Q3 2021 Green Plains Inc and Green Plains Partners LP Earnings Call

November 4, 2021

Yeah.

Good morning, and welcome to the Green Plains incorporated and Green Plains Partners third quarter earnings Conference call. Following the company's prepared remarks instructions will be provided for Q&A. At this time all participants are in a listen only mode. I will now turn the call over to your house field box Executive Vice.

President Investor Relations Mr Box. Please go ahead.

Thank you and good morning, everyone.

Welcome to Green Plains, Inc, and Green Plains partners third quarter 2021 earnings call participants on today's call are Todd Becker, President and Chief Executive Officer Patrick.

Patrick Simpkins, Chief Financial Officer, and Leslie they enter Maryland, EVP of product marketing and innovation.

There is a slide presentation available and you can find it on the investor page under the events and presentations link on both corporate websites. During this call we will be making forward looking statements, which are predictions projections or other statements about future events.

These statements are based on current expectations and assumptions.

We are subject to risks.

Actual results could materially differ because of factors discussed in today's press releases and the comments made during this conference call and in the risk factors section of our Form 10-K Form 10-Q, and other reports and filings with the Securities and Exchange Commission.

We do not undertake any duty to update any forward looking statement now.

Now I'd like to turn the call over to Todd Becker, Thanks, Bill and good morning, everyone and thanks for joining our call today. Our overall transformation remains on track as does our theme of focusing on execution and during the third quarter. We have made significant progress towards our 2020 for gold in the fourth quarter is proving to be even more exciting first let's talk about the Q3 results.

As indicated on our last call we expected the third quarter. It would be challenging as margins started out very weak we had near record corn basis levels throughout the platform as we discussed timing reversals of Q2, mark to market as well. Additionally, given the anticipated weak margin environment. During Q3, we made the decision to accelerate our remaining scheduled maintenance shutdowns.

Into September which impacted our margins by three to five cents a gallon based on reduced production volumes and increased repair and maintenance expenses in the quarter.

While spot crush margins began to expand in September we only saw a small benefit of that expansion as we had begun our fall shutdowns. However, as a result of shifting the timing of fall maintenance, we only had one maintenance turnaround at one of our smallest plant Atkinson in Q4.

Our operational timing did have some impact on the third quarter result.

Im happy what I'm happy about is year to date consolidated production margin, averaging over 16 cents per gallon, which we believe to be generally above market because of our strong first half results.

The fourth quarter has returned to a positive margin environment and based on the current market.

We expect to return to profitability, even as we had some of this early to protect our balance sheet. We are benefiting from the expansion in margins along with our higher run rates I am pleased that we have secured our natural gas supply below the current market and physical transport and financial terms through the first quarter of 2022 and partially beyond that we believe.

We are well positioned to be able to operate through any natural gas environment. This winter.

Operating expenses are seeing some inflationary pressures that are impacting the industry broadly, particularly in the area of urea denaturant and sulfuric acid, although with our project 24 modernization program wrapping up we will continue to see the benefits of reduced electricity natural gas and water usage at our project 24 plants and we expect.

To see additional benefits as we increase production levels at these plants rolling into 2022.

The quarter was very exciting from a strategic standpoint, as we announced a new turnkey initiative to expand our protein footprint without increasing our exposure to ethanol raise additional capital providing radios greater assurance that our transformation can be carried out on schedule broke ground on additional protein build out and finished the construction of the wood River fluid quip MSE system.

More exciting than the operational success are the commercial successes our team have been able to achieve and also the progress we have made in renewable corn oil clean sugar technology carbon capture and sequestration initiatives all of which I will address a little later on the call.

Finally, our board of Directors has continues its own refreshment initiative significantly expanding shareholder rights, while continue to continuing to focus on good governance, and adding diversity or.

Our board recently appointed Jim Anderson into the newly created role of lead independent Director Martin Salinas and far Aqua has also joined the board.

Adding significant capital allocation agribusiness and financial expertise.

Additionally, the board amended its bylaws updated charters to the audit and nominating and governance and compensation committees and.

And adopted a new board qualifications governance guidelines and diversity policy.

This has been in the works for some time as a result of shareholder input at our last annual meeting.

Having soundboard oversight is critical to our ability to execute on our transformation plan and for the future benefit of all shareholders. As previously indicated Green Plains partners was able to increase our distribution this quarter to 43 and a half cent per unit. This was something we are excited to be able to do for our unit holders now I will turn the call over the Patrick to review.

Green Plains, Inc, and Green Plains partners financial performance performance.

I will come back on the call to talk talk more specifically about our thoughts around 2022, our ongoing initiatives and how each vertical fits into our transformation plan all of which I think you will find very exciting Patrick. Thank you Todd and good morning, everyone. We reported a net loss for the quarter of $59 6 million or $1.

18 cents per diluted share compared with a $34 $5 million loss reported for the same period in 2020.

Our results for the period are inclusive of the $7 million, one time charge to depreciation related completion of our project 24 projects and other initiatives along with the $2 million onetime charge related to a true up from the sale of our cattle business last year.

Our plant utilization of 75% was favorable compared to 66, 8% run rate in the prior year and included the impact of the early plant maintenance plant shutdowns mentioned earlier in our Madison plant being offline during the quarter for project 24 upgrades.

Adjusted EBITDA for the period was negative $14 $8 million compared to a positive $6 $8 million, we recorded in the prior year largely related to historically higher corn basis across our platform and higher R&M costs associated with the change in our maintenance schedule, partially offset by higher higher contributions from our corn oil business due to strong demand.

For renewable diesel.

For the quarter, our SG&A costs for all segments was $26 million compared to $19 $9 million reported in Q3 of 2020.

Difference was driven in part by the addition of fluid quip SG&A expenses during 2021, as well as wage pressure and higher legal expenses.

Interest expense of $9 $5 million was down slightly compared to $10 $2 million in the prior year as a result of overall interest rates.

On slide nine of the earnings deck, we provide a summary of our balance sheet highlights. We ended the period with $764 $4 million of cash and working capital net of working capital financing compared to $226 million for the prior year quarter. As a result of an active capital campaign during 2021 supporting.

Our growth objectives.

Our liquidity position at the end of the quarter included $729 million in cash cash equivalents and restricted cash.

With approximately $312 $6 million available, primarily under our working capital revolvers and delayed draw term loan during.

During the quarter, we also secured a $164 9 million of additional funding through a successful equity offering to support delivery of our overall transformation plan and related opportunities.

For the quarter, we allocated $63 $8 million of capital to profit sustaining and growth projects, including $41 $6 million to MSC protein initiatives and approximately $13 $1 million towards maintenance safety and regulatory capital.

Total capex is anticipated in the year around $210 million based on current construction schedules slightly lower than our original guidance maintenance capital for the year is expected to be about $35 million as we as we've increased our focus on high return projects supporting our project 24 initiative with a focus on eliminating unplanned downtime.

And improving predictive maintenance.

I am pleased to report the partnership realized adjusted EBITDA of $13 5 million for the quarter comparing favorably to the $13 9 million reported in the prior year when considering the reduction in the minimum volume commitments associated with the sale of both our Hereford and Ord plants.

Continued financial performance, coupled with successful refinancing of the partnerships debt under $60 million five year term commitment.

The partnership to return value to its shareholders by increasing the quarterly distribution to <unk> $43.05 per unit, while maintaining a one times one coverage ratio for.

So the partnership distributable cash flow was $11 $5 billion for the quarter compared to 11 $43 million for the same quarter of 2020 over the last 12 months adjusted EBITDA was $53 $7 million distributable cash flow was $45 8 million and declared distributions were $18.

$8 million, resulting in a 243 times coverage ratio, excluding any adjustment for the required principal payments amortized in the past year now I'd like to turn the call back over to Todd. Thanks.

Thanks, Patrick as I emphasized last quarter, we are in an execution phase now and commercially we haven't focused on lining up multiple wins in high value ingredients, let me walk through each ingredient with you and I think you will see we are making incredible progress and expect 2022 to be a major transition year for the strategy on multiple fronts.

Forgive me for the amount of information, but this is a really important call for us to outline our progress let.

Let me start with ultra high protein ingredients.

Based on current consensus construction schedules, we expect over half of our production to be converted sometime in the middle of next year with Shenandoah fully running and wood River, now, making product and coming up to full MSE production capacity.

Central City in Mount Vernon are under construction and we are mobilizing we are mobilizing equipment and a team to our buying and expect to break ground. There in the next week or two.

In 2022, we expect our first turnkey system with thorough and ethanol to come online as well all of this is possible as we are partner with Fagan as our EPC contractor and they are world class. When it comes to these type of projects all in company owned production from protein, including <unk> will be running over 600 million equivalent production.

<unk> with more underway with that said construction and engineering and remains on pace.

Our platform by 2024, depending on once some of those outstanding permits are obtained in states, like Illinois, and Minnesota, which could take longer.

Now, let's spend some time on our commercial successes and progress around this product I believe fluid quip is a leading technology for protein production in the world dry milling bar. None it is the most consistent most produced most proven and most accepted today from a quality and consistency standpoint, which matters.

We believe it is becoming a standard and this matters to our as our quality digestibility flow ability and consistency make it a very different product and other protein alternatives out there from corn soy and the rest. This was a very clean protein product that looks the same anywhere we produce it.

We are working in every vertical from pet to Aqua culture to swine to dairy and poultry.

As we indicated our early focus wasn't pet and Aqua and we've seen great interest for certain higher value applications in swine as well I'm.

I'm happy to announce that we are basically sold out of Shenandoah once again for 2022 into the pet food space and more importantly signed a multi year Mou with increasing volumes through 2023, as our customers want to make sure.

Excuse me they have the supply secured so increasing volumes speaks volumes to the acceptance of our product and we have several other leading pet food brand that we are in final negotiations for 2022, and 2023 volumes one from Wood River as well. Some of this has been an 18 month journey and it's all around us.

Specific product we produce you don't just get to call up these customers and say I have something to tell you. It's very collaborative to a very specific ultra high protein produced using specifically fluid quip technology and processing.

We expect success over the next several weeks on these agreements it's been a bit of a chicken and egg, but they wanted to make sure. The new plants are coming online and we now have redundancy. So everything gets much serious much more serious very fast.

For me to do on this call is just run through our highlights of our protein operations technology development and commercial activity.

We continue to lead innovation in product development to two every animal animal vertical across the globe, we have assembled dynamic commercial team with deep industry knowledge as well as world class Nutritionists, we are seeing strong and growing interest in our products, which helps solve a variety of nutritional characteristics and challenges leading to a diverse portfolio.

A protein ingredients created from the MSE platform.

As part of expanding our diverse portfolio of ingredients. We were successful in running a steady state 27 fermentation run at the end of the quarter achieving higher protein concentrations at scale basically full production rates. Our goal of continue with 60% protein and above his insight and our next try we will be able will be to try and achieve.

This goal early in 2022, alongside our partners from Novozymes, We believe we must focus on minimum 60% protein concentrations, which will be the best outcome for our customers and our shareholders and achieve our intended nutritional and protein targets, providing a new ingredient we can utilize in customer development.

In addition to expanding our domestic reach we are engaged in numerous ongoing discussions with customers in international markets as well.

In Wood River, we have been running the MSE system for quite a while while finishing the dryer upgrade we save significant costs by retrofitting the dryer.

As it is the type required anyways.

During that time, we have consistently achieved corn oil yield of one two pounds per bushel or higher. We believe these are some of the highest yield achieved in the industry as fluid quip technologies incredible expanding corn oil yields and we believe this is just the beginning and I'll discuss the impact of this in a bit when I talk about renewable corn oil.

Additionally, we are seeing growing interest in our post MSE distillers product, which is a high fiber high energy ingredient important to a number of key verticals in its own right.

We are negotiating the international distribution agreements in high value markets in all species and have pending export sales to Asia based on base load volumes in agriculture for certain proprietary outcome that we have found.

Lastly, we have made significant progress process and agriculture product development and believe we still have the opportunity to create better tasting more nutritious aqua culture products and develop new outcomes as we focus on achieving higher than 60% protein concentration. It does go much further than that as we helped design rations for higher digestibility better pallet.

<unk> and better growth achievements, all by using our products.

Long term, we will believe we will continue to separate ourselves from the commodity markets and deliver high value specialty design nutritional solutions to our customers who view the ingredients produced from specifically the fluid quip technology to be the standard. This is not just about making protein anymore.

Let's move to renewable corn oil next.

Our low Ci renewable cornetto platform continues to accelerate along with the benefit of rising vegetable oil prices and we believe the industry dynamics will continue to support this with planning renewable diesel capacity coming online throughout the next year and beyond.

We have proven our platform corn oil yields will increase as our MFC builds come online leading to greater overall capacity. In addition, our gen generation one corn yields are pushing to an average of one pound per bushel or overall corner overcapacity should end the year at approximately 330 million pounds, which we believe will.

Increase from there with vegetable oil prices, 30% to 40 cents, a pound or more above historical averages and rising we could see total Cornwall contribution exceed $160 million at 65 per pound as a base load next year as well as 100, which is well over $100 million.

More than historical contributions.

We are in multiple discussions on potential strategic Cornwell offtake agreements that are ongoing but we are patient to make sure. We strike the right agreement for our shareholders. This is a long game, we don't want to get ahead of ourselves and make a decision too early as we are we are already getting premiums over soy for our oil as the Ci Valley.

<unk> is starting to be realized and just the normal pricing of our product.

We believe we can offer our partners our partners increased surety of low carbon intensity supply to participants in the global renewable diesel space and that is a structure that is beneficial for all parties, which we believe is.

Within reach for our company.

And the Queen Sugar front, which I believe could be our moonshot opportunities for Green Plains, and Green Plains shareholders. Our team has continued to make significant progress on improving the operations at the pilot plant at our innovation Center in New York.

The initial batch pilot system for CST is fully commissioned and now capable of producing <unk> scale 95, dextrose equivalent samples.

And we have produced our first fully refined samples as well.

All of the potential customers that receive samples produced at the pilot provided positive comments on performance of sugars tested.

<unk> system continues to produce engineering and technical data information needed for a full scale up design. Our initial review of CST sugar, it's equal to all public specifications what I.

I think is most exciting is we performed additional carbon intensity analysis for the unrefined CST product and are netted up to 48% lower carbon intensity compared to wet mill sugar.

Lastly, we have been meeting with potential over the fence <unk> opportunities with biochemical producers as well as synthetic synthetic biology applications. There is a strong commercial interest in co locating at one of our facilities. When we begin to implement a full scale system in coming years.

So we have covered protein oil and sugar and let me say a few words about carbon we continue our diligence to further invest in the carbon projects around direct injection commercial use and of course the pipeline, obviously, a direct inject site would be our first choice for capital allocation and we have three possibilities, but theres a lot of work to do there we will up.

<unk> as we get more results from these studies over the next coming months.

We are also the first we are also first and foremost a shipper on the stomach carbon pipeline for our western plants. Secondly, we are a founding investor in we have seen a potential forex multiple uplift of that at risk capital based on current valuations and lastly, we are a founding shipper and we will receive an additional uplift over and above our share of carbon.

Credit based on the 45, <unk> tax credit, which could be up to $6 million to $10 million a year as well the expansion of this credit would be more beneficial to our strategy and investment thesis more importantly, we need to make sure. This allocation of capital is the best use of our funds as we are a shipper in any situation and we should expect this to compete with other opportunities we are working on.

We are finalizing our comprehensive due diligence process over the next couple of weeks and I Hope you appreciate the depth of our commitment to making the best decision for our shareholders in order to best reduce our carbon intensity of our products. We are encouraged by the proposed carbon credit capture proposals, including expansion potential expansion and extension of.

45, <unk> tax credit and the creation of new tax incentives for sustainable aviation fuels, both of which have the potential to be an incredible opportunity for our green Plains, two <unk> platform as we see significant potential in low carbon ethanol and sustainable low carbon corn oil.

We are in exciting times around the potential for low carbon ethanol, which now includes alcohol to jet opportunities for sustainable aviation fuel, which could be the beginning of re basing value of our production assets and moving the industry towards a strategic feedstock and what I would call an ethanol 2.0 environment.

We are in exploratory discussions with potential partners ranging from technology distribution usage, and offtake and sustainable aviation fuel to close I wanted to take an opportunity to walk you through some near term expectations rather than to continue only focus on 2024 and beyond so let's talk about 2022 and.

I am very optimistic as discussed we have several MSE protein projects that are under construction and we anticipate them coming online by mid 2022 with over 50% of our platform capacity running next year for 2022, we believe the base loan baseline protein platform, we will have the capacity to contribute somewhere between.

40, and $60 million in EBITDA for 12 months to 20 cents a gallon initially, but remember we have several for the partial year or even just a few months in 2022 and.

In specialty alcohols, we still see a premium for our product with our annual capacity for USP as well as industrial be great at about $65 million 65 million gallons.

Contribute an additional incremental $15 million to $25 million over traditional fuel ethanol margins.

Add on top of that the contribution for renewable corn oil and we can make a case of a baseload from these initiatives to deliver between 150 and $200 million in EBITDA in 2022, if the market remains at 65 or higher per pound, which it absolutely could before considering our base ethanol business without corn oil.

As we break total Cornwall out separate plus other segments less corporate overhead.

Our refocus remains on reducing the carbon intensity of all of our sustainable ingredients that matter capitalizing on the World Class AG Tech portfolio, we now own with our partners and most exciting is that we expect to rollout our inaugural inaugural sustainability report next month with all of that said. Thank you for joining our call today and we look forward to the question and answer session.

Alright.

Gentlemen, please limit your question to more than two at this time, if you wish to ask additional question. Please rejoin the queue to ask a question. Please press star one on your telephone keypad until the draw. Your question. Please press the pound key one moment for your first question.

Your first question comes from Adam Samuelson with Goldman Sachs. Your line is open.

Yes. Thank you good morning, everyone.

Hi, Adam good morning.

Hi.

A lot of ground.

Let's cover that in the prepared remarks, I'd love to dig a little bit more into the carbon opportunity you talked about it on the script a little bit but it wasn't much in the press release and I guess can you help us think about the key gating factors towards the investment decision.

Around carbon sequestration.

Specifically on the pipeline.

Maybe help frame kind of what the potential equity investment could look like.

We are waiting for clarity on the infrastructure Bill in Congress on 45 tax credits just help us think about where the key kind of decision items would be there.

Okay. Thanks, Adam and low carbon is a very important part of our strategy and producing low carbon ingredients as.

It's one of the most important parts of our strategy. So that's first and foremost so the first thing that we did was we got involved in the initial Investor group to fund at risk capital to get the project started and we've already seen based on the first round of potential valuations and uplift from there. The second obviously is because we were a inaugural shipper we get.

Little bit different of an economic share from the from the tax credit as well, which is also beneficial for our shareholders. That's all without any further investment. So at this point now what we have is the ability to invest in the full project and what we have to make sure is that from the standpoint of best returns it must be beyond an infrastructure return, but we also want to.

Also motivated to make sure. This project also gets built as well so it's a little bit of a little bit of a return.

From a standpoint of what will it return relative to the investment we put in place, but we also want to make sure that we help the project get off the ground and get built and the FCS guys are making incredible progress around securing storage securing.

Getting starting to think about right of ways.

Adding things done with the with the local landowners and we're watching it very closely but we also just want to make sure from a diligent standpoint that is the best use of our capital but in terms of us wanting to get this project built we do and that will be part of our motivation because we believe low carbon intense fuels, we'll have an advantage and so we're looking.

Very seriously at it and well known and it kind of kind of going to make our decision a couple of weeks, but keep in mind as well we.

We are also have three sites in the east that can either have direct inject or other opportunities that we're starting to see develop around use of carbon for other products.

And we're looking at that closely as well and we have to be careful at some of our sites.

Maybe on some seismic zones. So we're going to watch that closely to see if there's other uses for the carbon or whether we ship it somewhere else, but we are very highly focused on number one the returns we've already achieved by being an early investor in number two.

The fact that we are a shipper on the pipeline as it gets built and then number three what is the investment we want to make and I think in the next couple of weeks, we're going to we're going to finalize that decision and just to make sure that that is the best use of capital for our shareholders.

Alright, I appreciate that color and then if I could follow up just on the on high protein.

You talked about consistently getting to 58%.

In commercial quantities signed some new ml use can you help us think about.

How you achieved pricing on those <unk> and those sales and how those tracked relative to your kind of framing of the J curve.

Value creation at higher protein levels.

Yeah, Thanks, and so.

Initially with our pet food customer. This is a designed product for their for their application today. So we're going to ship them the same product.

That we had shipped them last year as well because we are already in their ration were working with them now as we know we can start to achieve higher proteins at scale.

When we start to think about $2023 $24 25, whats the use for this product and how will they and how they formulate around it and so we are still getting a premium to soybean meal.

And we're very happy with the results from that Theyre consistent with kind of our initial thoughts on what this product is worth I think where we really want to focus though is instead of spending a lot of time between 50 and 60 in that 56% to 58 range, which we believe.

We can we now have the opportunity as we turn these onto potentially produce at scale.

When we see set our sights on 16 above that's really what makes the difference in terms of the opportunity and and getting included in higher value products around the world and so.

We have just taken the view at this point, we want to start to focus on $60 to 62 protein as a baseline product using biological solutions and we'll know early next year and if that's the case then is really isn't much reason to spend between 50.

Think that thats going to be great potential for longer term and higher and higher returns on these on these projects, but the first step even before that is we actually believe.

The fluid quip guys. The fluid quip technology can achieve higher mechanical separations and were working high on that because obviously opex versus capex.

It's something we would much rather focus on but our focus is towards the top end of that curve. If theres. Good markets between $56 58 and were starting to find those as well we will go there, but our goal is to really really moonshot, our way up to 60% plus as quickly as we can.

Okay I appreciate all that color I'll pass it on thanks. Thank.

Thank you.

Your next question comes from.

Jordan Levy with service to Securities. Your line is open.

Good morning, all.

Let me start out asking on turnkey solutions, and specifically maybe get a sense of how you see that pipeline evolving given its early stages and also how you think about the market development. You spoke gave a lot of detail on in tandem.

Any additional turnkey agreements.

Yes. Thanks, So our team is out talking to.

Others that may have interest in these type of projects I think.

What we want to make sure and I think.

What we want to do as we choose the right partner.

And they are also choose us as well and so.

It's absolutely want to start to focus towards the high end of the of the.

Plants in terms of best quality best locations, and where we see them fitting nicely into the portfolio.

<unk>.

Not all protein is the same and I think were proving that with our product and the inclusions, we're getting and the innovation that's happening around it and the quality of it and the flow ability and intended adjustability and I think I think people are learning that every single day in terms of what we're able to do not just the fact, our MSE systems, but other MSE systems that are.

<unk> today, we are all producing the same product, which is very important around keeping a level idea of what the consumer what the consumer wants and so when we look at turnkey solutions. It is absolutely a focus of ours I think we are going to be successful with others. We have opportunities in front of us and we're continuing to work those opportunities.

<unk> will be a great.

Proof point for this industry to understand the opportunity with this product. It's the largest one of the largest plant in the industry and we are putting into technology, there and we're very excited about that and so we continue to work on more and more partnerships from that perspective on top of that then the market development that we're doing around this.

<unk> is really.

Has some incredible opportunities, we're seeing different areas, both domestically and globally that are interested in this product at multiple different species. It certainly pet food driven today, it's aqua culture, driven as we are working on those as well, but we're also seeing very specific uses and dairy and swine and even in beef cattle.

<unk> to come up where this is becoming a higher value opportunity for us because it is doing great things for each of those rash and specifically at our nutritionists or working with them as well. So look I think the important thing is in a world.

Increasing demand for protein and by the way the world is tight protein again, while we've seen some some weakness and obviously soy meal prices, it's very tight around the world for proteins today, which we think is an opportunity and it's probably an opportunity for several more years is we don't really see a lot more crushing capacity in soy coming.

Until kind of late 'twenty, four and 'twenty five.

So we kind of have a great runway to gain market share with our products, but we're really focused on those higher value higher protein markets today in terms of developing that we could sell all of the 48 4900 $50 51 protein I think that we produce in middle of next year will probably be producing three or 350000 ton.

Of that that's not a lot in terms of the total world balance sheet, but what it is a lot of it's a very high value product and thats kind of what we're most excited about so our market development has made great strides this quarter, we signed an Mou for multiyear off takes of this product. We have many we have others that are that are in negotiation now for for use of this product.

Because it's the key is.

The key here is is that they want to make sure that they have the supply because once Shenandoah sold out there is no more supply once wood river sold out Theres no more supply. So there's really kind of limited supply of this product at the end of the day and it's a very high quality product replacement that can achieve great things and so locking in.

These agreements is guaranteeing supply and.

And ultimately we're going to we're going to be sold out of this platform.

Okay.

Great detail.

Yes.

Follow up to that maybe if we take a step back and look higher level bigger picture longer term.

Central to platform will keep that.

<unk> online and you start to looking to CST and that sort of thing I'm curious if you could just talk to how you see longer term potential to drive synergies from the market development work you're doing once you.

All into the kind of the next phase of this transformation plan in terms of high value ingredients.

Well when we look at kind of protein oil and sugar I mean, those are the meat three main high value opportunities, but protein is a baseline ingredient for many other opportunities around value added agreements in the east.

In the fiber people are calling us customers are calling us now for our fiber products that are stemming off of the protein product, they're calling for our used applications that are stemming off of the protein product. We're having we're just scratching the surface on that opportunity because the easiest thing for everybody to understand is protein concentration.

That's the thing that we've talked about it's much harder when you talk about well. There's also value in the east is also value in the fiber and Theres also other uses of this product and we are developing different technologies around this product that's a little bit harder to explain but that's really where the money. The real money is going to be made in diversifying our ingredient opportunity because it's not just.

Again it protein it is a good metric, but it's really not just a protein strategy. It is really a fully value ingredient value added ingredient strategy. When you layer on top of that the opportunity that we can make 95 day or dextrose equivalent.

Products that compete both financially.

Product wise at we think better economics than what's being made today.

And markets that need more and more product, we're seeing great interest in potential partners that want to do over the fence opportunities much like you see at other.

Other companies that produce dextrose, because theres just not enough availability left in the market today. So we're accelerating that opportunity, we're even getting calls and for people that want to buy the clean sugar Tech now touching we say, we're really not ready to sell it yet either we're going to we're going to use it here first at Green plains in as if the market develops long term, which we think.

You can potentially that could be another another opportunity for everybody, but if you just take a look at one really interesting market. If you just take a look at the global glycol market.

And you say if you can convert that to a bio glycol coming off of dextrose as your as your main feeds as a feedstock and move into bio glycol that market is big enough that if you converted every single ethanol plant in the United States. The Dextrose, you still would only have 20% to 30% of the market covered for our bio glycol type products. So the markets are so big.

And.

And sugar opportunities and chemical opportunities that you may never even have to worry about food applications going forward and on top of that.

At we're working with potential partners that have synthetic biology applications that have used our products and have said that <unk> gotten better results from our unrefined clean sugar.

Our unrefined clean sugar product versus a fully refined food grade product because of what's left in there that's giving them opportunities as well.

And if you take a look at the world around us.

Synthetic biology, it all starts with sugar. So we're all very excited about that as well.

Top of that I mean, how do you not look at our vegetable oil opportunity that we have when we start 2022 with all of our plants running close to one point, our yields and our MSC plants pushing towards one two to one four pounds.

Per bushel of oil and you think about the fact that we're already getting a premium to soy eating into some of the low carbon advantage that this oil has on top of that when you look at the fact that you really won't bring on a lot more oil veg oil capacity until 'twenty, four and 'twenty five we're sitting.

Here in a great place as you look at the reduction in canola oils for next year in the last call oil because of the Canadian drought, there's a chance that we start to see numbers towards with a seven in front of it in an eight in front of it next year in the in the vegetable oil market, which is just a wonderful opportunity for green plains shareholders as starting point, so we can be.

Our view is we need to be very patient and not signed too early because this is just starting there is a need for 20, plus soybean crushing plants to be built in the United States just to handle some of the renewable diesel demand not on top of that we're still a significantly lower carbon intense oil, which even adds to a better.

<unk>, So we view our strategic.

Location and this opportunity to be very valuable for our shareholders and we're going to do everything we can to make the best decision to monetize that opportunity for them.

Well, that's great detail. Thank you so much.

Your next question comes from Ben <unk>.

But.

Steven Your line is open.

Hey, Thanks, good morning, everybody.

I wanted to follow up on Adam's question about carbon sequestration, but as it relates to the long term opportunity around SaaS.

And I'm curious just when you think about the equation of making ethanol low Ci ethanol competitive feedstock for the SaaS opportunity, which as you noted is is.

It is really really big.

How important is that in the equation getting that Ci score down to make it competitive with veg oils.

Irrespective of the fact that theres going to be a lot more availability of ethanol as a feedstock versus.

Vegetable oils, which are likely to get sucked up by the renewable diesel.

Production demand.

Yes. So we think when you take a look at the need for sustainable aviation fuel and the demand for it youre only going to go so far with kind of the renewable diesel to SaaS and the rest. We believe is most likely a alcohol to jet opportunity I remember for a gallon or so of ethanol.

Youre really only going to get six gallon.

Sustainable aviation fuel, which is why the tax credit needs to be so high in terms of when youre looking at $1 $52 $3 a gallon, it's because number one youre going to lose volumes, but number two.

Being on pipelines, obviously is something that's going to be important orchestra questioning your carbon direct inject other areas that you can sequester carbon is a key component to sustainable aviation fuels.

Because you do have to start out with a lower carbon intense liquid fuel before conversion. So that's kind of a motivation. There one thing you got to be careful as you may not be able to.

Double dip in terms of the 45 Q in the aviation fuel credits that you might have to pick one of those but if you are a low carbon intense.

Alcohol.

A great starting point.

We are absolutely looking at this opportunity we are in discussions with potential partners not just only.

For the technology side and exploring different technologies that are available, but also you should be in discussions with distribution assets you should be in discussion with demand for the product.

You should be in discussion for.

You move how you move the product to market as well and so it's just it's not just announcing a technology, which I think are still there's still a lot of fluidity around which technology to choose and theirs.

Everyone out there and there's probably more coming quite frankly, so we have a little we got to see how this.

Build back better Bill ends up here with sustainable sustainable aviation fuel seems to be what I think is probably one of the growing opportunities for U S ethanol industry in total.

That we have not really seen before where you could possibly rebase these assets as a strategic.

Fuel for the use in sustainable aviation. Most interesting is let's just say, it's a 4 billion gallon type opportunity.

Well, you probably need 6 billion gallons of ethanol to get there and if you took 6 billion gallons of ethanol in a market that is using ethanol as an octane.

Land in a low carbon blend it could be it could be really interesting to this industry and to this company and for our shareholders as all of US takes place. So we have absolutely put resources in place to start to look at this opportunity and I think we'll have more updates each quarter as we go on.

Yes, Okay. That's great. Thank you Todd My second question is clarifying your commentary on 2022 kind of the EBITDA build that you offered I think it's clear you guys are on the runway to the long term EBITDA kind of baseline potential of the organization. So.

The timing is less important relative to the big picture, but I just wanted to understand if I heard what you said are you, saying between MSE USP and corn oil at the midpoint Youre thinking $245 million of EBITDA, plus whatever contribution you would get from.

Agribusiness and the partnership and the baseline ethanol business did I hear that right or is that run rate commentary that you offered.

No I mean, what we said is look we are we believe we're on the path to 2024, let's just and Thats what were focused on 100%.

But we would be remiss not to at least discuss what the 2022 opportunity is based on based on the current markets. So we're basing it on current vegetable oil pricing.

<unk> oil pricing at 65, a pound as a baseload, which is well over 100 million over our historical contributions that could be in that 150 $160 million gross ranked gross range after deduction of our.

After deduction of our loss in terms of distillers grains, but.

It's outside of the ethanol, let's just say we lead the ethanol margin along with no contribution from corn oil. That's the that's the number that could be to 2022 contribution at 65 cents a pound and if it goes up obviously every 10 cents a pound is about $30 million more than that so obviously, we will watch the VESCO vegetable oil pricing.

Very very closely on top of that then.

When you take a look at what we will have <unk>.

Running in 2022, it will be 200 million gallons equivalent of protein for the full year.

Then as we bring on another 360 million gallons from our own system for about half of the year.

Depending on when Obrien, Mount Vernon and Central City start up and then obviously <unk> will be later in the year, maybe you get a couple of months out of that but it will be during startup just baseline $40 million to $60 million is kind of how we're thinking about 2022 first first real contribution from protein and again I think it is.

Good for people to understand that this is not just any protein product that fluid quip MSC product is a very unique product may different it's produced differently and it's used differently and it's thought about differently and so we think somewhere between 40 and $60 million and then we will just have to wait and see where.

Specialty alcohol markets come in to be great market is hanging in there the USP market got a little bit weaker probably in that $20 million to $30 million range for 2022 contribution on top of that our normal contribution from AG and energy will probably come in line there as we might we're looking at should should that standard.

Alone or should that be part of the corn processing segment, so that could be an adder and then obviously, we take off our SG&A from there. So it's a good starting point to think about that but I think what it does is it tells you with ethanol zero baseline, which right now we know it's not.

That's just the baseline opportunity for the company based on everything we've done.

Lastly, and I know, it's a long answer we started out this whole corn oils discussion our yields were <unk> seven as an industry and now Green plains were pushing kind of one point O without MSC and fluid quip opportunities and you're going to see that's just a big opportunity at these higher oil prices, which in our view is a multi year opportunity.

Strategic to our shareholders.

Thanks, I really really appreciate the commentary it's helpful. Congrats and best of luck.

Thank you.

Your next question comes from Manav Gupta with Credit Suisse. Your line is open.

Hey, guys.

Question is clearly you have renewables online, which is highly highly desired.

<unk> did a lot of people know, Dan who will have been able to get deals on soy a benign so <unk> should be a lot more value, but what I'm trying to understand here is that two kinds of blue being off with one.

A newbuild diesel producer comes in all sorts of feedstock Guy a good amount of money even to develop his resources and then kind of a profit sharing agreement, but there's another kind of being offered by some of the newer guys will receive <unk> seeing the feedstock guy has to bring in the capital and then we will.

Do a deal which would make you a partial owner of the renewable diesel facility and I'm trying to understand.

Are you open to both kinds of BS or you'll be more open to the first kind of be maybe you don't have to put in the capital and become an owner that also had a newbuild diesel facility.

Yes, we're focused on.

The first idea that you've discussed but beyond that we think if somebody wants to secure our corn oil for long term off takes our long term security of supply that number one we believe we believe there is a profit share opportunity out there.

<unk>.

Remember.

Right off the bat from a Ci perspective, we believe that.

Renewable corn oil it should trade at about a dime premium over soybean oil and we haven't seen a trade that high but we have seen five years to 7% upon premiums being paid already.

So if we would have made a deal early.

We might not have actually had that benefit of the Ci uplift just from the market. So we know what we have and remember if you take a look at the top four players in our space, who make a altogether make the most amount of corn oil together.

One has committed.

Well one already.

<unk> renewable diesel.

Obviously, we've seen them commit to some partnerships already in terms of committing some vegetable oils. The other we haven't heard much from it and we have ourselves and so there's a lot of oil at the top of this.

Top of the food chain here and it's all very very valuable because of the <unk>.

The carbon intensity reduction that corn oil brings versus soybean oil number one number two it's a waste oil and that of food oil and the headlines right now on food oils I would say are moving.

A little bit negative in terms of looking at food prices and the articles around there, while leaving waste oils out of it. So I think we're just in a good place I don't think we need on renewable diesel assets quite frankly.

That's.

We are I think we're in a great position from the standpoint of having the feedstock.

And I think we're going to be able to take advantage of that for our shareholders. I think we are in a great position and we will see what transpires, but I don't think you want to rush to make a conclusion just yet because I think there is some very interesting opportunities around.

Monetization of our corn oil and I think if you rush into it too much you might have you might make the wrong decision, especially that the market is already trading over soybean oil several times last year for this year.

No I agree with you you should not be in the business of funding facility I was just trying to make a clarification on the second question, which you mentioned about these bills, which is coming up.

Finally appears that even though until 2026.

Everybody gets a blenders tax credit, but after that they believed the language is such that its looking like even on honest with you.

Moving towards lower carbon intensity.

Incentivizing us to actually take into consideration.

Robin and density even for something like a blenders tax credit. So I'm just trying to understand and you ought to view when you look at these regulations as they are coming in.

Moving in a direction.

<unk> didn't have a national low carbon fuel standard mandates at some point.

And then Steve will definitely would be taken into consideration in a much more meaningful way.

Now if you look at the RFS.

It doesn't take into consideration the carbon intensity at dawn.

Yes, I think we're trending in a direction that everything will be based around your carbon intensity.

What the final program it looks like it's hard to say and whether you can qualify for all of the credits available. If you have to pick and choose we have to also watch that carefully. So if you make the wrong decision too early you might be opting out of the program that that you want to be in so you have to take out until.

We see the final language around that.

I think you would need to be careful on which path with which path you choose because.

It's not an all for one solution you might have to pick and choose where you want to go and earn your opportunity and low carbon.

I agree with your comment we are moving into a low carbon standard of some sort.

But again hard.

At $85 a tonne 45 tax credits just keep this in mind everything works.

So youre project needs to stand.

On the Tech 45, Q first because I think the value of carbon is something we have to figure out what is that going to be long term because at $85 everything works and so but that doesn't mean that there arent great opportunities around lowering your carbon intensity.

But also having the opportunity around.

Sustainable aviation, our low carbon ethanol or combination of bolt on top of low carbon corn oil on top of low carbon ingredients and I think we're already seeing.

Beyond low carbon fuels, we are already getting.

Asks can you give us a low carbon.

Ingredient centered around our ultra high protein, but with added nutritional characteristics. We're getting asked that already is we're going to put carbon intensity in the bag of our feed.

Can you help us with that and Thats, a whole another opportunity around our ingredient platform, especially by being low carbon.

It's a bunch of different ways that you can think about this I would only caution you don't want to make the wrong decision too early because there is a lot of moving pieces.

Thank you for answering the questions and all the positive details you provided on the quantity.

Thank you.

Your next question comes from Eric Stine with Craig Cowen Your line is open.

Hi, everyone.

Hey, just one thing.

I'm doing well.

Just wanted to sneak one in here at the end.

Obviously, great that you have signed the.

You mentioned multiyear Mou for sales in the pet foods for 2023, and I know you are certainly targeting more sales or contracts in 2022, but just from a high level.

How do you think about kind of balancing the fact that it would be great to get those under contract, but as you said Youre also working more to that 60% plus type of level. So maybe just balancing balancing what the margin outlook could be at that at those higher percentages.

Versus locking things in early for 2022.

Yes, that's a great question, but I think the key here is.

Once you're in the.

The ration, especially in a consumer product.

<unk>.

The goal is sustain the ration and we've been able to do this now that will be our third and our fourth year and we're able then we're able to stay in the ration and I think I think once you do that these are these are 10 to 20 year relationships and so by even getting multiyear MLR used to stay in the rationale and talked about increasing volumes, what they want to be able to do so.

Cure.

Our customers want to be able to secure volumes. So they have something to buy and I think that's the key for what we're trying to accomplish here is locking in volumes without but also in each of our <unk> that we are either have or are negotiating within there.

In each of these we discussed the opportunity increased <unk>.

Protein concentrations or increasing nutrition.

Nutritional outcomes and leaving those open for negotiation because like you said I don't again like we talked about in corn oil like we talked about in carbon and like we talked about a sustainable aviation you don't want to you don't want to lock it away too early because there is a lot of other opportunities that might come into play like low carbon ingredients into.

Into Europe are like ingredients into Asia, agriculture, and again.

There could be a point, where there's just won't be enough of this product around because it's a very distinctly different product than maybe others, maybe the MSE fluid quip product is a very distinctly different product that alternatives that are available out there and I think that's really important so.

Getting a multiyear Mou and pet food.

Is almost unheard of from an for an ingredient standpoint, and it's just shows and showing their commitment that they want to commit to the quantities today and we can work on pricing and protein concentrations and nutritional characteristics later.

Got it and I guess that would speak to what you had said earlier just that it is collaborative as you said you don't just call someone up and say Hey, Ive got product for you this would be.

Something where you could sign a contract and expand from there.

Well you can call somebody up and say they have that but then youre going to get commodity pricing.

And it's not the same product. So we are working with them on very specific tailored products using the MSC as the starting point, but but we are discussing tailoring. These products to their use which is very different than just making some protein.

And thats, the uniqueness of our product because of the eastern component and it.

As well as the opportunity around low carbon.

Okay.

Okay. Thanks.

Your next question comes from Ken.

Zaslow with bank of Montreal Your line is open.

Good morning, guys.

Almost good morning Ted.

Two questions. One is can you remind us I don't know if you said at Shenandoah.

Margins, there and how much were they above the rest of the company can you give us some.

Context.

Yes, I mean like we indicated earlier the initial margins as Shenandoah were $12 20, a gallon and they continue to hold and so when we look at that relative to.

Contributions is starting to contribute potentially one to two cents a gallon overall to our total platform because it's only 8%.

Our total of less than 8% of our total production, but we're very happy we're very happy with the results, we're very happy with product quality happy with the corn oil yields because obviously at one one to one two pounds per bushel corn oil yield at Shenandoah with 65 cents a pound that helps the overall margin for the protein systems and so.

Net they are holding steady and we're looking to grow them.

The second question I had look I'm looking at your slide where you have the 2020 run rate EBITDA when you take those pieces apart.

Do you think you are tracking in line above or below those numbers.

And then when I look at the renewable corn oil I think your thought is that youre going to have to ask you about almost 400 million gallons you're at 330.

Are you looking to supplant that as well.

Yes, I mean, we're going to we'll continue to look at the opportunity in 2024, obviously theres moving pieces. Some things are increasing some things are decreasing.

Got to make sure that we had to stand up a clean sugar system between now and then obviously the renewable corn oil at 65 cents, a pound and potentially higher through 2024.

As an adder, we've seen some contraction of the specialty alcohol, a margin, which would be a decrease but then if we can achieve 60 protein.

And higher in nutritional outcomes that are beneficial for our in and using innovation and technology around this product.

Hopefully the sustainable high protein gives us higher numbers than that so again, we're not going to give the full guidance update yet, but I think <unk> got enough information from this call to start to think about what the what the opportunity is in 2024, obviously execution execution execution. We think that we will have half our systems converted by mid <unk>.

All of next year, we have the equipment coming in it's been ordered.

So even with this global supply chain have we seen some stuff get get bogged down yes, we have but I think were still good and on track for mid 2022, and then we just take the rest of that time to rollout the rest of our platform and finish their olson. So I think we've given enough information to at least start rethinking the distributions.

<unk> 2024, but I think at this point, where you can say, we're holding we're holding steady on our on our thoughts.

From this from the opportunity in 2024 as a starting point.

Great I appreciate it thank you thank.

Thank you Ken I appreciate it.

Yes.

We don't have any other further question I'll hand, the call back to Todd Becker.

Yes, thanks, everybody for coming on the call today, obviously.

As we mentioned, we're making incredible progress on our transformation, it's a very big opportunity for our company and our shareholders.

Notwithstanding there is still volatility in the underlying business that were the legacy business that were.

That we're focused on year to date really happy about the results. Obviously some movement between quarters Q4 shaping up to be a pretty interesting finish for the end of the year for the for the industry in total, but I think on top of that the success that we're seeing around our product product development opportunities innovation technology and customer.

Needs and wants and interest is really setting us well up well to deliver what we think will be a transition great transition opportunity in 2022 with the full transformation still ended up ending in 2024, and we think it's.

We think we're in really good shape as we kind of approach the next quarter in the next in the next year in a year or two so thanks for your support and I will see you next quarter I appreciate it.

Ladies and gentlemen that concludes today's conference. Thank you all for joining you may now disconnect.

[music].

Executive Vice President Investor Relations. Mr Box. Please go ahead.

Thank you and good morning, everyone.

Welcome to Green Plains, Inc, and Green Plains partners third quarter 2021 earnings call.

So it depends on today's call are Todd Becker, President and Chief Executive Officer.

Patrick Simpkins, Chief Financial Officer, and Leslie Vandermeulen EVP of product marketing and innovation.

There was a slide presentation available and you can find it on the investor page under the events and presentations link on both corporate websites. During this call we will be making forward looking statements, which are predictions projections or other statements about future events.

These statements are based on current expectations and assumptions that are subject to risks.

Actual.

Results could materially differ because of factors discussed in today's press releases and the comments made during this conference call and in the risk factors section of our Form 10-K Form 10-Q, and other reports and filings with the Securities and Exchange Commission.

We do not undertake any duty to update any forward looking statement now.

Now I'd like to turn the call over to Todd Becker, Thanks, Phil and good morning, everyone and thanks for joining our call today. Our overall transformation remains on track as does our theme of focusing on execution and during the third quarter. We have made significant progress towards our 2020 for gold in the fourth quarter is proving to be even more exciting first let's talk about the Q3 results.

As indicated on our last call we expected the third quarter to be challenging as margins started out very weak we are.

Near record corn basis levels throughout the platform as we discussed timing reversals of Q2, mark to market as well. Additionally, given the anticipated weak margin environment. During Q3, we made the decision to accelerate our remaining scheduled maintenance shutdowns into September which impacted our margins by three to five cents a gallon based on reduced production volumes and <unk>.

Increased repair and maintenance expenses in the quarter.

While spot crush margins began to expand in September we only saw a small benefit of that expansion as we have begun our fall shutdowns. However, as a result of shifting the timing of fall maintenance, we only had one maintenance turnaround at one of our smallest plant Atkinson in Q4.

While operational timing did have some impact on the third quarter results.

I am happy what I'm happy about is year to date consolidated production margin, averaging over 16 cents per gallon, which we believe to be generally above market because of our strong first half results.

The fourth quarter has returned to a positive margin environment and based on the current market.

We are well positioned to be able to operate through any natural gas environment. This winter.

Additional benefit as we increase production levels at these plants rolling into 2022.

Finally, our board of Directors has continued its own refreshment initiative significantly expanding shareholder rights, while continually continuing to focus on good governance and adding diversity.

Our board recently appointed Jim Anderson into the newly created role of lead independent Director Martin Salinas and far Assam has also joined the board.

Adding significant capital allocation agribusiness and financial expertise.

Additionally, the board amended its bylaws updated charters to the audit and nominating and governance and compensation committees and.

And adopted a new board qualifications governance guidelines and diversity policy.

This has been in the works for some time as a result of shareholder input at our last annual meeting.

Having soundboard oversight is critical to our ability to execute on our transformation plan and for the future benefit of all shareholders. As previously indicated Green Plains partners was able to increase our distribution this quarter to $43.05 per unit. This was something we are excited to be able to do for our unit holders now I will turn the call over to Patrick to review.

Green Plains, Inc, and Green Plains partners financial performance performance.

I will come back on the call to to talk more specifically about our thoughts around 2022, our ongoing initiatives and how each vertical fits into our transformation plan all of which I think you will find very exciting Patrick. Thank you Todd and good morning, everyone. We reported a net loss for the quarter of $59 6 million or $1.

<unk> per diluted share compared with a $34 $5 million loss reported for the same period in 2020.

Our results for the period are inclusive of $7 million, one time charge to depreciation related to completion of our project 24 projects and other initiatives along with a $2 million onetime charge related to a true up from the sale of our cattle business last year.

Adjusted EBITDA for the period was negative $14 8 million compared to a positive $6 8 million, we reported in the prior year largely related to historically higher corn basis across our platform and higher R&M costs associated with the change in our maintenance schedule, partially offset by higher higher contributions from our corn oil business due to strong demand.

For renewable diesel.

For the quarter, our SG&A costs for all segments was $26 million compared to $19 $9 million reported in Q3 of 2020.

The difference was driven in part by the addition of fluid quip SG&A expenses during 2021, as well as wage pressure and higher legal expenses.

Interest expense of $9 $5 million was down slightly compared to $10 $2 million in the prior year as a result of overall interest rates.

Our growth objectives.

Our liquidity position at the end of the quarter included $729 million in cash cash equivalents and restricted cash.

Along with approximately $312 $6 million available, primarily under our working capital revolvers and delayed draw term loan.

During the quarter, we also secured a $164 9 million of additional funding through a successful equity offering to support delivery of our overall transformation plan and related growth opportunities.

Total capex is as anticipated in the year around $210 million based on current construction schedules slightly lower than our original guidance maintenance capital for the year is expected to be about $35 million as we as we have increased our focus on high return projects supporting our project 24 initiatives with a focus on eliminating unplanned downtime.

And improving predictive maintenance.

I am pleased to report the partnership realized adjusted EBITDA of $13 $5 million for the quarter comparing favorably to the $13 9 million reported in the prior year when considering the reduction in the minimum volume commitments associated with the sale of both our Hereford and Ord plants.

Continued financial performance, coupled with successful refinancing of the partnerships debt under $60 million five year term commitment enabled the partnership to return value to its shareholders by increasing the quarterly distribution to <unk> $43.05 per unit, while maintaining a one times one coverage ratio for.

So the partnership distributable cash flow was $11 5 billion for the quarter compared to 11 $43 million for the same quarter of 2020 over the last 12 months adjusted EBITDA was $53 $7 million distributable cash flow was $45 8 million and declared distributions were $18.

$8 million, resulting in a 243 times coverage ratio, excluding any adjustment for the required principal payments amortized in the past year now I'd like to turn the call back over to Todd. Thanks.

Forgive me for the amount of information, but this is a really important call for us to outline our progress let.

Let me start with ultra high protein ingredients.

Central City in Mount Vernon are under construction and we are mobilizing we are mobilizing equipment and a team to O'brien and expect to break ground. There in the next week or two.

In 2022, we expect our first turnkey system with thorough and ethanol to come online as well all of this is possible as we are partner with vegan as our EPC contractor and they are world class. When it comes to these type of projects all in company owned production from protein, including <unk> will be running over $600 million equivalent production.

<unk> with more underway with that said construction and engineering and remains on pace.

Our platform by 2024, depending on once some of those outstanding permits are obtained in states, like Illinois, and Minnesota, which could take longer now.

We believe it is becoming a standard and this matters to our as our quality digestibility flow ability and consistency make it a very different product and other protein alternatives out there from corn soy and the rest. This is a very clean protein product that looks the same anywhere we produce it.

We are working in every vertical from pet to Aqua culture to swine to dairy and poultry.

As we indicated our early focus wasn't pet and Aqua and we are seeing great interest for certain higher value applications in swine as well.

I am happy to announce that we are basically sold out of Shenandoah once again for 2022 into the pet food space and more importantly signed a multi year Mou with increasing volumes through 2023, as our customers want to make sure.

Excuse me they have the supply secured so increasing volumes speaks volumes to the acceptance of our product and we have several other leading pet food brands that we are in final negotiations for 2022, and 2023 volumes from Wood River as well. Some of this has been an 18 month journey and it's all around our specific.

Product, we produce you don't just get to call up these customers and say I have something to tell you. It's very collaborative to a very specific ultra high protein produced using specifically fluid quip technology and processing and <unk>.

The easiest thing for me to do on this call is just run through our highlights of our protein operations technology development and commercial activity.

We are working on developing we are working on developing mechanical higher protein separations and believe we have a path with fluid quip technology and this is believed this as possible before we even add biological solutions. We continue to lead innovation in product development to two every animal animal vertical across the globe.

We have assembled a dynamic commercial team with deep industry knowledge as well as world class Nutritionists, we are seeing strong and growing interest in our products, which helps solve a variety of nutritional characteristics and challenges leading to a diverse portfolio of protein ingredients created from the MSE platform.

As part of expanding our diverse portfolio of ingredients. We were successful in running a steady state 27 fermentation run at the end of the quarter, achieving higher protein concentrations at scale basically full production rates our goal of continuous 60% protein and above his insight and our next trial will be able will be to try and achieve this.

Early in 2022, alongside our partners from Novozymes, We believe we must focus on minimum 60% protein concentrations, which will be the best outcome for our customers and our shareholders and achieve our intended nutritional and protein targets, providing a new ingredient, we can utilize and customer development.

In addition to expanding our domestic reach we are engaged in numerous ongoing discussions with customers in international markets as well.

In Wood River, we have been running the MSE system for quite a while while finishing the dryer upgrade.

We save significant costs by retrofitting the dryer.

As it is the type required anyways.

During that time, we have consistently achieved corn oil yield of one two pounds per bushel or higher. We believe these are some of the highest yields achieved in the industry as fluid quip technologies incredible expanding corn oil yields and we believe this is just the beginning and I'll discuss the impact of this in a bit when I talk about renewable corn oil.

Additionally, we are seeing growing interest in our post MSE distillers product, which is a high fiber high energy ingredient important to a number of key verticals in its own right. We are negotiating an international distribution agreement in high value markets in all species and have pending export sales to Asia based on base load volumes in agriculture for certain.

Proprietary outcome that we have found.

It does go much further than that as we help design rations for higher digestibility, better palatability and better growth achievements all by using our products.

Long term, we believe we believe we will continue to separate ourselves from the commodity markets and deliver high value specialty designed nutritional solutions to our customers who view the ingredients produced from specifically the fluid quip technology to be the standard. This is not just about making protein anymore.

Let's move to renewable corn oil next.

Our low Ci renewable cornwell platform continues to accelerate along with the benefit of rising vegetable oil prices and we believe the industry dynamics will continue to support this with planning renewable diesel capacity coming online throughout the next year and beyond.

Increase from there with vegetable oil prices, 30% to 40 cents, a pound or more above historical averages and rising we could see total corn oil contribution exceed $160 million at 65 per pound as a base load next year as well as 100, which is well over $100 million.

More than historical contributions.

We are in multiple discussions on potential strategic corn oil offtake agreements that are ongoing but we are patient to make sure. We strike the right agreement for our shareholders. This is a long game and we don't want to get ahead of ourselves and make a decision too early as we are we are already getting premiums over soy for our oil as the Ci Val.

<unk> is starting to be realized and just the normal pricing of our product.

Within reach for our company.

And the clean sugar front, which I believe could be our moonshot opportunities for Green Plains, and Green Plains shareholders. Our team has continued to make significant progress on improving the operations at the pilot plant at our innovation Center in New York.

The initial batch pilot system for CST is fully commissioned and now capable of producing tote scale 95 dextrose equivalent samples.

And we have produced our first fully refined samples as well.

All of the potential customers that receive samples produced at the pilot provided positive comments on performance of sugars tested the pilot system continues to produce engineering and technical data information needed for a full scale up design. Our initial review of CST sugar, it's equal to all public specifications. What I think is most exciting is we performed additional carbon <unk>.

Entity analysis for the unrefined CST product and are netted up to 48% lower carbon intensity compared to wet mill sugar Lastly, we have been meeting with potential over the fence biocatalyst opportunities with biochemical producers as well as synthetic synthetic biology applications. There is a strong commercial interest in co locating on one of <unk>.

Our facilities when we begin to implement a full scale system in coming years.

As we get more results from these studies over the next coming months.

We are also the first we are also first and foremost a shipper on the summit carbon pipeline for our western plants. Secondly, we are a founding investor in we have seen a potential forex multiple uplift of that at risk capital based on current valuations and lastly, we are a founding shipper and will receive an additional uplift over and above our share of carbon.

We are finalizing our comprehensive due diligence process over the next couple of weeks and I Hope you appreciate the depth of our commitment to making the best decision for our shareholders in order to first reduce our carbon intensity of our products. We are encouraged by the proposed carbon credit capture proposals, including expansion potential expansion and extension of.

We are in exploratory discussions with potential partners, ranging from technology distribution usage, and offtake and sustainable aviation fuel to close.

Wanted to take an opportunity to walk you through some near term expectations rather than to continue to only focus on 2024 and beyond so let's talk about 2022 and I am very optimistic as discussed we have several MSE protein projects that are under construction and we anticipate them coming online by mid 2022 with over 50 <unk>.

Rent of our platform capacity running next year for 2022, we believe the base loan baseline protein platform will have the capacity to contribute somewhere between 40 and $60 million in EBITDA or 12 months to 20 cents a gallon initially but remember we have several for the partial year or even just a few months in 2022 and <unk>.

With the alcohol as we still see a premium for our product with our annual capacity for USP as well as industrial be great at about $65 million 65 million gallons. This could contribute an additional incremental $15 million to $25 million.

Over traditional fuel ethanol margins.

On top of that the contribution for renewable corn oil and we can make a case of a baseload from these initiatives to deliver between 150 and $200 million in EBITDA in 2022, if the market remains at 65 or higher per pound, which is absolutely could before considering our base ethanol business without corn oil.

As we break total corn oil out separate plus other segments less corporate overhead.

Our refocus remains on reducing the carbon intensity of all of our sustainable ingredients that matter capitalizing on the World Class AG Tech for our portfolio, we now along with our partners and most exciting is that we expect to rollout our inaugural sustainability report next month with all of that said. Thank you for joining our call today and we look forward to the question and answer session.

Alright.

Gentlemen, please limit your question to more than two at this time, if you wish to ask additional question. Please rejoin the queue to ask a question. Please press star one on your telephone keypad and fluid draw. Your question. Please press the pound key one moment for your first question.

Your first question comes from Adam Samuelson with Goldman Sachs. Your line is open.

Yes. Thank you good morning, everyone.

Hi, Adam good morning.

Hi.

A lot of ground.

Let's cover that in the prepared remarks and want to do.

Dig a little bit more into the carbon opportunity you talked about it on the script a little bit but it wasn't much in the press release and I guess can you help us think about the key gating factors towards an investment decision.

Around carbon sequestration.

Specifically on the pipeline.

Maybe help frame kind of what the potential equity investment could look like.

We are waiting for clarity on the infrastructure Bill in Congress on 45 Btu tax credits just help us think about where the the key kind of decision items would be there.

Thanks, Adam and low carbon is a very important part of our strategy and producing low carbon ingredients.

It's one of the most important parts of our strategy. So thats first and foremost so the first thing that we did was we got involved in the initial Investor group to fund at risk capital to get the project started and we've already seen based on the first round of potential valuations and uplift from there. The second obviously is because we were a inaugural shipper we get.

A little bit different of an economic share from the from the tax credit as well, which is also beneficial for our shareholders. That's all without any further investment. So at this point now what we have is the ability to invest in the full project and what we have to make sure is that from the standpoint of best returns it must be beyond an infrastructure return, but we also want to.

Also motivated to make sure. This project also gets built as well so it's a little bit of a little bit of a return.

From a standpoint of what will it return relative to the investment we put in place, but we also want to make sure that we help the projects get off the ground and get built and the FCS guys are making incredible progress around securing storage securing.

Getting start to think about right of ways.

Getting things done with the with the local landowners and we're watching it very closely but we also just want to make sure from a diligence standpoint that this is the best use of our capital but in terms of us wanting to get this project built we do and that'll be part of our motivation because we believe low carbon intense fuels, we'll have an advantage and so we're.

Very seriously at it and well known and it kind of kind of going to make our decision a couple of weeks, but keep in mind as well.

We are also have three sites in the east that can either have direct inject or other opportunities that we're starting to see develop around use of carbon for other products and we're looking at that closely as well and we have to be careful at some of our sites.

And the fact that we are a shipper on the pipeline as it gets built and then number three what is the investment we want to make and I think in the next couple of weeks, we're going to we're going to finalize that decision and just to make sure that that is the best use of capital for our shareholders.

Alright, I appreciate that color and then if I could follow up just on the on high protein.

You talked about consistently getting to 58%.

In commercial quantities, signing some new use can you help us think about.

How you achieved pricing on those <unk> and those sales and how those tracked relative to your kind of framing of the J curve.

Value creation at higher protein levels.

Yeah, Thanks, and so.

Initially with our pet food customer. This is a designed product for their for their application today. So we're going to ship them the same product.

That we had shipped them last year as well because we are already in their ration were working with them now as we know we can start to achieve higher proteins at scale.

When we start to think about $2023 $24 25, whats the use for this product and how will they and how they formulate around it and so we are still getting a premium to soybean meal.

And we're very happy with the results from that they are consistent with kind of our initial thoughts on what this product is worth I think where we really want to focus though is instead of spending a lot of time between kind of 50 and 60 in that 56 to 58 range, which we believe.

We can we now have the opportunity as we turn designed to potentially produce at scale.

When we see set our sights on 16 above that's really what makes the difference in terms of the opportunity and and getting included in higher value products around the world and so.

We're just taking the view at this point, we want to start to focus on 60% to 62 protein as a baseline product using biological solutions and we'll know early next year and if that's the case then is really isn't much reason to spend between 50.

And 58, and we might as well just go straight up to the highest to the highest point, we can know where the values will be for that and how long it will take to develop some of those markets. Obviously that'll that'll take some time, but once we know we can make that the absolute product. We think that's going to be great potential for longer term and higher and higher returns on these on these projects, but the <unk>.

Step even before that is we actually believe the.

The fluid quip guys. The fluid quip technology can achieve higher mechanical separations and were working high on that because obviously your opex versus capex.

Is something we would much rather focus on but our focus is towards the top end of that curve. If theres. Good markets between 56 to 58 and were starting to find those as well will go there, but our goal is to really really moonshot, our way up to $60 plus as quickly as we can.

Okay I appreciate all that color I'll pass it on thanks.

Thank you.

Your next question comes from John <unk>.

Jordan Levy with service to Securities. Your line is open.

Good morning, all.

Wanted to start out asking on turnkey solutions.

Specifically, maybe get a sense of how you see that pipeline evolving given its early stages and also how you think about the market development. You spoke gave a lot of detail on in tandem.

Any additional turnkey agreements.

Yeah. Thanks, So our team is out talking to.

Others that may have interest in these type of projects I think.

What we want to make sure and I think.

What we want to do as we choose the right partner.

And they are also choose us as well and so.

It's absolutely wanted to start to focus towards the high end of the of the.

Plants in terms of best quality best locations, and where we see them fitting nicely into the portfolio.

<unk>.

Not all protein is the same and I think were proving that with our product and the inclusions, we're getting and the innovation that's happening around it and the quality of it and the flow ability and intend to digest stability and I think I think people are learning that every single day in terms of what we're able to do not just the fact, our MSC systems, but other MSE systems that are <unk>.

<unk> today, we are all producing the same product which is very important.

Keeping a level idea of what the consumer what the consumer wants and so when we look at turnkey solutions. It's absolutely a focus of ours I think we are going to be successful with others. We have opportunities in front of us and we're continuing to work those opportunities. There also will be a great.

Proof point for this industry to understand the opportunity with this product. It's the largest one of the largest plant in the industry and we're putting the technology there and we're very excited about that and so we continue to work on more and more partnerships from that perspective on top of that then the market development that we're doing around this.

<unk> is really.

Had some incredible opportunities, we're seeing different areas, both domestically and globally that are interested in this product at multiple different species that certainly Patrick driven today, it's aqua culture, driven as we are working on those as well, but we're also seeing very specific uses and dairy and swine and even in beef cattle is.

Starting to come up where this is becoming a higher value opportunity for us because it is doing great things for each of those rash and specifically at our nutritious are working with them as well. So look I think the important thing is in a world.

Increasing demand for protein and by the way the world is tight protein again, and while we've seen some some weakness and obviously soy meal prices, it's very tight around the world for proteins today, which we think is an opportunity and it's probably an opportunity for several more years is we don't really see a lot more crushing capacity in soy coming.

On until kind of late 'twenty four 'twenty five and so we kind of have a great runway to gain market share with our products, but we're really focused on those higher value higher protein markets today in terms of developing that we could sell all of the 48 4900 $50 51 protein I think that we produce in middle of next year.

We will be producing three or 350000 tons of that that's not a lot in terms of the total world balance sheet, but what it is a lot of it's a very high value product and thats kind of what we're most excited about so our market development has made great strides this quarter, we signed an Mou for multiyear off takes of this product. We have we have others that are that are in negotiation.

Now for for use of this product because of the key is.

The key here is is that they want to make sure that they have this supply because once Shenandoah sold out there is no more supply once wood river sold out there is no more supply. So there's really kind of limited supply of this product at the end of the day and it's a very high quality product replacement that can achieve great things and so locking in.

These agreements is guaranteeing supply and.

And ultimately we're going to we're going to be sold out of this platform.

Okay.

Thats great detail.

Maybe just as a follow.

So up to that maybe if we take a step back and look higher level bigger picture longer term.

The potential of the platform will keep that MSE online and you start to looking to CST and that sort of thing I'm curious if you could just talk to how you see longer term potential to drive synergies from the market development.

Paul.

Next phase of its transformation plan in terms of high value ingredients.

Well when we look at kind of protein oil and sugar I mean, those are the three main high value opportunities, but protein is a baseline ingredient for many other opportunities around value added agreements in the east.

In the fiber people are calling us customers are calling us now for our fiber products that are stemming off of the protein product. They are calling for our used applications that are stemming off of the protein product. We're having we're just scratching the surface on that opportunity because the easiest thing for everybody to understand is protein concentration so thats.

The thing that we've talked about it's much harder when you talk about well. There's also value in the east is also a value in the fiber Theres also other uses of this product and we are developing different technologies around this product that's a little bit harder to explain but that's really where the money. The real money is going to be made in diversifying our ingredient opportunity because it's not just.

Again protein it is a good metric, but it's really not just a protein strategy, it's really a fully value ingredient value added ingredient strategy. When you layer on top of that the opportunity that we can make 95 they are dextrose equivalent.

<unk>.

Products that compete.

Both financially.

Product wise at we think better economics than what's being made today.

And markets that need more and more product, we're seeing great interest in potential partners that want to do over the fence opportunities much like you see at other other.

Other companies that produce dextrose, because theres just not enough availability left in the market today. So we're accelerating that opportunity, we're even getting calls in for people that want to buy the clean sugar technology, and we say, we're really not ready to sell it yet either we're going to we're going to use it here first at Green Plains and as the market develops long term, which we.

You can potentially that could be another another opportunity for everybody, but if you just take a look at one really interesting market. If you just take a look at the global glycol market.

And you say if you can convert that to a bio glycol coming off of dextrose as your as your main feeds as a feedstock and move into bio glycol that market is big enough that if you converted every single ethanol plant in United States. The Dextrose, you still would only have 20% to 30% of the market covered for our bio glycol type products. So the markets are so big.

And.

And sugar opportunities and chemical opportunities that you may never even have to worry about food applications going forward and on top of that we're working with potential partners that have synthetic biology applications that have used our products and have said that have gotten better results from our unrefined clean sugar.

Our unrefined clean sugar product versus a fully refined food grade product because of what's left in there that's giving them opportunities as well and if you take a look at the world of synthetic biology. It all starts with sugar. So we're all very excited about that as well.

For bushel of oil and you think about the fact that we're already getting a premium to soy eating into some of the low carbon advantage that the soil has on top of that when you look at the fact that you really won't bring on a lot more oil veg oil capacity until 24 and 25 were sitting.

We're in a great place as you look at the reduction in canola oils for next year in the last call oil because of the Canadian drought. There is a chance that we start to see numbers towards with a seven in front of it in an eight in front of it next year in the vegetable oil market, which is just a wonderful opportunity for green plains shareholders, a starting point so we can be.

<unk>, So we view our strategic.

Location and this opportunity to be very valuable for our shareholders and we're going to do everything we can to make the best decision to monetize that opportunity for them.

That's great detail. Thank you so much.

Your next question comes from Ben Van Den You said Steven Your line is open.

Hey, Thanks, good morning, everybody.

I wanted to follow up on Adam's question about carbon sequestration, but as it relates to the long term opportunity around SaaS.

I'm curious just when you think about the equation of making ethanol low Ci ethanol competitive feedstock for the SaaS opportunity, which as you noted is is really really big.

<unk>.

How important is that in the equation getting that Ci score down to make it competitive with veg oils kind of irrespective of the fact that there is.

Give me a lot more availability of ethanol as a feedstock versus.

Vegetable oils, which are likely to get sucked up by the renewable diesel production.

Production demand.

Yes. So we think when you take a look at the need for sustainable aviation fuel and the demand for it youre only going to go so far with kind of the renewable diesel to SaaS and the rest we believe.

Is most likely a alcohol to jet opportunity I remember for a gallon or so of ethanol, you're really only going to get six gallon.

Sustainable aviation fuel, which is why the tax credit needs to be so high in terms of when you are looking at $1 $52 $3 a gallon, it's because number one youre going to lose volumes, but number two.

Because you do have to start out with a lower carbon intense liquid fuel before conversion. So that's kind of a motivation. There one thing you got to be careful as you may not be able to.

Double dip in terms of the 45 <unk> in the aviation fuel credits or you might have to pick one of those but if you are a low carbon intense.

Alcohol.

A great starting point.

We are absolutely looking at this opportunity we are in discussions with potential partners not just only four.

You should be in discussion for <unk>.

We're all out there and there's probably more coming quite frankly, so we have a little we've got to see how this.

Build back better Bill ends up here, but sustainable sustainable aviation fuel seems to be what I think is probably one of the growing opportunities for U S ethanol industry in total.

That we have not really seen before where you could possibly rebase these assets as a strategic.

Fuel for the use in sustainable aviation. Most interesting is let's just say, it's a 4 billion gallon type opportunity.

Well, you probably need 6 billion gallons of ethanol to get there and if you took 6 billion gallons of ethanol in a market that is using ethanol as an octane.

Land and a low carbon blend it could be it could be really interesting to this industry and to this company and for our shareholders. As all of this takes place. So we have absolutely put resources in place to start to look at this opportunity and I think we'll have more updates each quarter as we go on.

Yes, Okay. That's great. Thanks, Todd My second question is clarifying your commentary on 2022 kind of the EBITDA build that you offered and I think it's clear you guys are on the runway to the long term EBITDA kind of baseline potential of the organization. So.

The timing is less important relative to the big picture, but I just wanted to understand if I heard what you said are you, saying between MSE USP and corn oil at the midpoint Youre thinking.

$245 million of EBITDA, plus whatever contribution you would get from.

Agribusiness and the.

Partnership and the baseline ethanol business did I hear that right or is that run rate commentary that you offered.

What we said is look we are we believe we're on the path to 2024, let's just and Thats what were focused on.

100%.

But we would be remiss not to at least discuss what the 2022 opportunity is based on based on the current markets. So we're basing it on current vegetable oil pricing and with vegetable oil pricing at 65, a pound as a base load, which is well over $100 million over our historical contributions that could be in that 150 <unk> hundred six.

Just gross ranked gross range after deduction of our.

After deduction of our loss in terms of distillers grains, but if it's outside.

Side of the ethanol, let's just say we lead the ethanol margin along with no contribution from corn oil. That's the that's the number that could be to 2022 contribution at 65 cents a pound and if it goes up obviously every 10 cents a pound is about $30 million more than that so obviously, we will watch the VESCO vegetable oil pricing.

Very very closely on top of that then when.

When you take a look at what we will have running in 2022, it will be 200 million gallons equivalent of protein for the full year and then as we bring on another 360 million gallons from our own system for about half of the year depend.

Depending on when O'brien.

Vernon and Central City start up and then obviously <unk> will be later in the year, maybe you get a couple of months out of that but it will be during startup just baseline $40 million to $60 million is kind of how we're thinking about 2022 first first real contribution from protein and again I think.

It's good for people to understand that this is not just any protein product of fluid quip MSC product is a very unique product may different it's produced differently and it's used differently and it's thought about differently and so we think somewhere between $40 million to $60 million and then we will just have to wait and see where.

Especially the alcohol markets come in the B grade market is hanging in there the USP market got a little bit weaker probably in that 20% to $30 million range for 2022 contribution on top of that our normal contribution from AG and energy will probably come in line there as well we might we're looking at should should that standalone.

Or should that be part of the corn processing segment, so that could be an adder and then obviously, we take off our SG&A from there. So it's a good starting point to think about that but I think what it does is it tells you with ethanol zero baseline, which right now we know it is not.

That's just the baseline opportunity for the company based on everything we've done.

Lastly, and I know, it's a long answer we started out this whole corn oils discussion our yields were seven as an industry and now Green plains were pushing kind of one point O without MSC and fluid quip opportunities and you're going to see Thats, just a big opportunity at these higher oil prices, which in our view is a multiyear opportunity and.

And strategic to our shareholders.

Thanks, I really really appreciate the commentary that's helpful. Congrats and best of luck.

Your next.

<unk> comes from Manav Gupta with credit Suisse. Your line is open.

Hey, guys.

Last question is clear.

Clearly you have renewable conroy.

Highly highly desired and did a lot of people out there who will have been able to get deals on soil benign. So yardy utility clearly should be a lot more valuable and what im trying to understand is that two kinds of building off of it.

<unk>.

The Newbuild diesel producer comes in and offers to feedstock Guy a good amount of money even to develop his resources and then kind of a profit sharing agreement, but there's another kind of being offered by some of the newer guys will we think you're seeing the feedstock guy has to bring in the capital and then we will kind of be.

Labeled meek.

Partial owner offer renewable diesel facility and I'm trying to understand.

Are you open to both kinds of needs or you'll be more open to the first kind of be maybe you don't have to put into capital and become an owner of a newbuild diesel facility.

Yes, we're focused on.

The first idea that you've discussed but beyond that we think if somebody wants to secure our corn oil for long term off takes our long term security of supply.

That number one we believe we believe there is a profit share opportunity out there.

Remember.

Right off the bat from a Ci perspective.

We believe that.

Renewable corn oil it should trade at about a dime premium over soybean oil and we haven't seen a trade that high but we have seen five years to seven cents, a pound premiums being paid already.

So if we would've made a deal early.

One has committed.

While one already.

Owns renewable diesel.

One obviously, we've seen them commit to some partnerships already in terms of committing some vegetable oils. The other we haven't heard much from it and we have ourselves and so there is a lot of oil at the top of this.

Top of the food chain here and it's all very very valuable because of the <unk>.

The carbon intensity reduction that corn oil brings versus soybean oil number one number two it's a waste oil and that of food oil and the headlines right now on food oils I would say are moving.

A little bit negative in terms of looking at food prices and the articles around there, while leaving waste oils out of it. So I think we're just in a good place I don't think we need to own renewable diesel assets quite frankly.

That's.

We are I think we're in a great position from the standpoint of having the feedstock.

And I think we're going to be able to take advantage of that for our shareholders. I think we're in a great position and we will see what transpires, but I don't think youll want to rush to make a conclusion, just yet because I think there's some very interesting opportunities around.

Monetization of our corn oil and I think if you rush into it too much you might have you might make the wrong decision, especially that the market's already trading over soybean oil several times last year for this year.

No I agree with you you should not be in the business and it will be leased facility I was just trying to make a clarification on the second question, which you mentioned about these bills, which is coming up.

Finally appears that even though until 2026.

Everybody gets a blenders tax credit, but after that they believed the language is such that it's looking like even E.

On August 5th.

<unk> is moving towards lower carbon intensity fuse and incentivizing us to actually take into consideration.

Robin intensity, even for something like a blenders tax credit. So I'm just trying to understand and you ought to view when you look at these regulations is that coming in.

Moving in that direction.

You can see you don't have a national low carbon fuel standard mandate at some point.

Robin and density will definitely would be taken into consideration in a much more meaningful way because right now if you look at the RFS.

It doesn't take into consideration the carbon intensity at dawn.

Yes, I think we're trending in a direction that everything will be based around your carbon intensity.

What the final program looks like it's hard to say and whether you can qualify for all of the credits available. If you have to pick and choose we have to also watch that carefully. So if you make the wrong decision too early you might be opting out of the other program that that you want to be in so you have to take off until.

We see the final language around that.

I think you would need to be careful on which path with which path you choose because.

It's not an all for one solution you might have to pick and choose where you want to go and earn your opportunity and low carbon.

I agree with your comment we are moving into a low carbon standard of some sort.

But again hard.

At $85, a tonne $45 two tax credit just keep this in mind everything works.

So youre project needs to stand on.

On the tax 45, Q first because I think the value of carbon is something we have to figure out what is that going to be long term because at $85 everything works and so but that doesn't mean that there aren't great opportunities around lowering your carbon intensity.

But also having the opportunity around.

Sustainable aviation, our low carbon ethanol or combination of bolt on top of low carbon corn oil on top of low carbon ingredients and I think we're already seeing.

We are beyond low carbon fuels, we are already getting.

Asked can you give us a low carbon.

Ingredient centered around our ultra high protein, but with added nutritional characteristics. We're getting asked that already is we're going to put carbon intensity in the bag of our feed.

And can you help us with that and Thats a whole another opportunity around our ingredient platform, especially by being low carbon.

It's a bunch of different ways that you can think about this I would only caution you don't want to make the wrong decision too early because theres a lot of moving pieces.

Thank you for answering the questions and all the positive details you provided on the call today.

Thank you.

Your next question comes from Eric Stine with Craig Hallum. Your line is open.

Hi, everyone.

Hey, just one.

I'm doing well.

Just wanted to sneak one in here at the end.

Obviously, great that you have signed the.

You mentioned multi year Mou for sales into pet foods for 2023, and I know you are certainly targeting more sales or contracts in 2022, but just from a high level.

Versus locking things in early for 2022.

Yes, that's a great question, but I think the key here is.

Once you're in the.

The ration, especially in a consumer product.

The goal is to stay in the ration and we've been able to do this now that will be our third and our fourth year that we were able that we are able to stay in the ration and I think I think once you do that these are these are 10 to 20 year relationships and so by even getting multiyear Mou is to stay in the rationale and talk about increasing volumes what they wanted.

Being able to do is secure.

Our customers want to be able to secure volumes. So they have something to buy and I think that's that's the key for what we're trying to accomplish here is locking in volumes without but also in each of our <unk> that we are either have or are negotiating within there.

In each of these we discussed the opportunity of increased.

Protein concentrations or increasing nutrition nutritional.

Nutritional outcomes and leaving those open for negotiation because like you said.

Again, like we talked about in corn oil and like we've talked about in carbon and like we talked about a sustainable aviation you don't want to you don't want to lock it away too early because if there is a lot of other opportunities that might come into play like low carbon ingredients into.

And to Europe, or like ingredients into Asia, agriculture, and again, there could be a point, where there's just won't be enough of this product around because it's a very distinctly different product than maybe others, maybe the MSE fluid quip product is a very distinctly different product than alternatives that are available out there and I think that's really important so.

Getting a multiyear Mou in pet food.

Is almost unheard of from for an ingredient standpoint, and it just shows that showing their commitment that they want to commit to the quantities today and we can work on pricing and protein concentrations and nutritional characteristics later.

Got it and I guess that would speak to what you had said earlier just that it is collaborative as you said you don't just call someone up and say Hey, Ive got product for you this would be.

Something where you could sign a contract and expand from there.

Well you can call somebody up and say they have that but then youre going to get commodity pricing.

And thats, the uniqueness of our product because of the east component in it.

As well as the opportunity around low carbon.

Okay. Thanks.

Your next question comes from Ken.

Zaslow with bank of Montreal Your line is open.

Good morning, guys.

Almost good morning Ted.

Two questions. One is can you remind us I don't know if you said Shenandoah what would the margins there and how much were they above the rest of the company can you give us some.

Contact.

Yes, I mean like we indicated earlier the initial margins at Shenandoah, where 12 months to 20 cents, a gallon and they continue to hold and so when we look at that relative to.

Contributions is starting to contribute potentially one to two cents a gallon overall to our total platform because it's only 8%.

Our total of less than 8% of our total production, but we're very happy we're very happy with the results, we're very happy with product quality happy with the corn oil yields because obviously at one one to one two pounds per bushel of corn oil yield at Shenandoah was 65 cents a pound that helps the overall margin for the protein systems and so.

Net there are holding steady and we're looking to grow them.

The second question I had look I'm looking at your slide where you have the 2020 run rate EBITDA when you take those pieces apart.

Do you think you are tracking in line above or below those numbers.

And then when I look at the renewable corn oil I think your thought is that youre going to have to ask you about 400 million gallons you're at 330.

Are you looking to supplant that as well.

Yes, I mean, we're going to we'll continue to re look at the opportunity in 2024, obviously theres moving pieces. Some things are increasing some things are decreasing.

To make sure that we had to stand up a clean sugar system between now and then obviously the renewable corn oil at 65 cents, a pound and potentially higher through 2024.

<unk> is an adder, we've seen some contraction of the specialty alcohol, a margin, which would be a decrease but then if we can achieve 60 protein.

And higher in nutritional outcomes that are beneficial for our <unk> and <unk>.

And using innovation and technology around this product.

This sustainable high protein gives us higher numbers than that so again, we're not going to give the full guidance update yet, but I think <unk> got enough information from this call to start to think about what the what the opportunity is in 2024, obviously execution execution execution. We think that we will have half our systems converted by middle of <unk>.

Next year, we have the equipment coming in it's been ordered so even with this global supply chain have we seen some stuff get get bogged down yes, we have but I think we are still good and on track for mid 2022, and then we just take the rest of that time to roll out the rest of our platform and finish their olson so.

I think we've given enough information to at least start rethinking the distribution of <unk> 2024, but I think at this point, where you can say, we're holding we're holding steady on our on our thoughts.

From the opportunity in 2024 as a starting point.

Great I appreciate it thank you.

Thank you Ken I appreciate it.

Yes.

We don't have any other further question I'll hand, the call back to Todd Becker.

Yes, thanks, everybody for coming on the call today, obviously.

As we mentioned, we're making incredible progress on our transformation, it's a very big opportunity for our company and our shareholders.

Notwithstanding there is still volatility in the underlying business that were the legacy business that we're.

And customer needs and wants and interest is really setting us well up well to deliver what we think will be a transition great transition opportunity in 2022 with the full transformation still ended up ending in 2024, and we think it is.

We think we're in really good shape as we kind of approach the next quarter in the next in the next year in a year or two so thanks for your support and we'll see you next quarter I appreciate it.

Ladies and gentlemen that concludes today's conference. Thank you all for joining you may now disconnect.

Q3 2021 Green Plains Inc and Green Plains Partners LP Earnings Call

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