Q3 2021 Gevo Inc Earnings Call
Today's call Christmas jumped to begin shortly please continue to standby. Thank you for your patience today's conference is scheduled to begin shortly well he's computer standby. Thank you for your patience.
[music].
Welcome to <unk> third cohort or 2021 earnings conference call. My name is Gigi and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will be conducting a question and answer session. Please note that this conference is being recorded I'll now turn the call.
Over to Geoffrey Williams Jones, Vice President General Counsel and Secretary. Please go ahead Mr. Williams.
Good afternoon, everyone and thank you for joining <unk> third quarter 2021 earnings conference call I would like to start by introducing today's participants from the company.
With us today is Patrick Gruber, <unk>, Chief Executive Officer, Lynn small G. Those chief financial Officer, and Paul Blum G. Those cheap carbon and innovation officer.
Earlier today, we issued a press release that outlines the topics we plan to discuss.
A copy of this press release is available on our website at Www Dot <unk> Dot com.
I would like to remind our listeners that this conference call is open to the media and that we are providing a simultaneous webcast of this call to the public.
A replay of today's call will be available on <unk> website.
On the call today and on this webcast you will hear discussions of certain non-GAAP financial measures non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP.
Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
And in the press release distributed today, which is posted on our website.
We will also make certain forward looking statements about events and circumstances that have not yet occurred, including but not limited to projections about <unk> zero, one project and <unk> operating activities for the remainder of 2021 and beyond.
These forward looking statements are based on management's current beliefs expectations and assumptions and are subject to significant risks and uncertainties, including those disclosed in <unk> Form 10-K for the year ended December 31, 2020 that was filed with the U S Securities and Exchange Commission and it sounds like own reports.
<unk> and other filings made with the SEC by <unk>.
Including <unk> quarterly reports on Form 10-Q.
Investors are cautioned not to place undue reliance on any such forward looking statements.
Such forward looking statements speak only as of today's date and <unk> disclaims any obligation to update information contained in these forward looking statements, whether as a result of new information future events or otherwise.
On today's call Pat will begin with a discussion of <unk> business developments Lynne will then review <unk> financial position and Paul will finish up with a discussion of Verity tracking.
Following these prepared remarks, we will open up the call for questions I'll now turn the call over to Pat.
Thanks, Jeff.
As everyone paying attention to us.
Our presentations of press releases of the videos, they know where on a crusade in the pursuit of net zero drop in fuels.
We have learned that we can convert renewable carbon into gasoline jet fuel Saf.
And diesel fuel as well as the building block chemicals to make most plastics or other larger volume chemicals technologies work.
Key to driving out the fossil footprint in all of these products is renewable electricity and alternatives to fossil based natural gas you have to reduce and eliminate fossil energy from our production systems.
We should be able to achieve net zero fossil footprint all of our products as measured across the whole of the business system.
So all the way from carbon capture tailpipe or.
Or the exhaust of a jet engine.
We are in the business of transforming renewable energy into energy desk liquid like Saf and motor fuels.
When we look at our business, we have some similar issues with that kit that are confronted by evs and hydrogen.
That is what's the source of electricity is at fossil or not what's the source of energy to produce hydrogen fossil or not it turns are we're all aligned regarding infrastructure. If our business system has access to renewable energy and it shouldnt surprise anybody that the fossil footprint could be reduced and potentially eliminate it.
<unk> <unk> folk diageo bulk and companies like us all need improved access to renewable energy.
Good to see the emphasis of this in public policy, particularly regarding infrastructure I'm glad to see that Bill got passed.
Because of the size of our renewable energy need and the ability to achieve economies of scale, we expect that our business system could further catalyze development of renewable energy.
We are finding that there are many parties interested in building out renewable energy infrastructure, they need a big customer like us.
I'm also glad that our products drop into 15 pipelines and enhanced existing markets I'm glad our products are dropping at the consumer level. There is a benefit if no one needs to airplanes cars or trucks to reduce or even eliminate the fossil fuel greenhouse.
Greenhouse gas emissions footprint from combustion engines.
I expect that we will have the opportunity to help EEV and Haitian people too as we expect to generate excess energy et cetera, renewable energy electricity and hydrogen supply to the marketplace.
Where they wouldn't otherwise habit or couldnt do it.
Our net zero one plant design is unusual for the following reason.
We are designing it with a carbon footprint in mind from the get go.
We have worked with dual energy in a wind farm that'd be wired directly to the plant.
We're planning to install a wastewater treatment plant that has the ability to generate water for use in our production process sure.
But equally as important it is expected to produce enough biobased methane to run the plant.
We also plan to install our <unk> units to produce green hydrogen from wind.
So it's a different set of paradigms about how to install energy and manage it across the whole of.
Of course, we are we get excited that we can prove using the world leading Argonne National laboratories greet model that by substituting the energy sources getting it away from fossil based sources and by using carbohydrates from sustainably grown corn that the system. We are building should be able to achieve a net zero fossil carbon foot.
Print across the whole lifecycle from carbon capture tailpipe or exhaust of a jet engine think about it for a second here jet fuel has roughly a fossil footprint of about 90, using our carbon score index that means 90 is a fossil based.
Score.
RSA F. When bird according to the argon remodel is expected to be zero that means that our saf sitting a tank or a railcar before it's been burned is at least a negative 90 Ci score negative 90, if we never burned it as a fuel it would just be sequestered car.
But in a tank thats interesting paradigm when the fuels such as Thats the burgh it does release Cotwo.
So then the carbon scores back up from minus 90 to near zero.
Renewable energy and it take with all the advantages that that infrastructure provides to take it to market and all the vehicles. The planes. They all exist we use without change that's pretty amazing.
It's really who gave to think about what can be done so for a minute suppose.
Building blocks produced zero plant were used to make plastics, rather than making saf or motor fuels.
These building blocks would result in the same plastics made from petroleum, except that we have swapped out the fossil carbon renewable carbon capture from the atmosphere.
Technology works, so imagine car bumpers retires made from our stuff.
You'd be sequester carbon captured from the air transformed into durable goods.
The carbon score I'll bet bumper or tires could be expected to be massively negative.
Because we are not burning the products are being made into durable goods.
Of course, it will depend upon the content of those plastics.
Our rubber derived from our net zero type of ingredients.
Looking forward in the future, we expect to add geological sequestration to the de Carbonization mix of course, we can do that others can we can do it too that should make our footprint even more negative more negative in a big way that according to greet we'd expect the possibility of a negative 30 to 40 Ci score.
From where we are today, that's even after the fewest bird.
If we add some new techniques in agriculture, it can even be more negative across the whole of our lifecycle how could it be so negative because our business system would be the cost of carbon sequestration for instance, in the soil or and geological formations.
In addition by using the latest pricing processing techniques for corn higher value protein products and corn oil can be produced and sold into the food chain. This is really important we believe that is possibly use land to produce food and generate raw materials for energy simultaneously and many improvements still could be made we're not done yet.
Of course, we can also use carbohydrate feedstocks or buy from wood biomass molasses. Some other carbohydrate sources any of these are fair game for us as we grow our business.
Sustainability of each feedstock would need to be proven and it must be cost effective before we take it up.
Now we've been making excellent progress on the business front, so first chevron.
The Mou with them outlines the basic deal where they would take up to 150 million gallons of hydrocarbon fuels.
Correspondingly invest in the production assets to produce those fuels. Good that means that if we did six net zero one style plants each with a capacity of about 50 million gallons and if they took 50% of the capacity then the Mou contemplates them investing in 50% of the capital in each of the plants.
We still got to convert the Mou to definitive agreements.
And there could be some twists and turns along the way, but we liked chevron's commitment and their energy that they bring to getting this done.
Ethanol the jet is a new thing for us we've been working quietly for years and then we announced that we signed a deal with actions in North America that gives djibo exclusive license to develop ethanol to jet in North America.
<unk> that the licensing arm of the French National Research and Engineering laboratory called ISP.
Pete focuses on applied research and engineering, they do a lot of work.
Over the years over the decades on refining technology chemical plant technology and many many other technologies that are really well known.
Research and engineering outfit.
They're either capabilities are truly a mess we were just visiting there in the last month. They are quite impressive we got to know them. We got to know accidents because of our work on <unk>. One we are co engineering the process to convert isobutanol to jet fuel and renewable alcohol. It we get along really well with them and as we got to know them. We learned that they have more than 60 patents and 25 plants commercially opera.
With the technology to convert ethylene into fuels and chemicals now.
Now, we know how to Decarbonize the alcohols.
And we know how to convert alcohol into olefins ethylene isn't all of them.
And so together it occurred to us that you know what we've got a really clear path to take ethanol as a feedstock.
Can you think commercially proven technology and convert.
The Saf improving processes, it's pretty impressive.
They have done these technologies using petrochemical based feedstocks, what's new here, bringing ethanol in converting it to ethylene and taking the ethylene onward into the into the well proven processes.
We struck a strategic alliance with them.
And we believe that ethanol at the jet is going to be important and we see it is synergistic with the isobutanol to hydrocarbon routes in fact, there's many opportunities to add value to each.
It should give us the opportunity to produce more products.
A wider slate of products as <unk> likes to say, we can do diesel fuel jet fuel gasoline products and many other building blocks for the chemical industry and ultimately achieve a higher renewable content in fuels in other words. It makes it easier we have more building blocks to work with so we can make.
Our complete fuel over the long run. It's also worth noting that actions will provide process performance guarantees for the alcohol to Saf and motor fuels technologies and of course, that's really useful in financing production facilities.
At the project level.
We signed an Mou with ADM with the intent of converting 900 million gallons per year of ethanol into about 500 million gallons of Fas and hydrocarbons.
And along with that to build <unk> hydrocarbon, particularly indicator.
ADM has some of the most economical ethanol plants on the planet.
With low cost ethanol.
Is a really good idea when converting it into Saf.
Our work with ADM is expected to result in a JV with them and other investors.
<unk> indicator has been a pioneer in geological sequestration, two it's an exciting opportunity and I expect that they will be a good partner.
I know everybody is interested in the customer pipeline is growing we're still on an attack of obtaining financial offtake agreements the pipeline of potential contracts is now well over 1 billion gallons per year.
We are negotiating these contracts the interest in Saf has definitely increased especially since the white house meeting a couple of months ago.
We expect to announce next agreement that sells out net throughout <unk> and beyond.
We acquired the <unk> patent portfolio, we now have about 600, or so patents covering the biotechnology fermentation production processes converting out call. It in the hydrocarbon. It has it adds value to have all these patents under one roof.
Glad to have that.
Cleaned up.
Our net zero one project is on track Kiewit, one of the world's largest and most capable engineering and construction firms is a great addition to our team kiewit has tremendous horsepower and the capability to build multiple plants that once this ability is really important to us.
That is the situation I think we're going to find ourselves in that is needing to build more than one plant that once they have a reputation of delivering on time and on budget. In addition, they're really good people.
We will have the next round of engineering done around year end that will be moving to a more detailed phase we expect to have the EPC wrap completed around the end of the first quarter, maybe early second quarter, and then work to complete the project debt deal.
If this timing holds up we expect to get to get the plant up and running in 2024.
Our northwest, Iowa renewable natural gas project is on track and is expected to start up in the first part of next year, It's gone very well so far I like the experience we are getting because renewable methane biogas energy are all going to be really important to us as we work to finalize the hydrocarbon production system like alcohol and alcohol the hydrocarbon.
As I already mentioned one of the big issues and create that creates the footprint from these plants is the.
The fossil based natural gas and fossil based electricity eliminate these things makes everything more green.
The last key point, we are changing our ambitions, we believe that it's possible to bring online a business that delivers themselves 1 billion gallons of capacity or more per year.
Using the combination of <unk> and ethanol as heidrick as feedstocks to hydrocarbons to serve Saf and motor fuels markets by 2030, we call. This 1 billion gallon initiative simple 1 billion gallon or more by 2030. This is what we're working on and I believe the pieces are falling into place net zero one it's the first step.
And we need to get it right but.
But we see that.
The potential is large and we can achieve fast growth beyond net zero, one we see that chevron ATM access and others all could be part of making this happen.
Now it is small is here with me today, we decided to change the format and content of our earnings calls rather than read the financial details that are already disclosed in our earnings press release and Form 10-Q, we figure it would be far more useful for lids, but just talk about <unk> financial position and what his thoughts are in larger more general terms.
Yes.
Thank you Pat.
<unk> primary execution focus is getting net zero, one built and operating.
Zero once design and engineering work is progressing well and we're advancing the plant engineering procurement and construction contract with Kiewit we.
We feel very good about our partnership approach with kiewit, and Theres strong expertise and capabilities as well as their abilities around delivering multiple plants simultaneously as Pat mentioned.
We expect to start ordering long lead equipment.
To engage in site mobilization and preparation work and continue detailed engineering in the first half of 2022.
This is key to enable us to hold our project timelines.
The wind power and wastewater anaerobic digestion design build own operate manage partnerships referred to the boom partnerships are progressing well.
Dual energy.
The boom partner is advancing that zero ones 60 megawatt behind the meter wind.
<unk> development and working with potential utility partners to ensure a structure that works for all participants.
We are well into the engineering and commercial processes with multiple wastewater anaerobic digestion, the boom partners and expect to finalize those arrangements, where the winning party early 2022.
We've been very active with advance work around the net zero, one nonrecourse debt financing, we have multiple tracks underway, including tax exempt private activity bonds or pounds.
<unk> Department of energy loan guarantee route and some interest with long term private placement debt providers.
We're pursuing multiple paths out of an abundance of caution and to see which will present, the best debt structure and terms.
The base case, so far has been a pads offering by Citigroup.
The majority of our net zero project cost are eligible to be funded with pads and those markets are very attractive for this type of credit.
We expect to have the project finance elements in place in time for a mid 2022.
That offering regardless of the route taken.
The strength of net zero ones project participants from off takers to key with Citigroup and a range of other important supporting elements will all play well as we head towards breaking ground and financing construction next year.
We are also working to get follow on zero. One plant is sold out with off take agreements developed financed and built.
To build out a fleet of plants will be raising money at the project level as contemplated in the Chevron Mou.
And if the right circumstances arise at the Jabil, Inc level.
For example, adding a strategic party or two in the mix as a possibility and wood, hence our ability to execute on projects in any case, we will eventually want to raise money at the Gibeau, Inc. Level. So that we have capital to contribute as equity and can benefit from commensurate levels of project cash flows.
Our view on capital investments is that the opportunities are in men.
It should be accretive we are also interested in partnering with companies that own ethanol assets and in acquiring ethanol assets with the intent to decarbonize existing ethanol production to provide low carbon feedstock to new styles production capacity with correspondingly low carbon index scores on the final product.
We would welcome hearing from ethanol plant owners, who may be interested in <unk> approach to south.
We have identified and are pursuing several sites for follow on Greenfield net zero projects that are as attractive as zero ones like Preston site.
We will need these options on locations as we grow production capacity.
The carbonization of production is always a focus when looking at sites for example, Adm's Decatur, Illinois site presents a superb opportunity around that needs due to its carbon sequestration capacity.
We are also operating our la Verne plant to make isobutanol and working on optimization of systems and processes.
These learnings should serve us well as we operate the net zero plant.
Using the la Verne Isobutanol to make small quantities of hydrocarbons down at Silsbee, Texas plant and next year, we expect to use la Burns Isobutanol production as feedstock for our modular hardware carbon plant that is currently being fabricated by price and it's scheduled to be installed at Laverne in 2022.
We are currently a pre revenue company recall that while we are producing.
Laverne to accumulate feedstocks for hydrocarbon production, we suspended the plants ethanol production in Q1 2020 to focus on our net zero program.
Late next year, we would expect to see some revenues from our <unk> project and some revenues from sales of small quantities of hydrocarbon products.
In late 2024, we expect to see substantial revenue upon net zero ones projected startup.
As a 1 billion gallon initiative begins to take shape, we would expect to put out some guidance, but that is premature today.
Given our pre revenue status the key third quarter financial metrics are as follows.
End of Q3 cash and cash equivalents was $522 $4 million.
Long term debt outstanding was $66 8 million.
Corporate burn was $6 1 million.
Capital investments associated with net zero, one and other capital projects with $16 8 million and we had other investing activity of $9 million associated with the <unk> patent acquisition.
As Jeff noted full financials are available in our earnings release, and our Form 10-Q available on our website.
Now I'll turn it over to Paul Blum to talk about where we're at on the Verity tracking Paul.
Thanks, Lynn first I'd like to note that we have executed a joint venture agreement for Verity tracking with Blocksize capital.
Tracking is based upon distributed ledger technology, commonly called blockchain and it's focused on the tracking of sustainability attributes such as the greenhouse gas footprint across the whole of the supply chain, including carbon capture feedstocks sources of energy used in production and other key inputs to determine.
The lifecycle footprint with products like ours.
We intend to provide verifiable immutable sustainability data from the source of the raw materials to the tail pipe and exhaust of jet engines.
I am the responsible executives at G. Both for this joint venture.
In the future, we intend on spinning verity tracking out of GMO wheat.
We still have some more work to do to get it organized such as putting the key leadership team in place.
And what's a reasonable timeline for disclosure of commercialization plans to achieve first production of 2020 526 timeframe.
While the steps that have to happen or that we got to figure out the game plan of how we're going to fully Decarbonize and then we're doing some engineering work on the ethanol suggest stuff. Once we have that pin down then we'll know what timeline should be so we're a ways away from that yet it's not it's not like it's in the month.
And the as far as we go with ADM. The idea you heard that there talked about it as well and their earnings call is that.
Using that a million gallons of ethanol raw material is that's a good starting point to generate a heck of a lot of Saf.
We got a lot of work to do put in the game plan of do this we're gonna bring in other partners because it's a lot of work to Decarbonize things.
And then we have to finance the whole thing there's a whole lot of interested parties about who are hanging around here.
I'm working on it with us so it's one of the things you just have to stay tuned too.
Excellent. Thank you and then for quick follow up regarding net zero one I wanted problem. The Ccas commentary you get Walnut part of the initial furniture, one could you comment on the opportunity you have to integrate Ccs and the price and EBITDA uplift potential.
Well I'll comment first Finland, you can pick it up and talk about what it might mean economically or something all right. So the answer is yes, our plant that and that sort of one is like any other planets a permutation plant that generate some C. O two that that C. O. Two is actually pretty valuable and that it could be captured and sequestered. When you do that that has an impact of about 35 Ci points.
So if we're starting at a minus five it's another minus 35, even in California, where they just penalize corn and or minus five in California is a 40 and that's what our contracts are based upon then you would get presumably credit for carbon sequestration, so you'd get some improvement there and if you got the full credit you'd be.
<unk> down to a score of five in California.
And when.
<unk> do you have any comment and what do you think that value might be the upside.
35, Ci points at something like two cents, let's see I point per gallon. So you know.
It is substantial in terms of EBITDA uplift the the the costs associated with engaging a counterparty under see see us as is not nearly as great as the benefits that we're seeing out of the CIA reduction.
I would say, though that for net zero, one we don't see carbon capture sequestration as being a key component of the debt financing, but rather a potential equity upside investment in the or or engagement in a contract in the future.
And of course, that's because we think that that will have to get finance before the CCA Ccs pipelines exist.
Great. Thanks for taking my questions.
Thank you. Our next question comes from the lineup Sean Severson from W. T. R. Your line has now been great.
Great. Thanks, Thanks inconvenient.
Mhm.
Question on the mix of of Isooctane. These days in renewable gasoline, obviously, a lot of talking about I'd say, often certainly help with that.
Medium deal and stuff, but what are you what are you seeing these days and you look at the the <unk>.
Potential contacts optic agreements and isooctane versus Fas.
Well interestingly enough, it's still split.
Ballpark 50, 50, maybe 40% isooctane, 60% jet, but in recent since that White House meeting a couple of months ago. They are definitely has been an uptick people focus on Saf. The airlines still have an issue and that they don't make a lot of money so they're low to.
Project, longterm purchasing and things like that and so I think it will be interesting to see who all steps into the fray.
Two are the Offtakers before the airlines and so.
So, it's a bit changing but with isooctane isooctane as gasoline even after everyone Decarbonize things and if you took the most optimistic view of Evs and wildly successful levy's the gasoline pool is still the biggest marketplace.
And I think you'd be hard pressed to find anybody who thinks it isn't that way even the most optimistic scenarios say that gasoline.
Will be bigger than jet fuel or diesel fuel out at 2050. So we should decarbonize those to California provides a pretty good model for it though and that they know how to count carbon there and they've done a good job and they are a good model that works and.
Our business group with partners calculate that we need something like two.
26.
[noise] isooctane plants.
Aimed at California, just to meet their demand currently.
So there's a and that's because the import foreign.
Ah isooctane or alkylate from other places and.
And of course, that's fossil based so there's a good opportunity here and it's going to be an important part of the mix. The other thing about isooctane. That's interesting is that when all these guys are doing the renewable diesel or if you are making some lower value naphtha products snap is something that can be burning gasoline you mixed up all the right. So back then you just get more gallons of gasoline then and so because.
Our octane is such a high value product.
Cause it's pure isooctane.
So there's a we had the opportunity taken more gallons from other people and make it better blend and get paid for it.
Okay. Just a follow up question, what's the difference between Verity tracking in the greet model I think you just compare and contrast, I mean, I know, they're both carbon counting but could you highlight some of the differences for me so I understand I understand that too.
Sure Paul you want to take this question just explain what greed is and then.
The business concept of Verity.
Sure. Thank you and thanks for the question. So that when you think about greed greed, so lifecycle inventory program that Argonne National lab.
Runs in and basically.
Can calculate the carbon intensity score.
Of different products when you when you have the right inputs.
[noise] difference here between Verity tracking verity tracking use as green as part of our calculation system to make sure that we get the carbon intensity calculation right, but when Verity tracking also does is then tracks things from the sources. So think about what a farmer grower does what can you do.
With that corn at the processor level and then how the final product user implements or uses that product.
So really what verity tracking does is used three but then uses a blotchy and or distributed ledger technology to connect the dots through the value chain through the whole of the business process system to calculate the difference in the carpet intensity from the income that product that you're you're comparing it to.
Alright, thanks, guys.
Yeah. So the thing is Shawn is that.
Think argon greed is the scientific tool that measure stuff.
Verity tracking is actually kind of have like feel the auditors, we've got the audit stuff in the fields measure stuff in a field account for it take pictures whatever the heck it turns out to be and then it's accounting for exactly the energy package that's used in the production.
Tracking it all the way back out to the marketplace. So think it verity tracking as the sustainability certificate that comes with the product.
Except for it's gonna be a separate business cause it's going to be audited.
Right and have third parties.
Looking at it and saying Yep that is in fact, the case and of course, it's not lost on any of us that verity tracking done right.
Leads to Tokenization of those attributes and that's interesting as well because that could be another means of commercializing.
That value.
But.
That they were in trade in some capacity it could be exchanged like like <unk> what.
What do you what do you mean by that while you're talking to.
Everyone knows what a token is right everybody, who does blockchain understands tokens. If you have a certified will attribute that immutable can't be changed documented and all the rest you can't tokenize. It we've already worked on the prototypes for that and so you could do that and then they can be traded in some way except for what's gonna be different about these has to be some hocus pocus.
Poke his hand waving it's going to have all the dang data attached to it you can say here's exactly where it came from how it came to be the whole bit like you would expect out of a blockchain system.
Great. Thanks for explanation.
Mhm.
Thank you. Our next question comes from the line of on me today from H C Lane right. Your line is now then.
Thank you have good afternoon, everyone.
Neither or anything like that.
I bet. So what got you know your.
Partners and potential customers like Chevron from Mou do definitive agreements is there some sort of a trigger some catalyst that moves the needle for you guys.
No. It's just plugging along kitten, Tim in the same room with people me in the same room and.
Working at all through and figuring it out that's all so that's progressing and the same picture and all these deals and then around the ethanol plants and steeled ADM is great, but we're gonna we intend on working with more than just ADM. So it'll be interesting to see who else comes into the mix because that's a very fast way of growing and it's complimentary to our isobutanol.
So it's interesting and.
It'll be it'll be sporting to see how we trained I'm serious about this billion gallons per year of hydrocarbons by 2030 and.
So that's our focus and yep the.
The net zero project and what it proves that can be done is eye opening for everybody because it shows how things can be decarbonized. If you do the right mix of renewable energy electricity and the gas.
It shows people how it can be done it creates a roadmap for everybody else and so we're gonna use that and I'm glad that we were able to partner with actions and I'm glad that we have pieces that are falling into place.
[noise] and.
And congratulations on getting the Bureau, Max IP I was wondering if you have any plans for that I'd be in the near term, while you're just gonna maybe you sit on it and see how can you spell it out for you guys.
I'll tell you how we're going to use it is that that portfolio is really large and so there's lots of active patents and so we can extend those patents further add to them adjust them and extends the life of the patents and there's also useful technologies that are incorporated there I'll tell you. What it does is we're going to be successful I believe in being a big large company with big.
Revenues and these patents have long lifetime to 20 years. So it's really important to make sure that we are creating somebody who comes back something that.
Wanted to get them under our in our Kent, because I can imagine 10 years from now something goes wrong someone else might acquire them in there might have some other hassle someday in the future when we're worth big Bucks and sell cleaned it up as a good thing and it gives us more opportunities to create even more intellectual property.
Understood and then with respect to sort of you know you're blind build out or equipment needs et cetera, you know the current supply chain environment and all of the backlog.
You know these.
Types of deployments are facing right now are you already kind of dealing with those types of issues are are they a little bit well for you at this stage.
There with their kiewit a superb at this this is one of their strengths and so they are are there are already taken that into account and so you know.
So far I don't anticipate any big issues.
Whether our plants starts up mid year third quarter late in the third quarter or maybe it's even earlier those are all things that will be determined.
Other.
Project impacts and effects, but I don't expect it's equipment at this point it when.
When I asked that same question to the the engineer's theological we're already taken those kinds of things into account, Okay. We'll see we'll see.
Thought I would add that for the nonrecourse that purposes, we have to update certain with <unk> liquidated damages.
So keep it will take into account the procurement constraints and guarantee they're scheduled.
And so they're going to want to be absolutely certain of that date before they promised to guarantee it with that price in damages.
Understood on this has been.
This last one for me with respect to this verity tracking effort.
How much investment is going into this like how big are the team et cetera, and you can run that would be helpful.
It's it's it's a relatively small investment so it's one of these things where I wish we.
I wish I shouldn't say this even out loud, but I wish you would've thought of this year's ago and done it we could have really cool super-duper.
We're going to have a set value business from it but it's a one of these things where it's a small investment lot of leverage it's software oriented thing.
So it isn't like a heavy capital asset investment. So it's in the few millions of dollars kind of a thing as we develop this.
Okay, I mean, it looks like there are my local communities you guys you know.
Even with the Orangy effort and one of the things you lost.
Building for yourselves these are potential.
Services that you could provide other folks who it goes well. So you can get is that something that how you can you know maybe leveraging all these efforts can do.
Additional revenue opportunities. It is and you see it also in how we're putting together our partnerships with jewel energy they do a great job and they're they're hungry they want to grow and they're really good at working in the Midwest and their creative they got good financial partners. They get good technical partners. Good technology partners and same thing with our wastewater treatment folks work.
There they get this as to why this is important this point I keep making about if we wanted to be carbonized. The world. It focused on electricity, let's focus on getting rid of our 60% plus a fossil based electricity and turn it into renewable and let's do something about the gas. This latter one the gas is the reason we're doing renewable natural gas.
Originally started doing it because we're going to just supplied up towards the burn plant.
But we can make more money sama to California, So we're going to do that for a while but you know what it's available to us to use at any time and it has a massively negative Ci score. We think biogas is going to be incredibly important in the future because that is the only practical way to get rid of fossil based methane and so we think we're quite bullish on those opportunities the way, we think about it though.
Is we can take that green value and transform it into liquids.
That's a different paradigm and that's how we think about it so whenever we're looking at a site whether it's an ethanol plant site acquiring an ethanol plant working with ethanol partner were anaerobic digestion is going to be part of it it might not be manure digestion, but shoot if we just took the residual carbohydrate wasted permitted those with anaerobic digestion, we get two zero.
[noise] footprint for the biogas that's produced that's valuable.
Right on the system. That's all thank you so much you bet.
Thank you. Our next question comes from the line Oh Crap from no bold capital. Your line is now then.
April.
Thanks Gigi.
Hi, Pat how are you doing.
Great. Thanks.
Other than a very busy man I was I was you did a great job of laying out.
A lot of progress made.
I'd like to focus on Linda comments, just about being pre revenue you look at quarterly Casper and and maybe even on an annual basis.
When can you just highlight what will be you know.
Present in the fourth quarter financials as far as capital the beta Max is not going to be there and then highlight the corporate burn rate too if you wouldn't mind.
[noise], Yeah, I think our corporate burn rates around $6 million a quarter. So we're looking at $24 million for the corporate that excludes the cost of goods sold at Laverne.
Laverne.
In terms of capital investments in the next quarter it'll be similar the larger investments associated with getting going with sight mobilization site acquisition everything will will be into 2022.
401.
And would you be able to quantify that as far as what you might expect over the first half of 22.
Not at this point.
I wouldn't want to throw those numbers around loosely.
Yeah, but but they're going to be like long, we've talked in the past about long lead equipment items and there'll be some site work stuff like that but it's not the big drop of money. That's some time later once we have date certain did.
Delivery of a plant in the guarantees in place and the financing in place. So we got to unfold that still but it's looking good.
And by the way the reason that I had learned to make sure that he mentions where prerevenue companies because I keep getting questions from investors, where they go all you aren't making it you don't have any material revenues will no kidding, we keep telling people, we shut down ethanol and so ethanol wasn't our main business and we are about focusing our efforts on building.
Future capacity and technologies.
So that's why.
And then any any change to the either capacity or cost for net zero one at this point.
Not yet.
And I keep asking that question to Paul because I look at all the world with Covid and supply chains and the same thing Ahmet asked and I got no data that says anything different yet and we keep making progress. So this is a good thing. If there was something that was a disaster I'd heard about it already so yeah I was looking at it from the other side.
I said I said did you introduce the concept that maybe 45 to Miss 50 million gallons per year might be a little too small for.
Potentially gaming Oh.
They should season I was just looking at whether you.
Actually upsize, the net zero, one yet or sort of where that stands.
Let me comment on that so what post referring to is that we've always been talking about necessarily wanted to 45 million gallons of hydrocarbons $340 million.
Pounds of high protein animal feed products and 30 million pounds of oil.
And that's good you know what.
We could I think it's engineered.
Right at net zero could handle two of those plants.
And the other sites that were choosing all could handle two of those plans.
And so you do a lot of.
There's the capital costs, yes, but when your carbon copying you save a heck of a lot of money and when you're building things on skits or building them skip production facilities, which is possible to do and you're sticking to kind of carbon copies that can be very interesting. None of this is lost on us and of course, when you maximize capacity at a site you do spread out your fixed costs because it's.
The same team who can run both that 90 million gallons versus 45, none of that is lost on US and then you start thinking Hmm, that's interesting and what if we have an ethanol plant plus a nice to butanol plant.
Onsite and once you have dehydrated.
Ethanol to ethylene and made butene is out of it guess what is the same process to take a butene firm isobutanol at a beauty mixture from.
Ethylene and so it too at the same plant and so none of this is lost on US we just haven't gone into detail yet about.
How this will unfold in the early days here, you're right Paul that with what we got we sold out 54 million gallons under contract. So far we will get much more sold out I think here shortly and be able to talk about it you can see that the the interest from Chevron. There's a bunch of people who are interested the chunks and bites are getting bigger.
And so because we're still requiring someone to backstop them on a financial basis that makes it not for the faint of heart on the customer side.
But it is interesting and I think we are going to wind up bigger I, just don't know when we're going to be able to pull that trigger and we do need diversity of site as well. So I. Just we just got to go through the work and figure out which choices make the most sense given the full set of circumstances a customer's partner.
<unk> cites economics the whole bit.
Great. So bad if I heard it correctly, then you're you're still looking at December size, but maybe call. It co location. So that you get somebody whether it's input synergies or the.
The.
When the biogas in the wastewater right.
People to tap into sort of the if you will the plumbing.
A little more efficiently so that reduces your incremental costs.
That is a fair assumption and the reason I say it that way as if I want a whole timelines and get big faster than I should stick with the current size. We've already spent a year engineering, if I change it.
What happens I got another freaking long period of time to engineer stuff again. So the idea is do what you said as leverage it now we can also take your approach hydrocarbon plants mind, you are a little bit different they're easier to scale because we have a bunch of work that's been done by accident already have we can leverage and so that'll be that's a little bit different.
And of course, then ethanol comes into the mix and so when we look at ethanol. There's a lot of ethanol plants. We want that we can see make a lot of sense. We have our phone has been ringing and we do expect to have additional partners don't have a timeline yet the key is about D carbonization and so.
How can we leverage all these things and make them all works in antiquity get them deployed quickly cause I think there is a benefit and getting lots of decarbonized hydrocarbons out into the marketplace sooner rather than later and that's the game of foot and what we're working on Lynn mentioned that will be putting out guidance eventually here.
And and I don't know when it is but it's not very far away meaning.
It's within I don't know he'd even to say relatively soon we put out guidance for the billion gallon plan, who what where how and all the rest.
Okay, Great and then just just fine if I may.
So you you alluded to the fact that you the next slug of contracts could.
Sell out net zero two.
It might be forthcoming.
If that happens by the end of the year, Pat does that mean that you'll have.
That's zero, one and two under construction at the same time and sort of very <unk> very very parallel tracks or will they be sequenced a little bit.
Ah, they're gonna, they're gonna be a sequence just a bit because I think we've got sites well already have done site development work and continue to develop even more sites. We like some of these places and so that parts already ongoing where the engineering work of course, if we're doing a net zero copy. It is literally taken that plant drop it down somewhere else and so.
We can go pretty darn fast I think that practical timeline and I'm Lynn.
Been talking to what seven months delay for net zero two it would be the earliest.
Yes, six months six months.
And just just as a matter of we got get the permits and plays get the site work done get all the little details done.
And but yeah, it would be something like that remember, we sold out 54 million gallons and so if we get a big bite here, we're going to be well into net zero three at that point and then we might have even bigger bites and if we are bigger bites and it's call, we'd better hurry up and get on with these ADM plants you know.
Focused on Decatur first.
And then.
Lynn talked about.
Funding for the first time at in N C. Djibo ink level you refresh the ATM when you made the chevron announcement, but you need shareholder approval to expand they share authorization can you give me an idea of when you expect to do this year will.
Or both and then too.
The timing potential funding actually raising additional money beyond with cash you have now.
Well I think.
We actually have we're sitting here with $520 million of cash equivalent cash cash equivalents were pretty good shape. So it isn't like we have is burning Oh, my God I Gotta do something so we don't we that isn't the situation and we did refresh the ATM because it was time to do it and it made sense to do it and all the rest and we haven't used it yet.
So.
That all that's all sitting there.
We have a lot of interest the world has changed for us. So it's hard for us to describe there's no way for me to explain it to everybody does not possible, but the world changed and it's about who's going to play with US how we're gonna play how are we going to grow on everyone wants to go big sooner how are we going to put this together and make it happen. This is the question in front of us I get that we could just go.
Do our net zero one plant do another one net 0203 and have a nice business and it would be very profitable business. I mean shoot. These net zero plants are looking at a cash flow streams of $150 million a year or something so.
They're good projects Ooh I want to grow faster and I think now with this combination of Isobutanol and ethanol to hydrocarbon technologies. The two of them together, we can grow a heck of a lot faster and that's what we should be focused on and it makes it for a more efficient deployment of capital. So we expect to bring in other partners, we expect to bring in people investing at the project level. That's.
What the Chevron deal was about.
It's a we expect to see people interested at the Djibo level, we expect that.
We will have to raise money at it.
Raise money.
In the future but.
We'll see we're going to do it judiciously, we've talked in the past about this.
It's like I'm, not real big fan of doing dilutive Fundraisings, we don't we're beyond that stage I think so it's about accretive stuff, it's about saying here's my peers. These projects were going to raise money.
And here's the casual streams that respects. The result is that kind of a game that has to get played.
Great. Thank you Lynn. Thank you passed very helpful.
Thank you at this time I'm showing no further questions I would like to turn the call back over to Pat Groover for closing remark.
Well, thanks, everybody for joining US you know, it's an exciting time for US as billion gallon plan is the right kind of idea I'll bet. We can I wanted to see us do even more than that.
The fact that we're able to work with accidents get that deal done with them get the deal done make progress in the net zero concept, where we're decarbonising the production systems and being able to prove it that is all of it a big deal and it applies across the board. It's what is attracting people to us and that along with the way to count carbon and track corn and all the rest or any other.
[noise] feedstock with Verity tracking so we're on a run a good track I like where we are we're making great progress and thank you all for your support.
And thanks for joining us today.
This concludes today's conference call. Thank you for participating you may now disconnect [music].
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