Q4 2023 Gevo Inc Earnings Call
Yes.
Operator: Good day, and thank you for standing by. Welcome to the Gevo Incorporated Q4 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.
Good day, and thank you for standing by.
Welcome to the Chipotle incorporated Q4 2024 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone.
You will then hear an automated message advising your hand just raised.
Operator: To withdraw your question, please press star 1 one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Dr. Eric Frey, Vice President of Finance and Strategy. You may go ahead. Good afternoon, everyone.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to turn the conference over to your speaker for today, Dr. Eric Fry, Vice President of Finance and strategy.
You May go ahead.
Eric Frey: This is Eric Frey, Vice President of Finance and Strategy. I'm also responsible for investor relations here at Gevo. Thanks for joining us to discuss Gevo's fourth quarter and year-end results for the period ended December 31st, 2023. I'd like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo's Chief Executive Officer, and Lynn Small, Gevo's Chief Financial
Good afternoon, everyone. This is Eric.
Financing strategy I'm also responsible for Investor relations here at <unk>.
Thanks for joining us to discuss <unk> fourth quarter and year end results for the period ended December 31.
I'd like to start by introducing today's participants.
With us today are Dr. Patrick.
Chief Executive Officer.
Small geos Chief Financial Officer.
Eric Frey: 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.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Security Litigation Reform Act. These forward-looking statements are subject to risks and absurdities that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our sustainable aviation fuel projects, our recently executed agreements, our renewable natural gas project, and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements.
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 Dot com.
Be advised that our remarks today, including answers to your questions contain forward looking statements within the meaning of the private Securities Litigation Reform Act.
These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.
Those statements include projections about the timing of development engineering financing and construction of our sustainable aviation fuel products. Our recently executed agreements Ah renewable natural gas projects and other activities described.
Curious and exchange Commission.
Are incorporated by reference.
Claim any obligation to update these forward looking statements in.
Eric Frey: In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the investor relations section. Following the prepared remarks, we'll open the call for questions. I'd like to remind everyone that this conference call is open to the media and we are providing a simultaneous webcast to the public. A replay will be available via the company's investor relations page at www.gevo.com.
In addition, we may provide certain non-GAAP financial information on this call the relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www dot dot com in the Investor Relations section.
Following the prepared remarks, we'll open the call for questions I'd like to remind everyone that this conference call is open to the media and we are providing a simultaneous webcast to the public.
A replay will be available via the company's Investor Relations page at Www Dot Dot com I'd like to turn the call over now to CEO Dr. Catherine.
Eric Frey: I'd like to turn the call over now to the CEO of Gevo, Dr. Patrick Gruber. Thanks, Eric. Good afternoon, everyone.
Yeah.
Thanks, Eric and good afternoon, everyone and thanks for joining us on our call.
Patrick R. Gruber: And thanks for joining us on our call. We are filing our Form 10-K today, and we ask that you refer to it for more detailed information after this call. We ended the fourth quarter with about $376 million in cash, cash equivalents, and restricted cash on our balance.
We're filing our Form 10-K today and we ask that you refer to it for more detailed information after this call.
We ended the fourth quarter with about $376 million in cash cash equivalents and restricted cash on our balance sheet.
Patrick R. Gruber: The total that Gevo expects to have to spend to achieve FID for our Net Zero One project is $236 to $286 million, excluding certain internal cost allocations, of which only $125 to $175 million of cash is left to spend to get that project complete to FID, so it's a downhill slope to get there. I'd like to thank the Department of U.S. Energy Loan Program's office for the thorough and diligent work that their team is doing to help us secure a loan guarantee as part of this construction. Now,
<unk> expects to have to spend to achieve for our net zero. One project is $236 million to $286 million, excluding certain internal cost allocations.
Of which.
Only $125 million to $175 million.
Of cash is left to spend to get that project completed.
So it's a downhill slope to get there.
Like to thank the department of energy loan programs.
Thanks for the thorough and diligent work with their team has joined to help us secure a long guarantee as part of this construction financing.
Patrick R. Gruber: We are quite excited about Net Zero One, in fact, even more excited. In the third and fourth quarter of last year, we had McKinsey here working with us to challenge our assumptions, competitive position, competitive economics, and such. The results of their work with us reaffirmed that the NC1 plant design would be expected to deliver the lowest cost of carbon abatement compared to other SAF technologies, including HEPA, other ATJ routes, and especially direct air capture routes. The reason the NZ-1 design is expected to win economically is because of the mass reduction in the use of natural gas, the efficiency of the use of resources, creative integration technology, optimization of unit operations and overall efficiency, and select More effective carbon abatement means that less carbon value has to be recovered in the marketplace to make an economic return.
Now.
We are quite excited about net zero one package more excited in the third and fourth quarter of last year, we had mckinsey in here working with us to challenge our assumptions competitive position competitive economics as such the results of their work with us reaffirm that ANZ. One plant designed we expect it to deliver the lowest cost of carbon abatement compared to us.
SaaS technologies, including Capa, other atg routes, and especially direct air capture routes.
The reason the ANZ one design is expected to win economically is because of the math reduction in the use of natural gas the efficiency of use of resources creative integration technology optimization of unit operations, and overall efficiency and productivity and getting to high yields a SaaS or other valuable price that we want to make.
More effective carbon abatement means that less.
Carbon value has to be recovered in the marketplace.
To make economic returns.
Patrick R. Gruber: Think of it as more carbon reduction per gallon. That means more carbon abatement per gallon, more bang for the buck. All of this should result in a competitively priced product for customers and less burden on consumers and taxpayers. It's a good result.
Think of it as more carbon reduction per gallon that means more carbon abatement per gallon more bang for the Buck if you will.
All of this should result in a competitively priced product for customers less burden on consumers and taxpayers. It's a good result, it reaffirms that makes more clear why what we are doing matters. We are laser focused on delivering EPC contracts are set up customer contracts with terms that worked with for the loan guarantee and a project loan locked down.
Patrick R. Gruber: It reaffirms and makes it more clear why what we are doing matters. We are laser focused on delivering EPC contracts, a set of customer contracts with terms that work for the DOE loan guarantee, and a DOE loan project loan lockdown so that we can begin construction, which we estimate would take 24 months. We still have work to do in front of us, but we're making progress on the DOE and all the rest. In addition to the equity that we have built in the Net Zero One project, through that money that we've already spent developing it, we have also generated know-how and patents that we filed on a reusable asset, that is, the plant designs. This is critical because to enable the promise of SAF, you need an industrial process that works at a large scale that dramatically reduces the fossil energy footprint. Well, that's what we believe we have achieved. This doesn't require inventing new technologies; it requires engineering, systems integration, and know-how. The knowledge, technology, and intellectual property we have gained through the work on NZE1, I expect..., would benefit way beyond NZ-1. Why?
So that we can begin construction, which we estimate would take 24 months, we still work to do in front of US, we're making progress on the Doe.
And all the rest of it.
In addition to the equity that we have built in the net zero one project.
Through that money that we've already spent developing we have also generated knowhow and patents.
That we filed.
On a reusable asset that is the plant designs. This is critical because to enable the promise of SaaS you need in industrial process that works at large scale that dramatically reduces the fossil energy footprint. That's what we've achieved we believe.
This doesn't require betting new technologies requires engineering systems integration and Knowhow and knowledge technology intellectual property. We have gained through the work on ANZ one I expect.
With benefit wave yacht envy, one why because theres, a 190 operating ethanol plants in the U S more than that actually we expect that there'll be lots of opportunity to leverage our knowledge knowhow capability technology to produce higher value of low carbon ethanol and SaaS overtime. So the market dynamic dynamics are.
Patrick R. Gruber: Because there are 190 operating ethanol plants in the U.S. More than that, actually. We expect that there will be lots of opportunity to leverage our knowledge, know-how, capability, and technology to produce higher-value, low-carbon ethanol and SAF over time. So the market dynamics are strongly in our favor to reuse and repeat the knowledge-based assets we've built up in the development of our NZ-1 business model. That's something that'
Currently in our favor to reuse repeat the knowledge based assets, we've built up a development of our <unk> Z. One business model, that's something Thats an important aspect is that we are at knowledge business as well and we.
Patrick R. Gruber: We are a knowledge business as well. We've learned a heck of a lot about how to abate carbon. We have been pleased to see the progress on 40B and the future 45Z and the federal support for carbon abatement in the IRA bill. The Interagency Working Group and the U.S. Department of Treasury have indicated that an updated GRIP model will be used to quantify carbon reduction and that carbon sequestration would count, as well as certain agricultural practices. The theme is that you have to do the work, though, to actually have real measurements to get it audited and then report it. Otherwise, you don't get it. It's not a give it away. It's not gonna be a giveaway.
Yes.
We've learned a heck of a lot at how to abate carbon.
We have been pleased to see the progress on 40 B in the future 45 Z.
Federal support for carbon a baby in the highway Bill the Inter agency working group and U S Department of Treasury have indicated an updated greet model will be used to quantify carbon reduction and that this curve and that carbon sequestration would count as well as certain agricultural practices.
The fee base you have to do the work now to actually inhabit real measurements to get it audited and then reported.
So you don't get it its not a give it if that could be a giveaway you guys used to work for it that's good that place to our Verity business more on that later, we strongly believe that field level measurement and tracking of agricultural practices needs to be part of the Greek protocol, because we believe that it is at that level that the strongest data for carbon abatement can be brought forth, we believe that getting the <unk>.
Patrick R. Gruber: You gotta do some work for it. Well, that's good. That plays to our variety business. More on that later.
Patrick R. Gruber: We strongly believe that field-level measurement and tracking of agricultural practices needs to be part of the green protocol because we believe that it is at that level that the strongest data for carbon abatement can be brought forth. We believe that getting the policy guidelines right is important since this will be a precedent for the long run. Paul Bloom was with Secretary of Agriculture Bill Sack and EPA Administrator Reagan when they announced last week that it will take a few weeks longer for the next generation of that guidance to come out.
Policy guidelines right is important so this will be a precedent for the long run Paul Blum was with secretary of agricultural Bill sack and EPA administer Regan when they announced last week that it will take a few weeks longer for the next generation of that guidance to come out.
Patrick R. Gruber: But they are keen on making sure that it's going to work in the long run, and we think that's a good outcome. We look forward to seeing the results. We also continue to see strong support for carbon abatement states, with New Mexico becoming the fourth state to sign into law a clean fuel standard just this week.
They are keen on making sure that it's going to work in the long run it and we think Thats a good outcome. So we look forward to seeing the results.
We also continue to see strong support for carbon abatement states with new Mexico, becoming the first state to sign into law, a clean fuel standards just this week.
Patrick R. Gruber: This is a success for the second largest oil and gas producing state in the country, as well as other states interested in creating similar programs. We congratulate Mexico on this milestone and look forward to working with other states to develop similar programs. Now I'll switch gears and make a few comments about R&G and Verity.
This is this is a success for the second largest oil and gas producing state in the country as well as other states interested in trading similar programs, we congratulate Mexico on this milestone and look forward to working with other states to develop similar programs.
Now I'll switch gears to make a few comments about R&D and verity.
Patrick R. Gruber: Last year we expanded our dairy manure RNG capacity from about 350,000 to 400,000 million BTUs per year. I am pleased that we have generated positive standalone non-GAAP cash EBITDA from those assets for two consecutive quarters now. Last quarter, our production was at 91% of capacity. This year, we estimate that the non-GAAP cash EBITDA from our R&G business could add up to about $12 to $16 million on an annualized basis, assuming we get the LCFS pathway approved with a score of a negative 350. Those papers have been filed. We're just waiting for the results.
Last year, we expanded our Jeremy newer R&D capacity from about 350000 to 400000 million Btu per year I am pleased that we have generated positive standalone non-GAAP cash EBITDA from those assets for two consecutive quarters now last quarter. Our production was at 91% of capacity. This year, we estimate that the NIM.
GAAP cash EBITDA.
Business could add up to about $12 million to $16 million on an annualized basis, assuming we get the LCA best path we approved.
With the score of a negative $3 50 were those papers are filed we are just waiting for the result.
Patrick R. Gruber: There is a lot of embedded upside potential with this asset. We estimate that the number could be as high as 50 to $60 million per year from this. 400,000 million BTU plant if LCFS prices recovered to where they were a couple years ago and included the biogas Production Tax Credit in 2025 to 2027. Of course, there can be no guarantee that the LCFS prices in California will recover to that level, but even a fraction of that would be meaningful to us. I like this a lot.
There is a lot of embedded upside potential with this asset.
We estimate that the number could be.
As high as $50 million to $60 million per year from this 400000.
B to your plant if L L.
Ill CFS prices recover to where they were a couple of years ago and including the biogas.
<unk> tax credit and 25, 2025% to 227 of course, there can be no guarantee that DLC ASP.
<unk> prices in California, it will recover to that level, but even a fraction of that would be meaningful to us like this a lot there's a lot of upside potential.
Lynn Small: There's a lot of upside potential that's just embedded in it, and I'm glad we have the asset. Last year, in our third quarter, our variety tracking platform went live with farmers in South Dakota and Minnesota. We tracked ethanol plant customers totaling approximately 2% of the US ethanol industry by volume. And that's because, of course, we're the world's largest ethanol market. Our initial target market for Verity in the US is estimated to be about $1.5 to $3 billion for reducing and tracking the reduction of carbon intensity through the value chain from a bushel of corn to a seat in a vehicle or aircraft. Verity is a capital-light, fee-based software as a service business, so it's a nice complement to NZ1, Net Zero One, which is more capital intensive, providing customers and regulators with an audit trail so that they know what they are getting in terms of carbon abatement when they're paying, and they're paying for that carbon abatement. It's a necessary value-added component to everything we do at Ge Gevo's Q4 combined revenue and interest income was $9.4 million, with the interest income benefiting from higher interest rates.
I'm glad we have the asset.
Last year in our third quarter I've already tracking platform went live with farmers in South Dakota, Minnesota, we tracked ethanol plant customers totaling approximately 2% of the U S ethanol industry by volume.
And of course, we're the world's largest ethanol market.
Our initial target market for parity.
In the U S is estimated to be about 1.5 dollars 3 billion, reducing tracking the reduction of carbon intensity through the value chain for a bushel of corn to a seat in a vehicle or aircraft very as a capital light fee based software as a service business. So it's a nice complement to ANZ 101, which is more capital intensive.
Providing customers regulators with an audit trail so that they know.
What they're getting in terms of carbon abatement, when they are paying and they're paying for that carpet abated as necessary evaluating component to everything we do at <unk> as a carpet a payments company.
I'll pass it off to lend to talk through the operations of numbers.
Thanks.
G. Both Q4 combined revenue and interest income was $9 4 million with the interest income benefiting from higher interest rates.
Lynn Small: Our corporate spend, that is, G&A, was $25.5 million for the year 2023, excluding non-cash stock-based compensation of $17.1 million, which is a $2.5 million increase from 2022. Debt related to our RNG project was $68 million, consisting of $68.2 million of base value, less unamortized premium, and issuance cost of $0.2 million. As Pat mentioned, we ended the fourth quarter of 2023 with a strong liquidity position of $375.6 million in cash, restricted cash, and other liquid investors. The restricted cash portion is associated with our RNG bonds and certain collateral related to the development of Net Zero One and totals $77.2 million. During the fourth quarter of 2023, we invested and capitalized $13.5 million in cash, in capital projects comprised of $1.8 million in Net Zero One, $0.3 million in the expansion of our R&G project, $7.4 million into other Net Zero projects, and $4 million for our fractionation and hydrocarbon skids. We also advanced $1.1 million of reimbursable expenditures to our partner developer for the purchase of wind and hydrogen equipment to support On Net-01, the DOE and its suite of independent experts are working with us on due diligence and the loan guarantee structure.
Our corporate spend that is G&A was $25 5 million for the year in 2023, excluding noncash stock based compensation of $17 1 billion, which is $2 5 million increase from a 2022 number.
Sure.
Debt related to our R&D project with $68 million, consisting of $68 2 million of face value less unamortized premium and issuance costs of $2 million.
As Pat mentioned, we ended the fourth quarter of 2023 with a strong liquidity position of $375 6 million in cash restricted cash and other liquid investments.
The restricted cash portion is associated with RMG bonds and certain collateral related to the development of <unk> hundred one and totaled $77.2 million.
During the fourth quarter of 2023.
Vested and capitalized $13 5 million in cash and cash.
Capital projects comprised of $1 8 million into net zero or one.
$3 million into the expansion of our LNG project, seven 4 million into the other net zero projects and $4 million for fractionation and hydrocarbons.
We also have been $1 1 million of Reimbursable expenditures to our partner developer for the purchases that we ended hydrogen equipment.
<unk> net zero one.
On that 301.
And its suite of independent experts are working with us in due diligence and loan guarantees structuring.
Lynn Small: Once the debt component is pinned down with a formal term sheet, we'll formally ramp up the third-party equity capital raise and work towards a close of funding necessary to finance the project construction budget and all the project finance elements such as interest-bearing construction, various reserves, and transaction costs. Equity investors are standing by for a clear line of sight to the debt terms, which is underway and will be announced when the DOE term sheet is approved. During Q4 2023, our dairy RNGS, it's Northwest Iowa, sold 90,666. MMVTU of R&G. Revenue of $4.4 million for the quarter included R&D sales of $0.2 million and $4.2 million net proceeds from the sales of environmental benefits.
Once the debt component is pinned down with a formal term sheet will formally ramp up of third party equity capital raised and work towards the close the funding necessary to finance the project construction budget and all of the project finance elements such as interest during construction various reserves and transaction costs.
Equity investors are standing by for a clear line of sight to the debt terms, which is underway and will be announced when the viewing term sheet.
During Q4 2023 are very <unk>.
With violence 90666.
Btu of RMG revenue of $4 4 million for the quarter included R&D of <unk> 2 million and $4 2 million net proceeds from the sale of environmental benefit.
Lynn Small: Between R&G and Verity growth, we continue to close in on positive cash flow for the company. As Pat mentioned, we see a lot of embedded growth in R&G just by continuing to operate that app. We also look forward to announcing the first revenues at Verity this year, which is a capitalized, fee-based business. Now, I'll turn the call back to Pat.
Between R&D and <unk> growth, we continue to close in on positive cash flow for the company as Pat mentioned, we see a lot of embedded growth in R&D, just by continuing to operate that asset.
We also look forward to announcing the first revenues at birdie this year, which is a capital light fee based business.
Now I will turn the call back to Pat.
Patrick R. Gruber: Thanks, Glenn. Let me wrap up our prepared remarks by saying we believe Gevo is undervalued given its balance sheet and growth potential. We plan to address that first through execution and second by getting our message out. I hope everyone will take a look at the corporate investor presentation on our website, which lays out the enormous upside potential that we see and why now is such an exciting and pivotal time. Let's open it up to questions. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Thanks, Glenn let me wrap up our prepared remarks by saying, we believe jabil is undervalued given our balance sheet and growth potential we plan to address that first through execution and second by getting our message out.
I hope everyone would take a look at the corporate and Investor presentation on our website, which lays out the enormous upside potential that we see and why now is such an exciting and pivotal time.
Put it up for questions.
Okay.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Operator: Please stand by while we compile the Q&A roster. Our first question will come from the line of Amit Dayal with HC Wainwright. Hi, everyone. Good afternoon.
Please standby, while we compile the Q&A roster.
Our first question will come from the line of Amit Dayal with H C. Wainwright.
Amit Dayal: Thank you for taking my questions. Pat, just to clarify on the 125 to 175, you know, to be spent on NG1, is that for 2024, that spending coming into play? Or is that going to be over, you know, the next few years as you build everything up? No, that's to get to FID from where we stand today. Okay, so it's a budget that'll be measured out over time. If FID is in 2024, that's what it will be. It'll be, it could be, it's going to be, that's the money it takes to get to FID. It's not a time-based thing; it's what we have to spend to get that by the end of the year. And just to follow up on that, some of this you will get back, I guess, right, as you are spending up front. Okay. Do you know what the amount is potentially that you... Yeah, so it is. I think it adds up to be like 235. Eric, you can help me here. 235, 236 million or something like that.
Hi, everyone. Good afternoon, and thank you for taking my questions.
Just to clarify on the 125 to 175 to be spent on the ANZ one is that for <unk> four.
That spend coming into play or is that going to be over the next few years I can build everything out.
No thats to get.
From where we stand today.
Okay. So it's a budget that'll be measured out over time.
He is a 2024, that's what it will be it could be it is going to be.
The money it takes to get there.
That's not a timing thing.
What we have to spend to get there.
And just a follow up on the some of this you wouldn't get back I guess right.
Spending.
Okay.
Yes potentially.
Yeah. So it is.
I think it adds up to be like 235, Eric you can help me here.
$235 $236 million or something like that and all of that would be reimbursable. Upon F E.
Patrick R. Gruber: And all of that would be reimbursable upon FID, at which time we'll probably reinvest it into the project to take a big chunk of the equity of the project. Or, you know, it may be that we have better opportunities, which I can't see right now, but that could happen in the future. So it's reimbursable, and it's the full amount.
Time will probably reinvest it into the project to take a big chunk of the equity of the project or you know it.
It may be that we have a better opportunities.
I can't see right now, but that could happen out in the future.
So it's a reimbursable.
And its full amount.
Patrick R. Gruber: And then, in parallel to that, I think in the January update, you said you may be spending some funds on future MZ projects. Is that still on the table as well?
Understood and then in parallel to that I think in the January update you said you may be spending some funds on future MZ projects is that still on the table.
Patrick R. Gruber: We are, but and we're doing it's a low level of spending, but one of the things that we're seeing is that a lot of customers want to know how to get way beyond 65 million gallons. So it's about developing some other sites and making sure that we have good ones locked down. We aren't announcing where they are because that's not to our benefit because there's so much work of development work that needs to be done, but we have spent some so we're doing it in moderation, but yes, it's for locking down additional sites. Thank you.
We are but and we're doing it as a low level of spending.
One of the things that we're seeing is a lot of the customers want to know how to get to way beyond 65 million gallons of failure, it's about developing some other sites and making sure that we have good once lockdown, we arent announcing where they are can you just that's not to our benefit because there's so much work of development work that needs to.
<unk> done.
But we have spent some so we're doing it in moderation, but yes, it's for locking down additional sites.
Okay. Thank you and just last one from me.
Amit Dayal: This last one from me, you know, with respect to Verity, it looks like it's starting to get into the hands of customers, etc. And you are leveraging blockchain, you know, for this. Any scope of, you know, bringing AI-related offerings or, you know, capabilities for this? Is there a need for that type of feature in this or use for this in the Verity offering? There is.
With respect to verify it looks like it's starting to get into the hands of customers et cetera.
You are leveraging blockchain.
Yes.
Yes, any scope or.
Bringing.
Related offerings.
Capabilities for this and better need for that.
That type of a feature in this or used for this <unk> offering.
Patrick R. Gruber: So what's fascinating about Verity is that we're a little bit different than all the other companies out there, and we do it end to end. So think of it as, you know, carbon capture at a farm all the way through to the seat of an airplane or the seat of a car and how you map everything straight through that measuring the sustainability and carbon scores, hitting all the regulatory marks that are required for reporting and all of that. It's all integrated. And what's interesting about it, as the database builds, I think there'll be opportunities for AI, particularly with farmers so that they can see how to improve their fields. We've already seen improvements from farmers, and they're excited by it.
There is so what's fascinating about verity is that we're a little bit different than all the other companies out there and we're doing an end to end so think of it as <unk>.
Carbon capture at a farm all the way through to the seat of an airplane or a seat of a car and how you map everything straight through that measuring the sustainability and carbon scores hitting all the regulatory marks that are required for reporting and all of that it's all of it integrated and what's interesting about it as the database builds I think there'll be opportunities for AI, particularly with farmers. So.
They can see how to improve their fields, we've already seen.
Improvements from farmers and they're excited by it.
Patrick R. Gruber: And there's I think we even posted a video on our website talking about it, but it's pretty darn interesting where they can see differences from field to field using the tool that we developed. And that's pretty interesting because that allows them to plan differently for the next year and reduce their CI score. We fully believe that we will, that agricultural benefits will be part of the Argonne-Greek model as it gets enshrined into the 45Z and public policy.
And there is I think we've been posted a video on our website talking about it but it's pretty darn interesting, where they can see differences of field to field using the tool that we developed.
And that's pretty interesting because that allows them to plan differently for the next year and reduce their Ci score. We fully believe that we will that agricultural benefits will be part of the argon Greek model as it gets and try and into the 45 Z and public policy Theres a question of how it will be done, but it's all related to climate Smart AG and <unk>.
Patrick R. Gruber: There's a question of how it'll be done, but it's all related to climate-smart agriculture, and Secretary Vilsack and the rest of the team in the administration seem to be pretty committed to making sure that those improvements are measured and reported and get credit where it's due. So that's an exciting thing. Of course, that is something that's a pure upside. Our NZ-1 needs good corn.
Secretary Vilsack and the rest of the.
Theme in the administration.
It seems to be pretty committed to make sure that those improvements are measured and reported and get credit where it's due so that's it that's an exciting thing of course that is something thats a pure upside.
Z one needs.
Patrick R. Gruber: But it's also, remember, we're getting our low CI scores from wind power, from how we've reduced natural gas, and, of course, the CCS pipeline. We anticipate. Okay. Thank you. That's all I have. I'll step back in queue.
Good corn.
But it's also remember we're getting our low Ci scores from wind power from how we've done reduction of natural gas.
And of course, the Ccs pipeline, we anticipate.
Okay.
Understood. Thank you that's all I have I'll step back in queue.
Shawn Severson: Our next question will come from the line of Shawn Severson with Water Tower Research. Thank you. Good afternoon.
Our next question will come from the line of Shawn Severson with water Tower research.
Shawn Severson: Hey, Pat, I was wondering, could you address any real or perceived political risk, I guess, to the economics of NZ1? I mean, is there anything that, you know, we need to be watching for as far as plant economics and any changes in the political environment? Well, yeah, that's right. Carbon value is political. Alright, so you know, this is it to get real grounded.
Alright, Thank you and good afternoon.
Hey, Pat I was wondering could you address any real or perceived political risk I guess to the economics of NZ. One I mean is there anything that.
We need to be watching for as far as plant economics, and any changes in the political environment.
Well, yes.
Okay.
Carbon value is political.
Alright, So just is it to get real grounded our cash cost reduction is right now it pencils out to be something around $3.80 a gallon, that's very competitive cash cost basis.
Patrick R. Gruber: Our cash cost reduction right now pencils out to be something around $3.80 a gallon. That's a very competitive cash cost basis. But we need another $3.80 to pay for all the capital or something. It's something like that. Okay.
We need another $3 and.
80, <unk> to pay for all the capital or something it's something like that okay.
Patrick R. Gruber: What we need, then, is carbon value from the market that covers that cost. Well, it looks like there's more than enough carbon value to cover that cost. That's what creates the opportunity. And that comes from a combination of RINs, state level programs like in Illinois or in Oregon, or now New Mexico, or in California, or we expect one in Minnesota, etc.
What we're what we need then is.
Carbon value from the marketplace.
That covers that cost while it looks like theres more than enough carbon value to cover that cost that's what creates the opportunity.
And that comes from a combination of.
The rins the state level programs like in Illinois, or four in Oregon, or now new Mexico.
Corey in California, or we expect one of Minnesota et cetera that adds value and then theres the 45 Z potential as well at the federal level and then is this something else called scope three we know Thats Sculpsure, you screen sold and $1 per metric ton and substantial in some cases, but you've got to be able to prove in fact that you've really got a carbon reduction for your money.
Patrick R. Gruber: That adds value. And then there's the 45Z potential as well at the federal level. And then there's something else called scope threes.
Patrick R. Gruber: We know that scope threes are being sold in dollars per metric ton and are substantial in some cases, but you got to be able to prove, in fact, that you really get a carbon reduction for your money. So when you add all of that up, it looks like there's a lot of headroom here for something to give way, the law over time, carbon. In terms of the sentiments that we're seeing around 45Z, it's, we're hearing the sentiment of extended. It makes sense, However, I think having the ability to prove that taxpayers got some of their money for their money is crucial. That's why we're so keen on Verity.
So when you add all that up it looks like Theres a lot of headroom here for something to give way.
Over time.
And carbon value.
In terms of the sentiments that we are seeing around 45 Z. It's we're hearing the sentiment of extend it it makes sense. However.
Thank.
Having the ability to move that.
Peter's got something money for their money is crucial.
Why we are so keen on verity that seems to play on both sides of the aisle so far.
Patrick R. Gruber: That seems to be playing on both sides of the aisle so far, so I think we're in a good spot overall. So it looks like there's more than enough carbon value in the marketplace to accommodate variations of things that might change to some degree. And then it looks like it's headed in the right direction.
So I think we're in a good spot overall, so it looks like it's more than enough carbon valued in the marketplace through how many variations of things that might change some degree.
And then it looks like it's headed in the right direction.
Shawn Severson: That's my take. Thanks for that. That was helpful. And my next question is, I understand you were at a SAP conference last week, I believe in London. What was the takeaway from the user environment?
That's my take.
Okay. Thanks for that that's helpful and my and my next question is I understand Youre at a SaaS conference last week I believe in London.
What's the takeaway from the user environment I don't know if there's one on the investment side there on the user side, but just what are you hearing in the SaaS market. I mean, obviously you guys have already ahead of several great off take agreements, but what's the latest in the demand the demand picture and what some of the key points.
Patrick R. Gruber: And I don't know if there's more on the investment side there on the user side, but just, you know, what are you hearing in the SAP markets? I mean, obviously, you guys have already had several great offtake agreements, but what's the latest on the demand side and what some of the key points are from the potential consumers? Well, I think that the airlines know that they have to do something, and so it's a question of how will they do it? What do they do with it?
From the potential consumers.
Well I think that the airlines know that they have to do something and so it's a question of how do they do it why do they do it and what are the what are the real terms.
Patrick R. Gruber: And what are the real terms? And that is that the real terms are contracts that lead to financeable debt deals. That's going to be the critical issue that has to get resolved. We're working with partners on the customer side and the DOE on that issue. And everybody's cooperative. I think that everybody recognizes that we've run into this, they've all seen this McKinsey work, they've seen the competitive analysis, we're very transparent about this stuff. And they see that the ATJ is the most cost competitive route to make FAF and to do carbon abatement. And an important point is this: I keep saying carbon abatement; what this is about is the actual cost to reduce carbon. And so we're at about $450 per ton, or so it would pencil out to be today. And the next best alternative half hour would be about $600 to $700 a ton. Power to liquids, which everyone is so enamored with, it seems, for capturing CO2 and making liquids, that might be $1,100 to $1,500 a ton.
And that is that what are the real terms contracts that lead to financeable.
Debt deals that's going to be the critical issue that has to get resolved and we're working through partners on the customer side and the deal on that issue and everybody's cooperative.
I think that everybody recognizes that we've run into they've all seen this mckinsey where <unk> seen the competitive analysis, we're very transparent about this stuff and they see that.
The <unk> is the most cost competitive route to make SaaS tend to do carbon abatement.
An important point is that as I keep saying carbon abatement with assistance is about the actual cost to reduce the carbon alright, and so we're at about $450 per ton or so is what we would pencil out to be today and the next best alternative half that would be about six to $700 a ton powered liquids whichever one is so enamored with it seems for.
Kathryn <unk>, making liquids that might be.
$102500 a ton.
Patrick R. Gruber: So we're a fraction of the cost of some of those technologies. That data is sinking into people. And so ATJ is a fundamentally long-run competitive product and technology. So it's about sorting that out.
So were a fraction of the cost of some of those technologies that data thinking into people and sell ATCA as a fundamentally long run competitive product and technology.
It's about sorting that out so at that SaaS conference a lot of discussion was about the various technologies and the cost of carbon abatement, what's real and what isn't and.
Patrick R. Gruber: So at that SAF conference, a lot of discussion was about the various technologies and the cost of carbon abatement, what's real and what isn't. And then there is the question of financiers where they say that they hear so much noise about all these different technologies, it's confusing for them. They have no idea because everyone says, "oh, I have the new answer. And it's the greatest thing, and it'll be free, and things like that. Hi, we can use three pounds of hydrogen to make a gallon of jet fuel, like you would with power liquids.
And then there is a question finance, here's where they say who they are so much noise about all these different technologies, it's confusing for them. They have no idea because they're not survive the new answer and it's the greatest thing and it will be free and things like that.
We can use three pounds of hydrogen to make a gallon of jet fuel like you would with power liquids it'll be free stuff like that.
Patrick R. Gruber: Oh, and it'll be free. You know, it's stuff like that. And so it doesn't. It isn't. That isn't real.
And so it doesn't it.
It is.
Shawn Severson: So I think the reality of things is setting in for people. And, of course, we go along and we're like, hey, this is the real deal. Let's go. So we've got good partners; they're being cooperative. Thanks. My last question, I want to follow up a little bit on what Amit had asked. And that was about expenditures. I think we started to peel back the layers; the company is in a substantially, you know, very strong financial position and balance sheet. But I wanted to walk through, and I think you did a little bit in the new deck, which was very helpful, but walk through kind of what the operating expenses are in the plan for 2024. And what is, let's say, spend that can be done, you know, pushed out or timing-dependent. So it's a long way of asking, what do you really have to spend in 2024 and your flexibility in spending cash?
That is it real.
So I think the reality of things are setting and for people and of course, we come along and we're like Hey, This is the real deal let's go.
So we've got good partners there being cooperative.
Thanks, and my last question I wanted to follow up a little bit on what Amit had asked and that was about the expenditures I think when you start to Peel back the layers. The company is in a substantially very strong financial position and balance sheet, but I wanted to walk through and I think you did a little bit in the new deck, which was very helpful. But walk through.
Kind of whats operating expenses.
The plan for 2024.
And what is let's say spend that can be done pushed out are timing dependent so long way of asking what are you really have to spend in 2024, and your flexibility and spending cash.
Patrick R. Gruber: Um, because the main mission of Gevo is to get NZ1 operating, the number that I threw out there of that range in the beginning is, the chunk of the money, the bulk of the money that we're going to spend. If we strip everything away and say, money that's not recoverable someday, so not project money, then I think we're left with maybe $12 to $15 million or so of basic burn, or what most companies would Now, We have a bunch of activities planned.
Because the main mission of <unk> is to get the ANZ.
Operating the number that I threw out there of that range in the beginning.
Is that.
Chunk in the money the bulk of the money that we're going to spend if we strip everything away and say money thats not recoverable someday so not project money.
Then I think we are left with maybe $12 million to $15 million or so basic burn or what most companies would call basic burn.
No.
Patrick R. Gruber: We have a big, we're spending a lot of effort and resources, people on government affairs and all the things related to make NZ1 successful and profitable, the engineering, and we're developing some other sites. And so we bundle that all together. It's in that range that we're talking about already.
We have a bunch of activities, we do have a big we.
Spending a lot of effort and resources people on government affairs, and all the things related to make ANZ, one successful and profitable the engineering and we are developing some other sites. So we bundle that all together it's in that range that we're talking about already.
Shawn Severson: And we'll moderate the spend throughout the year, depending upon how fast the DOE goes or how fast all the pieces and parts come together, or if there's some kind of turmoil in the marketplace or whatever. So it isn't like it's, you know, we're just saying, shoot the whole lot, and it's all gone. We do careful moderation along the way. So, it's a long way of saying that when you get us down to the really basics, if you just looked at our management plus our R&D plus accounting and stuff like that, it's a pretty small number. Thanks, that was very helpful.
And we will moderate the spend throughout the year, depending upon how fast the deal goes through how fast all the pieces and parts come together or if there's some kind of a turmoil in the marketplace or whatever so it isn't like it's we're just saying shoot the whole wide and it's all gone we do careful moderation along the way.
So it's that's a long way of saying that.
When you get us down to the really basic if you just looked at our management, plus R&D, plus accounting and stuff like that it's a pretty small number.
Operator: Thanks, Pat. Our next question will come from the line of Kumar Raju with BBG. Good morning, your line is now open. Kamar, are you there?
Okay. Thanks, that's very helpful. Thanks, Pat.
Our next question will come from the line of Kumar <unk> with BBVA.
Okay.
Your line is now open.
Okay.
Tomorrow either.
Okay.
Operator: Okay, let's move on. I'm showing no further questions in queue at this time. I'd like to turn the call back to Dr. Gruber for closing remarks. Thank you all for joining the call today, and I appreciate you listening in, and thank you for the questions too. I'm glad to clarify some of these things, to clarify some of these things that have been confusing. And we really... I feel pretty good about where we are, and I like what I see on Argonne Creek.
Okay, let's move on.
Okay.
Im showing no further questions in queue at this time I'd like to turn the call back to Dr. Gruber for closing remarks.
Thank you all for joining the call today and I appreciate you listen again and I. Thank you for the questions too I am glad to clarify some of these.
To clarify some of these things that have been confusing and.
We really.
I feel pretty good about where we are and I like what I see on the argon.
Patrick R. Gruber: I'm thankful that they're taking a serious approach to getting it right. That's good for all of us, in terms of the 45 Z. And one comment on that, just to be clear, the rule that was going to come out is a 4540 B rule, right? That expires at the end of 2024. What we expect to see is talking about what the key components are going to be included in 45 Z as guidance. So I expect that people will be a little bit confused about that. 45Z is the thing that actually matters. So, whatever they say about 40 B's serves as an indicator. Some reference, and Preston. So I expect them. There are two things that should be different.
Paul that Theyre, taking a serious approach at getting it right. That's good for all of us.
In terms of the.
45, Z and what comments on that just to be clear the rule that was going to come out as a 40 40 B rule right that expires at the end of 2020 for what we expect to see is going to be talking about.
Here's the key component is there going to be included in 45 Z as guidance. So.
I expect that people will be a little bit confused about that.
45 Z is the thing that actually matters.
So whatever they say about 40 b serves as <unk>.
Some reference.
Precedent.
So I expect them.
Patrick R. Gruber: Whatever they say about 40B and how they implement that, I expect that it will be different than 45Z, but I expect them to give guidance to what 45Z will be. Fat. Thank you all. Thanks for following us and being part of G.I.T.O. Bye-bye. This concludes today's conference call. Thank you for participating. You may now disconnect. Please subscribe and like for more latest videos.
Two things to be different whatever they say about 40, b and how to implement that I expect that it will be different than 45, but I expect them to give guidance to what 45 Z will be.
With that.
Thank you all.
Thanks for following us and.
Being part of Tito.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yeah.
Okay.
Yes.