Q3 2023 Calumet Specialty Products Partners LP Earnings Call
Good day and welcome to the Calumet specialty products third quarter 2023 results conference call.
All participants will be in a listen only mode.
Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
You ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now like to turn the conference over to Brad Macquarie head of Investor Relations.
These go ahead.
Thank you Betsy and good morning. Thank you all for joining us today for our third quarter 2023 earnings call with me on today's call are Todd Borkman, CEO, Vince Denardo, CFO, Bruce Fleming, EVP, Montana, renewables and corporate development, Scott Obermeier EVP specialties I'd also like to introduce David lunar two.
Recently joined the company as our incoming CFO, which will be effective January 1st upon <unk> retirement Calumet.
You may now download the slides that accompany the remarks made on today's conference call, which can be accessed in the Investor Relations section of our website at Www Dot Calumet Dot com.
A webcast webcast replay of this call will be available on our site within a few hours.
Turning to the presentation on slide two you can find our cautionary statements I'd like to remind everyone that during this call. We may provide various forward looking statements. Please refer to the partnerships press release that was issued this morning as well as our latest filings with the SEC for a list of factors that may affect our actual results and cause them to differ from our expectations I'll now pass the call.
All the Todd Todd.
Thanks, Brad and welcome to Calumet is third quarter 2023 earnings call.
I'm sure. Many of you saw that Calumet issued two press releases this morning.
One was our traditional earnings release and the other was an announcement that after a thorough and productive negotiation our general partner and conflicts Committee reached agreement that Calumet will be transitioning to a C Corp.
I'm going to start with the quarterly report and will transition to the conversion and shortly thereafter, we do that let's turn to slide three.
During the quarter Calumet generated 75, and a half a million dollars of adjusted EBITDA and what was in many ways a tale of two halves.
The period started strong with the July to Directionally represented what we expect out of Montana renewables now that all units within the operation had been proven.
However, the second half of the quarter was driven by two specific transient operational issues at our largest plant and Shreveport in great Falls.
Our Shreveport plant is fully repaired and are grateful as DRAM replacement is on track to be complete in a week and next week.
Let me begin with more detail on our progress at Montana renewables.
First in July we demonstrated a financially representative result, consistent with guidance.
That was an important milestone as it marked the first full month that a majority of Montana renewables feed was untreated.
Specifically, 70% of our July throughput was local discounted untreated feedstock and <unk>.
<unk> L generated $14 $2 million of adjusted EBITDA in the month.
As mentioned these results fell within our previous guidance of $1 25 to $1 45 per gallon on Ontario feed and demonstrated the located in feedstock advantage that underpins, Montana renewables lasting competitive positioning.
Second and unfortunately as our August press release highlighted we also found a crack in a steam Jim It is a component of our renewable hydrogen plant.
Our team developed a plan to repair the German quickly on site.
However, after removing 469 tubes and getting a closer look we've made a decision to replace the steam drum.
This replacement is now installed and will be mechanically complete in the next few days.
We've included in the Appendix a few pictures of the steam gem repair that might help at the event perspective.
Third we demonstrated the site's hydrogen redundancy as we ran at reduced rates, while the steam system was under repair.
Given we are at reduced rates. We also took the opportunity to pull forward. The catalyst change that was otherwise scheduled for April of next year.
We're taking that catalyst change now.
It's worth noting that our next generation catalysts has performed well and yearly change is simply an economic optimization.
I'd, rather take a few extra days to complete the turnaround when we're already cut back then taking up full multi week shutdown. This spring.
Sets us up to enter a strategically important first half of 2024 with a clean slate no planned turnarounds.
Turning to Shreveport, We also announced a few weeks ago that we had an operational issue they cost us roughly 300000 barrels of specialty production during the quarter.
The volume was limited primarily because of a plug in here too, but our CDW unit the.
Plugging has been repaired and our Shreveport plant has been operating well for about a month now.
Because of the operational circumstances, the third quarter, certainly resulted in lower capture of market opportunity with.
With Shreveport fully up Montana, completing its steam drum next week and its catalyst change by the end of this month I have full faith that we'll learn from this very claim that trajectory that we've come to expect.
The quarter was a setback our strategy is robust and remains unchanged.
I'll take a few minutes to remind listeners of the strategic path. We're on as we're deep into the plan.
Our strategic transformation began three years ago and the depths of Cowen.
At that time, we determined at three things will be required to put our company on to a different financial trajectory transformed the business and ultimately unlock value for our shareholders.
First we needed to transform our core specialty business.
We needed to fund construct and operate Montana renewables.
And third we had considered the structure of Calumet when the other two are behind us.
And specialties, we made exceptional progress is highlighted by last year's record result continued demonstration of commercial excellence and despite a couple of quarters of operational setbacks in Shreveport marked improvement in the operations of this business.
At Montana renewables in three years, we've turned an idea on a piece of paper into a leading business in renewable diesel and sustainable aviation fuel.
<unk> been funded constructed fully demonstrated its operational and commercial leadership position and has shown a glimpse of its economic potential.
Over time, our thesis that Montana renewables is at or near the top of the renewable fuels competitive stack is based on five key pillars, which we believe are largely proven.
First is the geographic advantage and flexibility the business Hasnt product marketing.
From the beginning our offering was oversubscribed and through the first few months of operations, we've demonstrated the ability to partner with leading companies to flexibly find the best markets.
Most recently, we've seen this with over 60% of our products finding its way to Canada, which is fitting with our location less than two hours south of the Canadian border by truck.
As we see reports of backups in the Panama Canal, extending supply chains and all industries. We're reminded how fortunate we are in Montana renewables to be situated with direct rail access to critical markets.
I think we're seeing while the steady margin theory applies to the industry as a whole.
Volatility can be driven by length of supply chain.
And a declining feedstock price environment margins in our industry will be higher for those with short supply chain.
Over time, the industry volatility should balance out and we simply would expect those with shorter supply chains to be more steady.
Second is our feedstock advantage, which is underpinned by our geography and pretreatment capability.
Montana renewables at the nearest demand point for feedstock suppliers, who collectively represent more than 10 times, our capacity and our ability to competitively procure tallow distillers corn oil canola and even camelina is well known.
Our third competitive pillars, our SaaS advantage.
Sustainable aviation fuel has arguably the fastest growing area in energy in Montana renewables as a first mover here is the largest SAP producer in North America.
The great majority of the headlines we see of airlines buying SaaS are originated in Great Falls Montana.
As most of you know by now we believe that SaaS represents our next transformational opportunity as we look ahead to our Mac staff expansion.
During the first three pillars I character, Montana, I'd characterize Montana renewables is fully proven in the last few arent far behind.
The fourth pillar is operational capability.
We started renewable operations in great falls at about this time last year.
The sequential commissioning of four major process operations over a six month period was success, starting with our renewable diesel unit last winter and a catalyst that has proven to be robust.
Then the renewable hydrogen plant in the first quarter and last our SaaS unit and I appreciate her in the second quarter.
We learned a lot over the first few months of operations, including some expected early teething pains, and we have proven to each of our units and the technology works as expected.
The last three point as routine EBITDA generation, which is ultimately an outcome of the previous four items.
<unk> glimpse of less in Montana renewable generated over $14 million of adjusted EBITDA in July on only 70% untreated feed with a crack at our steam Jamba has set us back a few months.
We fully expect to resume demonstrating this final proof point in December and into 2024.
Turning to potential monetization, we expected some duration of audited financials that steady state operating levels as an enabler to receive a proper valuation for this business.
We've said before that our goal is not to over optimize and play for the last dollar, but the difference between marketing a 100% proven business and a 90% proven business is enough to warrant pushing the expected timeline for a potential monetization back a quarter and midfield mid year feels like a reasonable time timeline for potential next.
Step.
In parallel we're taking this last step to complete the ultimate deleveraging of Calumet, we continue to be optimistic about the DLA process.
We're in the final stage of the process and while we can't say with certainty that we will be successful or on what timeline. Our optimism continues to increase as time progresses that Montana renewables with its unique renewable hydrogen system and first mover advantage in SaaS is right down the fairway for the type of project. The department of energy is looking for.
And last we continue to progress engineering around our Mac staff project.
We have narrowed the field to a short finalists list of technology providers and general contractors, and we expect to be in a position to fully launch. This project as soon as we hear from the DLA that were cleared for financing.
All signs continue to point towards this project being one that can more than double the steady state EBITDA potential of Montana renewables.
We've discussed our specialty transformation and standing up Montana renewables.
I mentioned earlier that the third leg to deliver the shareholder value that we ultimately expect let's evaluate the structure of Calumet.
This topic has received a lot of attention over the past few years and we believed it was critical to address the fundamental business first.
We all we are reminded of the unintended consequences of being a very very thinly traded MLP recently, when a block sale of only one 5% of our units had an outsized impact on our shareholders.
We don't believe that was a reflection on the fundamentals of the business. It was rather the reality that without a broad institutional investor base, most of whom can't invest in Mlps, we can have wild swings in our equity price.
While this event served as a reminder, our general partner and conflicts Committee, we are well into negotiations on the ultimate conversion of Calumet MLP into a C Corp. When it occurred.
<unk> general partner comprised of our founders and their families has been an ardent supporter of Calumet since the beginning.
If we back up a few years when China was fighting for survival the general partner didn't waver.
With this transaction the general partner will absorb a meaningful tax bill and as Amy mentioned in this morning's press release, they are willing to lean in as they are believers in Calumet growth vision and see the significant value available to all unit holders.
There is no group more committed or financially aligned with the calumet value unlock than our general partner and on behalf of management and our unit holders I think the heritage group <unk> family and our conflicts committee for negotiating a transaction that is exceptional for all parties.
We believe this is a foundational launching pad for the future of our company.
Let's flip to slide four for more details on the transaction.
We're going to go over some detail here and we likely won't be getting into any more detail on Q&A. As this approval is hot off the press.
First the corporate conversion will close within the next nine months.
We will begin to prepare the necessary document for the filing process in.
From there we will file a form S. Four while the unit holder vote and prepare for the ultimate closing.
Upon closing the general partner will exchange its existing <unk> and 2% general partner interest, which is approximately one 6 million units for $5 5 million shares of common stock and 2 million warrants.
These warrants will have a strike price of $20 a share and will expire three years from the date of issuance.
This represents a dilution of four 5% to our current shareholders, which is illustrated in the appendix on slide 14.
This slide also highlights a few governance features including a staggered board, which will be made up of a majority of independent members.
It's worth highlighting that upon conversion there'll be a single class a voting shares with economic interest fully aligned.
As a management team, we look forward to getting out quickly to explain calumet growth strategy and immense value proposition to a new group of institutional investors that until now have not been able to invest in the company.
With that I'm going to turn the call over to Vince to review of the quarter.
Thanks, Todd before I comment on our business segment I would like to turn your attention to the Rins slides in the appendix. Our net income included a noncash gain of $173 million related to our Rins Mark to market adjustment, we do not view these mark to market gains and losses as meaningful with respect to our business.
And our strategy regarding brands remains unchanged.
Let's turn back to slide six our STS business generated $38 7 million of adjusted EBITDA during the quarter.
As Todd mentioned, we had a temporary operational issue at Shreveport that resulted in a loss of roughly 3000 barrels of specialty product production with.
We purchased some third party material, where we could to ensure our long term customers were kept hull, while the operations team at the facility, but the affected units back to normal normal production levels, which has occurred.
The other notable item that impacted the quarter was $19 per barrel increase in crude prices, our commercial team implemented price increases.
That largely took effect on October 1st.
We are seeing the benefit of the price increases this quarter as crude has stabilized.
We continue to be constructive on the margin environment going forward, although we'd expect normal seasonality late in the year on the field side, both volumes and margins improved quarter over quarter and while the winter is typically weaker seasonally especially for gasoline we continue to see strong.
Distillate margins not only do we produce more diesel and gasoline, but our specialty business tends to benefit from higher diesel prices.
Is it a tender.
Alternative for solvent and light blue.
With product inventory at or below their historical averages.
Fundamentals continue to point to healthy margins in the near to medium term.
Moving to slide eight our performance brands business had another solid quarter generating $13 2 million of adjusted EBITDA.
This was up $1 million from the previous quarter, we typically see some seasonality in this business as big box retailers manage year end inventory levels.
Our performance brands team is focused on continuing to manage our costs.
All of our high quality products to our customers and optimize our product mix to find the highest netback channels across our branded products and we're excited about the opportunities ahead to continue to improve this business as we have during the year.
Industrial demand that we have mentioned before continues to be strong, especially in mining and marine applications and we think these end users will continue to be tailwind.
For this business.
Moving to our Montana business you can see on slide 10 that we generated $38 2 million of adjusted EBITDA in the quarter.
Operations at our legacy asphalt plant were excellent and we have seen heavy Canadian crude differentials widened and at the end of the quarter and into the fourth quarter.
We operated the plant and nearly 12000 barrels per day of production, which has been fairly consistent after the large turnaround last year that separated our renewables business and legacy specialty asphalt business.
Montana Renewables had spent a lot of time on the previously disclosed steam system and I will briefly touch on that again, we have four hydrogen plants at the great foresight that supply highest hydrogen to both of the legacy plant in a renewable diesel plant.
Three of those were pre existing and we constructed the fourth as part of the <unk> construction and conversion. This redundancy has been important as we've been at least been able to run at reduced rates, while the fourth plant has been down.
With the steam drum replacement now mechanically complete we expect to begin bringing that hydrogen plant back into service.
One week from now.
We're also on track to complete the turnaround that was pulled forward and we're excited to pick up where we left off in July and fully demonstrating the uniqueness of Montana renewables as we expect to run at full 12000 barrels per day through December and going forward with most of that being untreated feed.
Let's start with the untreated feed that was on the books for the past couple of months and we expect to be back in the market in the new year, adding new regionally available supply.
With that I'll turn it back to dot for closing comment.
Thanks Vince.
Earlier this quarter, we announced that after a thorough search Vince and I found his successor as CFO and I will introduce David momentarily.
Before that I want to thank Vince for everything that he's done over the past few years at Calumet.
By the time of our next call David will be in the seat.
Vince joined Calumet in August of 2020.
Our stock was around $2 50.
We had a material weakness in our financial reporting and we're only shortly removed from a troubling SAP implementation.
Vince encourage tenacity and leadership were Paramount and fixing all of the above and he also led us through a re segmentation, which brought transparency to calumet by aligning the way we report the business with the way we run it.
Vincent I co developed a succession plan and Vince is going to be with us through April as David takes the reins.
David Looney, who joined in September has been working closely with Vince since day one.
He brings 20 years of experience advising companies on corporate financial matters, including M&A and capital markets transactions and relevant industries.
He was most recently with Goldman Sachs and he has hit the ground running as he leads the exploration of potential MRO monetization and broadly prepares to step in fully as CFO on January one.
Vince Congratulations and thank you and David welcome to Calumet with today's news and game changing opportunities ahead of us.
Credibly exciting time to be joining this company.
With that I'll hand, the call back to the operator for questions.
Operator.
Thank you.
We will now begin the question answer session.
You ask a question you May press.
Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset.
Keith.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press star. Thank you.
At this time, we will pause momentarily to assemble our roster.
Okay.
Yeah.
The first question today.
Roger read with Wells Fargo. Please go ahead.
Yes. Thank you good morning.
Congratulations on the announcement of the of the conversion to C Corp, I think that'll be.
It'd be something Thats been looked for hope for and we'll be well warmly received.
On the operational side.
The specialty margins you discussed them in the presentation and if you look at the chart are we essentially seeing specialty margins normalize here is that the right way to think about it plus or minus $60 or should we read into further strength based on the.
Crude price moves in the comment about October price increases.
Hey, Roger this is Scott.
I would answer it with two parts I think.
Overarching we've seen some tapering of normalization of specialty margins have come off all time records right over the past year. So there is some tapering down of specialty margins I think what what occurred though in Q3 was a little bit magnified on some margin compression as crude spiked up and a lot of our <unk>.
Operational issues created some additional headwind so as we think about about this quarter here in Q4, we've got a lot of our increases through depending on how crude shakes out, but we should see some improvement in fourth quarter to more normalized margins.
<unk> Q3 results.
Okay. Thanks on that.
And then on the <unk>.
Kind of what happened in the third quarter or the the drum issue and all I was wondering if we could get a little more clarity on the period at which you did achieve the dollar and a quarter or $2 45 margin sort of like what did you see in there how well did the unit run.
Is there upside from there if you are running really well.
On the right markets as you mentioned, whether it's Canada or somewhere else just trying to help understand what the real performance of the business when it isn't dealing with startup issues.
Hey, Roger it's Bruce.
I think the.
July performance was representative in terms of most of the things we look for and we ran well we.
We didn't run all the way Paul in July so actually as we get sped up again, youre going to see that margin improve because were going to spread the fixed costs on a unit basis, you'll see the margin improved.
And then in terms of the implied optimization.
We've got our product supply.
<unk> said.
We've got a.
Distribution optimization that the customers benefit from in return, we've got a very fully priced product.
That's kind of a synergistic partnership with them.
Okay I appreciate it I'll turn it back thanks.
The next question comes from Neil Malkin.
Goldman Sachs. Please go ahead.
Yes, good morning, and congratulations David welcome.
Congrats on the good news about the conversion I think liquidity has been long been a focus area for for investors around the stock.
The first question is just building on that.
The lost opportunity profit in the quarter as he is you think about the downtime and if you were to build back some of these issues.
Sense of how much EBITDA.
Would've been higher.
But in the absence of those issues.
Yes, we said about little more than $50 million is what we think we lost and.
In the third quarter Neil.
This is Tom by the way thanks for the question.
Let's see what events 300000 barrels and specialty if you look at our margins on routine margins in specialty that's probably a little over $20 million of lost opportunity and.
And then the same thing for MRO right two months of cut back. So so if we look at July and say that we should have had.
July going forward at a minimum.
That's where we get the other 30, plus so in total $50 million of lost opportunity for the quarter, which.
Disappointing, but also reminds us of the potential that we have ahead of us.
Thank you.
Again, I know, it's tricky to talk about the transactions attach a pass on that one but.
Just curious on tax implications to the extent.
You are of Calumet older and you're on the MLP. It sounds like the way. It's designed youll there won't be a meaningful tax impact, but can you confirm that and then as we think about U S cash taxpayer I would imagine the NOL will carry with this transaction and therefore.
I wouldn't imagine you'd be paying cash taxes for a while but any any thoughts on the tax side.
Great Yeah.
And you can't understood.
No.
I'll comment on it a little bit I'll be careful like normal.
You're all over all over the topic and I think you hit on a couple of the big ones. So on.
On the call I mentioned, the GP will make a meaningful tax cash payment.
That depreciable basis step up actually get shared across all shareholders.
There is some tax arbitrage is things like passive loss carryforwards.
Like you mentioned will flow into investor base that conversion and be taxed the capital gains rates rather than ordinary income.
The the other tax impact that it's hard to quantify but it could be meaningful is the increase in price between now and conversion as new investors enter will also result in a step up in depreciable tax basis, it'll be helpful to all investors. So I'll, probably stop there, but I think I think youre right as a whole to say.
For most this should this should not be Ah.
Negative tax event in fact should be very very positive tax event for the great majority of our unit holders.
Okay. That's great. Thanks, guys.
You bet. Thank you.
The next question comes from Manav Gupta with UBS. Please go ahead.
Hum.
Good afternoon, good morning, guys.
Help us understand a little bit about.
Restock process here looks like Youre firmly on course to get the operations fixed at Montana should we assume that <unk> 'twenty for you run all out and that kind of gives us that one could be a 140 EBITDA per gallon margin should we be watching that as the quarter.
Everything comes together for you in terms of RB.
Hey, Manav Bruce.
We're going to.
Dan to be running full from lets just say December one so that you get a solid month. Another proof point and then we will stay full.
What we've got to do with Audi the steam system repair work was an unplanned slowdown so we've got.
A certain quantity of claim feeds still backed up in inventory that we're going to have to pull through to the Buck 25 to <unk> 45 guidance as for Dirty fade.
And we've got a blended situation for a little while.
Perfect. Please follow up yes, yes, yes. Please go on.
Well I was going to say so if you look at July we had about 70% dirty 30% claim may actual performance. If I recall correctly was $1 23 on a blended basis so right at the.
You know kind of low end of the range. What you should look for is the spread between.
Perhaps our BD veg oil and crude.
Crude veg oil in the market as a proxy for what happens when we blend.
Perfect. A quick follow up is you already have a SaaS transition strategy in place and the expansion I understand youre waiting for the full confirmation of the daily loan, but help us walk through this SaaS transition strategy and when it's all over how much Seth could you be looking to producing your.
Thank you.
We're advertising and we have been for a couple of years.
230 million gallons a year of staff at the moment based upon the engineering progress that's looking conservative there's a high case at 300 million gallons.
That we think is probably reasonably achievable.
This is this is something that we'll be reporting back to you on as we go forward.
Thanks, guys.
Thanks, Paul.
Next question.
<unk> <unk> with H C. Wainwright. Please go ahead.
Good morning, Thank you.
All other questions have been asked I'll just on the timelines for the monetization.
With respect.
Yes.
Okay.
C Corp.
How does that impact you're saying <unk>.
24.
The monetization within nine months to complete the sequel transitioned so.
These have a bearing on each other in terms of how we can move forward on the monetization.
Hey, Matt its Tom.
It's a good question.
They could I think a lot of that's driven by what type of market. We're seeing at that point in time right. The nine months on conversions and outside date it could be faster than that if you think about what needs to get done.
I guess, starting now or very shortly we start doing the documentation, we're getting ready we're signing the.
The official document and then transit transitions us into filing the proxy the S four and receiving a shareholder vote. So it could be faster than nine months nine months is the outside date.
I think the committee on the GP agreed to have a firm date. So that there was certainty that a conversion would happened by a certain point in time, but it certainly can be pulled up. So so I think we'll get a better view of that process. Once we are in that timing. Obviously Q1 is going to tell us of audit at Montana, renewables too and I'm pretty sure.
Confident about that excited about that quarter.
And then we're going to assess how the market looks and I think it will be a combination of those three things that really drives the ultimate timing, but at this point, we don't see any time any reason to change anything we think these are all additive.
We think that adding more investors that potentially would have had to hold out for an MRO spend.
Spinoff.
Can now invest in Calumet and start to get inside the company and learn more about us I know theres a lot of people out there who are very interested and excited in.
MRO itself Theres been a lot of interest in that as a standalone public company. So I think as we look forward that continues to be the planning base and hopefully we'll get some of those investors to come in in and take a look at it sooner than they otherwise would have.
Understood. Thank you for that and just.
Listen to them.
Are there any unknowns.
Transition process that could be maybe Denise.
The process or you know cause.
Cause I mean, some of the challenges I guess.
I don't.
So you know I say that.
How does it see just because we haven't done it before but we've got a lot of advisors in.
Legal counsel that has and I think there's a pretty clear path for these types of things so as I look at the plan.
It appears pretty straightforward, there's a lot to do certainly.
But I don't see.
A specific event or a turning point or anything like that that would that would leave us questioning the ultimate outcome.
I appreciate it that's all I have guys I'll take my other questions offline. Thank you.
Alright, thank you.
As a reminder, if you have a question. Please press Star then one day joined into the question queue.
The next question comes from Jason.
Gentlemen.
Colin Please go ahead.
Yeah, Hey, good morning, Thanks for taking my questions.
I wanted to first ask on the Mac SaaS expansion project.
I think previously you had discussed that the gross capex was not tied to the Doe loan. It sounds now like they are kind of tied so if that's changed.
Can you discussed can you discuss why that's changed and then additionally, as you've been going out to customers to contract.
The SaaS available in the expansion case.
Are you confident or do you have enough confidence to provide.
Some sort of earnings outlook on that project. Thanks.
Let me start out Jason It's Todd and then I'm sure Bruce So first of all I plan to add on.
D L E.
Question, what we've said consistently is we don't want to take on additional debt.
<unk> SaaS and that continues to be the case.
When I made a comment on the earnings call around.
Yeah.
We will be ready to go when DLA approves financing.
What we're doing there is we're assuming that that's going to be.
The next opportunity for financing there is certainly other opportunities for financing I think I think you're probably referencing in the past, where we've said hey, it's part of our monetization proceeds could be used for for Max off expansion.
Types of things. So all we're doing here is simply suggesting that.
Oh.
You know, we would predict that <unk> is.
Sooner on the timeline, although obviously, we can't guarantee that don't know that but sit.
Sit on a timeline that ultimate monetization.
I think the bigger point is we don't want to take on additional debt to do Max SaaS. We made a commitment one way we went and did the 20 eights and.
And we're going to hold to that.
Got it.
Yeah.
Yes.
The second part of your question revolved around product placement.
I'll give you three thoughts first.
We read this sort of steady.
Stream of announcements of people signing up for billions and billions of gallons of SaaS, which may or may not ever be available in the market.
That's a bad job.
The situation for US is we are the largest of the only two producers on this side of the world.
And.
We could sell all of the SaaS to 12 different people tomorrow at the drop of ahead.
So you are in the very early stages of what's going to be practically a vertical evolution for this new industry.
So the third thought is we are the low cost.
<unk>.
No matter, what happens were going to stand at the top of the competitive rankings on this.
The lucky accident of having the hardware to recover the SaaS.
At a relatively low capital cost everybody else is going to have to build that so we're there already we're not first world LNG was one more second.
Or advantage that we're planning to stay advantaged.
Got it.
Maybe two quick clarifications on those comments first timing around the Doe loan.
I know it continues to shift out and it's always tough to guess when the governments get a.
Move forward on something and then on the SaaS economics, where youre seeing those price premiums come in relative to renewable diesel and I'll leave it there. Thanks.
The industry watchers seem to be center in on about $1 to $1 50 gallon framed.
Premium to R&D and Thats <unk>.
Substantially at a European.
Circumstance right now, but I think we could broadly suggests that it's going to be similar in North America.
Anybody with an R&D platform should be able to fish out about 15 or 20% of it as SaaS.
So those in our.
<unk>.
Alright, well together they are going to have the RF together through the nest of <unk>.
Regulatory support mechanisms, including the.
The new SaaS blenders tax credit.
And we think thats an appropriate.
Spread which is going to reflect an industry average player and to emphasize that we are doing better than that.
The.
And the way the trade flows setup is also probably going to contribute because.
There are feedstock deal differences.
There are catalysts deal differences there is operational severity and so if you think about refinery complexity in LP multi variable decision, making youll be thinking the right way about <unk>.
<unk> made from hydro process, they like us.
I'll contrast that with something that's very very linear if your model is you buy ethanol you convert almost all of it into SaaS.
Have all of that optimization flexibility so our dependence on any premium in the market is different.
To a new entrant that less flexibility.
Got it and then on the Doe loan timing.
That's up to the daily.
We're very pleased with the relationship that we've established over the last year and a half. It is actively engaged we are in underwriting, but I am not going to forecast their eventual decision or their timing.
Alright, great. Thanks for the color.
Thanks, Jason.
This concludes our question and answer session I would like to turn the conference back over to Brad Nick Murray for any closing remarks.
Thanks.
On behalf of the management team here in the room and really on behalf of all of Calumet, we'd like to thank you for your time and your interest this morning.
Great end of the week and this concludes the call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
[noise].
Okay.
[music].