Q1 2024 Gevo Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the GEVO First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Eric Frey, Vice President of Finance and Strategy. Please go ahead.
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Okay.
Good day and thank you for standing by welcome to the <unk> first quarter 2024 earnings Conference call.
Operator: At this time, all participants are in listen only mode.
Eric Frey: The speaker's presentation there'll be a question and answer session.
Operator: To ask a question. During this session you will need to press star one on your telephone.
Operator: We'll then hear an automated message advising you Anas race.
Operator: Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Eric Fry Vice President of Finance and strategy. Please go ahead.
Eric Frey: Good afternoon, everyone. 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 first quarter results for the period ended March 31st, 2024. I would like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Chief Executive Officer, and Lynn Small, Chief Financial Officer. We also have Dr. Chris Ryan, President and Chief Operating Officer, and Dr. Paul Bloom, Chief Carbon Officer and Chief Innovation Officer.
Operator: Good afternoon, everyone. This is Eric Fry, Vice President of Finance and strategy I'm also responsible for Investor relations here at Jabil.
Eric Frey: Thanks for joining us to discuss <unk> first quarter results for the period ended March 31 2024.
Eric Frey: Like to start by introducing today's participants from the company with.
Speaker Change: With us today are Dr. Patrick Gruber, Chief Executive Officer.
Eric Frey: And Lynn Smull Chief Financial Officer.
Eric Frey: We also have Dr. Chris Ryan President and Chief operating Officer, and Dr. Paul Bloom, Chief Carbon officer, and Chief Innovation 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 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.
Eric Frey: Earlier today, we issued a press release that I want the topics we plan to discuss a copy of this press release is available on our website at www Dot <unk> Dot com.
Eric Frey: 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.
Eric Frey: Please 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.
Eric Frey: These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.
Eric Frey: Those statements include projections about the timing development engineering financing and construction of our sustainable aviation fuel projects. Our recently executed agreements Ah 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.
Eric Frey: Looking statements. In addition, we may provide certain non-GAAP financial information on this call.
Eric Frey: The definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www dot two dot com in the Investor Relations section.
Speaker Change: Following the prepared remarks, we will open the call for questions I would 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 <unk> Dot com.
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 would 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.jipo.com. I'd like to now turn the call over to the CEO of Gevo, Dr. Patrick Gruber. Pat? Thank you.
Eric Frey: I'd like to now turn the call over to CEO of <unk>, Dr. Patrick Gruber Pat.
Patrick R. Gruber: Thanks, Eric. Good afternoon, everyone, and thanks for joining us on our call.
Patrick R. Gruber: Thanks, Eric and good afternoon, everyone and thanks for joining us on our call.
Patrick R. Gruber: Filling our Form 10-Q today and we ask that you refer to it for more detailed information after this call.
Patrick R. Gruber: We are filing our Form 10-Q today, and we ask that you refer to it for more detailed information after this call. Today, I would like to highlight a couple of key items from our filing and also talk about the recent IRA Section 40B SAF tax credit guidance that came out, which I have to say is very encouraging. Number one, we began utilizing our previously announced stock repurchase program when it was small. Our Chief Financial Officer will say more about this when he's on deck here to give comments.
Patrick R. Gruber: Today, I would like to highlight a couple of key items from our filing and also talk about the recent IRS section 40 be SaaS tax credit guidance that came out which I have to say, it's very encouraging.
Patrick R. Gruber: Number one we began utilizing our previously announced stock repurchase program when small our chief financial Officer will say more about this when he said on deck here to give comments.
Patrick R. Gruber: Now, my comment on this is that if you look at our cash, cash equivalents, and restricted cash, and divide that by our number of common shares outstanding, you will see that a loan is worth approximately $1.40 a share. That is about double where the share price was at various times in the first quarter. Obviously, we think the market has undervalued our shares.
Patrick R. Gruber: Now my comment on this is that if you look at our cash cash equivalents restricted cash and divide that by our number of common shares outstanding you will see that alone is worth approximately $1 40, a share that is about double where the share price was at various times in the first quarter. Obviously, we think the market is undervalued our shares.
Patrick R. Gruber: Since, in addition to our cash, we have a renewable natural gas business with positive standalone adjusted EBITDA, a wholly owned carbon accounting tech startup that we call Verity, a robust intellectual property portfolio, and significant progress on the well-positioned Greenfield Alcohol-to-Jet project called NZ1, along with a portfolio of other sites that can be developed. We also have our next generation ethanol to fuel chemical technology called ETEL that has made it through the next scale-up milestone with LG Chem, which triggers yet another royalty. Number two.
Speaker Change: Yes. In addition to our cash we have.
Patrick R. Gruber: Our renewable natural gas business with positive Standalone adjusted EBITDA, a wholly own carbon accounting tech startup that we call Verity a robust.
Patrick R. Gruber: Intellectual property portfolio.
Patrick R. Gruber: And significant progress for well positioned greenfield alcohol to jet project called N V. One along with a portfolio of other sites that can be developed.
Patrick R. Gruber: We also have our next generation ethanol fuels chemical technology called E tale.
Patrick R. Gruber: That has made it through the next scale up milestone with LG, Chem, which triggers yet another royalty payment.
Patrick R. Gruber: Number two.
Patrick R. Gruber: We have revised our expected spend on Net Zero One, our Greenfield Alcohol-to-Jet project. We now expect that we'll have to spend about $90 to $125 million from January 1st of 2024, that is this year, until we reach the fully financed construction phase of the project or financial close. That is a reduction from our previous range of $125 to $175 million. Chris Ryan, our President and Chief Operating Officer, will say more about the Net Zero One project a little bit later in this call. Number three.
Patrick R. Gruber: We have revised our expected spend on net zero, one or greenfield alcohol to jet project. We now expect that we'll have to spend about $90 million to $125 million from January one.
Patrick R. Gruber: 224, this year until we reach the fully financed the construction phase of the project or financial clause that is a reduction from our previous range of $125 million to $135 million, Chris Ryan, Our President and Chief operating Officer will say more about the net zero one project a little bit later in this call.
Patrick R. Gruber: I'm glad the guidance finally came out on Section 40B, the Sustainable Aviation Fuel Tax Credit under the Inflation Reduction Act. The 40B rule itself is mostly not germane to our plans since it expires at the end of 2024, but it does set guidance and precedent for the section we do care about, 45Z, which comes into play later in 2025 and beyond. I can say this: 40B looks to have been a clear step in the right direction since it recognizes the many carbon intensity reductions we've been talking about.
Patrick R. Gruber: Number three.
Patrick R. Gruber: I'm glad the guidance finally came out of section 40 be sustainable aviation fuel tax credit under the inflation reduction Act.
Patrick R. Gruber: Now.
Patrick R. Gruber: The 40 B rule itself is mostly not germane to our plans since it expires at the end of 2024, but it does set.
Patrick R. Gruber: Guidance and precedent for this section we do care about forty-five Z, which comes into play later in 2025 and beyond.
Patrick R. Gruber: I can say this the 40 b looks to a clear step in the right direction since it recognizes the many carbon intensity reductions we've been talking about it uses the argon greet model and trends that we've been advocating now for years. It includes Ccs and it it's moving properly towards taking into account agricultural practices.
Patrick R. Gruber: It uses the Argonne-Greene model, it enshrines it, we've been advocating for years, it includes CCS, and it's moving properly towards taking into account agricultural practices. In the comments from members of the administration there, it's clear that there's going to be more work to include more of Climate Smart Ag in 45 seats. Now, it's interesting to note that under the 40B rule, it looks like our proprietary NZ1 plant design, which really is different from anyone else in the world, that even without CCS or ag practices, we'd be well into the money, potentially achieving $1.50 to $1.75 a gallon.
Patrick R. Gruber: In the in the comments from members of the administration.
Patrick R. Gruber: It's clear that there is going to do more work to include more of climate smart edge in 45 days.
Patrick R. Gruber: It's interesting to note that had a 40 BP rule. It looks like that are proprietary in Z. One plant design, which really is different than anyone else in the world that even without ccs or egg practices, we'd be well into the money.
Patrick R. Gruber: Potentially achieving $1.50 $2 75, a gallon that means when you have 60 million gallons of jet fuel come in have a plant that's $90 million to $100 million $105 million of revenue.
Patrick R. Gruber: That means when you have 60 million gallons of jet fuel coming out of a plant, that's 90 to $105 million in revenue. I like the precedent. I want to see it stick. I want to improve it further. It's going to be very interesting, and it's pretty exciting.
Patrick R. Gruber: I like the precedents honestly, it's <expletive>.
Patrick R. Gruber: Improve it further it's going to be very interesting and it's pretty exciting. It's good progress I like what we're seeing.
Patrick R. Gruber: It's good progress. I like what we're doing... We expect that this guidance will be the launchpad for the sustainable aviation fuel 45Z tax credit. USDA Secretary Vilsack has noted that he expects 45Z will expand recognition of climate smart ag practices. Our Variety Carbon Solutions, of course, is well positioned to aid that. The 40V guidance is a good foreshadowing of 45Z guidance. The administration agencies have indicated there's more work to be done to refine the rules of 45Z, but it looks like a good, good starting point. In 45Z, it would also represent up to $1.75 of value per gallon.
Patrick R. Gruber: We expect that this guidance will be the launch pad for the stable sustainable aviation fuel forty-five fee tax credit USDA Secretary Vilsack has noted that he expects 45. He will expand recognition of climate Smart AG practices are very carbon solutions of course is well positioned to aid that.
Patrick R. Gruber: The <unk> guidance is a good for shadowing of 45 the guidance.
Patrick R. Gruber: The administration and agencies have indicated there is more work to be done to refine the rule of 45 Z, but it looks like a good good starting point.
Patrick R. Gruber: And 45 Z. It would also represent up to a <unk> 75, a value per gallon.
Patrick R. Gruber: SaaS production.
Patrick R. Gruber: Or that's, again, the potential of $105 million a year if the carbon intensity is counted as zero using all the tools at our disposal. We have lots of them. Now this guidance, as it stands, should give confidence to project investors that the government's on the right track. Yeah, there's more work to be done. But you know what?
Patrick R. Gruber: R again protest.
Patrick R. Gruber: Potential of $105 million a year, if the carbon intensity as carriers zero using all the tools at our disposal, we have lots of them.
Patrick R. Gruber: Now this guidance as even as Stan should give confidence to project investors that the governments on the right track, yes, there's more work to be done, but you know what they've been bringing additional clarity to the direction of the 45 day rolls you've indicated it's going to include the climate Smart AG.
Patrick R. Gruber: They've been bringing additional clarity to the direction of the 45Z rules. They've indicated it's going to include Climate Smart Agriculture. It includes CCS and GREET, all very constructive. This should help incentivize investment and could help bring our projected cost of carbon abatement for this first plant down when we include those credits, potentially to as low as $0 per ton, depending upon a number of factors. That's a big deal.
Patrick R. Gruber: Could ccs greet all very constructive this should help incentivize investment that could help bring our projected cost of carbon abatement for this first plant down.
Patrick R. Gruber: That is, we believe, one of the lowest cost, if not the lowest cost, routes of abating carbon. If you haven't already done so, please take a look at the deep dive presentation on net zero one and the competitive economics of alcohol to jet that we posted on our investor relations website, which goes into more detail. By carefully reviewing those economics, you can see why we have a deep conviction about our proprietary net zero integrated plant design and its economic impact.
Patrick R. Gruber: We include those credits to potentially be as low as zero dollars per ton, depending upon a number of factors.
Patrick R. Gruber: Big deal that is we believe one of the lowest cost if not the lowest cost route of abated carpet.
Patrick R. Gruber: If you haven't already done so please take a look at the deep dive presentation on net zero, one and the competitive economics of alcohol, but yet that we posted on our Investor relations website, which goes into more detail.
Patrick R. Gruber: Hi carefully reviewing those economics, you can see why we have a deep conviction about our proprietary net zero integrated plant designs and their economic impact.
Patrick R. Gruber: Finally, we have Paul Bloom, our Chief Carbon Officer and Chief Innovation Officer. He'll give us an update on Verity, our wholly owned carbon accounting tech startup. Now, I'll pass it off to Lynn to talk through item number one that I mentioned, the share repurchases, and the operations, and the rest of the numbers.
Patrick R. Gruber: Finally.
Patrick R. Gruber: We will have Paul Bloom, our Chief Corporate Officer, Chief Innovation Officer to give us an update on verity, our wholly owed carbon accounting tech startup.
Lynn: Now I'll pass it off to lead to talk through I, just remember one that I mentioned the share repurchases and the operations and the rest of the numbers.
Patrick R. Gruber: <unk>.
Lynn Small: During Q1 2024, our Northwest Iowa RNG project sold 88,967 MMBTU of RNG. Revenue of $4 million for the quarter included R&G sales of $0.2 million and $3.8 million net proceeds from the sale of the environmental attribution. Gevo's Q1 interest income was $4.6 million. Our corporate spend, that is, G&A, was $7.9 million for the quarter, excluding non-cash stock-based compensation of $4.2 million, which is a $1.8 million increase from the first quarter of 2023, mainly due to increased personnel costs.
Lynn: Thank you Pat.
Paul Bloom: During Q1 2024, our northwest, Iowa, R&D projects sold 88967 Btu of RMG.
Lynn Small: Revenue of $4 million for the quarter included RMG sales of <unk> 2 million and $3 8 million net proceeds from the sale of the environmental attributes.
Lynn Small: <unk> Q1 interest income was $4 6 million.
Lynn Small: Our corporate spend that is G&A was seven 9 million for the quarter, excluding noncash stock based compensation of $4 2 million, which is at $1.8 million increase from the first quarter of 2023, mainly due to increased personnel costs.
Lynn Small: Debt related to our R&G project remained unchanged at quarter end at $68.2 million after we successfully re-marketed the R&G green bonds on April 1st of this year. The remarketed bonds bear an interest rate of 3.875% and are backed by a new letter of credit of $69.9 million, a $0.3 million reduction from the previous bond's letter of credit.
Lynn Small: Debt related to our R&D project remains unchanged at quarter end at $68 2 million. After we successfully remarketed the RMG green bonds on April one of this year.
Lynn Small: The remarketed bonds bear interest of three 875% and are backed by a new letter of credits of $69 9 million.
Lynn Small: $3 million reduction from the previous bonds letter of credit.
Chris Ryan: We ended Q1 with a liquidity position of $340.6 million in cash, restricted cash, and other liquid investments. The restricted cash portion is $69.9 million and collateralizes our RNG bond letter of credit. During T1, we invested and capitalized $17.5 million in capital projects comprised of approximately $16.5 million into Net-01, $0.5 million into our R&G business, and $0.5 million for our fractionation and hydrocarbon SCID. In addition to the $16.5 million invested into Net-01, we advanced $0.6 million to our wind and hydrogen partner for development costs in support of the project, which we expect is reimbursable upon financial close.
Lynn Small: We ended Q1 with a liquidity position of $346 million in cash restricted cash and other liquid investments.
Chris Ryan: The restricted cash portion of $69 9 million and collateralize, our RMB bond letter of credit.
Chris Ryan: During Q1, we invested in capitalized $17 5 million cash and capital projects comprised of approximately $16 5 million into net zero or $1.5 million into our R&D business and <unk> 5 million for fractionation and hydrocarbon scared.
Chris Ryan: In addition to the $16 5 million invested into net zero, one we advanced the point 6 million into our wind and hydrogen partner for development costs in support of the project, which we expect is reimbursable upon financial close.
Chris Ryan: We see enormous value in advancing our business thesis, which requires prudent capital deployment to maximize long-term value for our shareholders. For example, we continue to invest in advancing Net Zero One towards financial close, when the project would be fully funded for construction and commission. But through our work and learnings in the project development process, we saw the opportunity to save on development capital required to reach CLOSE, and we, as Pat mentioned and Chris will further discuss, revised the project spend guidance from January 1, 2024, through CLOSE downward to $90 to $125 million from the previous guidance of $125 to $175 million, of which I noted that $17.1 million was spent in Q1 this year, inclusive of wind and hydrogen advances.
Chris Ryan: We see enormous value in advancing our business pieces, which requires prudent capital deployment to maximize long term value for our shareholders.
Chris Ryan: For example, we continue to invest in advancing <unk> towards financial close when the project would be fully funded for construction and commissioning.
Chris Ryan: But through our work and learnings and the project development process, we saw the opportunity to save on development capital required to reach close and we as Scott mentioned and Chris will further discuss revise the project spend guidance from January one 2024 through close downwards to 90 to 125.
Chris Ryan: From the previous guidance of 125 to 175 million of which I noted that $17 1 million was spent in Q1 this year inclusive of wind and hydrogen advances.
Chris Ryan: We will continue to identify activities and costs that can be deferred until after financial close whenever we can. We believe this is prudent capital deployment, minimizing Net Zero One development spend while advancing a groundbreaking ATJ plant to put Gevo on the path to meeting market demands for SAP. Another use of capital involved repurchases of our common stock under the previously disclosed stock repurchase program. Since the beginning of the year, we have repurchased approximately 5.5 million shares of common stock for approximately $3.7 million. Now Chris Ryan, our President and Chief Operating Officer, will talk more about Net Zero One. Chris?
Chris Ryan: We will continue to identify activities and costs that can be deferred until after financial close whenever we can we believe this is prudent capital deployment.
Chris Ryan: Minimizing net zero, one development spend while advancing our groundbreaking ATCA plant to put <unk> on the path to meeting market demands for SaaS.
Chris Ryan: Another use of capital involved for repurchases of our common stock under the previously disclosed stock repurchase program since the beginning of the year, we repurchased approximately five 5 million shares of common stock for approximately $3 $7 million.
Chris Ryan: Now, Chris Ryan, our President and Chief operating Officer will talk more about net zero one Chris.
Chris Ryan: Thanks, Lynn. For those of you who don't know me, I'm the Senior Executive at Gevo, directly overseeing and responsible for our Net Zero projects and their deployment. As Pat mentioned earlier, we reduced our expected spend requirement on NED-01 to reach financial close. As the time horizon to financial close of net zero one gets closer, we expect to continually reassess our spend and refine our expectations along the way as appropriate. We're pleased to be able to bring that number down.
Chris Ryan: Thanks Lynn for those of you, who don't know me I'm, a senior executive at Jabil directly overseen and responsible for our net zero projects and their deployment.
Chris Ryan: As Pat mentioned earlier, we reduced our expected spend requirement on that zero one to reach financial close.
Chris Ryan: As the time horizon to financial close zero, one gets closer we expect to continually reassess our expand and refine our expectations along the way as appropriate.
Chris Ryan: Plays to be able to bring that number down.
Chris Ryan: We don't see ourselves needing to spend more than that. Of the net zero one spend so far, about half is for engineering, and about a third is for wind and hydrogen equipment. We expect that spend will be recoverable to us at financial close.
Chris Ryan: See ourselves needing to spend more than that.
Chris Ryan: Of the net zero one spend so far about half is for engineering and about a third is for winded hydrogen equipment.
Chris Ryan: We expect that spend will be recoverable to us at financial close.
Chris Ryan: This investment in engineering puts us in the position of having detailed designs and intellectual property around the production of low-carbon hydrocarbons and sustainable aviation fuels, specifically that can be leveraged to save time, money, and reduce risk for future projects for Gevo and anyone who works with us to produce low-carbon sap. We want to see the CO2 pipeline in South Dakota move forward to keep Lake Preston as our most attractive site for producing sustainable aviation fuel. But we've developed a slate of potential sites that we've pre-qualified for future Net-Zero projects. But we still hope and expect to see Lake Preston as the home of NEV01.
Chris Ryan: This investment in engineering and puts us in a position of having detailed designs and intellectual property around the production of low carbon hydrocarbons and sustainable aviation fuel specifically it can be leveraged to save time money and reduce risk for future projects for <unk> and <unk>.
Chris Ryan: One who works with us to produce low carbon SaaS.
Chris Ryan: We want to see the two pipeline South Dakota move forward to keep like Preston is our most attractive site for producing sustainable aviation fuel.
Chris Ryan: We've developed a slate of potential sites that we've prequalified for future net zero projects, but we still hope and expect to see like Preston is the home of <unk> zero one.
Chris Ryan: Our work on the Department of Energy loan guarantee is going well, but as anyone who has worked on one of these knows, there's a lot of engineering and upfront risk mitigation required, much more than a typical balance sheet finance project. Our EPC partners are busy working with us to mitigate execution risk and ensure our contracts fit the DOE's loan guarantee requirements.
Chris Ryan: Our work on the department of energy loan guarantee is going well, but as anyone who has worked on one of these knows there's a lot of engineering and upfront risk mitigation required much more than a typical balance sheet financed project.
Chris Ryan: Our EPC partners are busy working with us to mitigate execution risk and ensure our contracts fit the doe loan guarantee requirements.
Chris Ryan: Likewise, our offtake partners are working with us to ensure that the contracted demand fits with the requirements of a DOE loan guarantee to finance the construction. At Lake Preston, the site we own is more than twice the size of the plant's footprint, which leaves plenty of room for future bolt-on projects. It's in a location where many of the surrounding farms in the region already use climate-smart agricultural practices, which reduces the carbon footprint of the corn feedstock we plan to use, that in turn increases our carbon footprint. Our location is also not far from our wholly owned renewable natural gas business in northwest Iowa, which gives us the option to trim our carbon intensity in our SAF by utilizing that manure-based RNG at our SAF plant. The location has rail access for product distribution. It's not far from the Minneapolis and Chicago airports.
Chris Ryan: Likewise, our offtake partners are working with us to ensure that the contracted demand fits with the requirements of the Doe loan guarantee to finance the construction phase.
Chris Ryan: Lake Preston the site we own.
Chris Ryan: He has more than twice the size of the plant footprint.
Chris Ryan: Which leaves plenty of room for future bolt on projects.
Chris Ryan: As in a location, where many of the surrounding farms in the region already use climate smart agricultural practices, which reduces carbon footprint of our corn feedstock we plan to use there.
Chris Ryan: That in turn increases our carbon abatement.
Chris Ryan: Our location is also not far from our wholly owned renewable natural gas business in northwest, Iowa, which gives us the optionality to trim, our carbon intensity in our SaaS by utilizing that manure based RMG at our SaaS plan.
Chris Ryan: And both of those airports are in states with a sustainable aviation fuel tax credit of $1.50 a gallon. We can also go to the West Coast, where there are low-carbon fuel markets, like in California. And we can get into Canada, which also has incentives for low-carbon fuel. One of the things we know that's required from our past experience is to have an audit trail of sustainability to prove to customers and policymakers the value of what they're getting from start, field to finish through the manufacturing process. That's why we launched Verity a few years ago. So I'll hand it over to Paul Bloom, our Chief Carbon Officer and Chief Innovation Officer, to share the latest on Verity. Maybe he can start by telling people what a chief carbon officer does, Paul.
Chris Ryan: The location is rail access for product distribution.
Paul Bloom: Not far from the Minneapolis, and Chicago airports and both of those airports are in states with a sustainable aviation fuel tax credit of $1 50, a gallon.
Paul Bloom: We can also get to the West coast, where there are low carbon fuel markets like in California, and we can get into Canada, which I'll also has incentives for low carbon fuels.
Paul Bloom: One of the things we know that's required from our past experience is to have an audit trail of sustainability to prove to customers and policymakers the value of what they are getting from start from the field to finish through the manufacturing chain.
Paul Bloom: That's why we launched Verity a few years ago.
Chris Ryan: So I'll hand, it over to Paul Bloom, our Chief Carbon officer, and Chief Innovation officer to share the latest on parity.
Paul Bloom: Maybe he can start by telling people, what a chief carbon officer does Paul.
Paul Bloom: Chris. So, briefly, because I get asked this question sometimes, let me address it.
Paul Bloom: Thanks, Chris So briefly because I get asked this question, sometimes let me address it.
Paul Bloom: What is the chief carbon I did a Fireside Chat last year to answer that question. For those of you who haven't seen it, I can sum it up that my job is all about maximizing the value from carbon abatement for Gevo and our shareholders throughout the entire supply chain. To that end, one of my primary responsibilities is leading our wholly owned carbon accounting tech startup called Verity. In every aspect of our business, from the field to the seat in the air.
Paul Bloom: It is achieve carbon officer did a fireside chat last year to answer that for those of you haven't seen it I can sum it up but my job is all about maximizing the value the carbon abatement for GMO and our shareholders throughout the entire supply chain.
Paul Bloom: That and one of my primary responsibilities is leading our wholly owned carbon accounting tech startup called Verity.
Paul Bloom: In every aspect of our business from the field to the seat on the aircraft. It is critical that we can accurately measure report verify and value carbon abatement with a high level of trust and transparency there.
Paul Bloom: It is critical that we can accurately measure, report, verify, and value carbon abatement with a high level of trust and transparency. Verity intends to provide Gevo and our customers with the digital tools to make sure that we can count all of the carbon abatement across the entire supply chain while fully capturing value from voluntary and compliance carbon markets and tax credits while avoiding double counts. As policies like the Section 40B SAF Tax Credit and, in the future, Section 45Z Credit are developed, we plan to use Verity to help simplify tracking, accounting, and auditing in an ever-changing policy landscape. We expect the requirements for the data in support of climate claims will gain importance to give confidence to consumers and other stakeholders. By definition, verity means truth.
Paul Bloom: <unk> intends to provide <unk> and our customers with the digital tools to make sure that we can count all of the carbon abatement across the entire supply chain, while fully capturing value pretty voluntary compliance carbon markets and tax credits, while avoiding double counting.
Paul Bloom: As policies like the section 40 bps ex credit and in the future section 45, Z credit or develop we plan to use verity to help simplify tracking accounting and auditing and an ever changing policy landscape.
Paul Bloom: We expect the requirements for the data in support of climate claims will gain importance to give confidence to consumers and other stakeholders.
Paul Bloom: By definition Verity means truth.
Paul Bloom: In the first quarter of 2024, we continued increasing our Verity customer base at the farm and field level. Additionally, we initiated the first privately sponsored grower program in the Midwest for a biofuels client. In addition, we signed a letter of intent with a provider of heavy-duty engine technology to develop carbon counting solutions to demonstrate and drive decarbonization of freight transportation in the United States. So now, in addition to field-to-seat tracking for SAS, we are starting to think about field-to-fleet tracking for heavy-duty vehicles in hard-to-abate market sectors.
Paul Bloom: In the first quarter of 2024, we continued increasing our <unk> customer base at the pharmacy level we.
Paul Bloom: We initiated the first privately sponsors GERD program in the Midwest for Biofuels client. In addition, we signed a letter of intent with a provider of heavy duty engine technology to develop carbon counting solutions to demonstrate and drive decarbonization of freight transportation in the United States.
Paul Bloom: So now in addition to field to seat tracking for SaaS start thinking about field to fleet tracking for heavy duty vehicles and hard to abate market sectors.
Paul Bloom: Finally, we continue to make great progress working with farmers of all sizes and from underserved groups through our Gevo Farm-to-Flight USDA Climate Smart Commodities Grant to implement, track, and incentivize a wide variety of agricultural practices at the field level that are intended to reduce emissions and sequester carbon in the soil. Using the best science, we are meeting farmers where they are with workable solutions that are additive, account for emissions reduction, and don't exclude certain practices or require bundling.
Paul Bloom: Finally, we continue to make great progress working with farmers of all sizes and from underserved groups through our <unk> farm to flight USDA climate Smart commodities grant to implement track and incentivize wide variety of agricultural practices at the field level that are intended to reduce emissions.
Paul Bloom: It's a question of carbon in the soil.
Paul Bloom: Using the best Science, we are meeting farmers, where they are with workable solutions that are additive account for emissions reduction and don't exclude certain practices or require a bundling. We've also started making incentive payments to farmers, who are adopting and implementing climates where practices under the program.
Paul Bloom: We've also started making incentive payments to farmers who are adopting and implementing climate smart practices under the program. By using the best tracking and accounting, we want farmers to be rewarded for reducing their carbon footprint and helping foster rural economic development with agriculture done right. After all, while we are focused on biofuels today, everything has a carbon footprint.
Paul Bloom: By using the best tracking in accounting, we went farmers to be rewarded for reducing their carbon footprint and helping foster rural economic development with agriculture done right.
Paul Bloom: After all while we're focused on Biofuels today everything has a carbon footprint. We anticipate the great work, we are doing with farmers today will benefit all agricultural supply chains with carbon accounting solutions from field to final use for food feed fuels industrial products in the future we want consumer.
Paul Bloom: We anticipate that the great work we are doing with farmers today will benefit all agricultural supply chains with carbon accounting solutions from field to final use for food, feed, fuels, and industrial products in the future. We want consumers, taxpayers, and policymakers to know that they get something for their money. Verity is all about delivering that transparency and trust. I'd like to reiterate our previously announced expectation of achieving first revenue at Verity this year.
Paul Bloom: Taxpayers and policymakers to know that they got something for their money.
Paul Bloom: <unk> is all about delivering that transparency and trust.
Paul Bloom: I'd like to reiterate our previously announced expectation of achieving first revenue it verity this year.
Paul Bloom: More details will be forthcoming as that happens and as we go forward. I'm going to leave it there for now, but we can discuss this further if there are any questions during the Q&A. Now, I'll hand it back over to Pat.
Paul Bloom: More details will be forthcoming as that happens and as we go forward.
Pat: I'm going to leave it there for now.
Paul Bloom: We can discuss this further if there are any questions in the Q&A now I'll hand, it back over to Pat.
Patrick R. Gruber: Thanks, Paul. So you heard Paul just now talk about Verity?
Pat: Thanks, Paul.
Pat: You heard Paul just now talk about <unk>, it's a pretty exciting opportunity. We're way out ahead in the curve here, having thought about this stuff for years, Chris talked about our net zero, one project and Lynne discussed our numbers.
Patrick R. Gruber: It's a pretty exciting opportunity. We're way out ahead of the curve here, having thought about this stuff for years. Chris talked about our Net Zero One project, and Lynn discussed our numbers. I want to close with this.
Patrick R. Gruber: Fundamentally, we see that there is an enormous supply of cost-effective carbohydrates and alcohols in the U.S. and globally. We also see enormous demand for drop-in low-carbon fuels and chemicals that can be derived from alcohol. We therefore see compelling value in connecting the dots between that supply and demand using existing technologies, plus our team's innovative, cost-effective, low-carbon implementations, which become available to us when we use photosynthesis and fermentation to make alcohols, and we combine them with great catalytic techniques, and then we wrap the whole thing in renewable energy. It's powerful.
Pat: I want to close with this fundamentally we see that there is an enormous supply of cost effective carbohydrates and alcohols in the U S and globally. We also see enormous demand for drop in low carbon fuels and chemicals that can be derived from alcohols.
Patrick R. Gruber: We therefore see compelling value in connecting the dots between that supply and demand using existing technologies plus our team's innovative cost effective low carbon from an implementation, which come available to us when we use photosynthesis and fermentation make alcohols and when combined with great catalytic techniques and then we wrap up.
Patrick R. Gruber: Whole thing with renewable energy.
Patrick R. Gruber: It's powerful.
Patrick R. Gruber: There are about 190 operating ethanol plants in the U.S. alone. We see that fleet being modified or converted over time to provide carbon abatement, lowering the C.I. scores and changing what they do or repowering.
Patrick R. Gruber: There are about 190 operating ethanol plants in the U S alone.
Patrick R. Gruber: We see that fleet being modified or converted over time to provide carbon abatement lowering the ci scores.
Patrick R. Gruber: And changing what they do our repowering themselves, we're going to help them be at the forefront of that.
Patrick R. Gruber: We're going to help them be at the forefront of that. In the long term, the vehicle to provide that carbon abatement may be low-carbon ethanol, alcohol for jet fuel, it could be diesel, because we can make that as well, or it might be gasoline, or it might be chemicals. All of those things are fair game.
Patrick R. Gruber: Once we establish the commercial business system, we would expect to see net zero chemicals. It shouldn't be lost on anyone that any of these products are fair game for us, focus on SAP first, but all of them are fair game. We have proprietary designs, technologies, and business systems that can take us in whatever direction the world of carbon abatement takes in the future. We believe the business system of Net Zero One sets us up to be at the forefront. It's our integrated plant designs that drive the carbon abatement and the CI numbers so low.
Patrick R. Gruber: In the long term the vehicle to provide that carbon abatement, maybe low carbon ethanol alcohol to jet it could be diesel because we can make that as well or it might be gasoline or it might be chemicals. All of those things are fair game. Once we establish the commercial business system, we would expect to see that.
Patrick R. Gruber: Zero chemicals or enable it shouldnt be lost on anyone that any of these products are fair game for US was to focus on SaaS first but all of them are fair game.
Patrick R. Gruber: Our proprietary design technologies and business systems that can take us in whatever direction the world of carbon abatement heads in the future we believe the business system.
Patrick R. Gruber: Our net zero, one sets us up to be at the forefront. It's our integrated plant designs that drive the carbon abatement in the Ci number is so low.
Patrick R. Gruber: Ours is a business system that begins with carbon dioxide being pulled out of the atmosphere and let nature do a lot of the work through photosynthesis and fermentation. It captures the carbon and the hydrogen and the electrons to hold those atoms together.
Patrick R. Gruber: Ours is a business system that begins carbon dioxide being pulled out of the atmosphere, let nature do a lot of the work through the photosynthesis fermentation is capturing the carbon and hydrogen and electrons to hold those atoms together.
Patrick R. Gruber: They're all needed for making fuels and chemicals. The NC1 system produces food chain ingredients and catalyzes change through Climate Smart Ag while mitigating land use issues.
Patrick R. Gruber: They're knee all needed for making the fuels and chemicals.
Patrick R. Gruber: D&C one system produces food chain ingredients and catalyze this change the climate Smart AG, while mitigating land use issues. It converts the COPD to carbohydrates via photosynthesis and the carbohydrates. The alcohols via fermentation and then crossing over from AG and bio world into chemical processing, where.
Patrick R. Gruber: It converts CO2 to carbohydrates via photosynthesis and the carbohydrates to alcohols via fermentation and then crosses over from the ag and bio worlds into chemical processing where we convert the alcohol into olefins, where the olefins are converted into fuels and chemicals in a chemical plant. It's not refining; it's a chemical. Gevo knows the agricultural and fermentation side, as well as the chemical processing side. That puts us in a pretty unique position. Alcohol provides a scalable link between two historically separate industries. We're crossover people.
Patrick R. Gruber: We convert the alcohol into olefins, where the elephants are converted.
Patrick R. Gruber: In the fuels and chemicals in a chemical plant.
Patrick R. Gruber: Refining is a chemical plant.
Patrick R. Gruber: It's cost effective.
Patrick R. Gruber: Jabil knows the AG fermentation side as well as the chemical processing side that puts us in a pretty unique position.
Patrick R. Gruber: Alcohol is provide a scalable link between two historically separate industries, where crossover people the AG industry and the fossil fuels and chemicals, we don't normally talk to each other where we bridge that gap and that's what's needed in the world of energy transition to establish new links between previously separate industries. If we're going to solve these problems. It has got to be a business system.
Patrick R. Gruber: The ag industry and the fossil fuels industry and the chemical industry don't normally talk to each other. Well, we bridge that gap. And that's what's needed in the world of energy transition, to establish new links between previously separate industries. If we're going to solve these problems, it's got to be a business system approach throughout. And then we have to layer in a verity to track and trace across the whole business system so no gains are lost. We like, and we focus on these business system solutions that work, that they are potentially low cost, competitive in the long run against fossil-based products, deliver value for customers, are financeable, and deliver growth. And you know what? We're making progress. All right. Let's open it up for questions. Thank you at this time.
Patrick R. Gruber: <unk> throughout.
Patrick R. Gruber: And then we have to layer in.
Patrick R. Gruber: <unk> to track and trace across the whole of the business system sooner games are played.
Patrick R. Gruber: We like and we focus on these business system solutions that work.
Patrick R. Gruber: And they have potential to be low cost competitive in the long run against fossil based products deliver value for customers Financeable and deliver the growth and what we're making progress.
Patrick R. Gruber: Alright.
Patrick R. Gruber: It's open it up for questions.
Operator: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to 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. Please stand by while we compile the Q&A list. Our first question comes from the line of Peter Kessler of Watertower Research. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced towards driving a question. Please press star one again, please standby, while we compile the Q&A roster.
Operator: Okay.
Peter Kessler: Our first question comes from the line of Peter case rate of water Tower Research. Your line is now open.
Peter Kessler: Yes, Hello, Thanks, very much for the call and congratulations on your results. It's also great to hear regarding the 40 <unk> tax credits I know your company has been advocating for that for a number of years. So my question here is regarding the net zero one and your new cost expectations. You mentioned in the call that you were able to reduce engineering cost and the cost of wind and hydrogen.
Peter Kessler: Just like to ask if you could please provide a bit more color around those cost cuts. Thank you very much.
Chris Ryan: Thank you, Chris. I think you're in the best position to address that. Do you want to take that one on? Yeah, sure. So what we did is
Peter Kessler: Chris I think you are in the best position to address that you want to take that one.
Chris Ryan: Yeah, sure. So what we did is we negotiated with our EPC and our wind and hydrogen equipment providers and basically pushed back payments until after finance. At the same time, we're looking for ways to cut costs. Not only in the project development, but the majority of it is pushing costs out.
Chris Ryan: Yeah sure. So what we did is we negotiated with our EPC and our win in hydrogen equipment providers and basically pushed back payments until after financial close at the same time, we're looking for ways to cut costs not only in the project development, but the execution phase as well.
Chris Ryan: But the majority of us pushing costs out till after close.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you one moment for our next question.
Operator: Thank you. One moment for our next question. Our next question is from the line of David Bohm of Thomas Capital. Your line is now open.
Chris Ryan: Our next question is from the line of David Bank of Commerce Capital. Your line is now open.
David Bohm: Hey guys, thanks for taking the question. Now that you've had a couple days to have the 40B model in your hands, I'm wondering if you could provide any sort of... CI range for what Net Zero One is looking like. It's kind of the first model that we've had from the government to really put some numbers around this. So, any CI range that you can provide on Net Zero One would be really helpful. Yeah, sure.
David Bohm: Hey, guys. Thanks for taking the question.
David Bohm: Now that you've had a couple of days to have the <unk> model in your hand, I'm wondering if you could provide any sort of.
David Bohm: Indicators Ci range for tier one is looking like.
David Bohm: Just kind of the first the first model that we've had from the government to really put a number.
David Bohm: There is around this.
David Bohm: Any range you can provide on that to you all would be really helpful. Yeah sure. So one of the things that.
Patrick R. Gruber: Yeah, sure. So one of the things that, in our design, where we've integrated a plant like this, we focus a lot on lowering the CI score. Our plant design itself takes down any... ETJ, by about 55 to 59 points, just from how we do it with our energy, how we integrate and all the rest. That's really different than if I had a plant that was unintegrated.
Patrick R. Gruber: In our in our design, where we've integrated a plant like this we focused a lot on lowering Ci score our plant design itself takes down.
Patrick R. Gruber: Yeah.
Patrick R. Gruber: T J.
Patrick R. Gruber: By about 55 to 59 points just from how we do it with our energy how we integrate and all the rest that's real different than if I had a plant that was an integrated so we're at we start with a very significant advantage. Some of the numbers that we see in the IR ABL or the Woodford the knick.
Patrick R. Gruber: So we start with a very significant advantage. Some of the numbers that we see in the IRA bill, or the guide set came out, they're talking about ATJ in the 70 to 80 range. Okay, tracked off, you know, 55 to 60 points straight away at CCS or before Climate Smart Ag or anything else. So that means that under the 40B, we would already have hit $1.75. And the question will be, how are they going to treat 45Z? That's going to work slightly differently. There is no cliff where you all of a sudden get $1.25.
Patrick R. Gruber: <unk> came out there talking about <unk> and <unk>.
Patrick R. Gruber: 70 to 80 range, Okay subtract off.
Patrick R. Gruber: 55% to 60 points Strait.
Patrick R. Gruber: Ccs or before our climate smart AG or anything else. So that means that under the 40 B, we would already hit a buck 75.
Patrick R. Gruber: And the question will be how are they going to treat 45 Z that's going to work slightly differently. There is no cliff, we offset and get about 25, it's going to be point by point reduction and get rewarded.
Patrick R. Gruber: It's going to be point by point reduction and getting rewarded. This is way better than I thought we'd be at this point in time. I'm pretty excited about it. And the precedents they're setting are profound. Look, they adopted the GREET model, and they did it without messing with it and making it crazy or anything else. All right. They included CCS.
Patrick R. Gruber: This is way better than I thought we'd be at this point in time I'm pretty excited by it and the precedent setting our profound look be adopted the greet model and it did it without messing with it making it crazy or anything else.
Patrick R. Gruber: Right.
Patrick R. Gruber: Great! That's awesome. That's what we need to see and have confidence in. And you know what? The Climate Smart Ag stuff, from our take on it, it's in the right direction. They're going to make it specific. It plays to our rarity business because we believe in field by field tracking too. And so we think we're going to win on that front. So I'll be very surprised if we don't wind up around zero by the time this is all said and done in terms of a CI score that would get us at that buck 75.
Patrick R. Gruber: Included Ccs, great. That's awesome, that's what we need to see and have confidence in and what the climate Smart AG stock from our take on it its in the right direction. They are going to make it specific it placed wire verity business, because we believe in field by field tracking too and so we think we're going to win on that front, so I'll be very.
Patrick R. Gruber: If we don't wind up.
Patrick R. Gruber: Around zero, but at time to saw sudden done in terms of a ci score that would get us up to about 75. So it's pretty darn interesting is pretty darn encouraging them fired up you can tell I'm fired up I'm sorry.
Patrick R. Gruber: So it's pretty darn interesting. It's pretty darn encouraging. I'm fired up. You can tell I'm fired up. I'm psyched. Yeah, I am too. I got Lindsay Fitzgerald here. She's sitting with me. And her take: Lindsay is the one. She's the Vice President of Government Relations, and she
Patrick R. Gruber: Yes.
Speaker Change: I mean.
Patrick R. Gruber: Lindsay.
Lindsay Fitzgerald: Lizzy Fitzgerald here. She is sitting with me and her take Lindsay is the one who she's vice president of our relations Lynn do you want to comment on this.
Patrick R. Gruber: Yes.
Lindsay Fitzgerald: So all of my point, but this is a great place to be this is the first time that we're seeing great built in with very minimal modification that Scott climate Smart Ed again, something that we are trying to recognize and to help farmers yields.
Patrick R. Gruber: Being understood and this is a phenomenal jumping off point for what we wanted to see and a 45 day.
Patrick R. Gruber: And it's that.
Lindsay Fitzgerald: Yeah, so it's a great starting place. I know 45Z Guidance is not fully out yet, but getting it zero makes a ton of sense. And, you know, the DOE, the DOE, correct me if I'm wrong, is part of this working group that put together the 40B Guidance, correct? And they're also the ones who are going to be judging you guys for the DOE loan. Is that correct? It's the same organization who's making
Speaker Change: Yes, that's good.
Patrick R. Gruber: Yes.
Lindsay Fitzgerald: Great. That's a great starting place I know 45, new guidance is not fully out yet but.
Lindsay Fitzgerald: Dennis zero makes ton of sense.
Lindsay Fitzgerald: And yes, the Doe.
Lindsay Fitzgerald: The Doa correct me, if I'm wrong as part of this working group that did put together the <unk> guidance correct and they are also the ones who are going to be judging you guys for the direct loan is that correct.
Lindsay Fitzgerald: Think of an organization, who is making the rules is the one who is possibly giving you guys. This one.
Patrick R. Gruber: They're the same big organization, different departments, that working group. We are, I know for sure that we're on the minds of all the people making the rules because we're an example of what can be done when it's done right, and we've got the data to prove it, and so that is on their minds. They've told us that directly, and we also provide data for them and the working group, the EPA, the DOE, the administration itself, DOT, and others. So we help, we provide a lot of information for these guys because we're not trying to do a freebie. We see a lot of companies out here in our space, they're just freebies. They just go, hey, it's a gallon. I'm going to sell you a gallon of jet fuel. Don't ask me the CI score.
Patrick R. Gruber: They're the same big organization different departments, but.
Patrick R. Gruber: Working group, we are I know for sure that were on the mind of all the people, making the rules because we are an example of what can be done when it's done right and we've got the data to prove it and so that is on their mind. They told us that directly and we also provide data for them and the working group.
Patrick R. Gruber: The EPA.
Patrick R. Gruber: The dose.
Patrick R. Gruber: The administration itself DFT and others and so we help we provide a lot of information for these guys because where we.
Patrick R. Gruber: We're not trying to do.
Patrick R. Gruber: We see a lot of companies out here in our space is just freebies, they just say hey, it's a gallon.
Patrick R. Gruber: That's kind of the approach. No, this is all about selling jet fuel along with a whole lot of carbon abatement and monetizing that carbon abatement. And you'd be astounded in this marketplace how many people that this concept just doesn't resonate. A lot of our customers, they don't want to talk about this. And so we're not this game is all about how do you drive real carbon value? It's by mitigating it throughout the business system, measuring it, tracking it, proving it.
Patrick R. Gruber: Did you sell a gallon of jet fuel don't ask me the Ci score that's kind of the approach no. This is all about.
Patrick R. Gruber: On a jet fuel along with a whole lot of carbon abatement, and getting monetizing that carbon abatement and you'd be astounded in this marketplace. How many people that were that concept just doesn't resonate a lot of our peers.
Patrick R. Gruber: They don't want to talk about that and so we're not this game is all about how do you drive real carbon value, it's by mitigating it throughout the business system measuring and tracking it proving it.
Patrick R. Gruber: And you know what? That's like the track that they're on. And I can tell you this too, from having talked with people from both sides of the aisle and in politics. When we talk about measuring it, proving that you're getting something for your money, that plays to both sides of the aisle.
Patrick R. Gruber: What that's worth to track that they're on this and I can tell you this too from having talked with.
Patrick R. Gruber: People from both sides of the island and politics when.
Patrick R. Gruber: When we talk about measuring it proving that youre getting something for your money that plays to both sides of the aisle. That's a big deal too so I'm pretty fired up about I think these guys are serious and wanting a lasting policy. That's rational has potential to drive improvements in a systematic way without being a freebie giveaway right.
Patrick R. Gruber: That's a big deal too, so I'm pretty fired up about it. I think these guys are serious and want a lasting policy that's rational, has the potential to drive improvements in a systematic way without being a freebie. So, I like what I'm seeing a lot. I am, like, seriously fired up. The more I think about it, I'm getting really fired up, right? So, I thought it was great. I thought I was – I'm stunned, actually. It's the right direction. It's better than I was expecting.
Patrick R. Gruber: So I like what I'm seeing a lot I am like seriously fired up and alright. Thank you alright.
Patrick R. Gruber: Really fired up right so.
Patrick R. Gruber: I thought it was great.
Patrick R. Gruber: Average spud to actually add.
Patrick R. Gruber: It's the right direction, it's better than I was expecting.
David Bohm: And just one more quick one for me, if I can. So I appreciate the reduced CapEx spend, and I appreciate you tuning the buyback. So I am looking at $340 million of cash, call it $100 million to get to FID after what you spent in the first quarter and a market cap of $160 million. So I guess my question is, why stop at the $25 million authorization on the buyback? It looks like you could buy back the entire market cap of the company and still have $80 million left. So what's the limit there in terms of what you guys are willing to do on the buyback when the valuation makes so much sense with that amount? Well,
Speaker Change: And just one more quick one for me if I can so.
David Bohm: I appreciate the reduced capex spend I appreciate it Judy the buyback.
David Bohm: Im looking at $340 million cash call it $100 million.
David Bohm: After what you spent in first quarter and a market cap of $160 million. So I.
David Bohm: I guess my question is why stop at the $25 million authorization on the buyback it looks like you could buy back the entire market cap of the company and still have $80 million left so what's the limit there in terms of what you guys are willing to do on the buyback.
David Bohm: When the valuation makes so much sense for that matter.
Patrick R. Gruber: Well, we have a view that there are a couple parts of that there's looking it rolls back and all those kind of things. And so we have that to pay attention to. We've been working on doing buybacks on. In my mind, I really want that I wrote, we're buying the stock back. I really want the stock back. So when I'm spending the money, it's because I think it's too stupidly cheap, and we should be buying it back. And so we set it at 25 for now.
David Bohm: We have a view.
Patrick R. Gruber: Theres a couple parts of that okay.
Patrick R. Gruber: Okay.
Patrick R. Gruber: All those kind of things and so we have that to be attached to we've been working on doing buybacks on.
Patrick R. Gruber: For my mind, I really want the IRA what were buying stock back I really want the stock back. So when I have spent the money. It's because I think it's too stupidly cheap and we should be buying it back and so that.
Patrick R. Gruber: And if we use it all, then we'll look at it again and expand it if we need to. We have other needs for our money, too. We have multiple plans that we can do, or things like that, or other opportunities that might be creative. So all that stuff comes into play. And so attention to our cash, manage it carefully. We're going to make the decisions to try to get us to profitability a whole lot sooner than waiting around for NZ1 to get built. And so those are all kinds of things that are on our minds. Lynn, do you want to comment on this?
Patrick R. Gruber: Okay.
Lynn Small: We set it at 25% for now and if we use at all but we will look at it again and expanded if we need to we have other needs for our money too. There is we have multiple plants that we can do or things like that or other opportunities that might be accretive.
Lynn Small: So all of that stuff comes into play.
Lynn Small: So attention to our cash manage it carefully.
Lynn Small: We're going to make the decisions to.
Lynn Small: Try to get us to profitability, a whole lot sooner than waiting around for ANZ wanted to get built and so those are all kinds of things around our mind.
Patrick R. Gruber: Lynn you want to comment on this.
Lynn Small: Yeah, I think the accretive opportunities are the key there. I mean, we do have competing interests for the cash that we have on our balance sheet. If we were to buy back all the shares, we'd be left with not enough capital to develop a business that is, I think everyone can see, a massive opportunity. And we're, as Gevo, with alcohol-to-jet technology at the forefront of leadership and delivering carbon abatement and SAF, and without resources, we won't be able to do that. So there's a trade-off. And that's why we wouldn't go, most likely, for the whole shebang of the equity stack. If we did, it would be more along the lines of the intent of...
Lynn Small: Yes, I think the accretive opportunities as the key there I mean, we do.
Lynn Small: Competing.
Lynn Small: Interest for the cash that we have on our balance sheet. If we were to buyback all the shares we'd be left with not enough capital to develop a business that is.
Lynn Small: I think everyone can see its a massive opportunity and we are.
Lynn Small: <unk> is GMO with alcohol to jet technology.
Lynn Small: At the forefront of leadership into delivering carbon abatement in south.
Lynn Small: And without resources, we won't be able to do that so there's a tradeoff there.
Lynn Small: And that's why we wouldn't go most likely for the whole shebang notes of the equity stack at this point, if we did it would be more along the lines of the intent of doing it all or something we'd have to be thinking about that we're not that I think thats premature and when I look at this.
Lynn Small: If we did, it would be more along the lines of the intent of doing it all or something. We'd have to be thinking about that.
Patrick R. Gruber: We're not that; I think that's premature. And when I look at this, I see a pretty large opportunity here that we're gonna have to measure quarter by quarter, pay attention to it, and make the decisions appropriately. And I'm keen on getting us, I'm keen on two things, getting us profitability sooner, getting cash flow streams, getting EBITDA up, R&G business is doing well, we're gonna eventually get the, you know, the approval down, contribute.
Patrick R. Gruber: I see.
Patrick R. Gruber: A pretty large opportunity here that we're going to have to measure it quarter by quarter pay attention to it and make the decisions appropriately and I'm keen on getting us down Makena, two things get us profitability sooner getting cash flow streams get EBITDA. Our LNG business is doing well we were going to eventually get there.
Patrick R. Gruber:
Patrick R. Gruber: The approval down.
Patrick R. Gruber: So we're actually, I want to get to profitability here sooner rather than later, and I do not want to raise money at the Gevo corporate level. If I can ever do it again, I'm one of the top shareholders of this company, and I do not want to do that. It's real simple. And so I don't want to put us in a position where we're cash short prematurely. So we'll measure it, conserve it, pay attention to it, and go. Gotcha. Thanks, guys.
Patrick R. Gruber: Now contribute so we're actually I wanted to get to profitability here sooner rather than later.
Patrick R. Gruber: And I do not want to raise money at the corporate level.
Patrick R. Gruber: I can ever again I'm one of the top shareholders of this company and I do not want to do that it's real simple and so I don't want to put us in a position where we're cash short prematurely. So we'll measure it conserve it pay attention to it and go.
Patrick R. Gruber: Got it thanks guys.
Operator: Thank you, one more for the next question. Our next question comes from a line from Derrick Whitfield, let's be sure your line is not open.
Speaker Change: Thank you Juan for next question.
Operator: Our next question comes from the line of Derrick Whitfield of Stifel. Your line is now open.
Derrick Lee Whitfield: Good afternoon, Pat and team, and congratulations on your legislative accomplishment. Thank you.
Derrick Lee Whitfield: Good afternoon patent team and congrats on your legislative accomplishment. Thank you.
Patrick R. Gruber: Perhaps building on Chris's prepared comments, I wanted to open with a question on 40-B policy. As I think about the way Climate Smart Ag was defined in the SAF credit guidance, how much of your expected corn feedstock surrounding the Lake Preston site would qualify today? And then more broadly, what's your take on the amount of corn feedstock in the Midwest that would qualify today or could qualify by 2027? Well, if we read it right...
Derrick Lee Whitfield: Perhaps building on Chris's prepared comments, so I wanted to open up the question on 40 be policy as I think about the way comments Mark.
Patrick R. Gruber: Was defined in the credit.
Patrick R. Gruber: Credit guidance.
Patrick R. Gruber: How much of your expected corn feedstock surrounding the Lake Preston site would qualify today and then more broadly whats your take on the amount of corn feedstock in the Midwest that would qualify today or could qualify by 2027.
Patrick R. Gruber: Well, if we read it right, I think that the way that they describe the, I don't think they're going to, in 45Z, I don't think they're going to do bundling. It's going to be specific and discreet, and you're going to have to do like low-till and no-till with a combination. And to get really low scores, you're going to need, combined with some fertilizer that has abatement built into it, and then also..., cover crops, which is all pretty, that's pretty normal stuff.
Speaker Change: Well, if we read it right I think that would be what they.
Patrick R. Gruber: The way that they described the I don't think Theyre going to 45. So you don't think youre going to do bundling, it's going to be specific and discrete and youre going to have to do like low til no tail.
Patrick R. Gruber: Combination.
Patrick R. Gruber: Get really low scores youre going to need combined with some fertilizer that has abatement built into it and then also.
Patrick R. Gruber: Cover crop, which is all pretty that's pretty normal stuff I think 55% of the acres in the country do that already so that to answer your question of how much. Yes. There is a lot that actually does it. It's a question of how well and the trickier thing is youre going to have to measure it.
Patrick R. Gruber: I think 55% of the acres in the country do that already. So to answer your question of how much Yes, there's a lot that actually does it. It's a question of how well, and the trickier thing is, you're going to have to measure it this way with the bundling that they did in 40 B.
Patrick R. Gruber: With the bundling that they did in 40 B. It's good show the direction. They said they wanted to be discrete measurable auditable awesome. That's what we want to see we want to see it field by field. So this is something that's really important point I don't like bundling I like field by field I like real measurements of real data because that's how we win the game over the long run and of course it also.
Patrick R. Gruber: It's good to show the direction. They said they want to be discrete, measurable, auditable, awesome. That's what we want to see. We want to see it field by field. So this is something that's a really important point. I don't like bundling.
Patrick R. Gruber: I like playing field by field. I like real measurements and real data, because that's how we win the game over the long run. And, of course, it also plays on what Verity is doing. So that's how we view it. And so it's a good jumping off point, and I expect it to move field by field, discrete data, measurable, auditable, and verifiable by third parties. That's what has to happen. That's gonna take a little work, but by God, we're ahead of the curve.
Patrick R. Gruber: Place what <unk> is doing so that's how we view it and so it's a good jumping off point and I expect it to boot field by field discrete data measurable auditable certifiable by third parties. That's what has to happen it's going to take a little work, but by God. We're ahead of the curve.
Derrick Lee Whitfield: Terrific. And then, kind of, looking forward in time.
Speaker Change: Terrific and then kind of looking forward in time.
Derrick Lee Whitfield: How do you think CARB will treat CI scoring for your project? Or is this a moot point based on Illinois being the target market?
Derrick Lee Whitfield: How do you think carb will treat Ci, scoring for your project or is this a moot point based on the Illinois being the target market.
Patrick R. Gruber: Well, the target markets are the states that already have programs in place. You have Illinois, you have Oregon, you have California. Washington you have who else Minnesota's developing one it's not quite finalized, yeah New Mexico has one, and so yeah, it's going where it's optimal so the idea that everything has to get shipped to California is a wrong paradigm. That's not how it's going to get done. It'll be whatever the market needs where you need enough games to play now that we can put them in different places. And it makes sense to do so in You also have Canada.
Derrick Lee Whitfield: The target markets are the people at the states that are already have programs in place you are Illinois.
Patrick R. Gruber: Half.
Patrick R. Gruber: Oregon, you have California.
Patrick R. Gruber: At Washington.
Patrick R. Gruber: Who else Minnesota's developing one is not quite finalized yet.
Patrick R. Gruber: New Mexico has one.
Patrick R. Gruber: And.
Patrick R. Gruber: So, yes, it's going where its optimal so the idea that everything has to get shipped to California, Ron paradigm, that's not how it's going to get done it'll be whatever the market needs were.
Patrick R. Gruber: Eaten up game to play now.
Patrick R. Gruber: That we can put it in different places and it makes sense to do in the optimization. You also have Canada. So it's a different game to play and we expect more states to be doing their own policies over the next few years and there'll be focused in that same kind of.
Patrick R. Gruber: So it's a different game to play, and we expect more states to be doing their own policies over the next few years. And they're gonna be focused on that same kind of thing that we're seeing in New Mexico, or Illinois, or Minnesota; it'll be stuff like that. So it's not that everything has to go to California, you're toast. Now back to how I think CARB will adjust to this.
Patrick R. Gruber: The thing that we're seeing in new Mexico, or Illinois, or Minnesota, it'll be stuff like that so it's not.
Patrick R. Gruber: Everything has to go to California, you're toast now back to how do you think how do I think carb will adjust to this I'll tell you. It's interesting the world is shifting about the perception of crops and the and the perception around indirect land use and all those things in this guidance.
Patrick R. Gruber: I'll tell you, it's interesting. The world is shifting about the perception of crops and the perception around indirect land use and all those things. In this guidance, you'll notice the indirect land use numbers are way down. And, of course, I'm a believer they shouldn't exist in the first place, but you know what? They're going in the right direction. They're way, way, way down from where they were.
Patrick R. Gruber: Youll notice the indirect land use numbers are way down.
Patrick R. Gruber: And of course, I'm, a believer that shouldn't exist in the first place, but you know what theyre going to the right direction. They are way way way down from where they were that's fundamentally important because thats not a real metric of anything that we can tell.
Patrick R. Gruber: That's fundamentally important because that's not a real metric of anything that we can tell. It's somewhat artificial, but okay, it's headed in the right direction. Good.
Patrick R. Gruber: Artificial but okay. That's headed the right direction. Good I was just at the hour.
Patrick R. Gruber: I was just in Turin, Italy, to sign this joint statement of Turin on biofuels. This is an international thing for the UN, for the G7, and it's talking about using crops. Europe is talking about using crops for feedstocks, for biofuels. Hello, the world is changing. And that's good. It's a fundamental shift. Well, who does it impact?
Patrick R. Gruber: Assistant Turin, Italy and to sign this joint statement upturn biofuel systems International thing for the U N for the G seven and it's talking about using crops.
Patrick R. Gruber: Europe is talking about using crops for feedstocks.
Patrick R. Gruber: For Biofuels Hello, the World is changing and that's good it's a fundamental shift who does it impact all these people who are who are weak kneed about taken on real data and using it.
Patrick R. Gruber: All these people who have got who are weak need to start taking on real data and using it. And it also is. As we're doing this, I think people are starting to recognize that this idea of it being food versus fuel isn't true. That is just a false paradigm. It's not that. The fact is, you can generate protein for the food chain and generate raw materials for energy, and there are several ways to go about it.
Patrick R. Gruber: And it also is.
Patrick R. Gruber: As we're doing this I think people are starting to recognize that this idea of its food versus fuel that's not true that as just a false paradigm. It's not that it's fact is you can generate the protein for the food chain and generate raw materials for energy and Theres several ways to go about it.
Patrick R. Gruber: And so that's something that's coming into play that people are starting to recognize and understand that it isn't as it's been portrayed. So this is good. It's going to be a shift that takes time, as in years, but California will adjust as well as more data comes forth. And they're a data organization. So as we get going and develop data, they said they want to see the data as we develop the data from the farms under our Climate Smart Ag programs. Great, we'll show it to them, and then we'll have the conversation. And it's persuasive as heck because it flies in the face of what a lot of environmentalists say.
Patrick R. Gruber: And so that's something that's coming into play that people are starting to recognize.
Patrick R. Gruber: And understand that it isn't as it's been portrayed so this is good it's going to be a shift that takes time.
Patrick R. Gruber: As in years, but.
Patrick R. Gruber: But California.
Patrick R. Gruber: We'll adjust as well as more data comes for us and there are data organization. So as we get on and develop data they've said they want to see the data as we develop the data for the from the farms under our climate Smart AG programs, great well show it to them and then we will have the conversation.
Patrick R. Gruber: And.
Patrick R. Gruber: Is persuasive attack because it's goes flies in the face of what a lot of the <unk>.
Derrick Lee Whitfield: And Pat, if I could, just one last question about 40B. How should we think about the fundamental value of your verity service with an inherently increasing demand as evidenced by the policy we're actually talking about? How do you guys think about the fundamental value of that service and your role in, I guess, creating value throughout the industry by CI scoring? Yeah.
Speaker Change: And Pat if I could just one last question about 40 B.
Derrick Lee Whitfield: How should how should we think about the fundamental value of your various service, which it inherently increasing demand as evidenced by the policy, we're actually talking about like how do you guys think about the fundamental value of that service.
Derrick Lee Whitfield: And your role in.
Derrick Lee Whitfield: I guess, creating value throughout the industry by Ci, scoring yes, yes, and it's bigger than that and some of that Paul addressed us to give a pit Paul I'd like you to give them a picture of how we see value here around verity and the different options and parts.
Patrick R. Gruber: Yes, and it's bigger than that. And so I'm gonna let Paul address this. Paul, I'd like you to give them a picture of how we see value here around Verity and the different options and parts that come to it.
Paul Bloom: That come to it.
Paul Bloom: Yeah, sure thing, Pat. And, you know, thanks for the question.
Paul Bloom: Yes, sure thing Pat and thanks for the question because I think this is really the main reason why we created clarity in the first place was to help people simplify.
Paul Bloom: A lot of the carbon accounting that needs to be done so first and foremost we can do that by making sure that how we total up the value of the carbon intensity from the bushel at that can then transfer into the carbon intensity that we can calculate it the gallon level right and everything that Chris talked about whether its wind energy.
Paul Bloom: Because I think this is really the main reason why we created Verity in the first place, to help people simplify a lot of the carbon accounting that needs to be done. So first and foremost, we can do that by, you know, making sure that when we total up the value of the carbon intensity from the bushel, that can then transfer into the carbon intensity that we can calculate at the gallon level. Right? And everything that Chris talked about, whether it's wind energy, renewable natural gas, carbon capture, sequestration, all those things, in addition to the climate smart benefits of agriculture, have to be connected together. Right?
Paul Bloom: Renewable natural gas carbon capture and sequestration all of those things. In addition to the climate smart benefits from agriculture have to be connected together right. So were seamlessly connecting it together and making that simplified audit trail happen. So we simplify things for the farmers, we simplify things for SAP producer like GMO and where.
Paul Bloom: So we're seamlessly connecting it together and making that simplified audit trail happen. You know, so we simplify things for farmers. We simplify things for SAP producers like Gevo. And we're doing that same simplification for companies like ethanol producers who are not signed up with Verity. So we're really bringing that simplification to something that's otherwise really complicated.
Paul Bloom: Doing that same simplification for companies like ethanol producers, who are not signed up with parity. So we're really bringing that simplification is something that is otherwise really complicated right. We always say we can do this with a bunch of spreadsheets, but we're doing this with distributed ledger technology, tying it together, making the tracking going forward seamless. So we can substantiate claims and then doing the audit.
Paul Bloom: We always say we could do this with a bunch of spreadsheets, but we're doing this with distributed ledger technology, tying it all together, making the tracking going forward seamless so we can substantiate claims and then do the auditing in reverse, you know, quickly. And, you know, we'll do that with third-party auditors. But that's really the big benefit that we bring, and our goal is to not leave any carbon on the table where you, if you're going after compliance markets, voluntary markets, or tax credits, you don't want to leave any of that behind. So you have got to capture all that value. And that's what we can help you do.
Paul Bloom: And the reverse quickly.
Paul Bloom: Quickly, we will do that.
Paul Bloom: The auditors, but thats really.
Paul Bloom: The big benefit that we bring in we really the goal is to not leave any carbon on the table, where if youre going after compliance markets voluntary markets or tax credits you don't want to leave any of that behind so you got to go to capture all that value and that's what we can help people do.
Operator: That's all for now. Thank you for your time. Thank you one moment for our next question.
Speaker Change: That's helpful. Thanks for your time.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Sameer Joshi of HC Wainwright. Your line is now open.
Operator: Thank you one moment for our next question.
Operator: Our next question comes from the line of Sameer Joshi of H C. Wainwright. Your line is now open.
Sameer S. Joshi: Yeah, thanks. Good afternoon. Thanks for taking my questions. Maybe I will take Paul's bait and ask about the first revenues expected from Verity later this year. Which areas, like what kind of customer is this, and what should we expect?
Sameer S. Joshi: Yes. Thanks, good afternoon, thanks for taking my questions.
Sameer S. Joshi: Maybe I'll take pause a bit and ask about the first revenues expected from <unk> later this year.
Sameer S. Joshi: Rich.
Sameer S. Joshi: What kind of customers this and what should we expect.
Paul Bloom: Yeah, sure. And, you know, again, I think we've mentioned this a few times, we're obviously Gevo first and foremost as we start to track what we need for sustainable aviation fuel, but we realize that the solution that we've created with Verity is the solution that many others need. So today, we've got three ethanol clients signed up. We did sign this letter of intent that we mentioned with an engine technology manufacturer, and then we'll be connecting that supply chain for connecting fuel in the fleet service to make sure that even the end users of the services of the fleet can capture their carbon intensity and quantify that.
Sameer S. Joshi: Paul.
Sameer S. Joshi: Yes sure.
Paul Bloom: And again I think we mentioned this a few times.
Paul Bloom: Obviously <unk> is first and foremost as we start to track what we need for our sustainable aviation fuel, but we realize that the solution that we've created with Verity is the solution that many others need.
Paul Bloom: So today, we've got three ethanol clients signed up.
Paul Bloom: Good sign this letter of intent that we've mentioned.
Paul Bloom: With an engine technology manufacturer, and then will be connecting that supply chain for connecting fuel in the fleet service to make sure that even the end users of the services that fleet can capture their carbon intensity and quantify that.
Paul Bloom: So again, with 190 ethanol producers out there, you know, that's a good fit. We're also looking at renewable diesel and biodiesel. That biofuels vertical is a big one. But then you think about the carbon tracking needs. So we're, while we're focused on the biofuels vertical now, we're rapidly expanding into adjacencies where we need this help in carbon tracking and transparency through the value chain. Think food, feed, and other industrial products, like what we're talking about with LG Chem.
Paul Bloom: Again with 190 ethanol producers out there.
Paul Bloom: That's a good fit we're also looking at renewable diesel biodiesel.
Paul Bloom: We're focused on the bio fuels vertical now.
Paul Bloom: We're rapidly expanding into Adjacencies, where we need this help in this carbon tracking and transparency through.
Paul Bloom: Through the value chain.
Paul Bloom: Food feed and other industrial products like what we're talking about with LG Chem.
Paul Bloom: I was going to say,
Paul Bloom: Understood.
Patrick R. Gruber: I was gonna say, so in terms of the kind of numbers we think about, I asked this question of Paul, like, on a weekly basis, actually, and I probably get on his nerves, and it's always coming and it is coming, and it's gonna be in the, it'll be a few million, you know, it's in that kind of a number, watered down and gets it going. Good.
Patrick R. Gruber: And it'll grow from there. And so it won't be this year in 2024. I don't expect it to be a giant number. It won't be.
Patrick R. Gruber: It's in that kind of a number this quarter it gets it going good and.
Patrick R. Gruber: And it will grow from there and so it's not this year in 2024, I don't expect it to be a giant number it won't be but what it's going to be initial sales with real customers initial partnerships being paid for services and fee fees for service and that type of thing.
Patrick R. Gruber: But you know what? It's gonna be initial sales with real customers or initial partnerships, paid for services and fees, you know, fees for service and that type of thing. And it has huge potential. And what's interesting is it cuts across supply chains too. So we stay focused on the basics of how do you measure the stuff around agriculture and the farms and then transform the products through ethanol plants. But you know what? You also have the potential for tracking animal feed for people who want low-carbon beef.
Patrick R. Gruber: Okay.
Patrick R. Gruber: And so, and that just comes hand in hand with it. So it's getting to be quite an interesting game to play. And, uh, and I liked the direction from 40B and what they've said out loud about where they're headed with 45Z is that you're going to be specific. They're talking about field level, auditable, traceable, straight through. That plays to what we designed Verity for.
Patrick R. Gruber: They are talking about field level audible traceable straight through.
Sameer S. Joshi: Yeah, no, completely agree on that. The potential for variety enhanced by the 40 degree and 45 degree further opening of that mark. On the ATO, what should we expect the next steps to be with LG? I know you will be getting some revenues, 0.8 million, I think, but then what are the next steps, and how should we see that growing?
Sameer S. Joshi: Further opening of that.
Patrick R. Gruber: Yeah, so I'm gonna, Paul, I'm gonna answer that, okay? It's a, and if I miss something, you jump in.
Patrick R. Gruber: But it's that next step to build a bigger, a bigger pilot plan or bigger, a small demo plan. And right now, it's about going ahead, getting the bids. That's on LG's dime, not ours.
Patrick R. Gruber: And right now they're at spot go ahead getting the bids.
Patrick R. Gruber: And we get to use the data. We own the intellectual property. It'll be like, this is a good deal for us. And we're aligned strategically with what we want. Remember our process: carbohydrates to alcohols, alcohols to olefins.
Patrick R. Gruber: We have improved technology for those olefins. For example, we can selectively make propylene. We can also make it into fuels. So we get to leverage all that knowledge into our fuels business. So it's a win-win straight away, and what's fascinating about this is that the savings here are big. There's not some incremental improvement. A lot of companies are focused on small improvements. This is a big improvement, and I think in our deep dive deck, it talks about this.
Patrick R. Gruber: It shows what it could mean, so it's pretty exciting. I wish it was ready for prime Time now, but it's not. It's going to take a couple of years to get it fully vetted, scaled up, and commercialized. But it's pretty cool, and it's ours. So that's a lot of fun.
Sameer S. Joshi: Yeah, no, no, that's true. On the DOE loan, can you just give us a little bit more insight on the level of engagement and maybe the timeline for the next milestones, just so that we can keep track of it?
Patrick R. Gruber: Yeah, so I can tell you this: the engagement level is high. They're working hard to get this done. The DOE is the government, the government's bureaucratic, they've got all kinds of rules to comply with, and they're working their butts off from here, I can tell. I think it helped a lot. The question earlier was about whether they all talk to each other at the DOE, and I think the answer is yes. I think it helps because they all know that we have the low-cost route to make alcohol to jet fuel and the lowest carbon score, with the most carbon abatement.
Patrick R. Gruber: And so I think they all know that and can see it and see why. You can go look at it. It's on our website as to why and how it compares to other people's technology. So, um... They're working on it. How long does it take?
Patrick R. Gruber: Well, Chris talked about that we're getting the engineering details figured out, mapped to what can be done on the DOE side, mapped to what can be done on the customer side, and so that stuff should become more clear relatively soon. Chris, I'm going to call upon you in just a minute, and you can comment on that more specifically on that timeline. So give it a thought. And then, you know, when we hope, I hate to project when we're gonna say we're gonna get to FI, the loan, closed because stuff happens and everyone, well, you said it was going to happen at this time, and it didn't. Well, it's not in my control exactly. All we can do is go through the work to get her done. Chris, do you want to comment on the DOE project here?
Chris Ryan: Sure, I just have to be aware of the fact that DOE has explicitly told us that, you know, we can't say too much publicly about it, but I will tell you that we've really felt the support from the DOE loan office in terms of them wanting to work with us to get this to work. There's a real sense that this is of strategic importance. And that really helps the team between, you know, Gevo and all of our counterparties and DOE as we work through all the details.
Chris Ryan: I think we will be able to say something more definitively over the next few months, a milestone, you know, a key milestone. But we are, you know, we're, as Pat said, high level of engagement. Frequent discussions, very detailed due diligence they're doing on us, and everything's moving forward. So, Yeah, that's about all I can say.
Sameer S. Joshi: And the last one, and maybe for Lynn, I know the reduction costs are related to mainly CAPEX that you would do at a later stage. Does that mean that any of the project development costs budgeted for this year are lower than the 5.3 million that was incurred in 1Q? Should we expect a reduction in that? Or were you capitalizing those CAPEX? in a different accounting manner.
Lynn Small: Are you referring to the project development cost in the statement of operations, the income statement? Yeah Yeah, I was with the we the reduction announced. Yeah, the reduction. I think the reductions will probably not hit that line item as much. Those are ongoing costs for a range of things. In combination with the GNA, those two items really cover the operations of the company, inclusive of, you know, some of that goes to Verity, and some of it goes to other project sites to have a slate of opportunities to exploit once we close net zero one. So I don't see that number coming down substantially. But the capitalized portion will come down to between 90 and 125. Eminet.
Lynn Small: Goes to other projects sites to have a fleet of opportunities to exploit.
Lynn Small: Once we closed <unk> zero, one so I don't see that number coming down substantially.
Lynn Small: But.
Lynn Small: So I did not realize the capitalized portion will come down to the 90 to 120 funds.
Patrick R. Gruber: I'm gonna, and Sameer, I'm going to add something. So some of you might wonder about what the heck you're working on multiple sites for. I'll tell you why.
Speaker Change: And Samir I'm going to add something somebody might wonder about what the heck do you work at multiple sites for I'll tell you why customers want multiple sites. They don't just want a one off plant and so part of the deal with them is you got to have a path forward that you can show them that something real that you can go ahead and develop multiple sites and so we do have to spend some effort on that and show people.
Patrick R. Gruber: Customers want multiple sites. They don't just want a one-off plant. And so part of the deal with them is you got to have a path forward that you can show them that something's real, that you can go ahead and develop multiple sites. And so we do have to put some effort into that and show people we're managing the cash to keep it low. And we definitely have multiple sites available to us that we could point to and say, no, here's where we can go, here, there, and over there. We can point to those things, and you gotta have that credible story because no one's interested in the one-off, nobody. So that's all part of what we have to do to build a market.
Patrick R. Gruber: We are managing the cash to keep it low.
Patrick R. Gruber: Definitely have multiple sites available to us that we could point to and say here's where we go.
Patrick R. Gruber: Here there.
Patrick R. Gruber: There, we could point to those things and you got to have that credible story because no. One is interested in the one off nobody.
Patrick R. Gruber: So that's all part of what we have to do to build market.
Patrick R. Gruber: Thanks a lot, Patrick, and good luck. Thanks. Yeah. Please take one moment for our next question.
Speaker Change: Thanks for that color Patrick.
Patrick R. Gruber: Yes.
Operator: Our next question comes from the line of Sameer Jain of UBS. Your line is now open. Hi, guys. I guess I was wondering, could you provide some clarity on net zero one and net zero two?
Speaker Change: Our next question comes from the line.
Sameer S. Joshi: Tom chain of UBS. Your line is now open.
Sameer S. Joshi: Hi, Thanks, guys.
Sameer S. Joshi: I was wondering could you provide some clarity on that net 012 time line as well and I guess have you guys considered any look into maybe like securing a partner to help financing or any other cost reductions on that regard I think the only thing into.
Sameer S. Joshi: Yeah, so net zero one timeframe is, you heard it's about the timeline runs through getting the DOE loan done, raising the equity, getting the financial close, that'll happen on its timeframe late this year, early next year in that timeframe, and then it'll go get billed. There's a net zero is got lots of traction, so it's quite interesting. Net zero two is we have several sites that we've targeted.
Sameer S. Joshi: Yes, so zero one timeframe is.
Sameer S. Joshi: It's about the timeline runs through getting the Doe loan done raising the equity getting the financial close that will happen on its timeframe late this probably late this year early next year in that timeframe and then we'll go get built theirs.
Sameer S. Joshi: No.
Patrick R. Gruber: They could be brought on pretty quickly, and all of it is done with partners. So that's how it's gonna be done. One of the things that partners wanna see is, hey, y'all got, where is it?
Patrick R. Gruber: How much is the interest rate? How much capital is needed? So that's all part of the plan that we're executing. All of this financing would be done at a project finance level, not at a GEVO level. This is a fundamentally important point for everybody.
Patrick R. Gruber: This is done in a special purpose entity where it's project financing. And so it has to meet project finance requirements. And that's how we approach it. Oh my god.
Sameer S. Joshi: So when you say net zero one, you say, the DOE loan, the financial closing, that would all be probably later this year or early next year. And then how long do you think it will take once the construction is fully done? I hate to predict that, you know, the normal timeframes, you know. You can't win at this, actually.
Patrick R. Gruber: So it's 24 months if things go right, and if they don't, it takes a little longer. If it was us building off our balance sheet and I had my own engineers building it without having to have help, I could do it faster, I'll bet. But, you know what? That's not how this gets done in this modern world. So, okay, 24 months-ish.
Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Pat Gruber for closing remarks.
Patrick R. Gruber: Yeah, so this 45B precedent is a big deal. The amount of work it took, I got to congratulate Lindsay and the team, and the rest of my folks for the amount of effort they put in to try to educate people.
Patrick R. Gruber: A year ago, people gave slim odds that we could get GREET models stuffed in there and support them with data and get people tuned into the fact that you really can count carbon. The idea that they're willing to do this, in part, is because of the work that we've done with Verity and all the rest showing, no, in fact, you really can count these things at a field level. People didn't believe that it could be done.
Patrick R. Gruber: We've had to show them that it can be done, and it should be counted. And so that's all part of it. So I feel pretty good about where we're at, and I feel like we're getting a lot of traction. We have traction with our customers, and we have traction with the DOE. You know, we've got money. I don't like our stock price at all, but by God, we're making good progress. So thanks for the support. Thanks for listening. Y'all have a good afternoon and evening.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Okay.
Operator: [music].
Operator: Okay.