Q1 2021 Aemetis Inc Earnings Call
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[music].
Welcome to the a modest first quarter 2021 the earnings review conference call. At this time all part of all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, today's conference is being recorded.
It is now my pleasure to introduce your host Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of a Medicine, Inc. Mr. Waltz, you may begin.
Thank you Melinda and welcome to the aim of this first quarter 2021 earnings Review conference call.
Joining us for the call today is Eric Mcafee, founder Chairman and CEO of day matters and Andy Foster President of the Medicine advanced fuels.
We suggest visiting our website at <unk> Dot Com to review today's earnings press release corporate presentation filings with the security and Exchange Commission recent press releases and previous earnings Conference calls.
The presentation for today's call is available for review or download on the investors section of the <unk> Dot Com website.
Before we begin our discussion today I'd like to read the following disclaimer statement.
During today's call, we'll be making forward looking statements, including without limitation statements with respect to our future stock performance plans and opportunities and expectations with respect of financing activity and the execution of our business plan. These.
These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings and.
Investors are cautioned that all forward looking statements made on this call and involve risks and uncertainties and the future events may differ materially from the statements made.
For additional information please refer to the company's security and Exchange Commission filings, which are posted on our website and are available from the company without charge.
Our discussion on the call today 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 measures is included in the earnings release for the quarter ended on March 31, and 2021, which is available on our website.
Adjusted EBITDA is defined as net income.
Or loss plus to the extent deducted in calculating such net income interest expense income tax expense intangible and other amortization expense accretion expense depreciation expense and share based compensation expense.
Now I'd like to review the first quarter results.
For 2021.
Revenue during the first quarter of 2021 increased to $42 8 million compared to $39 $5 million for the first quarter of 2020.
North America operations, and the first quarter of 2021 compared to the first quarter of 2020 experienced steady ethanol sales volume.
And with an increase and the selling price from $1 56 per gallon to $1 91 per gallon.
And an increase and the delivered corn price from an average of $5 20 per bushel during the first quarter of 2020 to $6 87 per bushel during.
During Q1 2021.
Gross loss for the first quarter of 2021 was $3 6 million.
Compared to.
$400000.
Loss during the first quarter of 2021.
Losses during the first quarter of 2021 resulted from a crush margin that was weaker than the same period of the previous year.
Within the first quarter 2021, the crush margin improved during the quarter as ethanol rose from $1 40 per gallon in January 2021 to more than $2.90 per gallon today.
Corn pricing and supply are and ongoing supply chain issue for the ethanol industry.
Selling general and administrative expenses increased to $5 $4 million during the first quarter of 2021 from $3 $9 million during the same period and 2020.
Driven primarily by compensation expense insurance premium increases as well as professional fees and.
As we execute our five year growth plan.
Operating loss.
And was $9 million for the first quarter 2021, compared to an operating loss of $4 5 million for the same period and 2020 much of which is from the effect of the difference and the crush and the ethanol crush spread between the periods.
Interest expense, including accretion of series a preferred units.
And the <unk> biogas LLC subsidiary increased to $7 $2 million during the first quarter of 2021 compared to $6 9 million during the first quarter of 2020.
Additionally, our <unk> biogas and gas initiative recognized $1 9 million of accretion of preferred payments on its preferred stock during the first quarter of 2021 compared to $960000. During the first quarter of 2020.
Net loss increased to $18 1 million for the first quarter of 2021 compared to a net loss of $12 1 million for the first quarter of 2020.
Cash at the end of the first quarter of 2021 was $15 8 million.
Compared to $592000 at the close of the first quarter 2020.
Cash strengthens strengthened for proceeds of $62 $4 million of stock sales, which was used to repay $36 $9 million of high interest rate debt.
Invest and capital projects and fund working capital for operations.
That completes our financial review for the first quarter of 2021 now.
Now I'd like to introduce the founder Chairman and Chief Executive Officer of HAE Medicine, Eric Mcafee for a business update.
Eric.
Thanks, Todd as we discuss the results from Q1, 2021 and I encourage you to consider reviewing the <unk> corporate presentation, which can be found on the homepage of the <unk> Dot com website.
<unk> was founded in 2006, we've grown into for lines of business, which are focused on producing renewable natural gas from dairy biogas with the negative 426 carbon intensity for transportation fuels and replace high carbon intensity diesel and gasoline.
Renewable fuels, including low carbon and the negative carbon intensity ethanol high grade distilled biodiesel and renewable jet and diesel using cellulosic hydrogen for waste wood, and byproducts, including carbon dioxide and Cornwall and enhanced by carbon dioxide injection wells, we plan to sequester cotwo and significantly reduce the carbon intensity of our products.
Health and safety products, including sanitizer alcohol refined glycerine blended handset of desert and other health safety products 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 capacity and the U S and India included in our production for foot portfolio is the largest ethanol plant and California is 65 million gallon per year fuel ethanol plant located in Keyes, California near Modesto that we leased in 2009 retrofitted for 18 months began.
<unk> and mid 2011 and of owned since 2012, when the original shareholders converted their ethanol plant ownership into about 10% of the common stock of the medicine.
We also built own and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin bio refinery on the east coast of India near the Port City of Kakinada, We are operating in India. Since 2007, we founded the India Biodiesel manufacturers Association and our managing director serves as chairman of the association and I'll be.
Half of the five major biodiesel producers in the country.
Before discussing our businesses.
The comment about the values and the culture of our company.
As well as the social and environmental impact of our production plants and development projects during a difficult time and the U S and India due to the COVID-19 pandemic and the lack of enforcement of federal renewable fuels laws by regulators.
For a company that's been sort of time working to improve our communities.
Our investments create jobs feed and house hundreds of families that depend on us to sustain and expand our business and.
And the products, we produce provided positive and meaningful contribution to reversing global climate change from.
And from truck drivers and India that move our feedstock and Biofuels to Midwest farmers that grow the crops and supplier of California biofuel plant.
And to the workers and maintain and expand our $300 million of production plants worldwide.
As well as the 160 <unk> team members and the several hundred people that work to support our businesses.
They rely upon us to operate every day, despite external events, such as financial crises and policy changes that impact our business.
Despite the extraordinary circumstances of the past year, we have maintained 100% of employment at all of our facilities worldwide.
We seek to build the strong sustainable company by supporting a resilient supported of corporate culture. Among our teams who work together to create value during times of uncertainty uncertainty during the past 15 years of this company culture and value system has endured oil price crashes and stock market collapses financial market downturn.
Political uncertainty and the active undermining of the federal renewable fuel of Baas by multiple administrations from 2014 for the present time.
Recent changes and federal leadership have been recognized by Wall Street as a significant positive transfer of medicine, and the renewable energy sector.
But our company was founded in 2006 with the same goals and values as we are executing executing upon today.
Though the stock market has only recently responded favorably to the unique below zero carbon intensity leadership position held by the medicine, the California, renewable biogas and about fuels market.
Our team has worked tirelessly for longer than a decade to build the fundamental foundation of our business and that respect we like to say that we are an overnight success the tip.
15 years of hard work to build and are now simply accelerating our leadership position as we execute the five year plan that was announced and Q1 and 2021.
The financing this 15 year growth process to become about a $200 million revenues business without heavily diluting shareholders was not easy.
It took hard work and sacrifice and the extreme commitment to our shareholders by our management team and our board of directors.
Our entire tier top management team has more than 12 years of tenure at the company with our President Andy Foster joining the company during the founding in 2006, and our head of International Sanjay Gupta, joining and 2007.
We have one of <unk> Board of directors member does serve for 14 years, formerly serving as the secretary of the U S Department of Agriculture.
And two of our board members were formerly long term executives at Chevron Corporation.
Our audit Committee Chairman the lead independent Director has served as the Chief Financial Officer for five public companies each of which had more than $1 billion of revenues and the largest at $16 billion of revenues.
We have of deeply committed and experienced team that has been working for many years to execute our long term vision and build value for shareholders, regardless of the external challenges that have come our way.
And the face of external challenges and the need for growth capital many of our competitors decided to sacrifice shareholder value for management compensation or executive comfort entering into highly dilutive equity transactions or convertible debt financings to fund losses or projects and.
And the past 15 years, we have done neither.
Avoiding highly dilutive equity offering for convertible debt financings.
To achieve the goal of protecting administered holders from dilution.
I've personally guaranteed more than $200 million of debt that is funded and medicine 2008.
This personal guarantee benefited a bit of shareholders by allowing shareholders to receive the benefit of funding with minimal dilution and has funded our growth to about $200 million of revenues.
Received no stock options since the inception of the company is compensation and making the decision every year to allocate my options to our employees to maximize their ownership and the company.
However, like other shareholders I have benefitted from avoiding large equity dilution since my wife, and I are the largest shareholders of the company through our holding company Mcafee capital.
While we have great upside potential my personal guarantees since 2008 has demonstrated a commitment to the long term value of the medicine. This is consistent with the values and I spoke of earlier and I'm proud that our shareholders have had the opportunity to participate and a higher valuation of the companys stock and recent months the.
The $200 billion of senior bridge financing has now been significantly reduced by $62 million of new equity received at high valuations during Q1 2021 and.
And our cash balance at the end of Q1 2021 was $15 million.
I still have more than $100 million of personal guarantees in place related to the amount of senior bridge debt, but we are well on our way to achieving strong operating cash flow that will further reduce our refinance the high interest bridge financing debt funded our past growth.
And Fortunately the positive macro trends for renewable fuels have opened up low cost long term U S Department of Agriculture Department of energy and tax free municipal private activity project financing opportunities for of medicine.
Less experienced investors and research analysts who may not fully understand this process of startup and rapid growth utilizing short term high interest rate financing, which has been refinanced using long term low interest rate debt.
Please note that this growth funding technique is not unique to <unk>. It has been successfully utilized for other prominent companies, notably Tesla the minimize shareholder dilution, while funding $15 billion of debt for rapid growth.
And then the repaying the debt with low interest rate financing and equity offerings at a very high valuation.
We are deploying similar well established financing tools, just doing so with far fewer zeros.
As of March 31, 2021 balance sheet shows we've already achieved significant progress and repaying our high interest rate bridge financing.
Yet even after the $62 million of equity funding during Q1 'twenty. One 'twenty. One there are only approximately $29 8 million shares outstanding at a medicine, we value shareholders at the top priority, including our unemployed and who are meaningful shareholders and the company.
I would like to mention another aspect of our company culture and <unk> to serve our communities with our products and our leadership.
Our 90 employees and India have been severely impacted by the COVID-19 pandemic with the locked and in India last year and another wave of COVID-19 infections. This past month, which have affected almost every family related to our company. However, our India plant workers have been helping the local community serving foods of migrant workers that are stranded away from their homes.
When the COVID-19 lockdowns occurred.
From setting up food stations to serve migrant workers, who are homeless and lining the whole of the highway near our India plant to caring for our own workers with strict and the effective safety measures during the COVID-19 crisis. The leaders in the company of shown courage compassion and of concern for others ahead of themselves.
Our Keyes plant team has not stopped working for a single day during the year long pandemic, despite significant local searches and COVID-19 infections day.
Quickly pivoted to producing hand sanitizer alcohol at the very time, California's economy was shutting down. Additionally, the renewable fuel products. We produce go to the very heart of creating safer and healthier healthier communities through cleaner air and reduce dependence on outside sources of energy.
And so many investors may not fully understand or appreciate why so many of our employees of made the personal sacrifices and long term decisions that have built the company. This advanced stage I hope it is clear that the resilience and persistence shown by our team is exactly why we have been able to execute and achieve key milestones and the midst of global pant.
Mick <unk>.
Such as obtaining a California environmental quality at permit for a 32 mile expansion of our dairy renewable natural gas project project or receiving 19 separate air permits for the jet deal.
Diesel project and many other achievements realized in the past year.
For the circular bio economy, and by our California, dairy renewable natural gas project.
Our soon to be solar power and ethanol plant, our biodiesel plant with glycerin byproduct and our renewable jet and diesel plant underdevelopment and to use cellulosic hydrogen for waste Orchard would provide significant benefits to the environment and local communities.
Each project provides large capital investments into local communities, while creating thousands of new jobs and agricultural and rural areas.
During the fourth quarter and full quarter full year of 2021, <unk> achieved important milestones towards revenue growth and sustained profitability and each of our for lines of business now.
And I'd like to ask Andy Foster President of the amount of North American business to review highlights of our renewable natural gas and ethanol businesses Andy Thanks, Eric.
And a medicine, we're focused on producing below zero carbon intensity products, including the production of negative carbon intensity of renewable natural gas and renewable fuels.
Our products maximize the value of carbon credits under the California, low carbon fuel standard the <unk>.
Renewable fuel standard and IRS 45 tax credits, while reducing operating costs by using waste materials and feedstock and excellent I'm, sorry, and excellent example of our low carbon and sustainable circular bio economy that Eric spoke of as our dairy renewable natural gas product project, which is designed to.
And many synergies with our Keyes ethanol plant.
Our Keyes ethanol plant uses agricultural feedstock that absorbs cotwo from the atmosphere during plant growth from which our production facility produces ethanol and animal feed the <unk>.
<unk> ethanol plant delivered 65 million gallons per year of renewable ethanol, but also produces about 2 million pounds per day of wet distillers grains that supply approximately 80, local dairies and feeds more than 100000 accounts.
Methane, commonly known as natural gas is a very potent greenhouse gas that is up to 80 times more destructive and carbon dioxide and warming our planet's atmosphere.
Approximately 25% of Calvert, California's methane emissions come from the newer waste ponds on dairy farms.
To reduce these damaging methane emissions, California passed the law, commonly known as Senate Bill 30.
<unk> hundred 83 that mandates of 40% reduction and methane emitted by large dairy lagoons by the year of 2030.
Biomethane sourced from dairies can be used directly in the form of renewable compressed natural gas to replace gasoline or diesel fuel and cars trucks and buses to significantly reduce carbon emissions and air pollution.
And the dairy cows generate waste that is captured and the covered lagoon anaerobic dietary digesters that we're currently building and theories producing biogas that has cleaned up pressurized and sent through and.
And processed through.
Our unit at the dairies to remove hydrogen sulfide.
We then transport the biogas via and <unk> pipeline to the <unk> plant, where it is used.
And ethanol production or the upgraded and compressed to produce renewable natural gas.
This RMG can fuel our <unk> trucks, and a fueling station at the Keyes plant to carry our wet distillers grains to the 80, dairies and Biofuels and biofuels to customers throughout Northern California. This.
And this process is the sustainable negative carbon intensity circular bio economy that productively uses dairy waste is fuel and significantly reduces air pollutants and the community.
Trucks can also be fueled by our RMG at any compressed natural gas station and connected to a utility pipeline and California as our RMG interconnection to the PGD pipeline enables us to send RMG to other RMG of fueling stations that we build or are owned by others.
This end to end system is scheduled to begin operating by the end of 2021.
In September 2020, we completed the construction of the first two of 17 covered lagoon Digesters and the <unk> biogas central dairy Digester project, including onsite, Barry biogas cleanup and pressurization of for mile pipeline that is owned by aimed at us and of boiler unit to use the biogas.
<unk> is process energy at the Keyes plant and the production of ethanol.
During Q1, the California Air Resources Board issued.
Issued a.
Reduced carbon intensity fuel pathway for the Keyes ethanol plant utilizing a negative for 2006 Ci score for our biogas compared to a positive 100 carbon intensity for petroleum and natural gas.
And to date, a medicine has been awarded about $23 million of grants from the California Energy Commission.
The California Department of Agriculture, and <unk> and other government agencies for the dairy biogas system and production of renewable natural gas.
In 2019 after more than a year of project development and financing work, we announced $30 million of equity financing to fund our biogas project.
In addition, we are and the process of obtaining long term debt funding under the USDA renewable energy for America program for more than $75 million of USDA guaranteed guaranteed loans that will complete the build out of the 17 dairies.
This 17 dairy project is scheduled to generate more than $40 million per year.
Operating cash flow under 25 year dairy supply contracts and when it is fully operational in mid 2022.
The preferred equity investor and the biogas project is automatically redeemed by and allocation of 75% of operating free cash flow until the preferred receives $3 for every $1 of equity invested.
<unk> recovers operating costs and 25% of free cash flow from inception subject to covenants. The redemption of the biogas preferred investment is expected to be completed by the year 2025, after which <unk> received 100% of cash flow from the project generated by 'twenty five 'twenty five.
The year long agreements with Aries.
Now, let's take a moment to discuss our progress at our California ethanol plant.
Revenues from ethanol ethanol production increased to $42 million and Q1 of 2021 <unk>.
Despite lingering COVID-19 issues early in Q1 that caused lower ethanol ethanol demand, while corn costs increased significantly starting in the second half of 2020.
However by late Q by late in Q1 2021, the price of ethanol had accelerated rapidly and is now more than 100% higher than January of this year as the new administration and EPA have shown a commitment to enforcing the renewable fuel standard.
As the economy began to reopen due to availability of vaccinations and Q1 2021.
Fuel ethanol demand began to recover.
And the recovery.
Since mid of Q1 of the Keyes plant has been running at full capacity in order to meet the significant demand for <unk> and for ethanol and California.
Particularly driven by the severe winter weather and the Midwest that cause.
Major disruption to the railroad system and supply chain used by Midwest ethanol producers.
But mostly reflecting increased consumption of gasoline and ethanol as economic activity has increased and Californians began driving more as they start to return to work.
And the <unk> ethanol plant has been operating at maximal sustainable production rates, while building the following projects to increase cash flow by approximately $23 million per year once completed.
<unk>.
Completing the installation of the new $8 million of zeolite membrane dehydration unit from Mitsubishi debt will reduce natural gas used at the alcohol plant by replacing our molecular sieves, which use a significant amount of petroleum and natural gas to operating with electrically powered equipment.
This upgrade to an electric dehydration system will reduce the carbon intensity of our fuel and is partially funded by a $1 5 million energy efficiency Grant.
And second installing five new stainless steel tanks for USP.
And beverage high grade alcohol storage and load out, which will increase our storage capacity by more than 250000 gallons and providing flexibility for operation of the new electric ethanol dehydration system at the plant.
Third installing of $12 million solar panel and micro grid array with battery backup to further reduce natural gas consumption by replacing carbon based natural gas with zero Ci solar electricity while operating.
While optimizing energy used throughout the ethanol plant, primarily funded by an $8 million, California Energy Commission Grant and force designing and building and electrically driven mechanical vapor Recompression also known as MTR system.
To significantly reduce petroleum natural gas use which equates to reducing approximately 100000 pounds of steam per hour, partially funded by a $6 million, California Energy Commission Grant and.
And also we've applied for <unk> energy efficiency grant as well.
When completed these upgrades are designed to potentially eliminate petroleum natural gas use at the alcohol plant.
<unk> our steam driven.
<unk> system, and save up to $8 million per year of natural gas and utility pipeline transmission costs. The.
And the California by a refinery will primarily operate using high efficiency electric motors and pumps powered by renewable power sources.
The combination of this new electric membrane dehydration system the.
Zero Ci solar power and the electric and VR system is expected to result in a double digit reduction and the carbon intensity for the fuel processed at our the.
For the fuel produced at our ethanol plant and keys.
Thanks, Andy.
Its review of our biodiesel business in India.
Last quarter, our Universal Biofuels subsidiary and India bid on a portion of the newly issued $900 million of biodiesel purchase tender offer for about 225 million gallons by the three India government oil marketing companies in the past the OFC bidding process required of one year of fixed price for biodiesel. However, the OFC bidding prices for.
Biodiesel was not successful in 2020 due to a high level of volatility and crude oil and other markets. So in response to requests by biodiesel producers, including a met US the oil marketing company contracting process has been changed to a monthly bid instead of a one year contract for the fixed price.
We expect that the new monthly OFC bidding process will be successful during 2021.
Allowing large volumes of biodiesel to be blended into petroleum diesel to improve air quality and reduce carbon emissions and India. The.
The second wave of COVID-19 related shutdowns has delayed the ramp up of production at the India plant, but we are well positioned for rapid revenue increase as large government purchases of renewable biodiesel occur to meet climate change and air quality goals. Once the current COVID-19 crisis facing India begins to subside hopefully in the coming weeks and months.
Let's discuss our carbon zero of renewable jet and diesel fuel project using negative carbon intensity hydrogen and riverbank, California.
We are pleased that the embedded carbon zero by refinery underdevelopment and riverbank near Modesto.
News to achieve major milestones, including the significant development. We just achieved through the issuance of 19 separate air permits for a riverbank refinery other otherwise known as the ATC or authority to construct.
So further amendments or plans of the part of final construction engineering. The ATC Air permit allows us to move forward with engineering EPC contractor agreements and project financing.
During Q1, 2020, one and we signed an agreement to retain Coke project solutions as the project manager and EPC, which has accelerated the pace of project development toward construction.
The riverbank plant is designed to produce 45 million gallons per year of renewable jet and diesel generating more than $230 million of revenue and more than $65 million per year of positive cash flow. We plan to expand production to 90 million gallons per year at the riverbank site by year 2025, as part of our five year plan to generate approximately 400 <unk>.
$60 million of revenue and of $130 million of annual positive cash flow for renewable jet and diesel production.
The riverbank plant, that's designed to use waste orchard wood and other waste biomass biomass such as debt forest wood to produce cellulosic hydrogen, which will hydro treat vegetable and other renewable oils to produce jet and diesel fuel.
Wastewater has become a major challenge for California is the state is facing of severe dropped and as for prioritize force management to reduce the impact of damaging wildfires.
Let's finish with a brief review of our technology development group.
Headed by a doctor of Gotham Vermeer, and <unk> as our VP of technology development. The <unk> technology development team worked with the federally funded joint Bioenergy Institute, and Berkeley, California for three years and the development of the patented process to extract sugars from low cost waste Orchard and forest Wood feedstocks.
This important production process has been exclusively licensed to <unk> for wood and other biomass from non commercial for us.
The negative carbon intensity sugars can then be used to produce high value of Cellulosic biofuels in the <unk> Keyes ethanol plant.
Displacing expensive and carbon intensive cornstarch as feedstocks to produce ethanol.
The remaining lignin can be used to produce cellulosic hydrogen for the hydro treatment of vegetable and the other oils to produce renewable jet and diesel fuels.
A $3 million, California Energy Commission Grant was awarded to Jae Bae antibiotics, which partially funded the years of collaborative work and lab testing that led to the granted patents.
Last Friday, we were notified that and Medicine project proposal was selected by the U S Department of energy to apply for a $1 million grant and a follow up $15 million of $40 million Grant to fund a production plant to extract sugars from locally sourced Orchard and forest waste Wood, we expect commercial.
Operations to pre extract cellulosic sugars from wastewater and when the riverbank renewable jet and diesel plant becomes operational.
These waste wood sugars are expected to generate more than $5 per gallon of revenue at low feedstock costs when used to replace corn starch and our keyes ethanol plant.
In summary, and medicines now implementing a diversified portfolio of negative carbon intensity projects from dairy renewable natural gas and low carbon renewable ethanol to renewable jet and diesel fuel.
We are rapidly deploying new projects and adopting both proven and as well as new technologies to reduce carbon intensity and input costs, thereby significantly increasing the value of <unk> and renewable fuels by maximizing L. CFS RFS and IRS 45, Q credit values are.
Our company's values remained unwavering and long term commitment to building value for shareholders and permit and respect for our employees and making significant and positive contributions to the communities we serve the.
Non debate the foundation upon which we have been executing upon our five year plan. Despite the challenges of the COVID-19 pandemic depend AMIC and other external factors.
Remains solid and we believe will result, and exciting growth opportunities for met us and.
Now, let's take a few questions from our call participants.
Operator.
Thank you Mr. Mcafee, we will now be conducting a question and answer session. If you do have a question. Please press Star then one on the telephone keypad to join the queue. If youre using a speakerphone. Please pick up your handset to provide the best quality again, ladies and gentlemen, if you do have a question or comment please signal by pressing star.
And one at this time.
And we will go right to the line of Manav Gupta with credit Suisse.
Please go ahead.
Hey, Eric and team. So my first question here is that when I look at your business growth plan and in the near term. The biggest growth is coming from Danny LNG is there any reason why I should be what it debt.
And will not be able to hit those data are LNG growth numbers I think that EBITDA guidance is 45 million in 2020 two going up $210 million 2024. So is there any reason range as CFS competitors why you think there could be an issue with you hitting that guidance.
At this point and time.
We have removed some of the key barriers such as the California, Environmental quality Act permit for our pipeline, which we announced within the past month has been granted.
And frankly, we've already signed up the key contracts with the dairies for the execution through the next.
Up to the the <unk>.
<unk> the areas that are challenges over the next year. So I would say the key project challenges are behind US we are executing on the renewable energy for America program USDA loan you may know that separately, we have of $125 million USDA.
USDA financing commitment letter signed already.
But in the and this dairy biogas process, we've invested about $30 million of equity already we have no debt and the subsidiary at all and so the next phases of <unk>.
Lending the U S.
Steve.
Funding that program is a very common program, it's very fast.
Typically a three to six month process from application to the completion and we're well into that process. So.
Assuming the that can do and continues to move forward I would expect we wouldnt see any interruption and our execution over the next roughly 18 months and that program would allow us to continue funding after that so we really don't.
Have exposure to needing additional equity or some of their contributions I think the.
The financing is the way forward I should mention though that.
This project is a very very attractive project, it's the lowest carbon rina.
The renewable fuel and the market today and the negative 426, and there are other agencies and tax free municipal markets et cetera that seem to be very very excited about this so I anticipate we'll be executing on the USDA for the next year or so, but I could see a scenario of which after that tax free long term financing or other sources of financing will be used.
So we're really just at <unk>.
Think of financing execution phase at this point and time the project milestones I believe for well under control and we're right on track on the on those items.
And then Eric what is not in the guidance is the carbon capture and sequestration, which was came out of a little bit after the guidance. So if you could talk about that opportunity from your perspective, how much you can capture and sequester, but as I understand the size of the facility is much bigger than what you can utilize.
So is that an opportunity to get third party carbon capture opportunity is and what kind of opportunities there to capture of third party carbon and put it in the ground.
You are correct the Stanford University Center for carbon capture study reviewing 61 of the largest carbon emission source of the California identified that are <unk>.
Sites would be able to do about 1 million metric tons of cotwo injection per year.
At our Keyes plant between the plant itself and the biogas.
Carbon.
And we produced about 200000.
The metric tons of Cotwo year at 52 dairies.
8 million minus the 102 and 1000 leaves about 800000 metric tons per year that third parties, which end of the Stanford study identified would be oil refineries will be the next category of carbon the meters that would be most of attractive for the sequestration.
We have already had meetings with major oil refiners in California, there is a strong appetite.
Two two.
Work with us and basically piggy back on the extensive EPA process that we're going through one of the unique opportunities we have as of our Cotwo clines either will be very very short I mean, as a matter of a couple of hundred yards or a mile or two and just basically insignificant compared to the Midwest pipeline, So the $2 billion.
The pipeline being proposed to go from Iowa, North Dakota, and other I think of one 5 billion dollar Blackstone and Valero pipeline being proposed and our project our pipeline costs are de.
De Minimis.
A couple of million dollars maybe.
It would be if we had to go a mile or two so we're just very unique position to execute quickly and don't have to wait for permanent and et cetera. These third parties.
Would be and opportunity for us to essentially have the well already built and we just moved the cotwo and via rail or be a truck you may note that we use biogas and trucking. So we're in a very very unique positioning and which we could be fueling our own trucks with our own biogas and if you look at the economics of biogas you can see that the.
Very low cost fuel for us to use so our plan is to complete these what for US is essentially it's and off take agreement, but it's more of a of partnership relationship with oil refiners and the ones, we're focusing on and in the Bay area, but frankly, the economics work.
Almost equally as well for for for La refiners, and I would expect to see reports on those arrangements over the next quarter.
Thank you so much for taking my questions and Im sure.
Thank you.
Next we go to the line of Derrick Whitfield with Stifel. Please go ahead.
Thanks, and good afternoon, all and also thanks, Eric for your prepared remarks on your board and your company's culture and values.
Perhaps beginning with that Theres been a lot of undue attention recently focused on your history and relationship with neither of motors for.
For the benefit of investors listening and today's call could you speak to that history and put it in perspective and then also.
And speak to the opportunity you see and your low cost investment and ebay motors.
Sure absolutely.
A medicine is a.
Below zero carbon.
Renewable fuels producer and.
And.
In order for us to monetize the biogas and produce the ethanol we produce frankly, even the renewable diesel we produce.
We are strongly benefited if it goes into trucks, there's a multiplier and some other reasons why displacing diesel and transportation is much more valuable and displacing gasoline.
And yet in the marketplace today, there are no truck companies that use ethanol as the range extender for an electric truck and actually it's the very simple reason ethanol engines are like gasoline engines and they don't have the torque they don't of the pulling power and Thats why when you go out and look at class eight large over the road truck.
And they are virtually all diesel trucks, you don't see gasoline and trucks pulling down and 80000.
The truck down the road.
Likewise.
We don't.
We don't add of medicine have access to the infrastructure to build the truck.
So as we looked closely at what the the.
Discipline is we need to apply at our business. We wanted to focus of producing these carbon negative fuels and <unk>.
Our presentation laid out of pretty disciplined plan to take advantage of our excellent position as of the ethanol producer of supplying over 80, dairies and ability to produce the.
Biogas molecule.
I have a background of the <unk>.
Capitalist and Silicon Valley of funded about 25 companies I founded about eight public companies for where oil companies two of Biofuels companies, including Pacific ethanol.
And so it didn't take long for us to the side.
Somebody needed to go and invest the capital developed the technology and deploy.
Electric trucks with ethanol range extenders opening an entirely new.
The market for ethanol and the U S.
The electric trucks with biogas range extenders, expanding our ability to ship biogas into trucks, and California as well as just electric trucks because of biogas as you know for the renewable natural gas can be converted into electricity to power electric trucks, So thats off of in the future.
<unk>.
Because we felt that that was not a business that a meta should do.
We took one of the my other portfolio of companies and encourage their management team to get active and this business and they got very excited about it and the.
The relationship we have of them ended up being mature enough that we determined the day met is actually is a lot of value. We can bring to that startup, though we don't have to put up any cash.
Related to their equity et cetera, we have 142 acre.
Riverbank facility that used to be and army ammunition plant was 710000 square feet of buildings that were seven production lines.
Very akin to what of let's say of truck manufacturers want to do we.
We also happen to have here of the.
The former headquarters building of the portfolio company debt.
Is undertaking this it's about 3000 square foot.
Office space not much but we have it available and so we found that there were just the number of things, we can do including supply carbon negative renewable natural gas, which is a unique asset for a renewable natural gas truck company to be able to use so we have.
And its shareholding that is not above 20% if it does exceed 20% our balance sheet is exposed to the consolidated and the debt and our income statement is exposed to consolidate any operating.
Losses, and so we have protected our balance sheet and income statement for many ups or downs and the business, but we have maximized the amount of equity upside we have and if the shareholders were to look at too simple to U S. I am PLE.
And.
Plus dot AI, you might notice of their valuations of rather significant and I think the Nemo motors has some opportunities to execute in that.
The marketplace of autonomous and electric trucking that.
Emphasizes the need for a range extender fuels that are carbon negative.
That's basically deploying our assets into removing the blend wall. So we don't have to put nine gallons of gasoline and with one gallon of ethanol and or sell a single gallons of ethanol and we can literally fill up of truck with ethanol and and drive it down the road or renewable natural gas into renewable and natural gas trucks the.
The net answer to your question there.
Thanks, Eric and then as my follow up I wanted to focus on your carbon zero project.
Could you speak to market offtake interest in that project and comment on when and reasonably be in a position to announce offtake commitments.
We are currently and paperwork with two oil refining companies that have strong marketing presence and California.
I would say easily among the largest suppliers of of diesel and.
Seem to be renewable diesel and California.
And I would expect the documentation, which is moving at the pace of the major oil companies should be able to.
Closed certainly and the next several months.
We don't control of the lawyers at the major oil companies, but we've had very very high level.
And I'd almost say that no. One has said they're not interested what we've been able to do is pick various strategic relationships and we have multiple multiple points of contact debt.
The synergistic with our business and so we're looking to execute on that.
Very helpful. Thanks for your time.
Sure.
Our next question or comment comes from the line of Amit Dayal with H C. Wainwright. Please go ahead.
Thank you Eric.
Okay.
And good. Thank you with respect to the dairy digester deployments can you give us an update on how many of deployed now and.
Yes.
I know you provided some color on how the revenue recognition for this but if you could remind the investors listening and that would be very helpful.
Sure we've completed two dairy divestitures of four miles of pipeline.
And Andy once you get the how we're doing over the net Amit. So we have we have two that are currently operating and.
<unk> of gas to the ethanol plant for process energy.
We have five that are either permitted or are mostly through permitting that will begin construction on and the next call. It the next.
30 to 60 days.
We'll have five more that will be gaining and the third quarter. So we will have by the end of this year, we will have 10.
And.
Digester.
Projects underway under construction, we're also beginning on Monday the.
Construction of our.
Gas cleanup hub of the Keyes facility, which will take the gas thats piped and from the dairies and clean it up through early keep membrane system and then we'll be ready for interconnection to the PGM pipeline or our CMG station at the ethanol plant, we're going to begin construction on that all of the.
And.
Pardon me all of the permitting work has been done.
And we're going to start pouring the foundation next week on that expect that to be done by.
The late second quarter early third quarter. So I think everything is moving along the pace.
The only challenge we have found is the counties because of COVID-19 a lot of the counties are back to the counties are backed up in terms of.
Their ability to process permits were not having any pushback on the permits there all very strongly supportive of our project. It's just that's just workload and theyre getting the economy is picking up and California, So theyre getting something like 30, new permit requests a week from various projects around the county, so kind of working through that the fact that we have a good.
Our relationship with them is helping us move the process, along but I would say to answer circle back to the beginning of your question. We should be we should be at a place where we will have 10 projects underway.
Certainly by the end of this year and five of those projects will be pretty close to completion by the end of ended the year or beginning of Q1 next year.
Understood. Thank you for debt.
And with respect to biodiesel sales that doesn't look like there were any sales and <unk>.
The change and the bid process or is it because of other reasons.
And that's primarily driven by COVID-19 the.
The process has actually improved to benefit us but.
There is there's some really strict measures that would be done to protect our employees and vendors and India.
Understood and.
The presentation Eric.
And 52 million coming from India biodiesel spook anyone.
Is that still something that you think of achievable or should we sort of just for patients for biodiesel revenues this year.
I think that the COVID-19 will have an impact of this year at full operation 12 months, it's the $168 million operation. So.
To tell you the truth, it's all about how the COVID-19 and OFC tender process kind of rolls out and the second half of this year.
Could very easily.
Of this year's expectations, it's really only about it's less and the third of what our total operating expense opportunity is the unknown.
And don't really is how this COVID-19 situation effects and <unk>.
I am sure you are aware of how dramatic the second pace has been for them.
But it could be just the dramatic that they recover as the vaccine start distributing et cetera. So.
Currently I would not change that we might revisit that and the third quarter will of lot more visibility then, but certainly where we're set up to start the plant and run at a 100% capacity. The day you started and.
The depending on these external factors.
Understood.
And with respect to sort of managing the crush spread et cetera for that amount.
Right now is there anything you are doing unique.
Sure.
Is there any opportunities to manage when produced in the bedroom.
Or are we just sort of dependent on the.
The volatility and the commodity space right now for.
And one of the margins.
And do you want to take the yes, I would say unfortunately I wish there was more we could do I think hedging and this kind of of market right. Now is a pretty dangerous strategy because we're not located near the corn I think if we were in the Midwest. Some of the some of the Midwest producers are able to do that because of the unique situation with local corn basis, but we're just not and that position.
On the upside for us when we've been through a similar experience and I would say it was 2016 of 2013 happened and where there was the drought or some other some other event that was going on and that caused the essentially of shortage.
We work with J D High school as our corn merchandiser based out of Omaha.
Great Company of 100 year old company.
And they have the ability to draw from grain elevators all over the Midwest in fact, I think that year, we received range from something like 25 different corn elevators.
And that gives us a dramatic advantage and the marketplace.
Midwest plants are not set up to receive grain for any other source other than trucks locally.
So when they run out of corn locally theyre done Theres really nothing they can do and I've talked to and the past couple of weeks I've, probably talked of six different producers and the Midwest who said.
This is the one time I wish I was the depth of destination plant because you guys have the ability to find it you can bring it and from the eastern corn belt. If we wanted to I mean, it gets expensive when you do that but but I think that is the one and.
The advantage, we have and are very what's going to be a very volatile very very difficult year on the corn supply side.
So I think.
We're going and we're going to do the best we can but I think the idea of trying to trying to.
Hedge as the destination plant with this volatility could could end up costing us some some pain. So we're unfortunately sort of stuck with where rent and unlike.
I'd like to say, we don't sell for and we have to sell ethanol so the demand for ethanol.
Actually go and determine our cash flow, we're seeing very very strong demand for ethanol right now and shortages and the western and Pat is the area of the pad five which as you know is the western United States for the.
For the past three months has.
Shown record lows.
From an inventory perspective part of that is attributable to the the giant storm that hit, Texas and the southwest still actually having impact as you all probably know across the economy.
That that is starting to work itself out, but California sort of went from from zero to 60 miles per hour and the last couple of months in terms of of.
Gasoline demand and so we're seeing I think at least through the third quarter, which is about all of the visibility you're going to get in the market. Like this right now I think we're seeing that we're going to continue to see strong demand in California.
And our local truck market, which is really what we serve.
And within 100 mile radius of our plant.
Continue to see strong ethanol demand so.
One of those deals where if the ethanol can keep pace with corn.
We can continue to have and operating.
Positive contribution margin.
If we see a retreat and ethanol pricing and the corn situation stays where it is where it gets a little challenging.
No I understood. Thank you for the country.
I know the was there was discussion previously about maybe allocating some capacity to hybrid industrial quality of alcohol is that still in play or should mean montney.
Zoom and any contribution from those efforts.
We have ongoing discussions.
Ill, let Eric speak to the sanitizer business, but from a potable alcohol perspective, and we have.
Ongoing.
Relationship with a couple of very large producers and our area and in fact have.
Discussion of the scheduled for later this month.
So I think we're going to continue to see as now we have a DSP permit from the TTP, we're allowed to do that.
I think we're going to continue to try to grow our potable alcohol grain neutral spirits business.
Is that the.
That's a nice piece of business I won't say, it's huge volumes, but it's it's a good solid business that allows us some diversification and I think the same is probably true of the sanitizer side, where we see opportunities to do that.
We will take advantage of those opportunities for it and we're waiting for the FDA to actually enforce the for.
Pharmacopeia standard again that will shut down a lot of the cheap imports of low quality product.
And now of over 200 of them had been warned by the FDA is not meeting the FDA spec. So we're waiting for the market to kind of cleanup as.
And as we see the and the market is the channel as was jammed pretty pretty significantly last year. So so the.
And.
There's not a ton of demand from from non traditional USP sources right now because anybody that goes to the supermarket you can find.
<unk> and bottles and stacks and stacks of hand, sanitizers. So the market needs to settle itself out a little bit and then but we do believe that's an ongoing opportunity for us.
And so on that thank you so much.
Sure.
Next we go to the line of Jordan Levy with true of Securities. Please go ahead.
Good afternoon, Eric and the rest of the team.
Great all the color you guys its Kevin.
Keep in mind, the two quick questions.
First just wanted to touch on the department of energy credit.
And.
In relation to the cellulose extraction from the Orchard wood.
And to my understanding that you guys have put a lot of weight into this and your five year plan, but just wanted to get your thoughts high level and the potential of that sort of project and.
But the economics of that could look like and what percent of and that sort of the time.
Sure. Thanks Jordan.
The first step and our jet and diesel hydrogen production process is to extract sugars from the waste wood, because we have an existing.
The 65 million gallon plant that can process of the sugars with very minimal additional capital expenditures that of course being a corn ethanol plant. So our overall strategy is to wean ourselves gradually off of being 100% dependent on corn.
And so as we increase the volumes of wood, we're using of jet fuel for increasing the amount of sugar, we can get from that wood and every 10% of the corn starch that we decrease at our corn ethanol plant saves us purchasing cost of corn and generates a lower carbon intensity score for the ethanol being <unk>.
<unk>.
And generates of different renewable at the application under number so we estimate about $30 million per year of additional positive cash flow from our corn ethanol plant for the 10% of the feedstock debt is displaced and we've done these numbers and number of times and they always come out of around 30 million and sometimes it's 28 times.
Sometimes it's 35%, but about $30 million. This is for 10%. This is linear so it doesn't decrease if we go to 20% debt at $60 million et cetera, the scale up of our sugar extraction technology, which is patented the patent was granted in January of this year. It is exclusively licensed to us for non commercial for us.
We're using it for orchards, which is 1 billion half acres, and one 6 million tons, each year and in California.
And that technology now needs to go to the pilot scale and so the department of energy.
Grant program and specifically to fund pilot projects and it's the two faced program. Its a $1 million Grant award for engineering, and some other things and then a $15 million to $40 million.
Grant award for actually construction of the of the plant the size of our plant would be of small commercial sides because of how it's integrated with our other facility. It actually would be projected to be positive cash flow upon its construction and so we're calling of the pilot plant, but it's the pilot commercial facility and then we would just expand it for that.
So it's a gradual technology development, we've been working on for probably for years now.
And now we have a path of the technology and the department of energy is recognized.
The unique opportunity to have a broad impact on the corn ethanol business.
And not just our plant, but frankly every plant did benefit from this technology.
That's great Thanks, Eric and.
And as a follow up just pivoting back to the R&D business just wanted to get your updated thoughts as it relates to come in the long term trajectory of debt.
Business and the ability to scale it beyond the 17 and even potentially beyond the 50 and the five year plan.
And just noting kind of the increased competition, we've seen just in general and the R&D space and.
And you are kind of unique positioning geographically just wanted to get your thoughts on how you think you can continue to scale that business.
We are.
Actively interacting with the dairies in the region. The counties that we operate and we are of course supply of about 80 to areas with the feedstock.
<unk> 36 miles of pipeline in the ground, obviously makes us the obvious choice for any dairies within Aw.
A few miles of our dairy.
Of our of our gas pipeline and that's all occurring over the next 12 months. So we continue to expand those relationships and approximately 1200 dairies in California.
We are regionally.
The leader and our market just because of our obvious connection to the local dairy market through the animal feed business.
I would say that over the next year, our job is to dominate the region that we're in.
And then.
A year from now and expand our footprint to other regions of California. If you look at the market and California, There's really only a couple of developers and one of which is and the south part of the valley and one of the sort of and the central part of the value and we're sort of in the northern part of the valley and we are of good relationships with the dairies in our area and I think we're showing that we can be very.
Very quickly ramp up of those.
The series into being customers. So out of the 1200 areas of our goal is to have the substantial portion of them.
And I would this is Andy I would just add to that debt.
We're deep into conversations with some all of the brand name.
Uptake partners that you all are familiar with we're having all of those conversations.
But what we're trying to do is come up of the strategy that will address the I think the underlying question you ask which is that some point of California become saturated right I think that's kind of what everybody's concern us because now <unk> got outside of the state developers coming in and it.
And that's kind of the kind of the wild west.
I think Eric touched on two things that give us an advantage one is our existing relationship and the dairy economy right. We've been selling feed to the areas for the last 10 years, we have a strong relationship.
And I think that helps us a lot in terms of and then I think the evidence is there with the number of areas that we've signed up and are continuing to engage with so you've got to have the source of the gas number one but the.
The other thing we're trying to do is balance our offtake agreements.
So that we're not putting all of our chips into one basket and then going to get real sad disappointed when the price changes or things happened and the market there.
Yeah.
Undoubtedly going to happen as we progress into this and the next five to 10 years.
So we're looking at really diversifying where we send our gas and how it's used and then I think the opening open. The remaining question that has got an obvious answer to it is just not quite there yet is how electricity is going to play into this whole market and I think we're contemplating that as well and.
Without getting into any detail, let's just say, we're not keeping our we're keeping our eye on the ball and on all of the potential markets that will exist for renewable natural gas.
As we progress for this and have had significant discussions with the California Air Resources Board and others. So we're trying to having been a destination ethanol plant for 10 years, we sort of notice like not to have very many options and so what we're trying to do is sort of smash that model and give ourselves lots of options. So.
We reduce our risk across the across the business.
Yes.
Excellent. Thank you. Thank you both very much.
Mhm.
Next we go to the line of Ed Woo with the Cindy and capital. Please go ahead.
Yes. Thank you for taking my question as we just passed the 100 days with the new President and the office.
What do you see either and the Greenville that he is proposing as well as the the staff. The EPA has in terms of the ethanol waivers and how do you see that playing out and the next six months.
I would say that there is some very promising legislation increasing the value of carbon credits from $50 under the 45 Q of provision two and one case, it's $80 and the other one I read was $125 per ton very significant and increase and the revenues that we could potentially get from carbon.
The sequestration the EPA has not only just talked but they've actually taken very significant action and.
In favor of the Biofuels industry, they filed an opposition to their own grant of three waivers this of strange, but the window the Supreme Court and they actually of pose their own grant of of hardship waivers to three oil companies and filed also of petition and support of the Biofuels industry on something that went the Supreme Court of this couple of weeks ago.
And so the EPA has actually hit the ground running the new Secretary.
It has promised that the renewable volume obligations, which are sort of the blending rules.
Had been delayed.
And I'll get.
Published and the next few months and so I think they're playing catch up a little bit, but so far have been and not only saying things, but doing things that are very much in support of the newble fuels.
The price of the three rents which of Cellulosic rins generated by our biogas.
About 80.
In the third quarter of last year and today of $3 20 per day three rent so.
That's a very significant almost quadrupling of the federal revenue, reflecting that the the off takers of the obligated parties and expect to actually have the blend the actual physical.
Molecule or buy a RIN from somebody who is physically blending of the molecule. This is what the renewable fuel standard was designed to do with the encourage some of the blend and other ones, who didn't want to blend to be able to buy.
And that the mechanisms now working the price. This morning for the day, six RIN, which was about 30 or.
So last year as of $1 80, the day six rent as of the corn ethanol Rins and.
And supporting the value of a blending ethanol because if you blend ethanol you don't have to buy any rent and so you get the rent for free we give away.
$65 million of them every year to anybody that buys ethanol and blends it so we're very well.
And equipped to meet the market demand, but frankly, the EPA does and enforce the rules theres not the market demand I think the.
The positive thing that the stock market has seen is it renewable fuels companies now are operating under a set of rules that are being enforced and debt that's providing a balance of the market. We haven't had for a number of years.
Great. Thanks for answering my question and good luck.
Thank you Ed.
And we take our last question or comment from the line of Marco Rodriguez with Stonegate capital. Please go ahead.
Good afternoon, everyone and thank you for taking my questions.
Hey, Mark and wondering if of Eric and I was wondering if you could maybe spend a little bit of time on.
And the capital structure here for Amit.
And you made some comments earlier in the prepared remarks were very helpful. But how are you kind of thinking about the your at the market offering and just kind of given the volatility and the stock price and.
Looks like some of the more expensive debt.
And the maturity date.
And I guess, you kind of another year here to April 22, just kind of update us on your thoughts and how youre thinking about it anymore.
Sure.
In response.
Bons too.
And really long long discussions with various.
Wall Street players.
We recognize the concern about the high interest rate bridge debt that we had and we took steps and early 2021 to not not completely replace the debt.
Don't think that's necessary, we have about $300 million cost of our assets. So we reduce that debt down to a meaningful opportunity to refinance it at lower interest rates.
So we are saving a substantial amount of money now by not having interest that's due but frankly the remaining high.
Higher interest and bridge financing.
The financing can now be refinanced with other tools and I think that and the first quarter. This year, we were above that debt refinanced threshold now, we're clearly within that refinance threshold.
So we are.
I think executing on our of.
Moderate plan of debt reduction.
The reduction of high interest rate debt debt debt.
I think over the next couple of months Youll see matures very nicely with what we would call low interest rate debt something in the 8% to 10% range and we would consider would be low interest rate debt.
Think though that most people are not.
Not clear that are of projects do not require parent company debt financing our projects are standalone.
And when we put for example, the $30 million of equity funding and to biogas.
That allows us to do that sort of thing at the project company level USDA renewable energy for America program. For example has nothing to do with the parent company debt, we kind of a $1 billion of debt to the parent company and would have no impact at all on our project company debt because of our subsidiary has no debt at all the the <unk> subsidiary literally as of debt.
And free entity with $30 million of equity invested so the same goes with our jet diesel plant, we have about $32 million of equity and grants and that subsidiary and and so functionally it's well set up to do a.
The USDA or Tac.
Tax free Muni financing and I think most investors if they want to spend and the extra time to go one layer down from looking at the consolidated balance sheet debt very quickly figure out that our India plant has no debt at all either we have no long term debt at all and completely debt free and 50 million gallon biodiesel plant set up to be.
To do over 160 million of euro of revenue.
All upside no downside biogas and of course, I mentioned and its debt free so.
We structured the company deliberately with no convertible debt. So we're not worried about the conversions that dilute shareholders and very very cooperative supportive relationship with our senior lender. They are the ones that put in the $30 million of equity and our subsidiary. So there also and owner of equity and the and the.
And publicly traded stock of the company. So we are of very solid relationship with them, they've done very well and the senior debt and because of that relationship we've been able to grow the company well, but by paying them down significantly and the first part of this year I think it is.
It probably provided some comfort to those and investors it might be a little more concerned about the.
The debt low that we were carrying as we came out of the fourth quarter last year.
Great very helpful. I appreciate the time guys. Thanks a lot.
Very much.
There are no further questions at this time I'd like to turn the floor back over to management for closing remarks.
Thank you very much to the analysts of joined US today as well as the meta shareholders and others.
Please review the <unk> corporate presentation, that's posted on the homepage of the <unk> website, we look forward to talking with you about participating in the growth opportunities of the medicine.
Thank you for attending today's a medicine earnings conference call. Please visit the investors section of the <unk> website.
We will post the written version of the audio version of this <unk> earnings review and business update.
Linda.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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