinned down.
The capital cost to the appropriate precision to enable the debt financing and net zero, one and that's a prerequisite we have to know what it is plus or minus 10% before we could do a debt deal and this will take to the and 2021 to complete and get it right.
We would expect to close a bond deal and the first half of 2022.
It's possible that the capital cost and net zero, one project could go up or down depending upon adjustments the scope of equipment cost or what we worked through and the design of that plant.
Well, that's what all of this design work is about right now pinning down the capital cost and the very best optimal processes processes that deliver the returns we want.
Net zero one is expected to take about two years to build this is normal it's a big capital deployment. One good thing is that the engineering and design cycle for net zero, two and three would be much much shorter we expect that those plants will be based upon net zero one.
It shouldnt be lost on anyone that our business is significantly de risked.
Money to execute our plans and a real sense, yes, it's quite a change from last year last year, we had to raise money to keep the lights on our team did well and developing the business advancing the technology.
Now if we raise more money the purpose will be to take more of the large cash flow streams, we expect from our net zero projects or from an LNG project.
Tomorrow, and small and I will be doing a fireside chat with <unk> research, but we will be discussing projects debt project economics and financing for both net zero one project and the LNG project, we will be answering a whole bunch of investor question information on registration can be found and in the investors section of our web site investors.
<unk> Dot com.
Now I will turn the call over to Carolyn who will take us through the financials Carolyn.
Thank you Pat.
<unk> and <unk>.
Revenue in the fourth quarter of 2020.
$5 million as compared to $6 9 million and the same period and 2019.
During the fourth quarter of 2020 hydrocarbon revenue was $24 million compared with 1.0 million and the same period and 2019.
Hydrocarbon sales decrease because of the lower shipments of finished products from our demonstration plant at the South Hampton Resources, Inc facility, and Phil East, Texas.
During the fourth quarter of 2020 revenue derived at the liver and facility from ethanol sales and related products was $5000 compared to $5 9 million during the same period and 2019.
And as a result of COVID-19, and in response to and favorable commodity environment, we terminated our production of ethanol and distillers grain.
In March of 'twenty, and 'twenty, which resulted in lower sales from the fourth quarter.
Cost of goods sold was $2 $1 million and the fourth quarter of 2020 versus $9 4 million and the same period and 2019.
Cost of goods sold included approximately $9 million associated.
So stated with production of Iga and related products and maintenance and the La Verne facility and approximately $1 1 million and depreciation expense.
Gross loss was $1 4 million for the fourth quarter of 2020 versus $2 5 million for the fourth quarter of 2019.
Research and development expense increased by $1 7 million during the fourth quarter of 2020 compared with the same period and 2019, due primarily to an increase and consulting and personnel expenses.
Selling general and administrative expense increased by $2 million during the fourth quarter of 2020 compared with the same period in 2019, due primarily to an increase and consulting and personnel costs offset by a decrease and investor relations and marketing costs.
For the fourth quarter, 2020, we reported a loss from operations of $7 million compared.
Compared to $6 2 million from the same period in 2019.
In the fourth quarter of 2020 cash EBITDA loss and non-GAAP measure that is calculated by adding back depreciation and noncash stock based compensation to GAAP loss from operations was $5 $1 million compared to $4 million and the same quarter of 2019.
Interest expense for the fourth quarter of 2000 $21.5 million, a slight decrease compared to the same period and 2019 and as a result of lower amortization of original issue discounts and debt issuance cost and the conversion of two point million of 2020 two.
And one notes to common stock during July of 2020.
During December 2020, we converted the remaining $12 7 million of 2020 'twenty, one notes into common stock.
For the fourth quarter of 2020, we reported a net loss of $18 1 million or a loss of <unk> 15 per share based on weighted average shares outstanding of 120.017 million and 120.
This compares to a loss of $6 8 million and the fourth quarter of 2019 or a loss of <unk> 50 per share based on weighted average shares outstanding.
13 million and 659944 and dirt.
During the fourth quarter of 2020, we incurred a one $4 million non cash loss related to the conversion of $12 $7 million and 2020 'twenty, one notes and a common stock.
During the three months ended December 31 and 2020.
Recognized a non cash loss totaling $8 $6 million.
Due to changes and the fair value of our 2020, one notes embedded derivative liability, resulting from the increase and the price of our common stock prior to the conversion of the $12 7 million of the 2021 notes.
Adding back these noncash losses resulted in a non-GAAP adjusted net loss of $8 $1 million and the fourth quarter of 2024 and non-GAAP adjusted net loss per share of seven cents based on a weighted average shares outstanding of 120 million.
And 17120.
This compares to a non-GAAP adjusted net loss of $6 8 million and the fourth quarter of 2019 and non-GAAP adjusted net loss per share of 50 cents per share based on weighted average shares outstanding of 13 million and 659944.
Now I will turn it back over and it Pat to wrap things up.
Thanks, Carolyn let's open up the call for questions operator.
Thank you and ladies and gentleman and that is star one to and in the queue and ask a question to remove yourself from the queue press the pound or hash key again star one to get into queue. Please standby, while we compile the Q&A and Ross Terry.
Our first question is on Amit Dayal with H C. Wainwright your question. Please.
Thank you Hi, Patrick good afternoon, everyone. We.
I appreciate you day, how you're doing much.
Good. Thank you Ben So I assume some of my questions around you know the project for Ducommun Tomorrow, but just in terms of the time line you related.
The first half was pretty good too.
For the financial close of net zero one.
Is this sort of a typical timeline for something like this and could this potentially be accelerated.
Teams well interest for you and <unk>.
Correct.
I would say that.
The critical time line runs through getting engineering estimates and we I don't know what the capital cost is what we're asking for in terms of debt support you got to have that pinned down and you can't do a debt debt financing. We also have to have a bunch of the permitting stuff done and all kinds of things.
That timeframe to get that stuff done and we're working on getting it done by the end of this year and in which case then we should be able to do the bond offering and the early part of next year, but because you know thats talking about a year from now or it's actually it could be it could be less of a year from now right but.
Because it's so far out there's a certainty around it so the lawyers advising you to give it a wide range first half of the year, but that's the answer.
And I do I want it sooner and I want it sooner I want it done and.
And.
And the most of the patient person on Earth when it comes to it.
Understood. Thank you from that and then our.
Our model and currently for net zero and it has some level of utilization coming on line by 2020 food.
Is that the day that Hulu.
Say that again I missed the first part of the question Yeah, I was just saying our financial model right now.
And publish publicly and we have you're doing you know.
Some of them some level of utilization from net zero, one coming on line by 2020 four.
Is that still a reasonable assumption.
Is that's the right assumption.
Okay perfect. Yeah. So in other words EBIT would be financed and the first half of the year, we still plan to get the plant online in 2024, we've obviously built ourselves from slack in there and.
And.
This is one of these things where you say you got to do the design right and get it right that allows you to plan right secure equipment properly it could be that we could do things and modules, which shortens up and construction timelines. That's the sort of stuff are figuring out.
But yes, we are aiming at that first part of 2024 like you have in your model.
Okay understood and then with respect to net zero, two and that's at a tree.
And you're obviously, considering those options right now but is this.
To argue and this probably comes and Bernie and 'twenty, two or could we see more clarity on.
Progress on our own these efforts earlier than grant money too.
I would expect debt we have progress in 2021 of those things. So we will get the contract signed with the sites and I would expect to have the net zero to site.
And customers announced in 2021.
And do I think we'd get a net zero three and that timeframe.
And I think it's pretty much probable now we all heard <unk> talk a few weeks ago and the fireside chat and he throughout the number of you could see us doing six plants and short order well.
And that's true, but we got to go through the work and duty slack and see us having multiple plants.
And play at the same time, that's not a these the firms we're working with on the engineering side and constructing side, they're capable of execution on that kind of scale. The trick is you got to get that design right because it leverages over into the net zero two and net zero through we can't be changed and things are messing around what things people often ask me why not just day.
Over and ethanol plant anybody know where the pipe diagrams are for that plant and it.
It's like we Gotta go learn that are you kidding me that each one is individually and different what we want to do is make it as cookie cutting as possible. So we can accelerate these timelines that's what we're shooting for and we're pretty stubborn about it because we think it is the best way to generate the most cash for the company over the long run because we want those cash flow streams, they're worth a lot of money.
Understood.
And just looking at the burn rate for 2021.
What do you think in terms of you know all of these efforts that you're putting in place to get the permitting and engineering et cetera done and what should be the burn rate.
Turning to anyone that we should think about.
I think for the burn rate for <unk>, Inc. Is in that $25 million ish range something like that and then we'll have projects stuff thats capitalized and that'll show up differently as a cash cash number will have to give guidance on that I suppose at some point, but it is kind of your normal project stuff, that's and that kind of a bucket but.
And <unk>.
Cash burn to do the development.
The resources to add we're adding we're adding staff for example, and more people to go do things.
That would show up we wind up with probably 25 million $26 million.
Byrne at the corporate level. So that's the G S E R&D and <unk>.
And the engineering stuff the actual corporate engineering.
Project stuff coordinating project focused work, that's all going to get a capitalization bucket for the project.
That's the development expense.
Understood.
And just one last one from me on that.
And the renewable natural gas opportunity.
The initial effort seems to be just for you all.
You know your upcoming facility and your own consumption et cetera could lower your.
Carbon intensity.
But could this one.
And a larger sort of ambition for the company in terms of actual.
Revenue scaling beyond what your income.
And the short seller.
That's a very good question very insightful question actually because what's happened is that we start working and the LNG project and northwest, Iowa, because we're thinking about putting that R&D over and over burn, but the demand for our products outgrew the scale of live earn and we would've had to redo a whole bunch of permits and Minnesota, all kinds of stuff that would have dragged out our timelines.
So we started thinking about the Greenfield plant and Thats your one and as we started thinking it through we realized we could make net zero one energy sufficient generate their own power gas on site well that diminish the need for that and northwest, Iowa R&D on the other hand, we had already done a whole bunch of the development work the way we think of it as this we already.
We learned how to solve this last this last 18 months, we've learned how to be developers for renewable natural gas, we are going in and renewable natural gas business that is just the fact, we're going to be doing that there's 355.
And million Btu's is initially going to go to California, and that's where we're going to sell it there'll be a time and the future once the net zero plant starts up and maybe when we start liver and backup all Babyhood tour and net zero two or three site, we could use that natural gas there too.
We need to so it gives us optionality that I kind of like but it shouldn't be lost and anybody that we do in fact have the capability to develop projects where not everyone can.
And we see how to get it done and how to monetize it.
Calif, if we sell the California.
And which we plan on doing and early days good plants payback right quick that's really attractive and then that that's a good thing. So it's one of these very interesting games and I think that Joel I think you know renewable energy transformed energy against liquids that's no joke.
We're wiping out the fossil based footprint by displacing fossil natural gas.
Fossil based natural gas more of its better we could actually drive.
If we took that gas up to net zero, one we could make a net.
A large negative greenhouse gas emission liquid transportation fuel that's kind of astounding.
Alright understood that's all and thank you so much and see you and mechanical.
Sure.
Thank you. Our next question comes from Paul <unk> with Noble capital markets. Your question. Please.
Yeah, good afternoon and Pat.
Okay.
Just one quick one out of the way.
And as your current share count right now.
I believe it's 198 million shares.
Okay. So it hasn't changed much since.
The.
And the January.
And then.
Has it changed at all since the end of January Yeah, No I think maybe simple.
The warrants and some of the warrants might've been exercised.
Thank you still had some warrants out there.
Hmm.
Right.
Yeah.
And what was the number that I have is still the.
The same old number on my slides that show up and Carolyn.
Yeah.
Ill.
You know what I'm, saying.
Just one and then on the R&D, Pat you said $70 million to $75 million as far as Capex.
You and.
And you're working on the financing have you figured out is it 70 30 as far as debt equity and how much equity are you going to end up putting into that plant.
Okay, we're going to talk about this tomorrow with a fireside chat, but here's the previews, we don't have to put any more cash into it we already did the development work and stack, we're going to get a rebate so to speak in that when we close that deal will get money back.
So it's already kind of a done deal and the financing arranged and we'll be talking more about that tomorrow and Lansdowne here. He's the guy who did a great job getting it all organized and get net finance.
And so that cash flow should be we should be seeing that.
Yeah, it'll be meaningful cash flow by the fourth quarter, we'll start seeing some of it early next year could put construction starts like we're going to break ground.
Like it's getting organized right now getting organized so it's very very soon we'll be breaking down and we'll do we'll do.
And announcement and you know what to see what kind of a ribbon cutting ceremony and stuff like that.
Breaking ceremony and things like that but it's a.
And he's done a great job.
Netting it all organized Chris Ryan has done a great job.
Net.
Figuring how to do development of R&D and get it done.
Good.
Different business opportunity for us.
Just two quick ones.
Would any cash.
Do you have an estimate on how much cash and you might be able to get out of that once the financing is done and then also the startup is it first quarter.
And of 2022 or fourth quarter of 2022.
Your line it'll start up and Italy.
Hello, and who's that.
Oh, that's limits are.
Oh, Okay go.
Go ahead, yeah, well will start up and first quarter, but the cash is a little bit back end loaded because of the way the <unk> credit system works, but we were expecting.
Cash distributions out of the project and the order of $10 million on very conservative assumptions around carbon score and and and.
And the cost to complete we think we can do a lot better on the capital cost.
What's the what's the range of outcomes do you think.
And we took a really conservative approach as we did it for ourselves because we are thinking about really long term and how to use it but net zero plans, but if we just sold the California and it all worked well what's that what's that $10 million turn into.
Well, it's really the range is about 9 million to $16 million, depending on the carbon intensity score.
And.
The returns can.
Barry from 32, the high Sixty's, depending on those things as well as the Capex.
And that help you Paul.
Yeah, no and I think you'd had like $20 million and it or.
And had about 20 million outlays before and will.
We don't we don't need to put any more cash into it because we've already spent.
About $8 million on the development, including equipment, and engineering, and such and we will pull that back out and the only.
We have zero net cash coming out of off of the balance sheet too.
The construction of the RMG project, Okay, Great and then can you give me a budget for your feed work.
You know either a cost estimate and are budgeting and and how much youre going to spend on the feed work.
For net zero, one that's $15 million.
Okay and then.
And it was helpful. You gave sort of the soft costs and the hard costs, the hard costs and net zero, one or 650 and and soft concert by 150 as it stands right now.
Right.
And you need to get that cost estimate to plus or minus 10%.
Are you currently and plus or minus 50%.
Footnote on your presentation that said it was plus or minus 50% can you help me reconcile debt that go versus where you are now.
So we're doing what we're doing and different parts of the process or a different statuses.
So.
We changed as we started thinking about how to build out and that sort of one and get ourselves off the dirty.
Fossil footprint of energy.
We are realizing with gosh, we should throw a water treatment plant and well we got to go through that and figure that out so that Scott and then how do you integrate it where do we what's the best way to maximize the protein and oil. So we've worked on a deal there with a partner and we will announce later.
And had to figure that out and so what we do is we say things like that and it's plus 50% some parts of the process already pretty well nailed down other parts. We're still going is it this chunk like this and where does it lay out and how does it and are back with the rest of it.
So it's the putting the pieces together that creates uncertainty and to get it right. But we also we have this is actually the work and tails actually getting bids on equipment and figuring out the real cost that's a non trivial thing.
And this is a giant plant so that.
That has to be done as well so it's a mixed and it's a mixed bag is what we got here and.
The trick of it is that.
And we want to keep we pin down the scope that's good.
That's extremely helpful. We have inside our battery limits inside our bedroom and ensure everyone listening means thats insider, so think of it and decided our fence line is under our control part of the plant part of the Bill.
Things that are outside of the battery limits would be things external to us we could still might be some cost we have to pay attention to for instance, we'll be doing a wind farm and partnership with dual energy.
But that's separate with different financing be.
And the insider battery limits and while we've got a water treatment plant, we got a protein plant and we got we're going to be taken out the vegetable oil.
Amounts of it.
We want all of that stuff because that offsets.
The acquisition cost of corn right, it's correlated internal hedge kind of a thing and it's worth a lot of money and then we got.
And the hydrocarbon stuff, we're partner with actions.
And.
And much of that because they built a whole bunch of these kind of plants, where you take the heidrick petrochemical based butylene and.
Two hydrocarbons well that's real similar to what we're doing except for we're start with Isobutanol, you Gotta make isobutanol and nice beautifully and and once you go from there then and then it works well great. They've done 120 of these plants before sorry 25 of these plants before so that's all good.
So it's all about putting all the big pieces together and figuring it out and it just takes time and that's where we're at.
It's not a it's not.
A full wet.
This part is.
It's not.
It's different.
And different parts different places and working through.
Okay and.
Maybe ill ask the cash burn question, a little bit differently and just.
What.
Have you determined how much extra equity youre going to put into net zero one.
What that figure is actually going to be or is it still a moving target because of the capital.
Cost estimates have been completely climate and finalized.
We just at the CEO level I, just simplify it and say, we're doing 100% of the equity and net zero one unless someone makes us one hell of a sweet deal and then which case, we would share that cash flow stream now remember we're greedy we view that cash flow stream is roughly $100 million a year of EBITDA at the project level and so why would we share it oh and I get that people have.
Nick would add value well, yes, and no it depends on what the deal is and so I like and it like this.
And I live in Colorado and I.
I'm, a baker and baking a cake and high altitude. It's tricky I got all my ingredients I don't need extra cooks and my bake and kitchen right now, helping me back you up with frosting on and after the thing is baked hey, welcome to it and we'll look at it and see what the deal is at that time and so it could be that we do add additional people into the mix of equity prior to close it could be.
And that we do and we're going to want to look at that very very carefully.
But you get them into early then.
The huge capex.
And you've got too many cooks and a kitchen and that's not.
That's how you rune timelines.
So I like where we're at on that front now when you can give a little more example of what youre thinking about what you've modeled.
Sure the debt.
Net work that we've done with Citi has been pretty exhaustive too.
Confirm that we can qualify for a private activity bonds issuance. That's a tax exempt bond issuance those markets are very attractive for the types of projects that we're sponsoring the net zero, one and we expect to be somewhere around two thirds leverage at the end of the day, we're expecting that.
We could be putting and somewhere in the neighborhood of $250 million of equity if we invest 100% of the part of the equity and that project.
And I'd also note that the returns that pad sites are oftentimes not giving credit to a range of fee that we would not charge to the project. If we're 100% equity if were partial equity will charge for licensing fees operations and maintenance fees and project management.
Certain overhead recoveries, if we're 100% equity consolidated those fees only come to GMO and add to the irr's that are being sited.
Great that's helpful and and that is.
250 million of equity that is the 2022 event right. So it's.
It's Ryan.
Do you do you have and ideas sort of where you think you'll end the year 2021 from a cash perspective, you have 531 million now.
Do you have an idea of sort of what you think your cash on hand or on the balance sheet will be at the end of this year.
Well that I'll, just say that we're budgeting the development of net zero or one as though we're going to complete it and closed financing and at the end of 2021 day.
And that won't happen, but that's the way, we're budgeting and it and it's including long lead equipment deposits to maintain that completion schedule that Pat cited earlier in 2024, we're going to probably have about $45 million out the door that will recover when we closed the financing of net zero one.
Okay.
And then so if you're doing if you're doing a cash there and you'd add it up and say you told you was going to be $50 million to do the debt.
<unk> engineering right.
He told you we'd lay out probably we budget for $45 million outlay, which we may or may not do but that's what we budgeted and.
For capital equipment long lead items.
And then we told you that it's like 25 $26 million of corporate bird related expenses to and all the other work. So that's the kind of numbers subtracted off of $5 30, that's the kind of the number you had line wind up with.
That's really helpful.
And is it 15 million on the feed or 50, sorry.
<unk> <unk>.
15, 1515, Okay, great Yeah, and then.
One clarification and I want to make.
You asked about the does the phase and stuff and design is that of course.
Design when we're talking about it this way is it's about.
Our process is designed it's about going through the details the mass and energy balances. These are engineering exercises to figure it out we're optimizing the process along the way right because we want to minimize the carbon footprints, we maximize the carbon score that we get that's how we make the most money. So you go through and look at everything and the design.
And so you go through and look at every single unit operation and ask you get the right. One does it have the right horsepower and that engine for that motor.
Is it the right type size is the right detail detail.
And put it all together and then you've got to source the equipment and come up with it that's why it takes so much work and so.
And when we talk about it.
Talked about a cat as engineers to each other here a few minutes ago, but other people listening might net grasp debt of course, we have a process design.
It's about.
Pinning down the exact detail. So we can spend money to go buy this stuff doesn't come off the shelf.
So anyway.
Okay, Great and then.
I think Pat before you.
R&D project, you had been sort of.
And that the off take customer might be somebody who would be recognizable and that would be sort of yes.
A significant move.
Are you prepared at this point to talk about debt or is it are you will have to wait until day.
Nancy and finalized.
Yeah that'll be a we got to finalize that contract. So okay. You know selling renewable natural gas, it's worth a lot of money and California right. Now so that gives us confidence just move ahead and the project anyway, and then we will.
And we'll announce that customer partner.
When we're when we're ready here.
Okay, and then just a couple more if you wouldn't mind.
It looks like you've identified sites for <unk>.
Zero, two and three and then along the line one and bring them wanting tricky thing to me was that you added a site on your map and <unk>.
Florida can you can you talk about.
Florida and from our standpoint.
Sure.
Yeah, so what's happening to us is that as the demand increases and I remember, we're dealing with people under confidentiality agreements right. So our customers I'll talk to us under confidentiality agreements and then other partners talk about us talk to us under confidentiality agreements were always restricted and what we can say.
However.
Corn and the Midwest is a sustainable.
Low cost way to get these carbohydrate residuals that we can turn into a hydrocarbon products and we also have good wind resource up there we've got good biogas resources up there and.
Makes sense makes sense up and the Midwest.
Yeah, and Florida, Theres, several feedstocks that have potential.
And the interest there's molasses type things and theirs.
Sugar residues from various types down there.
And so people have approached us with sites and so we have and we're going through the work to evaluate them, you'll see them and other places that popped up on our map to where same kind of thing where people are saying hey, we can supply you with carbohydrates would you want to build a site and you say Yeah. You show me the sustainability and you show me the cost you show me the risk associated with that acquisition of that.
Carbohydrate source and we will look at it but the one and catalog and the one in Florida has risen to the rank.
We got to evaluate its what shows up on our map.
Okay, Great and then could you help me understand the significance of the Mou that you signed with HCS and.
And how that fits in and they all grant.
Yeah, Yeah. So okay. So yes, with Acs has Hoffman Carlos Hudson and Carlos is especially if you're a manufacturer that we announced a deal with them, where we would be licensing our technology to them for production of hydrocarbons inspire Germany and.
And.
Usually a day leveraging their site.
Now the way.
We will work with them to arrange the Isobutanol production.
In Germany, or somewhere along the Rhine river, presumably or somewhere in Europe, we still have to go do that work.
You'll notice in that press release, you had talked about jet fuel and Germany.
Okay and it talks about the size of the project will co marketed to them because we're real particular about hyatt place and stuff and the market and hold it sustainable and all the rest, but so think net zero.
And on Sept and.
In Europe, the difference and Europe is that you don't have to have the Isobutanol plant next to the hydrocarbon plant they get and just for instance, you can float and stepped down the Rhine River and the U S. You can't do that of course, because you don't get the credits for it.
EPA requires the plants to be integrated and order to get the RFS credits the rins.
So there we can do stuff like that and separate and maybe some day here, we can separate things, but there seems to be economical and at work and is jet fuel aimed at Germany.
Great.
And you just mentioned and one thing that actually I wanted to bring up.
RIN prices are going through the roof. It seems like.
Can you help me understand whether that impacts and your development plans.
Impacts our development our development plans I mean broadly.
We have plans just broadly or does it happen.
And your strict your strategic outlook.
What we do is we tend to do like averages and futures types calculations and when we're looking at our own economic projections, but re price goes up that's good for us. So the way to think of our businesses, we win and if anything green goes up and value Rens L. CFS and tax credits, we win and that's just more margin to us.
And oil price goes up we went.
And if corn price goes up you know what's interesting about that is protein price goes up and so does the oil price and so that.
That's one day, just such a clear cut it's not a loss and it might even be a wind depending upon exactly how it happened and under what circumstance.
So it's one of these very interesting dynamics that we have we've tried to derisk the project and all those fronts, but.
And the returns we get 1.6 times the Rins.
This is again, one of the nuances of making and energy dense liquid.
We have one six ethanol gets one why were energy against so we get one point times.
So that matters. So when you see these RIN prices going up through the rough now multiplied by one six and that's what we would get credited to us so it matters.
Great. Thank you so much and look forward to tomorrow his presentation.
Sure.
Thank you and I don't have any further questions and the queue I would like to turn and back to Pascal and he's finally, Mike.
Thank you all for listening to us and they use our and join US for the Fireside chat tomorrow will be asking Lin a bunch of questions and shots you have or soon will be moderating, but I can't help myself and I'll jump in I know.
Thank you for your support and the company. We appreciate it we are off to a good start to this year, the things are working and making progress.
Actually.
Yeah.
And that's a change and.
Blessing from last year and.
Now we are driving to get this done and get this plant on line net zero, one and I want and that sort of two and I want net zero three as well, so and I want that R&D done and we're going to be evaluating whether it makes it even bigger.
So that's what we're focused on.
Thanks for listening today.
Right.
Yes.
Thank you, ladies and gentlemen for your participation in today's program and you may now disconnect have a great day.
[music].
And.
And.
[music].